Will Tesla (TSLA) Stock be Affected by Battery Business Competition?

NEW YORK (TheStreet) --Last Thursday Tesla Motors (TSLA) unveiled its residential and commercial-scale batteries at an event outside of Los Angeles as part of the electric car makers plan to generate new revenue, and Reuters is reporting that Tesla may not be as far ahead of the competition as it believes.

"We're just not aware of who would even really be second, honestly," Tesla CEO Elon Musk said at the event.

As it turns out Tesla is not the only competition in the business of offering integrated systems for generating solar power and storing it on-site, Reuters said, adding that established energy players like Samsung SDI  (SSDIF), LG Chem (LGCLF), and Saft Group are just some of the companies marketing similar products.

Shares of Tesla are up by 0.79% to $267.82 in pre-market trading on Monday morning.

Tesla's system starts at $3,000 for a home storage battery pack and analysts speaking with Reuters say that the price is in-line with the rest of the market.

Separately, TheStreet Ratings team rates TESLA MOTORS INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TESLA MOTORS INC (TSLA) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, poor profit margins and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Automobiles industry. The net income has significantly decreased by 561.8% when compared to the same quarter one year ago, falling from -$16.26 million to -$107.63 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Automobiles industry and the overall market, TESLA MOTORS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$86.40 million or 166.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 34.46%. Regardless of TSLA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TSLA's net profit margin of -11.25% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio is very high at 2.51 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, TSLA's quick ratio is somewhat strong at 1.02, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: TSLA Ratings Report

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