Tesla.

hey everyone me kevin here so something

went very wrong

tesla actually beat expectations which

is incredible tesla on the basis of 12

analysts surveyed by bloomberg projected

that tesla would bring it deliveries to

223

677

the average projection was 221

952 and that's what tesla mentioned to

investors so tesla mentioned 221.9

analysts expected 223.6

well we ended up folks with

241

300 cars being delivered in the third

quarter

those are the three months obviously

preceding october so going backwards

that's september august july which

what's interesting about those dates is

it's in the midst of the supply crisis

the supply chain shortages in fact if

you have a tesla that gets into an

accident these days it's very difficult

to get new parts for your tesla because

the parts are so

uh needed and in such short supply that

they're difficult to come by it takes a

very long time the parts are probably

sitting on a on a ship somewhere and a

lot of the parts are destined for for

new vehicles

so how do we

fix or how do we fit rather uh what just

happened with tesla into the future of

tesla especially at the same time as

individuals like chamath paper hantila

have suggested that they have completely

sold out of tesla and now i will say in

fairness regarding the chama thing it

actually turns out that he didn't just

sell tesla it actually looks like he has

not owned tesla at any point in 2021

so uh it sounds like he uh he's out of

it

which he was obviously one of the early

investors in tesla i've not owned any

tesla since before 2021 he wrote i was

speaking only as an enthusiastic

supporter of the company and its mission

okay so in other words he's just sort of

reiterating that hey i don't own any

tesla so he's already he paper-handed

last year basically on tesla which is

fine because

tesla actually hasn't done so much so

far this year it's kind of been a

sideways mover

up a little bit but certainly lagging

the s p 500 but what i want to do is

just take a look at our spreadsheet

again and forward projections for tesla

now these are obviously bullish

estimates here but the estimates that

i'm about to show well we'll go through

sort of bare a bull and base case we'll

go through the cases here in just a

moment uh but uh what we're trying to do

is we're trying to project out for 2025

and what's very important when it comes

to any kind of growth companies

recognizing especially with tesla that

even though it already seems like your

stock price has moved so much it's

always useful to consider what the

s-curve of manufacturing looks like so

before we hit the spreadsheet it's

important to remember that the s-curve

of manufacturing looks a lot like this

and so hence this kind of sideways

looking s and basically this is where

you you start off with production at

basically zero you very very slowly ramp

up production which is hard to do

lordstown motors just sold their factory

to foxconn so they can essentially

contract manufacture nia which is my

second ev position is a contract or they

contract out their manufacturing to jac

which is 50 owned by volkswagen 50 owned

by

the chinese communist party so it's it's

worth noting that manufacturing is very

difficult sure the legacy automakers

manufacture their own vehicles but

they're also trying to create

essentially a brand new s-curve see the

legacy auto manufacturers they might be

right here with their manufacturing

where they've essentially plateaued with

what they're uh making that's tesla

toyota 4gm right

with them starting anew with evs sure

they have experience to get factories up

and running in scale but you wonder how

that legacy experience translates over

to to a new uh

essentially product electric vehicles

this is i mean a lot should be similar

right paint body airbags things like

that so many things should be pretty

similar so you'd think that might give

them some competitive advantage but

oftentimes legacy companies are slower

to adopt new technologies or adopt new

machinery they're dealing with unions

that in some cases might help them

advance but in other cases could hold

them back against

automation for example which is

something tesla doesn't have an issue

with tesla doesn't have a unionized

workforce but anyway the s-curve is

really essentially this right here and

when you have companies like lordstown

motors fisker canoe

arcamodo a lot of them get stuck

here and the reason the companies go

public is is to essentially sell a

vision and hey if if the public gives us

the opportunity of raising money then we

can scale our manufacturing and then we

can actually get going on the s curve so

in my opinion and this is just my

opinion the the most difficult part of

manufacturing for evs is this right here

this first inflection point and uh lucid

actually is probably somewhere right

here they're at their first inflection

point now they got billions of dollars a

lot of it coming from saudi arabia and

we're able to build a factory in arizona

and they're rolling out vehicles that

people are going to start getting

deliveries on within the next two to

four months whereas again a company like

canoe or lordstown they're still at zero

then you've got the retrofit companies

this is totally different world like the

xl fleets or the highly on or whatever i

don't even really consider that vehicle

manufacturing that's more like taking a

vehicle that's already been manufactured

by somebody and then adding an electric

drivetrain and calling it an ev right

semi trucks have a lot of space so you

can you can uh

doink with the systems i shouldn't say

doink with you can upgrade the systems

but anyway tesla in all realities even

though the tesla stock price if we zoom

in

and this is always worth noting even

though tesla stock price has kind of

done

this

right

it kind of feels like we've already been

on an s curve and i'm trying to align

these by time tesla's manufacturing is

still really only what maybe here uh i

mean it is it is really at the beginning

of the s curve sure it's and if we zoom

in on this it becomes a little bit more

apparent

we are well uh well ahead of the

competition you know maybe neo is

probably somewhere like over here

you're actually in the manufacturing

stages but if if the end goal is for

tesla let's say to plateau around what

toyota manufacturers let's say 10

million vehicles per year then uh you

know you might be somewhere around

uh gosh the inflection point the rate of

change you'll probably ramp up pretty

heavily to about five million vehicles a

year and then you'll start to see this

inflect and slow down and this curve is

going to become very important in terms

of valuation because when what happens

with growth companies is you tend to

very very early on you have and i can't

even remember if i know how to draw it

there we go you have an infinite e ratio

with uh with companies when they're

early on because they have negative

earnings right if you have negative

earnings you essentially have uh an

infinite price to earnings ratio because

your earnings are undefined

uh but as you get to a neo

neo right now trades for something like

a forward p e ratio of 60. tesla trades

somewhere around a forward p e ratio

closer to 50 right now this is trying to

prog

project forward to 2025 let's say that's

about what uh at least in terms of wall

street estimates what they trade for

my estimates are a little bit more

bullish see if i believe uh well we'll

get into the spreadsheet and i'll

explain this a little bit better but the

point is and these these are forward ps

so what i should really do is get to

current pes because it'll make a little

more sense in in terms of this chart

forward pe is really looking at what

what's the company potentially going to

be worth in the future so neo is

actually still at an infinite pe ratio i

just looked it up on bloomberg and

tesla's at about 393. and so what

happens is this is the market

essentially pricing and growth and

eventually when you get to this lower

area over here this is kind of like

where your fords and the gms are right

this is where you're going to be a lot

closer to a 10 to 15 times pe ratio

and and that's because you're pricing in

less growth because you essentially have

less growth you've plateaued you're

growing at you know three to four

percent a year or whatever this is why

when people say oh well that company has

a high p e ratio i'm not interested in

buying that because it's overvalued or

people say oh like oh this stock has a

10 p e ratio that's undervalued no

they're just at totally different places

in the s curve and when you're buying a

company over here

you're buying into way less growth than

you are over here that's why the market

values things like this but it's worth

noting that when you chart uh an s curve

here your p e ratio on tesla is going to

decline right it's going to get back to

normalcy so i would say you might go 300

200

100 over here at 5 mil because you still

have a lot of growth ahead of you and

then as we round the corner over here

you're going to start going to

50

and 25 and you you might actually

because there's so much technology

involved in tesla i would say tesla

probably is going to end like an apple

around a 30. so you might have a whole

lot more of a curve that looks something

like this this would be a little bit

more appropriate you know who knows

maybe this is around seven and a half

mil maybe this is around 10 million

vehicles and and there's still some

growth to get it to 12 million vehicles

or tesla goes bankrupt right but this

again becomes very very important

because when we look at the spreadsheet

this will all make a whole lot more

sense right here so this is my uh my old

spreadsheet uh this is my 2025 uh

essentially base case scenario we're

only going to look at this here really

quick i want to keep this nice and

simple so revenue per vehicle 40 000

might honestly be low they are

monetizing full self-driving very well

and i expect the price of that to go up

substantially when full self-driving is

actually full self-driving i was

complaining on twitter the other day

that i still have not gotten my opt-in

button and there are a bunch of idiot

twitter trolls who are like well you

should drive safer apparently these are

folks who either don't follow tesla or

they're just trolling because if you

don't have the button to push they don't

actually start monitoring your driving

the way it works is you click the button

then they monitor you for a week then

you get invited to the beta maybe

but the button isn't even there for me

and it's really annoying because i have

the full self-driving computer i had

that upgrade done i verified with tesla

i have all of the hardware that i need

even though i don't have the in-cab and

camera on my 2008 tesla so it's kind of

just frustrating that i haven't been

able to push the button yet like it's

kind of like you go to disney world and

you see a long line i'm not bitching

about the fact that there's a long line

i'm complaining about the fact that i

can't even get in the line

right and i think that was a customer

service faux pas by elon musk because he

said tesla owners are going to be able

to push the button well i'm a tesla

owner and i haven't been able to push

the button so i get a little pissed

about that because i just feel like it's

misleading and sure like i get the like

it's one thing if it's like hey we're

gonna roll this button out to people

over time fine but just be transparent

about that so that just bothers me a

little bit but anyway uh so if we go

with 40 000 and we assume by 2025 about

4.8 million vehicles uh with this

services and energy doesn't matter so

much in fact they'll delete this in a

moment you'll see it that's going to get

us about revenues around 235 billion

dollars we do have expenses here and now

i did not include any semi-revenue robo

taxi revenue

insurance revenue uh for the sake of

this presentation here these are all

zero now people complain sometimes in

the content why are you not including

this well i'm not including this because

it's hard to value and i don't need to

in fact this is all just bonus it's just

going to make my estimate uh

look lower which is good because i still

have a bullish estimate so so these are

what i call the conservative buffers

where it's like the icing on the cake

like hey if that gives me an extra five

percent return annual compounded like

great i'll take it but i don't need to

estimate this for the purpose of this

video uh if anything it's just a safety

net for me so i'm gonna go with a 28

margin on the vehicles that they're

selling

uh and we're gonna take 15 off for

operating expenses

and 250 ml for interest that's about

where they've been hanging out that

could fluctuate that doesn't matter so

much so that's going to bring us to

about a 25 billion dollar profit and

we're going to take off a corporate tax

rate of about 22 we do have a risk

factor here that taxes could be going up

uh but anyway shares outstanding that

would bring us to about 17 in earnings

if we project to a 100 p e ratio in the

future that brings us to about 17 uh

sorry 1757

gosh 1757 as a share price the present

value of tesla has gone up it's about

780 right now and it's probably gonna be

higher on monday maybe it'll cost 800.

that means uh over five years we'd have

a compounded annual return of about 17

investing in tesla if this ends up being

true which is not bad okay so now

obviously we can play with this

spreadsheet a little bit if for example

i went in here and i said hey what if

tesla's revenue per vehicle is higher

because maybe they're selling that full

self-driving that's forty five thousand

dollars uh per vehicle that might bring

us to nineteen for uh you know 79 but

what i'm actually going to do is i'm

gonna go ahead and drop my estimate to

be a little bit more conservative and so

i'm actually going to just drop this to

what if we're only at a 75 p in the

future that's 1300 per share that's

still on almost 15 annual compounded

growth rate between now and 2025. so

and that's with a 75 in the future and

again very very important to compare

this

to uh what you have on the s curve which

is right here in my opinion extremely

important and uh and it helps

visualizing the p e ratio in the future

because then it gives you a little bit

more of an understanding that okay so

high pe does not necessarily mean

overvalued now i'm going to make a few

more modifications so the first thing

i'm going to do is i'm going to change

this 22 percent tax rate to 26.9 just in

case democrats get their policy through

and you'll see this number change when i

hit enter here that difference is how

much that tax increase is worth in share

price so we're going to go from 1757 to

about

1647 so that's 110

of a difference if this tax increase

goes through a hundred twenty ten

dollars as your punishment just because

of a higher corporate tax rate which

would change your court your um

compounded annual rate of return

right uh here

let's see if we go to the 800 or let's

say it's 800 on monday right so 800 on

monday present tax rate it gets you

about a 17 annual compounded if you got

a higher tax rate at 26.9

you would be oh yep let's actually put

the little percent sign in there there

we go so you'd lose about a percent and

a half in return annually because of

that higher tax rate by about 4.9

percent another thing that we can do

is we can kill uh energy here which is a

marginally profitable business so if i

kill this and hit enter we should see

this go down yep okay so energy business

worth about 38 or so so if i kill the

energy business we lose about 38 here

if i

bump the vehicle average selling price

this is where you should see a larger

move so from 1609 if i bump this up we

should yeah see it goes to 1812 so it

more than makes up the tax increase and

the loss of energy you know if we wanted

to play those sorts of scenarios here

now one additional thing that i thought

was very interesting is if i go in here

and i just take uh if i say we make

about two billion dollars let's say

we're roughly one percent in robo taxi

network because the robo taxi network is

extremely high margin which i'm just

going to assume it has a 30 expense

ratio so if you bring in about 1.92

billion you only spend about maybe

570 million in terms of like software

engineering development customer service

whatever a really high ratio of profit

right that's like 70 profit margin you

could really see with a lower tax rate

you could really see that the stock

price move with just a relatively small

take rate on robo taxis and so this is

where because this is so high margin

whereas all of these other items are low

margin like services you lose money

because it's not just the 95 operating

expenses but it's all the other

operating expenses on top of that

so

you're really losing money on services

right now you're tentatively losing

money on energy or roughly prop barely

profitable i expect that to obviously

get better in the future but for

something like robo taxi income this

could have a substantial impact to the

bottom line so for example if i bump

this to five

percent here and we actually make this

formulaic here

there we go bump this to five percent

because we're going to be bringing so

much the bottom line expenses are so

little we could see that share price

move dramatically five percent uh

full-time self-driving revenue over

about 10 billion dollars of full

self-driving revenue uh in addition to

car revenue per year in 2025 would would

substantially change the profitability

for tesla

well beyond where we sit now

so uh those that's kind of my belief

this i would say you know 1300 to 1700

is pretty reasonable for me by 2025. the

thing is the stock might soar before

that we could end up getting a euphoric

rally between now and uh and 2025 quite

frankly we could have a euphoric rally

in evs at the end of this year as we get

out of the supply chain crisis we could

have a euphoric rally in evs and this is

why when kathy wood says hey if we hit 3

000 before 2025 it might be time to sell

she's right because then the stock would

be running way ahead of the fundamentals

which some say has already happened but

hey uh

given where we are in the s curve i

think we've got another big rally to go

and i'm very happy about the way

deliveries came in so congratulations to

tesla congratulations to tesla

shareholders monday should be a

beautiful day thanks so much for

watching folks and we'll see you next

one

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