I have been giving extra thought to Tesla's stock price lately, I guess this is partly
due to me trying to become more of a trader these days, of which I mean concentrating
on my trading more, not trading more of a my position. Remember I am 90% shares with
a hold strategy. And the vast majority of you are too, and don't care about the stock
price until 2030, blah blah.
STOCK PRICE But that's not really true is it, although
it is rationally true, its not mentally true. You care what the stock price will be in the
meantime, and you care what it is today, because you are human with all associated emotions
that come with the package. Seeing the stock price move up validates our preconceptions
more, and keeps us confident, makes us feel better, and makes us feel wealthier, despite
it not rising enough for us to ever consider selling.
I have really been trying to get in-tune more with the market, and how it will react to
Tesla, especially in this tough, unpredictable economic climate. My consensus is that the
market no longer cares much about the future, and is more concerned about the present. It
wants tangible assets with real returns. Hence why high dividend stocks are outperforming
growth stocks. Money has become more expensive, and is becoming even more expensive. When
it was pretty much free, you could throw money at investments that may not see a positive
return until perhaps as long as next decade. Companies like Quantumscape for example, which
had a high of $115, currently trading at around $10, oh wow, that's quite the drop. Or Rivian
$130 down to 33. These are huge drops in value. Investors are less patient in these economic
times.
TSLA The same applies to Tesla. Wow Robotaxis,
worth trillions of dollars, yea, sure, but not for some time still. It's really easy
to get ahead of ourselves, but as much as Tesla resembles a tech company, it is still
at the mercy of it's manufacturing, and Tesla makes really big products, the biggest mass
produced product segment in the world, not smartphones that are so small they can fit
in your hand, but products that are so large your entire body can fit inside them. They
take time to design, and scale.
In addition to that we faced COVID which set us back, and the future of the company hangs
on the success of the 4680 cell, which is clearly facing some issues, despite once past
said issues, it will likely be better than we were told on Battery Day. And I have been
vocal about how important the 4680 line is. Yes, its amazing that Tesla can ramp up to
such high levels on a production line in China, and can hopefully do even better than that
with their newest production techniques. But it still isn't enough to take us to some serious
returns, until we see 4680 cells ramp up.
NUMBERS Again the market doesn't seem to be taking
this seriously. I think the market wants real numbers. We should see around $5 billion in
earnings for Q3, compared to $3.3 billion in Q1. That's quite the jump, despite that
only being a 20% increase in deliveries, yet still over a 50% in profit. Again this is
the economies of scale kicking in more, along with some really high price increases.
I think this will move the stock somewhat, and we could see around $330 to 350, assuming
no major macro movements. Q4 should reach to about $7 billion in net
profit, which again I would hope it pushes the stock to around $400, perhaps 420.
EVENTS Yes sure, there are tons of other amazing
Tesla events happening, that all mean a lot to us, but I think we are too echo chambered,
and just because we understand it, it goes over just about everyone else's heads. Elon
will tell us something, and instantly we might think, wow that's worth an extra trillion
dollar valuation for Tesla, awesome, but the market doesn't see it that way. In fact often
the opposite, like what is this delusional CEO thinking, launching a vehicle that looks
like that. He has totally lost the plot and shouldn't be in charge of Tesla. I think we
have a lot more faith in Elon than the average person. Yet we see these miraculous engineering
feats that Elon is able to achieve, and we think, well if he can do that, then he can
probably do this.
And all the things Tesla have achieved to date, well that was when the stock price was
about 1/20 the price it was today. Well Tesla has added a ton more resources and hired a
lot more people to help them with this mission, and learned a thing or two on the way. Yet
since then we have still not seen any new innovation actually in any products. Perhaps
except the gigacasting, but the stock was still a lot lower even back then. Now don't
you think all the extra investment on R & D, and talent has gone somewhere? Anyway, that's
just for the fanboys to understand it would appear, as the rest of the market is missing
it all.
TANGIBLE So the market wants tangibility right now.
Which is going to come down to real numbers, production numbers and profits. Along with
new models and new factories.
STOCK RUN Now I talk about how Tesla's stock does move
in an S curve, but that doesn't mean it will triple overnight. It means it remains flat
for a few years, and then starts to run, for perhaps a further 6 to 12 months. I think
we will have a more comfortable price after Q4, but this could get hit down again with
further 4680 delays. In the meantime the company is going to be pretty much carried by China.
CHINA China has been carrying Tesla for sometime,
they have had great success there, and has been great for cash flow. The speed at which
they are producing cars there is phenomenal, the fact they are able to further ramp up
to much higher levels again is mind blowing, and hopefully an example of what we will also
see in Berlin and Texas. China will also expand further too. And CATL and BYD will continue
to supply Tesla with more cells to further help.
To be honest right now, Tesla China is the heart of this business. Hence why the lock
downs hurt so much. Berlin and Texas are not pulling their weight. But next year we should
hopefully see another China factory operational and no doubt cranking. The market will give
that value.
4680 However Q1 may suffer a little if we still
don't have 4680s, we still have sometime until we get there, but there will not be a significant
stock pile of 2170 cells remaining. In fact it may even be possible that Tesla are choosing
not to ramp up Texas and Berlin that much right now, because they dont want to deplete
the stock pile as fast, and would rather produce at 1,000 a week or so for the rest of the
year, than ramp it up to 2 or 3,000 and have none left for Q1. I would love to tell you
it will all be ok, but we don't know yet. However, Elon seems very confident about it.
I just like to see it for myself. And I can't wait, as it will make me re-value Tesla in
a big way, and I will take on a different investment strategy.
But once they are running, then wow, we will finally have the 4680 Model Y in production.
The best EV in the world in every way. But of course these cells need to be in full effect
by mid next year, as that is when the Cybertruck is launched.
CYBERTRUCK Assuming the Cybertruck is launched on time,
for lack of better word, then that is going to boost the stock. I mean its highly likely
there could be some production issues along the way, as this is a revolutionary new line,
but seeing the production increase month over month, will bolster a lot of confidence in
the company. And as people start seeing Cybertrucks on the road with their own eyes, then I think
that will also affect the stock price. Then the more it ramps the more the stock price
might follow. Along with the 4680 cells ramping and the Austin and Berlin Model Ys.
ECONOMY Meanwhile for the year we will be in a recession,
hopefully the FED have broken the back of inflation, without crashing the economy too
much. I mean they have to find a balance anyway, and from there towards the end of the year,
we might be seeing our way out of it, and ready for recovery. This will obviously take
a lot of the pressure off the market, and start to see some more reasonable p/e ratios
for a growth company such as Tesla.
SUMMARY So to sum up, the stock to potentially over
400 around Q4, possibly higher, but this market has some serious gravity, despite Tesla totally
going against it as best they can. Then a potential dip in Q1. Then the real run up
should be happening for the rest of the year. As Tesla really gets going with their new
factories, and we see some serious production, if they sort 4680s then we could have around
3 million deliveries for 2023. I would hope that it ends up hitting around $900 to $1000
stock price perhaps at the end of 2023 or early 2024 with all this. And it could probably
achieve that sitting at something like a p/e ratio 50, just as a very rough guess.
Even if I am really wrong, then what part am I wrong about? Well in my opinion being
really wrong, would likely mean perhaps I am a year off, which I would say is more like
really, really wrong. Well are you really going to be that upset if you triple your
money in 2 years time, instead of one year? Even if it took 10 years, then you have still
done very well, and I know how many shares a lot of you hold, and that should make for
a sweet retirement. When I invested in Tesla I wasn't hoping to get 10x return by about
2027. Sure I ran tons of scenarios where if this happened, and that happened, then it
could be higher, but none of them had me 20x by 2021. There is always, what I like to call,
the Tesla and Elon magic. Or as Elon has even said pulling a rabbit out of a hat. This is
something that Tesla does. And I don't think anyone puts this magic into their estimates.