Tesla (TSLA) has recently garnered significant attention on Zacks.com, making it an important stock to analyze for its future performance. In the last month, Tesla’s stock has returned -4.2%, while the Zacks S&P 500 composite has seen a +3.6% change. The Zacks Automotive – Domestic industry, which includes Tesla, has experienced a decline of 2.3%. This leads us to question what direction Tesla’s stock will take in the near future.
At Zacks, we prioritize the evaluation of a company’s earnings projection as the determining factor for its stock’s fair value. We believe that a stock’s fair value is based on the present value of its future earnings. Consequently, we place significant importance on how sell-side analysts are revising their earnings estimates to account for the latest business trends. When earnings estimates for a company increase, its stock’s fair value also increases. Investors tend to buy stocks with higher fair values, leading to an increase in price. Empirical studies have shown a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
For the current quarter, Tesla is expected to report earnings of $0.67 per share, representing a year-over-year change of -21.2%. However, over the last 30 days, the Zacks Consensus Estimate has changed by -29.9%. The consensus earnings estimate for the current fiscal year is $3.16, indicating a year-over-year change of +1.3%. However, this estimate has changed by -20.8% in the last 30 days. For the next fiscal year, the consensus earnings estimate is $4.15, reflecting a +31.4% change from the previous year, but it has experienced a -22.4% change in the past month.
Tesla’s revenue growth forecast is also important to consider. While earnings growth is significant, a company’s ability to grow its revenues is equally important. Tesla is expected to see a year-over-year change of +10.6% in sales for the current quarter, amounting to $25.8 billion. For the current and next fiscal years, revenue estimates of $111.96 billion and $133.61 billion indicate +15.7% and +19.3% changes, respectively.
In the last reported quarter, Tesla’s revenues were $25.17 billion, representing a year-over-year change of +3.5%. However, the reported revenues fell short of the Zacks Consensus Estimate of $25.94 billion by -2.97%. The EPS surprise was -5.33%. Over the past four quarters, Tesla surpassed consensus EPS estimates twice and exceeded consensus revenue estimates once.
Valuation is an essential aspect of investment decision-making. Comparing a stock’s current valuation multiples, such as P/E, P/S, and P/CF, to its historical values helps determine whether the stock is fairly valued, overvalued, or undervalued. It is also helpful to compare a company’s valuation to its peers to gauge the reasonableness of its stock price. Tesla currently has a Zacks Value Style Score of D, which suggests that it is trading at a premium to its peers.
In conclusion, these facts, along with other information on Zacks.com, can aid investors in determining whether they should pay attention to the market buzz surrounding Tesla. However, its Zacks Rank #3 (Hold) suggests that it may perform in line with the broader market in the near term.
