Proprietary Data Insights
Financial Pros Automaker Stock Searches in the Last Month
Buy Tesla Now, Even After the Rebound
Financial pros are hot on Tesla (TSLA).
Our latest data from Trackstar, our proprietary sentiment indicator, shows its financial pros’ top stock search this month and last week, beating out Apple (AAPL) and Amazon (AMZN).
Over the last month, Tesla shares have rallied nearly 80% thanks to an outstanding Q4 earnings release from the company, which showed it achieved its highest-ever quarterly revenue, operating income, and net income.
TSLA’s revenues grew 51.4% in 2022, and it’s planning to ramp up production as quickly as possible, with the 50% compound annual growth rate target it began guiding to in early 2021.
Still, many investors fear CEO Elon Musk lost focus when he gave his attention to Twitter. And the market for electric vehicles continues to get more competitive.
But read on for why we think Tesla is a good investment, despite all the headwinds facing it.
Tesla is the world’s most valuable automaker, with a market cap of $610 billion. The company specializes in EVs, energy storage, and solar panel manufacturing. It operates factories in the U.S., China, and Europe and has delivered over 1 million EVs to customers worldwide.
It’s at the forefront of autonomous driving technology. Its vehicles feature advanced driver assistance systems. It released Full Self-Driving (FSD) capability to nearly all customers in the U.S. and Canada who bought FSD, but it falls well short of Level 5 technology – the kind where you let the car drive without supervision. Still, it’s an important milestone for the company, as it gives customers AI-powered autonomy.
Its business model focuses on direct sales to consumers, bypassing traditional dealership networks.
The company generates a majority of its revenues from automobiles. In 2022, it generated $71.4 billion, an increase of 51.4% from the year prior. The firm’s total revenues were $81.46 billion in 2022.
Source: Stock Analysis
TSLA has more than doubled its revenues over the last two years, from $31.5 billion in 2020 to $81.4 billion in 2022. It significantly invested in autonomous driving tech, positioning itself as a leader in the field, increasing the value proposition of its vehicles, and attracting more customers.
Net income more than doubled year over year, from $5.5 billion in 2021 to $12.5 billion in 2022. This was due to notable improvements in manufacturing efficiency and cost reduction, allowing Tesla to produce EVs for cheaper, increasing margins.
The company has $22.1 billion in total cash and $5.7 billion in total debt. It’s financially stable, with a current ratio of 1.5x.
Source: Seeking Alpha
TSLA trades at a P/E GAAP ratio of 52.5x, considerably cheaper than peers Ford (F) and Rivian (RIVN), as both those companies aren’t profitable. But TSLA trades at a premium over Toyota (TM) at 11.5x and General Motors (GM) at 6.7x.
Tesla’s price-to-sales ratio of 7.3x is notably lower than its five-year average of 9.9x. But it’s significantly higher than peers TM at 0.9x, GM at 0.4x, and F at 0.3x. RIVN is the highest among the group at 15.4x.
Tesla is not only the undisputed leader in EVs. It also has the best autonomous driving technology, which is why some analysts believe it should trade at a premium over its peers.
Investors once valued Tesla as a tech company. Though that fervor has subsided, the upside potential still exists should the company finally crack the AI-driving code.
Source: Seeking Alpha
TSLA boasts a net income margin of 15.4%, which is incredible when you consider its five-year average is 0.1%. The company has successfully expanded into China and Europe, where there’s strong demand for EVs, allowing it to diversify its revenue streams and reduce dependence on the U.S. market.
Its net income margin is significantly higher than peers TM at 7.4%, GM at 6.3%, F at -1.3%, and RIVN at NM (not meaningful). The company’s autopilot, FSD, and software have boosted margins, as they add revenues without any variable costs.
Furthermore, Tesla’s EBIT margin of 16.8% is more than 2x that of its peers, with TM at 7.1%, GM at 7.7%, F at 4.9%, and RIVN at NM.
And Tesla has more levers it can pull for profits, like battery, powertrain manufacturing, energy storage, solar, and services.
Source: Seeking Alpha
Consumers cut their spending in 2022 for fear of a possible recession. But they didn’t stop buying Tesla cars. As we noted, the company grew revenues 51.4%, significantly more than TM at 7.3%, GM at 23.4%, and F at 15.9%. Rivian’s revenues grew 104,800%, but the company made only $55 million the year prior.
Over the last three years, Tesla has grown revenues an average of 49.1% compared to TM at 2.9%, GM at 4.5%, and F at 0.5%. (RIVN IPOed in late 2021.)
Our Opinion 8/10
While some analysts may not like TSLA due to its valuation, we argue that TSLA has a huge technological edge over its competitors, which makes us believe it can continue to grow at the pace it has.
In addition, it has the highest operating and profit margins among its peers. While it makes most of its money from cars right now, it has several levers it can pull for future growth.
Tesla is a hard stock to try to time. That’s why we think you should just own it and add on dips.
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