Hey everyone.

Welcome to our Opportunity Mining section.

The company we'll dive into this week is Tesla Inc. (NASDAQ: TSLA).

Tesla is one of the largest EV companies in the world. Its stock plunged 65% in 2022. However, the stock has rebounded nearly 49% in 2023 to date. [1]

Will 2023 be a good year for Tesla?

[1] Data as of February 01, 2023. Source: moomoo

01 Business Model

Tesla makes, sells, and services electric vehicles (EVs) in the US, Europe, China, and other countries worldwide. It also sells energy generation and storage products.

The company currently manufactures four different consumer vehicles – the Model 3, Y, S, and X.

Founded in 2003, Tesla has become the world's most valuable automaker by market capitalization.

The company generated US$81.46 billion in revenue in 2022, most of which was from automotive sales.

Here's Tesla's revenue breakdown for the year ended 2022:

02 Strength

● Production cost advantage

Tesla has invested heavily in new manufacturing technology to bring down production costs.

As a result, Tesla earns more money per car it sells than any of its global rivals due to its low production cost.

According to a Reuters analysis, Tesla earned US$15,653 in gross profit per vehicle in the third quarter of 2022, more than twice as much as Volkswagen, four times the comparable figure at Toyota, and five times more than Ford.

This gives Tesla an edge in an EV price war with other rivals.

03 Growth Potential

● The EV market remains robust

In general, there is a strong shift in the automotive industry from conventional vehicles towards EVs, and the major players are expanding their production capacity.

According to precedence research, the global electric vehicle market was estimated at US$208.58 billion in 2022 and is expected to reach over US$1103.17 billion by 2030, poised to grow at a compound annual growth rate (CAGR) of 23.1% during the forecast period 2022 to 2030.

The robust growth of the EV market may create growth opportunities for Tesla.

04 Financial Numbers

● Volume

Tesla delivered 1.31 million electric vehicles in 2022, up 40% YoY. The company plans to accelerate volume growth to its long-term 50% CAGR with around 1.8 million cars in 2023.

● Revenue growth

Telsa maintained rapid growth in 2022. Total revenue grew 51% YoY to US$81.46 billion.

● Profitability

Telsa's gross margin has been improving in the last four years and reached an overall margin of 25.6% in 2022.

However, the quarterly gross profit margin has shown a downward trend, from 29.1% in Q1 2022 to 23.8% in Q4 2022, raising concerns about the price cuts' impact on profitability.

● Cash flow

Tesla has been able to generate positive free cash flow since 2019. The company's free cash flow reached US$7.6 billion in 2022. Sufficient cash flow has allowed the company to fund its product roadmap, long-term capacity expansion plans, and other expenses.

05 Valuation

As of February 2023, Tesla's market value reached US$572.85 billion.

Tesla's rivals include traditional automakers such as Ford, GM, and Toyota, as well as EVs makers like Nio and Li Auto.

Based on the P/E valuation ratio, Tesla's current PE (TTM) is 50.11x, much higher than traditional automakers.

However, compared with other EV makers, Tesla has already become profitable, while NIO and Li Auto are still running at a loss.

06 Risk

● Price war

In late 2022 and the beginning of this year, Tesla lowered prices on its cars worldwide. Analysts say the price cuts suggest that Tesla is prioritizing sales over profits and could spur a price war in electric vehicles.

● Increasing competition

The worldwide automotive market is highly competitive, and Tesla faces strong competition from existing and new automobile manufacturers. Increased competition could result in sales declines, price drops, revenue shortfalls, loss of customers, and loss of market share.