Stocks

Tesla Stock: Pricey but Still Worth a Look

Tesla (TSLA) is an EV manufacturer based in California. I am bullish on the stock.

Of all the world's EV companies, Tesla is like the 800-pound gorilla in the room.

You can like or dislike Tesla, but no one can deny the company's amazing growth story.

With that growth, however, some value-focused investors might be concerned about Tesla's valuation.

On the other hand, valuation concerns have been an issue with Tesla for a long time. The company is still capable of expanding, and TSLA stock can still go higher. (See Analysts’ Top Stocks on TipRanks)

A Quick Look at TSLA Stock

It's astonishing to consider that TSLA stock cost $50 back in the summer of 2019.

Even back then, some folks believed that the stock was too expensive.

It just goes to show that a stock can go up a lot, and then continue to move much higher.

Despite the onset of the COVID-19 pandemic, TSLA stock was absolutely unstoppable in 2020, as it broke above $700 that year.

In 2021, even though there was a slow period mid-year, the stock eventually resumed its upward momentum.

The peak, so far, has been the 52-week high of $1,243.49, printed in early November.

Therefore, $1,250 will be a critical resistance point until proven otherwise. Watch to see how TSLA stock behaves when it gets to that price, which will likely happen in the coming weeks.

Is the Valuation a Problem?

There's a long-standing debate between value investors and momentum traders.

When it comes to TSLA stock, the momentum traders always seem to prevail in the end.

Here's what might cause concern for value investors. Tesla's trailing 12-month price-to-earnings (P/E) ratio is 374.4.

Previous generations of investors would probably consider this figure to be excessively high. However, times have changed and so have companies' valuations.

Bear in mind that during 2021's third quarter, Tesla generated a whopping $8.8 billion in revenues.

Now, think about all of the EV startups out there. No one even comes close to Tesla when it comes to revenue generation.

Some of those startups haven't even sold any vehicles to the public yet, and they don't have a P/E ratio at all because they have no earnings.

Staying in the Green

Tesla produced approximately 238,000 vehicles and delivered over 240,000 vehicles in the third quarter of 2021.

Again, you'd be hard-pressed to find an EV startup with numbers like those.

Moreover, Tesla is in a better financial position than some competitors in the EV space.

As of September 30, 2021, Tesla had $45.7 billion in assets (unaudited), and $28.1 billion in liabilities.

Meanwhile, some traders are buying shares of EV companies that are "in the red," so to speak. You won't have to worry about that with Tesla.

Sure, CEO Elon Musk can be eccentric sometimes. It can't be denied, though, that he knows how to run a successful business and generate plenty of publicity.

So maybe, TSLA stock isn't really outrageously priced after all.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, TSLA is a Hold, based on 10 Buy, six Hold, and seven Sell ratings. The average Tesla price target is $887.38, implying 19.9% downside potential.

The Takeaway

Musk is a fascinating figure, and he is controversial but has made Tesla a huge success.

The company's valuation will continue to be the center of an ongoing debate, which will not end anytime soon.

Still, the data shows that Tesla is a company that can deliver vehicles and stay in a positive financial position.

Hence, TSLA stock might not be as pricey as it seems to value-focused investors.

Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.

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