Fundamental Analysis

Tesla Stock Analytics 2021

To Buy or Not to Buy – That Is the Question


Over the last year, Tesla capitalization has grown by more than 700%! However, when you see such explosive growth, you can’t help but think about how irrational the markets are and that it’s almost impossible to predict the arrival of such “triumph.”

A look at the company’s figures shows the incredible rise is justified so we only need to decide whether it’s reasonable to buy Tesla shares or not. Also, we’ll discuss how to buy or sell these shares.

We start by analyzing the company’s debt load or the level of “credit load.” To do this, let’s determine the ratio of debt to the company’s assets. In 2020, the ratio was 57.3%. A year earlier, the same ratio was 81%. By comparison, BMW had 71.8% and Volkswagen Group 74.4%. Therefore, Tesla does not have a very high debt load, which is a positive factor for investing in Tesla stocks.

 

Main Tesla ratios

The market capitalization of Tesla is $581.46 billion. The company’s asset value for 2020 was $51.2 billion. The value of equity capital was $22.2 billion. This means that the market valued Tesla at 11.3 times the value of its assets and 26 times the value of its equity capital. The market valuation is significantly higher than the book value of the business.

Over the last year, Tesla managed to significantly increase its revenue, which rose from $24.5 billion in 2019 to $31.5 billion in 2020, increasing more than 28%. Additionally, in 2020 the company, for the first time, managed to show a positive net profit of +$690 million.

Previously, the company’s net profit was consistently negative. The reason being were huge operating expenses, which wiped out all of the company’s revenue. The five-year average operating margin (ratio of operating profit to income) is -0.79%.

Because of the opposing net profit, the company is unprofitable. The 5-year average return on assets is -2.25%, the return on equity is almost -10%, and the return on investment is -3.38%.

The company has a tremendously high P/E, pointing to a substantial “overbought” share price. Tesla is ahead of the industry according to P/S and P/B as well.

Tesla’s Ratios:

  • P/E = 608.26 (in the industry = 8.96)
  • P/S = 16.18 (in the industry = 1.88)
  • P/B = 25.25 (in the industry = 5.09)

 

What else to look out for

Forecasts for the company’s shares are mixed. For example, Bank of America lowered the target price for the shares, arguing that investment in the company’s development may slow the growth of capitalization. In comparison, Goldman Sachs sees upside potential for the stock of about 20%. Morgan Stanley also raised its estimate for share price growth.

From the technical point of view, the price broke through the lower boundary of the ascending price channel, having corrected upwards in the short term, the price continues to decrease. From an Elliott Wave analysis point of view, we are witnessing the formation of a corrective wave. The downside target may be the $500 per share level or further towards $420.

 

Conclusion

  • Should I buy Tesla stocks or not, and how can I buy them?

Given the company’s rather high stock prices, which do not match its financial results in any way, it is logical to expect a continuation of a decline.

Fortunately, the Olymp Trade platform gives you the opportunity to make money on both the rise and fall of prices. Therefore, if you want to make money on Tesla’s declining capitalization, register on our platform, and you won’t have any problems achieving your goals.

  • How much does it cost?

Of course you will pay commission for opening trades, but it won’t be too much and your possible profit will definitely cover all possible expenses.

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