Interactive Investor

ii view: will Tesla shareholders keep the faith?

28th January 2021 16:34

Keith Bowman from interactive investor

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A doubling in the share price over recent months has left investors kicking the tyres at this auto maker.

Fourth-quarter results

Revenue up 46% year-over-year to $10.74 billion

Earnings per share up 95% to 80 cents

Cash and cash equivalents up 209% to $19.4 billion

ii round-up:

Founded in 2003, Tesla (NASDAQ:TSLA) designs, develops, makes, and sells fully electric vehicles and energy storage systems. 

It operates through the two divisions of automotive, and energy generation and storage. In 2020, automotive accounted for around 86% of overall revenues. 

For a round-up of these latest results, please click here

ii view:

These latest results mark the electric vehicle maker’s sixth consecutive quarterly profit. Although small in comparison to rivals such as Volkswagen (XETRA:VOW), production continues to grow. Over the latest quarter, it rose to nearly 180,000 units, up 71% from the final quarter of 2019. Tesla is due to begin production at new plants in Texas in the US and Brandenburg in Germany over the course of 2021.

For investors, increased production and reduced vehicle sale prices are beginning to leave Tesla looking more mainstream. Climate change and the election of a US government with green aspirations provide a positive backdrop. A previous cash raising of $5 billion, strengthening its cash and cash equivalents to just over $19 billion, offers reassurance. And Tesla’s own vehicle software and the development of autopilot and full self-driving capabilities all now feed into prospects.  

But a doubling in the share price since late October and following on from its last results is asking questions. European rival Volkswagen is itself busy adding to its own electric vehicle selection, underlining the comparison between Tesla’s market value at nearly 10 times that of VW. An estimated price-to-net asset value of over 100 at Tesla compares to Ford (NYSE:F) at under two.  While progress at Tesla is clearly being made, some consolidation in the group’s share price looks overdue, with some investors happy to take profits. However, the company has achieved cult-like status, and many shareholders will likely stay the course.

Positives: 

  • Ongoing quarterly profit
  • Climate change concerns are growing globally

Negatives:

  • Competition from other manufacturers is increasing
  • Elevated valuation

The average rating of stock market analysts:

Hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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