Tesla (TSLA) began deliveries of the Model Y from its Berlin auto plant Tuesday, as it establishes a manufacturing footprint in Europe. Is Tesla stock a buy?
The Berlin plant is capable of producing up to 500,000 vehicles per year. It will eventually produce the bulk of Tesla’s vehicles destined for European customers.
“This removes a major overhang on the stock over the past few months,” wrote Wedbush analyst Daniel Ives in a note to clients. “The red tape and headaches seen around the delays/disputes opening up this flagship European factory has been frustrating for investors to watch unfold as many on the Street were doubting if Giga Berlin ever actually would open.”
The Berlin plant is reportedly ready to make around 500 cars a week as it begins regular production, likely ramping up to 1,000 a week by the end of April. Tesla China is also expected to supply the Berlin plant with full 2170 battery packs until the new factory makes its own 4680 cells.
“We view Giga Berlin as a major competitive advantage for Tesla to further build out its supply footprint in this key region,” Ives said.
Tesla Raises Auto Price Up To 5%
The plant opening comes as Tesla recently raised prices across the board by 3% to 5% per unit in both the U.S. and China. Its cheapest electric car, the Model 3, now starts at $47,000, up from $45,000. The price hike comes as Chief Executive Elon Musk tweeted on March 13 that Tesla was seeing “significant recent inflation pressure in raw materials & logistics.”
The news also follows Tesla’s fourth-quarter earnings report that toppled estimates. Revenue jumped 65% to $17.7 billion, above estimates of $17.1 billion. It reported adjusted earnings of $2.54 a share, up 218% from the year-ago period and the fourth straight quarter of triple-digit gains.
In addition, Tesla grew deliveries 87% to 936,172 vehicles in 2021. The electric-vehicle maker expects production growth to boom in 2022 despite ongoing supply-chain issues. But Tesla also said there will be no new EV models this year. This includes the highly anticipated Cybertruck. Instead, Tesla wants to focus on growing production volumes on existing models at its current and new factories.
For now, Tesla has the enviable problem of demand outstripping supply. Production launches in Austin, Texas, and Berlin are key to alleviating these issues.
Analyst Views On Tesla Stock
In regards to Tesla’s fourth-quarter earnings report, Ives said they were stellar.
“With the chip shortage still a major overhang on the auto space and logistical issues globally, Tesla’s impressive earnings beat speaks to an EV demand trajectory that looks quite robust for Tesla with clear momentum heading into 2022, Ives said.
“While there are many competitors in the EV space, Tesla continues to dominate market share while battling through the chip shortage and now is seeing China demand step up big time after facing headwinds earlier in 2021,” he went on to say.
Tesla’s production ramp-up at both the Berlin and Austin plants likely will be slow at first. But Ives believes the Berlin plant will “alleviate the bottlenecks of production for Tesla globally.”
UBS analyst Emmanuel Rosner also maintained a buy rating on Tesla stock, with a price target of 1,200.
“Tesla’s relentless focus on driving down costs through new batteries, product localization, scale and efficiency continues to be in strong evidence quarter after quarter, and should accelerate with this year’s projects,” Rosner wrote in a note to clients.
Will Massive Expansion Bolster TSLA Stock
Tesla has undertaken a massive expansion of its manufacturing capabilities. Musk wants to eventually build 20 million electric vehicles a year over the next decade. That’s more than double the current production of other auto-making giants. So it’s now on a mission to rapidly expand its manufacturing capabilities.
Now that Tesla is making cars in Germany, it will go head-to-head in electric vehicles with three established German names: Volkswagen Group (VWAGY), BMW (BMWYY) and the Mercedes-Benz division of Daimler AG (DDAIF).
Other serious competitors include Rivian (RIVN), General Motors (GM) and Ford Motor (F), in addition to its China rivals. Ford’s F-150 Lightning electric truck is expected this spring. The first GM electric Silverado, aimed at a limited number of fleet operators, is expected to hit the road in the second quarter of 2023.
Checkup On Tesla Stock
According to the IBD Stock Checkup tool, Tesla stock has an IBD Composite Rating of 91 out of 99. When choosing growth stocks for the biggest potential gains based on the CAN SLIM investment paradigm, focus on those with a Composite Rating of 90 or higher.
The stock also has a Relative Strength Rating of 92 out of 99. The rating means that Tesla stock has outperformed 92% of all stocks in the IBD database over the past 12 months.
Its relative strength line has rebounded, a positive, but is still well off its peak.
Its Accumulation/Distribution Rating is B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A grade of A signals heavy institutional buying. The lowest rating of E means heavy selling. Think of the C grade as neutral.
In the stock market, timing is critical. So when you’re looking for stocks to buy or sell, it’s important to do the fundamental and technical analysis that identifies lower-risk entry points that also offer solid potential rewards.
Is Tesla Stock A Buy?
On Friday, Tesla stock reclaimed its 50-day line for the first time since mid January. While that’s a positive, Tesla stock is currently not a buy. MarketSmith charts show Tesla stock is mired in a four-month a consolidation while its relative strength line is lagging.
Tesla is an IBD Leaderboard stock, but still offers no immediate buy point. One encouraging aspect of the current correction in Tesla for long-term holders: It hasn’t been as deep as the drop in say, top enterprise software firms. For now, there is no proper entry in sight, as the stock continues to consolidate.
You’ll also find alerts to warning signs and sell signals that show when to take your profits or cut short any losses. You’ll also discover if the current stock market trend is conducive to buying stocks, or if it’s an environment where you want to take defensive action and sell.
Before making any investment decisions, be sure to check current market conditions and use IBD Stock Checkup to see if your stock gets passing ratings for the most important fundamental and technical criteria.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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