In the fierce competition within China’s electric-vehicle market, Tesla Inc. (NASDAQ: TSLA) has emerged as the clear winner in terms of stock performance when compared to BYD Co. (1211.HK).
Tesla’s stock has surged a remarkable 127% this year in the US, driven by price cuts that boosted deliveries and the excitement surrounding its artificial intelligence potential. On the other hand, BYD has experienced a 37% gain in Hong Kong as of Tuesday. While BYD has shown strong performance as the Chinese EV leader, with increased sales and an expanded international presence, its progress has been somewhat hampered by Berkshire Hathaway Inc.’s reduction in stake.
Tesla’s current rally comes after a challenging year in 2022, where the stock experienced a significant 65% loss, marking its worst annual performance. However, the lead it has gained this year may face challenges due to signs of overheating.
On Monday, Tesla’s shares were once again in the overbought zone, and the percentage of analysts recommending a sell rating has risen to 18.4%, the highest since September. In addition, the consensus target price for the next 12 months suggests a 22% decrease from the current levels.
In contrast, BYD has garnered positive attention from analysts, with no sell recommendations and a projected upside of 30%, as per data tracked by Bloomberg. Citigroup Inc. has even initiated a positive catalyst watch, anticipating a surge in BYD’s net profit for the second quarter and improved monthly deliveries until the end of 2023.
Commenting on the situation, Dickie Wong, director of research at Kingston Securities Ltd., stated, “If I were to choose between the two, I would be putting my money on BYD as Tesla’s valuation is way too expensive.” Currently, Tesla trades at 67.4 times forward earnings, whereas BYD has a more conservative valuation at 24.8 times forward earnings.