Heading 1: Introduction
The Prominence of Auto Stocks: Tesla vs Nissan
In this article, we will evaluate two prominent auto stocks, Tesla, Inc. (TSLA) and Nissan Motor Co., Ltd. (NSANY), and make predictions for investing strategies in the week ahead. Through a thorough evaluation of these stocks, we will argue that NSANY is a superior choice to TSLA for several reasons.
Heading 2: The Growing Automotive Market
Factors Contributing to Growth
The global automotive market is expected to continue growing due to various factors, including the rising demand for personal and commercial vehicles, the emergence of new technologies like electric and self-driving cars, and the increasing consumer awareness of safety and environmental concerns. Experts predict that the global automotive market will grow at a compound annual growth rate (CAGR) of 4.5% until 2030.
The Rise of Electric Vehicles
As concerns over climate change and air pollution intensify, there is a growing global momentum to shift towards electric vehicles (EVs) for a greener future. This shift is expected to propel the EV market into a transformative phase, with increased investments driving the expansion of EV adoption worldwide. The global electric vehicle market is projected to grow at a CAGR of 13.7% until 2023.
Heading 3: Performance Comparison: TSLA vs NSANY
Recent Stock Performance
Over the past month, TSLA’s stock declined by 17.5% compared to NSANY’s minor decline of 1.1%. Looking at a six-month period, TSLA declined by 27.2% while NSANY’s decline was 10.1%.
Recent Developments
- On January 18, 2024, NSANY announced that Caio Collet would serve as its reserve and simulator driver for the 2023/24 ABB FIA Formula E World Championship.
- On January 4, NSANY, in collaboration with UEA-based software company Coral, announced a partnership with biotech company VAXA Technologies to offset its carbon emissions generated during Season 9 of the ABB FIA Formula E World Championship.
Financial Results Comparison
For the fiscal third quarter ending September 30, 2023, TSLA reported total revenues of $23.35 billion, with a 22.4% decline in adjusted gross profit to $4.18 billion. Its net income attributable to stockholders also saw a decline of 43.7% to $1.85 billion.
On the other hand, for the fiscal six months ending September 30, 2023, NSANY reported a 30% year-over-year increase in net sales to ¥6.06 trillion ($40.91 billion). Its operating income grew by 115% to ¥336.74 billion ($2.27 billion), and its net income improved by 308.8% to ¥307.79 billion ($2.08 billion).
Past and Expected Financial Performance
Over the past three years, TSLA’s revenue has grown at a CAGR of 50.4%. However, analysts expect TSLA’s EPS to decline by 4.1% in the first quarter ending March 2024.
In contrast, NSANY’s revenue grew at a CAGR of 14.6% over the past three years. Analysts predict that NSANY’s revenue will increase by 291.2% this year and 7.7% in the third quarter ending December 2023. Furthermore, its EPS is expected to increase by 87.2% this year.
Heading 4: Valuation and Profitability
Valuation Comparison
TSLA has a higher forward price-to-sales (P/S) multiple of 6.90 compared to NSANY’s lower multiple of 0.17. TSLA also has a higher forward enterprise value-to-sales (EV/Sales) multiple of 6.73x, while NSANY has a lower multiple of 0.65x. This indicates that NSANY is more affordable.
Profitability Analysis
TSLA’s trailing-12-month EBIT margin of 11.18% is lower than NSANY’s margin of 4.64%. However, TSLA’s trailing-12-month net income margin of 11.21% is higher than NSANY’s margin of 3.78%.
Heading 5: POWR Ratings
Ratings Overview
According to our proprietary POWR Ratings system, TSLA has an overall rating of D, translating to a Sell, while NSANY has an overall rating of B, indicating a Buy. The POWR Ratings are calculated based on 118 different factors, each weighted to an optimal degree.
Category Performance
TSLA received a D grade for Growth, aligning with its poor recent performance. Conversely, NSANY received an A grade for Growth, reflecting its strong recent performance.
TSLA also received a D grade for Stability due to its 24-month beta of 1.88, while NSANY received a B grade for Stability with a 24-month beta of 0.64.
In the Auto & Vehicle Manufacturers industry, TSLA is ranked last at #39, whereas NSANY is ranked #17.
Heading 6: Conclusion and Next Steps
The Better Investment Choice
Considering the advancements in technology and the expected growth in the automotive industry, both TSLA and NSANY are poised to benefit. However, due to NSANY’s lower beta values and more attractive valuation multiples, it appears to be the better investment choice.
How to Proceed
Our analysis indicates that investing in stocks with an Overall Rating of Strong Buy or Buy increases the odds of success. For a list of top-rated stocks in the Auto & Vehicle Manufacturers industry, please click here.
*NSANY shares were trading at $7.92 per share on Monday afternoon, up $0.13 (+1.63%). Year-to-date, NSANY has gained 1.10%, versus a 1.79% rise in the benchmark S&P 500 index during the same period.*
Investors should be cautious and consider their own financial situation before making any investment decisions.
Analyst comment
Positive news: NSANY is a superior choice over TSLA for several reasons, including strong recent performance, lower declines in stock prices, significant growth in net sales and net income, and more attractive valuation multiples. NSANY is ranked higher in the industry and has an overall rating of Buy. Investors should consider investing in stocks with a strong rating.
