Tesla’s positive FCF suggests a 35% stock increase, with strategies like shorting OTM puts offering income opportunities.
Tesla’s Free Cash Flow and Stock Value
As Tesla Inc. (TSLA) prepares to report its Q4 earnings on Jan 24, the spotlight is on its potential to produce positive free cash flow (FCF), a rarity among EV makers. With TSLA stock at near-term lows, it’s projected to be worth considerably more.
Past Analysis and Revised Target Price
In a recent Barchart article titled “Tesla Stock Still Has at Least 24% Upside Based on Its Free Cash Flow,” I predicted a target of $318 per share. However, with newer data, I’ve adjusted this target to $286.24 per share, still 35% above the current price.
The Potential for a 35% Increase in TSLA Stock
This projection is based on Tesla’s consistent production of positive FCF. Last quarter, Tesla’s FCF was 3.4% of its quarterly revenue, making it the only North American EV producer with positive FCF. Using this margin, and analysts’ revenue estimates for 2024, Tesla could see a $910 billion market cap, a 34.9% increase.
Analyst Perspectives on TSLA Stock
Other analysts echo this positive outlook. Refinitiv’s average target from 37 analysts stands at $228.65 per share, and AnaChart.com reports an average target of $222.13 per share, both indicating potential growth.
Near-Term Stock Performance and Expectations
With the upcoming earnings report, analysts may revise their targets. If Tesla maintains its positive FCF trend, TSLA stock could reflect a higher value. This near-term low point offers an opportunity for shareholders.
Strategy: Shorting OTM Puts for Income
An attractive strategy for investors is shorting out-of-the-money (OTM) put options. For example, the $180 strike price puts expiring on Feb. 9, 2024, currently trade at $1.25 per contract. This method offers a substantial yield and is a safeguard against a 15% stock drop in the short term.
Conclusion
Shareholders have strategies to navigate this near-term weakness in TSLA stock. As Tesla continues to generate positive FCF, expectations for a higher stock price remain strong, offering a promising outlook for investors.
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