Back to top

Image: Bigstock

Zacks Investment Ideas feature highlights: Tesla, Apple, General Motors, Honda Motor and Ford

Read MoreHide Full Article

For Immediate Release

Chicago, IL – June 2, 2023 – Today, Zacks Investment Ideas feature highlights Tesla (TSLA - Free Report) , Apple (AAPL - Free Report) , General Motors (GM - Free Report) , Honda Motor Co. (HMC - Free Report) and Ford (F - Free Report) .

5 Reasons to Buy Tesla Right Now

Over the years, Tesla has shifted from developing niche products for affluent buyers to making affordable electric vehicles for the masses. Though there have been many naysayers along the way, shares have increased by more than 12,000%. Despite a brutal correction in 2022, the EV maker has delivered positive earnings surprises in nine straight quarters, and shares have begun to recover as a result.

Below are five reasons the momentum can continue into year-end:

A Plethora of Catalysts

Price Cuts Sparking Demand: Over the years, Tesla CEO Elon Musk has often said that the EV maker has a supply problem, not a demand problem. However, in early 2023, Musk boldly cut prices to counter rising interest rates that are driving financing costs higher, compete with rivals, and allow several models to be eligible for the hefty $7,500 tax rebates for electric vehicles. (Allowed on EVs under 55,000 and electric SUVs and trucks under $80,000).

Stock Repurchase Plan: Apple is the best example of using buybacks to its advantage. AAPL has the most aggressive share repurchase plan on Wall Street, and the success of the strategy is undeniable. Stock buybacks increase earnings per share (The total number of shares outstanding decreases), create a favorable imbalance between supply and demand (Publics supply of shares is lower), and imply that the stock is undervalued and that it expects future growth. In Tesla’s recent earnings calls, Elon Musk suggested that the company would do a “meaningful buyback” in the fourth quarter of 2023.

A Hummer Replacement? In the early 2000s, General Motors saw a wave of success with its best-selling Hummer SUV. The eccentric army truck became popular with people from all walks of life who wanted to stand out on the roads. However, during the 2008 financial crisis, the viability of the Hummer came into question. Not only was the economy working against it, but sky-high oil prices also made its gas-guzzling nature unattractive, and the green movement in the United States was beginning and consumers were looking to decrease their carbon emissions.

Later this year, Tesla will launch its “Hummer killer,” the obnoxious-looking Cybertruck. The Cybertruck SUV is unlikely to run into the same issues the Hummer did for two reasons. First, unlike in 2008, 2023’s economy is not on the brink of collapse. If you use the Tesla Model Y SUV sales as a precedent, consumers are not only attracted to EVs, but also willing to pay a premium. Second, because the Cybertruck is fully electric, it will attract environmentally conscious consumers.

Full Self-Driving (FSD) Deployment: Tesla continues to refine and improve its AI-powered self-driving program. Already, FSD is much safer than the average driver on the road. In a recent interview, Musk seemed very bullish on FSD’s potential, saying “Tesla will have a Chat-GPT moment later this year.” Musk should know – he was the brains and investment behind Open AI’s Chat-GPT.

Electrifying “Non-Automotive” Growth: Over the last few years, Tesla’s energy generation and storage revenues have been growing at a CAGR of 47%. Tesla’s “Megapack” deployment is expected to rocket higher by 135% in 2023.

Valuation

Price to Sales at Bargain Basement Levels: Because of Tesla’s dominance in the EV realm, innovation, and high growth, it garners a higher valuation than traditional automakers such as Honda Motor Co. and Ford. That said, from a price-to-sales perspective, TSLA is at its most attractive level since the start of the post-pandemic recovery on Wall Street. The last time Tesla’s P/S ratio was at 8 (like it is now), shares increased sevenfold over the next several months.

Financial Efficiency

Return on Equity: Typically, automakers are known for having razor-thin margins. For Tesla, this isn’t the case. Tesla’s return on equity of 27.29% is higher than the S&P 500’s 25.67% over the trailing twelve months.

The “Magic Elixir”

Growth and Liquidity: Large institutional growth investors consider two major factors when selecting stocks: growth and liquidity. Tesla has grown its top and bottom lines at a healthy double-digit rate for years all while having a market cap north of $500 billion – an extremely rare feat.

Long-Term Area of Interest

A Rare Technical Zone: In monster stocks, the 50-week moving average is a long-term level that investors often defend. Tesla has held the zone since its inception in 2010 and is making a rare visit.

Tesla also jumped above its 200-day moving average for the first time since 2022 – another bullish sign.

Conclusion

A plethora of catalysts, a bargain basement valuation, financial efficiency, growth and liquidity, and strong technical action are key reasons why Tesla’s stock should be higher 6-12 months from now.

Why Haven’t You Looked at Zacks' Top Stocks?

Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.

See Stocks Free >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

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/performance for information about the performance numbers displayed in this press release.

Published in