Is this EV leader a buy?

It’s time to revisit a legend of the electric vehicle space. Here is the break down of $TSLA, otherwise known as Tesla.


Current Price: $782.75

52/Wk High: $900.40

52/Wk Low: $379.11


Market Cap: $774.9 Billion

3 Month Performance: 21.42%


Read below for the break down!


Tesla ( $TSLA ) is a leading electric vehicle automaker and arguable energy generation and storage company. From technology leading and quality electric vehicles to solar technology and energy storage solutions, Tesla is a diverse company that has garnered significant attention.


Breaking down Tesla by segment, the company operates within multiple divisions including; Automotive, Service & Other, and Energy Generation & Storage. In fact, according to TREFIS (@trefis), 97.7% of Tesla’s stock price is based on the Automotive segment.


Furthermore, the Service & Other division makes up 0.6%, Energy Generation & Storage makes up 0.5%, and cash (net of debt) makes up the bottom 1.3%.


Sifting through Tesla’s current offerings, the company offers customers four electric vehicle models that are in active production; Model S, Model 3, Model X, and Model Y.


Exploring the company’s electric vehicles, the Model S and X offer customers a more luxurious and higher performance experience, while the Model 3 and Model Y offer customers a viable and comparable EV option for the everyday consumer.


Breaking down the base prices of each model, below is the current base price of each Tesla model currently in production.


Model S: $84,490

Model X: $99,990

Model 3: $41,990

Model Y: $52,990


Looking to the future, Tesla has three EV models on the way of which are the Cybertruck, Roadster, and Semi. Exploring production times on the three models, Tesla updated investors in the latest quarterly report.


“To better focus on these factories, and due to the limited availability of battery cells and global supply chain challenges, we have shifted the launch of the Semi truck program to 2022. We are also making progress on the industrialization of Cybertruck, which is currently planned for Austin production subsequent to Model Y,” the company said.



Rotating away from Tesla’s auto segment, the company offers solar and energy storage solutions to residential, corporate, and even government clients. Quickly sifting through Tesla’s energy offerings, Tesla offers residential clients Solar Roof, Solar Paneling, and Powerwall.


Digging deeper, Tesla offers commercial and government clients sizable solar and energy storage solutions, built to handle complex energy demand and systems.


Tesla is led by Technoking and Chief Executive Officer Elon Musk, who has led the company as CEO since 2008 and has been a member of the board since 2004. Musk is also the founder of SpaceX, The Boring Company, Neuralink, PayPal, and Zip2 Corporation.


Behind Elon Musk is a reliable management team comprised of multiple long-time Tesla veterans, including Master of Coin and CFO Zachary Kirkhorn and Senior Vice President of Powertrain and Energy Engineering Andrew Baglino.


In recent news, Tesla once again raised the prices of its most popular models. According to Jalopnik, Tesla Wednesday raised the prices of their Model 3 Standard Range Plus and Model Y Long Range by an additional $2,000 amidst strong demand.


Given the latest price increases to the Tesla models, the cheapest vehicle Tesla now offers is the Model 3, with the base model totaling $41,990.


Rounding out the recent price hikes, Tesla raised the price of both performance trims for the Model 3 and Model Y by a minimal $1,000 in total.


In other news, Tesla was ordered Tuesday by a San Francisco federal jury to pay a former black contractor $137 million over previous claims by the contractor of racial discrimination within the workplace.


Digging into the numbers, Tesla ( $TSLA ) beat Q2 2021 expectations with an EPS of $1.45, better than the analyst’s EPS consensus estimate of $0.98 for the quarter. On a year-over-year basis, EPS improved by 229.55%.



On the revenue front, Tesla delivered a record quarterly revenue of $11.958 billion in the second quarter. Compared to Q2 of 2020, Tesla expanded revenue by 98% year-over-year.



Leadership noted revenue was driven by “substantial” expansion in vehicle deliveries but admitted that vehicle ASP declined by 2% year-over-year due to downsized Model X and Y deliveries.


Breaking down revenue, automotive revenues totaled $10.206 billion, representing a year-over-year improvement of 97%. Do note, regulatory credits accounted for $354 million in revenue, representing less than the $428 million in Q2 of 2020.


Furthermore, energy generation and storage accounted for $801 million in revenue, representing a strong year-over-year improvement when compared to the Q2 2020 level of $370 million.


Lastly, service and other revenues totaled $951 million in the second quarter, representing a sizable expansion over the same time 2020 level of $487 million.


Shifting into profits, Tesla reported $2.884 billion in gross profit throughout Q2, representing a 128% improvement in gross profit over the second quarter of 2020. Do note, gross profit totaled $1.267 billion in Q2 of 2020.


Sifting through gross profit, Tesla reported a Q2 automotive gross profit of $2.899 billion, representing a 120% increase over the Q2 2020 level of $1.317 billion.


Speaking of records, Tesla also delivered a record quarterly net income of $1.178 billion, representing the first time Tesla delivered over $1 billion in quarterly net income. When compared to the Q2 2020 net income level of $129 million, Tesla impressed on the net income front.



Sifting through operations, Tesla also reported a 301% increase YoY in income from operations. In total, income from operations landed at $1.312 billion in Q2.


Rotating into margins, the numbers continue to improve. Tesla reported a total gross margin (GAAP basis) level of 24.1% in Q2, representing a 313 basis point improvement year-over-year. Furthermore, automotive gross margin improved by 298 basis points year-over-year to 28.4%.


Rounding out margins, operating margin landed at 11.0% in Q2, representing a sizable improvement of 555 basis points year-over-year from the Q2 2020 level of 5.4%.


Shifting into Earnings Before Interest, Taxes, Depreciation, and Amortization, Tesla reported an adjusted EBITDA of $2.487 billion throughout the second quarter, representing a 106% improvement year-over-year.


On the cash flow front, Tesla reported a Q2 free cash flow (FCF) level of $619 million, representing a strong 48% increase over the Q2 2020 FCF level of $418 million.



Finally, net cash provided by operating activities increased by a whopping 120% to $2.124 billion in Q2. Do note, the same time 2020 level was $964 million.


Rotating into production and delivery metrics, below is a breakdown of Q3 production compared to Q3 2020 levels.


Production (Q3 2021 Vs. Q3 2020)

Model S/X:

8,941 Vs. 16,992

Model 3/Y:

228,882 Vs. 128,044

Total:

237,823 Vs. 145,036


Furthermore, below is a breakdown of deliveries compared to Q3 2020 levels.


Deliveries (Q3 2021 Vs. Q3 2020)

Model S/X:

9,275 Vs. 15,275

Model 3/Y:

232,025 Vs. 124,318

Total:

241,300 Vs. 139,593



Moving away from vehicle metrics, solar deployed increased by 215% year-over-year to 85 megawatts in Q2, while storage deployed increased by 204% YoY to 1,274-megawatt hours throughout the quarter.



On the infrastructure front, Tesla reported 34% expansion in store and service locations, 34% expansion in their mobile service fleet, and a 46% expansion in supercharger stations.


Looking to the future leadership was upbeat but warned of production difficulties due to global semiconductor supply chain issues.


“For the rest of this year, our growth rates will be determined by the slowest part in our supply chain, which is the wide range of chips that are at various times the slowest parts in the supply chain,” CEO Elon Musk said.


Management did not provide specific guidance looking forward but noted that they expect 50% average annual growth in vehicle deliveries throughout a multi-year horizon.

Shifting into the balance sheet the numbers are solid.


Total Debt: $9.401 Billion


Total Liabilities: $30.342 Billion


Total Assets: $55.146 Billion


Cash & Cash Equivalents: $16.229 Billion


Do note, cash & cash equivalents increased by 88% year-over-year when compared to the same time 2020 level of $8.615 billion.


On a valuation basis, Tesla does trade at a premium.


Price to Earnings: 409.39x


Forward Price to Earnings: 109.94x


Price to Sales: 18.01x


Price to Book: 30.65x


Price to Free Cash Flow: 82.56x



Management has been effective.


Return on Equity: 12.41%


Return on Assets: 4.95%


Return on Invested Capital: 7.48%

Given the numbers the analysts are bearish with a mean price target of $690.04/share, representing a -11.77% downside.


The high price target is $1,200/share, representing a 53.31% upside, while the low price target is $150.00/share, representing a -80.84% downside.


In a recent note, Needham reiterated Tesla as underperform, citing a “less compelling” valuation going into Q3 earnings and the expectation that their sales and EPS expectations will move lower based on a “model mix shift” according to CNBC.


The big money is less involved, with 40.01% of Tesla being owned by institutions. Top holders include The Vanguard Group, Capital World Investors, and BlackRock Institutional Trust.


On a technical basis, Tesla has been grinding to the upside. According to the six-month charts, the MACD is moving with minimal upside momentum within a tight range around 16.19.


The six-month charts are also indicating an RSI of 63.57 and CCI of 75.4, both of which are on the higher end.



Exploring investor sentiment, the bears believe a lofty valuation, semiconductor supply issues, and increasing competition are reasons to expect future downside.


Meanwhile, the bulls believe reliable management, expanding sales, leading EV technology, and upcoming models are reasons to expect future growth.


In short, Tesla ( $TSLA ) is the clear leader of the electric vehicle race at the moment, boasting a reliable management team, solid balance sheet, expanding production, accelerating sales, a loyal customer base, widening margins, and more.


EAT - SLEEP - PROFIT


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