This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia, which sells the market-leading graphics processing units (GPUs) that power the data centers used to train and run AI models, has been a major beneficiary of the AI boom. But this also means that the stock could suffer if demand for AI computing slows.

However, despite sentiment toward AI turning more negative recently, demand for AI chips remains extremely robust. So, is the stock's recent sell-off a buying opportunity?

Demand is still rising

A glance at Nvidia's fiscal third-quarter results certainly doesn't indicate that the AI boom is cooling off.

"Blackwell sales are off the charts, and cloud GPUs are sold out," Nvidia CEO Jensen Huang said in the company's fiscal third-quarter earnings release.

The tech company's fiscal third-quarter revenue rose 62% year over year to $57.0 billion. That was faster than the 56% year-over-year increase Nvidia reported in fiscal Q2. This marked a return to accelerating growth after fiscal Q2's top-line growth rate decelerated.

The data center segment, where most AI hardware demand sits, told a similarly bullish story in fiscal Q3. The segment's revenue grew 66% year over year in the third quarter to $51.2 billion -- up from 56% growth in the prior quarter.

Further, Nvidia's profitability continued to impress. Fiscal third-quarter operating income rose 65% year over year to $36.0 billion, and earnings per share climbed 67% to $1.30.

Looking ahead, Nvidia guided for fourth-quarter fiscal 2026 revenue of $65.0 billion, plus or minus 2%. At the midpoint, that implies about 14% sequential growth and roughly 65% year-over-year growth.

A great business, but a risky stock

For investors looking to get in on this growth story, the pullback in the stock price certainly helps. But the setback may not be significant enough to fully price in some of the stock's biggest risks.

Shares currently trade at about 43 times earnings. A valuation multiple like this makes sense if Nvidia can sustain its rapid growth and maintain its high gross margin in the 70s. But if investors start to see signs that either of these important factors behind Nvidia's valuation is at risk, the stock could take an even bigger hit.

The risk is not that Nvidia suddenly stumbles in execution. This is unlikely. The bigger risk is that the AI buildout takes a breather. After all, the semiconductor industry has been cyclical for years -- and it's unlikely that this will ever change.

Competition is also intensifying. Some customers, including deep-pocketed tech giants Alphabet and Amazon, are designing their own chips. If they come up with reasonable alternatives to Nvidia's GPUs, investors could get spooked.

And export rules remain another wild card. Nvidia has shown it can grow rapidly while even when China's demand fades in importance. But because of regulatory and geopolitical concerns about sales of AI chips to China, there's ultimately less visibility about Nvidia's potential in the important market than there is in the U.S.

Sure, the stock's pullback makes Nvidia shares more interesting than they were a few months ago. And it's difficult to critique the business; not only did Nvidia's sales accelerate in Q3, but management guided for a massive fourth quarter.

Even so, the stock's high valuation means investors likely won't be very forgiving if the AI boom shows signs of slowing. To be clear, there's no clear evidence it is fizzling out yet. But since the market is forward-looking, all it will take is one or two material signs of a cooling market for AI chips to send the stock sharply lower. While there's no guarantee this happens, it is a risk that demands a margin of safety when buying the stock -- and I do not believe the stock's margin of safety at the moment is sufficient.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, and Nvidia. The Motley Fool Australia has recommended Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Over the past six months, Tesla (NASDAQ: TSLA) and Alphabet (NASDAQ: GOOGL) have both delivered eye-catching gains as investors seemingly crowd into anything tied to AI (artificial intelligence). Tesla shares are up more than 45% in that span, while Alphabet has climbed nearly 70% and is closing in on a $4 trillion market capitalization.

The stories behind those moves look very different. Tesla is still primarily an electric vehicle company trying to reinvent its future around autonomous driving and humanoid robots. Alphabet, meanwhile, generates cash from search advertising, YouTube, and a fast-growing cloud computing business -- and it is threading AI into all of these offerings.

Both companies could end up major winners from AI in 2026 and beyond. Yet when valuation and these companies' underlying business fundamentals are weighed together, Alphabet arguably looks like the better option for investors looking for more investment exposure to AI. 

Tesla: AI could transform its business

The bull case for Tesla stock these days hinges less on boosting electric vehicle sales and more on converting its AI efforts into scalable software and services. At least, that's the only way to explain the stock's valuation, which features a price-to-earnings ratio of just over 300 as of this writing. Tesla's autonomous driving network (Robotaxi), its autonomous driving subscriptions, and its humanoid robot efforts (Optimus) sit at the center of that ambition.

Recent financial results, however, highlight the gap between that vision and today's reality.

In the first half of this year, Tesla's revenue fell 10.6% year over year to $41.8 billion as automotive sales dropped almost 18%. Third-quarter results improved, with revenue rising about 12% year over year to $28.1 billion. But operating income still declined about 40% -- and operating margin for the period was only 5.8% (down from 10.8% in the year-ago period). In addition, the rebound in sales trends may prove to be temporary, because the period benefited from a pull-forward in demand as consumers rushed to place orders before the federal electric vehicle credit expired on Sept. 30.

Management has been clear that AI is a major reason profitability remains under pressure. Not only has it been a significant driver of research and development spending recently, but management expects AI to weigh on its business next year.

"On the [capital expenditures] front," said Tesla chief financial officer Vaibhav Taneja in the company's third-quarter earnings call, "while we are expecting to be around $9 billion for the current year, we're projecting the numbers to increase substantially in 2026 as we prepare the company for the next phase of growth in terms of not just our existing businesses, but our bets around AI initiatives, including Optimus."

This spending may pay off if Tesla can scale and commercialize its Robotaxi network and move Optimus from demonstrations to meaningful production. For now, however, almost all of Tesla's revenue still comes from its cyclical auto business, as well as its smaller but fast-growing energy business.

Alphabet: More profitable and cheaper

Alphabet's AI push looks more incremental but also more durable than Tesla's. Google Search and YouTube already rely heavily on machine learning to match users with relevant information and ads, and Alphabet's cloud computing business, Google Cloud, is selling AI infrastructure and tools directly to customers. Overall, Alphabet's move to integrate AI across its business seems to be creating an inflection in revenue growth.

Alphabet's third-quarter revenue rose 16% year over year to $102.3 billion, with Google Cloud up 34% and both search and YouTube delivering solid growth as new Gemini-powered features rolled out across the portfolio.

Profitability and cash flow help the story.

Alphabet's earnings per share in Q3 increased more than 35% year over year, and Alphabet generated about $48.4 billion in cash from operations during the period, bringing the total for the first nine months of 2025 to more than $112 billion. Cash and marketable securities on the balance sheet sit around the $98.5 billion mark, and the company continues to return capital through share repurchases and a modest dividend while still funding heavy AI investment.

Like Tesla, Alphabet's management expects its investments to rise from already high levels due to AI. Indeed, not only did management lift its full-year outlook for capital expenditures when it reported its third-quarter results, but it said it expects "a significant increase" in capital expenditures next year. Investments to support its AI-capable compute power for Google Cloud represent the primary driver for its capital expenditures.

The better bet for 2026 and beyond

Ultimately, the scale tips in favor of Alphabet for two primary reasons.

First, Alphabet's business is more established than Tesla's and is able to generate substantial profits -- and do so on a more consistent basis.

More importantly, however, the Google parent has a much cheaper valuation than Tesla's. Alphabet trades at 31 times earnings, and Tesla's price-to-earnings ratio is just over 300. Even when looking at price relative to analysts' consensus forecasts for earnings per share over the next 12 months (forward price-to-earnings), the chasm between the two remains massive. Alphabet trades at about 23 times forward earnings, and Tesla trades at close to 200 times forward earnings.

Sure, Tesla and Alphabet both hold significant promise when it comes to AI's impact on their businesses next year (and beyond). Tesla's upside rests on breakthroughs in full self-driving and robotics that could eventually reshape its economics. But the company is navigating a challenging environment in autos and a stock price valuation that is borderline egregious. Meanwhile, Alphabet faces its own risks, including regulatory scrutiny and the chance that its massive AI infrastructure doesn't pay off as well as expected. Still, its combination of strong cash generation, a cash-rich balance sheet, and a much lower valuation multiple arguably makes it the more attractive way to participate in AI heading into 2026. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and/or his clients have positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Tesla. The Motley Fool Australia has recommended Alphabet. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) is a fascinating business. The electric-vehicle and energy company is pushing into autonomous ride-sharing and humanoid robots while still ramping its core electric vehicle and energy storage operations.

I admire what Tesla is building and expect the company to be extremely successful over time. But valuation is a critical part of investing -- and at today's price, the stock already bakes significant growth for years to come, leaving very little margin of safety if the company's growth plans take longer than expected or if expanding into these new business lines costs more than anticipated.

With this backdrop in mind, I'd buy into the story -- but only at the right price.

Growth is recovering

After a sluggish first half of 2025, Tesla returned to double-digit revenue growth in Q3. Total revenue for the period reached $28.1 billion, a 12% increase year over year, driven by record vehicle deliveries and strong demand for large-scale energy storage projects. Automotive revenue rose 6% year over year to about $21.2 billion, while the energy generation and storage segment grew revenue 44% to roughly $3.4 billion as deployments reached 12.5 gigawatt-hours.

The company delivered more than 497,000 vehicles in the quarter.

Profitability, however, told a different story. Third-quarter operating income fell 40% year over year to $1.6 billion, and operating margin dropped to 5.8% from 10.8% a year earlier. Operating expenses increased by 50% to approximately $3.4 billion, as the company invested heavily in artificial intelligence infrastructure and new product development.

Valuation and my buy price

As of this writing, the stock has a price-to-earnings ratio of about 270 and trades at about 14 times sales. Those are demanding multiples for a company that still earns most of its revenue from selling vehicles. And even if investors expect Tesla to look more like a high-margin software and services platform over time, today's valuation already prices this in.

In the meantime, Tesla's business remains capital-intensive. But management hopes high-margin businesses -- self-driving software sales and an autonomous ride-sharing network -- can help the company transform into a technology company with tech company-like margins. Then there's Tesla's plans for humanoid robots, but it's unclear what kind of margins it can achieve in such an unprecedented business.

The problem? Each of Tesla's growth initiatives will require significant sums of capital to scale. In addition, there's timing risk. These growth initiatives carry technical and regulatory risk that could delay commercialization.

Investors can already see the strain. Operating expenses in the third quarter rose much faster than revenue. That kind of spending is understandable for a company that believes it has an opportunity of unusual size. But does the stock's valuation leave enough room for the risks associated with building out these new product initiatives?

At a price that values Tesla well over 250 times current earnings and about 170 times forward earnings, even modest setbacks in autonomy timelines or vehicle demand could create sharp swings in the stock.

That is why my own discipline points to a lower entry point. I believe that at around $220 per share, the stock would still carry a valuation that reflects Tesla's position in electric vehicles and its growth opportunities in higher-margin businesses.

Of course, this doesn't mean investors should sell shares they already own. Extreme volatility is part of owning a stock with so much future potential baked in. So it's normal for shares to trade in a wide band. In addition, given Tesla's long history of incredible growth, the company could very well exceed even my most optimistic expectations.

Still, I'm happy to admire the business from the sidelines and keep my buy price near $220, for now. This, of course, is a moving target that may very well move up over time as I get new information about Tesla's ever-expanding business.

While there's no guarantee shares actually fall to this price, I'll be ready if they do. In the meantime, I'll take new capital elsewhere. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and/or his clients have positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

After a sharp rally in recent months, Apple (NASDAQ: AAPL) shares look expensive. The iPhone maker's stock has climbed to fresh highs, reflecting investors' growing confidence that the company has emerged from its growth lull and is heading into a stronger product and earnings cycle.

Apple is still a hardware-focused business, but the story now leans more on services and the steady influence of its installed base. That shift, together with a clearer artificial intelligence road map, helps explain why the stock still carries a premium valuation.

1. Growth is back on track

After a sluggish stretch last year, Apple's revenue has begun to reaccelerate. Revenue grew 4%, 5%, 0%, and then 8% year over year across the four quarters of fiscal 2025 (respectively), lifting full-year growth to more than 6% from just 2% growth in fiscal 2024.

Importantly, this accelerated growth was driven by both hardware and services revenue.

2. A powerful iPhone 17 cycle

The current iPhone 17 cycle is a key driver of that rebound. iPhone revenue grew double digits year over year in the third quarter of fiscal 2025 and increased again in the fourth quarter as the new iPhone 17 lineup launched. Of course, the new iPhone models were available only for a few weeks during the fiscal fourth quarter. So, the real test will be during the important holiday period, which aligns with Apple's first quarter of fiscal 2026 (the current quarter).

But based on management's comments on the latest iPhone models in the company's fiscal fourth-quarter earnings call, we already know the iPhone 17 is probably going to do well this holiday season. "We're constrained today on several models of the iPhone 17," said Apple CEO Tim Cook in the company's latest earnings call. "There's not a ramp issue. It's just we have very strong demand and we're working very hard to fulfill all the orders that we have."

In addition, management specifically guided for double-digit year-over-year growth in iPhone revenue for the period.

3. Services tilt the business toward higher margins

Apple's important services business, which is home to the App Store, Apple's native apps like Apple Music and Apple TV, and other services such as AppleCare, continues to grow faster than the rest of the company and carries a much higher gross margin than hardware sales. In the fourth quarter of fiscal 2025, services revenue grew 15% year over year, compared with 8% for the company as a whole. In addition, the important segment represented close to 30% of total revenue during the quarter.

That shift toward recurring revenue sources in Apple's services business, including app store fees, cloud storage, payments, advertising, and subscriptions, should make Apple's business more resilient and -- importantly -- more profitable. After all, Apple's services business commands a gross margin of about twice that of the company's hardware business.

4. Guidance signals more momentum

Management's outlook adds another pillar to the bullish case. For the current quarter ending in December, Apple expects total revenue to grow 10% to 12% year over year, and iPhone revenue to grow at a double-digit rate.

Viewing this guidance in light of the company's recent acceleration in the back half of fiscal 2025, that guidance suggests the current momentum is not just a one-quarter blip tied to product timing but something more sustainable.

5. AI as a future catalyst

The final reason many investors remain comfortable owning Apple at a premium multiple is the potential for artificial intelligence (AI) to drive another hardware upgrade cycle. Apple has talked more openly this year about integrating AI across devices, from on-device models that power smarter photo and messaging features to a revamped Siri expected in 2026.

The company has begun to ramp up capital spending and AI-related research and development. If AI features start to require more powerful devices better suited for fast-changing computing needs, Apple is positioned to capture that demand through new products in existing product lines and potentially even entirely new product lines enabled by AI.

Taken together, these five pillars help explain why the market is willing to pay a rich price for Apple shares and why I personally remain bullish on the stock over the long haul.

Trading at around 32 times forward earnings, the stock isn't cheap, and any unexpected setbacks in iPhone demand or services growth could pressure that multiple -- especially if AI initiatives disappoint. Still, I believe the upside opportunity outweighs the risks.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and his clients have positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Tesla says the first builds of a more affordable model happened in June, with volume production planned for the second half of 2025.
• The new car will likely slot below today's Model Y and lean into Tesla's self-driving roadmap.
• Model 3 transformed Tesla's business. While this launch may be smaller, it could similarly matter for growth and valuation.

Tesla (NASDAQ: TSLA) is quietly approaching a product milestone that could dramatically catalyze its business: a new, more affordable vehicle designed to expand its addressable market and support its autonomy ambitions. Fortunately for investors, Tesla is no stranger to step-change launches -- and this one arrives amid a broader pivot the company has outlined toward artificial intelligence (AI) and software.

But what do we actually know about this vehicle? And, more importantly, could it move the needle like Model 3 did years ago?

What we know (and don't) about the new vehicle

"We continue to expand our vehicle offering, including first builds of a more affordable model in June, with volume production planned for the second half of 2025," Tesla said in its second-quarter update.

During the accompanying earnings call for its second quarter, Tesla CEO Elon Musk suggested that the new vehicle is essentially a variant of the Model Y. Some speculate it may be a stripped-down version or have a smaller battery or both.

Where could the vehicle be priced compared to the rest of Tesla's lineup? Today's U.S. Model Y starts at about $45,000 -- above pricing that many shoppers target. An "affordable" trim suggests a meaningful discount to current Model Y stickers, likely enabled by a smaller battery, simplified interiors, and scale savings on parts shared with the refreshed Model Y (Juniper).

What about design? It would not be surprising to see the budget variant borrow many of the refresh cues from the recently overhauled Model Y.

To be fair, we're just speculating here. We only know it will be less expensive than Tesla's current lineup (Otherwise, why call it "a more affordable model"?) -- so, probably somewhere in the $30,000 range.

The specific timing also remains unknown, but if Tesla still expects to achieve volume production of the new vehicle this year, then the first deliveries will likely occur soon.

Why this could still be a big deal

Model 3, which was Tesla's first vehicle priced well below its flagship Model S and X vehicles, significantly increased Tesla's deliveries. After its first Model 3 deliveries in the second half of 2017, Tesla scaled to approximately 368,000 deliveries in 2019 (up from just 76,000 in 2016) and then nearly 500,000 in 2020 as Model 3 volumes ramped and the 2020-launched similarly priced Model Y came into play as well, laying the foundation for the company's 1.8 million deliveries in 2023. That history illustrates how a lower entry price can unlock latent demand.

This new vehicle probably won't drive a Model 3-like step change by itself, but it could strengthen two important vectors. The first, of course, is affordability. A credible Tesla, under the current Model 3 and Y price points, addresses a widening gap in the electric vehicle market as interest rates make affordability more challenging.

The second way this new, more affordable vehicle can help unlock more demand is with autonomy. Tesla continues to frame its future in terms of AI, software, and fleet-based profits -- and recent steps toward an autonomous ride-sharing service suggest the next wave of vehicles will be built with self-driving in mind from day one. A budget Tesla that's full self-driving ready gives owners a potential path to deploy their cars into Tesla's planned Robotaxi network when regulations and software allow.

The investment lens, then, is about magnitude and timing. Near term, Tesla continues to face challenges as sales have dipped. In the second quarter, deliveries were down year over year. However, a late-2025 volume ramp for an affordable, autonomy-ready Tesla could stabilize unit trends while reinforcing the company's software narrative, which is crucial for valuation.

Tesla trades at a price-to-earnings ratio of around 250, reflecting expectations for faster growth and an expanding profit margin, driven by growing software-based sales. While a successful launch of Tesla's upcoming, more affordable model doesn't guarantee those outcomes, it likely improves the odds that today's premium proves defensible. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and/or his clients have positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• The electric car maker is building autonomy with cameras and neural nets, not LIDAR, worrying some investors.
• Tesla CEO Elon Musk has a clear explanation for why Tesla doesn't employ LIDAR in its cars.
• Recent results show pressure in the auto business, even as energy storage scales, making innovation in autos key for Tesla stock.

Tesla (NASDAQ: TSLA) shares have bounced in recent weeks as investors refocus on the company's artificial intelligence (AI) ambitions alongside its core electric vehicle (EV) business. The EV maker and energy company is pushing to commercialize an autonomous ride-hailing network, dubbed Robotaxi, that it says will lean on the same vision system already shipping in its cars.

Against that backdrop, the stock's rebound has reopened the debate: Without LIDAR (Light Detection and Ranging), a sensor system that uses lasers to measure distances and create 3D maps of surroundings, can Tesla really make self-driving work at scale?

What Elon Musk said late last year and then again this spring goes straight to the heart of that question. It also explains why Tesla continues to double down on a vision-only approach despite others continuing to pursue more sensor-heavy stacks. 

The investment thesis hinges on autonomy

Investors should first anchor on the business today. In the second quarter of 2025, Tesla's operating income fell 42% year over year to about $0.9 billion, producing a 4.1% operating margin, as pricing pressure and mix weighed on automotive profitability. Tesla produced over 410,000 vehicles and delivered more than 384,000 vehicles in the quarter, while energy storage deployments hit 9.6 gigawatt-hours (GWh) -- a bright spot as the nascent but important segment scales.

The first quarter painted a similar picture of near-term pressure in the core auto business, with revenue down year over year and management emphasizing cost work and software progress as offsets. Shares, meanwhile, have rallied from summer lows and recently traded at around $395, putting Tesla's market capitalization at around the $1.3 trillion mark, as investors again assign significant optionality to autonomy and artificial intelligence (AI).

Those fundamentals matter because they frame why autonomy is so central to the long-term story. If Tesla can layer higher-margin software revenue (Full Self-Driving subscriptions, ride-hailing take rates) on top of a large fleet, the earnings profile looks very different from that of a pure automaker.

Why Tesla is staying vision-only -- and what that means for investors

On Tesla's fourth-quarter 2024 earnings call, CEO Elon Musk distilled the company's thesis for a vision approach to autonomy -- without LIDAR -- in plain language:

Obviously, humans drive without shooting lasers out of their eyes. ... [H]umans drive with eyes and a neural net. ... The digital equivalent of eyes and a brain are cameras and digital neural nets or AI. So, the entire road system was designed for passive optical neural nets.

He reiterated the same idea on the first-quarter 2025 call: The car, he said, is analogous to a human -- digital neural nets plus cameras versus biological neural nets plus eyes -- implying the same strengths and weaknesses.

The practical takeaway is clear: Tesla does not intend to add LIDAR as a prerequisite for wide deployment. A pure vision stack simplifies hardware, lowers bill-of-materials costs, scales with the installed base, and, if it works, expands margins through software leverage -- without the added cost of LIDAR systems. It also aligns with how the company trains its models: by harvesting billions of miles of real-world video from its fleet to improve neural-net-only perception and planning.

Of course, a vision-only system must prove sufficient across edge cases -- such as adverse weather, unusual road geometry, and unpredictable human behavior -- where redundancy from LIDAR and high-definition mapping can potentially help competing stacks. But there will be weaknesses to any system. Investors, therefore, will have to hope those weaknesses are minor and that the system is far safer than human driving.

Because regulatory approvals are not guaranteed, even limited driver-monitoring or operating-domain constraints could slow a robotaxi launch. And while Tesla emphasizes software, recent quarters show that automotive margin pressure can persist if pricing remains competitive and software (e.g., paid Full Self-Driving) adoption lags expectations.

For investors, the question is not whether LIDAR "wins" in a lab. The question is whether Tesla can achieve safe, scalable autonomy -- with acceptable regulatory guardrails -- using cameras and neural nets, and then monetize it at meaningful rates on a massive installed base. If it does, the long-term earnings power looks far more like a software and network business layered on top of manufacturing. If it does not, the growth stock's rich valuation already embeds optimism that could be hard to defend on vehicles alone.

Therefore, Musk's comment is worth hearing because it clarifies the bet that Tesla bulls are making. Tesla is pursuing the most capital-efficient autonomy path tied to how humans actually drive. That approach could translate into faster deployment and better unit economics if vision-only performance crosses the safety threshold that regulators and riders demand. But it also raises the bar on software progress and real-world validation data in the coming quarters.

In the quarters to come, Tesla investors should closely watch software take-rate trends, energy storage scaling, operating margins, and any concrete milestones on Robotaxi. The return profile here increasingly hinges on software and autonomy delivering -- not merely on selling more cars.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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More reading

• 3 ASX ETFs with market-beating potential over the next 10 years
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Daniel Sparks and/or his clients have positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Nvidia's dividend is tiny by design, backed by an ultra-low payout ratio and massive reinvestment needs.
• Buybacks, not the dividend, are the centerpiece of the chip company's capital returns -- and the authorization just got a big boost.
• If earnings continue to compound, the dividend can rise over time without crimping growth investment.

After a monster run over the last two years, Nvidia (NASDAQ: NVDA) is no longer just the leading artificial intelligence (AI) chip supplier; it's also one of the biggest cash machines in tech. The company designs and sells the graphics processing units (GPUs), networking, and software that power generative AI training and inference across cloud providers and enterprise data centers. Investors often ask a simple question amid all the talk of growth: What about the dividend?

The short answer is that Nvidia's dividend exists, but it is intentionally modest. Management raised it during the 2024 stock split and has kept it at this level since then -- yet the yield rounds to near zero. That's not a bug; it reflects a capital-allocation playbook focused on reinvestment and opportunistic buybacks while earnings scale. The sections below explain the why, the how, and what to expect next. 

The dividend is small -- and that's deliberate

Nvidia's current quarterly dividend is just $0.01 per share, or $0.04 annually. Given where the stock is trading at the time of this writing, Nvidia's dividend yield is about 0.02%, which is obviously negligible. The company last lifted the payout by 150% alongside its 10-for-1 split in May 2024 and has kept it at that rate since then.

Of course, such a small dividend means that the company is hardly tapping into its earnings power. Using trailing-12-month earnings per share, Nvidia earned roughly $3.51 per share. Against a $0.04 annual dividend, that implies a payout ratio near 1%. In plain English, Nvidia is paying out about $0.01 of every dollar it earns, leaving enormous flexibility to fund growth and still raise the dividend over time.

Buybacks do the heavy lifting

But don't let Nvidia's small dividend fool you. The company is returning meaningful sums of cash to shareholders, just in a different way. Nvidia returns cash primarily through share repurchases.

In late August 2025, the board added $60 billion to the company's buyback authorization. Further, through the first half of fiscal 2026 alone, Nvidia returned $24.3 billion via buybacks and dividends, and as of the second-quarter release, it still had $14.7 billion remaining under the prior authorization -- before the new $60 billion was added.

The tech company has made a habit of routinely deploying billions of dollars per quarter on repurchases as free cash flow swells.

What to expect from the dividend going forward

Two forces will likely guide dividend policy from here: investment needs and earnings power. For now, the company has significant investment needs as it builds out AI platforms like Blackwell at a staggering scale.

On top of aggressively reinvesting in its business, the company will likely continue buying back its stock, as CEO Jensen Huang seems very bullish on the company's growth opportunities. So, as long as the data center cycle remains in hypergrowth mode, investors should expect buybacks to remain the preferred lever for returning capital to shareholders, with the dividend stepping up gradually over time from a very low base. That approach maintains high optionality in case demand shifts -- and it helps Nvidia avoid locking in a significant fixed cash commitment.

So, will the dividend grow over time? Probably. But it's uncertain when increases will come and how big they will be. Further, even Nvidia faces risks. AI spending is cyclical and capital-intensive, competitors are investing aggressively, and export restrictions have already complicated shipments to China.

Even so, Nvidia's recent results (revenue up 56% year over year in the quarter ended July 27, 2025, and guidance calling for another sequential revenue increase) reflect a business scaling rapidly enough to support both reinvestment and rising shareholder returns. If earnings continue to compound, modest dividend hikes remain feasible alongside significant repurchases.

But as long as the company has a massive opportunity set, shareholders shouldn't want dividend increases anyway.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Advertising and AWS are growing faster than the rest of the business and carrying higher margins.
• Guidance and recent execution support steady revenue growth and mid-teens earnings-per-share growth.
• Double-digit earnings growth alone could push the stock to $300 within two years.

Amazon (NASDAQ: AMZN) has been a steady winner in 2025, even as investors debate how quickly artificial intelligence will translate into dollars for the tech and retail giant. The company operates a massive online marketplace and logistics network, a fast-growing advertising platform embedded across its properties, and Amazon Web Services (AWS), the world's largest cloud infrastructure business.

Recent results and guidance point to a company leaning further into its most profitable areas. That mix shift, combined with disciplined cost control, sets up a reasonable path for earnings to compound at healthy rates. If the price-to-earnings multiple stays where it is today, shares could hit $300 within two years.

Strong growth in higher-margin lines

Amazon's second-quarter results were strong where it matters most. Net sales rose 13% year over year to $167.7 billion, while operating income climbed 31% to $19.2 billion. AWS grew 17.5% to $30.9 billion, and advertising services increased 23% to $15.7 billion -- both outpacing consolidated growth and, importantly, carrying richer margins than first-party retail.

The mix is slowly shifting toward these higher-margin engines. In the quarter, AWS represented about 18% of revenue, and advertising services exceeded 9% of total sales. Together, they're becoming a larger slice of the pie as they compound faster than online stores. The bottom-line effect is visible in earnings power: Trailing-twelve-month earnings per share improved to $6.55 through the end of Q2, up from $4.18 in the trailing-12-month period ending a year earlier.

While management doesn't specifically call out the margins of its advertising services segment, it did say in its second-quarter earnings call that "Advertising remains an important contributor to profitability in the North American International segments." Regarding AWS, its operating margin is about 37% on a trailing-12-month basis, compared to an operating margin of about 11% for the overall company.

Guidance adds another layer of confidence. For the quarter ending in September, Amazon expects revenue to be between $174 billion and $179.5 billion, up 10% to 13% year over year, and operating income of $15.5 billion to $20.5 billion. While that operating-income range allows for macro and spending variability, it still implies a business that is running far more efficiently than it was two years ago.

A clear path to $300, with caveats

For investors, the question is whether these dynamics can carry the stock from roughly the high-$220s today to $300. A simple way to frame it is to hold the valuation roughly constant and let earnings do the work. At recent prices, the shares trade at around 35 times trailing earnings.

If trailing-twelve-month earnings per share of $6.55 grow at about a 15% compound annual rate for two years, earnings would climb to roughly $8.70. Multiply that by the same 35 price-to-earnings multiple, and the stock price comes out to just over $300. In other words, without assuming a richer valuation, earnings growth could drive the stock materially higher in a relatively short timeframe.

Of course, there are some critical risks to keep an eye on. AWS' quarterly operating margin ticked down to 32.9% from 39.5% in the prior quarter as Amazon accelerated investments in artificial intelligence (AI) capacity and infrastructure. Further, competitive intensity in cloud computing remains high, and heavy capital spending tied to AI models and data centers could pressure near-term profitability. Additionally, trade and tariff policies remain a headwind that the company explicitly calls out in its guidance commentary, and retail demand can soften if consumers pull back.

Still, the core investment case is strong. Advertising continues to grow faster than the company overall, AWS remains a large and expanding business even as Amazon invests aggressively in AI, and cost discipline is showing up in operating income gains. These dynamics -- steady growth, a richer revenue mix, and a more efficient retail business -- should support mid-teens earnings growth and help the company command a similar price-to-earnings ratio in the years ahead.

Ultimately, the stock price going from the high-$220s to about $300 within two years looks not just possible but reasonable. With this said, investors shouldn't buy the stock with a two-year time horizon in mind. A longer-term view is less risky and allows more wiggle room for sentiment shifts. But this exercise helps show how Amazon can continue to reward shareholders.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Amazon stock: Headed to $300? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Meta's second-quarter revenue growth rate accelerated, on top of an already strong Q1.
• Heavy infrastructure spending may cap margins near term, but it supports a multi-year growth runway.
• Given Meta's momentum and profitability, there's a clear path to a good return for the stock over the next five years.

Shares of Meta Platforms (NASDAQ: META) have surged since late July's earnings update, fueled by the social media specialist's stronger-than-expected quarter and upbeat revenue guidance. No wonder Wall Street is piling into the stock. There's a lot to like. The Facebook, Instagram, and WhatsApp parent is leaning hard into artificial intelligence (AI) across products and ads, while returning significant sums of cash to shareholders via dividends and buybacks.

But can the growth stock's momentum continue? I think so. But where exactly could shares end up in five years?

Incredible business momentum

In the second quarter of 2025, Meta's revenue rose 22% year over year to $47.5 billion, with operating margin expanding to 43% and diluted earnings per share up 38% to $7.14. Ad impressions increased 11% and average price per ad rose 9%. Free cash flow was about $8.6 billion, even as capital expenditures climbed to more than $17 billion. Adding to the growth story, this was an acceleration from an already strong Q1, when revenue grew 16% and earnings per share jumped 37%.

In addition to growing rapidly, the cash-rich company is shareholder-friendly. Meta is returning a lot of cash to shareholders. In the second quarter, the company repurchased approximately $9.8 billion of its stock and paid $1.3 billion in dividends. And the balance sheet ended the period with over $47 billion in cash, cash equivalents, and marketable securities, providing ample flexibility to keep investing in AI and returning capital.

Looking ahead: Where is Meta's stock price headed?

With so much momentum and such a strong business, shares are likely headed meaningfully higher over the next five years. But how much higher?

The investment debate centers on two moving pieces: earnings growth and the multiple the market will pay for those earnings. A practical five-year framework for forecasting Meta's stock price in 2030 is to start with trailing-12-month earnings per share of $27.62 and grow it 10% to 15% annually through 2030. That range bakes in robust ad demand and AI-driven product improvements, while acknowledging that heavy infrastructure outlays could cap margin expansion for a while. Using that range, 2030 earnings per share would land roughly between $45 and $56.

What multiple should those earnings command? If Meta sustains double-digit revenue growth, a mid-20s price-to-earnings ratio feels reasonable. Put a multiple of 24 to 26 on that earnings per share range, and you get a rough 2030 stock-price band of about $1,080 to $1,460 per share, with a midpoint around $1,270 using 12% annualized earnings-per-share growth and a price-to-earnings ratio of 25. Based on Meta's stock price at the time of this writing, that would imply compounded annual returns in the high single digits to low teens over the next five years. That's a forward-looking estimate, not a promise -- but it shows how modest assumptions can still produce attractive outcomes.

There are real risks. Management now expects 2025 capital expenditures of $66 billion to $72 billion and has cautioned that 2026 expense growth will likely run above 2025 as depreciation on new infrastructure ramps and technical hiring continues. That can pressure near-term operating margin. Further, regulatory overhangs are also non-trivial, including potential changes to ad experiences in Europe under the Digital Markets Act. Finally, any macro slowdown that hits ad budgets would add volatility and potentially weigh on earnings and the stock price's potential.

Even so, the core story is intact: Meta's ads business keeps compounding, AI upgrades continue to improve relevance and advertiser performance, and the company is building what Meta CEO Mark Zuckerberg calls "personal superintelligence." If earnings per share compounds in the low-teens and the market remains willing to pay a mid-20s price-to-earnings multiple, Meta's long-term math works. The path won't be linear. But the destination looks compelling.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Apple's June quarter showed reaccelerating growth and record services revenue.
• A record installed base supports ongoing monetization across the ecosystem.
• Capital returns and upcoming product updates strengthen the long-term case.

Apple (NASDAQ: AAPL) heads into Tuesday's product launch event with fresh momentum in both the underlying business and the stock. Shares have climbed recently, prompting a fair question for investors: Did the investment window already close?

I don't think so. The Cupertino-based tech company that makes the iPhone, Mac, iPad, and Apple Watch -- and runs services like the App Store, Apple Music, Apple TV+, iCloud, and Apple Pay -- just put up a strong summer update that bolsters the bull case.

In late July, Apple delivered a June-quarter revenue record and an all-time high in services revenue. And with an upcoming iPhone cycle and feature updates across software, now's a sensible time to revisit the stock.

The short version: The business is nudging back toward growth while leaning more on high-margin, recurring revenue -- and this tailwind of growing high-margin sales looks like one that could persist for a very long time, providing a powerful lift to the business.

Recent results show real momentum

In the third quarter of 2025, Apple's revenue rose 10% year over year to $94 billion, with diluted earnings per share up 12% to $1.57. Management called out June-quarter records for total company revenue, iPhone revenue, and earnings per share -- and said the installed base of active devices reached a new all-time high. That matters because Apple's growing device footprint is the flywheel behind services monetization.

Services continued to do the heavy lifting for the company in fiscal Q3 (Apple's quarter ending June 28). The segment generated $27.4 billion in revenue, up 13% year over year and an all-time high. Costs tied to services were just $6.7 billion, underscoring why this stream is so valuable: As services scale across a larger base of devices, Apple adds revenue that carries structurally higher margins than hardware. The net effect is a business mix increasingly tilted more toward recurring, cash-rich activity.

Also worth highlighting, Apple's growth is improving. In its fiscal second quarter of 2025, companywide revenue was up 5% year over year; the June quarter's 10% growth marks a significant step up.

Cash generation remains robust, too. Apple's fiscal third-quarter operating cash flow was $29 billion. Additionally, in May, the board authorized an additional $100 billion share repurchase program alongside a dividend that was lifted to $0.26 per share. That combination -- accelerating growth, expanding services, and big sums of cash being returned to shareholders -- is a winning recipe.

Catalysts, risks, and why I like the stock today

Looking ahead, Apple's record installed base is the engine. Each iPhone, iPad, Mac, and Apple Watch creates multiple touchpoints for services like App Store purchases, subscriptions, and payments. As the company rolls out new software and features -- including Apple Intelligence integrations highlighted this summer -- it increases the reasons for users to stick with Apple and to spend more within its ecosystem. Tuesday's event should reinforce that narrative, as the company will likely bring to market the next iPhone family, updated Apple Watch models, and ecosystem enhancements that should fuel engagement.

The stock's valuation isn't a bargain, and that's the pushback you'll hear. However, the mix shift toward services, the durability of Apple's customer loyalty, and consistent capital returns arguably justify a significant premium. Growth stocks often merit higher price-to-earnings multiples when revenue visibility and cash generation are improving.

The business, of course, is not immune to risks. Macro pressure on device upgrades, regulatory scrutiny, and competitive dynamics in key geographies can all weigh on results.

Therefore, with revenue reaccelerating, services setting records, and a product event that can stoke demand and engagement across a massive installed base, Apple is my top stock to buy right now, bar none. If the market gives you volatility around the event or into the holiday quarter, I'd view that as an opportunity to add shares. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Apple is my top stock to buy right now appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and his clients have positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

One "siren's song" that lures in dividend investors all too often is an above-average dividend yield. After all, investors looking for income from their stock investments love to receive their dividend paychecks -- and the bigger they are, the better, right? Not necessarily.

Investors looking to bolster their portfolio with dividends should carefully balance the importance of share price appreciation potential, dividend yield, and dividend growth potential. Too much focus on dividend yield could mean missing out on long-term appreciation in the underlying stock price and/or meaningful growth in a company's dividend payments over time.

Apple (NASDAQ: AAPL) is one of those companies that lacks in terms of dividend yield, but easily makes up for this weakness in other areas, particularly in terms of dividend growth potential.

A small but mighty dividend

Today, Apple's dividend yield stands at just 0.5%. This compares to a dividend yield of 1.2% for the S&P 500 overall. So, it might be confusing why I'd call Apple a great dividend stock. But hear me out.

Let's start with this: Not only is Apple's dividend growing every year, but the company is only paying out a small fraction of what it could pay in dividends. Further, note that Apple's annualized dividend payment run rate of $1.04 today is double what it was 10 years ago and 27% higher than its annualized payments five years ago. More importantly, there's plenty of room for further increases in the years to come. Today, the company pays out just 16% of its earnings in dividends.

Another way to put Apple's dividend growth potential into perspective is to examine the company's cash flow statement. Despite generating around $100 billion in free cash flow (the cash left over after both regular operations and capital expenditures are taken care of) annually, the tech giant's annualized dividend payments over the last trailing 12 montamounted to only $15.3 billion.

All of this to say, the iPhone maker could actually increase its dividend at a faster rate than its earnings growth if it wanted to.

Returning cash to shareholders in more ways than one

Despite all this wiggle room for dividend growth in Apple's finances, it's possible that the pace of its dividend growth in the coming years will not exceed the rate of its earnings growth by much (if at all). This is because the company has an exceptionally strong appetite for share repurchases. In fiscal 2024, for instance, Apple spent $95 billion repurchasing its shares -- a figure that far exceeded its dividend payments of $15.2 billion during the period.

Further, Apple recently hinted that it will continue to prioritize share repurchases. Alongside its fiscal second-quarter earnings release on May 1, Apple announced that its board authorized an additional $100 billion for share repurchases. Additionally, during the company's fiscal second-quarter earnings release, Apple said that this authorization reflects management's "continued confidence" in its business "now and into the future." In other words, management appears to be suggesting that it believes its shares are undervalued.

However, at least modest dividend growth in the years ahead is all but inevitable. Apple has a history of increasing its dividend every year, and it is likely to continue doing so. Since initiating its quarterly dividend in 2012, the company has increased its dividend every year. Indeed, Apple management regularly tells investors that it plans to boost its dividend on an annual basis.

"[W]e continue to plan for annual increases in the dividend going forward as we have done for the last 13 years," noted Apple chief financial officer Kevan Parekh in the company's most recent quarterly conference call.

One thing we know for sure is that Apple will be returning a lot of cash to shareholders going forward. While it's difficult to predict exactly how much cash will go toward dividends and how much will go toward share repurchases, management has made it clear that it plans to keep aggressively returning cash by stating in its most recent earnings call that it is maintaining its long-standing goal to get to net cash neutral (when total cash and marketable securities equals total debt). With $133 billion in cash and marketable securities, about $100 billion in annual free cash flow, and about $98 billion in total debt, the tech giant will likely have to keep giving away sums in excess of $100 billion per year (via repurchases and dividends) for some time.

So don't underestimate Apple as a dividend stock just because it has a small dividend yield. It might be small, but it is mighty. It's backed by a cash-rich company with strong cash flows -- and there are plenty of reasons it can grow on an annual basis for years to come. The icing on the cake? The underlying business is high quality, and management is also returning cash to shareholders indirectly through share repurchases.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Apple is a great dividend stock, despite its low yield appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market often rewards companies it believes have strong future growth potential with premium valuations. In the case of Apple (NASDAQ: AAPL), investors have bid up shares to roughly 35 times earnings -- a level that implies big growth expectations from the Street.

But a closer look at Apple's recent performance raises questions about whether the company's growth trajectory can live up to this lofty valuation.

iPhone is a drag... for now

Apple's recent financial results don't paint the picture of the growth stock you'd expect given its high valuation. In the company's fiscal first quarter of 2025, which covered the holiday shopping season, Apple reported revenue of $124.3 billion, representing just 4% year-over-year growth. More concerning for investors should be the performance of the iPhone -- Apple's flagship product that still accounts for over 56% of total revenue. iPhone sales actually declined 8% year over year during the period.

Another concern has been Apple's sales in Greater China. They fell 11% year over year during fiscal Q1. Accounting for 15% of sales, challenges in this key market are weighing on results.

Of course, there are some things for investors to be excited about. Apple saw impressive growth in some other product segments. Mac and iPad sales, for example, jumped 16% and 15% year over year respectively. But these divisions represent a much smaller portion of Apple's overall business. Services revenue, however, represents a more meaningful portion of Apple's business -- and it is growing fast. Including subscriptions and App Store sales, services segment revenue grew by 14% to $26.3 billion. This is Apple's second-largest segment after iPhone, accounting for more than 21% of revenue.

Premium valuation in context

With this backdrop, it's hard to justify the stock's current valuation. Sure, Apple's current price-to-earnings ratio is down from around 40 at the beginning of the year. But it's still much higher than the valuation levels the company typically traded at over the last decade. During the last 10 years, shares averaged a price-to-earnings multiple in the low twenties.

This elevated multiple would typically suggest investors expect accelerated growth ahead. However, Apple's own guidance points to continued modest growth, with the company forecasting "low to mid-single digit" revenue growth for the coming quarter, according to management's guidance in the company's most recent earnings call. This disconnect between valuation and projected growth raises concerns about whether Apple's stock price has gotten ahead of its fundamental business performance.

Apple's AI wildcard

One factor that could justify Apple's premium valuation would be a successful pivot to artificial intelligence as a growth driver. The company has been rolling out its Apple Intelligence features, which it hopes will drive iPhone upgrades and strengthen its ecosystem advantage.

But there's no guarantee this thesis will play out -- and things don't seem to be going smoothly.

Apple's cautious approach to its AI rollout could cause demand for the latest iPhone models to be lower than expected. Some features were initially available only in certain markets and languages, and other key features have reportedly been delayed.

If AI fails to accelerate Apple's revenue the way investors hope, the continued success of the iPhone maker's services business will become even more important. But that's a lot of pressure for a segment only accounting for about a fifth of revenue. AI features that reignite iPhone upgrade trends would be the quickest way to faster growth.

The risk-reward proposition isn't good

While Apple remains financially strong with impressive profit margins and a loyal customer base, it's simply difficult to justify such a significant premium based on current growth trends.

Investors considering Apple stock at current levels should carefully weigh the company's ecosystem advantages, evidenced by the strength in its services segment, against the challenges it faces in its core business. While Apple has consistently surprised skeptics in the past, the combination of slowing growth and a premium valuation creates a challenging risk-reward proposition at current prices.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Apple stock has a growth problem. Is it really worth its premium valuation? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) stock has served investors well in 2023. The electric-car maker's shares have soared more than 90% year to date. Indeed, the growth stock's performance has been so staggering that investors are now regularly referencing the stock's membership in the elite club called the "Magnificent Seven." The group features seven large technology companies that collectively trounced the S&P 500's returns this year.  

With such strong performance from Tesla in 2023, the growth stock once again became a Wall Street darling. Are more big returns ahead for the stock in 2024 and beyond? Or has the stock become overvalued? Let's explore whether the stock looks more like a buy, hold, or sell today.

Big growth drivers

There's no denying the array of strong growth drivers Tesla has supporting its business.

First, there's the secular momentum it's seeing from increasing demand for electric cars. This has played a big role in the company's 42% year-over-year growth in trailing-12-month deliveries.

Of course, Tesla is also seeing incredible momentum in its energy storage business as utilities are turning to the company's utility-scale battery pack systems to stabilize the grid, prevent outages, and reduce costs. Its energy storage deployments, measured in gigawatt hours, soared 90% year over year in Q3.

Additionally, the automaker delivered the first units of its new all-electric Cybertruck in late November. While deliveries of the vehicle likely won't ramp up to any meaningful volume until sometime around the end of 2024, the vehicle importantly gives Tesla access to the massive and lucrative pickup truck market.

Finally, investors shouldn't underestimate the potential of Tesla's full self-driving software. While the software is still in beta, it already has formidable pricing power with consumers. Even in beta, the software upgrade costs Tesla owners a whopping $12,000. Despite the high price tag, tons of customers are opting in. Impressively, Tesla's vehicle fleet has already cumulatively driven more than 0.5 billion miles using full self-driving software, giving Tesla a massive set of data and analytics to rapidly improve the artificial intelligence (AI) supporting the software.

It would be difficult to overstate the importance of Tesla's self-driving efforts to management. "We will continue to invest significantly in AI development as this is really the massive game changer," said Tesla CEO Elon Musk during the company's third-quarter earnings call when discussing its full self-driving technology development. "... success in this regard, in the long term, I think, has the potential to make Tesla the most valuable company in the world by far," Musk said.

Undeniable headwinds

With all of this said, three undeniable headwinds for the stock make it a hold at its current price rather than a buy.

1. Tesla stock's high valuation of more than 75 times earnings arguably already prices in significant success, leaving very little room for error.
2. High interest rates have made vehicle affordability more difficult and Tesla has had to respond by lowering prices (there's no telling how long interest rates could remain elevated).
3. There's always a risk that investors are underestimating how costly it will be for Tesla to execute on its growth plans.

For these three reasons, Tesla stock should be viewed more like a hold at its current valuation than a buy despite its business momentum and its long runway for further growth. However, if shares took a 25% to 30% haircut, it might be time to accumulate shares of this disruptive innovator. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Tesla stock: Buy, sell, or hold for 2024 and beyond? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

After getting annihilated in the first half of 2022, shares of streaming-TV giant Netflix, Inc. (NASDAQ: NFLX) have seen some upward momentum recently. Indeed, since July 1, the stock has risen about 25%. Of course, this gain still leaves the stock far from where it was at the beginning of the year. Shares are down more than 60% year to date.

An analyst from JPMorgan Chase thinks the stock could continue to rise from here. There's increased investor interest in the stock ahead of the company's upcoming launch of its ad business, Doug Anmuth said in a note to investors on Wednesday. How far could the stock rise? The JPMorgan analyst has a $240 12-month price target for the stock, indicating he believes there's still meaningful upside for the streaming service company's shares ahead.

Subscriber headwinds

While it's encouraging to hear that Anmuth is betting Netflix stock can add to its already-impressive gains since the middle of this summer, a $240 price target notably only represents 7% upside from where shares are trading at the time of this writing. The reason for Anmuth's conservative outlook for the stock? He believes there's uncertainty surrounding how the company's subscriber trends will add in the second half of 2022. So even if he's optimistic about the potential for Netflix's long-awaited ad-supported tier, headwinds to subscriber growth are keeping many investors on the sidelines.

Second-quarter subscribers fell sequentially for the second quarter in a row, declining from 221.6 million in the first quarter of 2022 to 220.7 million. Fortunately, Netflix guided for sequential growth in Q3, though the expected uptick is anemic. Netflix guided for 1 million new members in Q3. 

Until Netflix's subscriber growth starts to pick up some speed, some investors and analysts may worry about the company's long-term prospects.

Betting on ads

Fortunately, however, Netflix may soon drive enough top-line growth from the launch of its ad-supported tier to help soothe any investor concerns about the company's suppressed subscriber growth. Management said in its second-quarter update that it expects to launch its first ad-supported tier early next year.

Investors are likely hoping the addition of a new way for consumers to watch Netflix content will attract incremental revenue. Indeed, it's one of the key pillars behind management's plan to reaccelerate its revenue growth.

"While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues)," Netflix said in the company's second-quarter letter to shareholders.

Given Netflix's near-term challenges with subscriber growth, Anmuth may be right to be conservative with his 12-month price target. But with shares priced at just 19 times earnings at the time of this writing, investors may not be fully appreciating the potential impact of a new ad business next year. Shares may be more undervalued than Anmuth's $240 price target suggests.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of electric car maker Tesla (NASDAQ: TSLA) were trading sharply higher on Tuesday. The growth stock rose as much as 2.4%. While the stock lost some of these gains later in the day, shares were still up nearly 2% as of 12:50 p.m. ET.

The stock's gain is likely due to trading bets and hype surrounding the company's planned stock split this week. Tesla shares are splitting on a 3-for-1 basis. The stock will start trading on a split-adjusted basis on Thursday, Aug. 25.

So what

Tesla stock has had a rough year, sliding about 16% year to date. But the stock's year-to-date return would have been much worse if it wasn't for a sharp recovery over the last three months. During this period, the stock is up more than 30%. This compares to a 6% gain for the S&P 500.

While the stock's move higher on Tuesday may be due in part to traders making bets on the stock in anticipation of a potential bump higher this week as the company executes its stock split, part of the optimism may also be a continuation of Tesla's upward trend over the last three months.

Now what

Whatever the main reasons for the stock's nice uptick on Tuesday, investors should stay focused on the electric car maker's fundamentals. After all, it's impossible to know how the stock will trade throughout the week as Tesla shares are split anyway.

Tesla's second-quarter vehicle deliveries fell sequentially as the company dealt with the ramifications of Shanghai government restrictions on factories in the region as the Chinese market implemented strict procedures to stop the spread of COVID-19. But despite a sequential decline, deliveries still grew 27% year over year in Q2. Even more, management said it finished up the quarter with strong production rates, setting up the company for higher production levels in Q3 and potentially even a higher year-over-year growth rate in deliveries. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Tesla (NASDAQ: TSLA) surged higher last week, helped by the electric-car maker's second-quarter report, which included better-than-expected adjusted earnings per share and an impressive outlook from management for a strong second half of the year. The upbeat update from management was welcomed warmly by investors as Wall Street is being greeted by a growing number of disappointing quarterly reports this earnings season.

While the earnings release included a lot of interesting information, investors interested in the stock should also take some time to listen to Tesla's second-quarter earnings call, where management discussed its results in more detail with analysts. It was packed with helpful information, including additional commentary on the supply chain, more color on the company's plans to boost manufacturing capacity, and more. Management's comments from the call provided important information for investors as they try to assess the company's growth potential.

Here are three quotes from the call that investors should see.

An improving supply chain

"I think we're seeing a very rapid increase in battery production and in the whole supply chain," said Tesla CEO Elon musk in the earnings call.

This is great news for Tesla, since the company seems to have more than enough demand. With Model Y orders today delivering sometime next year, for instance, Tesla's sales growth is limited by supply.

The company provided some more concrete evidence of its improving supply chain when Elon noted that the company saw record levels of production at both its Fremont and Shanghai factories in June.

Combining its improving supply chain with its achievement of record production levels in June, Tesla said it expects to have a record-breaking second half of the year.

Tesla's planned Cybertruck launch

The long-awaited Tesla Cybertruck has a target launch date. Musk said he expects deliveries of the fully electric pickup truck to start in the middle of next year. "And we're very, very excited about that product. I think it might actually be our best product ever," the CEO added.

Given the popularity of pickup trucks in the United States, investors have good reason to look forward to the important vehicle's launch.

Manufacturing capacity expectations

In the company's second-quarter earnings report, Tesla revealed it currently has installed production capacity for production of up to 1.9 million vehicles per year. For context, Tesla delivered only 936,000 vehicles this year. Achieving production levels of 2 million vehicles annually, therefore, would represent significant growth.

But it's one thing to have installed capacity and another to refine production lines and the supply chain to fully utilize this capacity. To this end, one analyst asked how quickly Tesla can ramp up production and Musk said, "I think we've got a good chance of exiting this year at 40,000 vehicles a week." That's an annualized run rate of more than 2 million vehicles.

Overall, the earnings call gave even more credence to the already upbeat narrative revealed in the company's second-quarter earnings report. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Meta Platforms (NASDAQ: FB) took a hit on Monday, declining as much as 3.7%. But as of 1:30 p.m. ET, the stock was down 2.1%. The stock's decline worsens a sharp year-to-date decline as investors worry about the social media company's ability to return to strong revenue growth rates.

While this theme could be behind some of the stock's pullback on Monday, it was likely mainly driven by bearishness in the overall market.

So what

Highlighting what a brutal year it's been for the parent company of Facebook, Instagram, and WhatsApp, shares have cratered more than 40% year to date as of this writing. However, the stock is notably up from levels in April, before the company impressed investors with better-than-expected earnings per share. 

The stock's move lower on Monday comes as the overall market tumbles with investors worrying about the impact of inflation and rising interest rates on the economy and on an already uncertain operating environment for many companies. Capturing the broader market drawdown on Monday, as of this writing, the S&P 500 is down about 2.6% and the Nasdaq Composite is down 3.5%.

Now what

Meta grew its revenue just 7% year over year in the first quarter as the company faces off against tough year-ago comparisons and continues to deal with Apple's recent changes to ad tracking and measurement on iOS, its mobile operating system.

Looking ahead, management expects continued headwinds. While the company is making progress on addressing challenges presented by iOS, Meta isn't fully out of the woods yet. In addition, the company's year-ago comparison in Q2 is particularly tough. To this end, management guided for second-quarter revenue to come in at $28 billion to $30 billion, compared with $28.6 billion in the year-ago quarter. The low end of this guidance range, therefore, would notably translate to a year-over-year decline.

Of course, Meta hopes that, as it works through its tough year-ago comparisons in the first half of the year and solves challenges associated with iOS, revenue growth can reaccelerate.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Meta Platforms, Inc. The Motley Fool Australia has recommended Amazon and Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Twitter (NYSE: TWTR) surprised Wall Street this week when it announced it had entered into an agreement to be acquired by billionaire Elon Musk, a move that would make the company private. With the acquisition price about 8% higher than where the stock is trading Tuesday morning, some investors may be tempted to try to profit from this delta. But investors should think twice before they play this game.

This deal comes with some serious risks and a good case can be made for selling Twitter stock today.

Important details you should know

Twitter announced Monday that Musk would buy the social media company for $54.20 per share in cash, valuing the company at about $44 billion. The move would take the company private, meaning shareholders would be paid cash at the time the deal is closed and Twitter shares would no longer be traded on the New York Stock Exchange.

The company seems excited about the deal. "The Twitter Board conducted a thoughtful and comprehensive process to assess Elon's proposal with a deliberate focus on value, certainty, and financing," said Twitter Chairman Bret Taylor in a press release. "The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter's stockholders."

As Twitter notes, the purchase price represents 38% upside over the stock's closing price on April 1 -- the day before Musk's 9% stake in the company was disclosed.

But don't forget to acknowledge the risks to this transaction. The biggest thing investors who currently own Twitter stock (or those considering buying it) should know is that there's never a guarantee that an acquisition will be completed, even when the company being acquired has already entered into a "definitive agreement" with the acquirer.

Twitter, of course, was sure to disclose the risks to this transaction, noting that it is "subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals and the satisfaction of other customary closing conditions."

What could happen if the deal falls through

There's significant risk to holding. If the deal does not work out, Twitter shares could plummet. After all, the stock's recent gain is almost entirely due to the likelihood of Musk buying the company at a price of $54.20 per share. Without this possible deal, and without the promise of Musk's leadership, the stock could spiral downward as investors contemplate what a failed deal could mean for the company's future.

It's worth noting that all we know about the deal's timing is that it is expected to close sometime this year. There are eight months left in the year. Would the risk of holding during that period really be worth just an 8% premium to today's price? Probably not.

It’s also worth noting that since this isn't a company buying Twitter, there may be a lower risk of any potential antitrust issues. Further, the financials behind the deal may be simpler -- and the parties easier to deal with -- than if this were a merger between two companies as opposed to a buyout buy a billionaire. Nevertheless, such a large deal from a single person is uncharted territory and could pose unforeseen risks. So investors should tread carefully when considering the probability of this deal closing.

All of this to say, a strong case can be made for selling Twitter stock today. And to those thinking of buying Twitter stock today, there’s good reason to stay on the sidelines. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Twitter. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Electric-car maker Tesla (NASDAQ: TSLA) reported first-quarter deliveries on Saturday. While the record deliveries were far higher than they were a year ago, they were short of analysts' average estimate for the quarter.

On one hand, Tesla's first-quarter deliveries are an impressive achievement given the global supply chain challenges. On the other hand, however, the fact that they were worse than expectations provide more confirmation to investors that the auto industry is struggling to recover from chip shortages and other parts and logistical issues that have been plaguing it. 

Tesla's first-quarter deliveries: The raw numbers

Tesla delivered approximately 310,000 vehicles in Q1. This record quarterly figure is up from about 309,000 in the fourth quarter of 2021 but represents a staggering year-over-year growth rate of 68%. The figure also notably puts Tesla's trailing-12-month deliveries at a figure above one million (about 1,061,000) -- for the first time. This is up from trailing-12-month deliveries of approximately 596,000 just one year ago.

The deliveries in the quarter consisted of 295,324 Model 3 and Y vehicles combined and 14,724 total Model S and X vehicles. Model 3 and Y deliveries were down slightly sequentially while Model S and X deliveries were up 25% over the same time frame. The sharp sequential increase in Model S and X deliveries reflects Tesla's ongoing ramp-up of production of these vehicles following an overhaul to their design in early 2021 that required updates to the electric-car maker's production line. 

Analysts, on average, were expecting Tesla to deliver about 317,000 vehicles during the period. The underperformance likely took some investors by surprise because the sequential growth was the slowest Tesla has seen in years.

There's hope for a strong second half

While the quarter's deliveries may have missed analysts' estimates, there's still good reason to expect sequential growth to reaccelerate later this year, particularly in the back half of 2022. The company said in its fourth-quarter update that it expected production levels to increase at its existing factories and that it would bring production online at new factories in 2022. Indeed, production has already started at the company's factory in Germany. And Tesla could be just months away from the start of production at its new factory in Texas.

But things could get worse before they get better. Tesla's factory in China is currently on a production pause because of COVID-19 restrictions. Furthermore, it takes time to ramp up production at new factories. So any impact from Tesla's factory in Berlin in Q2 could be very small. 

Despite supply shortages and a production pause in China, Tesla's full-year guidance for 50% growth this year may be conservative enough for the company to still easily surpass this range, especially if some supply constraints are alleviated in the second half of the year -- just as production potentially ramps up to meaningful levels at new factories. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In 2006, Tesla (NASDAQ: TSLA) CEO Elon Musk laid out an audacious plan for the electric car company to go from a start-up with an expensive sports car in development to a volume manufacturer of fully electric vehicles. Few believed the CEO at the time -- and for good reason. Starting a capital-intensive business in and of itself is no easy feat, let alone starting an auto manufacturing company.

Here's how Musk summarized his plan in a 2006 blog post. 

Build sports car

Use that money to build an affordable car

Use that money to build an even more affordable car

While doing above, also provide zero emission electric power generation options

The plan was simple in words. But as investors would find out, the journey would be rife with challenges. Yet somehow Tesla managed to do the impossible. It has become a volume auto manufacturer, on pace to deliver well over 1 million vehicles in 2022 alone. At the same time, long-term investors in the growth stock have been rewarded handsomely.

Since then, Musk has provided a master plan update, which focused largely on the company's aspirations to expand its energy business and develop autonomous driving technology. With these efforts well underway since the 2016-released 'Master Plan, Part Deux', the CEO has confirmed that Tesla is now working on part three to its master plan.

So, what's next?

Bigger is better

The next growth phase of Tesla is about getting big -- much bigger.

"Main Tesla [master plan part 3] subjects will be scaling to extreme size, which is needed to shift humanity away from fossil fuels, and [artificial intelligence]," Musk said on Twitter this week. The plan, Musk noted, will also include some details regarding his other two companies: space technologies giant SpaceX and underground tunnel specialist The Boring Company.

It's no secret that Tesla's current growth rates already put the company on a path to be one of the biggest auto manufacturers (by volume) in the world someday. Consider that Tesla exited 2021 with its vehicle deliveries growing at a rate of 71% year over year and management guidance for deliveries to grow about 50% or greater this year.

Further, Tesla has two new high-volume factories that it recently finished building. Altogether, the company has the pieces in place to be building several million vehicles per year as early as 2023.

Despite a wild trajectory already, Tesla may be planning on doubling down even more on its growth ambitions.

Streamlining manufacturing

Investors may have got an early glimpse into Tesla's part three to its master plan in the company's most recent earnings call. Management said it had shelved its efforts to bring to market new vehicles in the near term and even completely discarded aspirations to bring to market an even cheaper Tesla model at some point.

The rationale behind these moves was that (a) demand was sufficient without new models, and (b) bringing to market new models during a supply-constrained environment simply didn't make sense.

"The fundamental focus of Tesla this year is scaling output," Musk said in Tesla's fourth-quarter earnings call. To do this, the company is focusing its engineering resources on the successful products it has already brought to market.

"So if we'd actually introduced an additional product, that would then require a bunch of attention and resources on that increased complexity of the additional product," Musk added later in the call, "resulting in fewer vehicles actually being delivered. And the same is true of this year. So we will not be introducing new vehicle models this year."

Of course, Tesla said it still plans to bring to market some new vehicles, including its long-awaited Cybertruck, Tesla Semi, and a redesigned Roadster sports car. But manufacturing streamlining and, ultimately, significant growth in production and delivery output appears to be the company's main focus. And based on Musk's preview of Tesla's part three to its master plan, the company may be even more committed to this priority now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• 3 ASX ETFs with market-beating potential over the next 10 years
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Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns and recommends Tesla and Twitter. The Motley Fool has a disclosure policy.