Good Monday everyone and welcome to the BCB Cyber Series that takes on the tech stocks that can provide the cyber-fuel we need to pursue our digital wealth passions.
Today, we are returning to Mega-Cap Tech Stock Tesla. As Tesla is set to be added to the S&P 500 on December 21st, 2020, much is about to change and much already has.
Before we get there though, as always our reminders: we dig for the cyber-fuel we need, we are always working to make sure the best of the best, those monster companies in Tech, form a key portion of our portfolios.
For all these mega-cap stocks, just like Investopedia, our core defining feature here is that the market cap is over $200 Billion! As always though, we dig deeper still, looking for those companies that are pushed by incredible disruptive tech with a great story, not to mention having a solid base in the numbers.
Before we dive too deep though, we strongly advocate that we don’t act solely on anyone else’s opinion, not even ours! Make sure we are all thinking for ourselves as self-definers and making our own decisions. In the end, the responsibility is on each one of us as individuals. So decide wisely!
Jumping right in now the BCB Cyber way, we cover 3 quick pieces of important information so we can get moving on our day. First, we tackle the story to find out who and what the company is, second, we look at the numbers both positive and negative, and finally we discuss our position on the stock.
This is TS2B, Tech Stock to Buy, Mega-Cap edition, and this week we are going to take on Tesla, the Palo Alto, California energy-redefining enigma; cleverly, unintentionally, disguised as an automobile company.
BCB Cyber: Mega-Cap Analysis for 12.14.20
1 – STORY
Tesla is Most Definitely a Tech Company, Not Just an Automaker
If there is one thing that 2020 has proven, its that Jim Cramer (we love Jimmy Chill) was right about Tesla: this is no automotive company. Tesla’s story is much deeper. It is in fact a technology company first and foremost that makes cars, and should in fact be compared to NVIDIA and AMD.
Where Elon Musk leads like a real life Tony Stark, the products and business model are so much more. With a mission statement that seeks to accelerate the world’s transition to sustainable energy. The product of Tesla may be oft-understood to be cars cars, whomsoever assumes that is grossly underestimating this incredible company.
Tesla is creating its very own ecosystem for Technology for the automobile in the same vein as Apple has for its phones. The software experience is central to the customer as it provides the opportunity to add value to an individuals investment in their mode of transportation.
Tesla is working to do exactly this with everything from autopilot to power charging and this is just the beginning for a tech enhanced mobile environment that is quickly becoming a centerpiece in people’s lives.
In addition, the quality and therefore reputation of an Tesla product is considered in much the same vein as something like Apple today as both are racing forward.
In addition to this, Tesla takes aim at the ESG world of investment as well as becoming the poster child for climate change innovation. The push for their energy business to remodel the world under solar is well under way and the company is making great strides to make it quick, efficient and effective. A true path to any investors heart.
Taking its Rightful Place on the S&P 500
Perhaps the biggest news this year however is the inclusion of Tesla into the S&P 500. The chart above gives a quick and easily understandable entry into how significant this inclusion is. Tesla will enter into this index on December 21st, 2020 based on the closing price from December 18th, but may have a very bumpy ride. Rumor has it that traders may be looking to move out on the 18th, but remember, BCB Cyber advocates investing, not trading. This may be another entry point.
As for what Tesla is actually worth, there is a tremendous amount of debate. From under $100 to nearly $800 per share there is wild speculation.
Our assessment though is that for a company changing the world around us and more importantly our daily lives, its worth riding the wave, but to do so intelligently.
2 – BY THE NUMBERS
BCB Cyber loves to follow five specific metrics: Revenue Growth, Forward Price to Earnings Ratio, Return on Assets, Operating Margin, and Debt Considerations.
Starting out, we see that Tesla is definitely still a growth driver, with most recent numbers on trailing twelve months (TTM) demonstrating another significant increase in revenue over 2019.
And, that Forward P/E is still ranking high, but right in line with where we see other massive technological disruptors like Shopify with a Forward P/E of 277.78.
Now we flip to compare the Return on Assets (ROA) and Operating Margin (OM) when we last examined Tesla in October 2020.
In October we saw an ROA of 2.17% and an OM of 4.74%.
In just a short couple of months we see that both are building in a significant fashion. Operating Margin sits now at 6.11%, a whopping 28.9% increase, and Return on Assets at 2.74%, representing a substantial 26.3% increase.
Finally we see that debt factor, as always… However, the cash position is nearly double what it was in October ($8.62 Billion). The strength of this position is clearly improving as well as Tesla is increasing its financial flexibility.
3 – THE BCB CYBER TAKE
As of this morning, on 12.14.20, my own portfolio has a position of 22.29% in Tesla with a cost basis of $155.42. This is definitely a stock worth buying at the right price and one that BCB Cyber believes to be the right fuel for the fire!
Remember, we are just like the masses, struggling to make ends meet and build our future. So, we start building and keep doing our homework. This is just what we need to start us on our journey toward cyberizing our lives.
BCB Cyber believes in the potential for this risky, tech innovator and loves the story. However, this is definitely a stock worth buying at the right price and one that BCB Cyber believes to be the right fuel for the fire! Remember we balance our perspective and cyberize our wealth over a longer term of 5 years or more. We will definitely be looking to add balance to our position, with the right portfolio proportions of between 13 and 15 percent and at the right price. Tesla, alongside Nvidia, are our two biggest holdings and look to keep them growing, while maintaining balance.
Remember, as always, think for yourself, do your own homework, and cyberize your life with the best in disruptive tech. Learn more in our Wealth Section and dive deeper into Establishing the Baseline on BCB Cyber.com!