Tesla (NASDAQ:TSLA) will report quarterly earnings on April 23. Analysts are bracing for bad news.
In the two weeks since it announced first-quarter delivery numbers, TSLA stock is down 10%. It has now lost over 36% of its value in 2024 and could be headed lower.
TSLA is expected to open this morning at about $158 per share. That’s a market capitalization of $500 billion on 2023 sales of about $96 billion.
Falling Like a Rock
Tesla faces increased competition from China, but many of its wounds are self-inflicted. Rather than deliver a lower-priced electric vehicle (EV), it produced the CyberTruck, a $80,000 pick-up that looks like it was drawn by a six-year-old.
Worse, it recently canceled plans to deliver a $25,000 SUV called the Model 2 next year. Instead, it’s pushing a self-driving robotaxi that skeptics fear will not work. Analysts have been reluctantly cutting their price targets.
Tesla’s $1 trillion valuation is based on it being a tech company, not a car company. Technology companies like Apple (NASDAQ:AAPL) are worth several times sales, thanks to growth and services revenue. Car company market caps are a fraction of their sales. General Motors (NYSE:GM), for instance, currently has a market cap of $50 billion on 2023 sales of $175 billion.
Tesla, however, has very little long-term debt. GM has over $83 billion in long-term debt. That means its “enterprise value,” the value of its stock and debt combined, is about $136 billion. That’s still less than one-third of Tesla’s value.
The most valuable car company in the world, Toyota Motor (NYSE:TM), has $110 billion in debt. Add that to a market cap of $318 billion, and you have an enterprise value of $430 billion. No other car company is worth over $100 billion.
TSLA Stock: What Happens Next?
Tesla bears will be watching to see if its enterprise value falls below that of Toyota. Analysts want to see if Tesla’s “ecosystem revenue” from charging, insurance and service offers hope for the future.
On the date of publication, Dana Blankenhorn had a LONG position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
