Investors could be missing out on a massive opportunity by not buying into BYD, a Chinese EV maker similar to Tesla that trades at a much more depressed valuation, according to Bernstein. The firm has an outperform rating on BYD and a price target of HK$359, which implies upside of 61%. It also rates Tesla as underperform. ” 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,” analyst Toni Sacconaghi wrote. For 2024, Sacconaghi forecasts Tesla’s earnings before interest and taxes will reach $8.7 billion on $114 billion of revenue, while BYD’s earnings will reach $7.1 billion on $112 billion of revenue. Despite this similarity in growth trajectory, BYD’s current valuation is a mere $90 billion versus Tesla’s $750 billion. “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,” the analyst wrote. “We believe that in the long term, valuations matter, and based on fundamental value the valuations are more likely to converge than diverge.” One difference in prices between the two companies stems from analysts valuing Tesla as more than just an auto company. On the other hand, BYD is primarily viewed as an electric vehicle business, with analysts discounting side businesses like the ones devoted to batteries, semiconductor chips and handset components and assembly. But these collective “side bets” amounted to 26% of BYD’s revenues and 15% of the company’s gross profits in 2023, Sacconaghi said. “Notably, BYD’s battery/energy storage business is currently larger in scale than Tesla’s,” he wrote. Year to date, BYD’s Hong Kong-listed shares are up 15%. Meanwhile, Tesla is up a massive 90% for 2023. 1211-HK TSLA YTD mountain TSLA vs BYD in 2023
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