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.
Tesla is the undisputed market leader in battery-powered electric car sales in the United States, enjoying roughly a 70% market share. Over the years, Tesla has shifted from developing niche products for affluent buyers to more affordable EVs for the masses. The firm's three-pronged business model approach of direct sales, servicing, and charging sets it apart from other carmakers. Year-to-date, shares are higher by 128%. However, investor concerns are mounting, including:
· Valuation: The EV king's market capitalization is more than the combined value of all legacy automakers.
· Underperformance: Though Tesla has more than doubled this year, it has underperformed the market and "Magnificent 7" recently.
· Recall: This week, news broke that Tesla must recall more than 2 million vehicles.
Below, I will debunk the most common investor concerns and lay out my bull case for the stock:
Don't Judge a Book By its Cover: Tesla Valuation is Cheap
The price-to-book ratio (P/B ratio) is a financial metric that compares a company's market value (its stock price) to its book value (the net value of its assets minus liabilities). P/B is calculated by dividing the market price per share by the book value per share.
A low P/B ratio may suggest that a stock is undervalued, while a high ratio may indicate overvaluation. Investors use this ratio to assess a company's relative worth in the market compared to its accounting value. Tesla currently has a book value of 14.03. Compare that to another mainstream stock like Apple, whose book value is 49.54, and Tesla suddenly looks cheap.
Furthermore, it is essential to remember that Wall Street is a discounting device. Over the past twelve years, Tesla has achieved a stunning compound annual growth rate (CAGR) of 72%, earning its premium above slower-growing legacy automakers.
Rallying on Negative Recall News
Earlier this week, Tesla was forced to recall over two million vehicles over autopilot safety concerns. As I always like to remind investors, the reaction to negative news supersedes the news itself. In the case of TSLA, the stock shook off the bad news and is green for the week.
Technical "Shakeout" and Price Rotation Higher
Savvy investors understand that price movement is the ultimate arbiter of decisions, because after all, price is the only thing that pays. TSLA shares sliced below the 50-day moving average on the recall news and then ripped higher. Such price action indicates a shakeout, where weak hands get stopped out of their positions, clearing the way for the next move higher. Now, TSLA is triggering a bullish swing trade signal by clearing last week's highs.
Cybertruck Hype Real
Many Tesla bears suggest that the hype around Tesla's Cybertruck is unfounded. However, Google Trends data suggests the opposite is true. As Tesla investor and enthusiast Sawyer Merritt points out, "Tesla has surpassed Ford to become the most searched auto brand in the US. Tesla's gone from not making the rankings at all in 2022 to second place in 2023, with 29 of 155 countries listing Tesla as their #1 car brand in Google Trends."
Competition Not a Threat
Thus far, all of the fully-EV focused automakers like Rivian have yet to achieve a quarterly profit. As Elon Musk points out, it's one thing to create a prototype and a whole other thing to manufacture at scale. Meanwhile, Ford, the only other profitable EV maker in the US, announced that it would cut F-150 Lightning production in half next year. (the Lightning is seen by the market as the biggest threat to the Cybertruck)
China Sales Growing Despite Weak Economy
Despite a floundering Chinese economy, recent registration numbers suggest that Tesla is on pace to break its quarterly record for deliveries in China (156.7k).
Exponential EV Growth is on the Horizon
A recent study suggests that by 2030, two-thirds of all global car sales will be EVs.
Bottom Line
Investors using traditional valuation metrics to value Tesla are likely to be wrong. Tesla's price-to-book ratio reveals an undervalued position compared to other mainstream stocks. Meanwhile, the Cybertruck's rising popularity and Tesla's sustained growth in China further underscore its market strength. As the automotive landscape continues to evolve towards electric vehicles, Tesla's innovative approach and global expansion prospects make it a must-own.
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.
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: Shutterstock
Zacks Investment Ideas feature highlights: Tesla, Apple and Rivian
For Immediate Release
Chicago, IL – December 15, 2023 – Today, Zacks Investment Ideas feature highlights Tesla (TSLA - Free Report) , Apple (AAPL - Free Report) and Rivian (RIVN - Free Report) .
Why Tesla's Cheap (2024 Outlook)
An Up and Down Year for Tesla
Tesla is the undisputed market leader in battery-powered electric car sales in the United States, enjoying roughly a 70% market share. Over the years, Tesla has shifted from developing niche products for affluent buyers to more affordable EVs for the masses. The firm's three-pronged business model approach of direct sales, servicing, and charging sets it apart from other carmakers. Year-to-date, shares are higher by 128%. However, investor concerns are mounting, including:
· Valuation: The EV king's market capitalization is more than the combined value of all legacy automakers.
· Underperformance: Though Tesla has more than doubled this year, it has underperformed the market and "Magnificent 7" recently.
· Recall: This week, news broke that Tesla must recall more than 2 million vehicles.
Below, I will debunk the most common investor concerns and lay out my bull case for the stock:
Don't Judge a Book By its Cover: Tesla Valuation is Cheap
The price-to-book ratio (P/B ratio) is a financial metric that compares a company's market value (its stock price) to its book value (the net value of its assets minus liabilities). P/B is calculated by dividing the market price per share by the book value per share.
A low P/B ratio may suggest that a stock is undervalued, while a high ratio may indicate overvaluation. Investors use this ratio to assess a company's relative worth in the market compared to its accounting value. Tesla currently has a book value of 14.03. Compare that to another mainstream stock like Apple, whose book value is 49.54, and Tesla suddenly looks cheap.
Furthermore, it is essential to remember that Wall Street is a discounting device. Over the past twelve years, Tesla has achieved a stunning compound annual growth rate (CAGR) of 72%, earning its premium above slower-growing legacy automakers.
Rallying on Negative Recall News
Earlier this week, Tesla was forced to recall over two million vehicles over autopilot safety concerns. As I always like to remind investors, the reaction to negative news supersedes the news itself. In the case of TSLA, the stock shook off the bad news and is green for the week.
Technical "Shakeout" and Price Rotation Higher
Savvy investors understand that price movement is the ultimate arbiter of decisions, because after all, price is the only thing that pays. TSLA shares sliced below the 50-day moving average on the recall news and then ripped higher. Such price action indicates a shakeout, where weak hands get stopped out of their positions, clearing the way for the next move higher. Now, TSLA is triggering a bullish swing trade signal by clearing last week's highs.
Cybertruck Hype Real
Many Tesla bears suggest that the hype around Tesla's Cybertruck is unfounded. However, Google Trends data suggests the opposite is true. As Tesla investor and enthusiast Sawyer Merritt points out, "Tesla has surpassed Ford to become the most searched auto brand in the US. Tesla's gone from not making the rankings at all in 2022 to second place in 2023, with 29 of 155 countries listing Tesla as their #1 car brand in Google Trends."
Competition Not a Threat
Thus far, all of the fully-EV focused automakers like Rivian have yet to achieve a quarterly profit. As Elon Musk points out, it's one thing to create a prototype and a whole other thing to manufacture at scale. Meanwhile, Ford, the only other profitable EV maker in the US, announced that it would cut F-150 Lightning production in half next year. (the Lightning is seen by the market as the biggest threat to the Cybertruck)
China Sales Growing Despite Weak Economy
Despite a floundering Chinese economy, recent registration numbers suggest that Tesla is on pace to break its quarterly record for deliveries in China (156.7k).
Exponential EV Growth is on the Horizon
A recent study suggests that by 2030, two-thirds of all global car sales will be EVs.
Bottom Line
Investors using traditional valuation metrics to value Tesla are likely to be wrong. Tesla's price-to-book ratio reveals an undervalued position compared to other mainstream stocks. Meanwhile, the Cybertruck's rising popularity and Tesla's sustained growth in China further underscore its market strength. As the automotive landscape continues to evolve towards electric vehicles, Tesla's innovative approach and global expansion prospects make it a must-own.
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/performancefor information about the performance numbers displayed in this press release.