Tesla Stock & The Coming Stock Depression.

hey everyone me Kevin here we got to

talk about Tesla why because well we

have serious fears in fears Insurance in

the market that we have two major phases

of Market contraction phase number one

is when we just see prices collapse

because price to earnings ratios are

collapsing and that's okay that's

something healthy that happens but phase

two of a recession could be an earnings

recession and this is when we actually

see consumer demand hurt to the point

where people are spending less money on

goods and services as a result companies

show lower top line revenue and lower

net revenue a simple example that I

regularly like to use of course this

video is going to be about Tesla but a

simple example that I regularly like to

use is if you look at the last of Nike

earnings you see that we had tremendous

growth during the pandemic and not a

surprise people buying shoes working out

from home whatever getting workout

clothing you name it but what do we have

in the last earnings report we have a

year-over-year comparison of Revenue

that is down one percent and net

earnings that's down five percent

compared to last year now if you have

that for two quarters or more in a row

you tend to be in an earnings recession

and that oftentimes comes with big old

analyst downgrades and as EPS goes down

at the same time as multiples went down

in the first part of the market crash

well what ends up happening you end up

getting low you end up getting lower

growth expectations and lower premiums

for stocks which in English stocks go

down it's not great in a recession

stocks suffer a lot now there are

however some companies that potentially

could survive an earnings recession and

one of those companies in my opinion is

Tesla and I'm going to explain briefly

why I have that thesis in this video

along with some new information on Tesla

but at first I want to talk to you about

this valuation argument because every

time I bring up Tesla as an investment

people say oh my gosh how could you

invest in Tesla it's so overvalued and

then I like to ask oh you know would you

invest in Apple or would you invest in

Microsoft right now no it's pretty big

names and most people who think that

Tesla is overvalued onto me and say yeah

I mean apple and Microsoft are great

companies so one of my favorite metrics

is the PEG ratio and this is a ratio of

how much money you're paying for growth

this is really important because rather

than just looking at the share price of

let's say a thousand dollar stock

divided by their earnings of say twenty

dollars then you get a price to earnings

ratio of 50. we're now going to take

that 50 and actually compare it to the

growth and if earnings let's say

earnings are a dollar are going to a

dollar and fifty year over year that's a

50 growth rate divide that 50pe by the

growth rate what do you have you have a

peg of one when we do this math with

Tesla we actually get a 2022 PEG ratio

of 1.41 and a 2023 ratio of one anything

under two generally means you're getting

a decent deal for growth anything under

one is just absolutely phenomenal or at

one is is even more phenomenal now if

you look at Apple you have a pig ratio

of

3.8 and if you look at Microsoft you're

over two so when you look at a PEG ratio

where you're actually taking the price

to earnings ratio and you're dividing

that by the growth of earnings you

actually have an extremely in my opinion

well-valued company of course it creates

risk factors the biggest risk factor is

what if that growth slows down growth

slows down then obviously the PEG ratio

goes up and that's one of the big themes

is what if growth slows down and that's

something that we got to talk about

because things are changing in China

delivery weights are now down to one

week in China this is happening at the

same time as Tesla Giga Shanghai is

expanding substantially in fact we're

now expecting 100

000 cars to be delivered out of Giga

Shanghai this is actually incredible

because we've generally been delivering

around 70 000 vehicles per quarter and

now I'm sorry per month okay this is a

per month figure we're gonna go from in

the 70 000 per month to a hundred

thousand vehicles per month this is

phenomenal but because of the pain the

Chinese consumers experiencing in China

Chinese consumers still saving

substantially more remember back in

January we were saying wow the Chinese

consumer is saving four times as much

money as they were last January and we

know the Chinese are very very smart

people especially when it comes to

savings and cash what did you end up

with well basically now a pretty bad uh

recession if not depression in China I

don't I don't really believe that their

GDP is actually still going to be 3.5

this year I think that's nonsense I

think they're negative but we'll never

hear that uh but anyway so obviously

we've got lockdowns in consumer fear in

China but the big issue that we have

with Tesla is what if Tesla manufactures

more vehicles but then doesn't have more

buyers and China is about to be our

first test of that because as we're

expanding and we're seeing wait times go

down which unfortunately is something we

saw happen at Peloton right wait times

came down then prices came down and then

all of a sudden the stock fell 90 right

that's scary if your demand evaporates

you're screwed now do we think that

potentially could happen with Tesla well

of course of course that could

potentially happen with Tesla in fact

Tesla is reportedly giving Insurance

subsidies to get people to buy Teslas in

China of course they've got other

competition like byd and Neo over in

China but most of in my opinion the

reason why we're seeing lower wait times

in China is both a combination of the

fact that we're producing way more cars

but also because well China's uh having

a little bit of a depression okay all

right that's just between you and me all

right I don't want the CCP coming after

me but anyway

the good news is the United States

economy could potentially desire to

absorb those chinese-made Vehicles now a

lot of chinese-made vehicles used to be

exported to Germany but now we've got

Berlin ramping up and maybe we don't

necessarily need as many of those

Vehicles going over to Europe because

we've got Giga Berlin to provide local

production the big issue in my opinion

will be is if Chinese vehicles or

chinese-made Teslas are sitting around

waiting for buyers that's going to lead

to price drops and we already know that

China's production is the highest margin

but let's ship these cars instead of

maybe to Europe or locally within China

get them to the United States and bring

those wait times down as we go through

this recession we expect both margin to

go down and the amount of outstanding

buyers available in the buyer pool to go

down we do hope that as wait times start

approaching maybe one to two weeks we

hope that more buyers start coming to

Tesla which may not happen right that's

a risk factor but we hope that more

buyers come to Tesla because a lot of

people when they want to buy a car they

don't want to wait three months or six

months in fact if you look at wait times

in America right now if you want the

long range model 3 it's not even

available for sale because the wait

times are so long that they have

canceled people's ability to actually

pre-order that vehicle in America not

only that but the model 3 currently has

a delivery expected time frame of

October to December that's at least four

weeks but potentially months the model Y

which in my opinion is the best value

for a Tesla has a delivery process or

time frame of December to April and

again I think that's the best of value

car now you're still going to have

people though that say you know what

look I just don't want to buy a car

during a recession personally I think

that's smart I mean when I talk to

people daily when we do our fundamental

analysis in the course member live

streams uh linked down below by the way

there's a coupon code C that expires

soon this month so make sure you get

that before prices go up but when we're

in these fundamental live streams people

ask me like hey should I be buying a car

right now and I hate to say it but no

you shouldn't be buying a car in this

market right uh no I don't think I can

single-handedly you know hurt Tesla's

Market here obviously I'm really heavily

invested in Tesla and while I am

becoming a licensed financial advisor

I'm not your financial advisor so I

can't give you personal advice I can't

tell you what to do but look I'm heavy

on Tesla because I think that we are

going to have continued survival in

earnings and continued demand I'm

starting with the risk factor because if

the if the demand wanes we're going to

see earnings go down and Tesla will end

up just like Nike with negative growth

and if we end up having negative growth

that PEG ratio goes out the window and

instead you have a company that actually

is overvalued so what are the odds of

that well in my opinion fortunately very

very low and they're very simple reasons

for that first shout out to Troy test

like on Twitter for providing us some

expectations he's usually pretty dang

accurate with his expectations uh we

believe that in quarter three Tesla will

deliver 369

000 units that is higher than the 310

000 units we had in January and it's

certainly higher than that summer

slowdown we had of 254 000 when Shanghai

was locked down that is growth folks

that's really really good growth in fact

that is about a 20 delivery growth in a

quarter that is third quarter compared

to first quarter but we expect to go all

the way to 461

000 Vehicles by Q4 that's a hundred

fifty thousand Vehicles more that's 50

more than in q1 it's not even a

year-over-year comparison it's like a

three-quarter comparison which is really

really incredible so fun nominal growth

rate on the actual deliveries we've got

to keep those earnings High though when

that unfortunately filters through

margins fortunately though Elon has been

suggesting that we're starting to see

commodity prices which is obvious I mean

we know iron and copper and a lot of

these commodity prices are plummeting we

know that because we can just look at

them uh but he's even been mentioning

this on Twitter so we could even see

price drops at Tesla to re-motivate

demand which would be very good while

still maintaining margins so there's

definitely a buffer there sort of

somewhat of a margin of safety uh but we

are this is a little bit of a downside

for the first time uh in in really

certainly in the last two years uh which

in my opinion really means ever we are

seeing Tesla's order backlog start to

decline now this is expected in a

recession remember what I've always said

I've always said that in a recession you

would expect a man to just plummet like

30 for Teslas but if outstanding demand

is 35 you could lose 30 percent still

maximize your production and still grow

earnings even through a recession and

unfortunately I just don't think there

are many companies that you can invest

in during this particular recession we

are going through where you're actually

going to see earnings keep going up up

and up in fact the housing market is

already turning we know that we talk

about that in the zero to millionaire

real estate investing course but not

only is that already turning we are

seeing home good retailers like

Furniture retailers and Appliance

retailers according to the Wall Street

Journal this morning start laying people

off because they see demand slowing

because of slowing housing sales this is

exactly what you would expect but a

house market is slowing down it's why

I'm launching the startup house hack

which if you're an accredited investor

this is not a solicitation where you can

go to househype.com to learn more about

investing with me at house hack and I'm

working on the non-accredited version so

if you're not accredited don't worry I'm

still thinking of you well also later

today be doing a live stream for house

hack that'll be at 4 pm so stay tuned

for that uh but we are at about 102 days

of production

that's about three months a little more

than three months I really believe and

that backlog will grow obviously as wait

time shrink I believe as long as we can

keep an order back it doesn't have to be

a big bag

or order backlog as long as we can

maintain well as for at least the next

year

I think Tesla is not going to end up

being in an earnings recession like most

companies and people are actually going

to end up looking at Tesla as a safety

play because they're going to look and

go dang Apple's in an earnings recession

Nike's in a Rings or session what the

heck Tesla one of the largest market cap

companies in the market could end up

actually looking at like a safety play

Imagine That going from thinking that

Tesla might be overvalued to a value

play well maybe I shouldn't say value

but I should say safer play hashtag no

guarantees because don't sue me bro

thanks for watching check out the coupon

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