We recently published a list of 12 Most Profitable Growth Stocks To Invest In. In this article, we are going to take a look at where Tesla (NASDAQ:TSLA) stands against other most profitable growth stocks to invest in.
After the September inflation report, the market did feel a slight bit of panic but it seems to be fading away. After the report, the market expectations for a rate cut shifted, with 79.9% of participants predicting a cut to 450-475 basis points, while 20.1% expect the rates to remain unchanged. It was a change from 32.1% expecting a 50 bps rate cut and 67.9% anticipating a 25 bps cut at the beginning of the month as mentioned in our 8 Most Profitable Blue Chip Stocks to Invest in article.
However, on October 11, the CME FedWatch tool showed that 89.5% of the market now expects a 25 bps rate cut and the rest expect it to remain the same.
Market Corrections Ahead but No Bear Market in Sight
Christian Mueller-Glissmann from Goldman Sachs joined CNBC’s ‘Squawk Box’ to discuss the latest market trends. He believes that the stock market pullback in August could be a warning of more potential corrections, but he does not see a severe bear market ahead. His overall outlook is positive due to a healthy macroeconomic environment, where growth remains stable, inflation is under control, and central banks are starting to reduce rates. These factors create a favorable setting for equities and other risk assets.
He pointed out that while bullish market positioning contributed to August’s setback, the combination of declining inflation and rate cuts allows central banks to cushion against financial shocks, minimizing the risk of a deep downturn.
Mueller-Glissmann highlighted two key reasons for not expecting a major market decline: inflation has significantly dropped, giving central banks more flexibility, and price momentum over the past 6-12 months suggests a strong macroeconomic backdrop. With the labor market improving, he sees no signs of an economic downturn.
His strategy focuses on quality growth stocks that are temporarily undervalued and cyclical value stocks that could recover as the market stabilizes. Regarding inflation, he noted a shift from inflation relief to growth as the main market driver, raising concerns about inflation resurfacing if growth strengthens. However, he remains confident that inflation will stay anchored, and disinflation will continue into the year’s end.
Our Methodology
For this article, we used stock screeners to identify nearly 25 growth stocks above the market cap of $10 billion with a 5-year revenue compound annual growth rate (CAGR) of 30% or above. Next, we narrowed our list to 12 stocks with the highest TTM net income. We also mentioned the hedge fund sentiment around each stock, which was taken from Insider Monkey’s Q2 database of 912 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a customer using the company’s e-commerce platform whilst shopping online.
Tesla, Inc. (NASDAQ:TSLA)
5-Year Revenue CAGR: 30.75%
TTM Net Income: $12.427 billion
Number of Hedge Fund Holders: 85
Taking the third spot on our list of most profitable growth stocks is Tesla, Inc. (NASDAQ:TSLA), a leader in the electric vehicle sector, mostly for transforming the automotive and clean energy industry. The company focuses on the design, production, and sale of battery electric vehicles, as well as providing advanced energy storage systems and solar products.
The company made significant noise in the market at the “We, Robot” event on October 10. The CEO, Elon Musk unveiled two innovative vehicles, the Cybercab and the Robovan. The former is a car with no steering wheel or pedals while the latter is shaped like a modern train buggy that can carry up to 20 passengers or transport cargo.
The Cybercab is projected to cost under $30,000 and is expected to be produced from 2026. Musk described this occasion as a pivotal moment for Tesla (NASDAQ:TSLA), comparable to the launch of the Model 3 in 2017.
Musk also emphasized significant advancements in the company’s humanoid robot, Optimus, which is designed to handle various everyday tasks. He projected that the robot could be priced between $20,000 and $30,000, making it potentially accessible for consumers.
He said that Optimus robots will be the company’s most significant product as he envisions a future where these personal robots do everyday tasks for owners. The robots were seen dancing at the event and serving drinks to the attendees.
He suggested that all the technologies that we have already seen are being used in the development of Optimus. He said, “It’s just a robot with arms and legs instead of a robot with wheels. And we’ve made a lot of progress.”
Following the event, Wedbush reiterated its Outperform rating and a $300 price target on Tesla (NASDAQ:TSLA). The firm expressed optimism about its autonomous vehicle strategy, especially the Cybercab, which they found highly impressive in person.
The firm believes that Cybercab could become a $10 billion annual business for the company in the coming years. However, the firm highlighted regulatory, insurance, and launch challenges Tesla (NASDAQ:TSLA) must navigate for future growth.
Baron Partners Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) manufactures electric vehicles, related software and components, and solar and energy storage products. The stock contributed as Tesla continued to drive vehicle manufacturing costs lower, accelerate the launch of new models, and invest heavily in its lucrative AI initiatives. Shareholders reaffirmed the CEO’s compensation plan, alleviating personnel and legal uncertainties. Despite material operational complexities resulting in significant shutdowns of key manufacturing facilities and lower sales volume, Tesla presented better-than-expected margins in the quarter. It expects to launch a lower cost model as soon as late 2024, which should result in accelerated revenue growth, reduced manufacturing costs, and increased factory utilization. The company continued to advance its autonomous driving capabilities, expanding its already significant data centers and developing its humanoid robot Optimus. These investments increased confidence in the attractive growth opportunities that remain ahead.”
Overall, TSLA ranks 3rd on our list of most profitable growth stocks to invest in. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
