Is Tesla Motors (TSLA) Stock Still a Buy? - Stocks in the News


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Tesla Motors Inc, ( TSLA ) is an American company that designs, manufactures, and sells electric vehicles and advanced electric vehicle power train components via its own sales and service network. The company is engaged in commercially producing a federally-compliant electric vehicle, the Tesla Roadster, and in addition to developing its Model S and future vehicle manufacturing capabilities at the Tesla factories, the company is designing, developing, and manufacturing lithium-ion battery packs, electric motors, gearboxes and components both for its vehicles and for its original equipment manufacturer customers.

These activities occur at its electric power train manufacturing facility in Palo Alto, Ca, USA, and at the Tesla factory. The company provides services for the development of electric power train components and sells electric power train components to other automotive manufacturers.

TSLA Prospects

Lately, TSLA's stock has been winning many races, as the company really does put the pedal to the metal. The stock price just keeps moving higher, and TSLA shares recently hit a new high. While many feel as though the stock might have more room to run, the question many investors are asking is, 'are Tesla shares overvalued?'

TSLA's stock maintains a forward P/E ratio of 2990.74, which is through the roof when compared to other Zacks Rank #1 stocks in the same industry, such as Nissan Motors, ( NSANY ), and Tata Motors Ltd. ( TTM ). NSANY has a forward P/E ratio 9.75, while TTM maintains a forward P/E ratio of 10.59.

Some say TSLA is overvalued, and that what goes up must come down; however why is it then, that notable analysts from Stifel Nicolaus upgraded TSLA to a "buy" rating, with a $400 price target? Bearing in mind how much TSLA's stock has already gone up over the past two weeks, this may not seem like the logical thing to do, however, TSLA's stock seems to have captivated investors' attention once more.

TSLA is currently a Zacks Rank #1 (Strong Buy) and for good reason. TSLA's CEO, Elon Musk, has recently disclosed plans of his intention to construct a "gigafactory," to ramp up production, which in turn will lead to more sales, gross profit, and income. The gigafactory will also be responsible for manufacturing batteries, and it will arguably be the world's largest producer of batteries.

The factory will also have an impact on cost-efficiency, as it will lower the costs of manufacturing Tesla vehicles, and allow for the proliferation of Tesla automobiles for people who cannot afford Model S and other ones at this point in time. The factory aims to push sales upwards of 500,000 electric cars/year, an exponential boost from today's 35,000/year.

Another important element to consider is how TSLA is faring in the world's largest auto market, China. Very recently, TSLA has agreed to a partnership with China's second biggest wireless carrier, China Unicom ( CHU ). TSLA has teamed up with CHU in hopes of cooperating on a challenge that calls for building and developing charging stations in China.

The deal entails many details, such as 400 charging stations in 120 Chinese cities to be developed, along with supercharging station in 20 larger, and more significant, Chinese cities. TSLA is aiming to provide the charging equipment while CHU provides the physical space for the stations themselves. The stations will only service TSLA automobiles, but will be free of charge.

TSLA has been honing in on China, and trying to generate more sales to the newly found Chinese middle and upper class. This comes with approval from the Chinese government, which looks to encourage the proliferation of more environmentally friendly cars, such as electric and hybrid automobiles.

TSLA seems to be the perfect pick, especially considering how TSLA has been the pioneer and revolutionary in electric cars, and in addition to that, the market for electric cars is faring very well, as sustainable energy and climate change become imminent problems in today's world.

TSLA Financials & Conclusion

Despite the revolutionary success of Musk's TSLA, the stock is consistently judged by many investors to be overpriced and only attractive for speculators. It seems like TSLA is changing the world and how consumers perceive electric cars, though the vast majority of the market is expected to be driving fuel cars during the upcoming decade, however, if any company can change the world, it is the one headed by a visionary like Musk.

TSLA's financials have not been doing well at all for quite some time, and TSLA has its popularity among investors, and beating estimates, to thank for its strong performance. It is important to note that TSLA does not pay any dividends to its shareholders, and does not have any plans to do so in the future. As of (12/31/2013), TSLA managed to generate sales worth $2,014 million, a gross profit worth $456 million, and a negative net income of -$74 million. TSLA maintained a diluted net EPS of -$0.62/share last year.

Despite negative EPS for the current quarter (9/2014), the Zacks consensus Estimate Trend shows some improvement this year as, TSLA is expected to produce $0.09 in EPS. TSLA also seems to be able to surprise EPS estimates on a consistent basis, with a 74.44% surprise average over the past year.

Analysts have also consistently revised and raised their EPS estimates for the current year from $0.05/share 30 days ago to $0.09/share today. TSLA is currently ranked a Zacks Rank #1 (Strong Buy), and the stock has an Earnings ESP of 50.00%, and a EPS surprise last quarter of 33.33% suggesting it definitely knows how to handle earnings season expectations.

As with any stock, serious investors should research and read up on anything they plan on putting their money into. TSLA is arguably a strong pick this quarter, but investors may want to err on the side of caution when playing this volatile stock, as it can be prone to big moves in short time frames.

If investors want a safer bet, they should perhaps look to TTM or NSANY, and they should read a detailed comparison between TSLA, TTM, and NSANY here , just to see which one is more suitable for their outlooks and risk, though TSLA does seem likely to electrify portfolios in the near term no matter what else happens with the auto industry.

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TESLA MOTORS (TSLA): Free Stock Analysis Report

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TATA MOTORS-ADR (TTM): Free Stock Analysis Report

CHINA UNICOM (CHU): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
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