2. Tesla, Inc. (NASDAQ:TSLA)
Flagged Overvalued by Number of Articles: 4
Tesla, Inc. (NASDAQ:TSLA) is an Austin, Texas-based electric vehicle company.
The premium valuation of the company led by Elon Musk can be gauged by the fact that the market capitalization of Tesla, Inc. (NASDAQ:TSLA) is higher than the market capitalization of the next five automakers combined. Tesla, Inc. (NASDAQ:TSLA) produced only 930,400 vehicles in 2021 and contributed a meager 1.16% to the global auto production of 80 million vehicles.
In a research note issued on December 7, Toni Sacconaghi at Bernstein highlighted that Tesla, Inc. (NASDAQ:TSLA) could be facing a demand problem and has responded by reducing its prices in China and the US. Furthermore, the company has lowered its production in China as well. The price reduction could result in the average selling price (ASP) falling by $1,400 per vehicle. This could result in a contraction in gross profit margin by two percentage points (ppts). The analyst has assigned Tesla, Inc. (NASDAQ:TSLA) stock a target price of $150 along with an Underperform rating.
Baron Funds discussed its outlook on Tesla, Inc. (NASDAQ:TSLA) in its Q3 2022 investor letter. Here’s what the firm said:
“Tesla, Inc. (NASDAQ:TSLA) makes fully electric vehicles (EVs), related software offerings, solar and energy storage products, and battery cells. After a tough second quarter that included a prolonged shutdown of one of Tesla’s key manufacturing facilities in Shanghai, the company demonstrated a significant 40% sequential increase in production volumes resulting in another quarterly record of production and deliveries. Despite the second quarter complexities, inflationary pressures, and production ramp-up of two new facilities (Berlin and Austin), the company exceeded Wall Street expectations in the second quarter. It maintained healthy 26% normalized gross margins, achieved industry-leading 18% adjusted operating income margins, and has generated over $14 billion of cash from operations over the past year. Moreover, due to Tesla’s high level of vertical integration and U.S. manufacturing capacity, the company is expected to be one of the key beneficiaries of the Inflation Reduction Act, qualifying for significant manufacturing and consumer-related incentives. We believe these incentives can add up to tens of billions of dollars over the coming decade, while also enhancing Tesla’s competitive advantage versus other automakers. The company also held its second artificial intelligence day, which presented continued advancements in its vehicle self-driving program and showcased its rapidly evolving humanoid robot developments (check out the Optimus videos on YouTube). We continue to believe Tesla is well positioned to benefit from complementary tectonic shifts in the automotive industry, including electrification, autonomous driving, and shared mobility. And, yes, Tesla is still effectively debt free, with over $18 billion of cash on its balance sheet, and investors are even speculating about a stock buyback, a far cry from worries of bankruptcy just a few years ago.”
