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Is There More Upside In Tesla Stock As Competition Heats Up?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsApr 16, 2021 04:33AM ET
www.investing.com/analysis/is-there-more-upside-in-tesla-stock-as-competition-heats-up-200573322
Is There More Upside In Tesla Stock As Competition Heats Up?
By Investing.com (Haris Anwar/Investing.com)   |  Apr 16, 2021 04:33AM ET
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Looking at the performance of Tesla (NASDAQ:TSLA) shares, it’s no secret that investors don’t see a major competitive threat for the electric-vehicle company in the near-term. Even after incorporating the recent weakness that marred high-growth tech companies this year, Tesla is still one of the top-performing companies listed on the S&P 500 during the past 12 months.

Tesla investors are excited to see that the world’s most-valuable EV company is well on track to meet its production targets. The company told investors early this month that it delivered 184,800 cars worldwide in the first three months of 2021, up from 180,570 in the fourth quarter.

“We are encouraged by the strong reception of the Model Y in China and are quickly progressing to full production capacity,” the company said. The new Model S and Model X have also been “exceptionally well received,” Tesla said, adding that it’s in the early stages of ramping production.

As the California-based company continues its growth journey, some serious competitors are also entering the market. While traditional auto-makers, like Volkswagen (OTC:VWAGY) and General Motors (NYSE:GM) accelerate their EV efforts, smaller Chinese upstarts like Nio (NYSE:NIO) and Xpeng (NYSE:XPEV) are also vying for tech-savvy customers.

VW this week launched its new Audi Q4 e-tron model to compete with Tesla in the fast-growing market of compact crossover SUVs. Pricing for the vehicle will start at 41,900 euros ($50,200) in Germany, which will offer as much as 520 kilometres (323 miles) of battery range.

The Audi’s EV model is among a dozen vehicles the German auto-maker has planned, including VW’s ID.4 and an electric version of the Porsche Macan. VW is targeting to sell roughly 600,000 purely battery-powered cars this year. The Q4 e-tron is based on VW’s architecture for mass-market electric cars, called MEB which, according to auto analysts, stacks up well against Tesla on a number of key aspects. 

$150 Price Target

Volkswagen should keep getting more credit for its battery-powered car strategy that could lead the company to surpass Tesla in electric-vehicle sales as soon as next year, according to a note by Deutsche Bank.

If the market were to apply multiples similar to Tesla and Nio to VW’s battery-electric vehicle business, it would be worth about 195 billion euros, more than the entire company is worth now, analysts led by Tim Rokossa wrote in a report last month. They lifted their price target for VW shares by 46% to 270 euros.

As the competition heats up, some analysts are questioning the highly optimistic rating on Tesla stock. The company’s valuation of around $700 billion is close to the total size of the U.S. and European automotive markets, even though it’s only a “minor player” overall, said Roth Capital’s analysts Craig Irwin, who thinks Tesla stock is worth $150.

Tesla Weekly Chart.
Tesla Weekly Chart.

Irwin told CNBC this month:

“So for me, I see this as a market dislocation. I see this as something avoiding analysis of the fundamentals and I think there’s room for many successful companies in the market. People are just assuming that Tesla has no competition when they put this kind of lofty valuation on the company.”

Bottom Line

Despite competitive threats, Tesla continues to be the most favored EV stock, with analysts’ consensus price target of around $700 a share. That means investors are comfortable with the company’s performance and its future outlook. That said, it will certainly become harder for analysts to justify further upside in Tesla shares if new entrants succeed in attracting buyers and challenging the company’s dominance. That’s perhaps the reason that Tesla stock has underperformed the overall market this year, after remarkable gains in 2020.

Is There More Upside In Tesla Stock As Competition Heats Up?
 

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Is There More Upside In Tesla Stock As Competition Heats Up?

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Comments (8)
JJ GG
UpDownUpDown Apr 17, 2021 12:22AM ET
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Spot on analysis. Net margins of under 3% and so many other things... great company but not valued at entire US and Euro market.
Ron Love
Ron Love Apr 17, 2021 12:22AM ET
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Net margins? Tesla’s foal right now isnt to bank earnings, its to rapidly expand the company. They are spending earnings on capex. Buy McDonalds or AT&T stock if you’re looking for a low growth company.
Ron Love
Ron Love Apr 17, 2021 12:22AM ET
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Jimmy Wilson
Jimmy Wilson Apr 16, 2021 2:30PM ET
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2 Words: “Tesla Energy”.
Javier Aliaga
Javier Aliaga Apr 16, 2021 1:31PM ET
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if only was an automotive company... dig deeper next time
Darcy Welsh
Darcy Welsh Apr 16, 2021 1:11PM ET
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Tesla is much more than their cars, and thats what is oft overlooked. They have the most extensive charging network available (enormous added value for their cars), they are a leader in battery technology, their energy storage products are gaining serious market traction (see recent Apple deal as example) and their solar roof is revolutionary. Expect their cars to account for a smaller ans smaller percentage of overall revenue as the other products continue to grow
Jaime Chung
Jaime Chung Apr 16, 2021 1:11PM ET
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yes because they are not the pointer on electric cars!!
CHAD TENDIES
CHAD TENDIES Apr 16, 2021 9:26AM ET
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Tesla makes garbage products for garbage people
Cristiano Dangelo
Cristiano Dangelo Apr 16, 2021 9:26AM ET
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The hater again...get a life!
Gene Kret
Gene Kret Apr 16, 2021 5:26AM ET
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Your God darn right TSLA is the best! Look people, its very simple TSLA is in total control of their supply lines where none absolutely none of the other manufacturers are! Ford and GM are even manufacturing overseas duh! Chinese cars are cheap, ******* junk boxes that rattle and squeak and are air noisy are you kidding me.... the TSLA models are being bought by the Chinese folks. Chinese dont even want Chinese garbage cars! Every smart investor should and needs to buy TSLA stock. Plus you should own one!
Olalekan Olaniyan
Olalekan Olaniyan Apr 16, 2021 5:26AM ET
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don't make laugh . have you seen Chinese cars. get out of your bubble wrap boi.
Francis Placid
Francis Placid Apr 16, 2021 5:10AM ET
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It so nice to invest here
Ramesh N Sharma
Ramesh N Sharma Apr 16, 2021 5:05AM ET
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What about Dogecoin?
JJ GG
UpDownUpDown Apr 16, 2021 5:05AM ET
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Dogecoin... crazy crazy
 
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