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Tesla Clears FSD Suit, Shares Up Ahead of Key Updates: Buy TSLA Now?
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Electric vehicle (EV) pioneer Tesla (TSLA - Free Report) secured a legal victory in a lawsuit that accused the company of making misleading statements about its Full Self-Driving (FSD) technology. U.S. District Judge Araceli Martínez-Olguín dismissed the case, which had been brought by shareholders who argued that Tesla CEO Elon Musk exaggerated the capabilities and timeline of FSD to inflate the company's stock price.
Judge Martínez-Olguín found that many of the statements Musk made about Tesla’s self-driving technology were not false, while others concerned future plans that were not yet realized. She also pointed out that the plaintiffs failed to show a clear link between Musk's involvement and any alleged misleading information. However, the judge gave the shareholders time until Oct. 30 to file a revised complaint if they wish to continue pursuing the case.
TSLA Prepares for Q3 Results and Robotaxi Day
October is shaping up to be a pivotal month for Tesla, with optimism building around its upcoming third-quarter 2024 earnings release and the much-anticipated "Robotaxi Day" event on Oct. 10. During the event, Tesla is expected to showcase its latest developments in autonomous driving and demonstrate its proposed “cyber-cab.”
The company is yet to release its third-quarter delivery numbers and earnings call date. The Zacks Consensus Estimate for the to-be-reported quarter’s revenues is pegged at $25.8 billion, implying an increase of 10.4% year over year. The consensus mark for the quarter’s earnings per share (EPS) is 58 cents, indicating a decline of 12% year over year. However, TSLA has an Earnings ESP of +7.85% as the Most Accurate Estimate is pegged 5 cents higher than the Zacks Consensus Estimate.
While Tesla’s stock has experienced volatility this year, shares rose 22% over the past month. Renewed investor confidence and enthusiasm for the company’s artificial intelligence (AI) and self-driving ambitions might have fueled gains. The company outpaced the industry, sector and S&P 500's gain during the time frame. Meanwhile, shares of legacy automakers like General Motors (GM - Free Report) and Ford (F - Free Report) fell over the past month.
One-Month Price Performance Comparison
Image Source: Zacks Investment Research
Tesla’s Success Hinges on FSD Amid Ebbing EV Margins
With competition intensifying in the EV space, Tesla’s focus on autonomous driving and AI is expected to be a game changer. Tesla is pushing forward with advancements in FSD. In September, the company rolled out software updates. It has also enabled FDS in some Cybertrucks. The introduction of Tesla’s humanoid robot project (Optimus) and FSD Beta software (V12.5) rollout signify promising advancements for the company. TSLA expects to have robotaxis ready next year. It also intends to produce several thousand of its new Optimus robots for internal use in 2025.
Nonetheless, it is currently plagued with shrinking automotive margins amid aggressive price cuts and discounts. The company expects its vehicle volume growth rate for 2024 to be noticeably lower than 2023. We expect margins to remain under pressure amid high costs of goods sold and frequent price cuts by Tesla. Our model estimates a gross margin of 18.4% gross margin from the automotive unit (including regulatory credits) in 2024, implying a decline from 19.4% recorded in 2023.
A Look at TSLA’s Valuation
At first glance, Tesla seems a lot overvalued at the current levels. TSLA shares currently trade at 7.59X forward sales, way higher than the industry.
Image Source: Zacks Investment Research
However, Tesla’s involvement in several fast-growing sectors, including solar and clean energy, EV charging, and its Full Self-Driving technology, cannot be overlooked. Typically, tech companies enjoy higher valuations than traditional automakers, and Tesla straddles both categories. So, TSLA might just command that premium valuation.
Worth Buying Tesla Stock Now?
While Tesla’s focus on AI and autonomy is promising, and it remains a solid long-term investment, near-term concerns should not be ignored.
Over the past 60 days, EPS estimates have been revised downward, reflecting worries about Tesla’s short-term profitability.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2024 EPS is pegged at $2.27 per share, suggesting a 27.3% decline year over year.
Tesla’s bold ambitions are exciting, but successful execution is key to its long-term growth. It may be wise to wait and see how the company has performed in the third quarter and whether it meets the expectations and hype surrounding the upcoming robotaxi event. For now, TSLA has a Zacks Rank #3 (Hold).
Image: Bigstock
Tesla Clears FSD Suit, Shares Up Ahead of Key Updates: Buy TSLA Now?
Electric vehicle (EV) pioneer Tesla (TSLA - Free Report) secured a legal victory in a lawsuit that accused the company of making misleading statements about its Full Self-Driving (FSD) technology. U.S. District Judge Araceli Martínez-Olguín dismissed the case, which had been brought by shareholders who argued that Tesla CEO Elon Musk exaggerated the capabilities and timeline of FSD to inflate the company's stock price.
Judge Martínez-Olguín found that many of the statements Musk made about Tesla’s self-driving technology were not false, while others concerned future plans that were not yet realized. She also pointed out that the plaintiffs failed to show a clear link between Musk's involvement and any alleged misleading information. However, the judge gave the shareholders time until Oct. 30 to file a revised complaint if they wish to continue pursuing the case.
TSLA Prepares for Q3 Results and Robotaxi Day
October is shaping up to be a pivotal month for Tesla, with optimism building around its upcoming third-quarter 2024 earnings release and the much-anticipated "Robotaxi Day" event on Oct. 10. During the event, Tesla is expected to showcase its latest developments in autonomous driving and demonstrate its proposed “cyber-cab.”
The company is yet to release its third-quarter delivery numbers and earnings call date. The Zacks Consensus Estimate for the to-be-reported quarter’s revenues is pegged at $25.8 billion, implying an increase of 10.4% year over year. The consensus mark for the quarter’s earnings per share (EPS) is 58 cents, indicating a decline of 12% year over year. However, TSLA has an Earnings ESP of +7.85% as the Most Accurate Estimate is pegged 5 cents higher than the Zacks Consensus Estimate.
While Tesla’s stock has experienced volatility this year, shares rose 22% over the past month. Renewed investor confidence and enthusiasm for the company’s artificial intelligence (AI) and self-driving ambitions might have fueled gains. The company outpaced the industry, sector and S&P 500's gain during the time frame. Meanwhile, shares of legacy automakers like General Motors (GM - Free Report) and Ford (F - Free Report) fell over the past month.
One-Month Price Performance Comparison
Image Source: Zacks Investment Research
Tesla’s Success Hinges on FSD Amid Ebbing EV Margins
With competition intensifying in the EV space, Tesla’s focus on autonomous driving and AI is expected to be a game changer. Tesla is pushing forward with advancements in FSD. In September, the company rolled out software updates. It has also enabled FDS in some Cybertrucks. The introduction of Tesla’s humanoid robot project (Optimus) and FSD Beta software (V12.5) rollout signify promising advancements for the company. TSLA expects to have robotaxis ready next year. It also intends to produce several thousand of its new Optimus robots for internal use in 2025.
Nonetheless, it is currently plagued with shrinking automotive margins amid aggressive price cuts and discounts. The company expects its vehicle volume growth rate for 2024 to be noticeably lower than 2023. We expect margins to remain under pressure amid high costs of goods sold and frequent price cuts by Tesla. Our model estimates a gross margin of 18.4% gross margin from the automotive unit (including regulatory credits) in 2024, implying a decline from 19.4% recorded in 2023.
A Look at TSLA’s Valuation
At first glance, Tesla seems a lot overvalued at the current levels. TSLA shares currently trade at 7.59X forward sales, way higher than the industry.
Image Source: Zacks Investment Research
However, Tesla’s involvement in several fast-growing sectors, including solar and clean energy, EV charging, and its Full Self-Driving technology, cannot be overlooked. Typically, tech companies enjoy higher valuations than traditional automakers, and Tesla straddles both categories. So, TSLA might just command that premium valuation.
Worth Buying Tesla Stock Now?
While Tesla’s focus on AI and autonomy is promising, and it remains a solid long-term investment, near-term concerns should not be ignored.
Over the past 60 days, EPS estimates have been revised downward, reflecting worries about Tesla’s short-term profitability.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2024 EPS is pegged at $2.27 per share, suggesting a 27.3% decline year over year.
Tesla’s bold ambitions are exciting, but successful execution is key to its long-term growth. It may be wise to wait and see how the company has performed in the third quarter and whether it meets the expectations and hype surrounding the upcoming robotaxi event. For now, TSLA has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.