Below is Validea's guru fundamental report for TESLA INC (TSLA). Of the 22 guru strategies we follow, TSLA rates highest using our Quantitative Momentum Investor model based on the published strategy of Wesley Gray. This momentum model looks for stocks with strong and consistent
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On January 2, 2024 at 14:35:13 ET an unusually large $76,775.80K block of Put contracts in Tesla (TSLA) was bought, with a strike price of $450.00 / share, expiring in 17 day(s) (on January 19, 2024). Fintel tracks all large options trades, and the premium spent on this trade was
Asian shares extended a global sell-off on Wednesday while the dollar held gains as market optimism about early and aggressive U.S. interest rate cuts ebbed ahead of the release of Fed minutes and jobs data.
In the latest market close, Tesla (TSLA) reached $248.46, with a -0.01% movement compared to the previous day. The stock's change was more than the S&P 500's daily loss of 0.57%. At the same time, the Dow added 0.07%, and the
EVs may be the future of mobility. Unfortunately, for Toyota (
NYSE:TM
) stakeholders, the Japanese automaker appears to be hopelessly lagging behind its key competitors at first glance. However, with Tesla (
NASDAQ:TSLA
) having already picked the low-hanging fruit of the initial wave of EV customers, the next growth area centers on the middle-income crowd. That has Toyota written all over it. Given the possibly shifting winds favoring the auto giant, I'm bullish on TM stock.
TM Stock May Rise on the Next Wave of the EV Evolution
Despite challenges throughout 2023, the
EV sector is on the rise. According to TipRanks reporter Michael Marcus, the segment is “expected to hit more than 17 million unit sales annually by 2028.” As Marcus put it, it’s a wide-open field for risk-tolerant investors. And while the demand profile has bolstered Tesla and legacy automakers, which pivoted aggressively toward electrification, Toyota has lagged behind.
That’s not to say that Toyota doesn’t care about next-generation mobility. For years, the company dominated the hybrid game with models such as the Prius. Increasingly, though, the narrative has swung firmly in favor of plug-in battery EVs. It’s here where the automaker has been found flat-footed. Still, as the EV cycle transitions from early adopters to the mainstream growth phase – which necessarily involves targeting middle-income consumers – Toyota could effectively play catch-up.
First, Japan’s flagship automaker is no longer diddle-daddling regarding the electric transition. Industry reports show that Toyota has been beefing up its infrastructure to accelerate production. Specifically, the company is utilizing self-propelled lines along with rapid chassis-molding technologies to get units rolling off production and onto showroom floors quickly. As well, it’s working on its battery innovation to deliver massive improvements in range.
Second, the company has a strong reputation for quality control. For years, the Toyota brand has been synonymous with reliability, quality, and value. And the recent controversy involving falsified safety tests at Daihatsu – Toyota’s small-car unit – really shouldn’t sully this reputation, especially among American drivers.
Subsequently, quality control has long been an issue for Tesla. Mostly, these concerns center on non-critical aesthetic issues. However, serious failures have occurred, casting some doubt on Tesla’s ability to serve middle-income consumers. After all, this segment just can’t afford to deal with problems like affluent customers can. That shouldn’t be a concern with Toyota.
Winds May Start Shifting Favorably for Toyota
Again, Tesla dominated the early adoption phase of the EV cycle, there’s zero question about it. While the company didn’t exactly pioneer EVs – the concept is actually quite old – it brought the concept of electric-powered transportation to the mainstream consciousness. However, just because Tesla won the early innings doesn’t mean it will win the game.
Fundamentally, as the market starts to address the regular-income crowd – because upper-income folks can only buy so many EVs – the narrative will likely start favoring TM stock. At the basic level, Toyota’s bifurcated identity – Lexus for the upwardly mobile consumer, the namesake brand for those who fly economy class – should benefit TM stock. Put another way, Lexus can compete with Tesla’s top-of-the-line models while Toyota can grab market share among middle-class drivers.
Another factor potentially benefiting TM stock is the vast underlying network. While Tesla should be commended for aggressively expanding its holistic network, including charging stations and service centers, one of the consistent complaints about ownership is the inconvenient service scheduling. It’s already aggravating for current Tesla owners. Should the volume of users increase, the growth may outpace the company’s speed of infrastructure development.
On the flip side, that should be far less of a problem for Toyota. With an extensive dealership network along with facilities all over the U.S. and other parts of the world, Toyota would simply be better positioned to serve their customers -- combustion, hybrid, electric, you name it.
And while automakers continue to move into the electric realm, it’s useful to remind ourselves of a key point: no guarantee exists that EVs will take over as quickly as projections state. If outside circumstances stymie the EV rollout, Toyota could still soak up demand from its bread-and-butter divisions. Thus, TM stock offers something for everyone.
Attractive Valuation Might Seal the Deal
If investors needed more convincing regarding TM stock, the valuation might do the trick. Currently, shares trade at a trailing-year earnings multiple of 9.1x. No matter how you look at it, that’s a discounted multiple. If you’re looking strictly at auto and truck dealerships, this segment runs an average earnings multiple of 10.8x. For auto parts, you’re looking at 17.7x.
Is TM Stock a Buy, According to Analysts?
Turning to Wall Street,
TM stock has a Moderate Buy consensus rating based on two Buys, no Holds, and zero Sell ratings. However, the analysts did not provide a price target.
The Takeaway: TM Stock May Win the Mainstream Growth Cycle
When it comes to the early phase of the EV growth cycle, there’s no question that Tesla utterly dominated. However, as the market pivots toward the middle-income consumer, that’s the area where Toyota could come out ahead. Thanks to its brand reputation and extensive network, the company is more aligned with middle-class needs, thus potentially bolstering TM stock.
Disclosure
The S&P 500 and Nasdaq Composite closed the first trading session of 2024 lower, weighed by a fall in Apple shares after a broker downgrade and declines among other big-tech names triggered by a move higher by Treasury yields.
The S&P 500 and Nasdaq Composite ended the first trading session of 2024 lower, weighed by Apple shares falling after a broker downgrade and declines among other big-tech names triggered by a move higher by Treasury yields.