Zacks Investment Ideas feature highlights: Tesla, General Motors, Ford, Toyota and Volkswagen

For Immediate Release

Chicago, IL - January 24, 2019 - Today, Zacks Investment Ideas feature highlights Features: Tesla TSLA , General Motors GM , Ford F , Toyota TM and Volkswagen VWAGY .

Is Tesla On Sale or In Trouble?

Last Friday, electric automaker Tesla announced 3,000 employee layoffs in an attempt to lower costs, even as they attempt to increase production of the mass-market Model 3.

In a letter to employees, Tesla CEO Elon Musk pointed out that although the company had made great strides in terms of the number of vehicles it is able to produce and deliver, the high prices of its cars keeps them out of reach for most consumers.

Musk predicted that the company would be able to post a second consecutive profitable quarter due to continued shipment of higher priced Model 3 variants - including to Europe and Asia for the first time - but that future sales and profitability growth hinged on the company's ability to produce lower-cost vehicles for a wider audience.

The CEO said that audited results would probably show a profit, "but less than Q3," - when the company earned $2.90/share, blowing away estimates of a small loss for the period. The Zacks Consensus Estimate for Q4 earnings is $2.13/share - consistent with Musk's prognostications.

TSLA is currently a Zacks Rank #3 (Hold).

The Model 3 was originally introduced with an expected base price of $35,000, but most of the cars that have been delivered so far have been long-range versions that start at $49,000 - and sold for an average price of about $60,000 during Q3. Recently, Tesla has made the mid-range level Model 3 available, starting at $44,000, but none of the $35,000 cars have yet been sold and Musk himself has admitted that the company is not currently able to turn a profit on the lowest price Model 3s.

In the letter, Musk targeted May of 2019 for the first sale of $35,000 cars to all markets. He's racing against the clock in the US due to the impeding expiration of the federal tax credit for Tesla vehicles. Through 2018, buyers of all Tesla cars received a $7,500 tax credit. In the first two quarters of 2019, the credit is reduced to $3,750, then halved again - to $1,875 - during the second half of the year before being eliminated altogether in 2020.

Especially in the lower price ranges, the federal tax credit is a significant component of the final price consumers pay for a Tesla.

Investors were not pleased with the concept of layoffs or the indications tha t earnings would be lower and the shares traded sharply lower, shedding 14% since closing at $347.31/share on Thursday before the announcement.

The reaction was so severe that two very positive developments for Tesla went largely ignored - the groundbreaking for a Gigafactory in China that will produce batteries and Model 3 autos, possibly within a year, and European "homologation" of the Model 3, approving the vehicle for sale throughout the continent. The first Model 3s left the West Coast of the US for Europe on a cargo ship last week and European customers anxiously awaiting cars they ordered have been tracking the vessel's progress on an internet app.

All of the 14,000 orders taken so far in Europe are for the higher-priced variants of the Model 3, a bullish sign for Q1 2019 revenues.

The extreme selloff on the layoff news seems overdone, though Tesla still trades at a 12M forward P/E ratio of 52X. For reference, mature competitors in the industry like General Motors, Ford, Toyota and Volkswagen all trade at single-digit multiples.

The rich multiple highlights the fact that Tesla remains under constant pressure to produce revenue and profit growth in order to deserve its share price. The bull case is that Tesla will be able to continue its growth trajectory for the foreseeable future which will translate into rising share prices, but this past week has been an indication that the markets are likely to be unforgiving of any missteps along the way.

For investors who still believe in Tesla's long-term prospects, recent declines offer an opportunity to purchase shares at a steep discount to where they have traded recently, but be aware that more volatility most likely lies ahead, especially around the earnings release and conference call next week.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>

Follow us on Twitter:

Join us on Facebook:

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Ford Motor Company (F): Free Stock Analysis Report

Tesla, Inc. (TSLA): Get Free Report

General Motors Company (GM): Free Stock Analysis Report

Toyota Motor Corporation (TM): Free Stock Analysis Report

Volkswagen AG (VWAGY): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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

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

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More