TSLA Stock Study (8-7-24)
Posted by Mark on September 30, 2024 at 07:09 | Last modified: August 7, 2024 11:53I recently did a stock study on Tesla, Inc. (TSLA) with a closing price of $200.64.
M* writes:
> Tesla is a vertically integrated battery electric vehicle automaker
> and developer of autonomous driving software. The company has
> multiple vehicles in its fleet, which include luxury and midsize
> sedans, crossover SUVs, a light truck, and a semi-truck. Tesla
> also plans to begin selling more affordable vehicles, and a sports
> car. Global deliveries in 2023 were a little over 1.8 million
> vehicles. The company also sells batteries for stationary storage
> for residential and commercial properties including utilities
> and solar panels and solar roofs for energy generation. Tesla also
> owns a fast-charging network.
Despite only being profitable since 2020, the company is already mega ( > $50B annual revenue) in size. I am excluding previous losing years from the full analysis.
Since ’20, Tesla grows sales and EPS at annualized rates of 45.9% and 167%. Lines are up, narrowing, and parallel. EPS R^2 is 0.84 although Value Line gives a mediocre Earnings Predictability score of 35 (probably dating farther back than ’20).
Since ’20, PTPM leads peer and industry averages while increasing from 3.7% to 10.3% (’23) with a 4-year mean of 10.7%. ROE leads peer and industry averages while increasing from 3.8% to 25.6% (’23) with a 4-year mean of 19.2%. Debt-to-Capital is less than peer and industry averages while falling from 37.4% to 13.3% (’23) with a 4-year mean of 21.2%.
Quick Ratio is 1.2 and Interest Coverage is 30.4 per M* who also rates the company “Exemplary” for Capital Allocation. Value Line gives an A grade for Financial Strength.
With regard to sales growth:
- YF projects YOY 2.2% and 16.4% for ’24 and ’25, respectively (based on 40 analysts).
- Zacks projects YOY 2.0% and 14.3% for ’24 and ’25, respectively (10 analysts).
- Value Line projects 24.5% annualized growth from ’23-’28.
- CFRA projects 3.1% YOY and 10.4% per year for ’24 and ’23-’25, respectively.
- M* provides a 2-year ACE of 9.2% per year.
With ’24 looking to be slow, my 9.0% per year forecast is below the range of ’25 and beyond.
With regard to EPS growth:
- MarketWatch projects 20.1% and 18.7% per year for ’23-’25 and ’23-’26, respectively (based on 56 analysts).
- Nasdaq.com projects 35.8% and 35.1% per year for ’24-’26 and ’24-’27 [9 / 9 / 1 analyst(s) for ’24 / ’26 / ’27].
- Seeking Alpha projects 4-year annualized growth of 10.8%.
- Argus projects 5-year annualized growth of 105%.
- YF projects YOY 25.0% contraction and 35.0% growth for ’24 and ’25 and 5-year annualized growth of 3.0% (32).
- Zacks projects YOY 26.3% contraction and 36.5% growth for ’24 and ’25 and 5-year annualized growth of 21.6% (11).
- Value Line projects 15.9% annualized growth from ’23-’28.
- CFRA projects contraction of 24.7% YOY and 4.4% growth/year for ’24 and ’23-’25 along with 3-year CAGR of -6.0%.
- M* projects long-term annualized growth of 22.0%.
I am not as puzzled by YF long-term estimate as I am Argus that implies [more than] doubling every year for the next 5 years.
My 10.0% per year forecast is near bottom of the long-term-estimate range (mean of six: 29.7%). Initial value is 2024 Q2 EPS of $3.56/share (annualized) rather than ’23 EPS of $4.30.
My Forecast High P/E is 40.0. Since ’20, high P/E falls from 1124 to 69.6 (’23). I regard all these numbers as NMF until the company reports more profitable years allowing the market to settle upon a more stable valuation. I now forecast at the upper end of my comfort zone (lower than the historical range).
My Forecast Low P/E is 23.0. Since ’20, low P/E falls from 109 to 23.7 (’23). I am below the range.
My Low Stock Price Forecast (LSPF) is $138.80. Default ($81.90) based on initial value given above seems unreasonably low at 59.2% less than the previous closing price and 41.0% less than the 52-week low. Instead, I will use the 52-week low itself: 30.8% less than the previous close.
These inputs land TSLA in the HOLD zone with a U/D ratio of 0.5. Total Annualized Return (TAR) is 2.7%.
PAR (using Forecast Average—not High—P/E) of -2.1% is unacceptable for any size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR [even that is less than the current yield on T-bills, however].
To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 97 studies (my study and 18 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 13.9%, 17.4%, 55.2, and 30.0, respectively. I am lower across the board. Value Line’s projected average annual P/E of 41.0 is less than MS (42.6) and greater than mine (31.5).
MS high / low EPS are $8.78/ $3.91 versus my $5.73 / $3.56 (per share). My high EPS is less due to a lower growth rate. Value Line is higher than both at $9.00.
MS LSPF of $117.60 implies Forecast Low P/E of 30.1: nearly a perfect match indicating the default value. This is 15.3% less than mine resulting in more conservative zoning.
With regard to valuation, PEG is 4.0 and 5.1 per Zacks and my projected P/E, respectively: substantially overvalued.
MOS is robust because my inputs (and most-recent-quarter initial value) are near or below respective analyst/historical ranges and MS inputs. Further substantiating this is MS TAR of 18.5% that is 15.8%/year greater than mine.
A TAR discrepancy that large makes me question whether my inputs are unreasonably low, but lack of data leaves the door open to almost everyone. The company has yet to be profitable for a full business cycle and nobody truly knows how it will react. With regard to YF and Argus, 105% is legitimatized as much as 3.0%.
Per U/D, TSLA is a BUY under $161. BI TAR criterion is met ~ $115/share given a forecast high price of ~ $229.
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