Tesla Inc

Tesla Inc (NASDAQ: TSLA) design, manufacture, develop, and sell fully electric vehicles and offer services pertinent to sustainable energy products.

On 26 April 2021, Tesla expects to release its earnings update for Q1 FY21.

Investment Rationale – Hold at USD 732.23

• From a technical standpoint, 50-day SMA (USD 693.82) indicating an upward trend in the stock.
• Over the past five years (FY15 to FY20), revenue and gross profit have surged at a CAGR of nearly 50.78% and 48.31%, respectively.
• During FY20, the Company ramped up the production of vehicles, increased market share for solar energy systems, and built new manufacturing capacity, which underpins bright prospects.
• The Company has a better ability to pursue capital-intensive projects against the previous year with the enhanced position of liquidity.

Risk Assessments

• The global trade conditions can impact the user industry and create a shortfall of microchip supply.
• The Covid-19 related restriction can impact the production and deliveries by halting manufacturing facilities.

Recent News

2 April 2021: Tesla produced nearly 180,000 vehicles in Q1 FY21 and delivered around 185,000 vehicles, substantiating a solid reception in China for Model Y. The model X and model have also installed the new systems and performing well.

(Source: Company Website)

Financial Highlights for the year ended 31 December 2020 (as 13 February 2021)

 (Source: Company Website)

• In FY20, Tesla realized total revenue of US$31.5 billion, reflecting an increase of US$6.96 billion against FY19.
• The Company continued to ramp up production, expand operations, and build new manufacturing capacity to ensure further revenue growth.
• The net income attributable to common stockholders also reflected a favourable change of US$1.58 billion in FY20 versus FY19.
• As of 31 December 2020, Tesla had cash and cash equivalents of US$19.38 billion, reflecting a better liquidity position against FY19.

Share Price Chart  

 (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

During FY20, Tesla demonstrated an improvement in the top-line and the bottom-line items of the income statement. However, the Company’s market opportunities can be restricted with the Covid-19 challenges, while it has never paid any dividends to the shareholders. Nevertheless, the new manufacturing equipment, increased affordability of vehicles, and development of own battery cells shall help the Company in navigating short-term impediments and generate sustainable demand for its shareholders. The stock made a 52-week High and Low of USD 900.40 and USD 134.76, respectively.

Based on the strong fundamentals, solid guidance, and valuation conducted above, we have given a “Hold” stance on Tesla Inc at the closing price of USD 732.23 (as on 14 April 2021), while we look forward to reinvesting when short-term uncertainties fade away.  

Assertio Holdings Inc

Assertio Holdings Inc (NASDAQ: ASRT) is a commercial pharmaceutical entity that offers a broad portfolio of inflammation, neurology, and pain medications.

In May 2021, the Company plans to hold its earnings call for Q1 FY21. 

Investment Rationale – Avoid at USD 0.5182

• From a technical standpoint, 50-day EMA (USD 0.75199) seems unfavourable and reflecting a downward trend in the stock.
• The uncertainties regarding the severity of the Covid-19 pandemic, government restrictions, and recent restructuring has kept the outlook gloomy.
• The Company does not generate much revenue to finance, and dependent upon external funding to pursue the growth opportunities.

Risk Assessments

• The Company has gone through a massive restructuring in December 2020, and yet to prove its financial viability and adaptability in the new working environment.
• ASRT has been facing a decline in prescriptions related to elective surgeries due to the Covid-19 led restrictions.

Recent News

12 February 2021: Assertio Holdings affirmed the closing of the direct offering of US$34.3 million. The net proceeds of the offerings are planned to use for general corporate purposes.

Financial Highlights for the year ended 31 December 2020 (as on 11 March 2021)

 (Source: Company Website)

• During FY20, the Company reported a leaner operational profile, increased digital marketing, and improved cash position.
• In FY20, the Company also raised US$45.3 million in cash (net of expenses) to improve the liquidity position.
• It also went through comprehensive restructuring and completed a strategic asset sale of US$505.2 million.
• The Company also appointed Chief Financial Officer to Paul Schwichtenberg, and promoted Ajay Patel to the position of Chief Accounting Officer.

One Year Share Price Chart      

 (Source: Refinitiv, Thomson Reuters)

Conclusion

Evidently, the Company has taken actions to right-size the organization, reduce cost base, and enhance liquidity; however, it has recently gone through restructuring and announced the shift in plans. The Group has settled its historical debts, settled outstanding litigations, and reduced the headcount. Considering the past record and macroeconomic uncertainties, the outlook seems gloomy, and therefore, it is prudent to avoid taking any fresh position in the stock. The stock made a 52-week High and Low of USD 1.45 and USD 0.33, respectively.

Based on the weak fundamentals, heightened operational risk, and uncertain market conditions, we have given an “Avoid” stance on Assertio Holdings Inc at the closing price of USD 0.5182 (as on 14 April 2021), while we look forward to reviewing the stock when the Company has a better clarity over outlook and profitability.

*All forecasted figures and Peer/Industry Information have been taken from Refinitiv, Thomson Reuters.

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