We have been so busy commenting, and speculating on what we heard from the Q4 earnings, and
so much new info about the company, that, its only 5 weeks until Q1 2022 is wrapped
up.
And then we will go through all of this again, delivery numbers, etc.
Except I haven't heard anyone talk much about this quarter, no one has ever drawn much excitement
towards it.
We were actually expecting it to be somewhat disappointing, as costs would have been higher,
due to the new factories coming online.
Except, that doesn't appear likely to be a thing now does it?
Elon has even announced the opening party for Texas on the 7th of April, so we can only
imagine the official opening is around that date, possibly at the start of April, as Elon
did initially say April 1st, only to realize that was actually April Fools day, whether
intended or not, it was quite funny.
We also aren't expecting Berlin to come online this quarter either.
Disappointing I know, but don't be too distracted.
Don't let Wall Street get you down about the stock.
The market is feeling very depressed right now, and still punishing Tesla.
The thing is Tesla continues to out perform the market's expectations.
And despite not having the two new factories online this quarter, and having fewer deliveries,
is perhaps what Tesla is being punished for, but these new factories aren't going to be
able to hurt profit margin either.
You see, the new factories could be running at a loss to start with, or at least lower
margins.
It's not that Tesla can't ramp up fast enough, they will be limited by the chip supply they
have available to them.
Therefore this will hurt margins, until more chips become available, which they very likely
will.
Therefore, we could actually still see quite a profitable Q1.
Don't forget in Q4 we just saw all those extra expenses selling general and admin, potentially
as high as $700 million, which won't be in there this quarter.
That is going to have a huge impact of profits.
We should see profit margins up much higher, mainly due to all these price rises from last
year catching up, and further adding to profits.
We noticed this in quite a major way last quarter, and it should be felt even more so
this quarter.
Some prices of some models in some markets are up as high as 20% over the year.
In addition to that further ramping of the high end S and X, will also also increase
the average selling price somewhat.
Would it be unreasonable to even think that we could see profit margins as high as 32%?
I think so.
We are expecting more ramping to be coming out of Fremont, the main reason I think for
this, is Tesla freeing up more 2170 batteries as the standard ranges are using LFP batteries.
Thus improving battery supply, and being less battery constrained.
Implying the Model Y will be more ramped up than the Model 3.
We were told Fremont should expand 50% this year in production.
What a jump from what is the oldest facility, and the only non-purpose built facility out
of all the vehicle factories.
Yet 12 years later since Tesla bought the fab, they are still able to improve production
a further 50% year over year.
That is a huge improvement in efficiency.
Numbers like what we have seen China is capable of.
We are hearing around 68,000 units produced in January.
That many already, in the first month of the quarter.
Whoa, this is likely the start of the new batteries that Tesla are receiving from CATL
up the road.
Thus likely also lower cost, saving in a lot of transportation and likely also a lower
production cost too.
I know February is a shorter month, but perhaps March can make up for it, and China alone
could reach 210,000.
My previous estimate was 200,000 from China, but I will explain why this may be higher
at the end of the video.
We don't know to what level we might expect come out of there.
We have a good idea of how many batteries CATL will have, and we have a good idea what
run rate Tesla are capable of there, or what we have witnessed in the past, and they happen
to be about about the same.
Something in region of 1.3 million units a year.
I haven't done a forecast for the earnings for Q1, but if you would like me to have a
go this early on, then let me know.
But it should hopefully still be a good jump from Q4 one way or another.
It was about this time of the quarter last quarter when I did my base, bull and bear
case, and if you recall my base case was just 1,000 deliveries off the actual number.
Let me know if you want me to cover all 3 cases again.
One more thing though I think will help, is this quarter will have a major correction
with the trailing twelve month p/e ratio.
You see around Q1 2021, Tesla had only recently broken even still, and profits were low.
Q1 2021 earnings were only $438m, we are about to replace that figure with Q1 2022 for the
trailing twelve months earnings.
Tesla is currently being valued on the p/e ratio from the trailing twelve months now
totaling $5.5 billion.
If Q1 2022 is for example $3.5 billion.
Then this changes our total to $8.5 billion, a 55% increase in trailing twelve month earnings.
Which would thus have the same effect on the trailing twelve month p/e ratio, reducing
it down from 164 to 96, at the current stock price of $805 at the time of this video.
Because we have replaced $400m of earnings with $3.5 billion, that's a big difference.
Except this isn't a quarter sometime next year, we are talking about the current quarter
that ends next month.
This is soon.
Everyone has been too distracted with what was said on Q4, and the progress of the new
factories, that once again, the existing factories have snuck up and surprised us.
That Shanghai factory is always surprising us.
Capable of 4 times the capacity we were initially told, and ramping there quickly.
Yet the stock price is lower now, than over a year ago when this factory first opened,
and despite it doing so much more than we thought, we are still in a time of a lower
stock price.
Do you get it?
Tesla are likely capable of 4 or 5 times as much capacity from their factories than we
thought, when the stock price was higher.
I am continue looking at different angles in which to value Tesla.
I don't know how many of my videos end up pointing out just how low the stock price
feels, but it does feel low to me.
I don't say this as a complaint.
I am not frustrated or angry, and shouting at the market to buy more Tesla.
I am grown up enough to understand the stock will not do what you want it to.
I am merely pointing out how I feel about the stock price, based on my research.
And I will use that knowledge to my best ability.
Likely by attempting to build a larger position in Tesla.
Of course this is not me telling you to buy Tesla because it's cheap either, it may always
get cheaper.
I bought some more when the stock price was $780.
But we all have different strategies and are in different positions with different targets.
What it is I try and point out, is that one day the market will likely catch up and realize
how cheap Tesla stock is, and we will make a good return
I know it sounds trite, but there's a reason everyone says it, for your shares, if you
are holding for the next 5 to 10 years, then it's of little consequence of how the stock
is performing today.
Unless of course, you are still building your position, in which case it means in reality,
you want the stock price to go down.
That is in a sense the rational thing to hope for.
But emotionally we want validation that our pick has won, and that we were right.
Especially very much so with a stock like Tesla, where there is so much negativity,
and FUD, against it.
The media don't like Tesla because they are not an advertiser, aka a customer.
And after the way the media has treated Tesla, perhaps if Tesla ever did advertise, then
it would not be through the conventional forms.
In fact I would say that most of us would agree, that if Tesla started advertising,
then it would not be like any advertising we have ever seen before.
And the government don't like Tesla because Tesla spend very little in the way of lobbying,
or donations.
Despite having to deal with these two headwinds we are all still here today.
So now Tesla's stock price is down, and we are all waiting for an event to boost it back
up.
We have been waiting so long, that it wont be too long until the next quarter actually
rolls around.
There is a high chance that this quarter is particularly good too, due to those reasons
I mentioned.
The higher margins, and more ramping up, and potentially as much as $700m less in OPEX.
Tesla hasn't stopped getting stronger and growing in other areas, just because we are
waiting for these new factories.
I keep telling you, this company is not messing around.
This is an important quarter then.
For some reason every quarter seems so important.
There's always something.
Alright, but this could be a big quarter.
At a guess perhaps another 50% increase in earnings.
But surely if not quite that high, then even if it was just 30%, i.e. just $3 billion in
profits, it would be enough to start moving the stock again.
People seem to have forgotten how much of this company is valued as a car company, and
that when the profits jump that much, it reminds them again, just how much Tesla is capable
of growing, and how valuable it truly has become.
And what happens when you have a huge margin, on large capital items, that gets better.
Now, I do have one other theory, that despite the fact we don't have these new factories
online this quarter, well that perhaps there were chips that were earmarked for those factories,
that can now be used in other factories such as Fremont and Shanghai.
China is capable of these really fast production speeds we have seen, and CATL has the battery
supply necessary.
Perhaps then, that any lack of production from the new factories will just be made up
for in Shanghai and possibly Fremont.
The chips and possibly batteries, or scarce parts, can be used elsewhere.
Anyway, I will stat work on my earnings forecast for Q1, as think it could be good.
Tesla's stock price appear to be being punished more than others, I hope this Q1 reminds people
again of Tesla's power.