Since it's Nasdaq debut 10 years ago, Tesla's (TSLA) stock performance has defied convention. And so have their automotive products, level of innovation, operations, and leadership. The share price hit a high of 917.42 on February 19th (pre-quarantine), then dipped to an ultra low of 361.22 on March 18th, only to sky-rocket back up to 1794.99 per share, and oscillate around the 1,500's most recently.
This afternoon, Tesla will be releasing their earnings results for Q2. The news, analyst remarks, and message boards are flooded with bulls and bears giving their two cents on what to expect. Here are some considerations.
The Bull Case
Q2 numbers for cars delivered well exceeded expectations. Estimates were expecting 83,000 cars, but 92,650 were delivered.
Gigafactories are now around the globe, and Tesla is more than able to ramp-up production with existing and planned factories in Nevada, New York, China, Germany, and either Austin, Texas or Tulsa, Oklahoma.
Tesla accounted for 23% of EV sales in China.
Cybertruck Pre-orders estimated to exceed 650,000.
Battery technology is constantly improving while becoming more and more cost efficient. These cost savings quickly trickle down to the consumer.
Supercharging stations are now scattered all over North America and in other countries. According to Car & Driver, as of January of this year, "Tesla had 15,525 Superchargers in 1,770 locations worldwide, 754 of them in the U.S." And this number continues to grow.
The CEO, Elon Musk, believed in this company and vision to such a degree that he was willing to sell his assets to front 100 million to save the company from closing early in Tesla's infancy.
Musk also co-founded many other successful companies such as PayPal, SpaceX, SolarCity, Starlink, HyperLoop, OpenAI, Zip2 Corp (Musk's very first company), and The Boring Company.
Technologies can be shared between Tesla and SpaceX. For instance, it was announced today that an alloy developed by SpaceX will also be used on the new Cybertruck. And even though Tesla and SpaceX are not the same company, the market sentiment towards Tesla, along with confidence in Elon Musk's leadership and vision, are synchronous with that of SpaceX. Tesla's stock price increased immediately after May 30th's successful first manned SpaceX launch of their Falcon 9 rocket.
Battery Day (September 22nd), a highly anticipated catalyst to reveal something that Elon Musk dubbed, "alien technology."
J.D. Power surveys show Tesla automobiles as the top car for Appeal.
Tesla develops their own chip technology and Artificial Intelligence software.
Tesla also works with battery technology, energy creation, and energy storage. A main reason why Elon Musk stated in a podcast that he didn't want the company's website domain to remain www.teslamotors.com.
Tesla is far ahead of other manufacturers in their self-driving capabilities with their current Full Self-driving Feature (FSD). Their cars already hold a significantly higher safety record than conventional automobiles.
Tesla's FSD collects data for Tesla's A /I network to continually self-learn.
If Tesla posts a profit in Q2, they will have been profitable over the past 12 months. This is one key metric used in determining its inclusion into the S&P 500. If included, many outstanding shares may be purchased by large funds that track the S&P 500.
Current analyst price targets range from 300-2,300 per share. If earnings results are positive and a profit was made, a higher price target is likely to be reached (and better justified).
Their luxury car status remains high as an aspiration brand.
The Bear Case
Valuation as a car company leaves a wide gap between the company's current earnings and it's current market cap of 295 Billion (now worth more than Toyota's 174 Billion & Volkswagen's 84 Billion, combined). EPS is currently at -0.74. We will see if their Q2 delivery beat well over expectations translates into a profit.
J.D. Power surveys show Tesla automobiles at dead-last in Initial Quality, with 250 problems per 100 vehicles, versus the industry average of 166 problems.
Growing competition (existing and upcoming) from BMW, VW / Audi / Porsche, Nikola, Rivian, Nissan, GM, and China's Nio, and Xpeng Motors. Although most have yet to produce a worthy competitor in regards to performance and range, and most certainly with regards to Tesla's level of autonomous driving.
Current analyst price targets range from 300-2,300 per share. If earnings results are negative and a profit was not made, a lower price target is a likely result as bearish analysts bolster their arguments on stock price, market cap, and valuation.
Their luxury car status and average overall higher price tag. Although prices should continue to decline as the battery costs continue to decline.
Disclaimer: This post represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should conduct their own due diligence and consult their tax and financial advisors before making any investment.
Disclosure: I currently hold a position in TSLA, with the intention of going Long.
I wrote this post myself, and it expresses my own opinions while sometimes quoting others. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
