My previous bullish thesis about Tesla, Inc. (NASDAQ:TSLA) was not as successful as the initial one, as the stock underperformed the broader market over the last quarter. The latest earnings release was full of disappointment as the company missed consensus estimates, and the management indicated concerns over the current harsh environment. But I consider these challenges temporary and not secular. Revenue is still growing, and production volumes are moving in line with the company's long-term goals. Contraction in margins is also not a secular trend but is mainly caused by discounts for Tesla's vehicles, which are implemented to address the softening demand as consumers are becoming more price-conscious. Even though profitability metrics declined, Tesla is still ahead of the competition from the financial efficiency perspective, and the company's balance sheet is a fortress. This makes the company well-positioned to weather the storm without sacrificing or postponing its innovation and growth initiatives. According to my valuation analysis, the stock is substantially undervalued. That said, I reiterate my "Strong Buy" rating for TSLA.
