NOTE: PLEASE READ THE FULL ARTICLE. IN THE END WE HAVE GIVEN PROS AND CONS OF BUYING TESLA (TSLA) STOCKS AND THE END POINT THE SHOULD YOU INVEST OR NOT. (*ALL THE INFORMATION IN THIS ARTICLE HAS BEEN TAKEN FROM THE INTERNET SOURCES)
HERE WE GO -
People thinks that Tesla’s (TSLA) stock value is determined by how many cars it will sell this year or next, or by some multiple of next year’s sales or earnings. But the value is determined by estimating the present value of the free cash flow stream that Tesla will generate over its lifetime.
MarketWatch readers, like investors everywhere, can’t seem to get enough news about Tesla and quirky billionaire CEO Elon Musk.
Where Tesla fits in -
Tesla is, in many ways, a stock that’s in a class by itself. And even if it weren’t, investors would need to remember that sometimes it’s not easy to compare apples to apples between any single company and its rivals. Consider this a reminder to do your own research and make an informed decision based on your individual needs, other news and numbers beyond what’s in this recap.
With that out of the way, let’s begin with the basics: Tesla isn’t quite the momentum darling it was in years past. And worse, with a 52-week high of about $900 a share and a current price in the low-$600s, it may be possible to make the case that Tesla hasn’t just slowed down but has actually shifted into reverse.
That may not be great for the bulls to hear, but it’s an important starting point.
NOTE : YOU COULD SEE THE ANALYSIS OF TSLA ( TESLA ) STOCKS AND OVERVIEWS ON - TipRanks
NOTE : YOU COULD SEE THE ANALYSIS OF TSLA ( TESLA ) STOCKS AND OVERVIEWS ON - TipRanks
As has been proven many times before, an Elon Musk tweet is a powerful tool. On the weekend the unpredictable Tesla (TSLA) CEO determined a Twitter poll’s outcome would decide whether he should sell a 10% stake in the company. This was Musk’s way of addressing the debate around unrealized gains being a way to avoid paying taxes. By the way, the answer from Musk’s gazillion followers was ‘yes,’ to which the market said, ‘oh no’ and sent shares down early on Monday.
The latest Musk-centered media storm is likely to swiftly fade until the next one appears, possibly as early as this evening. In the meantime, its best to focus on Tesla’s fundamentals, and here Daniel Ives (Director at Wedbush) believes things are only heading in one direction.
“Two fundamental changes have occurred to the Tesla story,” the 5-star analyst said. “1) the margin story coming out of 3Q earnings speaks to the massive leverage taking hold into 2022/2023, and 2) Hertz/Uber deal was a tipping point highlighting more mainstream adoption of EVs and a rental market that could be another 200k-300k cars delivered annually for Tesla as others follow Hertz's lead.”
As ever, though, the key element in the Tesla story remains China, which the analyst estimates will be the source of 40% of the EV maker’s 2022 deliveries. It has been far from smooth sailing in this most important of regions, but the company has managed to turnaround significant PR/safety headwinds from earlier in the year, and is now on track to see out 2021 on a ~50,000 monthly run-rate for China in Q4 that could “ramp further into early 2022.”
Tesla also has a “high class problem” of demand outstripping supply. But this will be addressed shortly when the long-awaited giga factories open in Austin and Berlin and will help “alleviate” the bottlenecks of production felt across the globe.
During the course of 2020, TSLA shares rose nearly 700%. But with this big run-up followed by an earnings miss, many investors might be wondering: "Is now the time to buy TSLA stock?" Before you make a decision, consider the pros and cons.
Pros of Buying Tesla Stock
Tesla also has a “high class problem” of demand outstripping supply. But this will be addressed shortly when the long-awaited giga factories open in Austin and Berlin and will help “alleviate” the bottlenecks of production felt across the globe.
During the course of 2020, TSLA shares rose nearly 700%. But with this big run-up followed by an earnings miss, many investors might be wondering: "Is now the time to buy TSLA stock?" Before you make a decision, consider the pros and cons.
Pros of Buying Tesla Stock
One of the biggest bright spots in Tesla's most recent earnings report was a record number of both production and deliveries. In the fourth quarter, Tesla produced 179,757 vehicles, an impressive 71% increase from the same quarter last year and well more than the 145,036 vehicles Tesla built in the third quarter. As for deliveries, Tesla found 180,667 vehicles a brand new home – a 61% year-over-year increase.
Tesla had set an ambitious goal of 500,000 vehicles delivered by the end of the year. Even with pandemic-related disruptions on its production lines, the company came incredibly close, delivering 499,647 over the course of 2020. The management team at Tesla believes it can improve on that, promising 50% average annual growth in deliveries over the coming years.
Cons of Buying Tesla Stock
Tesla's greatest asset is also its biggest threat: Elon Musk.
Hesitant investors will cite tweet after tweet of problematic rhetoric from the company's CEO. Perhaps the most infamous example occurred in early August 2018 when Musk tweeted that he was "considering taking Tesla private at $420."
After this incident, Musk was forced to step down as chairman of the board in settlement of his suit with the U.S. Securities and Exchange Commission. Unfazed, Musk single-handedly knocked billions off Tesla's market value earlier last year by tweeting, "Tesla stock price is too high imo."
The End Point - Should You Buy Tesla Stock?
The ride for shareholders seems to be smoothing out as the company meets quarter after quarter of profitability. That said, investors can't ignore Tesla's off-the-charts valuation multiples. And though the company reported $31.5 billion in total revenue for 2020, its current market cap is nearly $800 billion.
Tesla has grown into the largest car company in the world and now sits comfortably atop the industry. If things continue to go Tesla's way that's not likely to change anytime soon, and if history is any guide, betting against Musk tends to be a bad call.
