Tesla’s Performance: Analyzing Stock Trends and Earnings Estimates

Tesla (TSLA) has become a focal point for investors, ranking among the most searched stocks on Zacks.com recently. Understanding the factors influencing Tesla’s stock performance can provide valuable insights for potential investors.

In the past month, Tesla’s shares have returned +8.1%, contrasting with a -4.3% decline in the Zacks S&P 500 composite. Additionally, the Zacks Automotive – Domestic industry, where Tesla is classified, saw a loss of 1.9%. This raises an important question: What does the near-term future hold for Tesla’s stock?

Media reports or speculation about changes in business prospects often drive immediate stock price movements. However, it is the underlying fundamental factors that ultimately govern buy-and-hold decisions.

Revisions to Earnings Estimates

At Zacks, we emphasize the importance of changes in the projection of a company’s future earnings. We believe that the present value of future earnings streams establishes the fair value of a company’s Stock.

Analysts covering Tesla are continually revising their earnings estimates to reflect current business trends. When earnings estimates increase, the fair value of the Stock tends to rise as well. A higher fair value in relation to the current market price can attract investors, pushing the price up. Research supports a strong link between earnings estimate revisions and short-term stock price movements.

For the current quarter, Tesla is projected to report earnings of $0.42 per share, reflecting a -19.2% change from the same quarter last year. Over the past 30 days, the Zacks Consensus Estimate has decreased by -35.9%.

Looking at the current fiscal year, consensus earnings estimates stand at $1.88, which shows a year-on-year decline of -22.3%. This figure has fallen by -29.7% in the last month.

In the following fiscal year, a consensus earnings estimate of $2.91 indicates a significant increase of +54.4% compared to the expected earnings from the previous year. However, this estimate has also seen a reduction of -16.5% recently.

The Zacks Rank, which incorporates the size of changes in earnings estimates and additional factors, currently rates Tesla as a Zacks Rank #5 (Strong Sell), suggesting pessimism regarding its short-term price performance.

12 Month EPS

Projected Revenue Growth

While earnings growth is a key measure of financial health, revenue growth remains essential. A company cannot consistently increase earnings without corresponding revenue growth.

Tesla’s consensus sales estimate for the current quarter is $23.82 billion, indicating a year-over-year decline of -6.6%. For the current and next fiscal years, the estimates stand at $100.18 billion and $117.79 billion, respectively, reflecting growth of +2.6% and +17.6%.

Last Reported Results and Surprise History

In its last reported quarter, Tesla achieved revenues of $19.34 billion, which is down -9.2% year-over-year. Earnings per share (EPS) of $0.27 for the same timeframe contrasts with $0.45 from the previous year.

When compared to the Zacks Consensus Estimate of $20.98 billion, the reported revenue marks a surprise of -7.85%. The EPS surprise came in at -38.64%.

Over the last four quarters, Tesla exceeded EPS estimates only once and matched consensus revenue forecasts just once during this period.

Valuation

Evaluating a Stock without considering its valuation can lead to inefficient investment decisions. It is essential to assess whether the current price reflects the real value of the business and its growth potential.

By comparing current valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to historical values, investors can determine if a Stock is overvalued or undervalued. Additionally, comparing with industry peers provides insight into the stock’s pricing efficacy.

The Zacks Value Style Score evaluates stocks based on several metrics and categorizes them from A to F. Currently, Tesla is rated F, indicating it is trading at a premium compared to peers.

Bottom Line

The information outlined provides a basis for evaluating Tesla amid growing market interest. However, with a Zacks Rank of #5, there are indicators suggesting that the company may struggle to match broader market performance in the short term.