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Taking Tesla seriously

If a recession can’t stop it then virtually nothing will – why the price is about right

Andrew Willis 15 May, 2020 | 1:00AM
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Well into this pandemic and massive economic disruption, Tesla’s stock is surviving and thriving. Tesla has been made fun of, doubted and shorted, but it’s delivering. We’re adjusting many levers in our assessment of the company and as a result, we’ve nearly tripled our fair value estimate for the company to 731 U.S. dollars. This isn’t far from where it was last week and isn’t “too high” like CEO Elon Musk said.

Tesla maintained growth throughout the crisis, sector strategist David Whiston notes, maneuvering its complex business lines through labour and logistical issues, so well that it made for a record quarter. On top of delivering value, the business was also still investing throughout the quarter, with the Shanghai Model Y plant and Gigafactory Berlin both due to start production next year.

Now we note that the next quarter will suffer from the coronavirus as its main factory in California remains closed. But when restrictions are lifted we expect orders to fill quickly. We’re raising our delivery estimates and predict a capacity of a million units by 2021.

Tesla’s been able to produce desirable vehicles while generating free cash flow and net profit far better than it ever has. They’re formidable competition to all premium automakers and have a chance to be the dominant electric vehicle firm.

For Morningstar, I’m Andrew Willis.  

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Tesla Inc1,051.75 USD4.24Rating

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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