The Crash of Tesla Stock.

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hey everyone Kevin here in this video

I'm going to break down exactly what

happened to Tesla stock today and what

it fundamentally means for the stock

going forward first I'm going to start

with some basics in terms of why might

the stock have moved so volatility over

the last 72 hours and what could it

pretend for the future so the first

thing that I'd like to do is look at the

technicals when we understand the

technicals I think we can understand

that Tesla actually was set up for a

very high hurdle today it was set up

against knocking on the door of the

200-day moving average which right now

sits at about 2 15 and the next

Fibonacci retracement line sitting at

about 211. that means we really didn't

have a lot of upside before we needed a

lot of pressure to push through and

break through to the next level which

we've already been rejected at on

February 16th and so for the last 61

days we have been trading sideways on

Tesla and that is okay it shows that

we've been able to hold on to support

Elon musk is no longer selling leading

to this massive decline that we had last

year now of course there were other

fundamental factors yes we did have to

get into some price cutting for EVS but

in my opinion much of this drop was

driven by selling by Elon Musk and this

isn't to blame Elon Musk it's a totally

okay for him to do that after all he's

the owner of the stock just like you are

and if you decide to pay per hand and

sell that is okay but what's more

important is that Elon sold about 24

billion dollars of Tesla stock to about

15 billion dollars that retail bought

that put a lot more selling pressure and

created this downward Trend that is

nowhere near what we're seeing here in

fact we are seeing stability here as

Elon Musk is not selling but not only

are we seeing stability but if we

actually undo the information of the

average candlesticks we can see that we

ran up about the six percent that we

lost today we ended up closing at about

207.79 on Friday the day before we were

sitting at a close of 195.28 which is

substantially similar to where we sit

now at about 194 77 so it was really a

give back and in my opinion the number

one reason we had a sell-off today is

because a we're up against hard

technicals B we're in no man's land see

nothing really has fundamentally changed

for Tesla and D this is not a

comfortable place for a Trader to sit so

I think a lot of folks may have loaded

in here hoping for a big big beat closed

their positions Monday morning and

exited the stock as we didn't have the

Catalyst to break the next retracement

levels and so those losses were realized

and that's why I think we're right back

to Thursday the day before we had the

sort of catalyst run-up I think that's

probably the biggest reason but there

are also other fears there are fears

that wait a minute is Tesla's growth

slowing down and this is a very

reasonable fear that I think is worth

talking about it's something we talked

about as well in our course member live

stream this morning but one of the

things that I thought was very

impressively important was that the

company grew a quarter over quarter by

about four percent now that is actually

very typical that from Q4 to q1 the

company slows its growth down as usually

there's a rush to capture an electric

vehicle tax credit at the end of the

year and so usually q1 is seasonably bad

however when you do the math and you

don't actually go into recognizing yes

hey maybe this is normal

there is some fear that is created when

you annualize a four percent quarter

over quarter growth you get a 16 growth

rate for Tesla which Elon musk's goal is

growing somewhere between 35 to 50

percent that annualized growth rate from

Q4 to q1 is not fantastic now that might

not be fair to do and a better example

might be looking year over year because

hey we want to get closer to 50 well

year over year we hit about 36 percent

on growth well 36 percent is at the low

end of production growth and or I should

say delivery growth and we're not

actually delivering substantially more

in q1 to maybe give people discomfort

that oh yeah we're definitely going for

50 this year instead we look like we're

definitely more on that 30s trajectory

and any kind of adjustment on EPS growth

rates is generally going to affect the

valuation of a growth company that makes

sense after all if we look at the

fundamental tools of the company and we

go ahead and pull up a fundamental

analysis spreadsheet like one that I

have for the end of 2025. we could see

this very very simply remember my

assumptions 47k per vehicle 4 million

Vehicles nothing here has changed but if

we scroll here and we assume a PEG ratio

of 1.67 which is a very reasonable PEG

ratio for a Growth Company Apple's a

little bit above that right now end

phase is a little bit below that right

now but if we assume a 1.67 PEG ratio

and we multiply that by a 30 percent

assumed growth rate on earnings per

share which is conservative because we

could be at a 50 growth rate maybe but

let's go with 30 well that would give us

a p e of 50 which means in the future we

should be sitting around a reasonable

stock valuation of about 531 which

represents a compounded annual return of

about 38.5 percent but if we drop this

15 or this 30 assumed growth rate to 15

we have did the p e ratio would drop to

about 25 which would drop the stock talk

value to about 265 which actually still

would represent about a 10 annual gain

uh per year for the next three years and

if I drop that to where the stock is

trading for now it puts us at about

almost 11 so even with a growth rate of

just 15 on EPS Tesla does very well

still for us compounded over the next

three years so even if you took this

terrible q1 growth rate this Q4 to q1

growth rate and annualized it that is

you took that nominal four percent here

and you annualized it which you

shouldn't do because most of the sales

are going to occur in Q4 more sales

occur in Coupe 3 and then q1 is usually

your sort of give back and pause period

right and this is there's also a reason

why Tesla happens to enjoy taking off 14

days sometimes like they did this year

for Giga Shanghai and Chinese New Year

shutdown 14 days represents quite a bit

of a quarter orderly production cycle

actually represents 15.5 percent so if

we actually multiply the production that

we had here of production of around 441

000. assume about half of those are made

in China so 220 let's just say that

would bring us another 33 000 Vehicles

well if we produced another 33 000

Vehicles we would actually be sitting at

Vehicles produced of about

474 instead of 471. so that kind of lets

us know where production is in terms of

a rate of production growth well 474

rather in production growth compares to

Q4 2022 quite well let's look Q4 2022 uh

production Tesla let's go ahead and pull

those delivery numbers for Q4 and what

we'll find on the Tesla website which is

right here we produced

439 700 Vehicles well wait a minute that

means we basically didn't grow at all

between Q4 and q1 right no we actually

did grow if you assume that the factory

wasn't supposed to be closed for those

14 days for Chinese New Year so go 474

divided by 439 701 let's actually add

those digits in over here there we go

we're growing at about 7.8 percent per

quarter in production growth that means

production is growing about 31.2 percent

okay so if I lost you on any of that

math let me simplify that and I'm going

to simplify that by just drawing it out

very very simply for us what I'm going

to do is I'm going to say production is

growing right now between Q4 to q1 by 31

and deliveries grew between this period

by 16

annualized but we'll put an asterisk on

that because that's q1 so instead we'll

take the year over a year which is

basically favorable to Tesla which is

right here on this and we'll assume 36

percent year over year so let's draw

that in right over here 36 percent and

so what do you have for Tesla well you

don't have anything near 50 growth and

that could be the second reason why

Tesla took a little bit of hit today

production is growing at an annualized

adjusted rate adjusted for the Shanghai

shutdown of 31

deliveries are growing at an annualized

rate or I should say not annualized

what's an annualized rate of 16 but an

annual rate year-over-year rate of 36

neither of those are close to 50 so I

think the reality is markets may be

adjusting the fact or to the fact that

they need to assume a growth rate for

Tesla of 30 to 35 percent rather than 50

and the fact that we only took a six

percent hit in the stock market today we

basically just gave Friday back to me is

a signal that markets really weren't

actually pricing in a 50 growth rate

anyway in fact given that we basically

just gave up the speculating speculative

trading of Friday it to me almost feels

like this is potentially just perfectly

in line with What markets were expecting

anyway yeah some analysts expectations

were higher somewhere lower but if

you're doing your PEG ratio analysis or

you're assuming EPS growth run it at a

30 percent and anything more than that

in my opinion would be conservative

something that I like to do in my course

member live streams is I purposely like

to be conservative with companies I like

to do my fundamental analysis and not

try to add in every little bit of

minutia I can because in my opinion that

makes you potentially too optimistic for

the company and that's dangerous because

you want to be realistic don't get me

wrong I'm bullish I think Tesla is one

of the companies with the largest amount

of pp the largest PP we know the most

amount of pricing power and I think that

is incredibly powerful for Tesla and I

think that pricing power will stay as

long as we don't go into a deep hard

recession shallow recession Tesla will

get right through it now look are there

some questions potentially around the

balance sheet of course Tesla really

doesn't have as much cash as it seems

like like it does because a lot of

people like to pull up the statement of

cash flows and the balance sheet for

Tesla and say but Kevin Tesla has 22

billion in cash that's fine but you have

to realize they also have about

22.3 billion dollars in accounts payable

that are just sitting there bills do and

payable so that cash is really zero

what's more important is that they are

burning about 1.8 billion dollars in

operating uh or cap X I should say

expenses every single quarter and when

they burn about 1.8 billion dollars that

comes off with their operating cash flow

which fortunately they have a lot of but

the problem is it's shrinking they're

operating cash flow shrunk from about

3.3 billion to 1.4 billion and we are

trending towards a recession so while I

believe that Tesla has a substantial

amount of pricing power no company is

going to survive a hard recession very

well but I do think that Tesla has a lot

of potential for even in the face of a

shallow recession not re-testing the

lows that we've seen in the past so

personal I'm not opposed to adding on

some of the dips that we see for Tesla

especially when we Trend closer to that

175 level not a terrible level in my

opinion because it's a good Fibonacci

retracement level that we have recently

Revisited you can see that on screen

here this platform by the way right here

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really awesome platform to play with

options on to value options I mean in

fact if we go out right now 46 days and

look at Tesla for May and sell some at

the money puts let's see what kind of

money we're looking at today so we're on

puts we're May 19th let's go to

195. we'll call those about at the money

that's going to yield us about 16

dollars per contract so 16 divided by

194 it's going to yield us about eight

percent right now selling puts on Tesla

and these puts just went up about 35

percent on this selldown so it could be

a good opportunity to farm some yield

and if you were to get exercised at 190

puts it would really be like not getting

a yield but instead it would be like

buying the shares for 174 which guess

what that's exactly where the Fibonacci

retracement line is so if you're like

yeah I mean I'd go buy oh sorry I made

that mistake it's actually 195 is what

we calculated off it puts you at about

179. okay well close enough so it gets

you relatively close to the Fibonacci

retracement so if you were thinking hey

I wouldn't mind buying somewhere around

that FIB retracement 179 175 fantastic

here's a way you could potentially sign

yourself up to buying Tesla essentially

today at that level downside is if the

stock never revisits those levels you

wouldn't be buying the shares you'll

just keep your premium right but anyway

if I wanted to go out a little further I

went out 200 days which usually I don't

go out that far but in that case I'd be

getting about a thirty dollar uh premium

which is pretty incredible because 30 on

190 5 puts me at about a 15.3 percent

return just selling puts on Tesla that

is being willing to buy more Tesla

shares in that case I'd actually be

buying the shares below the FIB

retracement at about 165. by the way if

any of that's confusing you can learn

more by checking out my zero to

millionaire program link down below uh

or the stocks and psychology of

MoneyGram as well as Weeble metcaven.com

free so now some people online are

comparing Tesla to rivian or are

suggesting that competition is rising

but what I would like to do is I'd just

like to say if I were a company that was

willing to spend nearly five billion

dollars to make revenues of 1.6 I too

could sell as many vehicles as Tesla

could because I'm losing money hand over

fist and I don't know how to actually

manufacture now some people like to say

oh but Kevin rivian is just ramping up

I'm sorry when you're spending 288

dollars for every 100 of Revenue you

make you're a money losing machine Tesla

did not even lose lose this much money

when they were delivering the same

amount of vehicles as rivian that's even

without the tax credits Tesla had a 20

gross margin yeah they had an overall

net loss just like rivium but their

gross profit was at least positive when

they got to the level that rivian is at

so it's ludicrous in my opinion to

compare Tesla to rivian because they

don't know how to make money they know

how to burn money light money on fire

you want to see your revenues grow I

could grow your revenues a hundred

dollars as well pay me 288 for every 100

of Revenue growth you want and I'll be

your rivian too it's absolutely

ludicrous not only is that ludicrous but

it's also worth remembering that a lot

of media companies are comparing a Tesla

to byd but they're not actually

subtracting out the plug-in hybrids from

their battery electric numbers

fortunately there's this uh Twitter

account and we have to always remember

we we want to verify sources whenever we

can I'm not able to independently verify

this apparently this is from the Chinese

elect electric vehicle post but a Berlin

energy on Twitter posted this and I

think it's uh worth taking a peek here

they posted quarterly battery electric

vehicle sales and they actually noticed

a 19.6 percent decline for byd battery

electric sales and a 4.3 percent

increase for electric vehicle sales at

Tesla this despite the fact that plug-in

hybrid sales are blowing up for byd

those are doing quite well and then over

here you could see new battery electric

registrations and it shows the Tesla

Model Y and three well above the number

three and four byd positions uh very

nice here in fact the model 3 outpace is

about number three and four over here

and the model y just blows the others

out of the water so pretty impressive

honestly for a Tesla here and a lot less

fuddish than really the six percent move

on Tesla today uh forces I think uh

there's a lot of fud fear uncertainty

and down and look I'll take any any kind

of data head on and discuss it I'm not

trying to say any kind of negativity is

fake news here right like I'm willing to

look at anything for example I'm willing

to look at Goldman Sachs projections for

Tesla and I'm willing to jump on over to

their sheet and give them credit for

suggesting that their price target for

Tesla at the 12 month is 225 leading to

about an 8.5 percent uh upside they do

give very reasonable concerns they say

look there is Automotive stress today

financing is very expensive it looks

like Tesla's buying down some of the

rates on their vehicles so you could get

about in the mid fives for a raid on the

Tesla as opposed to what a lot of people

are paying at dealerships like six to

seven percent but there is the potential

for a continued production in prices yes

there's clearly long-term growth which

is true we completely agree with and

they do make the argument here that a

Tesla is likely reasonably going to be

able to get to about 20 margins for the

rest of the year but yeah margins

probably will end up in getting squeezed

at the same time as we are seeing the

inflation reduction Act tax credit no

longer in effect potentially for the

entire quarter but right now maybe only

the first 18 days of the quarter so that

could lead to Future price reductions

for Teslas but if the margins couldn't

hold up in this quarter which I think

will be the hardest or one of the

hardest quarters then I'm pretty

optimistic will be okay in further

quarters so I'm optimistic here now that

kind of gives you an overview of what I

think on Tesla and why Tesla stock fell

today now to conclude which of the

reasons I gave I think is the most

Salient for why Tesla fell I actually

think it's the first I think we had a

lot of Trader activity thinking that

Tesla might Moon shot after a beat today

and it did not so positions had to be

closed that were opened on Friday it's

as simple as that do you like my

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you being here we will save you in the

very next thanks again goodbye

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