Tesla Stock Q4 Forecast: Why October is a Crucial Month for TSLA
- by The Globe and Mail
- Sep 25, 2024
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Tesla trades significantly above its mean target price of $201.60 – but then, it's not uncommon for the polarizing stock to trade above what the average analyst thinks it is worth. Notably, while Tesla bears tend to value the stock as an automotive company – a business that has sagged in recent quarters amid the demand slowdown and price war – bulls see it as a tech play.
Previously, Musk has touted autonomous driving as the biggest driver of the company’s current valuations, but he has since hyped other tech products, like the Dojo supercomputer and Optimus humanoid. While Musk seldom shies away from making flamboyant claims, he believes that Optimus alone could make Tesla a $25 trillion company.
All of that said, as artificial intelligence (AI) goes mainstream and more hardware products become AI-enabled, companies like Tesla could be among the biggest beneficiaries, as it has both software and hardware capabilities.
Is TSLA Stock Still a Buy?
Tesla has always been a story – with both believers and doubters. For bulls, the stock is a perma-buy, while bears tend to value TSLA at a fraction of its prevailing prices. In terms of current valuations, Tesla stock might appear stretched, as its next-12 months (NTM) price-to-earnings (PE) multiple of nearly 91x is not only the highest among its “Magnificent 7” peers, but even higher than the company’s average multiple over the last three years.
That said, Tesla’s PE multiple looks elevated because its profits have been weak due to the EV price war, and the stock’s NTM price-to-sales multiple of 7.53x is actually a bit lower than the 7.89x that it has averaged over the last three years.
The question might be - shouldn’t Tesla trade at a discount to its historical multiples? It's a fair question; not only is Tesla struggling for topline growth, but its industry-leading operating margins have also withered away. To be sure, Tesla’s automotive margins might not rise to their previous highs anytime soon, given the current overcapacity. However, Tesla still has several growth drivers, including the low-cost platform which the company might announce sometime this year – with some predicting it could be revealed during the robotaxi event next month.
Tesla defied pessimists to become the biggest EV company on the planet, while also achieving enviable margins. While a lot of optimism over a second-half delivery rebound, robotaxi, and low-cost platform has been baked into Tesla’s stock price after the recent rally, I believe it still has room to run higher.
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