After this year’s strong stock price performance, what lies ahead for Tesla (NASDAQ:TSLA)? That’s a question on the minds of many, given the number of headwinds that could negatively affect the performance of TSLA stock during 2024.
These headwinds could cause less stellar results for the undisputed EV market leader. Sentiment for TSLA shifted back to “heavily bullish” in 2023, but this could easily shift back to a more “on the fence view.”
Resulting in a de-rating to the downside for the stock, which continues to trade at valuation leaps and bounds above that of established automakers.
Yet while the Tesla skeptics may hope that vindication of their bear case will finally arrive next year, that’s hardly a given.
Mainly, because there is one major catalyst that could counter the aforementioned challenges, sending the stock surging rather than sinking. Here’s what I mean.
TSLA Stock and its Three Key Headwinds
The key headwinds that could threaten Tesla’s stock performance during 2024 are not unknown. They are existing issues, that right now the market is brushing off. Thanks to the Federal Reserve’s latest remarks on interest rates.
The prospect of lower interest, of course, bodes well for TSLA stock. Lower interest rates help to further justify Tesla’s premium valuation (77.6 times forward earnings). They could also help to drive a rebound in automotive demand, as lower rates mean lower auto loan payments.
Still, while the Fed may no longer be raising interest rates, a “pivot” may take shape more gradually than currently expected. As my InvestorPlace colleague Rich Duprey recently argued, high prices, not just high interest rates, are hurting EV demand right now. Tesla may have to continue engaging in a price war to sustain growth.
In short, Tesla’s first two key headwinds (soft demand and falling margins) may persist. Worse yet, a third issue (the push to unionize Tesla’s workforce) could intensify. The jury’s still out whether an announced pay raise will convince its U.S. employees not to unionize. Tesla’s Swedish mechanics seem to have the upper hand in their fight to unionize.
The Catalyst to Rule Them All
Some mention the Cybertruck as TSLA stock’s significant catalyst in 2024, while others point to further developments with Tesla’s autonomous driving feature.
Electric pickup trucks haven’t gained traction like sedans and SUVs, so Tesla fans may be overestimating the Cybertruck’s effect on future results.
Considering competition in autonomous driving, Tesla may need to lower prices for this feature in the future.
So, if not these possible catalysts, what catalyst could outweigh Tesla’s many challenges? Progress with bringing an low-priced electric vehicle to market. CEO Elon Musk has touted how much of a game-changer Tesla’s high-volume, low-cost Model 2 will be. If the company can deliver on Musk’s promises next year, count on it being a game-changer for TSLA.
Buuying TSLA Stock on the Next Dip
Sure, it’s not as if the Model 2 is guaranteed to generate big sales, much less debut, in 2024. However, if these vehicles simply begin to roll off the assembly line, such news could send TSLA shares higher in a big way.
Mostly, because the launch of mass market vehicles will help to increase confidence that Tesla will live up (or at least come close to meeting) to prior forecasts calling for it to produce tens of millions of vehicles annually.
The market will re-rate shares in anticipation of substantially higher revenue and earnings down the road.
Still, while the long-term bull case remains in motion, that doesn’t mean you need to run out and buy TSLA stock today. As the headwinds discussed above could drive additional temporary dips, wait until the next one before buying.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
