Sentiment is low, everyone is bearish, and the stock market appears to be sinking to the bottom. However, looking at the case for Tesla (TSLA), with shares down ~38% year-to-date, RBC analyst Joseph Spak believes that now is the time to buy the dip.

"Near-term set-up seems favorable... With investors primed for lower deliveries, we believe 2Q22 margins can surprise to upside," Spak opined.

The analyst expects Q2 deliveries will drop to 249,000 (compared to Q1’s 310,000), due to the pricing actions Tesla has taken a while ago but which it hasn’t been able to capitalize on as it has worked through the backlog. However, Spak expects the ASP (average selling price) for a vehicle to increase sequentially by around 3% (~$52,000 in the prior quarter to $53,400 this quarter).

Looking ahead to Q3, the analyst is calling for 396,000 deliveries - above Street expectations of 378,000. And as Shanghai gets back on track, Berlin and Texas “ramp” and pricing gains continue, Spak expects to see 2H22 auto gross margins above 30%.

The buoyant take doesn’t stop there. Beyond 2022, Spak is “increasingly favorable on Tesla’s industry positioning.”

The EV story is still in its early days and while Tesla is no longer benefiting from an “oligopoly-like positioning,” and is confronted with growing competition, the analyst is not overly concerned with losing market share. That is because as the decade progresses and EVs make further inroads, Spak thinks EVs will become increasingly reliant on the supply chain, and here Tesla has a big advantage.

“TSLA's early focus on vertical integration (not just batteries/raw materials but also motors, semis, software) is likely to pay off especially as industry supply of critical materials may become an issue in 2027/28 and TSLA may be able to control more of their own destiny,” the RBC analyst summed up.