The automotive industry is pushing its way to the new future with electric vehicles coming to dominate roads across the globe by 2040. Tesla (TSLA) stock has been a ‘Hot Stock’ within 2020 pushing boundaries and dominating above its competitors, but is Tesla stock a buy today?
Tesla (TSLA) Stock In 2021
A lot has happened for Tesla Motors (TSLA) since its official entry date on the stock market back in June 2010 entering onto the Nasdaq stock exchange, including TSLA stock now being a part of the leading S&P 500 index and being named as the largest stock to have ever joined the leading index.
Shares for Tesla stock have risen well over the years leading up to its new highs within 2020 and continuing as it sits at the start of today at 675.00 per share, forward from March 1st 2019 where the stock closed at 58.96 per share. The consumer demand is heavy and strong along with the company's reconstruction of the years, this hand in hand has caused Tesla to sky-rocket to become one of the biggest stocks on the market today.
The American automotive company which is known for various products including solar panels, battery energy storage and more adding significantly to the company’s revenue, but most notably Tesla stock is known for its skillfully created, efficient, dynamic and futuristic pieces of mechanical art, that of electric vehicles.
Holding an impressive 18% market share as of October 2020 out beating its competitors by almost three times as much, with Volkswagen being the closest competitor with a 6% market share within the months ending in September 2020.
The company recently announced its Fourth Quarter and Full Year results on 27th January 2021, continuing its tremendous run pulling in another successful quarter contributing to a total yearly revenue of $10.7 billion over the year with 509,737 vehicles created. This was a mix of Model 3 and Model Y being the most popular models with 454,932 being sold, running closely by Model S and Model X adding the additional amount.
But the question that surrounds this automotive stock is if this leading stock is a buy looking to the future?
The Decline In Tesla’s Share Price
Over the past week, TSLA stock has seen a decline within its share price which could be a result of various factors. One is due to the ongoing Coronavirus Pandemic causing future concerns for the stock. Secondly, over the last couple of weeks, Tesla had also confirmed that they had invested almost $1.5 billion of cash in hand into Bitcoin which could have also played a role within Tesla’s share decline. The day the news was confirmed to the public saw TSLA stock decline in a single day by almost 8% on Tuesday 23rd February. And ever since that date, the stock’s share price has been on the downward.
The two factors above could have contributed to this downward spiral in the stocks share price, likewise when you look into the companies high valuation as it currently holds a market capitalisation of just over $640.3 billion when comparing this to the stocks share price and additional metrics this stock is naturally way overvalued.
Then it brings us to the CEO of Tesla Motors Elon Musk, who is extremely popular within the industry as being a well-respected business tycoon but also holds the title as being volatile when it comes to placing investments and making quick and sharp decisions. Decisions including the investment into the cryptocurrency, Bitcoin. Due to the unpredictable moves and makings that Elon Musk could potentially undertake, this could and is naturally leaving some investors to second question their investment. Even if the stock has delivered and looks potentially set to be able to deliver going forward, it could be a strong risk factor for many.
Lastly, another key focus on this automotive stock that could potentially continue to add to its decline in share price could be that of its competitors. When you look at Tesla stock in comparison to its competitors such as the well respected German brands like BMW, Volkswagen and Audi, who are closely behind TSLA stock in terms of sales, Tesla’s motors hold a more expensive valuation. The company’s Model S Sedan an all-electric vehicle is valued at $74,990 in comparison to BMW who has a starting price for a hybrid-electric vehicle at $44,500 leading up to $65,000.
A reason for such a high value in Tesla's electric vehicles is that of its battery technology. The batteries that are embedded within these pieces of modern art are the key essential element for the vehicles to operate but they are also the reason as to why the products are as costly as they are.
On the back of the company having a higher valuation in comparison to other companies, Tesla’s strong consumer demand has led the company to not be able to produce as quickly as the demand is apparent. This statement could be both a positive and a negative for the stock, as it shows that the demand is there to be able to sustain and move forward as the world evolves. However, as this happens if the products are not available, other well-respected leading brands are delivering new, efficient products at cheaper costs which could prove to leave Tesla being the losing favour for many consumers.
The Positives For Investing In Tesla Stock
Firstly, now that the stocks share price is on the decline this does prove to be an even stronger positive for investors looking to invest within TSLA stock. And an even better scenario is if the stock continues to decline. This would prove the right time to certainly buy into this stock and hold for the long-term, especially as the company sits in a profitable position thanks to 2020.
Realistically if this is the case, it will not be long before the stock creeps it’s way back up and has been evidenced holding a 52-week range of $70.10 at its lowest and $900.40 at its highest.
The company has witnessed an outstanding year within 2020 despite the challenges that Covid-19 has sprung on the world. Confirming the stock’s success the company delivered a successful number of over half a million vehicles to consumers, a reported $0.24 per share, operating free cash flow of $2.8B within 2020 with Q4 bringing in $1.9B alone, a rise of $4.9B in cash and cash equivalents in Q4 reaching $19.4B in total, a leading-industry 6.3% operating margin and archiving $721M GAAP net income with $2.5B non-GAAP net income in 2020.
These financial results, despite not hitting its earning-per-share target (EPS), are rather talented to say the least. Deservedly after its performance over the year, Tesla stock has been named as the most valuable automaker in the world and looking set to retain this title for years ahead.
Looking to 2021 and beyond the company has already confirmed its future growth plans. Production becomes one of the key focuses along with bringing two new updated versions of two of its current models, Model 2 and Model X vehicles embedded with further eco-energy equipment which are currently in production. Following on from the future outlook the company has confirmed that they are looking to hit 50% average annual growth in vehicle deliveries with coming years aiming to grow faster.
Following from the points mentioned within the stocks negative factors, Battery Cells are a main focus for the stock and are well on their way in archiving their goals. Tesla is aiming to drive down battery cost by almost 56% in manufacturing costs and a potential decline in future product costs with its latest ‘tabless’ design.
The new design provides five times as much energy, six times the power and more range in comparison to the older battery cell.
The aim, despite the obvious of bringing overall costs down, it also enables Tesla to achieve its goal of hitting 20 million sold electric vehicles annually quicker and almost 40 times as many from today’s annual figure.
The fact the company sits in a healthy financial position is another strong benefit. Free cash flow and sufficient liquidity enable the company to fund future projects for long-term expansion. This will have a knock-on effect on the company’s profit as the company is looking to continue its industry-leading highs along with expecting its operating margin to continue to grow throughout the future.
Tesla continues to develop in all areas, expanding new factory facilities across the globe to develop their in-demand products but concentrating on the rapid expansion of moving the world into an eco-friendly environment with EV’s and energy-efficient battery technology.
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What Are Analysts Advising On TSLA Stock?
Having weighed in on the positives and negatives for Tesla stock, analysts are taking both bull and bear approaches to this stock. With many analysts downgrading the stock from a ‘Buy’ to a ‘Hold’ consensus rating based on the current happenings of the stock. Jefferies analyst Philippe Houchois recently advised that it is not due to Tesla not having the potential to rise, it is due to needing ‘valuation to be grounded into visibility on market size’.
Despite Jefferies giving their thoughts on the stock, 20 Wall Street analysts have also given the stock a neutral rating of ‘Hold’. Although many are still bullish on this stock giving it a ‘Strong Buy’ rating due to the capability of what this stock can achieve and following in light of the company’s recently reported earnings.
Based on estimates by analysts TSLA stock’s revenue is due to increase by 30.61% rise per year, reaching an average potential 3-year forecast of $68.3B based on the company’s current performance. Naturally, this is having a knock-on effect with the stocks EPS average forecast as it has been forecast to reach $2.67 over the year with potentially hitting an EPS of $5.40 in a 3-year average forecast. Confirming that both average forecasts are going to exceed the industry and market averages as it has done so over the 2020.
Although average forecasts by analysts have been shown that of an increase for this stock, the bear analysts covering this TSLA have reached a verdict of an average price target of $581.14 giving the stock a decline and showing a downside of almost 14% of where the stock sits today at $675.50.
The stock today current has a 12-month price target of $610.34.
Overall the verdicts by Wall Street analysts show a pull-and-pull case on Tesla stock, but it is undeniable that many would not have predicted that this stock would have achieved what it has over the year proving that more success is possible for the leading automotive company for the years ahead.
The Bottom Line Verdict for Tesla Stock
Looking at both the pros and cons of Tesla stock, this stock does indicate that it has significantly more to offer within its pipeline, despite its recent decline in share price over recent days. We believe this will be a momentarily temporary position as investors soon realize that this stock is a true real-deal.
As of today based on the stocks share price whilst writing this report has already risen to $709.54 and its P/B ratio in comparison to the US market is looking strong. Now is a good time to consider or to buy into this stock especially as it could soon be sitting at its already archived highs of above $900 per share as we move further into the year.
The way the world is moving into an eco-friendlier world with electric vehicles playing a huge part in the process as currently motor vehicles cause over 75% to 90% of emissions within the US alone. The drive forward to reduce such emissions within the most popular form of transport is going to be a significant impact felt and witnessed across the globe, as EV’s have been proven to have low emissions proving to be more eco-friendly to the environment than that of burning oil fuel vehicles as they release less harmful emissions.
With that being said, Tesla is the leading company that is making this goal become more achievable as it is dominating above all competitors. Although this company’s products hold high price tags, this could soon become more affordable as Battery Cells become more efficient and less costly having a knock-on effect on its sale price. Providing all the above, TSLA stock is a buy looking into 2021 and beyond based on evidence and predictions for the future.
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- TSLA has become the leading automotive maker within the industry today holding a staggering market capitalisation of $640.31B.
- Tesla trades on both NASDAQ and the S & P 500 index.
- Tesla’s share price does not come cheap and is the most expensive within the industry, hitting new highs in 2020 of over $900 per share.
- TSLA’s products are high value in comparison to other EV products on the market. This is due to the Battery Cell that is the key element within the vehicles. However, TSLA is continuing to cut down the costs with the new ‘tabless’ battery cell.
- Tesla stock has become profitable over the year and is aiming to drive the success forward through 2021 and for future years ahead, as the world enters a more eco-friendly environment.
- Investing in Tesla stock does hold risk elements which is why it is strongly advised before investing to conduct additional research into TSLA stock.