TSLA Forecast: A Ride to the Future.

Milana PapadopoulouThis TSLA Stock Forecast article was written by Milana Papadopoulou – Financial Analyst at I Know First.

Highlights:

  • TSLA Stock is currently undervalued.
  • The fair value of the stock is around the $300 mark. The current stock price is $234.79 (As of 27/11/2023)
  • Aided by its proprietary AI and new model releases, Tesla is bound to experience growth in the coming year.
  • The forecast is in line with the algorithmic signal.

TSLA Forecast: Business Description and Developments.

Tesla, a US-based company, is a pioneer in the electric vehicle industry and is committed to driving the widespread adoption of sustainable energy solutions. They have established a global network of vehicle service centres, Mobile services, body shops, Supercharger stations, and Destination Chargers to enhance the accessibility of their products to customers worldwide. Tesla focuses on providing customers with high-performance, attractive, and safe vehicles. They are continuously working towards developing and improving their full self-driving technology to enhance road safety. Furthermore, Tesla is dedicated to reducing the cost of ownership for their customers by continuously lowering their manufacturing costs and providing tailored financial and other services. Overall, Tesla’s mission is to provide the best possible experience to its customers while driving a sustainable future for the planet.

Source: The Guardian.

Tesla has been making some impressive strides in their production and expansion efforts. They held a ribbon-cutting ceremony for their new factory in Germany on March 22, 2022, followed by the factory’s grand opening in Austin, Texas, on April 7, 2022. In mid-2023, the company began constructing a new plant in Monterrey, Mexico, which is a promising step towards increasing its production capacity.

TSLA Forecast: Ambitions for Grandeur.

Tesla also achieved a major milestone on July 15, 2023, by producing their first Cybertruck. As of October 2023, the company has an annual installed vehicle production capacity of over 2.35 million units, which is a remarkable feat. This figure includes 650,000 units produced at the Fremont Factory in California, over 950,000 units at its Shanghai factory in China, 375,000 units at its Berlin factory, and more than 375,000 units at the Austin plant.

Tesla Factory in Fremont, CA. Source: Flickr

Tesla has set an ambitious goal of increasing its annual sales volumes from approximately 500,000 units in 2020 to 20 million units by 2030. This represents a forty-fold increase, which is a testament to the company’s vision and determination. Despite the rising competition in the automotive market, Tesla is well-positioned to achieve this goal by employing aggressive acquisition strategies. Furthermore, the company stands to benefit significantly from the 2022 Inflation Reduction Act, as most versions of the two best-selling EVs (the Model Y and 3) are now eligible for the $7,500 federal EV Tax credit. This will undoubtedly help Tesla maintain its competitive edge and emerge as a major player in the EV market.

TSLA Forecast: Cybertruck: for the off-road and the city.

Tesla’s newest car model, the Cybertruck, is set to commence deliveries on November 30th after a long wait. According to analysts, the car has received around 1.7 million pre-orders. The vehicle was first announced in 2019 and generated a lot of media attention. Although it was initially scheduled for delivery in 2021, the date was pushed back due to the high cost of batteries from 2020-2022, as reported by Tesla’s CEO, Elon Musk. However, future delays are unlikely, with the price of raw materials such as cobalt used in battery manufacturing expected to remain low through 2023 and beyond.

Tesla Cybertruck. Source: Flickr.

The highly anticipated Cybertruck will debut in North America with an expected price point of $50,000. Since truck sales have historically performed well in this market, there is hope that the vehicle will succeed. However, Tesla’s ability to scale manufacturing and manage costs effectively without compromising quality will be vital to this success. Elon Musk has ambitious plans to produce around 250,000 trucks per year by 2025, and it remains to be seen if the company can achieve this goal.

While some analysts have expressed concern that the timing of the Cybertruck’s release might not be ideal from a market perspective, others argue that Tesla could gain an advantage by moving forward with the launch now. The company could capture a larger market share while competitors struggle in a challenging economic climate by doing so. Ultimately, the success of the Cybertruck could have significant implications for the auto industry as a whole. Also, as investment firm ARK Invest notes, if Tesla is able to disrupt the traditional automakers’ profit centre by introducing a profitable EV, it could transform the market and create new opportunities for growth.

TSLA Forecast: AI-Assisted Driving.

Tesla cars have a distinct advantage over other brands: they are equipped with highly embedded technology. They are considered the most technologically advanced cars on the market, providing constant feedback to the developers through the use of cameras and sensors built into the car. This gives Tesla access to vast amounts of data, which can be analysed to improve its technology. Additionally, Tesla cars already incorporate AI, making them even more advanced than their competitors.

Tesla Model S Dashboard. Source: Flickr.

The future of Tesla is looking brighter than ever as Elon Musk’s AI company, xAI, has developed a new tool called Grok, which is set to revolutionise how we interact with cars. The AI system uses data collected by Tesla cars and natural language patterns from X (Twitter) to create a voice assistant that will be integrated into the car’s software. This invention will give users seamless voice control over the car’s AC, multimedia, and navigation systems. Additionally, Grok is programmed to entertain drivers and passengers with its sense of humour. The success of this project could pave the way for xAI to offer the Grok technology to other car manufacturers, further advancing the automotive industry.

TSLA Forecast: Q4 2023 Earnings Prediction.

Tesla’s Q3 earnings came out on the 18th of October, 2023. Investors were met with unfortunate news that they were lower than forecasted by analysts previously. This sent the stock down rapidly from $263 to below $200. The stock has slowly crept up since but has not reached previous highs. Due to the previously recorded consistent seasonality in Tesla’s earnings by an I Know First Analyst, the Q4 earnings will likely beat expectations. This could also allow Tesla to post higher-than-expected yearly earnings for FY2023. The Earnings Per Share are also projected to grow significantly in FY2024, as presented below.

Tesla Inc. EPS. Source: NASDAQ.

TSLA Forecast: Revenue Analysis.

Tesla generates its revenues from two primary segments: automotive and energy generation and storage. 

Automotive segment: 

Currently, Tesla produces four different consumer vehicles: Model 3, Y, S, and X. In December 2022, they began early production and deliveries of the Tesla Semi, the first commercial electric vehicle. They have also announced several planned electric vehicles to address additional vehicle markets, including the Cybertruck and the new Tesla Roadster, which cater to specialised consumer electric vehicles. 

The efforts to expand the range of products align with Tesla’s favourable course of development. According to S&P Global Mobility, the BEV model count in North America will exceed 100 by 2026, which is over four times higher than in 2022. Tesla’s competitive advantage lies in developing FSD (Full Self Driving Capabilities) and AI software.

Energy Generation and Storage: 

The Energy Generation and Storage segment comprises Energy Storage Products and Solar Energy Offerings. Powerwall and Megapack are Tesla’s lithium-ion battery energy storage products. Powerwall is designed to store energy at a home or small commercial facility. Megapack is an energy storage solution for commercial, industrial, utility, and energy generation customers, multiple of which may be grouped to form larger installations of gigawatt hours (“GWh”) or greater capacity. As for Solar Energy, they sell retrofit solar energy systems to customers and channel partners and also make them available through power purchase arrangements. Another product is the Solar Roof, which combines premium glass roof tiles with energy generation.

The vast majority [85%] of revenue in 2022 came from Automotive sales. The energy segment currently represents only a tiny fraction [5%] of the income but has grown significantly over the years.

Tesla Revenue by Segment Dynamic.

Half of the revenue in 2022 has come from sales in the United States, with the second biggest market being China [22%] and the third being Europe. The share of revenues from China has rapidly increased in the last five years, with the role of Europe also strengthening the firm’s Income Statement.

Tesla Revenue by Region Dynamic.

TSLA Forecast: Industry Outlook.

Global Vehicle sales outlook forecast: Vehicle sales have grown significantly in 2023, ahead of GDP growth, with analysts’ estimates around 8%. 2024, the market is still expected to expand, but at a slower rate. Despite these projected developments, it is unlikely that the demand will reach pre-pandemic levels by the end of 2024. 

Global Light Vehicle Sales Dynamic. Data sourced from Moody’s.

Despite that, the share of Electric Vehicles in total new car registrations has grown in the past years and is expected to continue. The trend has been led by China, with Europe in second place. In 2023, however, the growth is expected to slow down slightly.

Vehicle Electrification rates. Source: BNEF, ACEA, US dep. Energy, ING Research.

The Market for PHEV (Plug-in Hybrid Vehicles) and BEV (Battery-powered Electric Vehicles is divided between major companies. Tesla has the second largest market share among individual brands, at 14%. Moreover, in 2020, the firm’s management stated a goal of 20M automobiles sold annually by 2030. This would make it the world’s largest auto manufacturer.

Market Share Split by Brand.

TSLA Forecast: Stock Valuation

Tesla Inc. FFO Forecast FY 2023.

Following the Analysis of Tesla Inc.’s Business and the broader market, it can be concluded that TSLA stock is a buy. It is undervalued relative to its potential. With the forecast horizon of one year, the target Share Price is in the $250 – $300 range. The current share price is $235.45 (as of 27/11/2023). This forecast is based on the projected EBITDA and EPS for FY 2023. It is summarised below.

TSLA Price 1-Year Forecast.

The base assumption for calculating the projected earnings is the Revenue figure of $97,120M. This figure is taken from the average analyst consensus summarised on Yahoo Finance.  Costs and Receivables are taken as a percentage of revenues of an average figure over the last five years in the case of incidental costs/gains. 

Source: Yahoo Finance

On the contrary, as of November 2023, the Analyst Consensus is that TSLA stock is leaning towards “Hold”. The Average Stock Price Target presented by analysis is $224.90, with a High of $380 and a Low of $24.33.  14 out of 23 analysts are bearish on the stock, with the recommendation rating presented by Yahoo Finance being 2.8, where 3 represents “Hold”. 

TSLA Forecast: Conclusion

As mentioned previously, in the projection, the stock is anticipated to trade at a significant premium relative to peers in the automotive industry. This notion is realistic because of the technological advantage, sizeable market share, and superior operational efficiency. 2024 will likely be a “slow” year for the Automotive industry. Despite that, high liquidity, low debt, and brand recognition could allow Tesla to succeed and set a precedent in the industry.

Worth noting is that the AI-driven stock selection by I Know First indicates a strong bullish signal for TSLA stock on the one-year market trend predictions, aligning with my perspective. The light green for short-term forecasts suggests a mildly bullish stance, while the darker green represents a strong bullish signal for the one-year forecast.

Past Success with TSLA Stock Forecast

I Know First has been bullish on the TSLA stock forecast in the past. On August 25th, 2023 the I Know First algorithm issued a forecast for TSLA stock price and recommended TSLA as one of the best mega-cap stocks to buy. The AI-driven TSLA stock prediction was successful on a 1-month time horizon resulting in more than 7.37%.

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Please note-for trading decisions use the most recent forecast.