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Tesla (TSLA) stock fell nearly 4% yesterday amid the market sell off. However, while the S&P 500 is still up double-digit during the year, Tesla stock is trading almost flat for the year.
After the splendid rally in EV (electric vehicle) shares in 2020, where TSLA shares rose 740% while NIO rose over 1.100%. EV shares have looked weak in 2021. What is the outlook for Tesla shares in September and is the recent weakness a buying opportunity?
Technical analysis of the Tesla share
Let’s start by looking at the technical analysis of the TSLA stock. Currently, the electric vehicle company run by Elon Musk is mixed on the charts. Although it trades above long-term moving averages like the 50-day, 100-day, and 200-day SMA (simple moving average), it has fallen below short-term moving averages, including moving averages. to 10 days and 20 days. SMA. Its MACD (Convergence Divergence Moving Average) gives a sell signal. However, the 14-day RSI (Relative Strength Index) is a neutral indicator.
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Recent developments in TSLA action
Tesla has rarely had a good relationship with regulators. The company has also had issues with the National Highway Traffic Safety Administration (NHTSA) in the past. Musk also criticized the US SEC that he prefers to call the Short Sellers Enrichment Company.
Now the company is in trouble with regulators again over FSD (fully autonomous driving option). NHTSA Director Jennifer Homendy finds the name “FSD” problematic and calls it “misleading and irresponsible.” True, Tesla maintains that FSD is not fully autonomous and that drivers should keep their hands on the steering at all times. However, there have been cases where Tesla cars have crashed in FSD mode. According to Homendy, the nomenclature “has clearly misled many people into abusing and abusing technology.”
Tesla intends to launch a beta version of the FSD which the regulator is not very happy with. According to Homendy, “basic security issues need to be addressed before it is extended to other city streets and other areas.”
Long-term predictions for Tesla stock
Here, it should be noted that Tesla’s FSD and other software capabilities are key to its long-term success. Currently, the company charges $ 10,000 for the FSD option, but Musk expects the prices to eventually hit $ 100,000 in the long run. Musk previously said his revenue from FSD and the launch robotaxis could be similar to auto revenue.
Musk cited a hypothetical example assuming annual revenues of $ 60 billion. During the fourth quarter 2020 earnings call, Musk said, “So – and the rate at which you get 20 EPs on that, it’s like $ 1,000 billion and the company is still in fashion. strong growth. So I think there is a way to kind of justify the valuation of the company where they only use cars and nothing else, cars with FSD. He added: “And I suspect that at least a number of investors are taking this approach.”
Tesla’s Long-Term Delivery Tips
Additionally, the company expects its deliveries to increase at a CAGR of over 50% in the long term. Tesla is investing in new factories and the Berlin Gigafactory is expected to come online this year. The Texas Gigafactory would also be online soon. Musk also pioneered the idea of ​​setting up factories in Russia. That said, Russia has not been a profitable market for Ford and General Motors and both have left the country.
Last year, Musk also said that Tesla Energy’s revenue would be similar to that of automobiles in the long run. Currently, revenues from the Energy activity do not even contribute 10% of total revenues.
Forecast of TSLA actions
Wall Street is not as divided on other stocks as it is on TSLA. Of the 40 analysts covering the stock, only 17 have a buy rating while 14 rate them as an expectation. The remaining nine analysts rate the stock as a sell. Its median target price of $ 766 is a 4.6% premium. However, there is a wide dispersion in analyst target prices and they range between $ 67 and $ 1,591. Some, like Cathie Wood, see the stock climb to $ 3,000 by 2023. Gene Munster expects Tesla’s market cap to eventually hit $ 2,000 billion.
How analysts view TSLA stock
Earlier this month, Wedbush Securities, which is among Tesla’s biggest bulls, reiterated its outperformance rating on the stock. “As this green tidal wave reaches its next phase globally, we believe the demand story for Tesla EV is only beginning to play out despite some lingering headwinds in China starting to grow. ‘reverse as the end of the year approaches, “he said in his note. The brokerage sees demand for electric vehicles “flex” next year and finds Tesla as the biggest beneficiary.
Next month, Tesla would release its third quarter delivery report. The report could impact TSLA’s share price and also provide insight into how the chip supply situation is hurting the business. Chinese electric vehicle companies NIO and Li Auto have already lowered their guidance for the third quarter due to the chip supply situation.
Valuation of TSLA shares
Tesla’s valuation has been a conundrum for analysts and this also explains the divergence of opinion among analysts. Tesla stock has a market capitalization of $ 722 billion, more than double that of Toyota, the second-most valued automaker. At its peak, Tesla’s market capitalization exceeded that of all major automakers, including Toyota, Volkswagen, General Motors and Ford combined.
Currently, TSLA is trading at an enterprise value of NTM (next 12 months) against a sales multiple of 12.2x. Now, as valuations look high for a value-driven investor, EV enthusiasts have taken hold of Tesla shares anticipating a massive surge in electric vehicle adoption. Tesla’s valuation comes mainly from the software part of the business, which would help it to significantly increase its margins. Currently, all of the company’s profits come from the sale of carbon credits.
Should I buy Tesla shares?
If you believe in Tesla’s software capabilities and expect its sales to grow steadily despite increasing competition from mainstream automakers, you might find the action appealing. In addition, unlike other names in electric vehicles, TSLA is now a sustainably profitable company, even if the margins are quite low. That said, while TSLA stock may seem overvalued to many, it has created a lot of wealth for investors. If the company can deliver on its promises, it could generate good returns in the future as well.
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