| This week, Tesla (NSDQ: TSLA) released Fiscal 2021 Q1 results that exceeded Wall Street's expectations. The electric vehicle (EV) manufacturer reported earnings per share (EPS) of 93 cents versus a consensus estimate of 79 cents. Also, total revenue of $10.39 billion easily exceeded the $9.92 billion estimate. The good news didn't stop there. Telsa delivered 184,800 new cars during the quarter. That is more than double the number of new vehicle deliveries during the same period last year. The company also widened the gross margin on its automotive division by 95 basis points. You might think news that good would send Tesla's share price higher. After all, TSLA soared more than 700% last year on results considerably worse than that. As I noted three months ago, Tesla CEO Elon Musk "is the man that can do no wrong in a stock market that will only go up." That is no longer the case. Since peaking at $900 on January 25, TSLA is down 20%. Over the same span, the NASDAQ Composite Index is up nearly 4%. It appears that King Midas may have finally lost his golden touch. Betting against Elon Musk thus far has proven to be a losing proposition. Perhaps more so than any other stock, Tesla has been a short seller's nightmare. Just when you think TSLA has become grossly overvalued and ripe for a correction, it usually does just the opposite. Crowded Market This time, it may not be as easy for Tesla to escape the hangman's noose. Despite its recent fall, the stock is still valued at roughly 170 times forward earnings and 25 times sales. Those metrics would be okay for a small-cap stock with huge upside potential. However, with a market cap of nearly $700 billion Tesla is now the seventh most valuable company in the S&P 500 Index. As for Tesla's upside potential, that depends on how much market share you believe the company will capture as the EV market grows. There is no argument that the EV market is on the verge of a massive expansion. Over the next six years, EV sales are projected to grow at a compound annual growth rate (CAGR) of 45%. By 2027, global demand for EVs is estimated to exceed $1 trillion. The problem for Tesla is that it now has a lot of competition. Last month, Volkswagen (OTC: VWAGY) announced its intention to deliver more EVs in 2025 than Tesla. Late last year, General Motors (NYSE: GM) said that it will launch no fewer than 30 new EV models by the same year. |
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