In 2019, Tesla delivered around 368,000 units making it the leading producer of plug-in electric vehicles. The company Tesla Model 3 is the world's best-selling all-electric vehicle. In the last quarter of 2019, Tesla's Model 3 vehicle accounted for more than 80% of all the vehicles delivered by the company. Model 3 overtook Model S and Model X, which were initially the best-selling models. Although the number of competitors in this industry has increased, Tesla still enjoys leadership in the industry.
Market analysts predict a vibrant future for the company. Baird analyst Ben Kallo indicated that the move by the Company CEO Elon musk to raise more capital through common stock had analysts that the company would strengthen its financial position as well as use the improved financial position to strengthen its leadership in the market (Reinicke, 2020a). Another analyst, David Whiston, from Morningstar, noted that the offering of a new share at the prevailing share prices would improve the company’s already strong financial position and enable it to invest in further growth.
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Some analysts in reaction to Tesla's 2020 second-quarter earnings report have indicated that its stock is overvalued. The earnings beat Wall Street expectations, and the companies share rose by 6%. The shares had recorded earnings of $2.18, beating the expected loss of $0.15. JPMorgan analysts lead by Tyan Brinkman indicated that despite the earnings, the shares are still overvalued. JPMorgan indicated that the share performed well despite the challenging macro backdrop. As more carmakers develop electric vehicles, the demand for Tesla's vehicles will decrease. Currently, According to JPMorgan, a comparison of Tesla's share and other EV makers indicates that the industry leader's shares are overvalued. Bank of America analysts indicated that the company's stock prices are detached from the company's current fundamentals (Reinicke, 2020b). The company’s share price is driven by the share itself. The higher the stock price, the more it becomes easy to raise funds and fund Tesla's excessive growth. Investors keep rewarding the company for an overpriced stock.
Tesla's liquidity has varied over the last three years. In 2017, the current ratio was 1.13, with liabilities of $6.25 billion and assets worth 7.03 billion. In March 2018, the company reported a current ratio of 0.7, liabilities of $8.65 billion, and assets worth $6.35 billion. In March 2019, the company reported a current ratio of 0.83, liabilities of $9.24 billion, and assets worth $7.68 billion. In March 2020, the company reported a current ratio of 1.24, liabilities of $11.99 billion, and assets worth $14.89 billion. By September 2020, the company reported a current ratio of 1.64, liabilities of $13.30 billion, and assets worth $21.74 billion (Macrotrends, n.d.a). Profitability has also been varying over the years. In 2017 the company had a net profit of $-1.962B, $-0.976B in 2018, and $-0.862B in 2019. By September 30, 2020, the company reported an income of $0.300B (Macrotrends, n.d.b). The company's market value has also changed over the years. The market value by the end of 2016 stood at $30.82 billion, $53.55 billion by the end of 2017, $54.96 billion by the end of 2018, and 487.5 by the end of 2019, and $548.76 by November 2020 (Macrotrends, n.d.c).
The company's performance has gradually improved since 2016. Its current ratio, asset management, profitability, and market capitalization have all improved over the years. This year it will post the highest it has ever posted. Although some analysts indicated that the share is overvalued and not supported by the fundamentals, its fundamentals are strong. The threats of new entrants are likely to challenge the performance of the company. Many companies have started to make electric vehicles, and as they gain a share of the market, they are likely to affect Tecla's market leadership.
References
Macrotrends. (n.d.a). Tesla Current Ratio 2009-2020 . https://www.macrotrends.net/stocks/charts/TSLA/tesla/current-ratio
Macrotrends. (n.d.b). Tesla Net Income 2009-2020 . https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-income
Macrotrends. (n.d.c). Tesla Market Cap 2009-2020 . https://www.macrotrends.net/stocks/charts/TSLA/tesla/market-cap
Reinicke, C. (2020a, February 14). 'A smart move': Here's what 4 Wall Street analysts are saying about Tesla's $2 billion common stock offering . Business Insider. https://markets.businessinsider.com/news/stocks/tesla-common-stock-offering-what-analysts-commentary-saying-capital-raise-2020-2-1028907106
Reinicke, C. (2020a, February 14). 'Still highly overvalued': Here's what 8 Wall Street analysts are saying about Tesla's blockbuster earnings report (TSLA) . Business Insider. https://markets.businessinsider.com/news/stocks/tesla-stock-price-q2-earnings-analysts-comment-following-blockbuster-report-2020-7-1029425880
