It goes without saying that Tesla Inc (NASDAQ:TSLA) has been the darling of the stock market—and one of my top picks—in 2020. Tesla stock has soared by more than 400% in 2020. Over the past 12 months, it’s up more than 700%.
This is a company I’ve long been bullish on. But the big question now is: should we continue to be bullish on Tesla Inc? In other words, has the stock hit its ceiling, or is there yet room to grow?
I believe, dear reader, that we’re nowhere near done seeing TSLA stock rack up gains.
First, the recent good news.
The Tesla Q3 2020 quarterly report showed massive profits of $331.0 million. This marked the fifth-straight profitable quarter for the auto manufacturer. (Source: “Tesla racks up another profitable quarter with boost from regulatory credits,” The Verge, October 21, 2020.)
Chart courtesy of StockCharts.com
What’s more, the report shows profits doubling the previous year.
Frankly, this was to be expected. This has been, without a doubt, the greatest year for Tesla stock since its inception.
While the company has always been prone to rapid growth spurts, this year’s upward trajectory has been truly remarkable due, not just to its rapid pace, but also to the context: all these gains are happening in the midst of the coronavirus pandemic.
While tech companies by and large were able to avoid the brunt of the stock market damage, TSLA stock really shouldn’t have been able to glide through the pandemic so unscathed.
Think about it: the company suffered huge closures at many of its plants. Remember that CEO Elon Musk was getting into Twitter spats (what else is new?), claiming that he was prepared to go to jail as long as his workers could return to their jobs in spite of the lockdown orders.
He didn’t end up in jail, but the event puts into perfect clarity just how problematic the pandemic was for Tesla Inc.
Tesla, while inarguably a tech security, is very much a manufacturer as well. Manufacturers, it should be stated, were largely pummeled by the mass lockdown.
Despite that, Tesla stock was able to not only survive, but thrive.
The reason being that Tesla cars, now that they’re more affordable and culturally prominent, were able to see a massive sales boost even amidst a pandemic that was throttling so many other parts of the economy (not to mention millions of Americans’ savings).
Given all these circumstances, it’s an absolute shock that Tesla Inc was able to generate $8.8 billion in revenue, with $579.0 million in energy storage sales and $581.0 million in services revenue. (Source: Ibid.)
The company, however, wasn’t able to reach profitability purely through sales. Tesla supplemented its profits with $397.0 million worth of regulatory credits in the quarter, a decrease from the record $428.0 million in credits it sold in the second quarter. (Source: Ibid.)
Overall, the company delivered 139,300 vehicles in the quarter on its way to those impressive numbers above, beating its previous-quarter record of 112,000 vehicles in Q4 2019. The company was able to produce 145,036 vehicles in the third quarter as well, beating the 82,272 vehicles it made the prior quarter. The disparity in those numbers was largely caused by the factory shutdowns brought on by COVID-19.
Musk continues to promise that Tesla will deliver 500,000 vehicles by 2021, representing a 36% increase over 2019. In order to reach that goal, the company would have to exceed past quarters and deliver 181,650 cars—not impossible, but knowing Musk’s penchant for loose promises, I wouldn’t hold my breath.
But even the company does miss that mark (something it has had to contend with in the past), I don’t think we’ll see any major hurdles in the way of Tesla stock’s growth.
That’s because, for all the momentum swelling behind TSLA stock in 2020, 2021 may be even better.
Consider that Tesla Inc has accomplished all this with a White House administration that is not terribly concerned with environmental issues.
With Joe Biden looking ever more likely to win the presidency (although an upset is still very much a possibility), we can expect to see even more favorable regulations come Tesla Inc’s way should Biden sit in the White House in 2021.
What’s more, Biden isn’t likely to support a radical economic reimagining like the Green New Deal.
Instead, he’s far more susceptible to centrist policies and actions, like a private enterprise-led battle against climate change. And what company would be better to lead said fight than Tesla Inc, with its millions of no-emissions cars dotting the streets of America?
In fact, that kind of partnership is very typical of Biden, with his past as a centrist politician.
In other words, whether you hate or love Biden, the fact remains that his victory will likely be a boon for Tesla stock.
With that in mind, the TSLA stock prediction for 2021, right now, is highly positive.
The future of Tesla stock is uncertain as to whether it can replicate the absurd gains it experienced in 2020.
But what is far more certain is that the stars are aligning for a TSLA stock breakout at just the right time.
As the company begins to lose a bit of the momentum that propelled it to a banner year, a Biden victory in the upcoming U.S. presidential election would likely spur further TSLA stock growth for years to come.
The fact is that we’re likely to see a friendlier White House for Musk to deal with in the next four years (at least). That alone could have huge ramifications for the future of Tesla stock.
Compare that with an increasing focus on the environment among both consumers and politicians, and you have a company that’s well suited to dominate the market in the next few years.
While I’m under no illusion that Tesla stock is guaranteed to see 700% gains in the next 12 months, I do believe that another 50% to 100% gain in the next year is well within reason, as the company’s political options open up just as its technology continues to impress and its cars continue to fly off showroom floors.