Tesla Stock Up 5% in September – Time to Buy TSLA Stock?

The price of Tesla stock went up over 5% in September as demand forecasts for the United States and China for the third quarter pointed to a continuation in the company’s positive top-line performance.

It seems that these estimations were accurate as Tesla’s Q3 production and deliveries report exceeded analysts’ estimates with a total of 241,300 cars delivered during the third quarter of the year against a consensus forecast of 229,242 compiled by Refinitiv.

This figured resulted in a 20% quarter-on-quarter jump for the company headed by Elon Musk and a 73% leap compared to the same quarter a year ago.

Meanwhile, from that total, 232,025 units were Model 3/Y while the remaining 9,275 vehicles were Model S/X. Compared to the past quarter, Model 3/Y figures jumped more than 16% while they advanced 87% compared to Q3 2020.

Can these outstanding numbers keep pushing Tesla (TSLA) stock higher? In the following article, I’ll take a look at the price action and fundamentals to possibly answer that question.

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Tesla Stock – Technical Analysis

Tesla stock has recently reversed a sharp downtrend that the stock experienced since its January all-time high of $900 per share and even though the road to its recovery has been bumpy the lower trend line has remained intact despite this mid-term weakness.

After today’s upbeat production and deliveries report, Tesla stock is climbing 3.5% in pre-market action at $802 per share. As a result, the price action is climbing above the mid-April lower high, which confirms the reversal.

Thus far, both the Relative Strength Index (RSI) and the MACD are steadily climbing and this favors a bullish outlook as well. Moreover, the stock closed last week only 2.3% above its 20-day moving average. This creates room for further upside and one could expect a jump to around $850 if positive momentum accelerates on the back of today’s report.

Tesla Stock – Fundamental Analysis

Tesla seems to have navigated the ongoing chip shortage successfully as indicated by today’s numbers. In this regard, Cathie Wood, the head of the popular ARK Invest, emphasized that the company managed to report positive numbers despite its chip-intensive nature. She highlighted that electric vehicles use at least three to five times more of these components than their fossil-powered peers.

“Today, $TSLA announced that in the third quarter it sold 241,300 vehicles globally, up 73% year over year (YoY) and 20% quarter over quarter (QOQ). Meanwhile, $GM blamed the ~33% YoY decline in its US sales on chip shortages. What? #EVs require 3-5x more chips per car produced!”, Wood tweeted on Saturday when the report was released.

In the past 12 quarters (3 years), Tesla has managed to increase its deliveries at a compounded annual growth rate of 42.4% while sales have grown from $21.46 billion in 2018 to $31.54 billion last year at a 21.1% CAGR. Moreover, the company doubled its top-line results during the first semester of 2021 compared to the same period in 2020, partially amid lower comps but also due to higher sales volumes.

At its current valuation of $768 billion, the company is trading at a forward price-to-sales multiple 12.9 and a forward EV/EBITDA of 59.

This EV/EBITDA multiple seems particularly attractive as Tesla has managed to grow its EBITDA at a 62% CAGR in the past two years which means that Tesla could be trading near its fair value.

The combination of a robust balance sheet, appealing valuation metrics, largely untapped total addressable market, and a management team that has demonstrated its capacity to live up to its promises, Tesla remains a very attractive long-term bet and this positive performance during a time of crisis for the sector just goes to show how resilient the company is to even the most adverse scenarios.

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