Tesla, Inc (TSLA) stock is trading around $326 per share heading into November, and the company has a market capitalization of $54.449 billion. The price-to-earnings ratio is -67.26, and the earnings-per-share is $-4.85. However, despite these underinflated statistics, Tesla Inc. is on the cusp of implementing major innovations. In Q3 2016 analysts pegged Tesla’s earnings estimates at $-0.54, while the actual earnings came in above expectation at $0.71. However, in Q4 2016, estimates were $-0.43, and actual earnings were $-0.69.
By Q1 2017, forecasters estimated earnings of $-0.81 with actual earnings of $-1.33. By Q2 2017, Tesla started turning things around with an improved performance over estimates ($-1.33 actual earnings versus estimates of $-1.82). The next earnings date is slated for 1 November 2017, and analysts are anticipating earnings of $-2.26. The reason Tesla’s actual and estimate earnings figures are negative is the company has invested heavily and not generated the necessary returns. As soon as Tesla starts rolling out mass production of vehicles, the EPS figures will improve. Everybody agrees that it is a value stock, with high earnings potential in the future. Consider the following revenue and earnings figures since 2014:
- In 2014, Tesla generated revenues of $3.20 billion with earnings of $-294.04 million
- In 2015, Tesla generated revenues of $4.05 billion with earnings of $-888.66 million
- In 2016, Tesla generated revenues of $7 billion with earnings of $-674.91 million
As far as recommendation trends go for the stock, the consensus among Thompson’s Reuters analysts is a rating of 2.8 on a scale where 1.0 is a strong buy, and 5.0 is a sell. Most analysts regard it as a hold stock, with a high minority as an underperform stock, and a small minority as a buy/strong buy option. The recent upgrades and downgrades history for Tesla is interesting. On 4 October 2017, Nomura initiated an upgrade on the stock to a buy rating. However, on the same day, Standpoint Research downgraded the stock to a sell from a hold rating. Despite these negative performance figures, this is not a stock to be summarily dismissed.
Why Tesla Is Revolutionizing the Automobile and Insurance Industry
Despite lackluster performance in terms of profitability and EPS, Tesla remains at the forefront of innovation. The company was founded by South African born Elon Musk – an entrepreneur with bold ideas. He has been credited with founding many of the world’s most cutting-edge solutions such as PayPal, Zip2Corp (which he sold for $307 million), X.com, Space Exploration Technologies Corporation (SpaceX) and of course Tesla. The ground-breaking work and creative vision of Musk and company has raised the bar in the technological arena and is causing a paradigm shift in the way industry is operating.
Already, Tesla plans to roll out a wide range of affordable vehicles that do not run on fossil fuels. His electric cars have won critical acclaim from major industry authorities such as Motor Trend Magazine, among others. Musk is all about maximizing, harnessing and producing clean energy which benefits humanity. This is invariably going to cause tectonic shifts in the way that the automobile industry, the energy industry, and the automobile insurance industry functions. By incorporating artificial intelligence into vehicles’ navigation systems, driver safety will be dramatically enhanced.
This will naturally reduce the human error component that is an intractable component of current automobile insurance premiums. By reducing the probability of accidents through AI technology and smartcar functionality, humanity can save a bundle on automobile insurance. Already, Tesla, Google, General Motors Corporation others are working on the requisite technology to enable vehicles to self-drive. The sci-fi vision in Hollywood is becoming a reality for the masses. Flying cars may be next, and companies like Tesla are spearheading this initiative with clean energy, low cost, and maximum efficiency.