We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Dillard's and Match Group have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – November 22, 2022 – Zacks Equity Research shares Dillard's (DDS - Free Report) as the Bull of the Day and Match Group (MTCH - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla (TSLA - Free Report) , Harley-Davidson (HOG - Free Report) and PACCAR (PCAR - Free Report) .
Dillard's maintains its Zacks #1 Rank status after another strong earnings report where analysts boosted estimates for the current quarter and next year.
We'll go over the details of the report from November 10 right after we check in with the solid analysis from my colleague Brian Hayes last month. Here's what Bryan observed...
Dillard's is a long-term market winner within the Zacks Retail – Wholesale sector. The stock has held up extraordinarily well this year while the general market continues to hover in bear territory. Stocks that are able to show resilience during bear markets and weather the volatility tend to lead the upside once the market turns the corner.
DDS sports the highest-possible 'A' rating in our Zacks Value Style Score category, indicating an increased likelihood that the stock continues to propel higher. Dillard's is trading at just a 7.53 forward P/E. The powerful combination of relative undervaluation and positive earnings estimate revisions should serve bullish DDS investors well into the future.
Recent Earnings and Future Estimates
DDS has been on a hot streak in terms of earnings surprises, beating estimates in each of the past four quarters. Back in August, the company reported Q2 EPS of $9.3/share, a +222.92% surprise over the $2.88 consensus estimate. Dillard's has posted a trailing four-quarter average earnings surprise of +214.96%. When a company is consistently exceeding estimates by this wide of a margin, it typically creates a 'tailwind' and boosts price momentum.
Sales for the second quarter of $1.59 billion also topped estimates by 2.23%. DDS has surpassed revenue estimates in each of the last four quarters.
In the past 60 days, analysts have raised their full-year EPS projections by +38.34%. The Zacks Consensus EPS Estimate now stands at $36.23 per share. Revenues are anticipated to climb 4.79% to $6.8 billion.
(end of analysis from Bryan Hayes)
Q3 Delivers a 125% Earnings Beat
Well, they did it again. Dillard's bottom and top lines surpassed the Zacks Consensus Estimate and advanced year over year. This marked the seventh straight quarter of a top and bottom-line beat. Results gained from the continued momentum in consumer demand.
Since Dillard's is a core luxury department store in Texas and other energy-rich states, I'm betting that the bull market in oil has a bit to do with it. DDS currently operates 249 full-line Dillard's stores, and 28 clearance stores in 29 states.
Adjusted earnings of $10.96 per share significantly surpassed the Zacks Consensus Estimate of $4.87. The bottom line rose 11.7% from the year-ago quarter's $9.81 per share.
Total revenues of $1,544 million increased 4.3% from the prior-year quarter and beat the Zacks Consensus Estimate of $1,490 million. However, the figure came below our estimate of $2,100.7 million.
Total retail sales (excluding CDI Contractors, LLC) advanced 3% year over year to $1,499 million. Comparable store sales rose 3% year over year. The company witnessed robust sales in cosmetics, men's apparel and accessories, home and furniture, and shoes. On the flip side, juniors' and children's apparel was the weakest performing category.
In response to this report, analysts of course had to raise FY'23 (ends in January) EPS by 14% due to the big $6 beat. But they also raised next year's EPS consensus by 10% to $25.10.
While we wait to see if analysts are more optimistic about next year's earnings outlook, the stock remains attractive on a price-to-sales basis trading at under 1 times revenue.
Match Groupis the $13 billion host extraordinaire for the world's foremost dating websites and operates a portfolio of more than 45 brands. Its biggest and best known outlets are Tinder, Match.com, PlentyOfFish, Meetic and OkCupid.
The Dallas, TX-based company offers dating products in 42 languages in more than 190 countries and will cross sales of $3 billion this year, up over 6.9%.
The company is currently enjoying moderate growth, driven by robust momentum at Tinder and solid performances from Meetic, Match, Pairs as well as PlentyOfFish.
Match came out with quarterly earnings of $0.58 per share recently, missing the Zacks Consensus Estimate of $0.64 per share. This compares to earnings of $0.53 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of -9.38%. A quarter ago, it was expected that this media and internet company would post earnings of $0.69 per share when it actually produced earnings of $0.89, delivering a surprise of 28.99%.
Over the last four quarters, the company has surpassed consensus EPS estimates only two times.
Match Group, which belongs to the Zacks Internet - Commerce industry, posted revenues of $809.55 million for the quarter ended September 2022, surpassing the Zacks Consensus Estimate by 2.08%. This compares to year-ago revenues of $801.84 million. The company has topped consensus revenue estimates two times over the last four quarters.
Revenues of $810 million increased 1% year over year, beating the Zacks Consensus Estimate by 2.14%.
Excluding forex, the top line increased 10% year over year to $883 million, driven by 9% growth in revenue per payer (RPP).
Quarter in Detail
In the third quarter, the number of total payers increased 2% to 16.5 million. The number of total payers from America and Europe decreased by 0.9% and 1.31%, respectively, whereas the Asia Pacific (APAC) saw an increase of 11% on a year-over-year basis.
Total RPP was flat over the prior year's quarter at $16.02. Region-wise, RPP increased 6.07% in America and decreased 14.5% in APAC, while remaining unchanged in Europe year-over-year.
America's RPP increased primarily due to increases in subscriptions and a la carte purchases at Tinder and Hinge. Europe's RPP was unfavorably impacted by the strength of the U.S. dollar relative to the euro and British pound, while APAC and Other's RPPs were unfavorably impacted by the strength of the U.S. dollar relative to the Japanese yen and Turkish lira.
Direct revenues from the Americas were up 4.9% to $413.8 million. Direct revenues from Europe and APAC decreased 1.35% to $214.7 million and 4.72 to $166.5 million, respectively.
Direct revenues from Tinder grew 6% from the prior-year quarter, driven by 7% Payers growth to 11.1 million, partially offset by an RPP decline of 1%.
Direct revenues from All Other Brands collectively declined 5% year over year, along with an 8% Payers decline, which was offset by 3% RRP growth. Within All Other Brands, Hinge Direct Revenue grew nearly 40% year-over-year in the third quarter 2022.
Match, Meetic, OkCupid and Plenty of Fish, saw both direct revenue and payers decline 15% year-over-year basis. APAC-based businesses, Pairs and Hyperconnect, saw direct revenue decline 15% year-over-year basis.
Bottom line on MTCH: While we want to support people being able to find love online, we have to be wary of investing in the portals for it.
Additional content:
The Investment Case for Tesla (TSLA - Free Report) : Buy the Latest Dip?
Tesla has been one of the most amazing growth stocks since its market debut in 2010, outperforming major tech titans and auto giants. While the electric vehicle (EV) bigwig had its share of ups and downs, it generated mind-boggling returns for patient investors.
Indeed, its pricey valuation has never made sense but Tesla fans have always believed in Elon Musk's vision. From a shaky startup, Tesla has come a long way on the back of its soaring popularity of e-mobility, exciting products, aggressive expansion efforts and legions of loyal fans. After running into losses for years, Tesla notched up its first full-year profit in 2020. Ever since, TSLA has managed to be in the black, proving its skeptics wrong.
Over the last five years, shares of the company have skyrocketed more than 2,300%. But the stellar run on the bourses hit a pause this year, as is the case with many exciting and high-flying growth stocks. Logistical issues surfaced as a thorn in Tesla's narrative. An ultra-hawkish Fed is further spoiling the momentum. Year to date, Tesla has plummeted roughly 50%, making even its most steady supporters jittery. On Friday, the stock sank to a 52-week low of $176.55, ending the session a tad higher at $180.19.
Does the recent dip represent a buying opportunity? Before we look at Tesla's outlook and valuation to see if it is indeed a good time to buy its shares, let's check out what has been ailing the stock's performance lately.
Q3 Sales Miss, Twitter Hangover & Other Pain Points
Tesla reported third-quarter earnings last month, with the bottom line beating the Zacks Consensus Estimate but revenues missing the same.Top-line growth was underwhelming, with sales missing expectations by 4% on revenues of $21.45 billion. A record 343,830 deliveries during the quarter slightly missed expectations as well. Shedding light on logistical challenges, management notified in a press release, "As our production volumes continue to grow, it is becoming increasingly challenging to secure vehicle transportation capacity and at a reasonable cost during these peak logistics weeks." Of course, investors are discouraged by the sales miss and logistics concerns.
Markets aren't reacting too well to Musk's takeover of Twitter. Tesla investors fear that Twitter could be a distraction for the entrepreneur. Musk's selling of TSLA shares to fund Twitter is not going down well with its shareholders. Earlier this month, Musk liquidated more Tesla shares following his Twitter acquisition. He sold 19.5 million shares worth close to $4 billion, bringing the total value of Tesla shares sold by Musk to roughly $20 billion so far this year. A big concern of TSLA shareholders is that Musk will be spread too thin across all his responsibilities because of the Twitter takeover. Speculations are rife that the widely-hailed Tesla CEO doesn't have enough time on his hands to navigate both companies properly.
The stock was also hurt by the recent price cuts for its EVs in China. Tesla slashed the prices of Model 3/Y cars by as much as 9% in China during late October amid signs of softening demand and rising competition in the world's largest car market. Tesla is hardly immune to the supply-chain issues, and economic uncertainty and aggressive rate hikes are making matters worse for the automaker.
Long-Term Prospects Still Strong
The world is doubling down on EV adoption with government subsidies, policy changes and infrastructure buildup. And Tesla has gradually established itself as a leader in the e-mobility space. This should be the perfect backdrop for solid growth into the foreseeable future. Tesla has a 5-year expected EPS growth rate of 31.4%, higher than the industry's 18.7%.
Robust demand for Models 3 and Y, production ramp-up at gigafactory 4 (in Berlin) and 5 (in Austin), and introduction of models, including Semi and Cybertruck, are set to support delivery growth. Musk expects deliveries to surge at 30% annualized rate for the foreseeable future. It's also worth noting that Tesla boasts an energy business with the potential to grow faster than its vehicles business. Tesla's energy generation and storage revenues are on a massive growth trajectory, thanks to the positive reception of Megapack and Powerwall products.
Valuation & Growth Estimates
Despite the massive sell-off this year, Tesla shares are still overvalued. TSLA has a P/E ratio of 34.95, above the industry average of 28.41. While the premium may be a factor, Tesla has never really been a value stock. Also, valuation is starting to become reasonable as the company is consistently improving its business model. Although expensive at 34.95X P/E, the value is the lowest level the shares have traded this year so far. TSLA's P/S of 5.10 is also much lower than its decade-high 18.73 and near-the-median 4.06.
While there could be better buying opportunities ahead, Tesla is trading at a far better valuation than it has in the past. Also, electric vehicles still represent a relatively small portion of the auto industry market and the space still has massive scope to grow.
Year over year, TSLA's 2022 EPS is now expected to rise 79.2% to $4.05. Earnings in 2023 are expected to jump another 30.5% to $5.29 per share. The top line is expected to climb 54% this year. Estimates point to another 39% ascent to $115.11 billion in 2023, more than quadrupling pre-pandemic sales of $24.57 billion registered in 2019.
Final Words
As Tesla's shares have slumped in the red year to date, long-term investors are therefore presented with an opportunity to buy the dips at a level not seen in some time. TSLA's valuation multiples fell extensively, perhaps enticing investors with a long-term horizon. Further, Tesla has a strong growth profile, with revenue and earnings projected to soar by double-digit percentages in its current year and next. We believe Tesla is a solid long-term investment option at current price levels based on its market leadership, progressively broadening global operations and new product developments that promise to take it to dizzy heights in the coming years.
However, near-term headwinds persist. Tesla faces problems related to raw material procurement and logistics. The strong U.S. dollar also doesn't help a company that generates a significant percentage of sales overseas and a substantial ramp-up in production in the country. Commodity inflation has been shrinking the automotive gross margins of Tesla for the past two quarters. Persistent rate hikes and fears of a potential recession may create better opportunities, as the shares could get beaten down further. Considering all the tailwinds and headwinds, it would be a good idea to take a wait-and-see approach on Tesla. The current Zacks #3 (Hold) of TSLA underscores our stance on the stock.
While Tesla currently carries a Zacks Rank #3 (Hold), we present you two stocks from the auto space that currently have a Zacks Rank #2 (Buy).
Harley-Davidson: One of the leading motorcycle makers in the world, Harley-Davidson is currently focusing on motorcycle models and technologies that better align with the market trends. HOG's 'Hardwire' plans look to improve effectiveness and contribute to revenue growth.
The Zacks Consensus Estimate for Harley-Davidson's 2022 sales and EPS is pegged at 7.5% and 12.4% growth each from the respective year-ago reported figures. HOG has a Value Score of A. The stock's earnings surpassed estimates in three of the last four quarters and missed once, the average surprise being 43.24%.
PACCAR: PACCAR is one of the leading names in the trucking business with reputed brands like Kenworth, Peterbilt and DAF. PCAR's accelerated efforts toward electrification and connected vehicle services are set to boost prospects.
The Zacks Consensus Estimate for PACCAR's 2022 sales and EPS stands at 21.6% and 53.2% growth each from the respective year-earlier reported numbers. PCAR has a Value Score of A. The stock's earnings exceeded estimates in each of the last four quarters, the average being 12.6%.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Dillard's and Match Group have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 22, 2022 – Zacks Equity Research shares Dillard's (DDS - Free Report) as the Bull of the Day and Match Group (MTCH - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla (TSLA - Free Report) , Harley-Davidson (HOG - Free Report) and PACCAR (PCAR - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Dillard's maintains its Zacks #1 Rank status after another strong earnings report where analysts boosted estimates for the current quarter and next year.
We'll go over the details of the report from November 10 right after we check in with the solid analysis from my colleague Brian Hayes last month. Here's what Bryan observed...
Dillard's is a long-term market winner within the Zacks Retail – Wholesale sector. The stock has held up extraordinarily well this year while the general market continues to hover in bear territory. Stocks that are able to show resilience during bear markets and weather the volatility tend to lead the upside once the market turns the corner.
DDS sports the highest-possible 'A' rating in our Zacks Value Style Score category, indicating an increased likelihood that the stock continues to propel higher. Dillard's is trading at just a 7.53 forward P/E. The powerful combination of relative undervaluation and positive earnings estimate revisions should serve bullish DDS investors well into the future.
Recent Earnings and Future Estimates
DDS has been on a hot streak in terms of earnings surprises, beating estimates in each of the past four quarters. Back in August, the company reported Q2 EPS of $9.3/share, a +222.92% surprise over the $2.88 consensus estimate. Dillard's has posted a trailing four-quarter average earnings surprise of +214.96%. When a company is consistently exceeding estimates by this wide of a margin, it typically creates a 'tailwind' and boosts price momentum.
Sales for the second quarter of $1.59 billion also topped estimates by 2.23%. DDS has surpassed revenue estimates in each of the last four quarters.
In the past 60 days, analysts have raised their full-year EPS projections by +38.34%. The Zacks Consensus EPS Estimate now stands at $36.23 per share. Revenues are anticipated to climb 4.79% to $6.8 billion.
(end of analysis from Bryan Hayes)
Q3 Delivers a 125% Earnings Beat
Well, they did it again. Dillard's bottom and top lines surpassed the Zacks Consensus Estimate and advanced year over year. This marked the seventh straight quarter of a top and bottom-line beat. Results gained from the continued momentum in consumer demand.
Since Dillard's is a core luxury department store in Texas and other energy-rich states, I'm betting that the bull market in oil has a bit to do with it. DDS currently operates 249 full-line Dillard's stores, and 28 clearance stores in 29 states.
Adjusted earnings of $10.96 per share significantly surpassed the Zacks Consensus Estimate of $4.87. The bottom line rose 11.7% from the year-ago quarter's $9.81 per share.
Total revenues of $1,544 million increased 4.3% from the prior-year quarter and beat the Zacks Consensus Estimate of $1,490 million. However, the figure came below our estimate of $2,100.7 million.
Total retail sales (excluding CDI Contractors, LLC) advanced 3% year over year to $1,499 million. Comparable store sales rose 3% year over year. The company witnessed robust sales in cosmetics, men's apparel and accessories, home and furniture, and shoes. On the flip side, juniors' and children's apparel was the weakest performing category.
In response to this report, analysts of course had to raise FY'23 (ends in January) EPS by 14% due to the big $6 beat. But they also raised next year's EPS consensus by 10% to $25.10.
While we wait to see if analysts are more optimistic about next year's earnings outlook, the stock remains attractive on a price-to-sales basis trading at under 1 times revenue.
Bear of the Day:
Match Groupis the $13 billion host extraordinaire for the world's foremost dating websites and operates a portfolio of more than 45 brands. Its biggest and best known outlets are Tinder, Match.com, PlentyOfFish, Meetic and OkCupid.
The Dallas, TX-based company offers dating products in 42 languages in more than 190 countries and will cross sales of $3 billion this year, up over 6.9%.
The company is currently enjoying moderate growth, driven by robust momentum at Tinder and solid performances from Meetic, Match, Pairs as well as PlentyOfFish.
Match came out with quarterly earnings of $0.58 per share recently, missing the Zacks Consensus Estimate of $0.64 per share. This compares to earnings of $0.53 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of -9.38%. A quarter ago, it was expected that this media and internet company would post earnings of $0.69 per share when it actually produced earnings of $0.89, delivering a surprise of 28.99%.
Over the last four quarters, the company has surpassed consensus EPS estimates only two times.
Match Group, which belongs to the Zacks Internet - Commerce industry, posted revenues of $809.55 million for the quarter ended September 2022, surpassing the Zacks Consensus Estimate by 2.08%. This compares to year-ago revenues of $801.84 million. The company has topped consensus revenue estimates two times over the last four quarters.
Revenues of $810 million increased 1% year over year, beating the Zacks Consensus Estimate by 2.14%.
Excluding forex, the top line increased 10% year over year to $883 million, driven by 9% growth in revenue per payer (RPP).
Quarter in Detail
In the third quarter, the number of total payers increased 2% to 16.5 million. The number of total payers from America and Europe decreased by 0.9% and 1.31%, respectively, whereas the Asia Pacific (APAC) saw an increase of 11% on a year-over-year basis.
Total RPP was flat over the prior year's quarter at $16.02. Region-wise, RPP increased 6.07% in America and decreased 14.5% in APAC, while remaining unchanged in Europe year-over-year.
America's RPP increased primarily due to increases in subscriptions and a la carte purchases at Tinder and Hinge. Europe's RPP was unfavorably impacted by the strength of the U.S. dollar relative to the euro and British pound, while APAC and Other's RPPs were unfavorably impacted by the strength of the U.S. dollar relative to the Japanese yen and Turkish lira.
Direct revenues from the Americas were up 4.9% to $413.8 million. Direct revenues from Europe and APAC decreased 1.35% to $214.7 million and 4.72 to $166.5 million, respectively.
Direct revenues from Tinder grew 6% from the prior-year quarter, driven by 7% Payers growth to 11.1 million, partially offset by an RPP decline of 1%.
Direct revenues from All Other Brands collectively declined 5% year over year, along with an 8% Payers decline, which was offset by 3% RRP growth. Within All Other Brands, Hinge Direct Revenue grew nearly 40% year-over-year in the third quarter 2022.
Match, Meetic, OkCupid and Plenty of Fish, saw both direct revenue and payers decline 15% year-over-year basis. APAC-based businesses, Pairs and Hyperconnect, saw direct revenue decline 15% year-over-year basis.
Bottom line on MTCH: While we want to support people being able to find love online, we have to be wary of investing in the portals for it.
Additional content:
The Investment Case for Tesla (TSLA - Free Report) : Buy the Latest Dip?
Tesla has been one of the most amazing growth stocks since its market debut in 2010, outperforming major tech titans and auto giants. While the electric vehicle (EV) bigwig had its share of ups and downs, it generated mind-boggling returns for patient investors.
Indeed, its pricey valuation has never made sense but Tesla fans have always believed in Elon Musk's vision. From a shaky startup, Tesla has come a long way on the back of its soaring popularity of e-mobility, exciting products, aggressive expansion efforts and legions of loyal fans. After running into losses for years, Tesla notched up its first full-year profit in 2020. Ever since, TSLA has managed to be in the black, proving its skeptics wrong.
Over the last five years, shares of the company have skyrocketed more than 2,300%. But the stellar run on the bourses hit a pause this year, as is the case with many exciting and high-flying growth stocks. Logistical issues surfaced as a thorn in Tesla's narrative. An ultra-hawkish Fed is further spoiling the momentum. Year to date, Tesla has plummeted roughly 50%, making even its most steady supporters jittery. On Friday, the stock sank to a 52-week low of $176.55, ending the session a tad higher at $180.19.
Does the recent dip represent a buying opportunity? Before we look at Tesla's outlook and valuation to see if it is indeed a good time to buy its shares, let's check out what has been ailing the stock's performance lately.
Q3 Sales Miss, Twitter Hangover & Other Pain Points
Tesla reported third-quarter earnings last month, with the bottom line beating the Zacks Consensus Estimate but revenues missing the same.Top-line growth was underwhelming, with sales missing expectations by 4% on revenues of $21.45 billion. A record 343,830 deliveries during the quarter slightly missed expectations as well. Shedding light on logistical challenges, management notified in a press release, "As our production volumes continue to grow, it is becoming increasingly challenging to secure vehicle transportation capacity and at a reasonable cost during these peak logistics weeks." Of course, investors are discouraged by the sales miss and logistics concerns.
Markets aren't reacting too well to Musk's takeover of Twitter. Tesla investors fear that Twitter could be a distraction for the entrepreneur. Musk's selling of TSLA shares to fund Twitter is not going down well with its shareholders. Earlier this month, Musk liquidated more Tesla shares following his Twitter acquisition. He sold 19.5 million shares worth close to $4 billion, bringing the total value of Tesla shares sold by Musk to roughly $20 billion so far this year. A big concern of TSLA shareholders is that Musk will be spread too thin across all his responsibilities because of the Twitter takeover. Speculations are rife that the widely-hailed Tesla CEO doesn't have enough time on his hands to navigate both companies properly.
The stock was also hurt by the recent price cuts for its EVs in China. Tesla slashed the prices of Model 3/Y cars by as much as 9% in China during late October amid signs of softening demand and rising competition in the world's largest car market. Tesla is hardly immune to the supply-chain issues, and economic uncertainty and aggressive rate hikes are making matters worse for the automaker.
Long-Term Prospects Still Strong
The world is doubling down on EV adoption with government subsidies, policy changes and infrastructure buildup. And Tesla has gradually established itself as a leader in the e-mobility space. This should be the perfect backdrop for solid growth into the foreseeable future. Tesla has a 5-year expected EPS growth rate of 31.4%, higher than the industry's 18.7%.
Robust demand for Models 3 and Y, production ramp-up at gigafactory 4 (in Berlin) and 5 (in Austin), and introduction of models, including Semi and Cybertruck, are set to support delivery growth. Musk expects deliveries to surge at 30% annualized rate for the foreseeable future. It's also worth noting that Tesla boasts an energy business with the potential to grow faster than its vehicles business. Tesla's energy generation and storage revenues are on a massive growth trajectory, thanks to the positive reception of Megapack and Powerwall products.
Valuation & Growth Estimates
Despite the massive sell-off this year, Tesla shares are still overvalued. TSLA has a P/E ratio of 34.95, above the industry average of 28.41. While the premium may be a factor, Tesla has never really been a value stock. Also, valuation is starting to become reasonable as the company is consistently improving its business model. Although expensive at 34.95X P/E, the value is the lowest level the shares have traded this year so far. TSLA's P/S of 5.10 is also much lower than its decade-high 18.73 and near-the-median 4.06.
While there could be better buying opportunities ahead, Tesla is trading at a far better valuation than it has in the past. Also, electric vehicles still represent a relatively small portion of the auto industry market and the space still has massive scope to grow.
Year over year, TSLA's 2022 EPS is now expected to rise 79.2% to $4.05. Earnings in 2023 are expected to jump another 30.5% to $5.29 per share. The top line is expected to climb 54% this year. Estimates point to another 39% ascent to $115.11 billion in 2023, more than quadrupling pre-pandemic sales of $24.57 billion registered in 2019.
Final Words
As Tesla's shares have slumped in the red year to date, long-term investors are therefore presented with an opportunity to buy the dips at a level not seen in some time. TSLA's valuation multiples fell extensively, perhaps enticing investors with a long-term horizon. Further, Tesla has a strong growth profile, with revenue and earnings projected to soar by double-digit percentages in its current year and next. We believe Tesla is a solid long-term investment option at current price levels based on its market leadership, progressively broadening global operations and new product developments that promise to take it to dizzy heights in the coming years.
However, near-term headwinds persist. Tesla faces problems related to raw material procurement and logistics. The strong U.S. dollar also doesn't help a company that generates a significant percentage of sales overseas and a substantial ramp-up in production in the country. Commodity inflation has been shrinking the automotive gross margins of Tesla for the past two quarters. Persistent rate hikes and fears of a potential recession may create better opportunities, as the shares could get beaten down further. Considering all the tailwinds and headwinds, it would be a good idea to take a wait-and-see approach on Tesla. The current Zacks #3 (Hold) of TSLA underscores our stance on the stock.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
2 Auto Stocks to Bet On
While Tesla currently carries a Zacks Rank #3 (Hold), we present you two stocks from the auto space that currently have a Zacks Rank #2 (Buy).
Harley-Davidson: One of the leading motorcycle makers in the world, Harley-Davidson is currently focusing on motorcycle models and technologies that better align with the market trends. HOG's 'Hardwire' plans look to improve effectiveness and contribute to revenue growth.
The Zacks Consensus Estimate for Harley-Davidson's 2022 sales and EPS is pegged at 7.5% and 12.4% growth each from the respective year-ago reported figures. HOG has a Value Score of A. The stock's earnings surpassed estimates in three of the last four quarters and missed once, the average surprise being 43.24%.
PACCAR: PACCAR is one of the leading names in the trucking business with reputed brands like Kenworth, Peterbilt and DAF. PCAR's accelerated efforts toward electrification and connected vehicle services are set to boost prospects.
The Zacks Consensus Estimate for PACCAR's 2022 sales and EPS stands at 21.6% and 53.2% growth each from the respective year-earlier reported numbers. PCAR has a Value Score of A. The stock's earnings exceeded estimates in each of the last four quarters, the average being 12.6%.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.