Tesla: The MOST Dangerous Stock.

hey everyone me kevin here all right

office is still a mess but i owe you an

update on a tesla tesla had absolutely

phenomenal earnings this week and it's

actually

down on the week well we've got to talk

about this and why i believe that if it

weren't for the federal reserve this

entire month tesla would have already

surpassed

sixteen hundred dollars per share this

month

it obviously hasn't but let's talk about

where my thesis is and my response to

the folks who say tesla is just an

extremely overvalued company it's a dumb

company to invest in and it's way too

risky

let's talk about that because i think

it's way too risky not to invest in

tesla

okay folks first this is not financial

advice these are my opinions second most

companies have a single product or line

of products that are extremely

innovative and useful to customers for

example take adobe we love adobe adobe

premiere adobe photoshop adobe lightroom

but once you acquire customers with an

amazing product and you grow for many

years in a row what do you do once

you've acquired them well you try to

prevent people from leaving to different

services like maybe going to final cut

on the mac and no longer using premiere

or whatever

well at the same time maybe the company

will continue to update their software

to minimize people leaving and providing

more competitive elements but really at

some point after you grow after you have

your first sort of blow up your

exponential growth like oh my gosh

everybody's using pdfs remember pdfs are

a creation of adobes

you get this big growth curve it almost

seems exponential but because of the law

of large numbers exponential can't go on

forever with businesses so you tend to

have a leveling off this is what we call

the s-curve

slow growth at the beginning of a

business exponential growth at the boom

of a product or service and then a

capping out

and to add growth you end up having to

add new types of businesses like

analytics for ads something that adobe

is doing and that's great it is now

helping adobe achieve a wall street

forecasted average growth rate

of 12

for the next five years

its projected earnings this year are

13.7 dollars which means at 408 dollars

per share its closing price today april

22nd here

adobe sells for 30 times earnings simple

all we did there is divide the price

by

13.7 cents or 70 cents of earnings boom

you get 30. that's a multiple it's a p

ratio it's like a gross rent multiplier

or

once you get down the line more like a

net

rent multiplier but don't worry so much

about that for those real estate folks

they'll know what i mean when i say grm

now another cool thing that you could do

though

is you can take this growth rate we're

going to do this with tesla as well

that the company's growing at which is

12

and actually divide the multiple that

you're paying for the company uh by the

growth growth rate so if you take 30

times earnings that the company's

selling for right now and divided by the

growth rate you get the peg ratio in

this case that would be 2.19

approximately because you're dividing 30

by a growth rate of about 12. okay makes

sense

now this is also when most people look

at the chart of a company like adobe and

say oh adobe i'm paying about 2.19 in

terms of a peg ratio 30 times 2022

earnings it's down 27.5 this year to

date if you go out 12 months it's down

20 so in other words it's been on a

large downtrend and some folks might

look at this and say hey here's an

opportunity to buy adobe at a discount

but wait a minute

discount to what a euphoric stock market

or is there some spectacular new

innovative growth coming to adobe see

here you're buying a falling stock with

a 30 times earnings rate and a peg ratio

of 2.19 thanks to the 12

growth rate so you're investing in adobe

for 12 growth and you're paying 30 times

earnings for that okay

these folks might then also think well

using similar metrics here if we just

look at price to earnings tesla is

ridiculously overvalued i mean trillion

dollar company for an auto manufacturer

that seems crazy

and this is unfortunately where most

investors completely misunderstand

stocks margins and tesla see tesla has

phenomenally high margins and margins

that are shockingly growing during

inflationary times imagine when we don't

have inflation and how much margin

expansion we could get we thought 30

percent in margins could be good but

when we get things like the cyber truck

we might actually be knocking on the

door of 35 to 40 margins but forget

about that for men forget about the fact

that the company is becoming much more

efficient than any car company to have

ever existed before tesla today almost

entirely is a car manufacturer and at

this point if we stack up the numbers of

tesla versus adobe we find that tesla

has an earnings per share of an estimate

of about 15.9 this year

at a thousand dollars that means it's

trading for about 63 times earnings

that's more than twice adobe's valuation

right seems like a rip-off like adobe

was trading for 30 times earnings why am

i paying 63 times earnings for tesla

kevin do you just proved yourself it's a

rip-off

well you're going to miss the boat if

you're not already thinking what i'm

thinking but before i tell you what i'm

thinking in my response we've got a

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pricing okay so i left off mentioning

that adobe is selling for about 30 times

earnings and tesla is selling for 63

times earnings which makes it seem like

you're paying almost well actually a

little bit more than two times the

valuation for tesla as you are adobe

right because you know they're selling

for uh a pe of about 30 and the tesla's

right around 60 63.

but wait a minute adobe's growing at 12

how does that compare to tesla ah well

tesla is actually growing at more than

50 percent

if you believe what elon said and that's

average over the next five four to five

years unless of course all of a sudden

consumers decide they hate teslas that

would be a big risk factor right if if

consumers all of a sudden decided they

hate

teslas i promise you this tesla will

crash faster than a model s plaid

carrying netflix's earnings

that's really bad but wait a minute

sixty percent growth is literally five

times the growth of adobe for only twice

the price so you're getting five times

the growth

for

twice

the price

and you're paying a peg ratio of about

one

because again you take that pe ratio

2022pe of about 60 to 63 divided by the

growth rate of the 60 that's about one

so

you're paying twice the price to get

five times the growth you're getting

less than half on the peg ratio this

actually in terms of a growth stock

makes tesla bargain

that makes tesla at least two and a half

times more attractive than adobe now

some folks might disagree with that

again if people stop buying tesla cars

you've got a big problem but now we've

got to think about the s-curve of demand

for tesla because see tesla is more than

just a vehicle manufacturer it's really

a holding company if you think about it

there are four major other s-curves that

we haven't even talked about and i'm not

even considering the cyber trucker semi

truck no no those are all part of the

cars businesses it's all part of the big

five businesses the cars and the four

others think about the big businesses

they have number one cars

duh

high margin cars high quality cars some

of the safest cars to ever exist on the

road

that's number one and everybody wants

one

number two full self-driving chips

ai and autonomy it's almost like an and

i know this sounds a little crazy but it

won't be crazy in the future i expect

it's almost as if tesla has its own

qualcomm and nvidia in its portfolio

that it's holding that's because tesla

makes incredible chips in-house they're

not making chips for you to play video

games or for you to play you know with

bitcoin

they're a chip maker to learn real world

artificial intelligence to train neural

nets and to make our cars more efficient

use less power react quicker better

faster and

of course

more efficiently than ever before

see they're an ai developer and a chip

maker if you want chips to mine again

you know bitcoin or you just want a

regular ai developer and chip developer

i think in the future nvidia and

qualcomm are going to be great companies

maybe at some point in video with their

partnership with lucid will bring out

some form of lane keep assist they have

a partnership so we'll see

but see tesla's not just a car company

it's a car company and a chip company

and an ai company that's business one

and business two think of business three

a battery and energy company

they're making their own supply

number four they're an insurance company

one of uh warren buffett's greatest home

runs

at least as told by his uh

biography warren buffett and the

snowball of wealth

one of his greatest home runs was going

heavy in on geico early

and you might think bo but it's it's too

late for tesla right

i don't think so because then you've

even got business number five robotics

and i think an easy way to visualize

this and how impactful uh these s-curves

could really be in the future is is

really by understanding

the power of being a battery maker

and an ai developer

and a robotics manufacturer we think

that the car business is everything

that's it you know once the car

businesses you know hits the top of its

growth curve it's over for tesla

let's see the beautiful thing is and i

saw this from uh value analyst

number one on twitter this is somebody

that i met uh at the uh

rodeo parties in austin texas cool guy

take a look at this folks i think you'll

like this

what we're so used to as the s-curve

is right here this is your electric

vehicle s-curve

now i might disagree with the size of

some of these but what tesla is is

actually a company that has compounding

s-curves and right now you're only

paying for this green section right here

that's what you're paying for you're

paying for the green that means you're

getting fsd and robo-taxi

for free that's the self-driving the fsd

the chip side right

that means you're getting a battery

manufacturer potentially even here in

the future a lithium miner we'll see

what elon ends up pulling out of his hat

you're getting an energy company

essentially for free but look at the

biggest of the s curves that's almost

like investing in the best possible

robotics startup ever folks

ai robots it's not just manufacturing

robots that test like in

seller license it's the future of

robotics in our homes the optimus

these are the things that you're betting

on with tesla you're not just betting on

electric vehicles and quite frankly

even if you were betting on electric

vehicles tesla is two and a half x more

attractive than adobe thanks to its

phenomenal growth perspective again if

you don't believe in the growth

perspective don't invest in tesla

because we can't yet value fsd robo taxi

because we just haven't seen it full

scale although i watch fsd videos every

day and i know it's getting better and

better and better one day i'll get an

invite to fsd

we know the battery business is getting

better and better and better and they're

probably the folks over at tesla are

probably some of the most brilliant

minds for battery engineering and then

of course that optimus robot so

long story short i'm really happy i am

super heavy in on tesla and

all of this nonsense right now with the

federal reserve is creating a delicious

short-term buying opportunity

we'll see on the other side of this

madness

and your goal is

not financial advice how many tesla

shares can you stack up

see the next one bye