Tesla, Inc.

TSLA Details

Tesla, Inc. (NASDAQ: TSLA) designs, develops, manufactures, sells, and leases electric vehicle, energy generation and storage systems, and offers services in these related businesses, directly to customers, through website and retail locations.

Result Performance for the Period Ended 30 June 2021 (Q2FY21)

• The revenue stood at $11,958 million in Q2FY21, up 98% YoY, primarily driven by an increase in Automotive revenues revenue to $ 10,206 million in Q2FY21, up 97% YoY, followed by Energy generation and storage revenue to $801 million in Q2FY21, and Services and other revenue to $951 million in Q2FY21.
• The operating income increased in Q2FY21 YoY to $1,312 million, resulting in an 11.0% operating margin, primarily driven by volume growth and cost reduction. Positive impacts were partially nullified by growth in operating expenses comprising a rise in SBC, Model S/X ramp (negative margin in Q2FY21), growing supply chain costs, decreased regulatory credit revenue, Bitcoin-related impairment of $23 million and other items.
• The cash and cash equivalents fell to $16.2 billion in Q2FY21

Consolidated Income Statement (Source: Company Reports) 

Key Update

As per the release dated 24 September 2021, the company announced that the 2021 Annual Meeting will be presented from Tesla’s Gigafactory in Austin, Texas on 7 October 2021

Outlook

The company plans to increase the manufacturing capacity at the earliest. Broadly, it estimates to attain 50% average annual growth in vehicle deliveries, which depend on equipment capacity, operational efficiency, and the capacity and stability of the supply chain. Moreover, the company is working as per the schedule to build first Model Y vehicles in Berlin and Austin in 2021. The acceleration in production will be dependent on the successful introduction of multiple new product and manufacturing technologies, ongoing supply-chain related challenges and regional permitting. Moving ahead, the company expects operating margin to grow over time, driven by capacity expansion and localization plans underway.

Key Risks

The company is exposed to the impact of COVID-19 related circumstances and could experience delays in launching and ramping the production of products and features. Further, it may be unable to increase global product sales, delivery and installation capabilities and servicing and vehicle charging networks. The future growth is dependent upon consumers’ buying pattern for electric vehicles and specifically vehicles in an automotive industry.

Valuation Methodology: Price/Sales Based Relative Valuation (Illustrative)

Stock Recommendation

The company has delivered a 6-month and 1-year return of ~+17.19% and ~+80.76%, respectively. The stock is trading above the average of the 52-week high price of $900.40 and the 52-week low price of $379.11, which indicates a good opportunity for accumulation.

The stock has been valued using a Price/Sales multiple based illustrative relative valuation method and arrived at a target price which reflects a decline of low double-digit (in percentage terms). The company might trade at a slight discount to its peers average, considering a lower current ratio at 1.51x in Q2FY21 versus an industry median of 1.56x, and below industry fixed asset turnover at 0.46x in Q2FY21 versus an industry median at 0.82x

Considering, the aforementioned factors along with its current trading levels and the associated business risks it is prudent for investors to book profits. We give a “Sell” rating on the stock at the current market price of $788.00 per share, as on 10:35 AM Washington DC, USA Time, as of 30^th September 2021.

Technical Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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