TSLA Leaps 40% In One Month, Now Is Not The Time To Buy The Stock

We believe there are a few things to fear in TSLA stock given its overall Moderate operating performance and financial condition. But keeping in mind its Very High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $1.5 Tril in market cap, Tesla provides electric vehicles and regulatory credits in automotive, and designs, manufactures, installs, sells, and leases energy generation and storage solutions.

[1] Valuation Looks Very High

This table highlights how TSLA is valued vs broader market. For more details see: TSLA Valuation Ratios

[2] Growth Is Weak

• Tesla has seen its top line grow at an average rate of 12.9% over the last 3 years
• Its revenues have fallen -2.7% from $95 Bil to $93 Bil in the last 12 months
• Also, its quarterly revenues declined -11.8% to $22 Bil in the most recent quarter from $26 Bil a year ago.

This table highlights how TSLA is growing vs broader market. For more details see: TSLA Revenue Comparison

[3] Profitability Appears Weak

• TSLA last 12 month operating income was $5.8 Bil representing operating margin of 6.2%
• With cash flow margin of 17.0%, it generated nearly $16 Bil in operating cash flow over this period
• For the same period, TSLA generated nearly $6.1 Bil in net income, suggesting net margin of about 6.6%

This table highlights how TSLA profitability vs broader market. For more details see: TSLA Operating Income Comparison

[4] Financial Stability Looks Very Strong

• TSLA Debt was $13 Bil at the end of the most recent quarter, while its current Market Cap is $1.5 Tril. This implies Debt-to-Equity Ratio of 0.9%
• TSLA Cash (including cash equivalents) makes up $37 Bil of $129 Bil in total Assets. This yields a Cash-to-Assets Ratio of 28.6%

[4] Downturn Resilience Is Weak

TSLA has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• TSLA stock fell 73.6% from a high of $409.97 on 4 November 2021 to $108.10 on 3 January 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 11 December 2024
• Since then, the stock increased to a high of $479.86 on 17 December 2024 , and currently trades at $459.46

 
2020 Covid Pandemic

• TSLA stock fell 60.6% from a high of $61.16 on 19 February 2020 to $24.08 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 June 2020

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read TSLA Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.