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Tesla, Inc. (TSLA)
- Equity
- US
- Consumer Cyclical
RISK
RETURN
Key risk factors
High price volatility
Low default risk
Good trading liquidity
Key return factors
Strong margins and returns
Greatly overvalued vs peers
Very low or no dividends
Company profileTesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. It operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers electric vehicles, as well as sells automotive regulatory credits; and non-warranty after-sales vehicle, used vehicles, retail merchandise, and vehicle insurance services. This segment also provides sedans and sport utility vehicles through direct and used vehicle sales, a network of Tesla Superchargers, and in-app upgrades; purchase financing and leasing services; services for electric vehicles through its company-owned service locations and Tesla mobile service technicians; and vehicle limited warranties and extended service plans. The Energy Generation and Storage segment engages in the design, manufacture, installation, sale, and leasing of solar energy generation and energy storage products, and related services to residential, commercial, and industrial customers and utilities through its website, stores, and galleries, as well as through a network of channel partners; and provision of service and repairs to its energy product customers, including under warranty, as well as various financing options to its solar customers. The company was formerly known as Tesla Motors, Inc. and changed its name to Tesla, Inc. in February 2017. Tesla, Inc. was incorporated in 2003 and is headquartered in Austin, Texas.
Valuation: Greatly overvalued
Multiple
TTM
NTM
P/E
43.70
78.10
PEG
1.00
-
P/B
9.20
8.20
P/S
6.30
6.00
P/FCF
430.60
208.00
EV/EBITDA
44.40
38.20
Based on key historical and expected multiples, the stock is greatly overvalued relative to its peers. Specifically, the stock is expensive' on P/E, overvalued on EV/EBITDA, and overpriced on P/FCF.
Performance: Mixed
The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 24ppts over six months and grown 24ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Neutral
The average target price is 178 and suggests 1% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 320.0. This translates into 78% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 22.9. This is equivalent to 87% downside potential in the worst case.
Profitability: Strong
RoE
Tesla, Inc. reported a return on equity (RoE) of 21.4% in the last 12 months, down from 33.6% in FY22. The market consensus projects an RoE of 19.3% in FY24, again ahead of its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 12.6% in the last 12 months, a decrease from 17.4% in FY22. The market analysts predict that RoA will be 11.3% in FY24, again stronger than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) declined to 17.3%, above the peers. The consensus estimate for FY24 for RoCE is 9.7%, however, this time below its peers.
Net margin
EBITDA margin
Historically, TSLA has reported strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 14.4%, down from 15.4% in FY22. The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 13.5% in the last 12 months, a decline from 21.9% in FY22.
RoIC / WACC = 1.2(average value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.2 in the past several years. This ratio implies a average shareholder value creation. Growth: Good
Revenue
EBITDA
EPS
Free cash flow
TSLA reported revenue of USD 94 745mn in the last 12 months, down 2% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 10% from FY23 to USD 4.27. Market expects EPS to reach USD 2.53 in FY24.Revenue has been growing steadily in the past several years (positive), while EBITDA has grown rapidly in recent years (positive). This all contributed to very fast EPS growth (strongly positive). Free cash flow, on the contrary, has climbed rapidly in recent years thanks to good cash generation, in contrast to the EBITDA dynamics. We emphasize the highly volatile dynamics of all key metrics. This is an extremely negative factor.
Dividends: Very low or none
The company does not pay dividends at all, or it pays them sporadically.
Default risk: Low
The risk of default is low. We note resilient historical revenue growth, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to poor working capital management.
Volatility: High
In normal market circumstances, TSLA is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense.
Stress-test: Average
In highly turbulent market conditions, TSLA is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate.
Selling difficulty: Low
TSLA boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.