We will provide a deeper dive on Tesla soon, however, we are strongly considering an entry for the following reasons:
· Operating leverage: the company is delivering on margins and this is an important box to tick. There was concern that the lower prices would lead to a deteriorating bottom line, but this was not the case.
· Pricing leverage: Tesla’s pricing is becoming more affordable to the middle class and there’s some early evidence this could be met with enough demand to keep the company afloat on revenue growth.
· The valuation is very low, and with an ear towards technicals, we’d like to take advantage of the market’s deep discount on this particular stock.
Tesla reported revenue growth of 37% for revenue of $24.3B. Although this is a deceleration, the bottom line impressed with an operating margin of 16% compared to 14.75% in the year ago quarter. Again, there was built-up anticipation on the operating margin due to Tesla lowering prices, and this hurdle was cleared.
Net income grew 60% in Q4 for a margin of 16.8% compared to 13.10% in the year ago quarter. For FY2022, net income more than doubled.
Perhaps most importantly, Tesla is trading quite low and has not traded this low since “the new macro.” The forward P/S is at 4.7 and the forward P/E is at 36.15. If you take the tumultuous market of 2022 as a comp, Tesla may have 20% and up to 100% room. For the best case scenario to happen, we need broad market participation.
Please follow the forum for entry updates and look for detailed earnings coverage next week.