Right now a lot of companies are being punished. In booms there is too much money going around,
a lot of people have missed out on investments that have doubled, tripled, or even 10xed
just over the last couple of years. Tech has been making big noise in the markets and people
don't want to miss out. They think EVs are the future, but they missed out on Tesla,
and end up investing in companies like Rivian, naively thinking they are the next Tesla.
Now in this recent blood bath we have been experience Tesla has dropped 42% from the
start of this crash, yet companies like Google, Apple and Microsoft have only dropped 15-25%,
about half as much as Tesla.
Well we are facing liquidity issues, those
p/e ratios of 100 are now compressing to 30. The market is interested in how much free
cash flow companies are producing that is what is important now. For one, they may need
this cash flow to get through the recession. On top of that these are entities generating
cash flow and liquidity, which could become contracted further.
Wall Street doesn't have the patience right now to see through growth companies, potential
unicorns or moon shots. That paradigm has left right now, we are more concerned about
the immediate future, and want to prepare accordingly. The same goes with the crypto
economy, too much hope in there right now, save perhaps Bitcoin, which is the only crypto
that has real value.
P/E ratios are being compressed. If you had
a p/e ratio of 100, and the market had all the time in the world, for you business to
change the world. The market was patient, and other investors have other investments
that are thriving at the same time, so they can place a proportion of their investments
in higher risk, longer growth areas.
The average p/e ratio of the SNP usually sits around 15, before this correction, we were
up around 20, all these high growth stocks with insane p/e's or even negative p/e's are
all being hit and coming down to reality.
It's like as if the exponential scale after this accepted p/e ratio of 15, has too high
a logarithm. Just to give you an idea of what I am saying I think a formula could explain
it, hopefully it's easy enough to understand.
I am just using this formula as an example to indicate what has happened to p/e ratios.
If you previous p/e ratio was 45, there was previous an addition p/e of 30 added for the
potential of the company. All that potential that was adding all that extra value to the
company, may have now shrunk to just an extra 10 added on to p/e.
In this example the correct would now take this company to a p/e ratio of 25, thus losing
about half of its value, provided profits remained.
Right well then, what about Tesla? Tesla is
a growth company, that also has free cash flow, reaching not far off $3 billion in a
quarter. Ok, that might be just 1/10 of Apple's free cash flow, but its still more than any
other EV company on the planet.
The street's estimates for Wall Street, are so low, they barely treat Tesla as a growth
company in the first place. Let alone the fact that Tesla are very close to getting
all their ducks in the row, so that we can finally witness Tesla's exponential growth,
as it makes it's way rapidly up the S curve. By my count, currently around 60-70% of Tesla's
factory capacity is barely even operational. These new factories are big. These new cells
are outstanding, oh and will bring lots of additional margin. So much so that every extra
vehicle produced at Berlin or Texas will add 50% more to profit than one from Fremont.
The street has not valued any of this in.
Unless they have, and have some secret attack against Tesla to try and destroy the company.
Although they can't get a king in check mate when it's 3 dimensional. And I have a very
exciting video on the way, about how Tesla may be immune to anything they can throw at
it.
In fact they are already now, the FUD has
begun.
And it would appear one of the orchestrators was none other than the unscrupulous Mr Bill
Gates, perhaps still bitter about no longer being the alleged richest man on the planet
any more. Perhaps also resentful that someone else has stolen his limelight of being the
savior for saving the world, from the likes of climate change. Yes, Gates efforts so far
have been futile. Tesla is by far the company making the largest efforts with climate change.
Oh and this was after Gates also shorted Tesla to the tune of $1/2 billion. Gates is attacking
Tesla.
The attacks aren't stopping there, they are
coming in far and wide.
Tesla was also kicked out of the ESG index. Although ESG stands for social, governance
and environmental, its main concern is just environmental. Which would meant it would
be safe to infer that Tesla should likely be at the top of the list of corporations.
However, the S & P ESG Index dropped Tesla and instead included ExxonMobil, that's right,
it's a total farce.
But this is a big sell off, and accompanied with negative headlines. Who's to say others
don't drop TSLA, it would appear anything is up for grabs.
In addition to that we have also had Cathie Wood and ARK Invest selling some of their
TSLA stock too, and this doesn't appear to be the usual adjustment that causes FUD, it
would appear that ROKU is now ARK's top holding. Another one of Cathie's great selections trading
at 1/6 it was at it's all time high. I listen to Cathie, she is smart, and seems to have
a good understanding of the macroeconomics. I don't like being rude or anything, but I
just don't know what she is thinking.
As if Cathie Wood couldn't make an even worse decision, she now also decided to invest into
none other than General Motors. So, as for me, ARK and Cathie Wood have lost al credibility
to me. I think she has lost the plot, or perhaps just got very lucky. I have also been vocal
about just how insane the future they envision for Tesla. It's scary actually how an organization
supposedly as credible as ARK, can be so very very wrong.
ARK's luck was from investing in disruptive technologies, I think the entire portfolio
or strategy is based on Wrights Law. I think she simply got lucky, that one of the disruptive
techs, also happened to be in the climate change sector, Tesla.
I think its climate change companies that are the ones to be looking at, not disruptive
technologies that are trading at fractions of their all time highs.
Of course all the covid lock downs accelerated all this disruptive technology, but it was
short lived as lives came back to normal, but resulting in more false positives for
ARK's trading strategy.
This has even triggered a lot of investors
margin too, and they have had to sell, resulting in more selling, and it doesn't stop there
either. I have been hearing some other rumors too
about others selling off Tesla, but I can't confirm them, but supposedly Ron Baron has
sold some, and Ray Dalio might has shorted Tesla, and who knows, probably Michael Burry
too.
Either way, we do no for sure, that Elon himself, has been selling some TSLA. Over $8 billion
worth of stock, it even makes Bill Gates half billion look small.
But Elon needed those funds for his Twitter
acquisition. Oh and all the great headlines that has been accompanied with, including
various Tweets sent out by Elon, perhaps making more enemies than necessary. All in all, the
entire Twitter fiasco has hurt Teslas stock even further.
The thing is, shares arent just sold, they have to be bought. And with this much selling,
and the economic environment we are seeing then there are a lot more sellers than buyers,
so the stock will get beaten down.
Which is why we are also hearing a lot now
about a potential buy back.
Tesla's 3rd largest private stock holder, and a listener of the channel, Leo Koguan,
for the reasons mentioned, thinks Tesla should be buying back the stock.
For starters the stock price is cheap, if we can't afford to buy it, then perhaps Tesla
can buy some at least. But like I was saying, there aren't going to be enough buyers to
match these sellers, hence why the stock has dropped below, at least in my opinion, its
true market value. Basically Tesla's stock price is getting hammered,
and some investors are asking for some internal support. Google, Facebook, Microsoft and Apple
have all been doing massive stock buy backs, and their stocks have faired significantly
better during this rout.
But what if Tesla has more important ideas earmarked for $15 billion? Tesla could expand
Texas about 7 fold for that much money.
Oh right yea, on top of all of this is the
entire macro, inflation, interest rates, recession, market crash factors going on too, only to
further add to the excitement. And, we don't need to get into it again, but of course all
the issues Tesla have been facing in Shanghai.
My entire point of this video is top help
you realize, that Tesla is being hit extra hard here, on top of whatever you want to
call this market adjustment. All of the things I have mentioned are temporary and will pass.
This feels like a dip on a dip that was already on a dip. A triple whammy if you like. This
could be the last time we see Tesla this low. Of course Tesla and Elon are still under attack,
so the attacks might continue and we dont know to what extent.
Just be honest with yourself, and ask how upset with yourself would you be if Tesla
jumps and you missed this opportunity, and then compare those emotions with the feeling
of Tesla dropping another 20% after you purchased, and judge which one you could live with the
easiest. Perhaps that might help you with your decisions.
Although I think we have these low prices, perhaps $600 to 800 until around July, when
we are approaching the shareholders meeting, and the mention of the split. The split will
start to gain energy and will be felt in the stock price quickly. Like always I can't predict
the future, but from my research I think you have about a 2 month window to buy Tesla before
it could recover. But who knows, the great depression didn't find its bottom until about
3 years after the market crash.
Anyway, that is how I see it, but look forward to reading all your thoughts too.