Tesla (TSLA) shares have risen by 18% in the last month and are presently priced at $475. While Tesla’s core automotive business is facing headwinds, amid mounting competition and a broader slowdown in EV demand, investors appear optimistic about the company’s AI related developments. The company recently provided an update on its Robotaxi program, noting that roughly six months after launching a limited service in Austin, Texas that relied on human safety drivers, it has begun testing vehicles without safety drivers on board, a step that underscores progress toward autonomy. As an aside, Apple stock has done well the past six months, but is that about to change? Check out: How Apple Stock Can Plummet 30%.
VAIL, CO – JUNE 9, 2017: The Tesla brand logo embellishes the nose of a Tesla electric sedan in Vail, Colorado. (Photo by Robert Alexander/Getty Images)
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That being said, our comprehensive analysis indicates that it might be the right moment to sell TSLA shares. Overall, we maintain a pessimistic outlook on the stock, and a target price of $330 seems feasible. We find that there is an almost equal balance of positives and negatives in TSLA stock considering its general Moderate operational performance and financial status. However, given its Very High valuation, we consider the stock to be Unattractive.
Here is our evaluation:
Summary
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Let’s delve into the details of each of the assessed factors. But first, for a quick background: With $1.5 Tril in market capitalization, Tesla offers electric vehicles and regulatory credits in the automotive industry and designs, manufactures, installs, sells, and leases energy generation and storage solutions.
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[1] Valuation Looks Very High
Valuation
Tesla
This table illustrates the valuation of TSLA compared to the broader market. For more information see: TSLA Valuation Ratios
[2] Growth Is Inconsistent
- Tesla has experienced an average top-line growth rate of 9.3% over the past 3 years
- Its revenues decreased by -1.6% from $97 Bil to $96 Bil in the last 12 months
- Furthermore, its quarterly revenues increased by 11.6% to $28 Bil in the most recent quarter from $25 Bil a year earlier.
Growth
Trefis
This table shows how TSLA is expanding compared to the broader market. For further information see: TSLA Revenue Comparison
[3] Profitability Appears Weak
- TSLA’s operating income over the last 12 months was $4.9 Bil, corresponding to an operating margin of 5.1%
- With a cash flow margin of 16.5%, it produced approximately $16 Bil in operating cash flow during this period
- During the same timeframe, TSLA achieved nearly $5.1 Bil in net income, indicating a net margin of around 5.3%
[4] Financial Stability Looks Very Strong
- At the end of the latest quarter, TSLA’s Debt stood at $14 Bil, while its current Market Cap is $1.5 Tril. This results in a Debt-to-Equity Ratio of 1.0%
- TSLA’s Cash (including cash equivalents) accounts for $42 Bil of $134 Bil in total Assets. This leads to a Cash-to-Assets Ratio of 31.1%
Financials
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[5] Downturn Resilience Is Weak
TSLA has underperformed compared to the S&P 500 index during different economic downturns. We evaluate this based on (a) how much the stock declined and, (b) how rapidly it rebounded.
2022 Inflation Shock
- TSLA shares dropped 73.6% from a peak of $409.97 on November 4, 2021, to $108.10 on January 3, 2023, in contrast to a peak-to-trough drop of 25.4% for the S&P 500.
- Nonetheless, the stock completely recovered to its pre-crisis high by December 11, 2024
- Sine then, the stock surged to a high of $479.86 on December 17, 2024, and is currently trading at $475.31
2020 Covid Pandemic
- TSLA stock fell by 60.6% from a peak of $61.16 on February 19, 2020, to $24.08 on March 18, 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500.
- The stock fully recovered to its pre-crisis high by June 8, 2020
Nevertheless, the risks are not restricted to significant market declines. Stocks can drop even in favorable market conditions—consider events such as earnings announcements, business updates, and outlook alterations. To understand how the stock has bounced back from sudden drops in the past, read TSLA Dip Buyer Analyses.
The Trefis High Quality (HQ) Portfolio, which includes a selection of 30 stocks, has consistently achieved superior performance compared to its benchmark, encompassing the S&P 500, S&P mid-cap, and Russell 2000 indices. What accounts for this? As a collective, HQ Portfolio stocks have delivered better returns while taking on lower risk than the benchmark index; presenting a more stable investment experience, as observed in HQ Portfolio performance metrics.