# Fundamental Analysis

(*) Tesla designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally.

(*) The company operates in two segments, Automotive, and Energy Generation and Storage.

(*) The Automotive segment offers electric vehicles, as well as sells automotive regulatory credits. It provides sedans and sport utility vehicles through direct and used vehicle sales, a network of Tesla Superchargers, and in-app upgrades; and purchase financing and leasing services.

(*) The Energy Generation and Storage segment engages in the design, manufacture, installation, sale, and leasing of solar energy generation and energy storage products, and related services to residential, commercial, and industrial customers and utilities through its website, stores, and galleries, as well as through a network of channel partners. This segment also offers service and repairs to its energy product customers, including under warranty; and various financing options to its solar customers.

# Latest News

(*) Tesla is the first carmaker to reach US$1 Trillion in market value milestone after major order from Hertz for electric vehicles. Now, Tesla has been overtaking Toyota as the world's most valuable carmaker.

(*) Car rental group, Hertz said it had ordered 100,000 Tesla Model 3 sedans to electrify its fleet. The announced 100,000 vehicle order is sizeable for Tesla, which the company delivered a total of 241,300 vehicles in the 3^rd quarter this year, a record for the company.

(*) Tesla overtook Toyota in July 2020 to become the world's most valuable carmaker in terms of market value. Since then, its value has increased fivefold with the company now worth more than the next nine most valuable publicly floated carmakers combined.

(*) Tesla becomes the sixth American company to hit a trillion-dollar valuation mark following Apple, Microsoft, Alphabet, Amazon and Facebook.

(*) Due to shortage in chip supply, Tesla had been mocked for years for failing to produce two consecutive quarters of profit. But now, Tesla has earned net income for nine quarters in a row.

# Financial Results Highlights

(*) Tesla posted recorded revenue and profits in 3^rd Quarter.

(*) The company reported 3^rd Quarter earnings that's a beat on both the top and bottom lines.

(*) The record results were driven by improved gross margins of 30.5% on its automotive business and 26.6% overall, both of which are recorded for at least the past five quarters.

(*) Earnings per share (adjusted) = US$1.86 versus US$1.59 market consensus forecast.

(*) Revenue = US$13.76 billion versus US$13.63 billion market consensus forecast.

(*) The company recorded US$1.62 billion in GAAP net income for the quarter, only the second time in history it has surpassed US$1 billion mark. In the year-ago quarter, net income was US$331 million.

(*) Automotive revenue rose to US$12.06 billion and costs of automotive revenue amounted to US$8.38 billion for the quarter.

(*) Generated US$806 million in revenue from its energy business segment, which combines solar and energy storage products, and US$894 million in services and other revenue, which includes vehicle maintenance and repairs, auto insurance and sales of Tesla-branded merchandise among other things.

(*) For its energy and storage business segment, costs of revenue rose to the highest number in the last five quarters to US$803 million during the 3^rd Quarter.

(*) During the 3^rd Quarter, Tesla recorded a US$51 million impairment related to its investment in bitcoin, which it reported under “restructuring and other” expenses.

# CEO Remarks

(*) Tesla's chief executive Elon Musk has said, he anticipates building 20M cars a year by 2030 – roughly double what leaders such as VW and Toyota currently producing.

(*) Tesla to sell a “full self-driving” software upgrade for US$10,000 upfront or for US$199 per month. Such fees represent a new profit model for carmakers, which typically sell volume cars in single-digit margins and premium vehicles in low double-digit margins. However, the controversial driver-assist programme could potentially run afoul of regulators.

# Views and Observations

(*) I believe that Tesla is garnering greater levels of enthusiasm from investors given its technological dominance.

In addition, the step-function change in Tesla from a single-factory, niche EV producer to a global EV and Battery powerhouse with a far wider range of EV products and an emerging software/services model offers potentially greater optionality.

(*) Buy rating.

(*) Price Target.

Looking at the weekly chart – Tesla hitted the previous high on the week beginning on 25^th January = US$900.40, then the share retracted to US$546.98 on the week beginning on 17^th May.

MEASURED TARGET = US$900.4 + US$353.42 = US$1,253.82.

(*) Buy Price.

Again, looking at the weekly chart – Tesla formed a “RUN AWAY GAP” last week; the gap magnitude = between US$910.0 and US$944.2. As such, we set our BUY PRICE = US$910.0.

POTENTIAL UPSIDE = 37.8%.

CUT LOSS PRICE = 20-Day Moving Average at US$826.62.

(*) BUY PRICE = US$910

(*) PRICE TARGET = US$1,253.82

(*) CUT LOSS LEVEL = US$826.62

I, Michael Fung, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.

本人馮兆山為證監會持牌人士。截至本評論文章發表日止，本人及/或其有聯繫者並無持有全部提及之證券的所有相關財務權益.