Electric vehicle giant Tesla, Inc. (TSLA - Get Rating) in Austin, Tex., designs, develops, manufactures, leases, and sells electric vehicles and energy generation and storage systems. It was recently removed from the S&P 500 ESG Index. The stock has declined 12.9% in price over the past month and 33.8% over the past six months to close yesterday’s trading session at $758.26. In addition, it is currently trading 39% below its 52-week high of $1,243.49, which it hit on Nov. 4, 2021.

Wedbush and Daiwa Capital analysts slashed TSLA’s price target to $1,000 from $1,400 and to $800 from $1,150, respectively.

Also, its 27.10% trailing-12-month gross profit margin is 24.4% lower than the 35.82% industry average. Furthermore, supply chain challenges, semiconductor chip shortages, COVID-19 outbreaks in China, and high inflation make the stock’s near-term prospects uncertain.

Here are the factors that could affect TSLA’s performance in the near term:

Robust Financials

TSLA’s total revenue increased 81% year-over-year to $18.76 billion for its fiscal first quarter, ended March 31, 2022. The company’s adjusted EBITDA grew 173% year-over-year to $5.02 billion, while its non-GAAP net income surged 255% year-over-year to $3.74 billion. Also, its non-GAAP EPS came in at $3.22, up 246% year-over-year.

Favorable Analyst Estimates

For its fiscal 2022, analysts expect TSLA’s EPS and revenue to grow 79.1% and 59.9%, respectively, year-over-year to $12.14 and $86.05 billion. In addition, its EPS is expected to grow 39.7% per annum over the next five years. And  Wall Street analysts expect the stock to hit $930.55 in the near term, indicating a potential upside of 22.7%.

Stretched Valuation

In terms of forward P/S, TSLA’s 9.09x is 893% higher than the 0.91x industry average. Its 8.99x forward EV/S is 710.8% higher than the 1.11x industry average. Furthermore, the stock’s 18.85x and 46.19x respective forward P/B and P/CF are higher than the 2.48x and 9.19x industry averages.

POWR Ratings Do not Indicate Enough Upside

TSLA has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. TSLA has a D grade for Value, which is in sync with its higher-than-industry valuation ratios.

The stock has a D grade for Stability, consistent with its 2.12  beta.

TSLA is ranked #26 among 68 stocks in the F-rated Auto & Vehicle Manufacturers industry. Click here to access TSLA’s ratings for Growth, Sentiment, Momentum, and Quality.

Click here to check out our Automotive Industry Report for 2022

Bottom Line

TSLA is currently trading below its 50-day and 200-day moving averages of $906.57 and $912.94, respectively, indicating a downtrend. Furthermore, it could keep retreating in the near term due to concerns over increased raw materials costs and stalled factory operations. Also, the stock looks overvalued at the current price level, and we think it could be wise to wait for a better entry point in the stock.

How Does Tesla (TSLA) Stack Up Against its Peers?

While TSLA has an overall POWR Rating of C, one might want to consider investing in the following Auto & Vehicle Manufacturers stocks with an A (Strong Buy) or B (Buy) rating: Honda Motor Company, Ltd. (HMC - Get Rating), Bayerische Motoren Werke Aktiengesellschaft (BMWYY - Get Rating), and Daimler AG (DDAIF - Get Rating).

TSLA shares fell $1.01 (-0.13%) in premarket trading Wednesday. Year-to-date, TSLA has declined -28.42%, versus a -12.48% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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