[NASDAQ: TSLA]: The entire market experienced huge losses on Thursday after the Fed announced that it was raising interest rates. The selloff continued into Friday, as most stocks closed the day in negative territory. In spite of this heavily bearish sentiment, Tesla Inc (NASDAQ: TSLA) closed Friday trading in positive territory. It is one of the few stocks that closed Friday trading in the green. This bounce came from the fact that Tesla’s sell-off on Thursday was quite heavy, and created room for speculators looking to buy into Tesla in anticipation of a pullback.
However, over and above the speculative aspect to this stock, Tesla’s bounce could be driven by the company’s growth potential. One aspect of Tesla’s potential is the high prospects of model 3 in the market. In Q3, the company registered an improvement in its free cash flows. It’s free cash flows rose to $881 million, after years of negative cash flows. This is an indicator that the model 3 is gaining traction in the market, and as a result, Tesla Inc (NASDAQ: TSLA) could record even better results in Q4. This could be creating buying pressure in Tesla (TSLA) going into 2019 as investors anticipate major positive returns when Q4 results come out.
Tesla Inc (NASDAQ: TSLA) is also supported by the fact the U.S and China seem to have eased off on the trade war. The two countries now have a roadmap to fair trade, and as long they stick to it, things will be better in the future. China is a key market for Tesla’s long-term growth and heavy tariffs on its cars by China were already having an impact on the company’s sales. In essence, if trade relations between the U.S and China continue on their current trajectory, Tesla’s future is assured. This is in spite of a more aggressive interest rates regime in the U.S and its potentially negative effects on U.S stocks, and the stock markets all across the world.
Besides, even as higher interest rates the U.S hurt companies, Tesla’s debt payment strategy looks sound. Recently the company announced that it would pay its bondholders with a mix of equity and cash. This is an indicator of its strengthening cash position in the market, and its ability to survive higher interest rates. The company’s revenue growth also paints the picture of a company that is getting better in its cash position. Tesla’s quarterly revenue growth (yoy) stands at 128.60%. This is an exponentially high growth rate and one that places the company in an even better cash position for growth going into the future. That’s because it will enable the company to pay its future debts without strain, in spite of the higher interest rates prevalent in the market.
In essence, Tesla Inc (NASDAQ: TSLA) makes for a good long-term hold. It may not be the most profitable company at the moment, but it is laying the foundation for exponential growth. The company has already shown that it has what it takes to become the top automobile company in the world. Macro-factors are already in its favor, as climate change becomes a source of concern all across the world.