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Here's Why Tesla (TSLA) Stock Looks Like a Strong Buy Right Now
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Tesla (TSLA - Free Report) has seen its stock price jump over 18% since the electric car power posted impressive third-quarter results. Now, with a new chairman in place, it seems like Elon Musk’s company could be on track to return to its status as a Wall Street darling.
Quick Q3 Overview
Tesla’s quarterly revenues surged 128% from $2.98 billion in the year-ago quarter to hit $6.82 billion, which blew away our Zacks Consensus Estimate of $5.67 billion. This growth also marked a 70% jump from Q2’s $4 billion.
Meanwhile, Tesla was able to swing from a quarterly loss of $2.92 per share to post adjusted earnings of $2.90 per share. The company also posted GAAP net income of $312 million. “We expect to again have positive net income and cash flow in Q4 and I believe, our aspiration certainly will be for all quarters going forward,” Musk said on Tesla’s Q3 earnings call.
Bullish Details
The EV giant’s third quarter results were driven by better-than-expected Model 3 sales, along with higher average selling prices, and improved automotive gross margins. Plus, the Model 3 was the best-selling car in the U.S. in terms of revenue in Q3, topping Toyota (TM - Free Report) , Honda (HMC - Free Report) , and Ford (F - Free Report) models. Meanwhile, Tesla’s Model 3 sedan, with more mass market appeal, was the 5th best-selling vehicle in terms of volume.
Weekly Model 3 unit production averaged 4,300, which fell below Musk’s 5,000 goal. But the company produced 5,300 Model 3s in the last week of Q3. Maybe more importantly, the labor hours it took to make a Model 3 fell 30% from the second quarter—which also fell below Model S and Model X for the first time.
Overall, Tesla delivered 56,065 Model 3s at a starting price of $49,000—far above its $35,00 goal—to help bring its U.S. total to nearly 70,000 vehicles. “In Q4, we will focus even further on cost improvements while continuing to increase our production rate,” Tesla said in a Q3 statement.
Outlook
Moving on, Tesla plans to bring the Model 3 to Europe early next year, where it said that the mid-sized premium sedan market is more than twice as large as it is in the U.S. The company also aims to bring “a portion of Model 3 production to China during 2019,” which will be designated only for local customers in the world’s second-largest economy.
At this point, it is worth looking at a what Bloomberg New Energy Finance projects from the overall electric vehicle market. Bloomberg’s primary research service projects EV sales will soar from 1.1 million in 2017 to 11 million in 2025. The report also expects EV unit sales to reach a whopping 30 million by 2030, with the jump fueled by cheaper production costs. “China will lead this transition, with sales there accounting for almost 50% of the global EV market in 2025.”
In the near-term, Tesla’s Q4 revenues are projected to skyrocket over 113% to hit $7.01 billion, based on our current Zacks Consensus Estimate. Tesla’s full-year revenues are expected to reach $21.30 billion, which would mark an 81% surge from fiscal 2017.
Price Movement
Now that we have covered Tesla’s Q3 results and its top-line outlook, it’s time to see what’s going on with TSLA stock. As we mentioned at the top, shares of Tesla have surged since the firm reported its quarterly results on October 24.
We can, however, see from the chart that shares of TSLA have cooled down over the last few years. Still, despite some turbulence, Tesla stock is up roughly 87% over the last two years, which crushes the S&P 500’s 26% jump and even comes in just above Apple (AAPL - Free Report) .
Shares of TSLA closed regular trading Tuesday up 2.25% to $338.73 a share. This still marks a roughly 12.5% downturn from its 52-week high of $387.46 per share, and could set up a solid buying opportunity for investors who are high on Tesla.
Earnings Trends
Tesla’s adjusted fourth-quarter earnings are projected to skyrocket 159% from the year-ago quarter’s loss of $3.04 a share to $1.80 per share. Plus, Tesla’s earnings estimate revision activity has trended completely upward over the last 30 days for Q4, as well as for fiscal 2018 and 2019. We can also see just how improved Tesla’s earnings estimate picture is in the chart below.
Bottom Line
Tesla’s recent earnings estimate revision activity helps it earn a Zacks Rank #1 (Strong Buy). TSLA also sports an “A” grade for Growth in our Style Scores system.
Lastly, many investors are likely still worried about Tesla’s current debt levels despite its strong quarter and improved outlook. Yet, it seems very reasonable to believe that Tesla will simply raise the money it needs by selling more stock. Investors would stand to lose out in the short-term. But the cash is 100% necessary for Tesla to reach its long-term goals.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Here's Why Tesla (TSLA) Stock Looks Like a Strong Buy Right Now
Tesla (TSLA - Free Report) has seen its stock price jump over 18% since the electric car power posted impressive third-quarter results. Now, with a new chairman in place, it seems like Elon Musk’s company could be on track to return to its status as a Wall Street darling.
Quick Q3 Overview
Tesla’s quarterly revenues surged 128% from $2.98 billion in the year-ago quarter to hit $6.82 billion, which blew away our Zacks Consensus Estimate of $5.67 billion. This growth also marked a 70% jump from Q2’s $4 billion.
Meanwhile, Tesla was able to swing from a quarterly loss of $2.92 per share to post adjusted earnings of $2.90 per share. The company also posted GAAP net income of $312 million. “We expect to again have positive net income and cash flow in Q4 and I believe, our aspiration certainly will be for all quarters going forward,” Musk said on Tesla’s Q3 earnings call.
Bullish Details
The EV giant’s third quarter results were driven by better-than-expected Model 3 sales, along with higher average selling prices, and improved automotive gross margins. Plus, the Model 3 was the best-selling car in the U.S. in terms of revenue in Q3, topping Toyota (TM - Free Report) , Honda (HMC - Free Report) , and Ford (F - Free Report) models. Meanwhile, Tesla’s Model 3 sedan, with more mass market appeal, was the 5th best-selling vehicle in terms of volume.
Weekly Model 3 unit production averaged 4,300, which fell below Musk’s 5,000 goal. But the company produced 5,300 Model 3s in the last week of Q3. Maybe more importantly, the labor hours it took to make a Model 3 fell 30% from the second quarter—which also fell below Model S and Model X for the first time.
Overall, Tesla delivered 56,065 Model 3s at a starting price of $49,000—far above its $35,00 goal—to help bring its U.S. total to nearly 70,000 vehicles. “In Q4, we will focus even further on cost improvements while continuing to increase our production rate,” Tesla said in a Q3 statement.
Outlook
Moving on, Tesla plans to bring the Model 3 to Europe early next year, where it said that the mid-sized premium sedan market is more than twice as large as it is in the U.S. The company also aims to bring “a portion of Model 3 production to China during 2019,” which will be designated only for local customers in the world’s second-largest economy.
At this point, it is worth looking at a what Bloomberg New Energy Finance projects from the overall electric vehicle market. Bloomberg’s primary research service projects EV sales will soar from 1.1 million in 2017 to 11 million in 2025. The report also expects EV unit sales to reach a whopping 30 million by 2030, with the jump fueled by cheaper production costs. “China will lead this transition, with sales there accounting for almost 50% of the global EV market in 2025.”
In the near-term, Tesla’s Q4 revenues are projected to skyrocket over 113% to hit $7.01 billion, based on our current Zacks Consensus Estimate. Tesla’s full-year revenues are expected to reach $21.30 billion, which would mark an 81% surge from fiscal 2017.
Price Movement
Now that we have covered Tesla’s Q3 results and its top-line outlook, it’s time to see what’s going on with TSLA stock. As we mentioned at the top, shares of Tesla have surged since the firm reported its quarterly results on October 24.
We can, however, see from the chart that shares of TSLA have cooled down over the last few years. Still, despite some turbulence, Tesla stock is up roughly 87% over the last two years, which crushes the S&P 500’s 26% jump and even comes in just above Apple (AAPL - Free Report) .
Shares of TSLA closed regular trading Tuesday up 2.25% to $338.73 a share. This still marks a roughly 12.5% downturn from its 52-week high of $387.46 per share, and could set up a solid buying opportunity for investors who are high on Tesla.
Earnings Trends
Tesla’s adjusted fourth-quarter earnings are projected to skyrocket 159% from the year-ago quarter’s loss of $3.04 a share to $1.80 per share. Plus, Tesla’s earnings estimate revision activity has trended completely upward over the last 30 days for Q4, as well as for fiscal 2018 and 2019. We can also see just how improved Tesla’s earnings estimate picture is in the chart below.
Bottom Line
Tesla’s recent earnings estimate revision activity helps it earn a Zacks Rank #1 (Strong Buy). TSLA also sports an “A” grade for Growth in our Style Scores system.
Lastly, many investors are likely still worried about Tesla’s current debt levels despite its strong quarter and improved outlook. Yet, it seems very reasonable to believe that Tesla will simply raise the money it needs by selling more stock. Investors would stand to lose out in the short-term. But the cash is 100% necessary for Tesla to reach its long-term goals.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>