Tesla Stock A Good Buy Right Now?
If you are a Tesla (NASDAQ:TSLA) investor and took advantage of its recent run-up following the Q2 delivery disclosure, it may be time to look elsewhere. As of this moment, we find Amphenol (NYSE:APH) – a company that produces electronic and fiber optic connectors, and Vertiv Holdings (NYSE:VRT) a company that provides critical infrastructure and services for data centers, as more attractive buys than Tesla.
Why? Simply because the valuation and growth numbers tell us so. Amphenol and Vertiv’s stocks have both seen higher growth in revenue and operating profits than Tesla in the last twelve months, as well as the most recent quarter. Not only that, they’re both cheaper than Tesla.
In fact, the strategy of thoughtfully shifting allocation to more attractive stocks is part of our market outperforming Trefis High Quality Portfolio (HQ) – which beat the S&P 500 in 2023 handily despite being meaningfully underweight the magnificent 7. Full HQ performance story here.
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Better Buys Than TSLA – APH & VRT stock?
Specifically, to illustrate the opportunity for Amphenol, you pay $27.93 per dollar of earnings-before-interest-and taxes (EBIT) for APH stock versus $95.29 for TSLA, and get higher annual growth (6.6% vs 1.4%), higher quarterly growth (18% vs 2.3%), and more margin increase (0.5% vs -5.9%). Overall, you get higher revenue, and operating profit growth from Amphenol and Vertiv, and pay less than Tesla stock.
So what’s the catch?
Now, could Tesla buck the trend? Could it grow its revenues and profits much faster than Amphenol or Vertiv in the coming quarters? Of course that’s possible. Especially, given the launch of the Cybertruck (which has been focused on the pricier $100,000 model, after Tesla axed the low-end model), the much-awaited Tesla Robotaxi update in late 2024, and the constant flow of positive news from Tesla’s energy storage and solar businesses (energy and storage sales grew 2x year-over-year in Q2). That said, Amphenol (>200% return in 5 years), and Vertiv (>600% return in 5 years), are no laggards.
The data below shows both Amphenol and Vertiv outperformed Tesla recently and over the last year. They might repeat this. Related ideas: Better Buys and Outperformers
Pay less per dollar of profit (EBIT) than Tesla, to get more revenue and profit growth?
| SECTOR | PEBIT | LTM Rev Growth | LastQ Rev Growth | LTM OpMargin Change | |
| TSLA | Consumer Discretionary | 95.29 | 1.40% | 2.30% | -5.90% |
| APH | Information Technology | 27.93 | 6.60% | 18.20% | 0.50% |
| VRT | Information Technology | 27.68 | 12.70% | 12.60% | 5.50% |
Note: PEBIT = market cap / last 12M operating income | LTM = Last 12 Months (last 4 quarters)
What about relative market returns?
There is evidence of market reward as APH stock has returned 26.3% and 55.7% over the last 6 and 12-month periods, which is higher compared to 11.5% and 0.3% for TSLA. While the last 3 months tell a different story, much of it was triggered by a single event – Tesla’s Q2 deliveries update. The point is, that Tesla stock has lagged.
| SECTOR | 3M | 6M | 12M | |
| TSLA | Consumer Discretionary | 23.50% | 11.50% | 0.30% |
| APH | Information Technology | -1.20% | 26.30% | 55.70% |
| VRT | Information Technology | -20.00% | 28.10% | 133.80% |
How did these metrics look 1 year ago – Could TSLA’s combination of higher valuation & lower growth persist?
TSLA still had a higher valuation of $66.85 vs $10.06 for APH but also higher annual growth (40% vs 5.3%), higher quarterly growth (47.2% vs -2.6%), though less favorable margin change (-2.7% vs 0.4%) The situation looks drastically different now which means that market reward could switch in favor of APH and VRT.
| SECTOR | PEBIT | LTM Rev Growth | LastQ Rev Growth | LTM OpMargin Change | |
| TSLA | Consumer Discretionary | 66.85 | 40.00% | 47.20% | -2.70% |
| APH | Information Technology | 10.06 | 5.30% | -2.60% | 0.40% |
| VRT | Information Technology | 23.42 | 19.80% | 31.50% | 3.90% |
Additional reference metrics and investment thesis for APH & VRT
While Tesla stock is viewed as a play on EVs, sustainable energy, and artificial intelligence, APH and VRT are also levered to multiple hot trends. Amphenol competes in highly specialized areas such as connectors and has focused on boosting its capabilities via a steady stream of acquisitions. Amphenol acquired over 50 companies over the past decade and has a solid reputation for cost management, leading to margin expansion. The company stands to benefit from themes including industrial automation, electric vehicles, and rising broadband deployment. On the other hand, Vertiv stands to benefit from the rise of cloud computing as well as the boom in generative artificial intelligence. The company offers solutions including power management and storage, thermal management, server rack systems, and operating stacks which are crucial to deploying large-scale data center infrastructure.
| SECTOR | PS | Market Cap | LTM Revenue | LTM Opinc | LTM Opinc Margin | |
| TSLA | Consumer Discretionary | 7.22 | $689 Bil | $95 Bil | $7.2 Bil | 7.60% |
| APH | Information Technology | 5.9 | $79 Bil | $13 Bil | $2.8 Bil | 21.10% |
| VRT | Information Technology | 4.18 | $30 Bil | $7.2 Bil | $1.1 Bil | 15.10% |
Note: PS = market cap / last 12M revenue
Here’s more on Trefis’ market-beating portfolios, including HQ with downside protection.
| Returns | Aug 2024 MTD [1] |
2024 YTD [1] |
2017-24 Total [2] |
| TSLA Return | -4% | -10% | 1463% |
| S&P 500 Return | 2% | 18% | 150% |
| Trefis Reinforced Value Portfolio | 5% | 12% | 733% |
[1] Returns as of 8/20/2024
[2] Cumulative total returns since the end of 2016
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