Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets, CFDs, OTC options or any of our other products work and whether you can afford to take the high risk of losing your money.

67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • Updates
  • electric vehicles

Should I watch Tesla stock right now following earnings?

In 2020, Tesla’s (NASDAQ: TSLA) stock price surged more than 700%. This year, however, after continuing its upward momentum in January, the stock is down over 3% year-to-date (YTD).

This article was originally written by MyWallSt. Read more market-beating insights from the MyWallSt team here.

The company beat both EPS and vehicle delivery estimates in Q1 2021 by $0.07 and 100,000, respectively, which shows that the demand is still there for its products. Are investors getting nervous about Tesla’s high overvaluation or the number of competitors emerging in the Electric Vehicle (EV) space? Whatever the case may be, the stock is available at a discount, so is now the time to watch?

 

The bull case for Tesla

Tesla is regarded as the first true mover in the EV sector, having been built from the ground up as a mass manufacturer of relatively affordable vehicles; the prices of which will drop as battery tech advances and becomes less expensive. Further aiding this endeavor is Tesla’s opening of a new battery ‘gigafactory’ in Texas later this year. The company’s growth cannot be ignored and its record half-million vehicle delivery in 2020 is expected to be exceeded this year by over 50%. Furthermore, Tesla believes that deliveries will grow over an annual rate of 50% in the next few years. Last quarter also marked another record for the company as it recorded over $1 billion in non-GAAP net income. 

Autonomous Vehicles (AV) are the future of the electric sector (projected 12% market penetration by 2030) and no other EV competitor has the amount of data that Tesla has collected for this tech over the years from their vehicles. The AV market is expected to be worth nearly half a trillion dollars by 2030 and with Tesla’s clear competitive advantage and 18% global market share in the EV space, I reckon the company will get a nice portion of that sum. This is also serving the company well in its insurance endeavors, which analysts are projecting to be worth a quarter trillion dollars in revenue for the company by 2030. As for its core business, along with its new Texas factory, Tesla will be erecting another factory in Germany this year as well. 

 

The bear case for Tesla

Yes, Tesla’s stock price is relatively ‘discounted’ but it is still ludicrously expensive. The company’s market cap is nearly $700 billion, which is higher than the seven biggest carmakers combined. Tesla’s stock price is trading at 170x forward P/E, while the S&P 500’s is only 22x. Additionally, actuaries determined that Tesla has only a 45% chance of making its future profit projections, so that adds further credence to its overvaluation.

Competition is coming from not only new entrants in the space, like NIO but by legacy automakers as well. In fact, in the first 9 months of 2020, VolkswagenRenault-Nissan-Mitsubishi, and Hyundai-Kia all sold more EVs in Europe than Tesla. Volkswagen is releasing 70 new EV models by 2030 and General Motors is expected to have 30 models on the market by 2025. These companies have the financial power and customer base to pose a real threat to the rising automaker. And finally, there’s Elon Musk, Tesla’s ‘Technoking,’ who has been known to exaggerate a claim or two in the past, who may finally lose credibility one day amongst investors. 

 

So, should I watch Tesla stock right now?

Yes. Tesla manufactures sleek automobiles with bleeding-edge features and auto-updating technology. The company is building new factories, reducing battery costs, and delivering automobiles to meet with growing demand. With its foray into AV and insurance, which are projected to be huge revenue-boosters for the company, it could be a safe investment.

 

MyWallSt gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team posts daily insights, subscriber-only podcasts, and the headlines that move the market. Start your free trial now!

 

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

Latest articles