Tesla has been crashing for the last 2 weeks, due to the unfortunate events in Ukraine and
Russia. I don't want to speculate on how those events may unfold, there are people more credible
than me on that. I just want to hope for the best, and my thoughts are with the people
in Ukraine.
Over these last 2 weeks we saw the stock drop from the mid-900s, after it had already taken
a beating from the Fed. The stock dropped all the way down, even dipping into the 600s.
Over 40% drop from its all time high as early back as january.
he questions we really want to know is could it dip further? How long may it remain down?
And when might we see it jump back?
Let's begin with the first question, of how low might it go. There are some people throwing
out numbers of around $500. We always hear stupid numbers, but if Tesla has dropped below
half from its all time high in the past, and it wasn't far off time either. However, back
then there was no real yardstick, Tesla were not making any profit the market wasn't sure
Tesla were capable of achieving the unachievable. Tesla hadn't even proven themselves on manufacturing,
let alone demand, or making a profit.
Now, we have a p/e ratio as a yard stick. And if Q1 is going to be perhaps 3.5 billion
in earnings. If we annualize that we have 14 billion earnings. Tesla is $830 right now.
Tesla currently has a market cap of around $830 billion at the time of this video. Just
to point out 830 divided by 14 is 59. Implied almost a p/e ratio of about 59 at Tesla's
upcoming Q1.
How low will Tesla go? Well what say the stock dropped to $500. Same math, divide it by 14,
and we get 35. Helloooooo!!! If Tesla dropped to 35 we have a p/e ratio of 36, and this
doesn't even factor in depreciation, or armotization, and a lot of other growth areas.
But Even at a p/e ratio of 60, for Tesla, in this day and age is unexpected.
And what about 2022 Q4 though, estimate to be about $5.5 billion earnings, becoming $22
billion annualized. Well at the current stock price this would end up becoming a p/e ratio
of 830 divided by 22, which would also be a p/e of 37.
I am not saying the stock wont be absolutely crazy, and obviously it all depends on yet
another major macro issue. Right now they are really trying to shake out all the paper
hands. Maybe its a plot to shake out as many weak investors out of the market, before it
shoots up to record highs.
When the market loses perspective, make sure you maintain yours. It is ridiculous to have
Tesla sitting around these future p/e levels, Tesla have a long way to go. I bought on this
dip, when the stock price was $780. I bought a LEAPS that has an expiry of january 2024,
and expiration date of $900 for a price of $210 a share. I sold 30 shares to do this.
When others are fearful, be greedy. This is 2 years out, and although I haven't done my
forecasts yet, I have some idea. But in reality, it's allowing Tesla enough time to ramp up
to volume production for 4680s. I am hoping by the time 2024 has come along Tesla have
reached a good run rate, it could be between 100 Gwh or 250. Either way 100 GWh is enough
for one and half million more cars, i.e. from Texas. Implying that if the other factories
combined even did only 2 million, then there should 3.5 million vehicle run rate by 2024.
Even at 3 million though, we have broken past all sorts of barriers of economies of scale,
thus reducing costs, whilst also improving manufacturing techniques resulting in improved
gross margins, resulting in stellar profits.
What Tesla is trying to achieve is close to impossible. Clearly if it's this hard for
Tesla, no one is coming close for sometime. Hence why just in case I am allowing Tesla
2 years to really prove themselves. Over that time all sorts of other things could have
happened in the company. We should have seen some FSD advances for example.
Anyway, we all understand this is a long term thing. My point is perspective, when Tesla
drops. I can't see Tesla trading sideways for 10 years or something, like what happened
to Microsoft after the .com bubble. It actually took something like 17 years for Microsoft
to recover from the .com boom. Yet if you bought it at the peak of the bubble, you would
still be up 5 times your money today. But that was a long boring difficult HODL.
Even in a recession, it will take a lot to hold back Tesla's demand. The EV industry
is growing rapidly, and AVs will grow at an even faster rate again. If Tesla can 10x earnings
within a couple of years then the stock price will take some notice of that. We might be
in for a bit of wait again though until these earnings put some serious wind in the sails.
Particularly with the new factories, likely to affect earnings.
Visualize this for a second, picture yourself in the future, one year from now, checking
the stock price, and Tesla showing a p/e ratio of 35, or even 50. It doesn't look right does
it? Assuming Tesla hit these production estimates, and profits. It's investing, so nothing is
guaranteed, but Tesla's Q1 ends in weeks now. This should lock in some good profits. Offering
a better base for Tesla's stock price.
Who knows, if Tesla don't release FSD soon, perhaps the market will crucify Tesla as a
robotics AI company, and say it is solely a car company. Of course even if it's just
a car company, it's still an EV company, which mature should still warrant a p/e much higher
than an internal combustion car company, somewhere between 20 and 30 would be my guess. Especially
given all the future technology improvements and cost reductions to come. The point is,
even if that was the p/e ratio Tesla was given, Tesla's earnings could still grow out of that
in 2 years.
Tesla failing in FSD takes Tesla out of the AV industry, which has a very high p/e, and
places Tesla into the EV industry, although the Tesla is more of a smart vehicle than
just electric. Either way, it wont be in the ICE industry.
Remember these p/e ratios are also struggling due to having to give up so much more profit
due to unions and car dealers, among other things. The EV industry can sport a higher
for p/e ratio for these reasons also.
Historically it has dropped half from hits all time high before, which is going to take
the stock to low $600s. At this price all our heads will be spinning, I mean hopefully
it's this reason due to the mass hysteria of the market, not some catastrophic event.
I mean, if it is down that low for that reason. Although the buying opportunity looks tremendous,
that is probably a bit more red than pains me to see. I am content with my Tesla holdings
currently, and ready to move on now, and see the stock grow again, save the buying for
the next dip.
Anyway, markets are mad, and there are some serious macro threats, so it could drop to
anything, but I think the support of Q1 might hold up for the time being. After that, hopefully
the new factories. But after that, if the macro environment is not stable, then its
anyone's guess. However if it is stable enough, then I think we could see the stock flat for
most of the year, along with some dips, especially if we run into some issues with the new factories
and production lines. Plenty of potential pot holes there that could tank the stock,
offering more buying opportunities.
Unless we are being heavily sandbagged, and Tesla will produce an absolutely insane amount
of 4680 batteries from Texas in the near future. Therefore I can't see it remaining down anything
like $700 by Q4. There is enough reason and possibility combined with FUD and market manipulation
for the stock to remain sub 1000 for a good part of the year. Again, Q4 should hopefully
be the savior here, but that will be very much come down to 4680 ramping. I.e. 4680s
are the savior and the main thing to keep an eye on. Just like I have been saying all
last year. Of course, don't get disracted and ignore whats going on in China at the
same time.
You could look at China as a different operation. The US, and eventually Berlin, they will be
using a lot of 4680 batteries, and the advances in production will depend on 4680 progress.
Whereas China is a different kettle of fish. It will depend on CATL's LFP ramping. Tesla's
Shanghai operations will grow as fast as CATL can ramp up their batteries.
Then once the chips are once again abundant, quite possibly in Q4, then Tesla can go full
blast. Now this I would think would be a big enough boost to move the stock. I mean my
price target is $1500 for this, but I know some of you right now would be happy enough
just to see it back at $1200. I know how some of you feel, I have been there
before, and am there now of course. But this is Tesla, a lot of Tesla investors have made
a lot of money by holding through these sufferings. Sure, it gets easier each time in some ways,
as you get used to it, and because you are likely up more each time too. Of course the
loss is higher the more you accumulate, as you have more to lose. But that's Tesla, no
one said it was going to be easy.
Just invest in Tesla here, and you simply put as much money in as you can, and then
ride in the escalator as the stock price increase each day until its up 10x. Simple and easy,
and your a millionaire. No, it will test you, and hurt you, and make you pay. Just remember
how early days we are still in, and how relatively young Tesla still is.
Tesla is a serious work out for investors. If you can handle Tesla, then any other stocks
should be a walk in the park. Despite how hard it may be to HODL Tesla, the rewards
are more than worth it.
As long as Tesla's demand holds up, then eventually that stock price will catch up. Tesla has
been overly punished too, especially compared to the rest of the market. The market clearly
doesn't understand it yet.
To summarize our original questions, if it drops as low as sub 600, then putting it into
perspective to Q1 and future earnings it seems very low. But it would depend on what took
us to that level. Then I am suggesting it may take until Q4 earnings to put the stock
straight again, after it possibly being flat for a large part of the year. The stock price
trading range during this flat period will be dependent on macros.