Morning,
Ouf - this is a tough one. Tesla has always been one that has traded outside of any perceived fundamental value. Why? It is one of those 'cult' stocks and is heavily influence by Elon Musk.
That said, it is still considered the top EV stock in the world and has Apple like qualities and consumer 'stickiness' - which once again goes back for better or worse to its CEO. Despite being down 57% this year, its not like the company is cheap. It is trading at 46 times earnings (36x on a forward basis) and 6.9x sales. For an auto manufacturer, these multiples are quite high - but then again, Tesla has always been valued more like a technology stock than an auto manufacturer. They key here, is ...is this changing?
Tesla is still the largest auto company with a market cap of $475B and its closest competitor is Toyota with a market cap of $191B. Is Tesla really double the size of Toyota? Likewise, most auto companies command PE multiples in the high single to low double digits - why? The industry tends to be very cyclical, is highly dependent on input costs and tends to be lower margin. That said, Tesla seems to be holding its own in this are with Gross Profit margins of 25% which is above the average - if it can maintain this - it is certainly worth a premium multiple over the others. The question is...how much of a premium?
For this, I like to look at the growth prospects of the company and bar none, Tesla remains one of the fastest growing auto companies in the world. It is expected to grow revenue and earnings by 30%+ over the next 3-5 years - that is triple that of the industry average. With that in mind, Tesla certain deserves a strong premium over its auto competitors.
Now, one might have to be a little patient as high growth stocks are still taking a beating. We are in a risk-off environment and when this happens, high growth stocks trading at high multiples usually take a hit - which is why Tesla is down so much. If one sells here, they are selling at one of the lowest in terms of market sentiment for these stocks. Being down 30% on a high growth stock is actually not that bad. That 30% can made up in an instant if the markets return to risk-on mode and funds start to flow back into high-growth stocks. The problem is, no one knows when that will happen. So with that in mind, you must decide if you need the money today or if you can afford to wait for market sentiment to shift - which can be 1, 3, 6 or even 12 months down the road.
Personally, I think Tesla is starting to look attractive as an entry point.
Mat