Tesla vs BMW: Which Stock to Buy?
In the last 5 years, Tesla’s stock rose from $30 to $320 and manifested an astounding performance of more than 1000%, but without any operating profit! How realistic are the expectations of company’s future? Is the stock in a bubble? Or can BMW be a better investment?
Tesla lacks profitability, therefore we will compare Price per Sale P/S:
Price/Sales TTM (11.05.2017):
Tesla’s P/S is 11 times higher than BMW because of very fast increasing sales.
In the first quarter of 2017, BMW generated a revenue of $23,448 mil. compared to Tesla’s revenue of $2,696 mil.. BMW’s revenue is 8.7 times higher.
At the end of 2016, BMW realised 7.8% Earnings growth and has a current Price/Earnings (TTM) of 8.1.
To justify the current stock price of Tesla,
Tesla has to grow its current revenue (6.7/0.6) = 11.17 times! and have the same earnings growth as BMW (inflation omitted). Or Tesla has to generate 30% more revenue than BMW with the same growth rate – Price/Earnings of 8.1.
If you look at the table above, you will notice that Tesla is heavily diluting its shares which is not included in the calculation. Despite of this share dilution, Tesla’s long term debt at the end of 2016 rose from $2.28 Bil. to $7.39 Bil..
And a very important another problem for Tesla is that the company gets more and more competition which is a real treat for its revenue growth, for example: all-electric BMW i3 and the plug-in hybrid BMW i.
In 2016, BMW spended for R&D more than $4 Bil. whereby Tesla’s R&D budget was only $834 mil.. And BMW has decades of manufacturing expertise while staying at the forefront of new technologies like carbon fiber, autonomous driving, and electric vehicles (EVs)
According to the German carmakers, Tesla came to the electric vehicle market too early without profiting from it.
No Investment or Financial Advice.