Is Tesla stock a bargain now?
Tesla stock is down more than 60% in the last 12 months.
The last leg down came on the heels of Musk’s acquisition of Twitter and the Fed signaling rate hikes may persist for longer than previously expected.
So is this a buying opportunity or a “look out below!” situation?
Tesla stock’s Valuation
Tesla is trading today at roughly the same valuation it had in August 2020.
Since August 2020, Tesla has done the following:
- Increased Deliveries by 185%
- Increased Revenue by 175%
- Increased Net Income by 1876%
The company’s Price-to-Earnings (PE) ratio is currently in the low 40s which is the lowest level it’s ever been in history.
Current forecasts suggest Tesla is on track to grow income by roughly 50% in the next twelve months and roughly 100% in the next 24 months.
Tesla’s Price-Earnings-Growth (PEG) ratio which considers both the company’s projected growth and its current PE ratio (the lower the PEG the cheaper the stock all else equal) is now lower than Johnson & Johnson, The Coca-Cola Company, and even Chipotle.
| Tesla | Johnson & Johnson | The Coca-cola company | Chipotle | |
|---|---|---|---|---|
| PEG Non-GAAP (FWD) | 1.04 | 4.50 | 4.79 | 1.82 |
Impact of interest rates on Tesla
Some investors are panicking about the higher interest rate environment that lies before us and are forgetting that Tesla doesn’t need to raise any money.
It has $21 billion in cash, $5.87 billion in Total debt, and generated $5.1 in cash from operations during its most recent quarter alone.
The Tesla Noise
Tesla shorts are making a big stink out of “Musk’s declining credibility” in light of his Twitter acquisition without pointing to a single objective metric related to Tesla’s fundamentals that has deteriorated since the acquisition.
Moreover, why has Musk’s credibility declined anyway?
He took an over-bloated unprofitable cash burner in Twitter, laid off 70% of the workforce, one can assume mid “stay woke” TikTok dance routine, and still managed to improve the objective measurements of the platform’s health including daily engagement, number of users, and speed.
Why again has his credibility declined as a business operator?
As someone who strives to maintain a disciplined approach to investing, I don’t pay attention to the wishy-washy subjective feelings about people. Instead, I choose to spend my time caring about objective facts and not a single one has changed detrimentally for Tesla or its prospects since Musk’s Twitter acquisition. If anything, he now has a very powerful tool to promote and synergize with Tesla products.
In my view, this is absolutely a buying opportunity for an investor who has at least a 12-24 months time horizon and a stomach for volatility.
I continue to buy.
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