Tesla: In-Depth Fundamental Analysis 1M (Apr. 29)X FORCE GLOBAL ANALYSIS:
Tesla is an American Electric Vehicle (EV) company with a disruptive presence in the automotive industry. TSLA is one of the most hyped stocks of NASDAQ, with avid supporters of the company itself, as well as its leader - Elon Musk. Due to the nature of the stock, technical analysis can be used to identify strong support and resistance zones, but fundamental insight is required in order to grasp the tremendous value this company has to offer. Thus, in this analysis, we take a purely fundamental approach in analyzing this stock.
Fundamental Analysis
- Despite the Corona Virus (COVID-19), Tesla has managed to manufacture and deliver record-high number of vehicles for Q1 2020
- Tesla ended 2019 with 6 Billion Dollars, and early this year, they raised an additional 2 Billion through stock offering
- This indicates that Tesla has enough money to go endure the chaos caused by the viral outbreak
- Tesla is one of the biggest beneficiaries of the Zero Emission Vehicle (ZEV) credit regulations, racking up huge ZEV credits that other automotive companies pay billions to purchase
- In March 2020, Tesla has taken up 25% of the Chinese EV market, and further domination in arguably one of the most important markets is anticipated.
Arguments against Tesla
- Tesla has a negative Earnings Per Share (EPS). Negative earnings are a red flag for value investors
- Tesla's operating margin is arguably too low, and not enough to be profitable for the long term
- Tesla's Debt to Equity ratio is quite high, and is a reason for concern, as it suggests that Tesla is a higher risk investment
- While gross income growth of Tesla for the past three years have been great, these are not sustainable numbers
- There are arguments against Tesla's management; some argue that Elon Musk gave himself too big of a compensation package
- This is concerning to investors, as the company has still not turned an annual profit.
Future Projections
- While the Electric Vehicle ( EV ) Market continues to grow, Tesla's market share remains at 17~18% of a rapidly growing industry
- Tesla's gigafactories have shown unprecedented progress in terms of how fast the factory was built, as well as the automated manufacturing process
- Tesla has 2billion miles of autonomous driving data, which is more data than any other player in the market for self-driving cars
- Based on the vast amount of data, Tesla's self driving cars will allow the company to generate software-company-like margins
- Tesla has better battery efficiency compared to combustion engine cars, and can still benefit from economies of scale
- According to EV experts, Tesla's vehicles are at least 4-5 years more advanced than those of its competitors.
- They have been hit with the coronavirus, slowing down production in their gigafactories, but their fundamentals remain strong nonetheless
What We Believe
In summary, Tesla is not for the average Warren-Buffet-style fundamental investor, seeking to purchase stocks at an undervalued price. It is, however, for the Masayoshi-Son-style investors who values the company by future expectations. We believe that Tesla is an automotive company to the same degree as Amazon is a bookstore. There is a lot more potential in the fundamentals of this company that many fail to recognize, and despite the short term hardships it may face, the innovative values that Tesla prioritizes can take this company to record highs.
Trade Safe.
