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      Tesla vs IBM: The Investment Faceoff

      By Wasim Omar

      Published on

      December 20, 2023

      12:23 PM UTC

      Tesla vs IBM: The Investment Faceoff

      Tesla Inc. (TSLA) and International Business Machines Corp. (IBM) are two US stocks that are among the biggest names in the global tech sphere, with each representing innovation in different aspects.

      Today we pit Tesla, the electric vehicle juggernaut, against the stalwart International Business Machines Corporation.

      Tesla, a trailblazer in electric vehicles and energy solutions, dazzles with its Automotive and Energy Generation and Storage segments.

      On the flip side, IBM, a tech titan, operates on a global scale, delivering integrated solutions through its Software, Consulting, Infrastructure, and Financing segments.

      As stock market participants and traders seek the optimal path, this showdown of Tesla vs IBM unveils contrasting philosophies – Tesla’s disruptive agility versus IBM’s established versatility. Will the allure of Tesla’s visionary pursuits triumph over IBM’s time-tested resilience?

      Join us in dissecting the financial landscape as we explore the captivating clash between these industry giants: Tesla vs IBM.

      AI Assessment

      Tesla vs IBM are navigating the AI landscape through distinct approaches. Tesla’s emphasis on AI software is underscored by substantial investments in a colossal supercomputer, evidencing a doubled computing capacity in Q3 2023.

      This expansion underscores Tesla’s commitment to propelling Full Self-Driving (FSD) technology efficiency.

      Leveraging data from its extensive vehicle fleet, Tesla has logged over 500 million cumulative miles with FSD Beta by Q3 2023, showcasing a reliance on real-world data to refine autonomous driving.

      Conversely, IBM strategically directs its AI endeavors toward enterprise solutions rather than consumer applications, based on a number of news reports.

      With the introduction of watsonx, IBM positions itself as an enterprise AI leader, capitalizing on its longstanding innovation in the AI domain. Foregoing the consumer AI race, IBM focuses on creating a formidable moat in the enterprise sector.

      Recognized by influential platforms like Gartner, IBM’s enterprise AI leadership is poised to attract businesses seeking efficiency enhancements through AI deployment.

      While consumer AI has seen recent surges, industry experts maintain that enterprise AI, especially championed by IBM, will yield superior long-term revenue and a more robust business approach.

      The rationale lies in enterprises’ substantial financial capacity to invest in IBM’s solutions, anticipating increased energy and cost efficiency.

      IBM’s AI roadmap anticipates significant advancements in the next two years, aligning with the projected 37.3% growth in the global AI market through 2030.

      As IBM solidifies its position in enterprise AI, the company stands poised to capture a substantial share of this transforming market.

      Value Comparison

      Tesla’s current valuation reflects a mixed picture. Trading at an EV to Revenue multiple of 7.7x, below its historical average, suggests a degree of undervaluation.

      Yet, a Forward P/E Ratio nearing 60x indicates a hefty premium. The downward revisions in analysts’ 2024 estimates, coupled with a 40% reduction in EPS and a 17% decrease in revenue expectations, raise concerns.

      Despite this, Tesla’s stock has surged over 120% YTD, creating a notable disconnect.

      Analysts that have employed the discounted cash flow (“DCF”) model, assuming moderate growth and expanding margins, suggest Tesla is trading close to fair value.

      Projecting $422B in Revenue and $78B in FCF by 2032, the intrinsic value lands at $222 per share, aligning closely with the current price of $239.

      While I view Tesla favorably for the long term, the lack of a sufficient margin of safety tempers a strong buy recommendation.

      In contrast, IBM presents an interesting opportunity. Leveraging its consulting business around AI solutions, IBM’s forward EBITDA multiple of 12.4x is above peers but below its historical average.

      With a focus on software services growth and an implied undervaluation compared to SaaS peers, IBM’s turnaround story suggests a potential long-term uptrend bias, in light of the broader Tesla vs IBM comparison.

      Investors may find IBM’s current valuation and growth prospects appealing amid recent positive developments.

      Final Takeaway

      In the clash of Tesla vs IBM, Tesla’s disruptive prowess and IBM’s strategic resilience take center stage.

      While Tesla accelerates Full Self-Driving tech with real-world data, IBM charts a course in enterprise AI, poised for sustained growth. Investors weigh Tesla’s undervaluation amid concerns and IBM’s compelling turnaround story with potential uptrend bias.

      As the giants navigate distinct paths in the evolving tech landscape, the call is yours: embrace Tesla’s visionary agility or bet on IBM’s enterprise prowess.

      The tech showdown illuminates divergent philosophies, urging investors to discern between Tesla’s innovation and IBM’s proven versatility for a strategic investment in the dynamic tech realm.

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