Reports Q4 2021 results on Wednesday, January 26, after market close
Income forecast: $16.88 billion
EPS forecast: $2.25
This quarter, the earnings performance of electric vehicle maker Tesla (NASDAQ:) could fade into the background as hefty market cap comes into play. As the macro market environment turns into risk aversion, unsustainable valuations become increasingly dangerous.
Since the pandemic hit, the world's largest EV manufacturer has had a remarkable growth story. Until early November of last year, shares of the Austin, Texas-based manufacturer were up more than 1,000% over the previous two-year period.
But the threat of higher interest rates, combined with CEO Elon Musk's sale of its shares in the company, hit Tesla hard, destroying about 25% of the stock's earnings since its record high of $1,229. 91 on Nov. 4.
Tesla Weekly Chart
Tesla reported earlier this month that its annual vehicle deliveries are up 87% in 2021, even as the auto industry faces severe shortages of semiconductors and other components due to supply chain disruptions.
The electric car maker also produced about 930,000 vehicles in 2021. More than half of those were likely made in Shanghai, Credit Suisse recently estimated.
While Tesla reiterated this month as "overweight," Morgan Stanley said it doesn't see anyone who can dispute the volume. Tesla is expanding on three continents and nearing completion of new plants in Austin, Texas and Berlin.
High-Performance Bar
Despite this favorable outlook, Tesla's ability to overcome supply chain bottlenecks that other manufacturers in the road, including its limits, were in our sight. And that's perhaps the main reason why most analysts don't expect a spike in TSLA stocks in the near term.
Zachary Kirkhorn, the company's chief financial officer, told investors in October:
"[We are] try to maximize that capacity as much as possible to meet the growing demand for clean energy vehicles. The net, apart from all this, is that we won't be able to increase production capacity fast enough to enlarge."
According to InvestingPro analysis Tesla stock is trading at a 12-month P/E multiple of 279, a level that has set the performance bar so high that There is no room for the automaker to make mistakes when it comes to financial performance.
As a result of this extremely rich valuation, Tesla's stock could be a risky bet based on the InvestingPro model, which assigns Tesla a fair value of $735.60 – a downside risk of almost 21% from current level. ]
Tesla fair value estimate
Source: InvestingPro
The analyst consensus estimate for Tesla stocks paints a similar picture. In a Investing.com poll of 37 analysts, 16 rate the stock as a buy, 11 consider it a sale, and the rest are neutral.
Tesla consensus estimates
Chart: Investing.com
Bottom Line
Tesla is likely to produce another after the company achieves its goal of delivering cars. ;s had achieved in the last quarter of the past year. But lingering supply chain constraints and concerns about the stock's skyrocketing valuation could keep investors on the sidelines, especially when growth stocks in general undergo a major correction.
