Since Tesla Motors (TSLA) is a fairly new automaker, its valuation multiples are not comparable with other industry giants such as Ford (F), General Motors (GM), and Toyota (TM). Therefore, in this article, we’ll try to figure out what other key factors may affect the company’s future earnings growth estimates and stock prices in 2016.
Higher production and deliveries
In recent years, Tesla has been able to showcase a significant increase in its vehicle deliveries. As noted earlier in this series, Tesla delivered 51,000 vehicle units in 2015, which shows a 76% increase in its shipments from the previous year’s 29,000 units.
The production line ramp-up discussed earlier in the series is certainly going to help the company produce more vehicles in the coming years. If Tesla fails to continue its significant progress on the production and delivery side in 2016, the stock will likely face selling pressure.
Dependence on Model X
Previously, the success of Model S alone drove Tesla’s revenues for years. In September 2015, the company expanded its portfolio and began delivering Model X. The success of Model X will play a vital role in the company’s future growth prospects. It may also impact the company’s future growth estimates and drive the stock in 2016. Investors should keep an eye on updates related to Model X and its performance.
Despite being a new entrant into the auto industry, Tesla has been able to expand its geographical revenue base. The United States remains the largest single market for the company. It accounted for 46% of TSLA’s 2014 total deliveries, while China accounted for 15% of total shipments.
Currently, China is the largest auto market in the world. Therefore, it makes sense for Tesla to lay out a business plan to expand further in the country. Such an expansion plan may positively drive the company’s stock.
Gigafactory and Model 3
Tesla’s future growth is also highly dependent on its ambitious Gigafactory project. This should help the company to significantly boost its production and meet its vehicle demand. Gigafactory will also equip the company to take on competition from other automakers (VCR) such as General Motors, Daimler (DDAIF), and Honda Motor Company (HMC). Any delay in the Gigafactory project could negatively impact Tesla’s stocks.
Tesla is likely to unveil its mass-market Model 3 in the middle of 2016. It will be interesting to see how Model 3 impresses auto buyers. Model 3 will be the key for Tesla to expand its reach to a broader customer base.