that Tesla shares (WKN: A1CX3T) has been one of the most impressive investments in the capital market in recent years. From an almost bankruptcy candidate, one of the most promising companies in modern times has developed – with a similar influence on the share price.
Ultimately, Tesla owes its business success to the right timing, to being in the right market at the right time. Tesla does not just develop and build an electric car. It has created a technologically advanced future car that is second to none.
Tesla’s highly efficient production facilities are exemplary. Competitors can also learn a lesson from value chain management.
Tesla’s success can also be seen in the share price: Over five years, the share has risen by almost 1,000% (as of April 6, 2022).
Nevertheless, the Tesla stock is not resilient to the current technology crash. The stock has already lost about a third of its value this year. With a current price of 656 euros, the question arises whether a price target of 500 euros or rather a target of 1,000 euros seems realistic.
A look at the valuation of the Tesla stock
With expected price earnings of 63.8 (as of 6/3/22, Reuters), the Tesla stock is by no means cheap. Comparing Tesla shares to premium carmakers like Mercedes-Benz or BMW, whose valuations are mostly single-digit, pays a big premium for Tesla’s growth history.
If these are not fully met, a target price of EUR 500 may tend to be more obvious. However, this is contradicted by the strong growth and the ever-improving profitability of the e-car pioneer. If both remain high in the long run, the target of EUR 1,000 may be realistic.
Current development of the Tesla share
Despite rising macro problems in the first quarter of 2022 (Ukraine conflict, supply chain problems, rising oil prices, COVID-19), Tesla was able to first quarter of 2022 convince. Total sales rose 81% to $ 18.8 billion. Adjusted EBITDA exceeded $ 5 billion for the first time.
According to the medium-term forecast, the number of vehicles delivered should increase by 50% annually – ambitious targets that have often been met in the past.
However, the medium-term goal may be jeopardized if the global economy slips into recession. Tesla investors were recently brought back to earth with an internal email from business leader Elon Musk.
It contained the latest news Tesla had to lay off 10% of its employees because many positions were overstaffed. And this news suggests that Elon Musk could now also assume an economic downturn.
Car manufacturers are usually hit harder by an economic downturn than other companies. Although the electric car maker is benefiting significantly from the boom in electric cars, a slowdown in growth should not leave the Texas-based business unaffected. Therefore, the 500 euro mark might be closer to 1,000 euros.
Whatever happens, the Tesla stock should remain a stock with an increased risk-reward ratio for many investors.
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Frank Seehawer does not own any Tesla shares. The Motley Fool owns shares in and recommends Tesla.