The stock may be bouncing around too much for anyone’s taste, but Tesla (Tesla Stock Quote, Charts, News, Analysts, Finance NASDAQ:TSLA) is a stock that really should be in your portfolio, says Shane Obata of Middlefield Capital, who argues that if you’re called by an automaker or technology, Tesla is still a very attractive bet in the electric vehicle space.
“We have been quite successful as owners of Tesla. We still like the name. The valuation is very high and we’re aware of that as a potential risk, but we think Tesla has multiple different reasons why it’s in this leadership position,” said Obata, a portfolio manager at Middlefield, who spoke on BNN Bloomberg on Friday. .
Shares of Tesla are falling sharply in recent trading sessions as the broader market continues to take a beating from fears of slowing economic growth, rising interest rates, inflation and geopolitical concerns. All of that has been overblown for growth stocks that have arguably lost their appeal with investors over the last half year.
Names like Amazon, Meta and Apple are down significantly, as is Tesla, which is now down almost 35 percent since the beginning of November. Still, the stock’s gains over the past two years have been phenomenal, and shareholders have a lot to be happy about, as TSLA is up 400 percent since May 2020.
But Obata believes the good times aren’t all in the rearview mirror, as Tesla’s dominance in the electric vehicle industry will keep him in the driver’s seat for a while yet.
“I’m not going to come out and tell you it’s a technology company because they make cars, but at the same time they have what we think is the best technology,” he said. “They are completely vertically integrated to make electric vehicles and we think that is really working. As you can see, their recent results have been better than expected: deliveries continue to increase with new facilities coming online and they are ramping up production there. And they’ve been able to keep costs under control, which has been very impressive and I think that speaks to vertical integration.”
“In terms of demand, I think it’s one of those companies where you can raise prices and that’s really not going to faze the end consumer. Tesla’s end consumer is… [a buyer of] a high-end or more expensive car, so I think consumers really enjoy the product,” he said.
Tesla reported revenue up a whopping 81 percent in its most recent quarter, the company’s first quarter of 2022, delivered on April 20. Tesla’s top line of $18.756 billion beat the analyst consensus estimate by $17.80, while EPS of $3.22 per share was well above Street’s demand of $2.26 per share.
“The first quarter of 2022 was another record quarter for Tesla based on several measures including revenue, vehicle deliveries, operating profit, and an operating margin of more than 19 percent. Our outstanding recourse debt has fallen below $100 million at the end of the first quarter. Public interest in a sustainable future continues to grow and we remain focused on growing as fast as reasonably possible,” the company said in a press release.
Quarterly profitability, a long-term issue for Tesla as it struggled for years to deliver products on time and cut costs while expanding, was impressive, with first quarter adjusted EBITDA growing 173 percent year over year to $5,023 thousand. millions. Free cash flow also grew from $293 million a year ago to $2.228 billion.
Like manufacturers around the world, Tesla is grappling with supply chain issues, and it hasn’t helped investor confidence lately that its main car factory in Asia is in Shanghai, where COVID-19 has hampered production in recent months.
However, Tesla’s pace of expansion has been something to behold, as in recent years it opened so-called auto gigafactories in Nevada, Berlin and Austin, Texas, along with the Shanghai location.
Obata believes that buying Tesla stock is not just a gamble on the company and its superior technology, but on fickle CEO Elon Musk, who, despite needing to put on more hats, including an ongoing attempt to take over the company of social networks Twitter, continues to perform admirably.
“The technology is seen as having a big advantage there, and then autonomous driving is still a long way off, but we think it’s something Tesla should do well at, as well as competitors like Waymo. The company has a lot going for it,” Obata said.
“I can understand people who are a little scared to step in as buyers, but it’s a tough sell because you’re betting against running the company and also against Elon Musk, who is clearly a genius who is running multiple businesses right now and doing it successfully in some way,” he said.
Reference-www.cantechletter.com