Stock Market

Tesla (NASDAQ:TSLA) stock is down roughly 38% year-to-date. With interest rate hikes set to continue and the economy seemingly on edge that would seem to imply Tesla share prices ought to fall further, right? I’m not so sure because I see multiple signs that indicate reason for optimism. 

Ticker Company Current Price
TSLA Tesla, Inc. $650.28

Entering Part 3 

CEO Elon Musk is a bold, ambitious entrepreneur with grand plans. Those plans include running multiple businesses at once and plans for each of those businesses individually. In the case of Tesla, that means enacting Part 3 of his master plan for the EV company. 

That means greater scale and increased production. When we say greater scale, we mean scaling up to a degree such that the energy infrastructure of the earth favors EVs, and thus Tesla. 

Musk puts an actual number on that scale: 300 terawatt-hours of installed capacity as measured by vehicles and battery packs. In order to achieve that Tesla has been increasing its partnership activity with mining companies. So, one part of Part 3 of the master plan is simply scaling up.

Another important factor for the company is increasing the volume of production of its vehicles.  

Investors want Tesla to produce more of its vehicles. The more it produces, the more it can deliver. The more it can deliver, the higher its stock should go. 

That may seem at odds with recent comments Musk made about headcount, though. 

Headcount Meets Ambition

Tesla sales increased 85% in 2021. That increase in sales was made possible by a 40% increase in headcount at the company. All other factors remaining unchanged, that means Tesla increased its efficiency during 2021. 

That’s a big plus for TSLA stock. There’s reason to believe that increased efficiency could get even better in 2022. After waffling about potentially cutting headcount by 10% this year Musk changed course, stating that total headcount will increase, but salaried headcount should remain fairly flat. 

Reading between the lines, that means Tesla should be relying heavily on temporary employees to achieve its goal to increase sales 50% in 2022. In other words, Tesla should be hiring lots of non-salaried employees to reach that goal. For investors that means Tesla is planning to keep salary expenses flat and hire cheaper labor to reach that goal of a 50% sales increase. In other words, a lot more revenue without the added expense of more expensive salaried employees.

Other Positive News for TSLA Stock

The other positive news to report related to Tesla is that Chinese EV demand is roaring back following lockdowns.  Officials from the Chinese Passenger Car Association expect June EV volume to be 50% greater than that in May. 

They also expect quarter-over-quarter growth to reach 20%. The returning demand means Tesla has a much greater probability of reaching its goal of increasing sales by 50%. 

On the date of publication, Alex Sirois did not have (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 Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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