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Proprietary Data Insights Financial Pros’ Top Automotive Stock Searches in the Last Month
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Should You Buy Tesla’s (TSLA) Stock?
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Investors weren’t impressed with Tesla’s (TSLA) latest earnings report. Shares plummeted over 10% as the company missed EPS estimates but beat on revenues. Still, financial pros were looking for signs of hope, according to our TrackStar data. Search volume focused on Tesla’s upcoming affordable model and Robotaxi initiative. However, we all know Musk often sets audacious goals and consistently misses timelines. So, where does that leave us? Tesla’s Business Unless you’ve been living under a rock, you know who Tesla is. Under the leadership of CEO Elon Musk, Tesla has expanded its product lineup to include a range of electric vehicles, energy storage systems, and solar products. The company operates multiple manufacturing facilities globally, including Gigafactories in the United States, China, and Germany. Tesla’s direct-to-consumer sales model and over-the-air software updates have set new standards for customer experience in the automotive sector. Currently, the company offers five models, with the Cybertruck being its latest innovation. Tesla segments its business into the following areas:
In Q2, deliveries dropped 4.8% year over year as the company struggled to sell vehicles, especially in China, where competition is heating up. Margins compressed as Tesla attempted to lure customers in with discounts. However, energy storage revenues doubled for the quarter from the prior quarter and a year ago. Musk spoke about his vision for robotaxis – an uber-like program where owners could rent out their cars. While he said it could happen early next year, the Robotaxi event scheduled for August has been pushed back to October. The real key to the company’s immediate future lies in the release of its lower-priced model (around $30,000) set to debut in 2025. Investors believe it could quickly become Tesla’s top seller, similar to Mercedes lower-end lineup. Financials
Source: Stock Analysis Up until recently, Tesla has seen incredible revenue growth. That came to a screeching halt as EVs saturated the market, particularly in China. This has forced Tesla to cut prices, compressing gross margins down to 18%, in line with some top auto makers. Yet, it knocks Tesla out of the high-growth category. Nonetheless, Tesla is an extremely profitable company, generating $3.0 billion in cash from operations each quarter and having very little debt. That gives the company plenty of cash to reinvest where it needs. Valuation
Source: Seeking Alpha You can’t look at Tesla and say it’s a value stock. And with margins compressing and growth in reverse, it’s tough to get excited about these multiples, especially when you can pick up General Motors (GM) or Ford (F) for 2.5x and 4.1x cash flow. Higher growth companies like Ferrari (RACE) command a premium. But not to the same degree as Tesla. Growth
Source: Seeking Alpha Tesla’s supercharged growth has recently faltered. That’s put it in a precarious position where it is seeing negative comps while competitors like GM and Ford are growing sales. Still, the introduction of a more affordable model in 2025 should juice sales. Profitability
Source: Seeking Alpha Tesla delivers enviable margins, though its gross margins are almost 8% lower than they had been after the pandemic. Premium brands like Ferrari can command higher prices, which translates into greater net income. Tesla used to be in that position but has seen its competitive advantage erode.
Our Opinion 8/10 Despite lower sales, Tesla continues to run a much better business model than most of its peers. While we are skeptical of the Robotaxi venture, the more affordable model due out in 2025 should add a significant boost to the company’s top and bottom line. |
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