Yes, it's a great feeling that Tesla is at its high for the year, and still feeling strong.
But to think it could hit $500, really?
$400 almost might feel like a stretch, maybe even 300 if we are lucky this year.
Well I am not suggesting this year to 500, but a possibility that it could indeed hit
500 next year, of course as always subject to negative black swan events or a financial
crisis of sorts, all of which is a possibility, and I could make a video on why Tesla could
drop below 200 next year too.
But those events are only temporary, and eventually the economy recovers and value is restored
in the stock market.
So rather than focus on total unknown future events that may or may not occur, lets focus
on things that we know that are on the way, and how that could actually affect the stock
price.
I am of the belief that Tesla's stock price naturally sits around $250 to 350, depending
on what level of bipolar disorder the market is currently feeling.
Yes, Tesla had a massive scare at the start of the year, and it shocked the system, but
it found the new norm, and the main potential of the company still remains, i.e. the AI
technology.
And since the likes of Chat GPT the market has decided that AI really is going from science
fiction, to science reality, and thus by association so is Tesla's FSD.
We have seen now the market is valuing Tesla as a tech AI company, and not a car company.
The stock price is still recovering from this shock, but has been gathering momentum, and
seems to be on its way to 300, after 300, then there is no telling what it could break
through too, possibly it will gap up to 330 according to technical analysts.
After 330, Tesla only needs to increase about 25% in order to hit its new all time high.
At that price Tesla would be up nearly triple from the bottom of the year.
And you know what, Tesla have done pretty much nothing all year, and its still increased
that much.
All that has happened is production numbers have increased 9% compared to Q4.
That is it, and a slight increase in energy, but relatively tiny in dollar terms, although
fairly decent in percent growth.
Now the main reason was that Tesla was over sold.
The CEO dropped billions of dollars of shares on the open market, institutions left, margins
got called, short sellers had a feel day, there was a flash recession, interest rates
were high, Tesla had to lower prices, Q4 was not epic, 4680s hadn't made any decent progress,
Model Y didn't qualify for the tax credit, it was scary times.
So the vast majority of this is the recovery from these extreme events that hit the stock
all at once.
The market has since decided to look more favorably, Tesla are still able to sell almost
all the vehicles they make, with these new price points and still make a decent profit,
and don't appear to have to drop prices any further.
But internally what have we seen from the company this year?
Texas opened its 4680 line, but nothing substantial or exciting to report there.
And Tesla broke ground on the lithium refinery.
Some FSD updates.
The rest has just been announcements, giga nevada, giga texas, a covert Model 3 update,
an unknown gen 3 vehicle with revolutionary new manufacturing techniques, and a Cybertruck
delivery event.
What hasn't happened is a serious 4680 ramp, breaking ground on texas or nevada, a gen
3 reveal, a Highland launch, or a Cybertruck delivery event.
Yet the stock is nearly at $300 already, and could possibly run to 300 this week.
Do you get it?
This price point for the stock is Tesla's natural price range.
These events that have been announced haven't even happened yet, and we are still at almost
300.
What's going to happen when we actually see progress with them too?
The market is going to get a big reminder of the level of growth that Tesla is capable
at times.
The only reason we have had a slow down in growth, is because the 2 new factories were
designed around cells that turned out to be a lot harder to produce than was initially
realized.
It's the direction Tesla went in, and it may have been a bit early.
But Tesla still have massive growth targets, and are not relying on 4680 cells for this
next phase.
We have CATL's new cells that are almost as energy dense as 2170 cells yet the same cost
as LFP, and are a lot easier to produce than 2170s.
CATL have built a massive 80 to 100 GWh factory right next to Giga Shanghai.
They are going to build an equally big one in Texas and/or Mexico.
That's enough cells for 3 and half to 4 million more vehicles.
Or at $150 profit per kWh $27 billion more gross profit, probably taking the entire gross
profit to around $50 billion when all complete, or more if there have been further advances
in other areas of the business.
That is a lot of gross profit from any perspective.
The Model 3 Highland is more important than people realize.
It's not just a new car, its a new battery.
It means more efficiency, longer range, better value, better performance, and likely more
demand and more profit.
But it doesn't stop there.
The old batteries will then be used in the Megapack factories.
As Model 3 Highland ramps, energy will ramp.
Tesla is mainly thought o as a save the world from climate change company.
And going into two areas to accomplish this, transport and energy.
Tesla has barely touched energy, once we see the Model 3 Highland ramp with these new cells,
then that will equally mean that energy can ramp up with the old cells that were being
used.
This was the whole point of the megapack factories, to take up the excess LFP cells.
What would be the point of making new factories for old technology, LFP cells, when CATL can
make factories for M3P cells that have more energy density for the same cost.
That is the future, and makes all the difference for Tesla too, to get that 10% more energy
density, and offer that much more range on vehicles.
Anyway, it will really result in the energy side of the business increasing, and we will
start seeing huge percentage increases in production there.
This will look very favorably for the company, as it is essentially the other half of the
business which has only been contributing minimally, and barely even been profitable.
It may also result in a new LFP Powerwall, which might cost a lot less than the existing
ones, making powerwalls far more feasible, and a justified for many homeowners.
The big update though, is going to be the Model Y Juniper update, the equivalent of
the Highland for the Model Y.
Again, it will use the new cells, and free up a more LFP cells.
These will likely be for the new megapack factory that is going to be in Shanghai.
Again this will cause a huge increase in the energy side of the business.
And it will be noticed.
It will be up to around 80 GWh a year, which is about the current supply of LFP cells Tesla
currently have.
40 GWh from Shanghai and 40 GWh from Lathrop.
Probably producing around $10 billion gross profit a year, or slightly more even.
Not to mention all the additional demand Tesla will get from the Model Y Juniper as it will
have a new battery that also offers more range.
Then Mexico breaking ground, and progressing hopefully at a good rate there.
I think we will see cars coming off the line next year.
I would hope at around Q3 next year, but potentially not until Q4.
Either way, its going to be an insane factory, and will be a great catalyst for the stock
too.
Not to mention the Cybertruck, that car is a driving advertisement for Tesla's engineering
capabilities.
$500 isn't necessarily my price target, this is me suggesting that if the market is valuing
Tesla at around 300 now, then seeing all these other events come into fruition will take
Tesla to new all time highs.
If Nvidia and Apple can hit all time highs already, without anything close the amount
of events that Tesla has on the way, just next year alone.
And I didn't even mention FSD or Robots.
FSD looks likely to make some really good progress this year and next too.
I just wouldn't be that surprised it we did hit $500, don't get me wrong, it could be
a lot through FOMO, and dip back down to 300 or lower again, it's Tesla remember, sometimes
the exuberance will push the stock price further than the fundamentals can keep up with.
Tesla's main product is EVs, and they require a lot capital intensive factories to get there,
which does take time, and the excitement in the markets comes and goes.
Stocks are often like a popularity contest, sometimes they are popular sometimes they
aren't all depending on what the market thinks, or what internal break throughs may also occur.