Tesla Stock is about to Explode | Massive PP.

oh man massive price cuts at Tesla for

Tesla vehicles across the board what

kind of price cuts are we seeing what is

this meme for Tesla's pricing power and

what does it mean for Tesla's valuation

how does it change that Tesla

spreadsheet oh boy hey everyone meet

Kevin here oh let's get into this first

we have to understand pricing power I'm

going to start by explaining what I

believe is not a company that has

pricing power usually a company that

does not have pricing power is a company

that in a recession sees demand for

their product decline but not only do

they see demand for their product

decline because quite frankly in a

recession just by the virtue of the

definition of a recession demand for

everything declines right remember what

a recession is it is a shrinkage of GDP

relative to last year so if last year

people bought a hundred dollars from

your hot dog stand and this year they're

only buying 98 dollars that is a form of

an earnings recession for you or in Top

Line references a revenue recession

right when we talk GDP we talk about the

entire economy shrinking that is we're

still selling hot dogs we're just

selling less than we were last year and

in recessions you have contraction

across the board everyone suffers

but there are companies that suffer less

than others and those tend to be

companies with pricing power see

companies without pricing power lose

growth but not only do they lose growth

they also see their margins compress

because costs can go up in a recession

or they're operating leverage shrinks

which means they're seeing growth go

down but they're still spending a lot of

money on their Administration and their

advertising programs and they're

frustrated because they're advertising

more but they're seeing less growth that

shrinks margins and then you look at

earnings per share and you see shrinkage

that is an earnings recession and nobody

wants to see shrinkage when it comes to

PP this for example would be a perfectly

exemplified by in my opinion Carnival

Cruise Lines Carnival Cruise Lines

regularly in earnings call after

earnings call exemplifies their

frustration over how their advertising

more coming up with better advertising

strategies but they're still losing

growth momentum while at the same time

losing margin Carnival cruise lines in

my humble opinion is a company that does

not have a lot of pp pricing power

whereas a company that is able to lower

prices to induce substantially higher

demand first of all takes demand away

from other competitors right so in a

recession if we're saying okay there's

less of a pie for everybody to go around

but I want more pie because I'm hungry

in in the case of companies you lower

prices to take more of the pie for

yourself and if you can maintain or grow

profitability during that time you can

grow overall profitability

then you win compared to your

competitors because maintaining

profitability in a recession enables you

to do what your competitors can't it

enables you to invest in your businesses

see in a recession most people just like

companies turn inward they say you know

what I'm not going to buy a new laptop

I'm not going to invest in a better

Production Studio for my YouTube set I'm

not going to invest in my startups like

my real estate startup or whatever I'm

gonna I'm gonna lay low I'm just gonna

survive and get through right and this

is this is like the safer option right

because you don't want to go bankrupt in

a recession but if you can maintain

profitability you have the opportunity

to invest in a recession when others

don't and much like Tesla has announced

not only the expansion of Giga Texas but

is soon to announce either the building

of potentially an Indonesia plant or a

Northeast Mexico plan maybe even both

who knows also still in negotiations on

that phase three doubling of capacity

expansion for Giga Shanghai these are

things that companies can do during were

sessions who have profitability and that

is a sign of pricing power when you are

able to take more of the pie

and maintain profitability so you are

able to invest more so not only are you

taking more of the pie today but you are

enabling yourself to invest more in the

company which enables you to take more

of the pie again in the future

and so this is what highest relative

pricing power means unfortunately that

is not as simple as what pricing power

is often defined as in a boom Market in

a boom Market a bull market in a

non-recession when the pie is growing

for everyone what you end up getting is

froth companies that have very bad

margins or very bad businesses and

business models make a lot of money but

companies that are really great

companies also make a lot of money and

everybody feels like they can raise

prices whether their product is good or

bad in recessions the crappy products go

bankrupt that's the point recessions are

like economic hurricanes they come

through blow everything around and all

the weeds on the on the ground and the

palm trees that have a bunch of dead

fronds or the old trees that just can't

hold themselves up very safely all of

that falls over gets Blown Away blown

onto the street and then washed out into

the ocean and all of a sudden you come

out after the storm and you're like

this place looks a lot cleaner than it

looked just a few days ago it's weird

okay I grew up in South Florida I had

that experience a lot a lot of

hurricanes in South Florida

but anyway

Tesla

cutting prices

in the case of Tesla is an example of

inducing higher demand in a recession

maintaining profitability and higher

margins than competitors meaning they

have the ability to take more of the pie

and still grow and still invest consider

again byd in China has a net profit

margin of 1.45 Tesla has a net profit

margin of 14.5 percent which company has

more capability of reducing prices while

still maintaining profitability

byd Cuts just a bit you're negative now

you can't invest as much anymore you're

losing money every quarter or every car

you sell you're losing money on net if

you have 10x the margin you have much

more pricing power because you could

drop your prices you could drop your

margin 50 sell a lot more still have

cash flow still invest a lot

and actually come out as a stronger

company on the other side of the

recession

the best investments we could ever make

in my opinion are the Investments that

we make during a recession but don't get

me wrong it is hard it is painful people

will think you're an idiot people will

hate on you for investing in a recession

because they're too afraid to do it

themselves they're too afraid to invest

in a recession they're the kind of

person that will read you quotes be

fearful when people are greedy and be

greedy when people are fearful yet when

everybody is fearful they're the ones

cowering in the corner crying

everyone will look at a stock market

chart and they'll look at the Dow Jones

over the last hundred years and they'll

see just this in a logarithmic curve

going straight up

uh over the long term it looks

exponential right but logarithmic as in

trying to scale it because otherwise it

looks ridiculous but anyway the point is

you generally see the stock market just

going straight up into the right

but what people do is they look at the

recession points and they're like well

if I were to invest I would just invest

in 09 in O3 in 2020 of March and at the

end of 2018 that's when I would invest

because I'm going to be a perfect

investor nobody is better than me that's

what people who don't actually do

anything in life think

but in my opinion real investors realize

the best time to actually make recession

Investments is when it's hard to do so

and that's now and the way you can

really do that the only way you could do

that is by working harder to increase

your income so that way you are able to

win when you escape a recession

that applies to companies and

individuals Tesla for example has to

work harder they have to cut the froth

they have to lay off people they don't

need they have to put higher demands on

the existing employees they have they

have to limit wage growth to keep

margins at least survivable they have to

cut prices to keep growth going so that

way they can keep investing into new

factories and r d whatever and that is

how companies grow they make hard

decisions during hard times and they do

what's hard during hard times rather

than going crying in the corner you get

off your ass and you work harder it is a

hard thing to do but it's the best thing

to usually do unless your product sucks

and you don't have any pricing power

because even if you work harder but your

product sucks you'll still go bankrupt

so what do we know about Tesla after my

little lecture

usually I only do lectures in the

courses on building your wealth linked

down below we do have a big pricing

change coming up uh on my birthday so

make sure to check out the programs on

building your wealth linked down below

and if you like the way I explain things

or I'm about to explain things whether

it's fundamental analysis technical

analysis you want to learn about finance

and actually building your wealth during

a recession check those out whether it's

real estate stocks building your income

these programs are phenomenal I am

extremely confident you are going to

love what you see okay so these are new

model y inventory levels and this is the

Tesla

data.matjung.net website a lot of people

have been using this referencing this on

Twitter uh this individual is uh so

gracious to to provide this uh this sort

of data tracker and a lot of folks have

gotten very nervous rightfully so that

look we had a we had a massive increase

to the Tesla vehicle credits that

Tesla's offering at the end of December

2022 and so what did we see we actually

saw not only a plummeting of inventory

after new pricing incentives but as soon

as the first of the year came and those

incentives

disappeared we were subject to the

government's unclear inflation reduction

act credits what did we see we saw an

explosion of vehicle inventory at Tesla

in fact we saw some of the lowest

registrations for Teslas in China that

we have

can I seen in recent history it was it

was not that great uh Tesla

registrations were in the neighborhood

of 2

000 Tesla vehicle registrations uh in in

the week between January 2nd and January

8th that's very very low usually we're

somewhere around

8 to 12 000 14 000 byd was kicking

Tesla's but it was ugly uh and so there

were quite a few signs and indicators

that oh things are becoming a little bit

problematic in terms of where Tesla

vehicle pricing sits right now and

fortunately Tesla has done what should

be done during such times in such cases

of uh lower demand for vehicles and they

have decided to reduce pricing in fact

take a look at how prices have been

reduced here's the chart from Bloomberg

I'll go ahead and hide myself for a

moment you find this on bloomberg.com

but you can see here that uh we've got

some large price Cuts model 3 down 6.4

percent model 3 Performance 14 model y

19 and 20 Model S 15 and 9 model X 9 to

14 this is some pretty large price Cuts

right now it is worth noting that

relative to March of 2021 these price

increases uh that we've seen since uh

March of 2021 still leave the vehicles

priced higher than what they were so

take a look at this again we'll go back

to this Bloomberg chart here for a

moment and what I want you to do is pay

attention to the model there this way

right here like the model 3 up there so

the model 3 right now sells for about

forty four thousand dollars that was

selling for

38 490 back in March of 2021 so it's

worth having a little bit of perspective

that uh you know

43 990 divided by what it used to be is

still 14

more expensive than what this car was in

March of 2021 and arguably Tesla has

actually become substantially more

efficient now we have had substantial

commodity price increases and we are

slowly seeing some of those come down

not all of them

and this is where we've got to kind of

scratch our heads a little bit and look

and say okay well how is this going to

impact margin because sure the vehicles

are still priced more than what they

were priced back in 2021 but now we're

in a situation where uh oh only some

commodity prices are actually falling

and not all of them let me give you an

example we have aluminum down 14 to 19

depended on the grade of aluminum we've

got the Bloomberg commodity and this is

year over year the Bloomberg commodities

index is down 20 year over year

depending on the type of Steel you're

looking at you could end with when

you're making your comparisons you could

see that regular rolled steel is

somewhere down between 12 to 18 but if

you actually go a little bit deeper and

you look at very very specific types of

Steel you could see substantially

greater plummets in fact an individual

was nice enough to send me a spreadsheet

with some some price indices

specifically for steel big shout out to

this is oh where's where to go I'm

pretty sure it's Tommy uh anyway yeah

Tommy big shout out to Tommy on Twitter

thank you so much Tommy on Twitter I'll

go ahead and uh share this screenshot

here uh Tommy on Twitter sent me an

example of a few different uh

spreadsheets for steel pricing and one

of the examples he gave is he suggested

that c-r-u-h which is a thicker steel

usually something that you would see in

framing for Tesla vehicles uh has come

down substantially in fact if we were to

just look at to simplify the spreadsheet

the pricing for structural steel January

to January so 2022 is January to January

now the uh pricing that you would see

would be on screen here a little small

there let's zoom in a little bit January

sitting at about

1490 as sort of an index price down to

712 so about half this January that's a

50 drop in steel now uh we've seen

similar prices like that for thinner

steels for things like doors and hoods

copper down eight to nine percent

year-over-year very important inside the

motors for electric vehicles however and

unfortunately lithium is substantially

more expensive Tesla just unfortunately

doesn't uh you know take advantage of

Contracting and a lot of their lithium

pricing at least per Bloomberg they tend

to pay for their lithium based on when

it's shipped and that's not so

convenient when all of a sudden you see

lithium hydroxide which goes into making

the Lithium-ion batteries up 156 percent

year over year in December that's uh one

and a half X I'm sorry well it's a

double right and then more so so when

you're up a hundred and fifty six

percent you're up about two and a half X

so let me let me translate that if it

was a hundred dollars now it's about two

hundred and fifty six dollars so it's

gotten quite a bit more expensive nickel

which is also a component of at least

some of the batteries Tesla uses up 23

so much like what Elon Musk said in his

Q3 earnings call

some prices are up some prices are down

now remember Elon Musk and Tesla last

raised prices in June of 2022 so it

actually hasn't been that long since

we've had a large and massive price

increase the price increases were

insanely high in June 15 to 20 percent

and now we're seeing a give back on that

and a little bit more some parts are

becoming more expensive or so for

example fsds up to 15 000 the take rate

for FSD is about 19 keep that in mind

that'll become very important when we're

about to go into our analysis and we'll

do some spreadsheet work midnight silver

a color for Tesla paint didn't used to

cost money now it's a thousand extra

dollars destination fees are up 190

dollars and now you have reports uh

after these price cuts that demand is

returning you look at the cnev post

Chinese uh website uh there are reports

that Tesla potentially received 30 000

orders within three days of their price

cut announcements late on January 6th uh

which my assumption is we we haven't

seen any increase in registrations yet

because there's probably some kind of

two or three day lag time before you see

registrations actually get processed and

when vehicles are actually sold so

vehicles started selling on the seventh

and 8th I wouldn't actually expect to

see those Insurance registrations show

up yet until the following week if in

the following week in China we're not

actually seeing a big spike in Insurance

registrations for Teslas it's gonna be a

problem

uh now uh there's also some talk about

Tesla potentially having delivered 10

000 Vehicles the first day of price Cuts

in China day that's insane think about

that for a moment if let's say you were

delivering 3 000 vehicles per day in

China now you're doing ten thousand

dollars initially even if that's just

the initial surge if that drops to say

seven thousand or six thousand a day

that's still a lot more than the 3 000 a

day we were doing before Big Boost uh

now

when it comes to Tesla we have to

remember

that Tesla in the long term is trying

not to be a luxury vehicle

vehicles are relatively expensive when

you're looking at the Y's the S's and

X's the model 3 has almost always been

less than the cost of the average price

of a new car the average price of a new

car in America right now is forty seven

thousand six hundred and ninety two

dollars now do be careful averages do

skew up

but if we go ahead and compare that

average price to what you can pay for a

model 3 right now you're at three and a

half thousand dollars less for a model

three than you are the average price of

a new car and back in 2019 the Tesla

Model 3 was selling for within 500 of

the average new price so if you use that

as sort of a comparison the Tesla is

becoming substantially less expensive

relative to the rest of the vehicle

industry and yesterday

we were on uh we we went on a very short

flight but we went on a very productive

flight and uh we in the jet we were with

my jet my my baby jet I call it we were

talking uh with our team and the shadow

War who was with us and we were talking

about Tesla specifically and one of the

things uh that uh that I spoke about was

this idea that I expect in the future

Tesla is going to have a twenty thousand

dollar vehicle and most people think I'm

absolutely crazy when I say that but I

think I have a very competitive thesis

about this and and I encourage you to

hear it out I think it's fascinating so

the thesis of the twenty thousand dollar

Tesla is actually that Tesla would sell

the twenty thousand dollar car for no

profit no gross profit at all now you

might think to yourself that's insane

and this was yesterday uh and that's an

important context because we discovered

something this this morning that that

Elon had said that it really aligns with

this idea which is pretty remarkable by

the way if you ever want to chat with me

in person on the jet you can join me

just use the link down below and

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you can follow me around as we explore

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I'll answer any questions that you have

uh well you know we can take pictures do

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hang out with us and the team it's

really a great experience check that out

via the link down below it's next to the

link for the courses and you can use the

coupon code for that before the pricing

changes by my birthday

so uh what I talked about was this idea

of the twenty thousand dollar vehicle

and the twenty thousand dollar vehicle

what's so incredible about this is not

having any profit you might think this

is a terrible idea but watch this let's

jump in over here and let's draw a

twenty thousand dollar vehicle let's go

ahead and assume this twenty thousand

dollar vehicle is a vehicle that only

has about an 80 mile range right maybe

it's a two-door 80 mile range you know

maybe it has a a 20 KV battery uh

kilowatt hour battery generally here in

America we call it uh and uh you know

maybe it's more efficient because it's

lighter and that 80 mile battery is

actually more like a 100 mile battery

plenty for people's daily commute going

to the grocery store whatever most

people drive an average of 30 minutes

one way which is probably somewhere

around 20 miles in One Direction

assuming it's not all just straight

highway but even if it was that's 60

highway miles and you've still got room

in the battery uh so what's incredible

about this

is if you take this smaller vehicle and

let's say in the future you sell it for

twenty thousand dollars and your gross

profit on the vehicle is zero literally

zero well first of all you are going to

cannibalize a substantial subsect of the

vehicle Market because other

manufacturers won't be able to compete

hybrids will not be able to compete

hybrids will die because you can't

compete with somebody who's willing to

sell you a car for no gross profit

because you'll go bankrupt if you have

no gross profit once you consider

operating costs you're massively

negative

but how could Tesla actually still have

a glorious gross profit well through

full self-driving see the beauty is with

full self-driving today we're at only

about a 19 take rate but full

self-driving hasn't actually been widely

available until Christmas where now at

sort of a wide release more individuals

are actually able to get full

self-driving beta and my estimate is

that the FSD beta signups are probably

going to take up pretty quickly to 30 to

40 percent but let's assume that by the

time a twenty thousand dollar car comes

out almost everybody takes FSD but when

I say almost everyone I'm still going to

take that down to 50 percent

so we go to a 50 take rate on FSD that

would give you gross profit of seven

thousand five hundred dollars the

incremental cost of one more person

having FSD is zero in fact we're going

to consider that any of the FSD costs

for Tesla are already built into their

operating margin so the more they sell

FSD the bigger operating leverage they

have because you've already spent the

money and you're making more money with

money you've already spent there's

really no margin there's no expense

there's no extra cost for turning one

FSD on it's literally software that you

did like the user themselves enables

they don't even have to call anyone to

enable it

so let's just make math simple and say

it's 100 profit

realistically probably accounting wise

to put in you know a 10 cost or whatever

for it but it's not necessary

so take rate of 50 the additional cost

zero now do keep in mind that in the

past I've always considered FSD as a

bonus but for this zero margin car in

order to actually have a functioning

business you have to assume that FSD is

part of the core business model

so now what you do is you're going to

add seven thousand five hundred dollars

to twenty thousand that's your gross

revenue is twenty seven thousand five

hundred dollars

and now your profit on twenty seven

thousand five hundred dollars is 7 500

bucks which means your margin is

actually

twenty seven point two seven percent

so you could literally

sell a cheap car

20 000 bucks make zero money on the car

but just sell FSD to fifty percent of

the people who buy and still be nearly

at a thirty percent profit margin now

that's incredible and it's really

critical for considering in terms of the

Tesla valuation because boy oh boy the

FSD is getting good and at this point

you've got to start at least assigning

some value to FSD because it's getting

to the level where it makes sense for

people to buy and it's available

so

what is interesting about this

conversation that we had on the jet is

that there's actually a reference to

Elon Musk suggesting something that is a

little bit more on the aggressive side

but it reiterates this now while we

talked about this on the jet yesterday I

just this morning saw uh Omar post this

tweet uh that's because he posted like

11 18 last night but I thought it was

incredible because it really aligns with

this story do you want to grow unit

volume in which case uh you'll have to

adjust prices downward

um or do you want to

grow at a lower rate or go steady is

sort of a choice there

um

you know my inclination would be to

still grow

you know as

I might might my bias would be to say

like okay let's let's grow as fast as we

can without putting the company at risk

um which would mean

you know in that in that scenario

profits would be low to negative during

a recession

provided the cash position is okay I

think that's still the right move long

term

and the

so

because there's also something that

Tesla possesses that other car companies

do not which is extremely fundamental

that is that the cars are upgradable to

to autonomy and so and arguably

an autonomous car is worth many times

what a non-autonomous car is

so even if your modules are extremely

low

uh in selling the car if the subsequent

upgrade to it being autonomous uh is

worth a lot so and that's just that's

something that no other car company can

do is it only tells it can do that

incredible

so some things to break apart from this

first of all

what we talked about regarding FSD in

the 20 000 vehicle aligns very closely

with what Elon here said in his Twitter

spaces uh call about this idea that you

can sell a car with little to no profit

margin and as long as there's some

essentially take rate on FSD you could

still make a lot of money you could

still actually have phenomenal margins

now I did not like that Elon Musk

suggested in a recession you could

potentially go to no profit or that was

that was more okay because the the FSD

portion but the part that's a little

concerning is he said or negative profit

that doesn't exactly send uh the the

good feels out to individuals betting

that Tesla's going to be great for

earnings reports going forward right

there used to be a lot of excess demand

for Teslas you'd have to wait six months

and uh at least my thesis originally was

that Tesla's excess demand wouldn't be

absorbed as quickly as it was the excess

demand was really quickly absorbed uh by

by more production or canceled orders

because of the recession and fears about

people's wealth going down or whatever

uh and so unfortunately the backlog has

evaporated for Tesla right and so you

are in a situation where what Elon is

suggesting here could be a hint of the

future that hey look we're we're just we

we're gonna have to sacrifice margin

at least during a recession and again on

one hand that's good because you're

potentially taking a larger portion of

the pie you'll uh from other

manufacturers while still making

Investments Elon suggested as long as

you've got the cash position to do that

he's been reluctant to buy back stock

because he wants to make sure they have

that cash insulated buffer to make sure

they don't go bankrupt during a

recession right that's worst case

scenario instead they're able to

continue investing like we talked about

with the gigafactory expansions and the

new gigafactories that's great in fact

in a video that I posted uh for maybe uh

two or so days ago and somebody actually

sent me this I forgot who it was but

whoever was thank you so somebody sent

me this they said Kevin you kind of

tease these price Cuts coming and it's

like well yeah I mean it's logical but

let's listen to it for a moment is this

video right at about 8 minutes and 40

seconds really is double and tripling

down on these capacity expansions it

makes you think that Tesla must clearly

have a path for so much demand in the

future or new pricing strategies that

are going to induce that new demand in

the future in order to keep these

factories busy expect there you go the

new pricing strategy is here

uh so now how do we build all of this

information

into evaluation model for Tesla

well that gets a little bit more

challenging we're going to do exactly

that

but it does get a little bit more

challenging so what I've done is I've

now run a low margin scenario for Tesla

and I've built in a 30 take rate for FSD

which is up from 19 as the average in

2022 which I believe is reasonable to go

from 19 to 30

specifically because you have Tesla

actually authorizing the wide release of

FSD keep in mind I have had full

self-driving on my model X since 2017

and on my Model S since 2021 and haven't

actually gotten it on the S until

Christmas of 2022 right so it was a year

of waiting before I actually got it

despite the fact that I paid for it a

long time ago that actually frustrates a

lot of people because you know in

America we pay for stuff and we want it

right away if you just have every day

this button dangling in front of you

that's like hey you know if you just

pushed this button you get FSD great

now there is a risk factor to this and

it has to do with the payments modeled

talk about that in just a moment uh that

does require some base cost expenses

though but again I'll explain that

so there there are a lot of assumptions

uh here and a lot of these I want to be

clear are going to be very blurry

for probably the next couple years which

that's what happens in recessions right

in recessions the the data becomes more

blurry Things become less obvious

one of those is actually going to be

what is our average revenue per vehicle

right now it's sitting around 52 000 but

what if that average revenue per vehicle

is down to 47 000 amongst all these

price Cuts uh well that's entirely

possible by 2025 that that's the average

revenue per vehicle

uh it's also possible that this number

of vehicles is grossly understated under

a new pricing regime now that's

remarkable because we've actually

reduced this from about 5.2 million to

4.2 for 2025 but you make some huge

changes to this formula when you

actually sell a lot more cars at a

slightly lower margin

and that is possible if we end up with

the phase 3 expansion for Shanghai to 2

million vehicles and then we get an

Indonesia and maybe even and a Northeast

Mexico plant 4.2 million Vehicles could

be laughable we I mean we in 2025 if we

are back into sort of a a you know more

of a bull market environment we could be

at seven million Vehicles nobody knows

right but let's just run the numbers

with 4.2 for a moment then let's keep

pretty much all things consistent with

the exception of what we're going to do

is we're going to throw in a 30 take

rate on FSD and so the way we're going

to do this math is we're going to take

number of vehicles times 30 percent

times fifteen thousand dollars

now there is a a risk with that math and

I will explain that in just a moment but

that brings you to about 19 billion

dollars of incremental Revenue keep in

mind I'm still only sitting at about one

percent for energy uh Services mostly

Break Even nothing for insurance or

semis or Tesla bot or any of that kind

of stuff right

what I've now also done is I've reduced

the margin uh that Tesla takes from

about 27 profit to about 15 gross profit

and so you can see here I've reduced

that margin substantially by going to 85

expenses on the vehicle you're sitting

at about 15

gross profit however I also put FSD in

here which I Peg just an incremental

increased FSD cost of two percent in for

margin again I think most of this is

going to sit in the operating expenses

for Tesla uh which we expect is going to

be somewhere around 14.6 billion dollars

uh this is not cost of goods sold right

it's not like the factories and the

assembly lines it's the people it's it's

your general Administration your website

your r d right your advertising which

there really isn't much so anyway that's

about I I have this set to about 14.6

billion so now what we get to after

taxes and everything is about earnings

per share of about eight dollars and 81

cents in 2025. that's

reducing margin to just 15 growth but

including a lot of FSD Revenue 30 of new

vehicles taking that FSD okay

Watch What Happens here

price Target assuming a uh a uh 50 times

p e ratio again this is assuming 30

growth PEG ratio at 1.67

brings you to an end of 2025 reasonable

price for Tesla of about 440. compounded

annual growth rate if you buy it at 120

of about 54.2 percent

now you can play with this as much as

you want

and what I like to do because I do

believe that a reasonable PEG ratio for

Tesla is 1.67 and I believe that it's

reasonable for them to grow earnings by

at least 30 percent uh per year with

this sort of growth strategy and FSD so

what I'd like to do

I mean you could play with marginal you

could play with the multiple on this if

you're like no Kevin we're gonna go with

40 you're going to see price change

right obviously

but we'll we'll keep it at 50. but what

we are going to do is we're going to

change some of the assumptions here

because you have to keep this in mind

when you previously were able to say hey

average revenue per vehicle was 52 000

and we took thirty percent gross your

previous Revenue uh or or gross per

gross profit was somewhere around

fifteen thousand six hundred dollars

that's great

but now if you just take 15 on a lower

Revenue per vehicle forty seven thousand

dollars

and then you uh add

uh some FSD in here which we're going to

assume a thirty percent take rate right

thirty percent take rate on FSD and then

we're gonna take off two percent for

costs or whatever so add that in you're

only now sitting at gross profit of

about 11 460. so even with a thirty

percent take rate and low expenses on

FSD you're still substantially looking

at less gross profit than what you had

back in the Glory Days

now the way that this can increase is

commodity prices could come down

substantially

but we're not in that environment yet

certainly not in a recession your buffer

for Tesla and a recession is FSD that's

it so you're still seeing a cut of about

what is that 24ish percent or something

like that you're still seeing a cut so

there's some options right you need the

take rate for FSD to go up to really

increase profitability if you have that

take rate at 50 like I said on the 20

000 car margins start looking nice again

or you reduce the price of FSD to push

that take rate up not so ideal though

or are you installment it which they do

if you have basic autopilot you can

actually pay 199 bucks a month to go to

FSD capability if you have enhanced

autopilot which these have base costs

obviously you can get FSD capability for

just 99 bucks a month now unfortunately

now you're stuck valuing SAS company

with a time frame to recognize all of

this income which lowers your cash flow

that's less ideal for Tesla I'd rather

see Tesla get the fifteen thousand

dollars right away

but they're probably only going to get

somewhere around maybe five thousand

dollars plus a monthly fee all right so

go for example to tesla.com which by the

way you can play around and see how the

incentives work out you can view more to

learn about the incentives uh from the

inflation reduction act uh now that the

Tesla Model y by the way is uh in

basically many cases many regards less

than fifty thousand dollars or at least

the model uh Long Range model is

they actually qualify for the 7 500

credit for now although we're still

waiting for more treasury guidance on

the batteries so so there's a potential

red flag there but what I want you to do

is go over here look at this

to add enhanced autopilot you have to

pay six thousand dollars

and so it shows you that you know there

is this potential of you getting a Tesla

and then you have basic autopilot uh

would cost you 199 a month to get to

full self driving from basic to full

self-driving no extra upfront cost other

than the vehicle enhanced autopilot

would give Tesla six thousand dollars of

Cash Plus 99 a month to get to full FST

I hate to say it I mean I think for most

people the monthly fee makes the most

sense especially during a recession

because think about it 199 times 12 is 2

388 dollars

fifteen thousand dollars divided by two

thousand three hundred eighty eight

dollars is six point two years most

people don't keep their car for about

maybe seven years on actually no houses

or an average of seven years most cars

are like three to four years

uh however you could make the argument

that well I'll be able to resell the car

for a lot more if I have FSD especially

if the cost of FSD goes up but I'm not

planning on the cost of FSD going up

anytime soon uh I think if anything

that's more potentially likely to go

down rather than up

so anyway uh that gives you a little bit

of a of a you know another consideration

here when it comes to FST but something

we can also do over here uh is watch

this I just want you I want to play

around with this I want to show you what

does this look like if we now increase

this to

5.2 million Vehicles by 2025 okay Enter

on that the only thing we did was is we

added an extra million Vehicles what do

we end up getting to watch this look at

that price Target goes to 545 right so

let's just say you're like I think it's

only going to be a 30pe company okay

fine still 327 bucks for this sucker and

what if we go over here and again we at

only 15 gross margin we go to 6.2

million Vehicles boom but you've got

that 30 take rate on FST

okay still at almost 400 bucks

and it's interesting how you can play

with this now you can also uh you know

say Okay Hey Kevin they'll make they'll

make 6.2 million vehicles but what if

their margin you know goes down to 10

okay well it's gonna be a hit and you're

at a 30p oh 286. it still is a

ridiculous

value at 120 bucks a share right it's

still 33 compounded growth at a 30pe

ratio you go back to 50 which how I get

to 50 is a 1.67 PEG ratio I think that's

a fair PEG ratio you go 1.67 fair for

companies anything below that deal deal

deal deal deal deal

in my opinion

go back to 50. even at that low margin

it looks great so you can do ink around

with the numbers all you want obviously

uh you know if you go to just now now

this is a problem you go to a take rate

of just 19 we go back to 15 gross margin

that take rate is going to be a big deal

now that take rate 19 is what it was in

2022. people maybe had more money in

2022 but you weren't guaranteed to

actually get FSD right but uh well wow

actually wait a minute with the take

rate down 19 percent

uh and the margin here but 6.2 million

vehicles and a 50p you're still at 539

that's actually incredible like I don't

know either way you slice I mean I think

you just have to go so nasty to make

this not a good deal like take it down

to 30 take this down to 10 gross profit

and leave that at 19 what are you at now

219. you're still almost a double

like I I don't understand when people

are like oh Tessa doesn't have any

pricing power when we look at the

relative pricing power for Tesla at

these valuations it's absolutely insane

how much potential pricing power there

is

so I personally am a big fan of pricing

power and this is why I believe the best

investment that you could make not look

I cannot legally provide you personal

financial advice I am a financial

advisor like I want to be able to shake

you and go do this but you know then

we'd have to sign some paperwork I'd

have to be your personal financial

advisor and and I just I just don't do

that okay

I can do that uh but this is why I

personally think if you can allocate

your Investments to an actively managed

ETF that focuses on pricing power stocks

you can do some really glorious things

because what you can really do is you

could look at uh you know here I'll just

draw on a quick little sheet here we can

look at uh something that maybe has a 25

allocation to Tesla

and if Tesla doubles all of a sudden it

becomes a 50 allocation in your

portfolio although you would assume that

if Tesla doubled by then the other

things would go up as well so maybe it'd

really only be a 40 allocation in your

portfolio right at some point it's going

to make sense to lower the allocation to

Tesla and if you're going to go from 40

to maybe let's say 10 allocation to

Tesla and you're going to sell 30 of

your Tesla stock that's a lot you're

gonna pay a lot in cap gains and it's

going to suck you don't want to pay a

lot of money in capital gains

beautiful thing though is if you hold a

ticker you know ticker ABC let's just

say and it's a pricing power ETF or an

actively managed ETF that has a big

allocation test on this example well if

within the umbrella of that ticker the

active manager takes you from 40 Tesla

because it's now run and doubled or

whatever back to 10 teslan rebalances

for you and they go from Tesla and they

trade that to maybe end phase is a

better deal and Apple's a better deal at

that time let's just say right

well then what you actually have

is a trade not a taxable event

now that's very interesting because you

can only do that under the wrapper of an

ETF

so you cannot be exposed to capital

gains by moving from one stock to

another that's crazy like that's it's

like the greatest tax hack that I've

ever seen in the stock market I think

it's so cool I think more people should

take advantage of that uh you know of

course they should always evaluate their

own personal finances and figure out

what's best for them but in my opinion

it's very very exciting so

here's my thesis if you want to chat

more with me as uh we uh we brainstorm

join me on my Jet and Shout Out me as we

go look at real estate I'd love to have

you thank you so much for being here for

this extended video on Tesla I I don't

know I don't know if you found this uh

more extended video style useful if you

did hit me up let me know in the

comments down below thank you so much

for watching and we'll see you in the

next one goodbye