Tesla itself is currently facing various short-term adverse factors, from the pending merger and acquisition of Musk with Twitter to the uncertainty of vehicle delivery in the fourth quarter, and even continues to suffer from the sluggishness of macroeconomic in the wider market. With the previous high valuation of Tesla , the stock is currently at a veritable low price level.
Tesla shares have fallen by about 48% so far this year. The stock fell about 50% from its all-time high after the November 2021 pandemic. This halved decline means that Tesla's stock price is now only about 5% higher than the low point during the late stage of the COVID-19 market crash, turning into a very attractive valuation situation for investors.
In addition to the broader macroeconomic sluggishness, Tesla's stock price is suffering from two key short-term challenges. First, Elon Musk must raise $24.51 billion in equity financing for his Twitter acquisition deal. So far, he has accumulated $15.4 billion by selling some of his shares in two different cyclone sell-offs, the first time in April-May and the second time in August. Musk also received a $7.1 billion stake in stake from Larry Ellison, Binance, Sequoia, Saudi Arabia Prince Walid and others. However, without considering Twitter's RSU, the funding gap is still around $5.4 billion. Musk may fill this gap by further cutting its shares in Tesla, so the stock is currently facing continued downward pressure.
As for the second major headwind, Tesla's third-quarter delivery volume did not meet analyst expectations. While quarterly production was 365,923 units higher than Bloomberg's estimated 359,853 units, the reported delivery volume of 343,830 units did not reach the consensus 357,938 units. Tesla said logistics restrictions are the reason for its insufficient quarterly delivery volume. However, given the weak demand driven by the continued weakness of the global macroeconomic globally, especially the performance of the Chinese market, which is crucial to Tesla, it is understandable that the stock's performance is under pressure.
Still, this weakness has now translated into Tesla's very attractive valuation situation, with the stock currently having a forward P/E ratio of just 34.94 times – the lowest since the depth of the COVID-19-induced market crash in spring 2020. As Tesla continues to forecast its annual electric vehicle delivery to grow by 50% in the foreseeable future, the stock is currently valued at arguably the cheapest in recent years.
In addition, in view of the recent intensification of Tesla's stock volatility, demands for stock buyback plans continue to increase. This is important because the electric vehicle giant now has enough financial resources to implement such a plan. That is to say, according to estimates by Gary Black, managing partner of Future Funds Co., Ltd., Tesla has $9.932 billion in free cash flow in fiscal year 2022. For fiscal 2023, the metric is expected to increase to $20.773 billion, providing enough buffer for the electric vehicle giant to start strengthening its value to shareholders.
If Tesla announces a stock buyback plan during the upcoming third-quarter 2022 earnings call, the stock may have a very positive reaction. This gives the stock another appeal to its current valuation indicator.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-