EV jolt: Bernstein says BYD should be much closer in valuation to Tesla
Nov. 27, 2023 1:25 PM ET
By: Clark Schultz, SA News Editor
23 Comments
 Trygve Finkelsen/iStock Editorial via
Bernstein reiterated an Outperform rating on BYD Company Limited (BYDDF) on Monday and made the point that the valuation gap between he two stocks should not be so wide.
"Tesla and BYD are currently the two leading EV manufacturers, and are now comparable in size across volumes, revenues, and profit dollars, but BYD is growing significantly faster," noted analyst Toni Sacconaghi. His forecast for 2024 is for Tesla (TSLA) to generate before interest and taxes of $8.7B on $114B of revenue, compared to an estimate for BYD (BYDDF) to churn up earnings of $7.1B on $112B of revenue However, Tesla (TSLA) was a market cap of $750B vs. BYD Company's (BYDDF) current valuation of $90B.
"We believe that the investment thesis that Tesla has a structural cost and scale advantage appears increasingly less credible, and arguably more applicable to BYD... We believe that in the long term, valuations matter, and based on fundamental value the valuations are more likely to converge than diverge."
Sacconaghi also said the argument that Tesla (TSLA) is much more than an auto company does not hold water as BYD’s battery energy storage business is currently larger in scale than Tesla's (TSLA). BYD is noted to have some of the same "side bets" for investors as Tesla (TSLA) in batteries, semiconductor chips, and handset components and assembly.
Last week, BYD (BYDDF) announced hat it achieved a historic milestone after the company's 6 millionth new energy vehicle rolled off the production line at the Zhengzhou factory. The Chinese electric vehicle said it has been actively expanding its global presence, introducing new energy buses and taxis for public transit electrification. "With a decade of dedicated efforts, BYD's electric public transport solutions now operate in over 400 cities across more than 70 countries," highlighted the company.
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