If there is one share that has been one of the losers of the year so far, it is Tesla. The latest quarterly figures have disappointed investors and the share has lost a good 1/3 of its value since the beginning of the year. Calculated from the all-time high, it is even around 60% (as at April 2024). Is the share worth buying?
Opinions on Tesla are notoriously divided. And this is not least due to the company's eccentric CEO, Elon Musk. Since 2019, the shares have experienced a rocket-like rise and at times made Musk the richest person in the world. And the current stock market valuation is still enormous. Even the combined valuation of the world's largest car manufacturers is still lower than that of Tesla.
And this despite the fact that the share price has already fallen by 60%. If we now look at car sales, we see exactly the opposite picture. While Tesla sold just under 2 million cars in 2023, the VW Group alone sold 9 million. An initially obvious imbalance.
To get a feel for whether a share is cheap or expensive, you can look at the ratio of market capitalization to company profit, and here too the picture is clear. The stock market value currently corresponds to 34 times the profit. That alone doesn't say much, but the industry average is less than 10. Tesla's share price would therefore have to fall by 80%!!! at current earnings to reach a similar valuation level to Volkswagen. Based on this, Tesla would still be very expensive and anything but a buy. However, it must be acknowledged that the P/E ratio was also well above 100 at times. The share has therefore already grown quite a bit into its valuation.
What fueled the share price from 2019 onwards was, on the one hand, the step over the profitability threshold (before that there was always a net loss) and, on the other, the enormous growth figures. Since 2020, revenue has grown 15-fold, while most other car manufacturers have stagnated for a long time with fluctuations in revenue. Profitability is also 5 times higher than the average of the competition. In other words, the company produces more effectively and achieves relatively high profits due to the lack of advertising and a clearly structured product portfolio. In business terms, Tesla has done its homework.
Recently, however, profit growth has declined significantly. Tesla is increasingly experiencing saturation effects and cannot maintain its steep growth figures indefinitely. In the highly competitive Chinese market in particular, the Group was recently forced to cut prices in order to achieve its sales targets and the competition from BYD and Xiaomi is not sleeping and is also increasingly conquering the European market. The desired dominance in the car market of the future is therefore currently a long way off.
Now to the share price and the outlook: In the long term, the share price is characterized by very rapid and steep rises (2014, 2020), some of which are then "digested" over several years. This seems to be the case again at the moment and reflects the slow "growing into the valuation". In the short term, the share is quite battered and would have to rise to the price range around USD 200 and then above USD 260 to regain momentum. However, a slow downward correction towards the long-term trend line with a possible medium-term target of 110-100$ is currently more likely.
Conclusion: The share is currently a hot bet that Musk will manage to be at the forefront of such important markets of the future as autonomous driving, as this is the only way to justify the still sporty valuation. It currently seems unlikely that Tesla will serve up to 25% of the e-car market, as some are predicting. The competition is not sleeping and is catching up. Its success is particularly dependent on Musk's decisions. The company has established itself as a valuable brand in a very short space of time, mainly thanks to him, and definitely has the potential. However, critical reports on the status of the development of self-driving cars (keyword: lidar sensors) are increasingly raising doubts and companies such as Mercedes are also getting heavily involved with investments worth billions. The big party seems to be over for now and a sustained resumption of the long-term trend is unlikely. At lower prices, however, it is definitely a comeback candidate.