Is Tesla A Buy After Over 100% Gains In 2023?

Is Tesla A Buy After Over 100% Gains In 2023?

Tesla, Inc. stock ended 2023 with a gain of about 101% despite languishing in the second half of the year. Notwithstanding last year’s gain, the electric vehicle maker’s stock is attractively valued, fund manager Gary Black said in a post on Sunday.

What Happened: Tesla’s valuation continued to be neutral versus other ”Magnificent 7″ stocks, said Black in a post on X, formerly Twitter. “Mag 7” is the collective name given to the biggest seven mega-cap tech stocks, namely Tesla, Nvidia, Apple, Microsoft, Meta.The analyst noted that Tesla’s price-earnings growth ratio, or PEG, is 1.9 times compared to the average PEG of 1.7 times for the group. Nvidia has the cheapest PEG ratio of 0.9 and Apple is most expensive with a PEG ratio of 2.7.

The PEG ratio is obtained by dividing a company’s P/E ratio by expected earnings growth over a specified future period, typically one to three years. A number below one suggests the stock is undervalued, while a stock having PEG ratio over one is said to be overvalued.

Black noted that Tesla offers the highest expected five-year adjusted earnings per share growth of 33% compounded annual rate and it also has the highest 2024 adjusted P/E, at 62 times.

Why It’s Important: Tesla is going through a transition phase as investors await the launch of a sub-$30,000 EV that is widely seen to kickstart volume growth. Market watchers also sees “halo effect” from the Cybertruck that launched on Nov. 30, 2023.

As the electric vehicle market sees stagnant growth and competitive pressure intensifies, the company’s fundamental performance may fail to kick into top gear. Bullish analysts, however, sees the Tesla growth story alive and kicking, with sum-of-the parts getting a boost from the monetization of its Supercharger network, potential commercialization of its full-self driving software that is in advanced beta testing, the Tesla bot and robotaxi services.

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