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Is Tesla a buy into earnings?

Electric cars are only growing in popularity and ease of use. Here is the breakdown on EV leader $TSLA better known as Tesla.

Current Price: $432.43

52/Wk High: $502.49

52/Wk Low: $50.036

Market Cap: $406.8 billion

Read below for the breakdown!

Tesla is an expansive company in which designs, manufactures, and sells electric vehicles. Not only that, but Tesla has other major segments, such as energy generation, battery technology, and solar technology.

Breaking the stock price down, according to TREFIS (@trefis) 97.2% of the stock price is based on Tesla’s Automotive segment.

Furthermore, 2.1% of the stock price is based on the company’s Energy Generation and Storage segment, while just 0.8% is based on Services and Other Revenues.

Throughout the past several weeks, Tesla has maintained positivity and continued to deliver solid news. Just weeks ago Tesla announced that it had delivered 139,300 (Up 43% YOY) vehicles in Q3, a record for the company.

Given the solid delivery numbers, numerous analysts have upgraded the name just prior to earnings, begging the question as to whether Tesla is a buy.

Digging into Tesla’s previous earnings, the company delivered a solid Q2 beat. Tesla reported a Q2 EPS of $0.44 versus the analyst’s expectation of $0.43.

On the downside, revenue growth was not stellar, with revenues totaling $6.0 billion in Q2, down -4.94% YOY. It is important to note though that COVID-19 created major complications and could be a core reason for the recent revenues decline.

Taking a look at the balance sheet the numbers are not bad, but they could definitely be better.

Total Debt: $14.139 billion

Total Liabilities: $28.280 billion

Total Assets: $38.135 billion

Cash&Short Term Inv: $8.615 billion

Based on the balance sheet the higher Total Debt level is a worry but given that Tesla is now consistently profitable it is not a major concern.

The key fundamental multiples present Tesla as being very overbought.

Price to Earnings: 1,131.25x

Price to Sales: 15.94x

Price to Book: 41.49x

Price to Cash Flow: 146.76

Based on the fundamental multiples Tesla stock is quite overbought on a near to mid-term basis, but for many long term holders, the stock is trading based on “future earnings” years away.

Given all the numbers, both positive and negative, the analysts are quite bearish even with recent upgrades. Currently, the mean price target is $333.65.share, representing a -23.45% downside.

Tesla’s high price target is currently $578.00/share, representing a 36.61% gain, while the low price target is $19.00/share, representing a -95.64% loss.

The big money is also quite bearish. Currently, just 44.27% of Tesla is owned by institutions. Top holders include Capital World Investors, The Vanguard Group, and Baillie Gifford & Company.

Taking a look at the technicals the six-month MACD has run-flat lately and is currently running sideways within a tight range around 11.57.

According to the six-month charts, the RSI is also running sideways and currently sits at 52.95 along with a mid-level CCI of 53.09. It is also important to note that Tesla currently trades roughly 70 points off its highs.

In short, Tesla is a solid company and leader within the EV space. I firmly believe that Tesla will see substantial growth over the next 5 to 10 years, making it a solid long term investment.

On the otherhand, in the short-term to mid-term the stock is simply too close to call given high volatility, the current price levels, and market uncertainty.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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