Why is Tesla Stock (Still) So Cheap?

Elon may be overcommitted but Tesla investors shouldn’t lose focus.

Andrew Willis 28 April, 2023 | 4:48AM
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Andrew Willis: So, Elon’s had a rough couple of weeks. His spaceship exploded, he had more checkmark drama on Twitter, and a group of institutional Tesla shareholders complained about ESG at the company and that its CEO wasn’t staying focused.

To top it off, we saw margins fall by nearly five percent from the previous quarter. We reduced our fair value for Tesla TSLA stock by ten dollars… But it still looks cheap, and strategist Seth Goldstein says his long-term view remains intact.

Even if the company has a distracted CEO, investors should at least keep in mind the groundwork that’s been laid. We’re talking about overhead expenses that should decline over time and significant progress toward functional parity with traditional gas vehicles – areas where you can still find Tesla with a head start.

For Morningstar, I’m Andrew Willis. 

 

bulls Bulls Say

  • Tesla has the potential to disrupt the automotive and power generation industries with its technology for EVs, AVs, batteries, and solar generation systems.
  • Tesla will see higher profit margins as it reduces unit production costs over the next several years.
  • Through the combination of its industry-leading technology and unique supercharger network, Tesla offers the best function of any EV on the market, which should result in its maintaining its market leader status as EV adoption increases.

bears Bears Say

  • Traditional automakers and new entrants are investing heavily in EV development, which will result in Tesla seeing a deceleration in sales growth and being forced to cut prices due to increased competition, eroding profit margins.
  • Tesla's reliance on batteries made in China for its lower-price Model 3 vehicles will hurt sales as these autos will not qualify for U.S. subsidies.
  • Solar panel and battery prices will decline faster than Tesla can reduce costs, resulting in little to no profits for the energy generation and storage business.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Tesla Inc184.86 USD-1.38Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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