Is Tesla a sub-$800 buy?

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Electric vehicle giant Tesla, Inc. (TSLA) in Austin, Texas, designs, develops, manufactures, leases and sells electric vehicles and energy generation and storage systems. It was recently removed from the S&P 500 ESG Index. The stock is down 12.9% in the past month and 33.8% in the past six months to close yesterday’s trading session at $758.26. Moreover, it is currently trading 39% below its 52-week high of $1,243.49, which it reached on November 4, 2021.

Analysts from Wedbush and Daiwa Capital cut TSLA’s price target to $1,000 from $1,400 and $800 from $1,150, respectively.

Additionally, its 27.10% 12-month gross profit margin is 24.4% below the industry average of 35.82%. Additionally, supply chain challenges, semiconductor chip shortages, COVID-19 outbreaks in China and high inflation make the stock’s near-term outlook uncertain.

Here are the factors that could affect the performance of TSLA in the short term:

Strong finances

TSLA’s total revenue increased 81% year-over-year to $18.76 billion for its fiscal first quarter ended March 31, 2022. The company’s adjusted EBITDA increased by 173% year-over-year to $5.02 billion, while its non-GAAP net income jumped 255% year-over-year to $3.74 billion. Additionally, its non-GAAP EPS was $3.22, up 246% year-over-year.

Favorable analyst estimates

For its 2022 fiscal year, analysts expect TSLA’s EPS and revenue to grow 79.1% and 59.9%, respectively, year-over-year to 12.14 and 86 .05 billion. Additionally, its EPS is expected to grow 39.7% annually over the next five years. And Wall Street analysts expect the stock to hit $930.55 in the near term, indicating a 22.7% upside potential.

Extended valuation

In terms of forward P/S, TSLA’s 9.09x is 893% above the industry average of 0.91x. Its forward EV/S of 8.99x is 710.8% better than the industry average of 1.11x. Additionally, the stock’s respective forward P/B and P/CF of 18.85x and 46.19x are above the industry averages of 2.48x and 9.19x.

POWR ratings don’t indicate enough advantage

TSLA has an overall C rating, which equates to a neutral in our POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.

Our proprietary scoring system also rates each stock against eight distinct categories. TSLA has a D rating for value, which is in line with its above-industry valuation ratios.

The stock has a D rating for stability, consistent with its 2.12 beta.

TSLA is ranked No. 26 among 68 F-rated stocks Automobile and vehicle manufacturers industry. Click here to access TSLA’s ratings for Growth, Sentiment, Momentum, and Quality.

Click here to view our Automotive Industry Report for 2022

Conclusion

TSLA is currently trading below its 50-day and 200-day moving averages of $906.57 and $912.94, respectively, indicating a downtrend. Furthermore, it may continue to decline in the near term due to concerns over rising raw material costs and stalled factory operations. Additionally, the stock looks overvalued at the current price level, and we think it would be wise to wait for a better entry point into the action.

How does Tesla (TSLA) compare to its peers?

Although TSLA has an overall POWR rating of C, one might consider investing in the following car and automaker stocks with an A (Strong Buy) or B (Buy) rating: Honda Motor Company, Ltd. (HMC), Bayerische Motoren Werke Aktiengesellschaft (BMWYY) and Daimler AG (DDAIF).


TSLA shares fell $1.01 (-0.13%) in premarket trading on Wednesday. Year-to-date, the TSLA is down -28.42%, compared to a -12.48% rise in the benchmark S&P 500 over the same period.

About the Author: Nimesh Jaiswal

At Nimesh Jaiswal His passionate interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving the price of a stock is the key approach he follows while advising investors in his articles. After…

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