Tesla, Inc. (TSLA) Stock Analysis: Buy Signals for This Week?

The Electric Vehicle (EV) industry leader Tesla, Inc. (TSLA) missed estimates for its third-quarter vehicle deliveries, as production halts were caused by factory upgrades to produce its Model 3 mass-market sedan.

The company, which is aggressively cutting prices to fend off competition, handed over 435,059 vehicles in the quarter ended September 30, down about 7% from the prior quarter, while an LSEG poll of analysts estimated deliveries of 459,949 vehicles.

TSLA is also facing a sales drop in its China-made EVs. China Passenger Car Association said sales of the company’s China-made EVs decreased 10.9% year-over-year for September.

Given this backdrop, let’s look at the trends of TSLA’s key financial metrics to understand why it could be wise to avoid the stock now.

Analyzing Tesla, Inc.'s Financial Performance and Trends from 2020 to 2023

The trend and fluctuations of the Price/Sales ratio (P/S) of TSLA for the period December 2020 to June 2023 can be summarized as follows:

• The P/S started at a high of 26.28 in December 2020.
• It experienced a downward trend, dropping to 18.61 by the end of March 2021.
• A slight fluctuation was seen in the subsequent quarters, with an increase to 21.97 in September 2021, followed by a decrease to 17.42 by December 2021.
• The year 2022 saw a progressive downward trend, from 16.62 in March to its lowest ratio in the series, recorded at 6.73 by December 2022.
• Moving into 2023, the P/S slightly rebounded to 5.99 in the first quarter but increased significantly to 9.08 in June.

From December 2020 to June 2023, the P/S plunged by almost 74% from its initial value. This reveals a general declining trend throughout the period. However, emphasis on the more recent data shows a rebound in the last recorded quarter.

The gross margin data for TSLA from late 2020 through mid-2023 shows a general upward trend, with some fluctuations. The details are as follows:

• On December 31, 2020, the gross margin was 21%.
• By March 31, 2021, there was a slight increase to 21.2%.
• This upward momentum continued steadily through June 30, 2021, with the value reaching 22%, and even further on September 30, 2021, when it reached 23.1%.
• December 31, 2021, saw a more significant jump to 25.3%.
• Continued growth was observed through the first half of 2022, peaking at 27.1% on March 31 and repeated on June 30.
• However, the latter part of 2022 presented a downward trend, with the gross margin reducing to 26.6% by September 30 and again to 25.6% on December 31.
• This downward trend continued into the first half of 2023, reducing further to 23.1% by March 31 and 21.5% by June 30.

Overall, the gross margin showed a net growth of 0.5% from its first value of 21% on December 31, 2020, to its last value of 21.5% on June 30, 2023. Despite the fluctuations in recent periods, note that the company’s gross margin registered a peak value of 27.1%, which suggests periods of strong performance.

The trend and fluctuations of the Return On Sales (ROS) for TSLA during the period from December 31, 2020, to June 30, 2023, are visually represented in the following points:

• There's a clear upward trend in the ROS from December 2020 to December 2022, with an increase from 5.6% to 17%. During this timeframe, the growth rate is approximately 203%.
• TSLA's ROS saw one of its biggest jumps between March 2022 and June 2022, going from 15.6% to 16.2% and continuing to rise to 16.8% by September 2022.
• Towards the end of 2022, the growth slowed down, with the value only increasing slightly from 16.8% in September to 17% in December.
• In 2023, there was a noticeable reversal in the trend. From March 2023 to June 2023, the ROS dropped from 15.1% to 14.4%, respectively, indicating a downturn in TSLA's operating efficiency.

As more emphasis is placed on the more recent data, it is worth noting that TSLA's most recent ROS value, as of June 2023, is 14.4%. Despite some earlier peaks and troughs, this reflects a significant overall increase compared to the initial value of 5.6% back in December 2020.

Reviewing the reported current ratio over 2.5 years (2020-2023) for TSLA, the data shows a visible downward trajectory and subsequent recovery phase.

As of December 31, 2020, the current ratio was at 1.88. This was followed by a declining trend across 2021, reaching a low point of 1.38 by September 30, 2021.

By December 2021, a slight drop saw the current ratio slide further to 1.37. Entering the first quarter of 2023, it has seen an encouraging rebound from 1.35 in March 2022 to 1.59 by June 30, 2023.

• From December 31, 2020, to March 31, 2021, the current ratio experienced a decline from 1.88 to 1.66, a decrease of approximately 11.5% in just three months.
• Subsequently, the trend across 2021 largely moved downwards until the end of the year, standing at 1.375 by December 31, 2021. This represented a drop of approximately 27% from its starting point at the end of 2020.
• However, from 2022 onwards, TSLA's current ratio started to rise again, albeit gradually, ending with a value of 1.53 by the close of 2022, a nearly 11% increase from its level at the start of the year.
• In the first half of 2023, this scene continued to improve, capping off at 1.59 on June 30, 2023, a further 4% increase from where it ended in 2022.

Looking at the complete data available, the current ratio has experienced a total increase of approximately 4% from its initial value in December 2020 (1.88) to the last value in June 2023 (1.59). While there have been periods of decline, the recent upward movement indicates a promising prospect for the company's liquidity status.

Tesla, Inc. Stock Fluctuations: An Analysis from April to October 2023

Examining the data of TSLA's share price from April 2023 to October 2023 reveals an overall fluctuating trend with periods of rapid rise and fall.

• The share price started at $175.98 on April 21, 2023, dropped to $159.74 by the end of April, but rebounded slightly to $163.19 in early May.
• From May 5 to June 23, there was a strong increasing trend in which the share price increased from $163.19 to $262.73. This period represents a period of accelerated growth rate in TSLA's share price.
• The share price slightly dropped to $253.99 at the end of June but quickly recovered and reached its peak value of $280.83 in mid-July.
• However, this was followed by a significant decrease from the end of July ($264.93) to mid-August ($228.08), representing a deceleration or negative growth phase.
• The price experienced a brief recovery towards the end of August, reaching $232.84, and perceived an upward trend in early September, with the price hitting $250.72.
• After reaching $272.15 mid-September, the share price had some fluctuations but ended on October 11, 2023, at $262.99.

In conclusion, the overall trend within this period shows volatility with both periods of growth and decline. The highest acceleration in share price growth occurred between May and June 2023, while the most significant deceleration or negative growth appeared from late July to mid-August 2023. Here is a chart of TSLA's price over the past 180 days.

Tesla, Inc.'s Performance Analysis: Quality, Momentum, and Growth Trends

The review period for TSLA's POWR Ratings grade extends from mid-April to early October 2023. During this time, the corporation's stock maintained a POWR grade of C (Neutral) for the vast majority of the period in question, slipping to a D (Sell) grade only in the second week of October 2023:

From April 15 to October 7, 2023, TSLA held a steady POWR grade of C (Neutral).

As of the latest date on record, October 11, 2023, TSLA's POWR grade dropped to a D (Sell). Regarding TSLA's ranking within the Auto & Vehicle Manufacturers category, which contains a total of 52 stocks:

• The highest rank it held was #37 within the category, as seen during the weeks of April 15 and April 22, 2023.
• For most of the review period, from the last week of April till early October 2023, TSLA's ranking fluctuated from around the 30s, dropping to #40 by mid-May and remaining fairly constant at that level.
• Finally, as of October 12, 2023, TSLA still maintained a rank of #39 in the category.

Overall, these metrics indicate moderate performance but hint at potential signs of a downward trajectory as of the most recent data.

Based on the POWR Ratings for TSLA, the three most noteworthy dimensions we'll discuss are Quality, Momentum, and Growth. 

Quality: This dimension has seen the highest ratings for TSLA over the reported period.

• On April 29, 2023, it scored a high value of 91, which then increased to 92 by the end of May 2023.
• In June 2023, the Quality rating further rose to 93, maintaining this peak score through July 2023.
• It then marginally decreased to 91 in August and dropped to 90 by September 2023, where it stayed consistent till the last report on October 11, 2023. 

Momentum: The Momentum dimension displayed a distinct downward trend throughout the selected timeframe.

• The Momentum rating started at a high of 80 on April 29 but fell to 71 by the end of May 2023.
• It slightly increased to 72 in June but decreased further to 67 in July, followed by a steeper fall to 57 in August 2023.
• Despite a brief increase to 53 on October 11, 2023, the downward trend was clear. 

Growth: The Growth dimension showcased a clear decline, with the rating dropping substantially over the referenced period.

• Starting at 60 on April 29, the growth rating decreased to 55 by the end of May 2023, where it remained till the end of July 23.
• In August 2023, Growth saw a sharp fall down to 40, then fell further to 36 in September 2023.
• By October 11, 2023, the Growth rating had dropped to 33, marking a significant decrease over the tracked period.

These trends and values give us a snapshot of TSLA's performance across these three critical dimensions during this period.

How does Tesla, Inc. (TSLA) Stack Up Against its Peers?

Other stocks in the Auto & Vehicle Manufacturers sector that may be worth considering are Honda Motor Co., Ltd. (HMC), Isuzu Motors Limited (ISUZY), and Stellantis N.V. (STLA) - they have better POWR Ratings. Click here to explore more stocks in the Auto & Vehicle Manufacturers sector.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

TSLA shares were trading at $260.06 per share on Thursday afternoon, down $2.93 (-1.11%). Year-to-date, TSLA has gained 111.12%, versus a 14.56% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

More...