Tesla TSLA The first quarter revenue report will be released on April 22nd. There is Morningstar’s view on what to look for in Tesla’s earnings and stocks.
Tesla’s fair value estimate
With its three-star rating, we believe that Tesla shares are valued significantly compared to long-term fair value estimates of $250 per share. It uses a weighted average cost of capital of just under 9%. Our stock valuation adds non-licors and non-working conversion obligations.
In 2024, Tesla’s delivery reached 179 million, just below the 1.81 achieved in 2023. Delivery forecasts will drop slightly in 2025. Deliveries in the first half are expected to be affected by new model y, which is not solid in all markets, especially at the beginning of the year. However, the second half of the year is better forecast, as affordable vehicles will begin by mid-year. As the company is stepping up production of new vehicles, it expects the total vehicle margin, excluding credit, to remain in mid-October, below its management’s long-term target of 20%.
Read more about Tesla’s fair value estimates.
Economy Moat Rating
Tesla is awarded a narrow moat evaluation. Tesla moats come from two of the five moat sources: the advantages of intangible assets and costs. The company’s powerful brand, Cache, as a luxury automaker, will lead premium pricing, but its expertise in EV manufacturing allows the company to make the vehicle cheaper than its competitors.
It is believed that Tesla could significantly exceed its capital costs over the next 20 years at least. This is a measurement used to evaluate a wide range of moats. However, the second decade brings significant uncertainty to both Tesla and the broader automotive industry, given the rapid advances in autonomous vehicle technology that allow consumers to change the way vehicles are used. That’s why we look at the evaluation of the narrow moat. This assumes that 10 years of excess revenue time is more appropriate.
Read more about Tesla Moat evaluations.
Financial strength
Tesla is excellent financial health. Cash, cash equivalents and investments were nearly $36.6 billion, far exceeding the total obligation as of December 31, 2024. The total debt was approximately $7.9 billion. However, the total liability was less than $10 million, excluding vehicle and energy product financing (non-RICORS liabilities).
Read more about Tesla’s financial strength.
Risk and uncertainty
We assign Tesla a very high Morningstar uncertainty rating, as we see a wide range of potential outcomes for the company. The automotive market is extremely cyclical and responds to sudden declines in demand based on economic conditions. As an EV market leader, Tesla will be targeted for increasing competition with traditional automakers and new entrants. As new, low-priced EVs enter the market, Tesla will be forced to continue lowering prices, reducing industry-leading profits. With more EV options, consumers can view Tesla as less favorable. The company also invests heavily in R&D to develop autonomous driving software without guaranteeing that these investments will bear fruit. Tesla’s CEO effectively owns just over 20% of the company’s stock, and uses it as collateral for personal loans, increasing the risk of large sales to pay off debts.
Read more about Tesla’s risks and uncertainties.
Tsla Bulls says
Tesla could disrupt the automotive and power generation industries with its technology in EV, AVS, batteries and solar generation systems. Tesla will have a higher profit margin as it reduces unit production costs over the next few years. Tesla’s fully self-driving software should generate growing profits over the next few years as technology continues to improve to embrace adoption adoption. Manufacturer.
Tsla Bears says
Traditional automakers and new entrants have invested heavily in EV development. As a result, Tesla sees slowing sales growth and is forced to lower prices and erode profit margins due to increased competition. Tesla, a major market, including the US and Europe, has cut sales and profits.
This article was edited by Gautami Thombare.
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