The US electric car manufacturer Tesla is now making comparatively steady profits – but how sustainable the Californians’ business model is remains questionable.
In addition, the competitors are blowing louder and louder hunting. In return, Tesla wants to significantly expand its own production. What’s going on at tech guru Elon Musk’s company , what analysts are saying, and how the stock last performed.
THAT’S ON AT TESLA:
In the middle of the corona pandemic, Tesla achieved its first annual profit in 2020. In the first quarter of this year there were still black figures – and thus the seventh quarter in a row. But it’s not just selling cars that makes money – if you take a closer look, the core business is hardly profitable. A lot of business came from trading in emissions certificates, which other car manufacturers need to improve their emissions balance and thus meet legal requirements in California, Europe and China, for example.
In the first quarter, Tesla turned over $ 518 million with the emissions rights. Since there are hardly any operating costs for this, the majority of the quarterly profit of $ 438 million should come from certificates trading. The balance sheet also benefited from a multi-billion dollar investment in cryptocurrency Bitcoin that hit the headlines in February.
Sales rose by almost three quarters to $ 10.4 billion – after all, Tesla delivered 184,877 cars in the first quarter, more than twice as many cars as a year earlier. With the mass market model 3, Musk even sees himself at the top of the world ahead of top-selling combustion engines such as the BMW 3 Series or the Mercedes E-Class from Daimler.
In China, the most important foreign market, Tesla recently had problems, with sales figures falling sharply in some cases. In April, the Shanghai factory of the e-pioneer was temporarily shut down – due to maintenance work that is customary in the industry. However, investors were still concerned about whether Tesla could maintain its position in the People’s Republic in the face of increasing competition in electric vehicles.
The Americans came under fire in China after a customer protest and had to apologise publicly for a complaint about the braking system of a Tesla that was started too late. There are repeated customer protests and official apologies from companies in China – they are seen as signs that the relationship between the company and the local authorities could be better. In May, Tesla again sold noticeably more cars than in April. Whether the criticism in the country is not affecting sales will only gradually become apparent due to the lead time of Tesla’s usual online orders.
The construction of the factory in Grünheide near Berlin is not quite as fast as hoped. Originally the production was supposed to start in July, now the talk is of a time in “late 2021”. Meanwhile, the group continues to increase imports to Europe, including from China.
But once Grünheide is up and running, Musk wants to have the Model Y crossover SUV built here, with which he has even more ambitious goals than the Model 3: Tesla believes that Model Y could become the best-selling car model worldwide across all classes it in the latest quarterly report.
The model is already rolling off the assembly line in California and Shanghai, and in addition to Berlin it will also be built in the new factory in Texas. In addition, a new version of the more expensive Model S luxury car comes onto the market. Overall, Musk is aiming for an increase in deliveries of 50 percent this year, as in the medium-term target range, to around 750,000 cars.
Musk also wants to build the world’s largest battery factory on the site near Berlin; Tesla has so far produced its batteries in the US state of Nevada. With the announcement, the company has apparently woken sleeping dogs, because in March the European top dog Volkswagen pushed ahead with the plan to build six battery cell plants with partners across Europe by 2030.
And anyway, the giants of the old car world are currently arming themselves with sums of money for the competition with e-cars and software, in which Tesla is considered to be the leader. Volkswagen has planned around 73 billion euros for the new technologies between 2021 and 2025, almost half of the total investment. US giant General Motors recently increased its budget for electric drives and autonomous driving by around a third to 35 billion US dollars (29.3 billion euros) by 2025.
WHAT ANALYSTS SAY:
Despite the lofty heights that the share price has reached, a large number of analysts are still optimistic about the paper’s future opportunities. 19 of the 44 experts surveyed by Bloomberg recommend buying the stock, 13 holding it and 12 selling it. The average target price is 618 dollars, which is roughly the current price level.
“You can almost get the impression that Tesla has two pillars: the sale of emission rights and the Bitcoin trade,” said NordLB analyst Frank Schwope after the quarterly figures. “The actually central pillar, the sale of cars, on the other hand, still does not make a great contribution to profits.” Because the competition is catching up with electric models, the income from the certificates is likely to gradually decline.
DZ Bank analysts such as Schwope from NordLB also come to the conclusion that Tesla is currently only making little profit with cars itself. In the opinion of the experts, vertical integration and position in important future topics such as battery technology are impressive. However, like Schwope, you are among those who consider the valuation of the stock to be too high and therefore recommend selling.
Chris McNally from the investment bank Evercore sees 2021 as dominated by preparations for the expansion of production in the coming year and currently has a neutral vote on the share.
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JPMorgan analyst Ryan Brinkman is one of the skeptics: The high rating of Tesla is likely to come to the test with new electric models of the rivals, because these not only competed for sales and market share, but also reduced the need for emissions certificates among the competition. And they would have made a profit in the first quarter. With a target price of $ 155, Brinkman is one of the most pessimistic experts.
Mark Delaney of Goldman Sachs, on the other hand, is far more confident. The statements about the Model Y meant that Tesla believes the car will have annual sales of around one million vehicles in 2022. He recommends that investors buy the stock with a price target of $ 860.
WHAT DOES THE SHARE DO:
By the end of January, Tesla stock had rushed from one high to the other. On January 25, it cost a little more than $ 900 at times. But it didn’t go any further uphill, because since February the price has mainly been on the downhill path. The share lost a good 40 percent by the beginning of March, before slowly picking up again. Most recently the share cost $ 623, a good 30 percent less than at the end of January.
Despite the recent losses, the past few months and years have been very successful for Tesla investors. The price has risen almost nine times since the low in mid-March 2020 – and over the past five years it has even increased 16 times. The US carmaker thus clearly outperformed German competition on the capital market, even if it was able to make up some lost ground recently.
Tesla is currently worth around 600 billion dollars on the stock exchange, or the equivalent of a little more than 500 billion euros, making it the world’s most valuable automaker on the stock exchange. For comparison: The three German manufacturers Volkswagen (129 billion euros), Daimler (82 billion euros) and BMW (59 billion euros) together make up a little more than half. And the US electric car maker is also leaving the competition in its own country behind: General Motors (GM) brings it to 85 billion dollars, Ford to 58 billion dollars.
Meanwhile, company boss Musk is also moving other courses with his statements: With Tesla’s decision to acquire Bitcoins worth 1.5 billion dollars and also accept them as a means of payment, the cryptocurrency initially catapulted its way up in February and March, and in April hit a record high of nearly $ 65,000. When Musk then discovered the problem of the poor energy and climate footprint of the computationally intensive Bitcoin network, not only did the most famous crypto currency crash significantly in May – also because China wants to take the reins of digital coins much more strongly. Bitcoin is currently around $ 32,800.
On Monday, the Tesla share was listed in pre-market NASDAQ trading at times with plus 0.84 percent at 628.52 US dollars. However, it is now giving up 1.07 percent to $ 616.64.
