I’ve decided to sell half my Tesla (TSLA) shares and reinvest in BYD (BYDDY). Although both companies are giants in the electric vehicle (EV) sector with similar revenue levels, Tesla’s valuation has soared to levels that feel detached from its fundamentals. Here’s a closer look at the metrics that influenced my decision:

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1. Revenue Similarity but Valuation Worlds Apart

Despite similar revenues:

• Tesla: $97 billion
• BYD: $94 billion

Tesla’s valuation is far higher, making it challenging to justify relative to its earnings and sales performance. BYD offers nearly identical revenue, with a valuation that seems more aligned with its fundamentals.

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2. P/E Ratios: Tesla’s Price Is Through the Roof

Price-to-earnings (P/E) ratios highlight a stark difference:

• Tesla:
  • Trailing P/E: 95.89
  • Forward P/E: 105.26
• BYD:
  • Trailing P/E: 21.86
  • Forward P/E: 16.26

Tesla’s P/E ratios are sky-high, implying a heavy premium on the stock. BYD’s relatively modest P/E, especially the forward P/E of 16.26, suggests better value without the steep speculative markup that Tesla carries.

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3. Price-to-Sales Ratio: Tesla Is Overpriced

Looking at the price-to-sales (P/S) ratio, another critical metric:

• Tesla’s P/S Ratio: 12.58
• BYD’s P/S Ratio: 1.09

Tesla’s P/S ratio indicates a steep valuation premium over BYD, suggesting the market is pricing Tesla much higher relative to its actual sales. In contrast, BYD’s P/S ratio signals that its valuation is grounded more reasonably in its revenue, potentially making it a more attractive buy.

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4. Revenue Growth: BYD Outpaces Tesla

In terms of revenue growth, BYD’s performance significantly outshines Tesla’s:

• Tesla Quarterly Revenue Growth (YoY): 7.80%
• BYD Quarterly Revenue Growth (YoY): 24.00%

BYD’s growth is more than triple Tesla’s, reflecting its rapid expansion, especially in China and emerging EV markets. Tesla’s slower growth rate raises questions about how long it can sustain its high valuation.

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5. Dividend Yield: BYD Pays, Tesla Doesn’t

An added bonus with BYD is its Forward Annual Dividend Yield of 1.23%—a return Tesla does not offer. This dividend yield not only reflects BYD’s financial health but also provides passive income, making it an attractive option for long-term investors.

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6. The Tesla “X Factor”: Elon Musk

The final aspect of Tesla’s valuation is tied to the influence of Elon Musk. Musk’s track record of innovation and bold ventures—like his commitment to fully autonomous “robotaxis”—adds speculative value. However, with recent controversies and the uncertain timeline for true self-driving cars, the reliability of this “X factor” feels more tenuous.

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Final Thoughts

Tesla’s premium valuation makes it a costly investment relative to its earnings, sales, and growth potential, especially when compared to BYD. BYD, with its more reasonable valuation metrics, higher growth rate, and dividend, appears better positioned to deliver sustainable returns.

For me, it’s a matter of aligning my investment with value and growth potential—factors where BYD currently outshines Tesla.

December 9 2024 Update: in January I was an idiot

Yes, back then did an idiot move: Tesla outgrew BYD significantly, because Tesla has Munsk! I must remember: NEVER SELL A FREE STOCK like I did to TESLA