Tesla Motors, Inc. Stock Fundamental Analysis

Tesla Motors, Inc. Stock Fundamental Analysis

Company Information
Name: Tesla Motors, Inc.
Symbol: NASDAQ: TSLA
Sector: Consumer Discretionary
Industry: Automobile Manufacturers

Business Summary:

Tesla Motors, Inc. designs, develops, manufactures and sells electric vehicles and energy storage products. The Company produces and sells two electric vehicles: the Model S sedan and the Model X sport utility vehicle (SUV).
Key Information:
Stock price close at 16th November 2016: $183.93
Market Cap: 27.57B
52 Week Range : $141.05 – $269.34
Beta: 1.14
PE Ratio (TTM): -29.09
EPS (TTM):-6.32
Tesla Motors, Inc. (NASDAQ:TSLA) is an electric car manufacturer with products such as Model S, which we love and would buy without any hesitation. Great car with fantastic design and technology. But it is another thing to like a company and its products and to like or not the company’s stock. Having a thorough fundamental analysis on Tesla’s stock what can we point out as strengths and weaknesses?

Fundamental Analysis

Income Statement:

We will perform stock fundamental analysis for 5 years, from 2011 to 2015 and also focus on latest quarters for 2016.Total revenues and gross profit have followed a huge increase. From $204 millions of revenues in 2011, Tesla earned 4046 millions in 2015.Gross profit followed an increase from $62 millions in 2011 to $ 924 millions in 2015. As Tesla invests in technology research and development expenses and selling general expenses have both increased significantly during this 5 years period. The net result is negative operating income for all 5 years, with a huge negative increase in year 2015 of -$714 millions compared to -$187 millions to 2014.Net income after taxes is negative for all 5 years, with year 2015 having the biggest negative number of the 5 years -$889 millions. The trend of diluted normalized EPS is negative also, no surprise here, following the same trend as net income. In 2015 the diluted normalized EPS was -$6.93, the lowest point for the 5 year period.

Balance Sheet:

While cash and short term investments have been increasing from $280 millions to $1197 millions in 2015, what is alarming is the increase of total debt over the 5 years. It has increased from $280 millions in 2011 to $2,696 millions in 2015.Each year the total debt follows an increase compared to previous year. While total equity shows also a large increase over the 5 years from $224 millions in 2011 to $1084 millions in 2015.

Cash Flow Statement:

Here we have an interesting trend for cash flows from operating activities and cash flows from investing activities compared to cash flows from financing activities. Cash flows from financing activities have showed an increasing trend, as the company issued stocks and debt and the net result was an increase of cash but for the same period cash from operating and investing activities has been negative. And free cash flow has been negative for 4 out of the 5 years, with year 2015 being at -$2159 millions showing a negative increase of about 110% compared with year 2014.

Profitability:
As mentioned before the company has negative EPS for all 5 years, with year 2015 having the highest negative earnings per share of -$6.93 for the period. While gross profit margin is positive for all 5 years it has shown a diminishing trend and is currently at +22.82% for year 2015.Net profit margin is negative for all 5 years, showing a great improvement from year 2011, but for year 2015 it is at -21.96% almost doubled from last year. ROE is negative for all 5 years, again showing an improvement from base year 2011 but for year 2015 it is at -82.00% compared to -32.25% for year 2014 a very negative performance.

Solvency:
Both current ratio and quick ratio have showed a declining trend for our 5 year period. Current ratio for year 2015 is at 0.99, it was 1.95 at year 2011, while quick ratio for year 2015 is at 0.54, it was 1.69 at year 2011. Debt / Equity ratio is very alarming as it has been increased significantly during these 5 years. It was 1.2504 at year 2011, it was 2.488 for year 2015.
Relative value analysis with industry:
Tesla Motors, Inc. has negative profit margin, ROE and interest coverage ratios compared to the relevant ratios of the automobile manufacturers industry. The industry has all 3 positive ratios. The company has a negative P/E ratio, while the industry a P/E ratio of 9.48.The company has a price/tangible book value ratio of 10.29 compared to the 1.84 price/tangible book value ratio of the industry.

Growth:
The expected EPS growth rate for next 3-5 years is about 30%.Tesla Motors, Inc. had a recent EPS surprise of 112.28% on 26th October 2016, the first in last 4 quarters showing positive EPS of $0.14 compared to expected EPS of – $1.14.

Technical Analysis:

Tesla stock
Tesla stock

The stock has been in a downtrend and its recent price close of $183.93 on 16th November 2016 is below the daily moving averages of 50 and 200 days, which are currently at 198.75 and 212.48 respectively. Both moving averages show a declining trend. MACD is negative currently having a value of -4.746.Other indicators such as full stochastics for 14 days show an oversold condition being at 15.35.

Conclusion:
We do not like the fact that Tesla has not showed profitability for last 5 years. It has a lot of debt which makes it a very risky stock. Until it shows a consistent profitability we cannot suggest to buy the stock. It seems extremely overvalued on a comparative value analysis with the industry it belongs. Unless fundamentals improve a lot and show not just once improvement but a long term improvement, our bias is to sell or go short the stock going with current declining trend.

Legal disclaimer and sources:
The author has not any current shares of the stock in his portfolio or intends to buy, sell any stocks of the company in the near future. This is an independent financial analysis with not any financial compensation from any source. Sources used are investools.com, zacks.com, stockcharts.com and yahoo finance.

TIME INC NEW COM Fundamental Analysis

TIME INC NEW COM Fundamental Analysis
Name: TIME INC NEW COM
Symbol: NYSE: TIME
Sector: Consumer Discretionary
Industry: Publishing

Business Summary:

Time Inc. is a media company. The company has several well-known publications and provides content marketing, targeted local print and digital advertising programs, branded book publishing, and marketing and support services, including subscription sales services for magazines and other products, retail distribution and marketing services, and customer service and fulfillment services, for the company and third-party clients, including other magazine publishers.
Key Information:
Stock price close on 14th November 2016: $13.70
Market Cap 1.36B
Beta N/A
PE Ratio (TTM) -15.15
52 Week Range 12.23 – 17.66
Dividend & Yield 0.76 (5.80%)

Fundamental Analysis:

We will have a 5 year financial analysis of important fundamental metrics such as revenues, profit margins, net income, earnings per share, cash flow and balance sheet, examining years 2011 to 2015.Starting with revenues first thing we notice is a steady 5 year decline in revenues growth. For each of the last 5 years the company has made less sales compared to previous years. So we have a 5 year negative growth rate for revenues. Current sales growth for year 2015 is -5.43%. What is remarkable is the fact that gross margin shows a stability for the 5 years period, currently at +60.72% having a range of +62.12%/+60.72%. But net margin shows a different story. It has followed the same path as sales, declining for each of the last 5 years ranging from +10.01% during 2011, the highest piece to -28.39% for year 2015, which is the lowest for the 5 year range.
Net income after taxes shows a declining trend for the last 5 years ranging from +368 millions in 2011, the highest point to our range to -881 millions in 2015, the lowest point of reference. Diluted normalized EPS show a steady declining trend for the 5 years period ranging from 3.54 the highest price in the range in 2011, to -1.72 in 2015, the lowest point in the range. Cash flow analysis shows that cash from operating activities remain positive for each of the 5 years, but still showing a declining trend, ranging from 474 millions in 2011,the highest point in our range to 154 millions in year 2015, the lowest point in the range. Free cash flow follows the same trend as operating cash flow, a declining trend from 426 millions in 2011, the highest point in our range to -58 millions for year 2015, the lowest point to the range. And also turned negative from positive.

Balance Sheet:
What we can notice for the 5 years analysis are the following. A decrease of total assets and total equity, an increase of total liabilities and mainly a huge increase in total debt ranging from 34 millions in 2011, the lowest point in our range to 1,293 millions in year 2015, the highest point in the range. Current ratio for year 2015 is 1.26 and quick ratio is 1.23, both above 1 which is considered as a safe ratio but most importantly also both ratios are currently at the highest price for the 5 years range. Debt/Equity ratio has skyrocketed the last 5 years and is currently at 0.7178, the highest point in the time range but still below the price of 1, again considered safe.

Relative value analysis:
Comparing the Net Profit Margin, Return on Equity, Interest Coverage ratios we notice that TIME INC NEW Com has lower ratios than the industry ratios. Price to cash flow ratio is also higher for the company compared to the ratio of the industry. However the company has a higher dividend yield than the dividend yield of the industry.

Growth prospects:
The company has a current PEG ratio of 2.21 and estimated earnings growth for next 3-5 years of 5%.During last 4 quarters the stock has only one positive earnings surprise and the consensus for earnings in year 2017 has been in decline.

Technical Analysis:

TIME stock price
TIME stock price

The stock has been recently in a downtrend and current price of $13.70 is blow moving averages of 50 days and 200 days, currently at 13.83 and 14.58 respectively. However the stock has made a recent bounce from low price range of about $12.5 per share, while momentum indicators such as MACD,Stochastics and RSI show bullish momentum and are not at extreme levels.

Conclusion:
We strongly believe that unless a radical financial improvement happens our recommendation is to avoid buying the stock. In fact we favor selling the stock at any strong rally as very poor financial performance and a technical analysis that shows the stock is still in downtrend does not give us any strong argument to buy the stock.

Legal disclaimer and sources:
The author has not any current shares of the stock in his portfolio or intends to buy, sell any stocks of the company in the near future. This is an independent financial analysis with not any financial compensation from any source. Sources used are investools.com, zacks.com, stockcharts.com and yahoo finance.

Facebook’s bull rally has gone on for far too long, what is next

Facebook’s bull rally has gone on for far too long, what is next?

• Earnings and revenues show good momentum and increase
• Valuation is a lot of concern now
• Instagram is a great add-on to revenues

Facebook(FB) has made this year an impressive rally of almost 36% closing on 21st September 2016 at $129.94 per share. While this stock price increase can be attributed to strong revenues and profitability over last year, what is the future for Facebook stock?

Earnings and revenues show strong momentum

Earnings per share and total revenues show an increase during last 5 fiscal years. Free cash flow also shows an increase for all 5 last fiscal years, so Facebook has a strong financial performance and is producing a lot of cash, which is very bullish. 1 year EPS growth rate is 44.5% while next 3-5 years EPS growth rate is 69%, much higher than relevant internet industry and technology sector growth rates. So Facebook is a growth stock with a lot of momentum, but what about its valuation? Does recent rally leave plenty of stock price upside?

Valuation is a lot of concern now

While Facebook has a very good profitability trend as both its operating margin and profit margin are higher than relevant ratios for industry and sector some very important ratios, such as Price/Earnings, Price/Cash Flow, Price/Sales and Price/Book Value are much higher than all ratios of both industry and sector. Facebook has an earnings yield of 1.6% much lower than 5.1% earnings yield for S&P 500. What about the main industry peers of Facebook, Alphabet(GOOGL), LinkedIn(LNKD), Yahoo(YHOO) and Twitter(TWTR)? Facebook has a higher Price/Sales ratio than all 4 mentioned peers. Also Price/Book ratio is also higher than all 4 peers. Comparing Price/Earnings ratio Facebook has only higher ratio than Google, while both LinkedIn and Twitter have a negative ratio. As this shows a mixed trend, as a whole Facebook seems to trade at a very significant premium both compared to its industry and sector averages, and to its main industrial peers. We are concerned that while Facebook shows strong profitability, the current stock price seems to be very rich on a relative value analysis.

Instagram and WhatsApp can add more profitability to Facebook
Facebook has made several important acquisitions over last years to strengthen its dominant position in the technology sector and internet industry. Adding Instagram and WhatsApp to its business and marketing properties, these social media add-ons can provide significant revenues and profitability based on advertising platforms or charging a fee for services to their users. Social media competition is intense, but the potential of exploiting new promising sources of revenues is very large.

Conclusion

While Facebook has shown last 5 years impressive results in terms of earnings and revenues growth, and is considered a growth stock, the recent 1 year rally of 36% gains indicates that at current levels of $129.94 per share the stock is expensive on a relative value analysis. Technical analysis shows a very bullish picture as the stock both on a daily and weekly charts is above the 50 and 200 simple moving averages, which are also on a rising slope. There is a resistance around $132 per share but above that there is no significant resistance. The catalysts that can move the stock higher are mainly what sent stock higher last year, increased earnings per share and revenues. But we are concerned whether 3-5 years earnings growth of 69% is sustainable. While it is hard to ignore the strong financial performance of Facebook during last 5 years, we think at current levels the stock is not a buy. We tend towards a hold rating. Institutional ownership of shares is an impressive 72%, and this can provide support to the stock price. If Facebook fails to deliver strong earnings in the following quarters, a significant stock price correction is possible if combined with rich valuation on a relative comparison basis both to the industry, sector and the main peers. On the other hand good earnings momentum continuation could send the stock higher. We cannot rule out another stock price increase of a 10-20% from current levels sending the stock higher to 143-156 dollars per share. Any significant stock price corrections can be used as a good risk and reward investing positions to Facebook.

Legal disclaimer:
The author does not own any stocks of Facebook. Date used from sources CNBC, MarketWatch, and Morningstar.

Berkshire Hathaway Inc stock shows strong signs of entering a consolidation

Berkshire Hathaway Inc. stock shows strong signs of entering a consolidation and maturity phase, being a safe long-term stock pick

-Solid financial performance but having difficulty generating excess market returns in the future
-Valuation is not too expensive, signaling not any red flags compared to its main industry peers
-Wells Fargo recent scandal may however have a negative effect to Berkshire Hathaway Inc. if in the future a global banking financial system crisis occur
Berkshire Hathaway Inc. stock class B (NYSE:BRK.B) has so far this year an identical performance compared to major market indices S&P and Dow Jones, showing a gain of about 12%. Having a beta of 0.77 means that in fact being a defensive stock, actually performed better than the general stock market. The company is actually a conglomerate, being in the financial sector and insurance industry, but having a diverse portfolio of businesses.

The stock has a solid financial performance last year, but in the future there are risks of not being able to provide excess returns
According to a survey by IDC about challenges and trends for the insurance industry in 2016, 2 major risks are the threat of new entrants entering in the market and rising competition, and new investments required in the digital era to face new forms of threats. While profitability for last 5 years is good and shows a rising trend as both net profit margin ratio and return on equity ratio have increased, growth in net income and earnings per share seems to decrease. 5 years revenue growth also seems to increase at a diminishing rate. Free cash flow growth on a yearly basis for last 5 years shows a very erratic move, with a very significant decrease in last year, while debt/equity ratio shows a remarkable stability and is low enough, showing financial strength and stability. 5 years earnings growth forecast is 7.1% which is not too excessive and shows a mature growth company.
Valuation of Berkshire Hathaway Inc. stock class B (NYSE:BRK.B) is not too expensive, although price growth is expected not to be excessive
Current valuation of stock price class B for Berkshire Hathaway Inc. compared to its industry show that the stock has a lower Price/Earnings ratio of 14 compared to the Price/Earnings ratio of 17 for the insurance industry, while the stock has higher Price/Book, Price/Sales and Price/Cash Flow ratios than relevant industry ratios. Operating Margin and Net Profit Margin ratios for the company on a 5 years average are both significant higher than the ratios of the insurance industry. The same result applies also for Return on Equity ratio for the company, showing a better profitability and management effectiveness compared to its industry.

Wells Fargo recent scandal could be a high risk event as Berkshire Hathaway Inc. is the largest institutional owner of Wells Fargo stock
As a conglomerate the significant investment in Wells Fargo stock at about 9.5% total ownership is both promising and risky. In many cases stocks that have bad related news, such as scandals about financial statements tend to underperform the general stock market as the demand for their shares falls significantly. A significant drop in the stock price of Wells Fargo due to the recent scandal could have negative impact on the overall profitability of Berkshire Hathaway Inc. The banking sector is fragile this period as another important global bank, Deutsche bank is under pressure having to deal with an enormous amount of fine, $14 billions, imposed to it by the US Department of Justice for selling mortgage securities in the US a few years ago. A domino effect scenario in the financial sector and banks with a new crisis can only hurt Berkshire Hathaway Inc. At the same time the company has increased its position in Apple(Nasdaq:AAPL), and so far Apple stock is performing well enough having increased lately due to strong sales of new IPhone 7.

Conclusion of investment thesis
We think that Berkshire Hathaway Inc. stock class B having closed on September 28th 2016 at $145.28 per share is a hold. Valuation does not seem to be excessive, but at projected future 5 years earnings growth of 7.1% the potential for stock price increases, but at a moderate pace. We have a 12 months price target increase of 8-10% from current level or $156-$160 per share, ideally buying shares at any possible sell-off for a better risk adjusted return.

Sources and legal disclaimer:
The author does not owe any BRK.B stocks, this is not an investing recommendation,just financial analysis
https://www.idc.com/getdoc.jsp?containerId=EMEA41489516
Reuters.com, MorningStar.com, Google finance

The stock market on the internet is a blog about stock market analysis focusing on stocks both from a long and short position and does not offer investing recommendation,just pure financial analysis.

Alphabet Inc. (GOOGL) is trading near 52week highs can it go much higher?

Alphabet Inc. (GOOGL) is trading near 52week highs, can it go much higher?

-Google launches new applications to innovate and find possibly new streams of revenues

-EU antitrust charges on android is a major concern, that can affect stock price

-Valuation shows some mixed signs, it is not extremely expensive but also not a bargain

– EU antitrust charges on android is a major concern Alphabet Inc.(GOOGL) stock price closed on Friday 23rd September 2016 at $814,96 per share, having made an impressive one year rally return of almost 28%, up from $638,37 per share stock closing price on September 30th 2015. Is this stock price rally sustainable, and if yes what are price levels to watch for?

Google launches new applications to innovate and find possibly new streams of revenues

Recently Google launched a new application to make travel planning and organizing easier, called Google trips. Travel industry is a very large business and apparently Google wants to monetize new sources of revenues. But Google also is investing capital and exploiting alternative sources of revenues in many other industry and business sectors, from health sector and pharmaceuticals, to autonomous vehicles technology and new ventures in startups companies.  Investing capital in research and development has both a positive and a negative result. While exploring new business ideas, technologies, marketing opportunities can provide significant income and boost profitability as now Alphabet is a conglomerate which owns Google, there can be also significant delays and capital invested with uncertain financial results. Startups carry a lot of risk, and returns come only after many years, while capital committed is also significant. Alphabet recently reported according to the news to be interested to buy Twitter. This move can be advantageous if the mass user audience of Twitter is exploited to add mobile advertising revenues, but there is the risk of Alphabet overpaying for a company which struggles with profitability. Is Alphabet certain or confident that can make a profit utilizing Twitter as a business advertising platform, when Twitter itself cannot be profitable during last fiscal financial years?

EU antitrust charges on android is a major concern, that can affect stock price

Google has to face soon European Union claims that on Android system it favored its own browser and in fact restricted competitors to advertising and other mobile services. Google has a dominant position in Android operating system and if European Union decide that indeed Google breached antitrust and competition cases, a potential large financial fine of about $7.4 billion could be imposed to Google with at least a short term negative impact on its stock price.

Valuation shows some mixed signs, not at extreme levels

Google has been able to produce last 5 fiscal years increasing net income and earnings per share for each year. But there is a mixed overall image as in last 5 quarterly earnings per share releases, it has 3 negative surprises. Operating margin and net margin have been steadily declining over last 5 years. Return on Equity and Return on Assets have also followed a declining 5 years trend. Earnings per share growth for next 3-5 years is estimated to 15.77%, which is not unrealistic. What about relative value analysis of Alphabet Inc. (GOOGL) to its Sector, Technology and its Industry, Internet Information Providers? Alphabet Inc. has a trailing twelve months P/E ratio of 30.98, lower than the industry P/E of 39.34 but higher than the sector P/E of 17.87. Trailing twelve months P/S ratio for Alphabet Inc. is lower than both the relevant ratios for its sector and industry, P/B ratio for most recent quarter is lower for Alphabet compared to the industry ratio but higher than the relevant sector ratio. P/CF ratio for Alphabet Inc. for trailing twelve months is lower than both the ratios for the industry and its sector.

Comparing the main peers of Alphabet Inc.(GOOGL) , Baidu Inc.(BIDU,) Yandex(YNDX), Yahoo Inc.(YHOO) and Microsoft(MSFT) on a relative valuation for main financial ratios P/E,P/S and P/BV we notice that Alphabet Inc.(GOOGL) has only lower current P/E than Yandex, P/BV for Alphabet Inc. is higher only compared to Yahoo Inc. ratio and P/S ratio for Alphabet Inc. is higher compared to its peers ratios with the exception of Yahoo Inc., which has the same ratio of 7.34. If we add Facebook Inc. (FB) to the comparative analysis then Alphabet Inc. has all its mentioned ratios lower than Facebook.

Conclusion

Having a quick look at technical analysis Alphabet Inc. (GOOGL) is trending upwards with current price above the simple moving averages of 50 and 200 days. There is resistance at current levels where 52 week high of $819.06 per share is, but above this there are no significant resistances. We think at current levels Alphabet Inc. (GOOGL) is a hold, mainly due to its recent stock price rally. Adding positions to the price range of $780-$790 per share with 12 months target price of 10% and range of $890-$900 per share.

Legal Disclaimer:

The author does not own any Alphabet Inc. (GOOGL) stocks. This is just financial analysis,not an investing recommendation.Sources used are Google Finance,Zacks,MorningStar,Reuters.

The stock market on the internet is a blog about stock market analysis focusing on stocks both from a long and short position and does not offer investing recommendation,just pure financial analysis.