SHOT VIEW: Is Tesla Really Worth That Much?

September 11, 2020

Tesla current price incorporates nearly double the car sales of the world's largest manufacturers.

The following analysis is based on fundamental data. It does not have the expectation of making forecasts that will be confirmed in the short term. This is an extremely concise expression on Tesla, the result of an in-depth analysis. The aim is to seek the concrete value of the company, regardless of the market price.

In the last few days Tesla has been the protagonist of a sharp slowdown. After the news of the lack of inclusion in the S&P 500 index, the title lost 21% in a single session. The crash occurred after a climb that had been going on for months and that brought Tesla to record levels of market capitalization. This is happening at a time when investor valuations, especially in the technology sector, seem to be increasingly unjustified and based on imaginative future projections rather than on real company numbers.

Analyzing Tesla from a fundamental point of view it is difficult to find a justification for its current value. His core business is selling cars. Based on the recent financial statement, and after a comparison with the two world largest car producers, we can assert that its current price contemplates an almost double car sale compared to Toyota and Volkswagen. Extremely high numbers would therefore be needed to justify the current market capitalization and to record market multiples in line with those of Toyota and Volkswagen. Impossible.                                                 

Tesla's price is not justified even when considering the production of batteries. Among the major competitors in the field, no one is registering such high market multiples. Finally, we believe that the business deriving from the green certificates sales represents a marginal aspect. Its impact will decrease over time.

Putting together the best guesses on all three businesses, in our opinion a stock price below 50% of the current price would be incredibly optimistic today. Not being able to see beyond is perhaps our limit but... we know how to read financial statements and for this reason today we believe that Tesla is a SELL.