U.S. electric-car giant Tesla has long been an investor darling, but Chinese rival BYD is also rising in prominence. Last week, data from the two companies showed that BYD overtook Tesla as the world’s largest electric vehicle maker in the fourth quarter and surpassed Tesla’s production for the second consecutive year in 2023. After dominating China’s domestic market, BYD is now actively expanding overseas. Like Tesla, it doesn’t just sell cars and make its own batteries and other parts to stay competitive. Should investors stick with long-time favorite Tesla or buy up-and-coming BYD? This is what the professionals say. Tesla: “2024 looks tough” Bernstein said in a report on January 2 that 2024 “looks tough” for Tesla, especially in terms of profitability. “We believe more investors will begin to increasingly question the company’s growth narrative, especially since we believe Tesla will struggle to grow deliveries by 20% in 2024 (and 2025),” the company said. said, noting that this was well below Tesla’s 50% target. Bernstein added that Tesla’s fiscal 2024 profit margins and earnings per share will be “significantly” below consensus amid continued cost cutting. The investment manager also pointed to the impact of price cuts in September and October last year, predicting that gross profit margin may fall by 15.7%, lower than the market consensus of 17.8%. Bernstein analysts wrote: “For FY24, we believe Tesla’s margins are likely to decline and sales will disappoint… We do not believe Tesla will be able to cut prices further to drive sufficient demand elasticity, And it is unlikely to result in negative (free cash flow).” The company gave Tesla an underperform rating and a price target of $150, implying a 36% downside. HSBC also gave Tesla a “downgrade” rating in a report on January 3, which means the target price is more than 20% lower than the current stock price. Its $146 price target implies a potential downside of 37.8%. It noted that demand for electric vehicles appears to have stabilized. HSBC analysts said that while Tesla will remain price competitive, slowing EV adoption will give other EV makers more time to “get ready” and expose Tesla to tougher competition . “As far as EV makers go, Tesla may be an excellent company (although no longer No. 1 in sales), but we don’t think that’s what’s driving the valuation. Our concerns are consistent with Tesla’s various ideas Timing and commercialization uncertainty are related (Dojo, FSD, Optimus, etc.) from which a large portion of their valuations derive,” they wrote. Dojo is Tesla’s supercomputer, FSD refers to full self-driving capability, and Optimus is the humanoid robot it is developing. HSBC added: “We believe the timetable may be longer than current valuations reflect.” BYD: “Leading position in tough market” Bernstein said in a report on January 8 that BYD is due to Stand out with the best cost structure in the industry. The company said: “We believe that companies with advantageous cost structures and product innovation capabilities that meet consumer preferences will stand out from the competition and achieve better development.” Bernstein also emphasized BYD’s “rapid transformation” of products and responses market capabilities, and its “viable” export strategy. The company said BYD shares currently trade at 13.5 times 2024 earnings and 10.8 times 2025 earnings — “too low,” Bernstein said, given BYD’s profit expansion potential. . Bernstein gives BYD an outperform rating and a target price of HK$334 (US$43), equivalent to a potential upside of 63%. HSBC said it “remains constructive” on BYD in 2024, noting that higher exports will lead to higher profit margins, which could be the “next phase of growth.” The bank expects sales and profits to grow by 28% and 30% respectively in 2024. HSBC said: “(BYD) is in a leading position in a tough market.” HSBC also gave BYD a buy rating, with a target price of HK$356, implying a 73.8% upside potential. According to FactSet, analysts covering BYD give it a 94% buy rating, with an average price target of 56.2% potential upside. Analysts covering Tesla give it a 42% buy rating and a potential upside of 1.8%. —CNBC’s Michael Bloom and Evelyn Cheng contributed to this report.
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