This Q2 is still looking ugly, well actually it's looking even uglier with all the inflation
nonsense, we are seeing Tesla stock at prices we never again expected. But that's the thing
with Tesla is it will always drop again, until it goes through it's next cycle. And now I
am doing something about all these massive swings in the price, and finally I am trading
through. Although I didn't get the bottom of this dip, or is it the bottom yet? Well
lets talk about how much uglier things may get.
Of course we don't appear to yet be out of
the woods in China either. Shanghai is really what is required to carry this company. It
carried the company last year, and it's going to need to carry the company this year, which
makes it doubly hard if it's locked down or suffering supply chain issues. We did hear
how quickly Shanghai were able to get back to 80% production level within about a week
or two from the shut downs in April. With targets to hit 2600 vehicles a day by 16th
May, according to Reuters.
2600 vehicles a day, in China alone, that is huge. If it continued at that pace with
no downtime then thats 950,000 a year. Look lets face it, China is pretty much already
at a million run rate, when their ducks are in a row, it should be in excess of a million
by the end of the year, including downtime. If we ever had an inkling China china was
going to be that big that soon, back at the start of last year, then Tesla's stock price
would have likely surpassed $1000 then. The stock was the same price in December 2020
as it is at the time of this video, and look how much has happened since, China expansion,
4680 cells with structural batteries and front and rear castings, 2 new massive state of
the art giga factories, FSD Beta progress, Plaid the fastest production car on the planet,
even humanoid bots announced. We also went from a p/e ratio 1000 to under 100.
Yet the stock price reached a low nearly $300 less than it's high at the start of last year,
almost a year and half ago even, the stock price was nearly 50% higher.
On top of the China issues, we have also recently
had Elon selling off billions of dollars more of his Tesla stock. This has possibly brought
the stock down a further $100 or something, and it will take a little while to recover.
So with Elon's selling, China, 4680 delays, war, oil prices, supply chains, inflation,
interest rates, recession, etc, to be honest I think Tesla's stock price is holding up
reasonably well. We are being hit from all sides, but within a year or two, all of these
issues should have hopefully gone away.
It's times like these when you need to get
a grip, and face reality to gain perspective. Go though all your mantras or affirmations
about how good a car Tesla can make, about how smart the CEO is, and remind yourself
he has another company that actually lands rockets. Tesla make the best cars, Tesla make
EVs for the lowest cost, Tesla make the best EVs, they have the most advanced FSD, etc,
etc. Keep telling yourself enough, until you have made up your own mind, blocking out all
this other noise. I mean if you look out to the media, you are likely going to get doom
and gloom. I have the usual people telling me Tesla will get down to $100 or $200.
Now obviously no one knows what will happen, but if Tesla ever did get that low, it's not
likely to be a Tesla related issue, it would be a market related issue, and everything
will be cheap, and the economy may look so bad, that your Tesla paper loss, is far from
your biggest concern. Those are dystopian type price targets. We don't need to go there,
we will try and keep within a likely reality as much possible still.
Having said that, there is still a possibility
of going sub-600. I have stopped buying LEAPS currently, I had 6 I wanted to buy to replace
the 6 I sold when the stock was around $1100. I think I am going to try and be patient,
it's not easy, as when it bounces back, you definitely have a very fickle attitude, and
will quickly ask yourself, "what was I thinking???? Tesla was sub-700, why did I not buy it?".
Don't punish yourself too much. This is why I did buy 2 LEAPS so far, just so I don't
miss this dip.
Of course there is the other side when it just keeps dropping, and you bought too early.
But it's possible we go into an actual recession, and maybe the stock will stay trading low
between 600 and 800 for the rest of the year. Still lots of good buying opportunities, except
it becomes harder to find conviction in a recession. Tesla will still remain a growth
company through this time though. There is a lot of growth left for Tesla.
Anyway, we have this Q2 among us, we always
knew it was going to be bad, but the lock downs make it worse, and we even have a bitcoin
loss to add too. However, we will have higher ASPs, and improved margins for Fremont and
Shanghai, but we will also have the reduced margins from Berlin. I am not sure though,
we will even be seeing any deliveries from Austin this quarter, there don't appear to
be any signs soon. Which means we may not see as big a hit for the quarter as we could
have. I think I need to work out a model that will give us a good idea of how much Berlin
may be losing.
Personally, I think we will still see a lower EPS in Q2 due to this. I will run some numbers
for it soon though. I believe this is fairly priced into the stock already. But before
I was expecting a larger loss from Austin.
Really though, what is Austin doing? It's
obviously still 4680 production line issues. And this is really what is holding up the
entire company. It sounds like they may still be facing issues with the battery electrode
process, and trying to automate various stages still. As most of you know I think batteries
are the core of this business, and the 4680 being the best EV battery for mass production
in the world, well it's quite a big deal. I wish there was more news to report on the
progress of the 4680 cell, or the new Austin Model Y. But it seems to have gone radio silent.
All that anticipation and build up to finally discover what these 4680 cells can achieve,
to be left with just an impressive drone show, was a little disappointing. But still, over
a month on now, and we still haven't had any updates.
This is still the most exciting element of Tesla's business, as it all grows from here,
we are just seeking validation that it can be executed, I dont mind if it even takes
another 2 years, as long as it happens. I believe the value of that battery and associated
technology alone, may add an extra 0 on to the stock price within time. Hence my enthusiasm
on progress with this cell. But we've been left hanging here, in limbo somewhat, just
trying to make predictions on the rest of the business.
Anyway, fortunately China alone can pretty much become big and profitable enough to grow
into the current stock price. As long as it's not held back.
Look this was a rough time for Tesla anyway,
they are still suffering with supply chains, Elon has been selling a lot of stock, hurting
the stock price, so to suddenly throw on top a potential recession as well, Tesla's going
to get hurt. We all have a lot of conviction and faith in this company and its future.
We put the CEO on a pedestal and have seen him work wonders. For most of you just buying
stock, in reality it doesn't matter if you bought it at $800 or $600, you'll still be
happy in a few years when it's around $3,000. It's a little trickier for trading options,
when you have an expiration date though.
Just think, will you be kicking yourself in a few months, if we are trading above $1000
again? Did we just miss the last ever opportunity of buying Tesla stock a this good a price,
before 4680s ramp up the entire business, to the next level. Is it worth increasing
your portfolio knowing you run the risk of a further drop? Are you being too greedy waiting
to get it extra cheap? We are all in different financial positions, and all have different
targets for our Tesla shares. As I said I am buying this dip slowly, I don't want to
miss it out, but I also need to catch it pretty low, as I am trading with options.
I still want to see 4680 cells hit volume production, if they had reached that, then
I think I would be leveraging myself massively right now. I am not really concerned about
any these other short term issues with the business, if that has succeeded. I think Tesla
will handle a recession.
You've most likely been here before many times before, and kicked yourself each time for
not buying when it was so low. Equally you have probably bought on the past dips only
for it to keep dipping. Try and block out all the noise, and other people's opinions,
and center and ground yourself to try and work out your own decision on whether it's
a good time to buy. These are uncertain economic times, we don't know where currencies are
going to end up, how much more inflation is left, and how high rates may end up. You need
to work out what is right for your future. But either way, let me know you plan on doing.