The dream of green growth in e-mobility has long given the industry pioneer Tesla a stormy tailwind on the capital market. However, doubts about the current strategy of the company from sunny California have increased in recent months. The worries are well-founded: sales growth is losing momentum and, much worse, margins are on the decline. However, with the strategy of prioritizing vehicle sales over profitability, company CEO Elon Musk himself has started the downward spiral. Numerous rounds of price cuts in the U.S. at the beginning of the year caused the gross margin to plummet from 32.9% in the previous year to 19.3% in the first quarter. And the negative trend continues to this day: In the third quarter, Tesla achieved a value of only 17.9%, analysts expected on average at least 18.25%.
Sales growth from July to September was also weaker than expected at 9%. The reported USD 23.35 billion was slightly more than 3% below consensus estimates. Meanwhile, the curve for shipments is pointing down. In the third quarter, 435,059 were handed over to customers, compared with 7% more in the previous quarter. The Group blames this in particular on downtime for plant modernization. For the year as a whole, however, Tesla is still sticking to its delivery target of 1.8 million units. This means that 476,000 of the four models "S", "3", "X" and "Y" must be sold in the fourth quarter, an increase of 17.5% compared to the same period last year.
In general, a flattening sales curve can be observed for the e-car specialist over the past years. The positive effect following the pandemic in 2021 has long since faded away. The full-year target for 2023 means growth of 35.9%, which is only the rate of change from 2020, which was heavily slowed by Corona. Meanwhile, the operating return is clearly declining. If the car company achieved a margin of 17.2% a year ago, it was only 7.6% in the past third quarter. This means that Tesla has clearly fallen behind premium suppliers BMW and Mercedes, which are also pressing hard on the gas pedal in the e-sector in order to increase the pressure on market leader Tesla. However, as far as valuation is concerned, the picture continues to be a mirror image. The Tesla share has a 2024 P/E ratio of 57, while the ratio for the two Germans is in the low single digits.
It is probably the great growth fantasies that have led the market to grant the U.S. stock such an ambitious valuation. In addition to its claim to leadership in electric cars, Tesla is also at the forefront of autonomous driving technology. Several million miles have already been successfully completed with the AI-based full self-driving beta version of Autopilot. In addition, a new segment is to be conquered with the Cybertruck. Delivery was once planned for the third quarter, however, Musk admitted during the most recent presentation of figures that there are enormous challenges in achieving mass production with the Cybertruck and then generating a positive cash flow with it. Nevertheless, the tech billionaire is sticking to the ambitious project. Starting November 30, the e-pickup is to be sold, and Musk would even like to deliver a quarter of a million Cybertrucks annually starting in 2025.
Full-blooded entrepreneurs are known for full-bodied promises. But as the recent sell-off on the stock market shows, confidence in the company's fundamental prospects currently seems to be waning. To now write off Tesla completely is certainly the wrong approach. The company is indispensable when it comes to e-mobility, and after all, Musk has proven in the past, albeit often with a delay, that many of his visions have become reality. This could be one reason why the majority of analysts have not given the high-tech carmaker the thumbs down. Of a total of 45 research reports, 20 resulted in a hold recommendation, 19 saw a buy opportunity and only a minority of half a dozen rated the S&P 500 stock as sell. This results in an average target price of USD 257, which corresponds to a theoretical upside potential of around one fifth.
The large number of uncertainties coupled with a deteriorating chart picture - the 200-day-average line has just been crossed to the downside - do not necessarily speak in favor of a direct investment in Tesla at present. The high volatility, however, provides the best conditions for a barrier reverse convertible (BRC). Leonteq has launched two new single softcallable BRCs with extraordinary coupons and low barriers. The CHF version offers a maximum yield of 13.00% p.a., while in USD 17.00% p.a. is possible within the maximum term of one year and three months. The first soft callable observation day, which could provide for an early redemption, takes place for both products after half a year. The double-digit percentage returns are well protected with high risk buffers of 51% each.
However, the safety function of the product due to the barrier is only one side of the coin. As Barrier Reverse Convertibles are securitised bonds, the solvency of the issuer is also of crucial importance for certificate holders in a worst-case scenario. In this respect, investors are in good hands with Leonteq. The renowned rating agency Fitch has just raised the long-term issuer default rating to "BBB" with a stable outlook.
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