Despite a ceasefire with Iran now in place, Tesla (NASDAQ:TSLA) has yet to join the relief rally, trading flat on the day and still down ~23% year-to-date.
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Trade TSLA with leverageAnd it’s not hard to see why. Over the past three days, Tesla shares have dropped 9% following a disappointing set of Q1 delivery figures and weaker-than-expected energy storage results, presenting plenty of fodder for the bears, who have long seen the company’s valuation as detached from reality.
But for an investor who goes by the nom de plume of The Techie (TT), the share price drop offers a chance to load up at very appealing levels.
“Long story short,” explains TT, “the market is throwing Tesla out with the bathwater. The selloff, while painful, looks increasingly disconnected from the underlying business trajectory, and I’m seeing opportunity here.”
Yes, concedes the 5-star investor, near-term delivery figures are under pressure due to a softer demand backdrop and continued disruption from model transitions. However, zooming out, the investor says the underlying thesis remains unchanged. Tesla, as has been claimed many times before, is not simply an automaker, nor should it be valued like one. It has evolved into the only vertically integrated platform spanning EVs, energy, and autonomy at scale, yet TT believes the market appears to be pricing the stock as though that additional optionality has little value.
You might argue that it is stretching it a bit, given the valuation has long been a sticking point for some. The headline metrics have been nothing to shout about for a while, but the stock has mostly been able to brush off that factor as investors have pinned their hopes on the company’s autonomous/FSD/humanoid endeavors. Here, even TT concedes the forward valuation is where the “thesis gets uncomfortable,” with a forward P/E above 170x compared to a sector median in the mid-teens, and a forward EV/EBITDA above 85x vs. a peer median below 10x. It’s clear that this premium is “accounting for optionality,” but it is only warranted if the long-term growth narrative, including autonomous driving, Optimus, and the energy business, ultimately scales as expected.
TT evidently believes that this will be the case, and points to the “next major (potential) catalyst.” That will be April 22, when the company reports its full Q1 financials. Margins, average selling prices, and any updates on the Cybercab production ramp and the Optimus timeline are likely to be the primary factors driving the stock from here, says TT.
“At current levels, long-term investors are being handed an entry point that, in hindsight, may look obvious, and that’s rarely comfortable in the moment,” TT summed up. “I am not calling an exact bottom; nobody can. But for investors with a 12- to 24-month horizon, the risk-reward here is starting to look favorable.”
With this in mind, TT assigns Tesla shares a cautious Buy rating. (To watch The Techie’s track record, click here)
On the Street, 13 analysts join TT in the bull camp, while an additional 11 Holds and 8 Sells all add up to a Hold (i.e., Neutral) consensus rating. The average price target of $393.97 points to potential upside of about 14% over the next 12 months. (See TSLA stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.