Tesla, Inc.

TSLA Details
 
Update on TSLA Q1FY20 Vehicle Production & Deliveries: Tesla, Inc. (NASDAQ: TSLA) is engaged in the development, manufacturing and selling high-performance fully electric vehicles (EV) and energy generation and storage systems. On 3 April 2020, the company announced that it has delivered ~88,400 vehicles, with a total production of around 103,000 vehicles in 1QFY20. Total vehicle deliveries increased from the year-ago figure of 77,100. However, on a quarterly basis, the vehicle deliveries declined from the figure of 112,095 vehicles, as the worldwide auto industry suffered a demand hit and manufacturing pause, due to COVID-19 pandemic.
 

Vehicle Production (Source: Company Reports)
 
4QFY19 Key Highlights: During the quarter, the company reported non-GAAP earnings per share of $2.14, up 7% year over year. Automotive revenues for the period stood at $6.368 billion, up 1% year over year. In 4QFY19, non-GAAP net income stood at $386 million, up 12% year over year. Revenues increased 2% year over year and came in at $7.384 billion. During the fourth quarter, TSLA recorded delivery of 112,095 vehicles. The company exited the period with cash and cash equivalents of $6.268 billion. Net cash provided by operating activities stood at $1.425 million during the quarter, with capital expenditure amounting to $412 million, owing to higher investments in Gigafactory Shanghai and Model Y preparations in Fremont.
 

Q4FY19 Financial Highlights (Source: Company Reports)
 
Outlook: For FY20, TSLA predicts vehicle deliveries to be > 500,000 units. Both solar and storage implementations is expected to be a minimum 50% in FY20.
 
Stock Recommendation: The stock of TSLA closed at $454.47 with a market capitalization of ~$83.8 billion. The stock made a 52-week low and high of $176.99 and $968.99 and is currently trading at the lower band of its 52-week trading range. The stock has generated positive returns of ~15.11% and ~66.53% in the last three months and one year, respectively. TSLA remains on track to commence the production of ventilators for coronavirus patients. With President Donald Trump’s official approval to deliver ventilators driven cars, the company is looking forward to help in the time of COVID-19 crisis. On the valuation front, the stock is trading at an EV/Sales multiple of 3.8x as compared to the industry median of 15.1x on TTM (Trailing Twelve Months) basis. Given the recent update, and COVID-19 impact, we give a ‘Hold’ recommendation on the stock at the closing price of $454.47, down 5.63% as on 2 April 2020.

 
TSLA Daily Technical Chart (Source: Thomson Reuters)
 
 

The Walt Disney Company

DIS Details

DIS to Lay-off Employees Amid COCVID-19 Outbreak: The Walt Disney Company (NYSE: DIS) is an entertainment company and works in four business segments: Media Networks, Studio Entertainment Parks and Resorts, and Consumer Products & Interactive Media. In a recent update, the company stated its intention to layoff of non-essential U.S. employees across the company on April 19, 2020. The step was taken as a response to the global coronavirus outbreak that led to closure of its media and theme park businesses. Nonetheless, the company’s employees will be eligible to receive full pay and benefits through April 18, 2020, despite the closure of theme parks, and the shutdown of movie theaters.
 
DIS Pre-Pone “Frozen 2” in the US:   On 13 March 2020, the company stated that “Frozen 2” will arrive in the U.S about 3 months earlier on Disney+ commencing from March 15, 2020. The move is a part of company’s strategy to bring fun and joy to families amid this coronavirus outbreak.
 
Q1FY20 Financial Highlights for the period ending 31 December 2019: During the quarter, the company reported earnings of $1.53 per share, down 17% on a year over year basis. Revenues for the quarter came in at $20.86 billion, soaring 36% year over year, owing to robust growth across all segments, particularly the Studio Entertainment and Direct-to-Consumer (DTC) businesses. Cash provided by continuing operations during the quarter amounted to $1.63 billion, down from $2.1 billion reported in the year ago period.
 
 
Key Highlights (Source: Company Reports)
 
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of DIS closed at $96.97 with a market capitalization of ~$175.1 billion. The stock is currently quoting at the lower band of its 52-week trading range of $79.07 to $153.41. The stock has generated negative return 34.57% and 13.39% in the last three months and in a year’s time, respectively. Remarkably, Disney’s effort to introduce Disney+ in India via the Hotstar service on March 29, 2020, remains a key positive. Considering the aforesaid facts, we have valued the stock using a relative valuation method, i.e., price to earnings multiple. For the matter, we have taken the peer group - News Corp (NASDAQ: NWSA), ViacomCBS Inc (NASDAQ: VIAC), Netflix Inc (NASDAQ: NFLX), to name few, and arrived at a target price of lower double-digit growth (in % terms). Hence considering the current trading levels, aforementioned factors and the company’s current strategy to layoff employees amid COVID-19 crisis, we recommend a “Hold” rating on the stock at the closing price of $96.97, up 2.1% as on 2 April 2020. 
 
 
DIS Daily Technical Chart (Source: Thomson Reuters)

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