Thanks for posting your observations. I always appreciate hearing a more well-reasoned bear case for Tesla. I'll give the bull response.
A bear market/recession will harm any stock. But Tesla sales continue to explode, even in the bad economy.
Government subsidies are always a wildcard. There is an increased realization that legacy US automakers will be in big trouble if we don't get any new EV subsidies. This will massively increase Tesla's profit margins if it happens. So instead of subsidies drying up, we could get new ones.
BTC ownership by Tesla is a drop in the bucket. It has basically no effect.
It's true that you never know what Elon will do. But selling more of his holdings doesn't seem likely. And it's possible that if the Twitter deal gets settled in his favor Elon will buy back his Tesla stock.
As for P/E, we are already seeing Tesla's PE go lower and lower because Tesla's profits are exploding. I think if you look at what analysts are expecting for a forward PE, then it becomes hard to argue for a $400 stock price.
I was referring to the government subsidies that Tesla gets. Much of their profit came from selling regularity credits which won't last forever. Tesla stock price could fall 75% and it would still have a higher PE than Microsoft, Google and Apple. Tesla peaked around $130/share before Covid. Nothing has fundamentally changed about the company since then besides hype.
Regulatory credits are not actually government subsidies because the money doesn't come from the government. Tesla is being paid by other automakers to avoid government fines. So I see where we got our wires crossed with the terminology.
Regulatory credits used to be really important to Tesla, but as revenue from auto sales goes higher and higher, it becomes less and less important. The other interesting thing about regulatory credits is that everyone keeps expecting them to dry up but every quarter there's this big line item for it. I agree that the credits won't last forever, but every quarter they are still there but contribute a very small percentage of earnings. In fact, in Q4 2021, regulatory credits was only 2% of automotive revenue. The next quarter it jumped to 4%.
Tesla deserves a higher PE because it is growing a lot faster than Microsoft, Google, and Apple. So every time Tesla posts higher earnings, the PE goes down. The PE was 673 a year ago and now it's down to 100. PE compression is expected to continue if the stock price remains this low.
The fundamental thing that changed for Tesla is that it became a cash cow. The year before covid (2019), Tesla lost 98 cents per share. In 2020, it gained 74 cents per share. Then in 2021, it gained a whopping $5.60 per share. Now Tesla has essentially no debt and massive profits.
Tesla proved that it could be wildly profitable and it is expected to grow those profits at an exceptional rate. Tesla says it is expecting to grow deliveries annually by over 50% for the next several years. That's why the stock took off in 2020.
Even with the devastating covid lockdown of its Shanghai plant in Q2 this year, Tesla will still post a nice profit. And with two new factories ramping production in Austin and Berlin, profits should start to accelerate again toward the end of this year.
Sorry to beat this dead thread to death, but the strength of my arguments just keep getting stronger.
So many of you latched on to that Bloomberg analyst report that VW would overtake Tesla in EV sales by 2025. That's looking a lot less likely today. VW's CEO, Herbert Diess, has just called it quits. He is the embattled CEO who has been dragging VW, kicking and screaming, into the EV business. This is very bad news for VW's EV future.
Surprising news has emerged out of Germany today, as Volkswagen Group chairman and CEO Herbert Diess has announced he is stepping down from this position at the company and will be replaced by Porsche AG CEO Oliver Blume.
