Tesla Motors, Inc. was founded in 2003 by South African entrepreneur Elon Musk, and is based in Palo Alto, Ca. Tesla Motors, Inc. was founded in 2003 by South African entrepreneur Elon Musk, and is based in Palo Alto, California. The company designs, manufactures, and sells electric cars, and is known for introducing the first fully electric sports car, the Tesla Roadster, in 2008. Tesla stopped producing the Roadster in 2011 as its contract with the key supplier expired, and launched the Model S in June 2012. There are currently 85 Supercharging stations across the nation and 14 Superchargers in Europe. The Model X production will start as a trickle in late 2014, with volume production happening in early 2015. The company will post its financial results for the first quarter ended March 31, 2014, after market close on Wednesday, May 7, 2014. My recommendation is that teslas stock is a buy at under $200 per share. After building a base of support since last autumn, the stock broke above resistance, which was around the $200 per share.
Running head, TESLAS STOCK ANALYSIS 3
Tesla Motors, Inc. Stock Analysis Company Background and Life Cycle Analysis Tesla Motors, Inc. is a Silicon Valley based company that designs, manufactures and sells electric cars and electric vehicle powertrain components. Entrepreneur/Inventor Elon Musk and four other associates founded Tesla in 2003. The company held its initial public offering on January 29th of 2010. The firm became cash flow positive for the first time in history in Q4 of FY2012. Tesla Motors, Inc. designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. The company also provides services for the development of electric powertrain systems and components, and sells electric vehicle powertrain components to other automotive manufacturers. It markets and sells its vehicles through Tesla stores and galleries, as well as over the Internet. The company operates a network of 80 stores and galleries in North America, Europe, and Asia. Tesla Motors, Inc. was founded in 2003 and is headquartered in Palo Alto, California. The business is broken into two separate segments; automotive sales and development services. Automotive sales are the main revenue driver making up nearly 90% of the firms revenue. Automotive Sales is broken into two subsections, Vehicle, Options and Related Sales and Powertrain Component and Related Sales. An Analysis of Return on Equity The company's current return on equity greatly increased when compared to its ROE from the same quarter one-year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Automobiles industry and the Running head, TESLAS STOCK ANALYSIS 4
overall market, TESLA MOTORS INC's return on equity significantly trails that of both the industry average and the S&P 500. Teslas Financial Highlights TESLA MOTORS INC's gross profit margin for the fourth quarter of its fiscal year 2013 has significantly increased when compared to the same period a year ago. The company grew its sales and net income significantly quarter versus same quarter a year prior, and was able to outpace the average competitor in the industry when comparing revenue growth, but not when comparing net income growth. TESLA MOTORS INC has average liquidity. Currently, the Quick Ratio is 1.33, which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow. At the same time, stockholders' equity ("net worth") has greatly increased by 434.97% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future. First-quarter estimate First, start with the non-GAAP revenue figure. Tesla guided for deliveries of 6,400 vehicles. Most delivered vehicles have been sold with a high number of extra options, and fetched close to an average price of $110,000 per vehicle. While Tesla didn't come right out and say that the large number of customers opting for options has continued in the fourth quarter, CEO Elon Musk implied it in the conference call. Musk stated that the fourth-quarter margin guidance for 2014 "assum[es] that the take rate of options decreases slightly." He also said, "As we reach the broader markets, the option uptake, for example, people ordering, say, performance plus, we expect, will Running head, TESLAS STOCK ANALYSIS 5
decrease." Tesla hasn't reached the broader or "mainstream market" yet. Musk only mentions the mere possibility of declines in the future. Finally he even leaves the possibility open that the option take won't decrease, but for that to be possible would mean that current deliveries and orders haven't seen any reduction yet. Knowing this, $110,000 is a reasonable figure to use for the average price of each delivery for a total non-GAAP revenue expectation of $704 million. Next we have gross profit margins. Tesla said to expect Q1 to be "slightly" higher than Q4's 25%. What does slightly mean? To be cautious, we can use a flat 25%. This puts the gross profit margin at $176 million. Total operating expenses last quarter were approximately $145 million. Tesla said that these are expected to grow by 15%, to around $167 million. This puts the operating profit at around $9 million. Using 123 million diluted shares, this brings the non-GAAP earnings per share down to $0.07. Adding some unknowns like interest expense, and expenses related to battles with New Jersey and other states, and EPS should come in at something less than $0.07. Last time I check (4/12) analysts on Yahoo are calling for $0.12. Unless Tesla reports higher revenue or gross profit margins or lower operating costs than guided, Tesla could miss estimates by a good amount if analysts don't lower their figures.
Running head, TESLAS STOCK ANALYSIS 6
TSLA's very impressive revenue growth greatly exceeded the industry average of 5.3%. Since the same quarter one-year prior, revenues leaped by 100.8%. Growth in the company's revenue appears to have helped boost the earnings per share. The debt-to-equity ratio is somewhat low, currently at 0.91, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.33, which illustrates the ability to avoid short-term cash problems. The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 31.56%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, TSLA's net profit margin of -2.64% significantly underperformed when compared to the industry average. Conclusion The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, I find that the company's profit margins have been poor. Given all the information and the upcoming First-Quarter earnings that could come below analysts estimates, at below $200/per share, Tesla is a good buy or a hold.
Running head, TESLAS STOCK ANALYSIS 7
Reference 1- Yahoo Finance. Retrieved April 20, 2014, from http://finance.yahoo.com/q/pr?s=TSLA+Profile 2- Reuters. Retrieved April 21, 2014, from http://www.reuters.com/finance/stocks/companyProfile?symbol=TSLA.O 3 Tesla - The Street Rating
The NCLEX-RN Exam Study Guide: Premium Edition: Proven Methods to Pass the NCLEX-RN Examination with Confidence – Extensive Next Generation NCLEX (NGN) Practice Test Questions with Answers
The PMP Project Management Professional Certification Exam Study Guide PMBOK Seventh 7th Edition: The Complete Exam Prep With Practice Tests and Insider Tips & Tricks | Achieve a 98% Pass Rate on Your First Attempt
2024 – 2025 FAA Drone License Exam Guide: A Simplified Approach to Passing the FAA Part 107 Drone License Exam at a sitting With Test Questions and Answers