Tesla, Inc. (TSLA) has been making waves over the past couple of months, garnering investor attention through its 5-for-1 stock split and five consecutive quarters of profits. The political tailwind to the domestic EV industry should pave the way for TSLA’s unwavering growth over the next couple of years, riding the highs of the changing automobile industry.
However, many companies such as Fisker, Inc. (FSR) have emerged since the EV industry found commercial success, aiming to capitalize on the clean energy drive. These companies are expected to decelerate TSLA’s unchecked market dominance, by manufacturing cost efficient vehicles across the country.
Investors have been bullish about FSR’s growth potential in the upcoming months, allowing the stock to gain 81.9% since its market debut. TSLA, on the other hand, has gained 10.7% over the past month.
But which stock is a better buy now? Let’s find out.
The S&P 500 just announced the inclusion of TSLA in the index effective December 21st. The stock gained 13.2% after hours following the news. TSLA CEO Elon Musk’s wealth increased $15 billion following the news, making him the third richest person in the world.
TSLA is currently planning to launch three new electric vehicles in the near future, including the Tesla Cybertruck and 2 electric cars. It is planning to invest up to $12 billion in electric vehicles and battery factories over the next two years, with manufacturing facilities in three continents. The company raised $4.97 billion through an at-the-market stock offering in September to fund its capital-intensive projects in the near future.
Moreover, TSLA is reportedly planning to launch its products in India in 2021. With a huge population and thereby market base, this expansion is expected to ramp up the profits for the company. TSLA also has plans to open a new battery system project in Australia, which has been dubbed as ‘Big Tesla Battery’. In this regard, TSLA partnered with French renewable company Neoen to develop 300/ 450 MWh in South Australia.
After successfully dominating the electric vehicle industry, TSLA is currently venturing into other sectors. The company’s prior acquisition of SolarCity in 2016 has given it a smooth entry point in the solar panel manufacturing industry. CEO Elon musk expects this segment to become the next “killer product” by 2021. Total solar deployments in the third quarter that ended September 2020 more than doubled sequentially to 57 MV, while solar roof deployments tripled over this period.
TSLA also joined the tequila business on November 7th, launching its uniquely shaped tequila bottles through its official website, which sold out within hours.
Following the news release of the Pfizer (PFE) and BioNTech (BNTX) vaccine, Musk confirmed that TSLA became the manufacturing partner for German biotech firm CureVac (CVAC), and is currently in the process of developing RNA micro-factories and version 3 vaccine printers.
FSR, on the other hand, is a relatively new stock that made its debut last month.
FSR went public through a SPAC with Apollo Global Management affiliated Spartan Acquisition Energy Corporation on October 29th, making it one of the newest players in the electric vehicle market. The company has generated $1 billion in cash through the merger, including $500 million through common stock PIPE funding. The stock has gained 94.6% since its debut.
FSR is expected to launch a Fisker Ocean vehicle in 2022, and three vehicles by 2025. The company recently partnered with auto supplier Magna International (MGA) to supply the vehicle platform and build its Ocean SUV.
On October 21st, FSR announced a strategic partnership with Viggo Sign for the delivery of 300 vehicles in the fourth quarter of 2020. Earlier, in July, FSR announced entering into advanced talks with Extreme E for a potential strategic partnership and works team entrance.
Recent Financial Results
TSLA reported impressive results for the third quarter that ended September 2020, surpassing analyst expectations. Its EV deliveries increased 7% year-over-year (subject to operating lease accounting) over this period. Revenue increased 39% year-over-year to $8.77 billion, while gross profit rose 73% from the same period last year to $2.06 billion. Its net income and EPS rose 131% and 69%, respectively. TSLA’s EPS for this period beat the consensus estimate by 33.3%.
FSR is expected to commercially launch its EVs in 2022.
Expected Financial Performance
FSR’s EPS is expected to grow at a rate of 10% per annum over the next five years. Analysts expect revenue to rise 1.9% in the next quarter (ending March 2021), and 22.2% next year.
On the other hand, analysts expect TSLA’s EPS to rise at a rate of 353.9% per annum over the next five years. The consensus revenue estimates indicate 56.5% rise in the next quarter, and 45.5% growth next year.
FSR’s ROE of 1,491.4% compares favorably with TSLA’s 5.6%. However, TSLA’s return on total capital of 3.9% is higher than FSR’s negative value.
TSLA is rated a “Strong Buy” in our proprietary POWR Ratings system, while FSR is rated “Neutral.” Here’s how the four components of the POWR Ratings are graded for both of these stocks:
TSLA has an “A” for Trade Grade, Buy & Hold Grade, and Industry Rank, and a “C” for Peer Grade. It is currently ranked #17 in the Auto & Vehicle Manufacturers industry.
FSR has an “A” for Industry Rank, a “B” for Trade Grade, a “C” for Buy & Hold Grade, and a “D” for Peer Grade. It is currently ranked #27 out of 33 stocks in the same industry.
TSLA’s leading position in the electric vehicle industry, coupled with impressive financials over the past couple of years have paid off, as the company is finally set to join one of the biggest indices in the world. Furthermore, TSLA is likely to retain the role of the largest supplier of EVs in the market, as indicated by its strategic expansion plans, and global supply chain. It is also venturing into new avenues in the field of clean energy, bolstering the company’s growth potential even further.
FSR, on the other hand, being a new player, has yet to demonstrate its fundamental strength. While the stock’s impressive performance in less than a month’s trading has led to many investors assuming a long position in the company, its actual potential is yet to be determined based on the launch of its vehicles in the future. Thus, with TSLA’s proven track record, it is a better pick here.
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TSLA shares were trading at $498.71 per share on Thursday afternoon, up $12.07 (+2.48%). Year-to-date, TSLA has gained 496.07%, versus a 12.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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