We are all enjoying and celebrating these latest stock prices with Tesla. It's been
an insane run to say the least. But appears to have lost some steam for now, likely still
due to the FED threatening more rate hikes. We did see huge gains and a pullback was to
be expected. Although it was mainly macros, Tesla just got hit a little harder due to
it's volatility. However, it would appear the vast majority of Tesla investors are still
expecting to see 300, and most thinking within the next few months too. Is that possible,
will the stock hold at these levels?
Well as we are nearing closer to the Cybertruck launch, I don't think many investors want
to sell before then. In about a months time there will be an earnings call, and I would
pretty much guarantee, that there are a few questions asked about the Cybertruck. Most
likely one that will require Elon giving us an estimate as to whether we are still on
target for the Cybertruck delivery event, which many are saying as early as September,
due to deliveries supposedly at the end of Q3. This will be the event where we finally
get the latest Cybertruck specifications, an update from almost 4 years ago now, since
the launch event.
Perhaps Elon might push it back to October or even November, but I would say as long
as its this year, we are good. It's more about the fact that it will actually happen. If
Elon actually said something like October 21st will be the Cybertruck delivery event,
then that would amazing, to actually get a date finally locked in. And the stock would
run, possibly all the way to the event, and might pull back a little after it, judging
by the past mantra of many Tesla traders of buy the rumor, sell the news. But I wouldn't
say a massive drop in the price, and stock could still keep running with the market,
and seeing more Cybertruck progress, along with other Tesla events coming up.
The stock has been sitting around $250 to 300 for a large part of the last 2 and a half
years. This might be where the stock naturally sits. Although since that time the company
has grown a lot. Producing about two and half as many vehicles, oh and 2 more enormous factories,
with plans to build an even bigger one, and mention another location at the end of the
year, and finally expand Giga Nevada. All up probably doubling the existing factory
space there is currently, and almost tripling current run rates.
I mean I am of the thought now, that nothing can surprise me, especially when it comes
to Tesla and there is a real chance that we could actually see a new all time high this
year, if things go well enough, and Tesla achieves everything it said. However, whatever
the high is for the year, will it hold, or even keep rising? Eventually investors are
going to want to see some growth in the earnings too. It's great that FSD is progressing so
well, but no one knows when it will be ready, and even all the bulls have mixed opinions.
Although there are some really bullish bulls, which I think are almost a delusional as to
how successful Tesla could really be. I think whatever Tesla is becoming, is still going
to take time. But there is a saying, that you over estimate what you can do in a year,
but underestimate what you can do in a decade. We are still not even half way through this
decade yet, and look what Tesla have achieved. In the second half could Tesla could really
grow, as we see things compound.
Not just compounding, but exponentials are in play too. Tesla are building new factories,
but these new factories have improved manufacturing techniques that mean Tesla can produce vehicles
at a faster pace. So more factories, with higher outputs. Producing vehicles at a lower
cost with potentially higher demand. There is lots of growth on the horizon to come.
However, there will be a bit of a lull next year, at least in the financials. I think
going by the current run rate and progress of Model 3 and Y, the Cybertruck ramped up,
and energy ramped up, then we are probably not far off $20 billion in earnings at a guess.
This isn't going to be until the end of 2024 though. For the rest of 2024, Cybertruck will
reduce earnings due to the running costs, and if Mexico is complete in the year, it
will also be a big drain on cash.
Next year the stock will depend on progress with the Mexico build, and ramping of the
Cybertruck, at least going by what we know today. Financials wont mean much. The lower
prices for Y and 3 are priced in already. In fact the market is probably expecting some
cuts in rates, which may even mean we get to see higher margins again. Also there is
the $7,500 tax credit which turns into a rebate at point of sale in the US, which I would
expect to have more effect on demand.
Could the stock keep running next year too, again disclosure as always assuming there
are no black swan events or financial melt downs, that affect the economy. What about
hitting $500. Does that sound like a possibility?
Well that would be a market cap of around $1.5 trillion, only 20% higher than the all
time high. It would mean that at a p/e ratio of just 50, Tesla would only need to produce
$30 billion in earnings. And like we said Tesla wouldn't be far off $20 billion at the
end of next year, if we completely exclude Mexico, which could quite possibly contribute
a further $10 billion in earnings, and another $10 billion after its expansion. And I am
not including FSD. And like I said a p/e of 50 and Tesla is currently at a p/e of 75.
On the other hand, I think there are Tesla investors becoming too arrogant, almost mocking
the likes of Buffet and Munger for not investing in Tesla. Berkshire Hathaway have their own
strategy that has worked exceedingly well in the past. A lot of their best investments
are the ones they don't make, like how they steered clear of the .com bubble. Berkshire
Hathaway does value investing, Tesla is anything but a value stock. Tesla has a p/e ratio of
75, Apple is 30, but Warren was buying it in December when it was around 20. Because
that is their strategy. And perhaps they would consider Tesla, if it went down to 20, but
it won't because its not a value stock, its a high growth tech stock.
Other investors thinking that Robotaxis are going to be out next year. I think investors
are getting ahead of themselves somewhat. I know it feels really good the stock is up
again, but try to remain grounded and realistic. Expanding manufacturing for vehicles takes
a long time, especially for EVs, and solving FSD, well I am going to take a stab in the
dark, and guess that it wont be ready this year either. It will take time too. The point
is though, that Tesla is popular again in the market, and investors are believing more
again in what the company can achieve, and as the belief becomes stronger in FSD and
potentially Robotaxis, then that p/e ratio can get high. Seeing the Cybertruck launch,
will increase that same confidence further.
Elon hasn't set the bar that high for us lately. Not like he had in the past, with 100 GWh
of 4680 production we were meant to see last year, or FSD safer than a human. And the market
hardly prices in any of Elon's FSD estimates now anyway. It knows Tesla are the furthest
ahead, making the best progress, and it is worth a fortune to whomever gets their first.
And Tesla will get there first, and there will be no competition, it will be a monopoly,
and every other auto OEM will have to license Tesla's tech. I really don't know how anyone
else can compete, or gather enough data to come close.
So as long as Cybertruck doesn't run into too many production issues, of course there
will likely be some, but hopefully not some sort of new production hell, and as long as
there is a noticeable increase in progress, the stock should hold. And as for Mexico,
well Tesla have demonstrated they excel at building factories, Texas went up in an insane
amount of time, and ok sure Berlin dragged on a little at the end, but that was more
to do with all the red tape that you get in Germany. Mexico is even rumored to go up faster
than Shanghai.
Elon did say he expected 4680s to ramp next year too, but I don't even think many people
remember that, or even talk about it much, and thus if we don't see much progress there
next year, I can't see it affecting the stock, however if we do get a big ramp, then that
will look good. The big shiny cybertruck will get more attention most likely anyway. There
should be some 4680 ramping though, I mean there are 3 more lines in Texas to start running
anyway, which should add up. I think that 2.4 million units produced might be about
all they reach though. Which is still about 30% increase from this year, depending on
where we get to. I think investors will be accepting of that. And the excitement will
turn to how many units Mexico can do.