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SEPTEMBER 2020 TESLA INC LONG

"Over the years, Tesla has earned the stamp of the "gold standard", which is currently far from what it entered the stock exchange in 2010 as part of its public offering (IPO). Over the time, electric car manufacturer Tesla has become a company that is known globally for being a technology innovator in its industry, which, like Amazon transformed retail and Netflix entertainment, completely transformed the electric car market into its image."

MEDIUM-TERM INVESTMENT ANALYSIS TESLA Inc.

Company introduction

  • Tesla was founded in 2003 and is headquartered in Palo Alto, United States. Tesla Factory's main manufacturing plant is in Fremont, California, and the first Tesla Gigafactory near Sparks, Nevada. In total, Tesla will operate up to 4 gigafactories. Gigafactory 3 in Shanghai started delivering the first products this year, and by 2021 production should start at Gigafactory 4 in Berlin, Germany. In 2008, the model Roadster was introduced, followed by the Model S, the sporty Model X, the Model 3, the mid-size SUV Model Y and the Cybertruck. Tesla not only manufactures electric vehicles, but also easily customizable products for the production and storage of clean energy. These include systems like Powerwall, Powerpack and solar panels. In terms of market capitalization, it is almost double that of the two largest US giants General Motors and Ford.
  • Over the time, electric car manufacturer Tesla has become a company that pays globally for being a technology innovator in its industry, which, like Amazon retail or Netflix entertainment, has completely transformed the electric car market into its image. In the United States, it controls approximately 60% of the battery-powered electric vehicle market. Of this, Model 3 owns about 50% of the US market.
  • Over the years, Tesla has earned the stamp of the "gold standard", which is currently far from what it entered the stock exchange in 2010 as part of its public offering (IPO). Tesla originally targeted the impression of a specialized manufacturer and retailer for wealthy customers, but the management quickly realized that they had to take a different path for global expansion. So, although it continues to produce models that still fulfill the original idea of a manufacturer for the rich, over the years it has largely shifted to mass production of more affordable electric cars.
  • The company's business model differs from the competition mainly in that Tesla itself uses its own resources to provide direct car sales, complete service, charging of electric car batteries, battery development and production of technologies such as charging stations and self-driving software. Its scope includes the energy production and storage sector (6.3% of total sales) and the automotive industry (93.7%).

Tesla Inc. currently

  • Last year, Tesla shares managed to outperform the technology industry. The electric vehicle manufacturer reported its fourth consecutive quarterly profit in July, qualifying it for inclusion in the S&P 500 stock index. Tesla has the advantage of the first swallow with long-range vehicles in the electric vehicles production. It works with cutting-edge technology and has managed to generate a strong software advantage over potential competitors.

Tesla Batter Day 2020

September 22 – the most important day of technology traders

Whether you are an active trader on the stock markets or not, you should not definitely miss this day. A grand presentation will take place on the date, where, according to analysts' expectations, Elon Musk should introduce a new revolutionary type of battery to the public.

Tesla should produce the new batteries herself, and this is expected to have a major impact on Tesla's future. The main advantages should be a longer service life and, above all, lower production costs, which should help increase the company's still insignificant profit margins. To do this, if expectations are met, these revolutionary batteries should help significantly reduce price differences between electric cars and conventional internal combustion engine cars.

The public presentation of Elon Musk at the factory in Fremont, USA, took place on Tuesday, September 22, at 23:30 our time and people were able to watch it live online via the Tesla stream video channel.

Factors leading to the analysis of further growth in the share price of Tesla Inc.

  • At present, electric cars cover only a small part of the global car market. However, in a relatively short time, Tesla was able to gain significant market share with its specialization and expertise in this sector. The flagship, the Model 3 sedan, has helped Tesla establish itself as a leader in the electric vehicle segment. The ever-growing sales are mainly due to the strong performance of the cars and the impressive pleasing design.

  • Tesla has long-term made every effort to increase vehicle deliveries. In 2019, Tesla delivered 367,500 vehicles to customers, which is 50% more than in the previous year. Despite problems with the consequences of the pandemic and the recent interruption of production, Tesla still expects to reach the milestone of 500,000 vehicles delivered this year. Finally, a higher volume of delivered vehicles should help Tesla achieve cost and production efficiency, and thus also increase sales margins.

  • In addition to growing sales of electric vehicles, the company's positive factors also include steadily increasing sales of the company in the electricity generation and storage segment. Analysts expect the deployment rate of Tesla solar systems and storage facilities to increase by at least 50% this year.

  • A good sign for the company's future is more than ambitious plans to start production in China, thanks to China's largest electric vehicle market. The robust production of the new Gigafactory 3 in Shanghai, which operates at full capacity, goes hand in hand with the growing share of the Chinese EV market, which are other factors foreshadowing the future growth of Tesla. It is another generator of solid income for the company.

  • Strong sources of revenue for Tesla in the future are the Gigafactory 4 projects in Berlin, which are scheduled to launch in 2021, and the newly prepared Gigafactory 5, whose preparatory work has already begun.

  • Finally, the growing supply of Tesla Model 3, which forms a key part of the carmaker's total supply, increases the company's potential outlook. Revenues are likely to grow further, including Model 3 and its future development and ongoing Model Y deliveries. The maximum production capacity of the Fremont plant is expected to increase from the current 400,000 to 500,000 electrical units per year by the end of this year.

The company's results in the second fiscal quarter

  • Tesla's results in the second fiscal quarter met analysts' expectations and, in some respects, exceeded them. For example, analysts expected a loss of 10 cents per share, while in real terms earnings per share reached 44 cents. This above-average performance stemmed from higher-than-expected sales of $ 6.036 billion. Analysts expected an average of $ 4.964 billion.

  • Cash and cash equivalents were $ 8.615 billion as of June 30 this year, compared to $ 8.080 billion at the end of March. Net cash as a result of operating activities was $ 964 million in the second quarter of this year, an increase from $ 864 million in the prior-year period. Capital expenditures rose to $ 546 million from $ 250 million in the previous quarter.
  • Since the beginning of this year, the price of Tesla shares has risen by 386.4%. In the last 12 months, they recorded an increase of 786.4%. In contrast, the S&P 500 index grew by 6.8%, respectively by 15.9%, in the same period.

Outlook

  • Despite this year's forced shutdown of production as a result of the global pandemic, the company's management still expects the total number of delivered vehicles to reach 500,000 this year. However, the fact remains that the company's management did not provide any guidance on profit or cash flow forecasts in view of the difficult-to-predict developments in relation to Covid-19. However, it is true that Tesla's performance in the first half of this year was well prepared for the second half of the year. By the end of this year, the production capacity of the 3 and Y models in Fremont is expected to expand from 400,000 to 500,000 units per year. Construction of the Y model lines in Shanghai and Berlin is successful and deliveries are scheduled to begin in 2021. As for the Tesla Semi truck model, it should begin in 2021.

Warning of potential risks for Tesla Inc.

  • High research and development (R&D) costs and combined operating costs (SG&A - sales, administrative and overhead), which increased in 2015, 2016, 2017 and 2018, may again have a negative effect on profit margins in the future. Tesla is investing heavily in increasing production capacity, increasing sales of the 3 and Y models, building gigafactories and improving charging station infrastructure. These initiatives are likely to undermine Tesla's short-term financial prospects..

  • High capital expenditures are making Tesla‘s cashflow worse. Capital expenditures grew both year-on-year and quarterly. This trend is expected to continue and could have a negative impact on the company's profits. Although Tesla's performance this year is strongly positive compared to previous years, there are concerns about a possible economic slowdown in connection with the increase in coronavirus diseases.

  • While models 3 and Y help the company grow, production, profit margins and sales for models S and X are declining. During the second quarter, deliveries of S / X models fell by 13% and 40% year-on-year.

Graph Tesla Inc., source: Barchart.com

Hypothetical example - CFD on Tesla Inc. shares

  • Amount invested 50,000 USD

  • CFD stock contract type

  • Leverage 1:5

  • Margin 20% of the CFD value of the stock

  • Share price 387.79 USD (as of 9/24/2020)

  • Share value … USD 387.79 … 20% margin… approx. USD 77.55

  • Target Price 1 … 430.00 USD

  • Target Price 2 … 460.00 USD

  • Support 1 approx. 351.60 USD

  • Support 2 approx. 330.00 USD

 

  • With a full 100% investment, it would be possible to buy up to 563 shares at a margin of 77.55 USD. However, under the unwritten rule of investors, the maximum amount invested should never exceed 50% of the investor's free funds.
  • In case of purchase 1 CFD Tesla Inc. share, the movement of the price to TP at the level of 430.00 USD/CFD shares offers a potential of 42.21 USD.
  • If 50% of available funds were invested and 281 CFD shares were purchased, a price movement of USD 42.21 would increase the potential for appreciation of the analysis to approximately USD 11,861.
  • However, in the event of a negative progression and a decrease in the CFD share price to a support level of approximately 351.60 USD/CFD shares, the same trade would mean a loss for the investor of 23.30% of the investor‘s total funds

Please note that with regard to the size of the trading account and the size of the market, it is essential to adjust the size of the leverage and adjust the degree of selected risk accordingly. Trading CFD contracts and Forex is high risk and improperly set risk management can result in the loss of much or all of the investor's funds.

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