Tesla (TSLA, Financial) shares dropped by 5.77% following reports on the potential removal of the $7,500 electric vehicle (EV) tax credit by the Trump administration. This movement was also influenced by Tesla's announcement of their sixth Cybertruck recall this year, due to a faulty drive inverter component.
This decline was not isolated to Tesla as it also affected other EV manufacturers such as Rivian Automotive and Lucid Group, both of which are less profitable and thus more reliant on the EV tax credit. The proposed removal of this subsidy could further strain these companies, making them less competitive against gas-powered vehicles.
From a valuation perspective, Tesla (TSLA, Financial) carries a price-to-earnings (PE) ratio of 85.25, reflecting high expectation from investors, and its price-to-book (PB) ratio is at 14.27. Despite these high metrics, the company shows strong financial health, supported by a robust Altman Z-score of 14.63 and an Altman M-score indicating it is unlikely to manipulate earnings. Tesla's current market capitalization stands at $998.91 billion.
Interestingly, Tesla's GF Value is assessed as being "Modestly Overvalued" with a value of $254.70. For more detailed information, you can view Tesla's GF Value page.
Tesla has experienced substantial revenue growth over the past years, with a five-year growth rate of 30.3% and a ten-year growth rate of 38%. However, growth has slowed in the past year, reflecting the broader challenges the company is facing in the competitive EV market landscape.
Tesla's profitability looks favorable with an operating margin of 8.48% and a net margin of 13.08%. However, the company's high interest rate environment makes it difficult for Tesla to compete on price with traditional gas-powered vehicles, as mentioned by CEO Elon Musk.
Despite the current challenges, Tesla's long-term prospects remain supported by plans to expand its vehicle lineup and energy solutions, including a focus on more affordable vehicles and sustainable energy products.
