Slashing Tesla's Price Target [Tesla Stock]

also obviously Tesla beat massively

yesterday we talked a lot about earnings

catalysts and beat a four Tesla

yesterday but we need to break down the

revisions from Goldman Sachs how nice

how nice Goldman Sachs that right before

deliveries you all downgrade your

outlook for Tesla so you get a Goldman

downgrade right before the deliveries

and you actually cut your your

expectations for the stock and you cut

your expectation for the price of Tesla

and then as soon as the deliveries come

out with a big beat you happen to say

you know what we're actually now going

to raise our price Target from 248 to

now 275. it's almost like they're

constantly chasing the market trying to

do what the market is actually doing

with stocks and how the market is

reacting now we don't only want to talk

about this Goldman piece here we'll

briefly go through this but I want to

talk about byd after this uh and so

we'll get into byd in just a moment but

first let's just take a look at some of

the commentary that Goldman here

provides on Tesla as to why they're

increasing uh their price target for

Tesla Tesla delivered about 466 vehicles

and produced 480k Vehicles the

preliminary s or or these these numbers

rather were significantly above the

visible Alpha consensus data at 450.

Bloomberg can consensus at 448 uh and

Goldman Sachs estimates at 4 45. model 3

and why deliveries in the quarter were

up about eight percent quarter on

quarter and 88 is seven percent year

over year keep in mind that is comparing

to the whole of 2022 when Shanghai was

oopsie dupsies

uh and so implications and Analysis we

consider this to be a strong report as

volumes came in well ahead of consensus

in Goldman estimates we had expected

less of an increase in June vehicle

deliveries compared to past quarters

because Tesla has been in the process of

transitioning to a more even delivery

schedule throughout the quarter in order

to ease Logistics issues right if you

have a big run a big ramp at the end of

a quarter you start running out of ships

and trains and Freight cars to transport

your cars

but the report suggest that Tesla was

able to close the quarter more strongly

than we in the consensus had expected We

Believe Tesla could provide directional

color on Regional demand trends when it

reports results that would be uh on uh

June 19th we'll be getting Tesla

earnings so of course we'll be covering

those and then what is interesting is uh

there is some uh talks circulating now

that uh Tesla is is considering cutting

potentially prices at least in the US

and Canada uh or potentially have

already cut prices just here at the

beginning of July which some argue could

be a way of continuing to facilitate

this uh balanced sales push especially

since they just had an end of the first

half so big sales push and now create

another reason to get people in the

store with another price cut though a

lot of folks were like wait I thought

Tesla was going to be done with price

cut so maybe we haven't quite hit the

bottom yet for Tesla price Cuts in terms

of vehicle Cuts but certainly feels like

we're getting closer anyway looking at

Goldman Here We Believe Tesla could

provide directional color right we

talked about that we expect investor

Focus heading into the next earnings

report to be on uh gross margins duh

that's what we talked about yesterday as

well gross margin is going to be the top

one but personally in my opinion the two

to really focus on are going to be cash

flow and a potential for a money raise a

lot of expenses going in over at Tesla

let's look at some of the estimates that

they have over here

so these are the estimates for the

balance sheet they they actually see

Tesla's balance sheet Rising very very

strongly here into 20 uh throughout the

rest of 2023 sitting around that 21 mil

Bill level where we are now but by 2024

getting to about 33 billion dollars in

cash and potentially as much as 53

billion dollars in cash and cash

equivalents by 2025. this is sort of

your Goldman forecast right here uh and

then as far as cash flow cash flow from

operations they think will be positive a

substantially still throughout 2023

that's why I think you have a negative

Catalyst here because this is the

tightest right here if you actually look

it's much larger for 2024 in other words

the gap between capex and cash flow from

operations much larger in 2024 much

larger in 2025. I mean here you've got

about a 12 13 billion dollar difference

here you've got about a 20 billion

dollar difference you only have a

difference right here of roughly uh five

and a half-ish billion dollars so you're

getting pretty pretty tight over here in

terms of that cash flow that's why

I think the money rate is possible

anyway

in terms of earnings per share

Goldman Sachs looks like they're

revising some of their uh

yeah they actually are their last

earnings per share was uh was below for

for their non-diluted was below three

dollars and they've actually bumped that

to about 324. Wall Street consensus

right now is around 350 for 2023 and

with this deliveries be we might

actually end up beating 350 in EPS for

the year which would be great for the

stock but you could absolutely see a

strong growth here of earnings forecasts

if you look at just EPS growth alone

which goes into our PEG ratio

calculation if you go 469 divided by 324

looking about a 44.7 EPS growth rate

6.2 divided by 4.69 puts you about a 32

EPS growth rate I've been using around

30 for EPS growth so this is great uh

this is very very good yeah so I like to

see this from uh Goldman Sachs these uh

these revisions up and uh these uh uh

you know again potentially a red flag

right here an Achilles heel That Wall

Street doesn't seem to be paying

attention to a potential negative for

free cash flow we'll see but uh this is

a this is your vision up here again I

think you get a lot of these companies

they just revise their price targets up

as the stocks going up which is just

ludicrous anyway then we got to talk

about uh byd and it's uh relation to uh

Tesla over here because byd also

reported some pretty phenomenal numbers

before I do that I just want to be very

very clear because it there's like this

constant confusion uh in the just stock

community and it like people legit do

not understand what the word annualize

means they literally think you have to

compound you do not compound annualize

does not mean compound so what I mean by

that is if you look at q1

and you compare that to Q2 you get 10

growth that is the speed at which growth

is going right now

if somebody said oh Tesla's growing

every quarter at ten percent then you

compound then you have to use exponents

to calculate your you know how much the

company is going to grow by the year

but if somebody wants to annualize if we

maintain that speed how much is the

company going to grow the answer is very

simple it's 40 you just multiply by four

that's what it means to annualize that's

why the words are different annualize

multiply compound

exponents is very very simple but

apparently people the comments just

can't get it through their heads and I

think I've made this argument like a

million and a half times and it's

extremely exhausting but I hope if

you're watching this you realize there's

a huge difference between annualizing

and compounding

annualize you just multiply you're just

looking at a snapshot of growth the

reason for this can be very simply

understood to say that look

if in q1 you add a hundred dollars of

sales and in Q2 you have one hundred and

ten dollars of sales you are growing

at that line

compounded growth implies an exponential

curve but we have no data to suggest

that we're able to imply an exponential

curve all we have is we went up 10 from

q1 to Q2

that doesn't mean we're going to

compound

again

from Q2 to Q3 is that pace that's the

pace we're growing at

any anyway uh compounding implies growth

where you shouldn't imply growth and if

you compound uh you are probably over

evaluating growth now that doesn't mean

the company is not going to outperform

uh but it's just not what annualizing

means anyway rant on that over now let's

get into uh this uh some of these byd

numbers here so uh Chinese EV maker byd

report another impressive growth month

here now uh they sold almost twice as

many electric vehicles as they did last

year and a lot of folks are using this

as an argument to suggest aha byd is way

ahead of Tesla

keep in mind that when you Analyze byd

This is a company that first of all is

selling battery electric vehicles that

is pure electric vehicles but they're

also selling hybrids they're selling a

lot of hybrids

something to consider so for example if

we break down some of the the actual

numbers here what you can find here is

the total number of vehicles sold here

uh actually uh yeah which includes

plug-ins and uh battery electric

vehicles this is on a monthly basis this

shows you returning to growth at byd

still obviously very good but do keep in

mind that byd sells vehicles that are

substantially less expensive than Tesla

so it makes sense that growth rates

might appear somewhat higher at byd a

lot of folks question like hey well byd

is growing so much isn't that bad for

Tesla they're two totally different

markets cheaper hybrids on one hand some

smaller battery electric vehicles and

more expensive Vehicles over with Tesla

something to keep in mind uh and so as

you can see here Barons breaks that down

look at that byd is 90 is faster than

Tesla 70 but Tesla makes more expensive

Vehicles it's easier to sell less

expensive cars and then of course you

have you know pure electric vehicles

versus uh the hybrids and we can

actually break apart those numbers so uh

byd in the last quarter here there we go

they sold 251

000 vehicles in just June which is

pretty good it's somewhat close to about

half as many vehicles as Tesla sold but

if we break that down into hybrids and

non-hybrids they actually sold 128

000.

uh what do we have here this is in June

okay this is just the June number so for

June 128

000 Vehicles just EV and then they sold

123

000 hybrids so you're almost at a 50 50

uh change there last year or or split

between the two last year they sold

about 900 on 11 000 pure electric

vehicles which works out to about 76

000 per month on average for 2022. which

then we can multiply or divide rather

and find out their growth rate and you

can see that is a very impressive pure

electric vehicle growth rate of 68 so no

shade off byd I will say byd's numbers

are are pretty good you you've got a

you've got a company that's actually

selling a lot more Vehicles again

cheaper Vehicles the margins are nowhere

near as fantastic as what you have at

Tesla but then again margins are also

under pressure at both ends both

discounting byd does have a dealer

relationship so you do tend to get

dealer discounts rather than headline

discounts like you do a Tesla something

very important by the way a lot of

people forget about that whether by

accident or whatever but it's important

to consider that

when Tesla sells directly their price

decreases or modifications are very very

transparent whereas when you're working

with a dealer model price changes are

very Arcane you're just getting more of

a discount conveniently off of uh MSRP

or otherwise so something to keep in

mind when it comes to the dealership

model now when it comes to the

financials for byd

the the company is very robust obviously

you know Warren Buffett is somebody

who's a big fan of uh investing in byd

that we've seen him reduce some of his

stay in byd people still refer to the

company as uh buff it backed but anyway

uh they're they're a gross profit margin

uh sits somewhere around 17 which

Tesla's kind of starting to knock on the

door of that direction uh the byd's

gross profit margin in 2019 was 14.8

went up to 17.8 down to 13 during the

pandemic

1779. it's really stable somewhere

around 17 to 17 and a half

Tesla just hit a low of just about just

a little over 19 this next earnings

report will really tell you how much of

a difference there is between Tesla and

byd byd is still at 17 and Tesla Falls

to 16 or 17 well then byd is doing

pretty dang well right

however uh byd on net brings about 4.1

percent uh to the bottom line and uh

this compares to Tesla again with about

19

on uh on on gross but Tesla brings

almost three times as much to the bottom

line between 11 to 13 coming to the

bottom line compared to byd at only

about four percent so even though gross

margin is getting closer 17 WYD 19 ish

at Tesla that net bottom line number is

still 11 to 12 to 13 percent of Tesla

you're only at four percent at byd so do

consider that in your evaluation of the

comparison of the companies both of them

are expected to grow quite well earnings

are expected to grow at over 30 percent

uh for Tesla uh for probably the next

five years going forward which is

fantastic uh is something to keep in

mind uh byd is uh is also expecting to

grow earnings in excess of 30 some start

are arguing that their growth could

actually be a little bit higher than

Tesla's because they sell so many

hybrids at maybe closer to 35 percent so

something to keep in mind for the

difference between byd and Tesla but

look don't get me wrong it's always

going to be competition uh and uh that's

just uh that's just an age of the beast

but both of them are doing well and I

quite frankly think both can continue to

do well uh Barons talks about how a

price war broke out between EVs and

petrol vehicles in China and uh that

heavy discounts are really trying to

Spur the Chinese consumer to buy it's

another problem potentially facing

mainland China is byd is trying to get

out of China because they realize

Chinese consumers slowing down when I

say out of China I mean they're trying

to expand outside of China to also sell

to like the European markets it would be

very interesting to see byd cars in

America but uh we shall see now when I

started this uh segment somebody had

asked this morning uh a question that I

wanted to get back to they say do you

think Tesla's uh price spike will be

temporary and bad margins and a

potential raise and an Elon selling

tweet it will affect the stock so Elon

didn't suggest selling I actually think

his tweet was reverse psychology

I think his tweet of hey avoid margin

you know is is a bearish tweet but

imagine if we got bearish numbers

that would be horrible you know the SEC

would probably complain that he's

providing Insider information and

there'd be lawsuits again he did the

opposite I think on purpose because he

knew what the numbers were so gave a

bearish tweet

to purposely just mess with people who

want to believe that you know he's

trying to Insider trade or whatever he

literally did the opposite here but as

far as uh the margins problem yeah

margin and raise are going to be an

issue I think

the stronger of a a hold Tesla has on

pricing today stock pricing today will

be very good going into earnings because

take a look for example at uh the TA for

Tesla what you really want is you want

to solidify this 268 Fibonacci today

we're going to solidify that I don't

think we're going to make it to you know

basically your 300 level which is about

your 295 296. I don't think we're going

to make it to that level but I think

what you want is confirmation that we're

going to stay above 258. any excess

above 258 I think you could give up at

earnings but the goal is that you don't

break through 258 after earnings again

the goal is that you stay in this range

right here and if you stay in this range

after earnings and after that earnings

negative Catalyst goes away

especially if the earnings Catalyst

isn't that bad I think there's a chance

you could end up breaking over 300 after

earnings if it happens before you know

you could slip right back after earnings

but the more it goes up before earnings

the better

uh because you're just creating more

insulation for for yourself so a little

bit of my thoughts uh here on Goldman

Sachs byd uh and uh and pricing for

Tesla I do not think that you're at

anywhere near the levels yet on Tesla

where you would argue oh it's you know

it's it's time to fully dump Tesla or

whatever I think really that that time

will come in the future uh but I don't

think that time is now yet obviously not

personalized Financial advice here I

don't know your situation but that's

just uh Market commentary now I want you

to know this when it comes to AI time is

what's going to make you money and if

you can prove that value to an employer

you'll always be able to be employed so

this is another way of making sure that

you don't get replaced but

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