Tesla (NASDAQ: TSLA) stock is down 58% YTD and 20.5% in the past month. The controversial electric car (EV) company that defied the odds in 2020 and 2021 has seen investor sentiment plummet in 2022.
Elon Musk's Twitter antics appear to have cast doubt on his ability to steer Tesla to greatness (higher highs). The company is also recalling 321,000 Tesla vehicles over taillight issues. Meanwhile, Musk has been cashing in his Tesla shares and is embroiled in a dispute over his $56bn pay packet.
Tesla's Growth Trajectory
The name Tesla conjures up images of flashy electric vehicles, but the company also extolls the virtues of artificial intelligence, electric batteries, renewable energy (solar), and autonomous driving (self-driving = next-level freedom).
The Sun Shines on Elon
Tesla CEO Elon Musk's extraordinary life path is quite something. For all the negative press and dubious claims, Tesla, SpaceX, The Boring Company, Neuralink and OpenAI are businesses operating in seriously complex industries with the potential to unlock an entirely new existence for humanity. To have one man responsible for advancing all these technological breakthroughs is breathtaking.
That's why so many Tesla fans exist, and it gives weight to the narrative that Elon will bring Tesla's capabilities to fruition in time.
Indeed, just two months ago, Musk made the outlandish (but very bullish) claim that Tesla could be worth more than Apple (NASDAQ: AAPL) and Saudi Aramco (TADAWUL: 2222) combined.
And now, I’m of the opinion that we can far exceed Apple’s current market cap. In fact, I see a potential path for Tesla to be worth more than Apple and Saudi Aramco combined.
- Elon Musk TSLA Q3 Earnings Call
Harnessing the Double-Edged Sword
There's no doubt Musk's presence at Twitter is a distraction. It has hijacked Tesla's headlines and diluted the time he can dedicate to Tesla. But Musk is in charge of multiple companies and knows how to delegate.
There's also no disputing Twitter has been a key tool in Tesla's stratospheric trajectory. Therefore, if Musk plays his cards right, Twitter could prove a hugely powerful weapon in Tesla's diversified growth strategy long term.
Elon Musk is the ultimate gambler, but he uses science, logic, and a unique sense of humor to taunt, probe and incite debate.
From chaos, greatness can ensue, and creative disruption emerge victorious.
Tesla's Growth Trajectory (Rising Sales and Profits)
FactSet analysts project Tesla revenues to exceed $83.9bn in 2022, $120.6bn in 2023, and $156.4bn in 2024. That's an optimistic projection, further boosted by profits of $13.9bn in 2022, $20bn in 2023, and $25.9bn in 2024.
These figures represent revenue growth of 55.9% in 2022, 43.7% in 2023, and 29.6% in 2024. And profit growth of 82.9% in 2022, 43.8% in 2023, and 29.4% in 2024.
Will Tesla Stock Drop?
Whether to buy, sell or hold Tesla stock is the burning question. With multiple headwinds weighing on the TSLA share price today, it could undoubtedly have further to fall.
China is a thorn in Tesla's side. While it has opened doors to cheaper production and a broader end market, Tesla is at the mercy of the country's strict regime. COVID-19 fear is curbing consumer spending, and the potential for further lockdowns is worrying.
Tesla also faces rising competition from Chinese EV manufacturers in the region. It has already slashed car prices to stay competitive.
Supply chain disruption has been a prevailing problem for Tesla, with order delivery dates repeatedly bumped as the company struggles to deliver.
And don't forget the threat of China invading Taiwan. That would be game over for Tesla stock.
Tesla controversially bought Bitcoin back in February 2021, and many Tesla shareholders are crypto fans. Cathie Wood and ARK Invest have a hand in this as they've repeatedly promoted both in their quest for disruption innovation. With the FTX fiasco causing the value of Bitcoin to plummet, there's a chance this could rub off on Tesla too.
In its Q2 earnings call, the company said it had “converted approximately 75% of our Bitcoin purchases into fiat currency.” There was no mention of Bitcoin in its Q3 call but its October 10-Q reports:
in the nine month period ended September 30, 2022, we recorded $170 million of impairment losses resulting from changes to the carrying value of our bitcoin and gains of $64 million on certain conversions of bitcoin into fiat currency by us.
Tesla's Financial Metrics
TSLA stock has a price-to-earnings ratio (P/E) of 51.72. Its price-to-book-value (P/BV) is 13.25. Tesla doesn't offer a shareholder dividend.
Over the past year, TSLA stock has traded between $167.54 and $402.67. Today it trades at around $167.87. Year-to-date, the Tesla stock price is down -58%, while the S&P 500 is down -17% over the same period.
Tesla reported earnings in October, which saw Q3 deliver an operating margin of 17%, and free cash flow surpassed $3bn while approaching $9bn in the prior 12 months.
Tesla (TSLA) will report its next quarterly earnings on January 25, 2023. FactSet analyst estimates provide a full-year EPS consensus of $4.10 and a sales consensus of $83.9bn.
Investors are excited to hear how Q4 deliveries and pricing pressures fared in China, which will help finalize the annual sales and profits.
Tesla Analyst Ratings
43 FactSet analysts have a consensus Overweight rating on TSLA stock with a Tesla share price target of $289.03.
Is TSLA a Good Stock to Buy?
The buy, sell or hold debate rages on. If you believe in Elon Musk and his vision, Tesla could prove to be an outstanding stock to buy. If you think he's an opportunist that got lucky and is rapidly swimming out of his depth, TSLA stock is probably not for you.
Weighing up Tesla's position logically, its share price fundamentals show the stock is still overvalued. A current P/E of 51 and forward P/E of 29 are high but considerably lower than its historical average. They're also in keeping with Tesla's projected growth rate.
While its reliance on China is concerning, there are signs that it is ramping up deliveries, and Tesla China said there will be no more price cuts this year.
Although Tesla doesn't offer a shareholder dividend, Musk has hinted at a share buyback next year.
Even if next year is a very difficult year, we still have the ability to do a $5B to $10B buyback.
- Elon Musk TSLA Q3 Earnings Report Investor Call
Furthermore, Musk said, 'I think we've got the most exciting product portfolio of any company on earth, some of which you've heard about, some of which you haven't. 'This includes building its Cybertruck line in Austin, Texas, and progressing with its Robotaxi platform design.
Solar is another big part of the company's vision. The recent passing of the Inflation Reduction Act should help scale the US battery supply chain and boost Tesla's US market share for solar storage and EVs.
As always, plenty is going on at Tesla for investors to speculate over. Whether Tesla is a good stock to buy remains the million-dollar question. The risk is lower than it once was, but the TSLA share price could have further to fall if 2023 turns out to be another gloomy year for Wall Street.