Perhaps the biggest debate about Tesla Motors Inc (NASDAQ:TSLA) right now is whether the stock is too expensive. The bulls say no, while the bears say yes. Both sides have made their case, but today we’re hearing again from the bulls. No doubt the bears will have yet another response, and around we’ll go again.
Motley Fool contributor Daniel Sparks gives four reasons Tesla’s stock is not too expensive right now, and his argument isn’t based on valuation metrics. He sees other reasons for the value of the stock to be too high, and none of these four reasons are anything new.
John Buckingham: Busting the Myths & Seven “Valuable” Themes for 2021 [ValueWalk Webinar slides and video]
John Buckingham's presentation titled, 'Busting the Myths & Seven "Valuable" Themes for 2021'. The webinar for ValueWalk Premium members took place on 2/23/2021, and was followed by a Q&A. Stay tuned for our next webinar, Q4 2020 hedge fund letters, conferences and more John Buckingham Principal, Portfolio Manager, Kovitz Editor of The Prudent Speculator newsletter Read More
Why Tesla’s Stock Isn’t Too Expensive
According to Sparks, insider confidence is one sign that shares of Tesla Motors Inc (NASDAQ:TSLA) are not trading too high because co-founder Elon Musk and other executives at the company have a lot of skin in the game.
He also cites the company’s massive growth in such a short amount of time. Tesla reported that sales jumped 83 percent between the fourth quarter of last year and the first quarter of this year. Year over year, sales surged 1,770 percent, which he says puts it in the league of well-known luxury car makers. Also there’s more potential for growth as the company has plans to build a Generation III vehicle that’s aimed at the mass market.
Sparks also points to Tesla Motors Inc (NASDAQ:TSLA)’s operational feats, which include trimming the number of hours needed to build a single car by almost 40 percent between December and March. The result was a jump in gross margin from 8 percent in the fourth quarter of last year to 17 percent in the first quarter of this year. He says Ford Motor Company (NYSE:F)’s gross margin in the fourth quarter was 16.2 percent.
The fourth reason he gives for shares of Tesla Motors Inc (NASDAQ:TSLA) not being too expensive is how great the company’s cars are. Of course it earned the highest rating of any vehicle ever tested by Consumer Reports earlier this year.
Tesla Receives Buy Rating From TheStreet
Analysts at TheStreet are also pretty bullish on Tesla Motors Inc (NASDAQ:TSLA) today, reports Daily Political’s Latisha Jones. They gave the stock a grade of B- and a buy rating. Like Sparks, they point to the company’s revenue growth, increase in net income and solid cash flow from operations. They also note the company’s solid stock performance and its “notable return on equity.” In TheStreet’s view, these strengths outweigh the risks associated with the company’s “high debt management risk,” which they say holds true by “most measures” they evaluated.
Global Equities Research has rated Tesla Motors Inc (NASDAQ:TSLA) overweight, and Baird analysts have rated it as outperform. Bank of America Corp (NYSE:BAC) however, has a sell rating. According to Daily Political, Tesla has three sell ratings, three hold ratings and nine buy ratings. The site lists consensus though, as being a hold rating.