Is Tesla Stock a Good Buy Now? Key Q4 & 2022 Earnings Insights 🚗

Visit our website for more: https://www.overlookedalpha.com <br /><br />Tesla just reported earnings for Q4 and 2022. Full year revenues increased 51% to 81.5 billion, net income more than doubled to 12.6 billion and free cash flow rose 51% to 7.6 billion. <br /><br />The news sent the stock up more than 10%, giving the company a market cap of 506 billion dollars. With 22 billion in cash and 6.9 billion in debt, the enterprise value is 491 billion. <br /><br />That means the company is valued at 6 times revenue, 65 times free cash flow or 40 times earnings. <br /><br />A 40 times earnings multiple is not cheap but it's certainly more reasonable than the 100 times earnings that we saw last year. Especially when you consider a revenue growth rate of over 50%.<br /><br />So the important question for Tesla shareholders is whether the company can continue that growth going forward while maintaining its strong profit margins.<br /><br />A big deal was made recently about Tesla cutting prices on the Model 3 and Model Y with videos showing angry customers in China protesting and requesting refunds.<br /><br />Price cuts are often an indicator of slowing demand and a need to shift product. And that poses questions for the upcoming quarters.<br /><br />However, the Tesla shareholder letter explains that “prices have been on a downward trend for years and are necessary for the company to become a multi-million vehicle producer.” Later, Musk said on the earnings call that demand in January had been the strongest ever.<br /><br />As long as Tesla’s brand and margins remain intact, dropping prices allows the company to reach greater scale, which can further cement its position as market leader. <br /><br />But with legacy automakers slowly getting their act together, it wouldn’t be a surprise to see Tesla’s margins and influence come under at least some pressure. <br /><br />Combine that with a difficult economic environment and there are still major headwinds to Tesla stock while it trades at this valuation. <br /><br />We published a TikTok last year arguing that Tesla was overvalued at 100 times earnings and I gave it a bearish rating. But at 40 times earnings it’s much harder to make that case. <br /><br />Recent events have painted Tesla in a negative light but the numbers from the company don’t yet show material weakness. Even so, 40 times earnings is too rich to buy the stock. For these reasons, I currently give the stock a neutral rating. <br /><br />But these are my personal opinions not financial advice and I do own a small amount of Tesla stock.