Tesla’s growth faces five challenges, and Chinese competitors are increasingly competitive

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QQ music technology news on August 2, electric vehicle manufacturer Tesla recently released its financial report for the second quarter of 2021, showing a revenue of $12 billion and a net profit of a record $1.1 billion, all exceeding analysts’ expectations. However, Wall Street analysts seem to disagree. After the financial report, the company’s share price rose only slightly.
Obviously, investors are worried about several challenges that may soon slow down the crazy growth of Tesla’s share price, such as overvalued value, fierce competition from traditional carmakers and Chinese competitors, bitcoin exposure and rising material costs.
1. Overestimation
Wall Street has always been a highly efficient market and is very sensitive to the good news and bad news of listed companies. As a result, share prices rose before the good news and sold before the bad news. Sometimes, the market may be too optimistic, resulting in the share price of listed companies far higher than its fundamentals or intrinsic value. At other times, the market may be too pessimistic, resulting in the shares of listed companies far below their intrinsic value.
Tesla’s share price is overvalued by many standards. For example, tipranks, composed of top securities analysts on Wall Street, estimates that Tesla’s past return on equity in the next 12 months is only 12.41%, and estimates that the intrinsic value of Tesla’s stock is $160.11, far lower than the current price level.
2. Competition from traditional automobile manufacturers
Once, Tesla had few competitors, because the electric vehicle market it created had little competition from traditional carmakers. However, with general motors, Ford, Volkswagen and Toyota entering the electric vehicle market, the situation has changed greatly.
These “colonists” in the electric vehicle market have rich manufacturing experience, professional knowledge and distribution network, which can expand the production scale of electric vehicles and cross the “critical point” to bring electric vehicles to the public. At the same time, new competitors entering the electric vehicle market may trigger price competition, which will erode Tesla’s revenue growth and profit margin. This is what Wall Street pays close attention to in the quarterly financial statements.
3. Intensified competition in China’s market
Electric vehicles are very popular in China, and Tesla is one of the leaders. Nearly a quarter of its revenue came from China last quarter. But at the same time, Tesla also faces great challenges in the Chinese market, such as fierce competition from Chinese competitors, such as NiO. N, Xiaopeng automobile and ideal automobile.
4. Bitcoin exposure
Elon Musk, CEO of Tesla, has a special preference for bitcoin. Therefore, he has always invested part of the company’s cash in digital currency. Due to the surge in bitcoin prices in the first quarter, Tesla’s investment value of $1.5 billion reached $2.48 billion by the end of March. However, given the volatility of bitcoin prices, this investment has its own risks.
The accounting rules that increase the volatility of bitcoin treat this digital currency as an intangible asset for an indefinite period of time. Therefore, if its fair value falls below the book value during the evaluation reporting period, an impairment loss will be incurred. Prior to the sale of assets, the company cannot recover the subsequent increase in fair value impairment loss. Tesla reported that as the price of digital currency plummeted, bitcoin related assets were impaired by $23 million in the second quarter.
5. Rising material costs
Novel coronavirus pneumonia is also facing a severe shortage of raw materials due to the disruption of supply chain during the new crown pneumonia outbreak, which is expected to slow down its growth.
Musk told investors: “although we are producing cars at full speed, the global chip shortage is still quite serious. For the rest of this year, our growth rate will be determined by the slowest part of the supply chain. ” He added that the shortage of many chips will put the brakes on its rapid growth.
The average rating of Tesla stock by Wall Street analysts is “moderate buy”, of which 11 suggest “buy”, 7 suggest “hold”, and 4 suggest “sell”. They expect Tesla’s average target share price for the next 12 months to be $741.76 per share, which means an increase of 7.9%.
Tesla’s recent financial report provides sufficient support for the company’s bulls. However, the good news has been included in the market value of the company’s shares, or even moreļ¼ˆ Tencent Technology (reviser / Jinlu)