I feel like sentiment has changed for Tesla since this latest shareholder meeting, the
vibes from Elon felt a lot more positive, it felt like he was excited and motivated
about Tesla again, perhaps due to some recent break-throughs.
Or maybe the fact that he can step down as CEO from Twitter, and concentrate more on
Tesla again.
But whatever it is, I feel a renewed energy in the stock price.
And by the looks of things I am not the only one, given the stock is up around 7% since
the meeting.
Makes me glad I bought that stock option just before, oh dear old habits.
It was just a small one, but it's doing well, I had a feeling.
Now the technical analysts might tell you that we could see a gap in the stock, and
if it hits 183, then it will reach 200, etc, and they could be right.
It could actually run to 200 again, which a lot of people doubted.
Tesla is a story stock, the company that is making the biggest impact on renewable energy
for the world.
However, there are times when that story feels less believable than others.
I mean if it does come into fruition then there is almost no limit to Tesla's stock
price, hence why FOMO can be so strong with Tesla, and how the stock price can sometimes
run to levels that are unfathomable for most stock analysts, let alone Tesla bears.
They can't comprehend it, and just say thinks like "but the p/e ratio is far too high for
an auto company".
Yet if the economy gets really bad, we may even see a negative p/e ratio, whilst Tesla
still grow their deliveries and production over the same period.
Why?
Because Tesla is not a car company.
I mean look at Apple and Microsoft's stock prices, they are almost back at all time highs,
even in these economic times.
Sure they have profits to support them too, but what about Amazon?
Its now only down about 35% from it's high, compared to Tesla down around 57%.
The narrative to Tesla being a car company got too strong, and has been caught up in
the cyclical side of the economy and recession, being conditioned as a car company.
And even if profits really dwindle, well the same is true with Amazon.
My point is that when the Tesla's story gets more believable in the market, then the company
is viewed more as a tech or AI company rather than a car company, and thus gets priced accordingly.
Tesla's story, or Master Plans as they refer to them, become more convincing that Tesla
might actually achieve them.
When we see Tesla deliver more on their promises and objectives then this also further reinforces
this narrative and belief.
Except we simply haven't seen anything happen for quite a long time now.
Really, in my opinion, there has been nothing tangibly impressive since Tesla managed to
upgrade the Shanghai facility and hit about triple volume production.
Since then we have seen very little, no major progress with 4680, a moderate ramp increase
in Berlin and Texas, an FSD update, but no game changers.
Yes, we had some announcements, and they did break ground on the lithium refinery.
But this is not major.
A lot of potential rumors too.
Once we start seeing more of these events actually materialize, then the sentiment becomes
stronger.
The Model 3 Highland and Mexico breaking ground are going to be the next two that re-enforce
this the most.
Which could be as early as next month.
Some people are expecting the Highland to even use the unboxed manufacturing technique.
I find this highly unlikely, Tesla have moved on from the Model 3, and are forward looking.
This car is about 1/2 million or units a year.
Elon just said the next two products are 5 million a year.
Do you really expect Tesla to put that much effort into the Model 3, when they have this
enormous fab in Mexico to contend with.
Do you really think that Tesla want to risk the Model 3 production being down for a unknown
period testing new manufacturing techniques.
Of course not, look how much difficultly the X and S facelifts created.
The Highland is just going to be a facelift to stimulate demand more, and a cost saving
exercise to match the new mass market price points and increase profit margins.
And then we will see Tesla do exactly the same again with the Model Y Juniper update
next year.
But still seeing a new Model 3 will give Tesla more energy, as it is feeling somewhat neglected
in someways, for the reasons I mentioned before.
However, the main energy for the stock this year, is likely going to the Cybertruck launch.
So many doubter as to that model ever even being produced.
Seeing it come off the production line is going to be huge for the company.
I mean this is a sensational product, there has never been anything like it.
It is an incredible engineering feat, which will remind people of what Tesla is truly
capable of.
And how they do have the best engineers, doing amazing things like this.
But seeing that Mexico factory break ground for me, will be big.
Then seeing drone videos of all the updates happening there, and how fast they are able
to build and get up and running.
Watching all the casting machines going into the factory, and all the other exciting things
we saw when they were building the other factories.
Of course eventually they will need to show us what they are intending on building there.
Right, the gen 3 product reveal.
Product?
No products, the two new products which is safe to infer a more compact Tesla and a van.
That are going to responsible for about the next 3x vehicle production growth, and take
us to 8 million units a year when fully ramped. 8 million, compared to around one and a half
last year.
Well over 5 times as many vehicles.
And if Tesla really have got production costs down to half a Model 3, then there will be
a lot of profit associated with these cars too.
And when you multiply a lot of profit by 8 million vehicles, then the stock price could
be wild.
Then backed by the potential chance of FSD sold on top of these vehicles, and then the
stock price literally goes further than the moon.
I mean that could still take years, but in the meantime its about how much people believe
it's happening, and if Tesla are proving that they are winning on other areas of the business,
then FSD also becomes more believable.
But either way, there is no other company close to a scalable, affordable solution to
FSD, because no one else is doing it.
So if you believe FSD is possible in the future, then Tesla is your best bet.
Same for bots, no one else is making an affordable, scalable bot, with AI.
No one is even close, let alone one with battery that can actually last a good part of the
day.
And if you believe bots will one day be in the future for consumer, then again Tesla
is your best bet.
I am also excited about Tesla's advertising, I hope that they actually do a decent campaign.
They have so much data about the demographics of Tesla owners, that Tesla can easily target
the right consumers, rather than a broad advertising campaign which will be less effective, and
cost more per customer.
People are talking about really low budgets though, some even in the 10s of thousands.
I hope and doubt this is the case.
I think Tesla should spend at least $25 million on a campaign.
If this increases demand by 25,000 vehicles a quarter, it only cost $1,000 per additional
unit for this extra demand.
And Tesla likely gross profit around $7,000 on the sale.
In other words an additional $6,000 operating profit per vehicle.
That is an amazing return.
And as Tesla increase their production, with more models, when we are up around 3 or 4
million, then we really could consider closer to a billion dollars a year on advertising,
particularly if Tesla has made some FSD break throughs, and can promote those in the advertising
too, as there is so much profit with each FSD sale its unreal.
I made a video recently about how Tesla could hit $300 this year.
I know it sounds hard to believe, but that's the thing, belief.
When we see Tesla delivering on these promises, the belief of the company and mission increases,
which in turn increases the stock price too.
Tesla don't need the profits to back it up, they need the story to be believed by investors,
and worried that they could miss out on the once in a generation opportunity of a world
changing company.
Then of course as the stock price rises, it encourages even more belief and FOMO, as the
market realizes this is an AI, Robotics, Tech company, not a car company.