Income and Balance Sheet
Overall, Tesla’s performance in the stock market has been nothing short of spectacular. Using a minimum of five years data to determine the solidity of a stock, filed July 27, 2021, Tesla’s 10-K statements show income has risen from $700 million in 2016 to over 31 billion in 2020, well over a four fold increase in five years, from two distinct sources — car sales and leasing and energy generation and storage. Tesla is manufacturing company — both a car company and an energy company — in the alt fossil fuel market. Further, since Tesla now charges for its charging stations, it now receives income as a service company. Tesla is poised to benefit from the 2021 U.S. infrastructure package, which favors the EV market and its perceived climate benefits.
From the 2020 10-K, Tesla’s balance sheet is solid, with assets of roughly $52 billion and liabilities of 28 billion, indicating the company is well positioned to meet its obligations over an extended period of time. Tesla is also well positioned to continue to fund a roll out of different models from its internal coffers for a reasonable amount of time. Finally, also from the 2020 10-K, Tesla’s cash flows of 862 billion from sales of products and its energy services, far outstrip investment revenue of over 5 billion. Sales and EV service are king at Tesla.
Price Pressures
Tesla is an example of a well run company which makes great products in the modern era. Tesla’s closing price was $665 on August 17, 2021, down a bit from $717 earlier in that week. But Tesla had some bad news the week of August 15, 2021, as its Autopilot feature has come under serious scrutiny by the National Highway Traffic Safety Administration. There have been eleven accidents with the Autopilot feature since 2018. Autopilot is essentially the cruise control feature of a Tesla, which allows the car to take over the steering. Autopilot uses radars, sensors, and cameras in order to maintain the control of the car while under Autopilot’s activation. Best advice is, avoid the cruise control and pay attention to the road. Tesla is a highly innovative company and an absolute leader in the developing EV market; and clearly, some rough spots are still being worked out.
Bitcoin Play Appears to Have Been Profitable
Tesla purchased $1.5 billion in Bitcoin in February 2021. Bitcoin has been designated as an intangible commodity, and is therefore regulated through the Commodities Futures Trading Commission, rather than the Securities Exchange Commission. Bitcoin is not a stock, but rather is regulated like gold, earth metals, foodstuffs, etc, and must be listed as an intangible on the balance sheet. On the 10-Q statement, for March 2021, Tesla lists $299 million under net intangibles. On the 10-Q for July 30, 2021, $203 million is listed under net intangibles, demonstrating a net reduction of $96 million. On June 13, 2021, Musk announced he had sold 10% of its Bitcoin holdings to test liquidity. 10% of 1.5 billion, however, is only $150 million, meaning that there appears to be a capital gain of $54 million on the sale of 10% of the intangible. So it looks like Tesla made a solid bet on Bitcoin.
At a price earning ratio of 352, the price point of $665 appears a bit pricey, but its 52 week price range is $329-$900 and thus there appears to be potential for stable shares at higher pricing. I call Tesla as a Hold or Buy. The author owns Tesla shares.
*This article is based on the opinion of the author and does not guarantee the accuracy of the data and shall not constitute a basis of liability for any loss.
