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In many ways, Tesla’s (NASDAQ:TSLA) fourth-quarter results, along with the comments of CEO Elon Musk and the automaker’s CFO, represented a “Goldilocks” best-case outcome for EV stocks in general.

Specifically, Tesla’s earnings, and the bullish statements made by the company, showed that worries about a demand crisis in the EV sector were non-existent. That said, Tesla’s growth did come in well below its target, leading to a marked decline in the company’s stock price. However, I view the EV sector as one in which there’s plenty of room for competitors to pick up Tesla’s slack and provide long-term growth.

Based on the information provided by Tesla, I expect the automaker and many of its competitors to deliver profitable results in the coming years. Musk’s dark warnings for the sector – that many of its competitors could be headed for bankruptcy – are likely to be proven incorrect. Thus, I think there are many EV stocks worth buying at this point.

Here are why Tesla’s earnings are a green flag for EV stocks, including Rivian (NADAQ:RIVN), General Motors (NYSE:GM) and, of course, TSLA stock itself.

There’s No Demand Problem

As I mentioned in a previous column, Tesla’s Q4 “automotive revenues and its total sales both soared 51% YOY.” Indicating that the demand for the company’s EVs remains relatively strong, Musk reported that Tesla had set sales records in January. Specifically, he said, “thus far in January, we’ve seen the strongest orders year-to-date than ever in our history,” adding, “we currently are seeing orders at almost twice the rate of production.” Musk went on to note that TSLA raised the price of its Model Y slightly in response to strong demand.

Meanwhile, disputing the many assertions that Tesla had reduced its prices due to weak demand, CFO Zachary Kirkhorn suggested that the company’s price cuts in America were carried out to make more of the automaker’s EVs eligible for a greater percentage of the tax credits awarded to EVs through the Inflation Reduction Act.

Worries About EV Margins and Profits Are Overdone

Tesla has been able to reduce its overall costs, while the company’s production expenses at its Berlin and Austin factories have been on the decline. As these plants expand, it’s expected that the company’s margins will remain robust. Tesla’s net operating margin increased to 16% last quarter from 14.7% during the same period a year earlier. Additionally, the automaker’s net income, excluding certain items, soared to $4.1 billion from $2.88 billion during the same period a year earlier.

Part of the reason for Tesla’s high profitability, in line with my previous predictions, is that the company sells many high-margin products in conjunction with its EVs. Among these high-margin offerings are its Full-Self Driving software and its EV charging network subscriptions.

For Tesla and other EV stocks, the automaker’s profitability data are very bullish because they show that the sector’s profitability is not eroding and that EV makers can be very profitable.

Tesla’s Results and Musk’s Comments Boosted Confidence in EV Stocks

Heading into Tesla’s Q4 results, Wall Street’s tune has been changing for the EV sector. Indeed, for Tesla in particular, the Street’s view has become much more bearish. Hand-wringing about the sector increased, with many pundits convinced that the sector’s profitability would plunge amid vicious price wars and waning demand.

However, this view appears to have changed following Tesla’s results. Many analysts appear to ben much less worried about Tesla’s outlook, turning more bullish on TSLA stock. For example, Morgan Stanley’s prominent analyst, Adam Jonas, became bearish on Tesla and other EV stocks heading into the Q4 print. Jonas warned that the demand for EVs over the longer-term would be much weaker than previously expected.

That said, at the end of January, Jonas turned much more bullish. He wrote that automakers in general, and Tesla in particular, could benefit from reduced costs this year. The analyst reiterated TSLA stock as his top pick in the sector, reiterating a $220 price target.

With resurgent confidence in the EV sector, many EV stocks will likely follow Tesla higher.

Tesla Will Not Suck Up All the Oxygen in the Sector

Despite Tesla’s strong Q4 results and outlook, its total EV deliveries rose 31% year-over-year last quarter, well below its long-term 50% goal.

It’s true that China’s lockdowns probably were a significant factor behind the miss. Still, given the large extent of the shortfall, some combination of production constraints, increased competition, and demand issues in certain regions and among some demographic groups is keeping a lid on Tesla’s sales. So, it’s not surprising that Tesla’s share of the overall EV market fell sharply to 58% last quarter from 78% during the same period a year earlier.

But of course, with Tesla’s market share sinking, other EV makers will have an opportunity to thrive.

On the date of publication, Larry Ramer held long positions in TSLA and RIVN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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