Is Tesla ($TSLA) a Good Price & Good Company ? What Do U Think ?
My afterthoughts to Tiger_chat 's question of whether an investor profits from a good company or a good price ?
To that I have asked, "why not both" ?
Wouldn't that have more upside comparatively speaking ?
Having covered a handful of US banks, I am keen to look at an EV maker (Non-bank) company.
Lets take a look at $Tesla Motors(TSLA)$ , its Q4 2022 earnings and see if it still fits the bill.
Sidetrack: I have covered (1) an investment management company, (2) a healthcare company, (3) an entertainment company and (4) 7 financial institutions; to test out this theory.
- Netflix Inc - Click here to read. Like the post ok. Tks.
- $MasterCard(MA)$ Mastercard - Click here to read. Like the post ok. Tks.
- Intel - Click here to read. Like the post ok. Tks.
- $Microsoft(MSFT)$ - Click here to read. Like the post ok. Tks.
- Netflix - Click here to read. Like the post ok. Tks.
- Goldman Sachs - Click here to read. .
- Morgan Stanley - Click here to read.
- BlackRock - Click here to read it.
- UnitedHealth Grp - Click here to read.
- Citigroup - Click here to read.
- JP Morgan - Click here to read.
- Bank of America - Click here to read.
- Wells Fargo Inc - Click here to read.
- Jefferies Financial Group - Click here to read.
- An American multinational automotive & clean energy company
- Founded in July 2002 (20 years young company)
- Founders were Martin Eberhard & Marc Tarpenning; not mr musk
- In Feb 2004, mr musk became Tesla's largest shareholder after a $6.5 Million investment injection; while he wormed his way into corporate Tesla.
- It was monies he received when Paypal was sold to eBay with him being displaced in both BoD in both Paypal and eBay in the process.
- Company's name is a tribute to inventor Nikola Tesla. Poignant isn't it.
- It was listed on Nasdaq on Jun 2010 at $17 a share.
- By 2009, a year after Tesla's first EV the Roadster was launched, both founders have been elbowed out of the company by mr musk.
- Supposed, he copied & paste the same below-the-belt tactics used on him while in was in Paypal on the Tesla's founders.
n 2022, a year where US market has been hammered by extreme volatility and ease of covid pandemic restrictions - how did Tesla fare ?
Current stock price < 26 Jan 2022 stock price by -53.78%
- Total revenue came in at $24.30 Billion; that is +37% (QoQ) vs Wall street expectation of $24.16 Billion, according to Refinitiv.
- Net income (GAAP) came in at $3.68 Billion vs $2.32 Billion (Q4 2021); that is +58.62% (QoQ)
- Earnings per share (GAAP) as such was $1.07 vs $0.68 (Q4 2021); thats a +57.35% (QoQ).
Tesla Q4 2022 - Revenue breakdown
- If you look carefully, you will realize that its not really Tesla's EV thats bringing in the dole.
- It is "Energy generation & storage" that registered highest improvement at 90%. Revenue was up sequentially and YoY, reaching $1.31 Billion. Cost of revenue for its energy division was high, though, at $1.15 billion in the fourth quarter.
- Next comes "Services & other". It includes fees for out-of-warranty vehicle repairs, among other items, reached $1.6 Billion in Q4 2022. For EV car owners, do you think this is a "good" sign ??
Tesla Q4 2022 earnings - Another View of Revenue
- As could be inferred from above bar-chart, the rate of EV growth is plateauing for Tesla ?
- Do make a mental note of this as we will be brooching this topic again later on.
- As an EV maker, it is important to look at Tesla's EV production pattern.
- Total deliveries for Q4 2022 was 405,278 EVs.
- Deliveries are the closest approximation of sales disclosed by Tesla. These numbers represented a record Tesla with growth of +40% in deliveries YoY.
- Q4 2022 deliverables fell short of Wall Street expectations of 427,000 EVs actually; as compiled by FactSet as of 31 Dec 2022.
- Estimation range was between 409,000 to 433,000.
Tesla Q4 2022 - Other information
- As an EV maker predominantly, what is important to note would be its Automotive Gross margin. For Q4 2022 it came in at 25.9% vs 30.6% (Q4 2021); thats a -466 basis point (QoQ).
- Worthy note: this is the lowest figure looking backwards at the last 5 Quarters.
Tesla's CEO on Q4 2022 Results:
"Despite the fact that 2022 was anincredibly challenging yeardue to forced shutdowns, very high interest rates and many delivery challenges."
"Thus far in January, we’ve seen the strongest orders year-to–date than ever in our history. We’re currently seeing orders at almost twice the rate of production so I mean
"Pice really matters," adding that there are many people "who want to buy a Tesla car but can’t afford it" and that price changes "really make a difference for the average consumer." Tesla’s CEO Elon Musk.
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Is Tesla - Both A Good Price and Good Company ?
- Let's perform a critical autopsy.
- Aim of recent extreme price slash to Tesla's Model 3 & Model Y is to position itself to reap the benefits of the US's Inflation Reduction Act (IRA)'s incentives for domestic production & purchases of fully electric cars in 2023.
- Does it mean mr musk is not confident of the EVs he produces ?
- Does the price slash implies that both Model 3 & Model Y are not worth its value based on original "price tag" ?
- Does the price slash represents mr musk's attempt to stave off competition by keeping price extremely low ? Is this considered "Dumping" in trade ?
- As of this morning (31 Jan), its share price has risen to $166.66 per share. Lots of punters out there making short term profits ?
Tesla - Automotive Gross margin on Diminishing returns for 5 Quarters running
- What does diminishing Automotive Gross margin in the past 5 Quarters means to an investor ?
- Will it be an "escalating" Automotive Gross margin "negative spike in 2023" with EV prices slashed to the maximum ?
- Should know the outcome in Apr 2023 when Q1 2023 earnings report is next out. Will it be too late by then ?
- Above - Wall Street's news dated 25 Jan 2023 was basically calling mr musk a "story teller" (again!) for the umpteen times; for creating a smoke screen to misled the general public with regards to Tesla's 2023 outlook.
- Is mr musk setting the stage for another chunk of Tesla shares sell off soon ? Click here to read about this possiblility..... Never say never !
Analyst evaluation of Tesla
- On 25 Jan 2023, Analyst Craig Irwin at Roth Capital gave Tesla a Target Price of $85 a share and a "Hold" status. Its current price $160.27 (as of 26 Jan 2023) is way overvalued.
- Even mr musk himself has acknowledged during Q4 2022 earnings' conference call that he expects Tesla's headwinds to be from the Chinese EV makers.
- Short of giving air time to competitor, most are certain that he was referring to EV maker BYD (that Mr Warren Buffet still have a minority stake in via Berkshire Hathaway).
China EV Delivery between 02 Jan to 08 Jan 2023
- Just look at BYD's 2023 Jan first week delivery (35,924) vs Tesla's (2,110)
- That is a whooping +17 times (or +1,702%) more EVs than Tesla
- And to think that currently BYD EVs are not sold in the US yet. Just imagine how will all this playout when BYD decides to descend upon North America ?
- Do you think its market sentiments or Tesla's value that's driving its share price to rise recently ?
- Do you think TSLA screams buy now but only for quick changes of hands ?
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