Selling Tesla - The Collapse Explained.

so is the Tesla thesis dead is it time

to sell Tesla stock because after all

the stock has performed absolutely

miserably in just the last few weeks

here dropping nearly if not more than 25

at this point and the thesis must

obviously be dead because the stock

market is telling us that well stock

goes down so company must be bad right

well in this video we're going to do a

little bit of talking about autos and

we're going to determine is Tesla still

a stock to hold on to and has my thesis

changed with the latest price movements

well let's talk especially since you

never know what I'm going to do since

after all I'm a crazy flip-flopper

unless of course you're a course member

and you've signed up via the link down

below with that expiring coupon code

which does officially finally expire

Friday since we are ready to launch our

new product all right folks here we go

so in my opinion in order for us to be

able to talk about Tesla we also need to

be able to talk about Ford MGM and UBS

came out with some pretty intense papers

this morning telling us what some of the

major risks in the Auto industry are and

the reason we're going to talk about

those is because we have outline those

obviously with what we think regarding

Tesla now UBS went as far as downgrading

forward to a cell this morning actually

they mentioned that Ford ranks behind GM

in their views and they believe that in

the event of a likely recession that

they're basically going to see their

margins go down to break evens with

their total margin dropping in half to

just 3.6 percent and on that basis the

free cash flow falling to around Break

Even levels they actually don't think

that when Ford separates the electric

vehicle business from the Legacy

business they'll get anything other than

a little bit more transparency and they

think GM is much further ahead with the

ultium-based of batteries mostly because

GM is actually producing their own

batteries in many different locations so

UBS believes that Ford has one of the

least attractive risk to Ward reward

profiles and they've already been

warning on high supplier costs

unfinished trucks I mean there are

pictures on like Reddit or whatever ever

of Fords sitting in Lots thousands of

them and they're just not getting out to

customers or dealerships because they

still don't have the chips they need

which is weird because the chip sector

is actually getting destroyed right now

all dram prices everything's just

plummeting in the chip sector but the

thing is we're still missing certain

chips like the ones that we need for

Autos so at the same time as you have

like this chip overflow for things like

crypto you have this under supply of

things that you need for like cars so

you've got this really really remarkable

disaster going on in the chip world and

uh they also talk about here will Ford

be potentially a leading uh Legacy you

know company in the way of transitioning

to EV and they actually think not likely

they actually think that GM and Tesla

because they've localized their battery

supply chains are likely to be ahead so

this is really interesting so they're

basically bagging on Ford saying look

Ford has supply chain issues and more

margin issues mostly in part because

well a they have supply chain issues

because of the chip crisis but B they

don't have that localized battery

production and they just can't get their

margins right in fact on the Ford Machi

their CEO famously came out and said

look we're not making money on this

thing we're losing money on the the

mockies because of the supply chain

crisis and they weren't able to raise

prices enough to offset those declines

but UBS wasn't all Thrills about GM

either in fact they think that while

GM's continue is likely to continue to

have momentum they think the overall

Auto sector and this is bad in 2023 is

deteriorating fast so demand destruction

seems inevitable at a time when Supply

is improving and they think we're going

to see a massive paradigm shift in Autos

where we go from under Supply to

oversupply and consequently we're going

to see margins and prices come down

substantially as a result at GM they

expect earnings per share also to drop

by half this is but despite the fact

that margins have already led the

company to lose somewhere around 40

percent of their share value year to

date now that's pretty remarkable

because when you when you think about

that that's like saying uh you know hey

like Michael Barry said look first phase

is we see uh multiples come down right

multiple compressions so GM collapse is

40 right the next phase is hey well

earnings are now lower well if earnings

go down and multiples are lower you have

even more pain for the stock now no

guarantees because then you get Goldman

Sachs clapping back and saying hey

usually we see the bottom of the stock

market about six months before the

bottom of the earnings recession but

we'll see

so

one of the things that we have to keep

in mind now is production right so we're

worried about this potential move from

under Supply to oversupply how does that

compare to let's say Tesla right well

you have to keep this in mind so GM

produces around

6.8 million vehicles per year and Ford

produces somewhere around

4.2 million vehicles per year these are

really really big numbers Tesla on an

annualized basis right now is maybe

producing about 1.4 million vehicles per

year so the beauty about Tesla is

actually low production right now is

hopefully as you go into a period of

oversupply for vehicles you still have

substantially more demand for Teslas

because they're still underproduced

relative to what car companies like

Toyota or GM or Ford are producing but

it's very crystal clear here that Wall

Street thinks we're about to go into a

really nasty time for auto production

now they do do think that the GM

ultium-based model is going to be a big

push for for batteries and gonna be a

big you know big factor they also like

GM Cruise that's their sort of

self-driving division but they don't

actually see any kind of near-term

benefit to their GM Cruise Robo taxi and

they think that ultimately GM is second

to Tesla in uh in basically margins and

being an EV dominant company right so

you've got this sort of ranking here

where if you're just looking at these

three companies you've got very very

little shade being thrown on Tesla and a

lot being thrown on like the legacies

the Ford and the GMS in fact Bloomberg

went as far as summarizing it like this

for electric vehicle maker Tesla whose

third quarter deliveries fail to match

up to expectations we'll talk about that

in just a moment both UBS and RBC

analysts struck a more benign note UBS

sees Elon musk's lead company continuing

its aggressive growth through cutting

prices and leveraging costs while RBC

said it's very well positioned midterm

as the low-cost EV provider and folks

this is where we get to some of the most

important things that we have to

consider about Tesla the most important

things for Tesla are will the cars sell

okay the last quarter was the first

quarter that we've actually seen a

substantial

difference in the amount of vehicles

produced and delivered we used to

produce a certain amount of vehicles and

we actually used to deliver more

Vehicles than we produced so for example

we were sitting around for the last like

two years we've been sitting around

somewhere around 101 percent when you

divide those that means we're delivering

more Vehicles than we're producing and

that's just because of quarter by

quarter how things work you pile up some

cars and then you've always had more

vehicles to deliver than you've actually

produced in the next quarter and that's

always rolled forward

but that changed in this last earnings

report we missed by like five percent

that means there's a five percent gap

between how many vehicles were produced

and delivered and that's leading to

these massive heart palpitations on Wall

Street of people going dude demand for

Tesla is over it's absolutely over now

Tesla argues no the demand is not over

in fact we just had logistical problems

in the nature of we're delivering 50

more Vehicles than we ever have before

and a quarter and we just don't have the

connections that we need right now to

make sure that we get the best pricing

on transportation from where we produce

them to our delivery stations right

because you need to transport these on

vehicle transporting trucks semi trucks

that transport Vehicles right now what

is making some people nervous here

though is if you actually go to

tesla.com all you have to do oops I turn

put this on airplane mode anyway you go

to tesla.com and you click on existing

inventory right if you do that take a

look what you get right here you get a

bunch of Teslas around let's say San

Diego Los Angeles Orange County so it's

showing me in many different areas but

you're actually getting new Teslas here

with less than 50 miles on the odometer

and they're showing as existing

inventory coming soon to Los Angeles for

local delivery so I personally am

wondering are these cancellations they

probably are uh are these going to get

snatched up or are they going to pile up

right and so that's potentially a

leading indicator that we can watch we

have not actually seen that before and

so even though I believe look all right

maybe Tesla's right maybe we did have

logistical issues on deliveries at the

end of the quarter and we're still going

to be able to deliver all vehicles as

long as we can deliver all the vehicles

we produce Tesla's going to be a golden

child over the next two years I believe

no guarantees okay but I believe they

will be a strong Golden Child over the

next few years because people are going

to look and go geez man their earnings

are still going up their EPS is growing

by a 30 to 50 clip this is an amazing

company everybody else is suffering as

long as Tesla actually is able to sell

their cars remember Tesla skews to a

higher income individual the the I want

to say the median income of somebody

who's a Tesla driver somewhere in the

neighborhood of 130 to 140 000 that's

compared to like a GM or four driver

where the median income is closer to

sixty thousand dollars so you've got

this huge Delta in incomes and that

higher income cohort spends through a

recession now eventually they begin to

spend less and I've also been an

advocate of don't buy a new freaking car

right now okay by the stock not the car

that hasn't worked out great over the

last year I understand but I do think in

the long term it will always work out

way better so we've got this potential

crisis That Wall Street sees of uh oh

you've got a pile up of new vehicles on

their website a pile up there a few of

them but anyway you've got Vehicles

showing up on their website that haven't

been showing up before a two you've got

some excuse about not having enough

delivery trucks at the end of last

quarter and three if Tesla's growth

story goes away the stock will plummet

it will absolutely plummet because it's

gonna go to like a hundred dollars it's

gonna be terrible and I believe that

those three things are leading to a lot

of fear here on Wall Street right now

where people like oh my gosh this is

terrible that combined with the fact

that we're starting to see some levels

of retail capitulation and Tesla's a

really strongly held retail stock

well crap you know no surprise things

are going down you start seeing pain on

Wall Street Tesla falling a lot now

people lose their their faith in Tesla's

ability to deliver Vehicles it's a

heavily held retail stock retail starts

capitulating to retail sells their

biggest stock probably Tesla well so

Tesla goes down even more add to all

this garbage

Elon Musk and the stupid Twitter debacle

if he loses his his uh Equity Partners

he's gonna have to sell more Tesla stock

after earnings uh unless he has a 10b5

one plan and he was able to sell before

he's got some more Tesla to be able to

finance the stupid purchase of Twitter

which he's overpaying for by the by a

factor of two

it's all a disaster right but what's

remarkable is if we take everything that

I just said and we break it down and we

look at Tesla as a company and we say

does ultimately like five years down the

road does Twitter affect Tesla no

ultimately does retail capitulating

today affect Tesla in five years no

and as long as and this is the most

critical thing as long as Tesla can

still sell all the vehicles they produce

they're going to recover gloriously so

this is where I put together a few

scenarios and the scenarios vary in

intensity here so the first scenario I'm

going to go with the worst scenario and

this is we get down to 45 000 average

selling price for Teslas and we produce

only 3.2 million that's down from the

4.9 million this would be kind of bad

that's almost that's like a really big

reduction in how many vehicles we think

we can produce and sell this is like a

really bearish scenario in my opinion so

average selling price for my prior

spreadsheets going from 52k to 45

Vehicles sold in 2025 going from 4.9 to

just 3.2 okay that would still be way

less than what GM and Ford produce right

but anyway if that were the case with no

other icing on the cake like semis or

insurance or whatever else and a margin

of uh somewhere around a 31 margin still

on these uh these these vehicles expense

margin is 69 but that average selling

price going down and the quantity going

down Tesla might only be a 319 dollar

stock in the future which from 220 would

really only represent a compound at

annual return of about 10 this is like

really really bearish in my opinion and

it's kind of sad because we've been at

nine like 960 basically pre-split

pricing not that long ago like crazy

right this would be this is like in my

opinion one of your worst case scenarios

because it really would represent growth

in vehicle production plummeting to like

25 to 30 growth per year I don't know

how that would be possible uh with

Austin the Shanghai expansion uh and and

Giga Berlin ramping I I just don't see

that uh but I think that would be a very

bearish scenario here's another

potential scenario and that's we stayed

on average selling price of about 50 000

and we keep the number of vehicles at

4.9 million but margin collapses by

about three percent so we're only at a

28 profit margin that top number there

on the right that's right here uh in

this scenario you're potentially looking

at a 450 price Target by the end of 2025

that'd represent a 20 nearly 20 annual

compounded rate of return right and then

if if I go to the last scenario here

this is just still the bull scenario

okay we're going to reduce the average

selling price by 50 by 2 000 to 50 000.

still 4.9 Vehicles 4.9 million vehicles

but we keep margin high this is our best

case scenario where we sell all the

vehicles we can and we keep margin high

you'll be sitting at a 25 compounded

annual rate of return investing in Tesla

at 220 uh and then potentially getting

to 546 and this is not including any

potential euphoria that could come to

the stock when during the earnings

crisis we're like oh my gosh this is the

one surviving company that isn't getting

reamed on EPS it's EPS Asia is actually

still growing the way we expected it to

so uh what's my take well bottom line my

take is I'm a buyer uh you know I

believe that the Twitter fund is Twitter

fud it creates fear uncertainty and

doubt that elon's going to create

selling pressure you create temporary

selling pressure and a lack of liquidity

in the market because everybody's short

on cash what happens the price goes down

it's the way it is what happens when

wall Street's like oh my gosh this is

the bad Omen for for Tesla's demand in

the future of course the Stock's going

to go down like the stock going down

right now is is happening in my opinion

because of an incredibly logical

explanation

but it's still painful anyway thanks so

much for watching we'll see in the next

one bye