Chinese EV maker's valuation close to Tesla

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【Summary】Toni Sacconaghi, a Bernstein analyst, believes that investing in BYD Co Ltd, a Chinese electric vehicle maker, is a great opportunity as the stock is currently down about 20% from its year-to-date high. Sacconaghi is bullish on BYD stock because the company is growing faster than Tesla Inc. Despite generating slightly lower revenue than Tesla, BYD has a significantly lower market cap. Sacconaghi rates Tesla as underperform and expects BYD to be more attractive in terms of valuation and revenue.

FutureCar Staff Nov 27, 2023 10:17 PM PT

Chinese EV maker's valuation close to Tesla

BYD Co Ltd (OTCMKTS: BYDDF) has seen a 20% decline from its year-to-date high, presenting an opportunity for investors to acquire a high-quality stock at a significant discount, according to Toni Sacconaghi, an analyst at Bernstein.

Sacconaghi expressed bullishness on BYD stock, projecting that its shares could rise to HK$359, representing a potential increase of approximately 60%.

One of the main reasons for Sacconaghi's optimism is the rapid growth of the Chinese electric vehicle maker, which is outpacing Tesla Inc.

The notion that Tesla has a structural cost and scale advantage is becoming less credible and more applicable to BYD, Sacconaghi argued. Despite generating $22.74 billion in revenue in its latest reported quarter, BYD has a market capitalization of only $90 billion, while Tesla's market cap stands at $750 billion.

BYD recently made history by becoming the first Chinese automaker to participate in the Japan Mobility Show after 47 years. At the event, the YANGWANG U8 showcased BYD's innovative technology and superior craftsmanship to Japanese audiences.

Sacconaghi currently rates Tesla as underperforming and predicts the company will earn $8.7 billion in revenue in 2024. In comparison, he expects BYD to generate $7.1 billion in revenue during the same period, making it a more attractive investment considering the valuation difference between the two.

The analyst also highlights the undervaluation of BYD's "side bets," which accounted for 26% of the company's overall revenue in 2023.

Furthermore, Sacconaghi emphasizes that BYD has a larger scale in the battery/energy storage business compared to Tesla, making it a compelling choice for investors.