Examining Tesla’s Performance: Key Financial Insights Ahead

Tesla (TSLA) has emerged as a top-searched stock on Zacks.com recently. Investors should consider several crucial factors that might influence the stock‘s performance in the upcoming term.

In the past month, shares of this electric vehicle manufacturer have gained +1.5%, a stark contrast to the Zacks S&P 500 composite, which has declined by -7.7%. The Zacks Automotive – Domestic industry, in which Tesla is categorized, has experienced a -6% decline during this same timeframe. As the market adjusts, a significant question looms: What lies ahead for Tesla’s stock?

Media speculation and reports can cause stocks to trend and lead to immediate price fluctuations, yet underlying fundamental factors ultimately dictate whether investors choose to buy and hold a stock.

Revisions to Earnings Estimates

At Zacks, we emphasize evaluating changes in the earnings projections of a company as a primary factor in assessing its stock potential. We deem the present value of future earnings as a critical characteristic of the stock’s fair value.

Our analysis focuses on how sell-side analysts adjusting their earnings estimates based on recent business trends influence stock performance. When analysts raise their earnings estimates, the fair value of the stock typically rises. If that fair value surpasses the current market price, buying interest can push the price higher. Research shows a strong link between earnings estimate revisions and short-term stock price movements.

Tesla anticipates earnings of $0.50 per share for the current quarter, which represents a year-over-year increase of +11.1%. Notably, over the last month, the Zacks Consensus Estimate has decreased by -14.2%.

The consensus earnings estimate for the fiscal year is $2.71, indicating a year-over-year change of +12%. This figure has been adjusted down by -11.4% in the past 30 days.

Looking ahead to next fiscal year, the consensus earnings estimate sits at $3.58, which implies an increase of +32.1% compared to the previous year. The estimate has dropped by -3.9% over the last month.

Our proprietary stock rating tool—Zacks Rank—serves as a more definitive signal of a stock’s near-term price performance, utilizing earnings estimate revisions as a foundation. Currently, Tesla holds a Zacks Rank #3 (Hold).

The following chart illustrates the changes in the company’s forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

While earnings growth is often seen as the best indicator of a company’s financial health, increasing revenues is essential for sustaining that growth. Long-term earnings growth is rarely viable without corresponding revenue increases. Thus, understanding Tesla’s revenue growth potential is crucial.

The current sales estimate for Tesla in the upcoming quarter is $22.51 billion, reflecting a year-over-year change of +5.7%. Projected sales for the current and next fiscal years are $106.16 billion and $125.06 billion, suggesting increases of +8.7% and +17.8%, respectively.

Last Reported Results and Surprise History

Tesla declared revenues of $25.71 billion in its most recent quarter, indicating a +2.2% year-over-year change. The company’s EPS for this period was $0.73, compared to $0.71 the previous year.

However, actual revenues fell short of the Zacks Consensus Estimate of $27.5 billion, reflecting a -6.53% revenue surprise. The EPS fell short by -2.67% from expectations.

Over the previous four quarters, Tesla has exceeded EPS estimates only once and has achieved consensus revenue estimates only once during this period.

Valuation Overview

Considering a stock‘s valuation is crucial for making informed investment choices. To anticipate future price movements, it is essential to assess whether the current stock price accurately reflects the intrinsic business value and growth prospects.

Comparing valuation multiples such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) against historical values can indicate whether a stock is fairly valued, overvalued, or undervalued. Additionally, analyzing relative peer performance on these metrics offers clarity on the stock price’s reasonability.

According to the Zacks Style Scores system, Tesla has received an F for its Value Style Score, indicating that it is currently trading at a premium compared to its industry peers. Click here to view the key valuation metrics influencing this score.

Conclusion

The insights discussed here, along with further details on Zacks.com, can aid in your evaluation of the market sentiment surrounding Tesla. Nevertheless, the Zacks Rank #3 suggests that Tesla may perform in line with the broader market shortly.

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This article was initially published on Zacks Investment Research (zacks.com).

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.