Tesla (TSLA)

Tesla (TSLA)

Summary:  ON SALE

Score:  17/20

MOS:  80%

Share Price:  $709

Sticker Price:  $3568

Is Tesla stock a good buy?

Tesla, Inc. is an American electric vehicle and clean energy company founded in 2003 and based in Palo Alto, California. 

Martin Eberhard and Marc Tarpenning originally founded Tesla and served as CEO and CFO. Ian Wright was Tesla’s third employee, joining a few months later. In 2004 they conducted a series A funding round and raised $7.5M including $6.5M from Elon Musk. Following the investing round, Musk joined the company and became chairman of the board of directors and soon after J.B. Straubel joined Tesla in 2004 as CTO. In 2009 a lawsuit settlement allowed all five guys (Eberhard, Tarpenning, Wright, Musk, and Straubel) to call themselves co-founders.

Tesla has two main sources of revenue including automotive and energy generation and storage.

Most of us are familiar with the automotive channel as it’s known for the design, development, manufacturing, sales, and leasing of electric vehicles. This channel accounts for 94% of revenue.

The energy generation and storage channel is known for solar roofs and panels which account for 6% of revenue.

Here are Tesla’s current automobile line and estimated retail prices. All prices shown in USD.

Tesla Model S – $81,190 

Tesla Model X – $91,190

Tesla Model Y – $41,190

Tesla Model 3 – $38,690

Cybertruck – $39,900

Roadster – $200,000

 

Although Tesla is the current leader for EV sales around the globe, the competition is heating up. 

Here is what the news has to say about the industry and the competition.

This article from caranddriver.com lists the top selling EVs in 2021 (as of July) along with base prices.

  1. Tesla Model Y (76,429 units sold) – $41,190
  2. Tesla Model 3 (51,510 units sold) – $38,690
  3. Chevrolet Bolt EV and EUV (20,288 units sold) – $37,495
  4. Ford Mustang Mach-E (12,975 units sold) – $43,995
  5. Nissan Leaf (7729 units sold) – $32,620
  6. Audi e-tron and e-tron Sportback (6884 units sold) – $66,995
  7. Volkswagen ID.4 (6230 units sold) – $41,190
  8. Tesla Model X (6206 units sold) – $91,190
  9. Porsche Taycan (5367 units sold) – $81,250
  10. Tesla Model S (5155 units sold) – $81,190
  11. Hyundai Kona Electric (4346 units sold) – $38,575
  12. Hyundai Ioniq Electric (1022 units sold) – $34,250

The top 12 total 204,141 EVs sold to date in 2021. Of that total, Tesla sold 139,300 (68%).

Of the manufacturers listed above, the big threat is VW. VW manufactures and sells its own vehicles but the company also owns Audi, Lamborghini, Porsche, Passat, and Jetta.

This article from forbes.com says the VW can seriously challenge Tesla’s sales in 2022. VW is already the top EV seller in Europe as it owns 24% of the European market as of 2020, up from 13% the year prior. Tesla plunged from 29% down to 13% the same year.

Globally in 2020, Tesla sold just under 500,000 EVs taking 16% of the market share which is down from 17% in 2019. VW sold about 422,000 EVs, taking 13% of the market share. In the fourth quarter of 2020, VW surpassed Tesla and sold 191,000 EVs compared to Tesla selling 183,000.

This article from thedrive.com states that VW will challenge Tesla’s commercial market share and manufacture electric trucks and buses to compete with Tesla’s semi-truck. Securing commercial freight contracts could be a significant revenue generator and VW plans to capitalize on this segment.

This article from thestreet.com outlines a quote from Jim Cramer stating the “Ford’s electric F-150 will crush Tesla.” The Ford F-150 has been the top selling vehicle in the US for 44 years in a row. When this vehicle goes electric, it’s game over for the competition.

This article from media.ford.com says the Ford F-150 Lighting will be available in spring of 2022 at a starting price of $39,974. This new truck model will be more advanced from a technology standpoint than anything else on the road. It will carry enough power to act as a backup generator to power your home, in the event of a power outage. The engine will be over 500hp and have a battery range of over 300 miles.

Here are some articles that give perspective on how fast the competition is moving.

This article from CNBC states that GM wants to end production of all diesel and gas-powered cars, trucks, and SUVs by 2035. GM also plans to use 100% renewable energy to power its US facilities by 2030 and global facilities by 2035.

By comparison, this article from media.ford.com states that Ford will be completely all-electric by 2030.

Also by comparison, this article from industryeurope.com states that Volkswagen plans on going all-electric by 2026.

Now let’s take a look at the 4 M’s.

MOS: The MOS of Telsa is quite impressive. A score of 17/20 and MOS of 80% shows Tesla is well-oiled machine poised for more financial growth.

Meaning: We know EVs are the future as auto manufacturers around the world compete for market share. The challenge with all auto manufacturers is supply chain. I personally like software companies because you don’t have to source metals, plastics, and components to generate sales. With automobiles, the supply chain costs are high. When you compare Tesla to a company like Apple, you still have to source raw materials but the materials required to sell one unit can fit into the palm of your hand. With automobiles, you need thousands of pounds of materials to sell one unit. Although the world has enough raw materials today, the impact on the environment to manufacture, mold, and shape materials is something to consider. And speaking of supply chain issues, semiconductor’s are in short supply and high demand because chip manufacturing slowed in 2020 due to Covid-19. Fortunately for those of you who invest in AMD, Tesla uses AMD chips. Keep in mind, when investing in EVs, supply chain is something to consider as supply chain issues can hinder sales.

Moat: EV competition is starting to catch up and even pass Tesla. We know VW is going to be a challenge with both the consumer and commercial segments around the world. We also know Ford will challenge Tesla in the US, especially when the electric Ford F-150 releases in 2022. Tesla has a strong brand moat at the moment. When people think of EVs, Tesla is typically top-of-mind. Will that continue over the coming years? Maybe. But you definitely want to keep your eye on VW and Ford.

Management: Knowing there was a lawsuit to make the early employees classified as co-founders is honestly laughable. It’s like little boys arguing over who’s toy belongs to who. Guys, it’s a title. Grow up. The fact that this even happened is disappointing. But, it’s water under the bridge now. I do respect what Elon Musk has done through the years. He’s a guy with a big vision and he has the intelligence and vigor to turn visions into reality. The world needs more innovative leaders like him. Musk has served as CEO since 2008. Tesla went public in 2010 at around $4 per share and today the share price is $709. That’s a 17,625% return over 11 years and an annualized return of 60%. Musk has done a great job leading this company and it will be exciting to see where this company goes in the future.

Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.

 

Revenue (Found on the Income Statement)

2017:  $11B

2018:  $21B

2019:  $24B

2020:  $31B

Revenue is increasing consistently which is a great sign.

 

Net Income (Found on the Income Statement)

2017:  -$1.9B

2018:  -$976M

2019:  -$862M

2020:  $690M

Net Income increased substantially in 2020. This is a big reason why this stock is On Sale.

 

EPS (Found on the Income Statement)

2017:  -2.37

2018:  -1.14

2019:  -.98

2020:  .74

EPS turned positive which is also why this stock is On Sale.

 

Free Cash Flow (Found on the Cash Flow Statement)

2017:  -$4.1B

2018:  -$221M

2019:  $968M

2020:  $2.7B

Free Cash Flow also increased substantially in 2020. The financial health of the business is increasing nicely.

 

Total Assets (Found on the Balance Sheet)

2017:  $28B

2018:  $29B

2019:  $34B

2020:  $52B

Total Assets have increased consistently which is a great sign.

 

Total Liabilities (Found on the Balance Sheet)

2017:  $23B

2018:  $23B

2019:  $26B

2020:  $29B

Total Liabilities have increased which is okay.

 

Total Debt (Found on the Balance Sheet)

2017:  $10B

2018:  $11B

2019:  $13B

2020:  $11B

Total Debt has decreased in 2020 which is a good sign.

 

Total Equity (Found on the Balance Sheet)

2017:  $4.2B

2018:  $4.9B

2019:  $6.6B

2020:  $22B

Total Equity has increased substantially in 2020.

 

Over the last year, the financial health of Tesla has greatly improved. It’s no surprise the stock has a score of 17/20 and a MOS of 80%. Although the financials look great now, the two big issues I see are the competitors, including VW and Ford along with supply chain challenges. If you like EVs, Tesla is a great brand to rally behind but I suggested you balance your portfolio with other businesses that aren’t so material or supply chain heavy.

The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.

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