Is Tesla convicted if Elon Musk buys Twitter?
- Elon Musk’s plan to buy Twitter (NYSE 🙂 has intimidated Tesla’s shareholders.
- Tesla will not be affected in the long run if Musk buys Twitter.
- The electric car manufacturer continues to improve fundamentally.
Tesla (NASDAQ: TSLA) (NASDAQ: TSLA), -6.26%, has struggled to stay afloat lately as the stock market has been dominated by generally negative sentiment and pressure from CEO Elon Musk’s latest Twitter proposal ( NYSE: A1W6XZ, -2.28%) has grown even larger. Musk and the popular social media platform signed a $ 44 billion deal on April 25th.
Following the news, Tesla’s (NASDAQ 🙂 shares fell more than 10%, which is a possible sign that shareholders are worried about what Musk’s connection to Twitter will mean for the electric car company in the future. As a result, the company’s stock price has fallen nearly 20% over the past month, and the stock is now valued at $ 891 billion.
Musk, which is already responsible for Tesla and SpaceX, will now head one of the largest social media companies in the world. Should investors worry that he has too much on his plate? Although only time will tell, I do not think we need to worry about the future of Tesla. The latest news has triggered a negative sentiment towards the stock, but the electric car manufacturer will not be affected in the long run.
Tesla delivers again and again
Although investors expected a poor result in the first quarter of 2022 due to the COVID-19-related shutdowns at the Shanghai plant, Tesla was able to report impressive results. The company reported year-to-date earnings of $ 18.8 billion and $ 3.22 / share, beating consensus estimates by 5% and 42%, respectively. Vehicle production and deliveries increased year-on-year by 69% and 68% to 305,407 and 310,048 vehicles, respectively.
Over a multi-year time horizon, the company plans an average annual growth of 50% in vehicle deliveries. Mainly due to supply chain constraints, Tesla’s factories will operate under capacity, which management says will continue to be the case for the remainder of 2022. However, given the roadblocks Tesla has consistently overcome, investors have no reason to worry about the company’s future operational results.
In the midst of such spectacular growth, things are looking up in other areas of the company as well. The company’s total debt (excluding vehicle and energy products financing) is below $ 100 million, and the electric car maker continues to make progress with cash flow generation: At the end of the first quarter, free cash flow was $ 2.2 billion. While Tesla is a polarizing stock in the eyes of many investors, it is clear that the world’s most valuable automaker is improving its financial position.
Tesla’s valuation is far ahead of the competition
With Tesla trading at 119.1 times earnings today, the bears’ biggest criticism of the company has always been its sky-high valuation. In comparison, other car manufacturers such as Ford (NYSE :), General Motors (NYSE 🙂 and Toyota (TYO 🙂 have price-to-earnings ratios of 5.1, 6.6 and 8.4, respectively. This is not necessarily a fair one-on-one comparison, as Tesla is a pure electric car manufacturer whose market is growing much faster than the traditional car industry. And although these companies have dipped their toes into the electric vehicle market, Tesla remains the clear leader in this field.
Compared to the leading electric car rival Lucid Group (NASDAQ 🙂 (NASDAQ: TSLA, -4.88%), Tesla does not seem so expensive. Lucid Group has a price-to-sale multiple of more than 800 compared to Tesla’s 15.4. Again, this is not a good direct comparison, as the Lucid Group is currently growing its revenue at a much faster pace than the Musk-led company. Nevertheless, Tesla is certainly not a cheap investment today, no matter how you value it.
Is Tesla a purchase today? Do not let Elon Musk’s latest move toward a Twitter takeover guide you, instead focus on the company’s basics. The electric vehicle market is expected to grow to $ 825 billion by 2030 with a compound annual growth rate (CAGR) of 18%. Tesla continues to be the industry leader and is likely to see steady growth going forward.
Still, the stock is trading at a high valuation even after the recent price drop. Investors need to weigh their options before buying this EV magnate, but it would not be unwise to focus on more attractive stocks in the market at the moment.
This article was written by Lukas Meindl in English and was published on Fool.com on May 9, 2022. It has been translated so that our German readers can participate in the discussion.
Lukas Meindl holds positions in Tesla. The Motley Fool has positions in and recommends Tesla and Twitter.
Broget Fool Germany 2022
This article first appeared on The Motley Fool