The Tesla Stock Implosion.

the McDonald's corporation saw Revenue

fall eight percent in 2022

and guess what the stock did

it fell 1.8 percent

that's right after McDonald's Revenue

was down eight percent in a year the

stock was only down 1.8 percent

basically flat

in contrast Apple grew nine percent in

the last quarter year over year after

growing 35

in 2021

yet the stock fell

28 in 2022.

and of course in this video we're going

to be talking about Tesla's disastrous

2022.

so what's happening here with Wall

Street why is it same that all of a

sudden stock prices are completely

detached from fundamentals in the

opposite direction now don't get me

wrong socks were relatively detached

from their fundamentals in November of

2021 when everything was skyrocketing

even Looney stocks were skyrocketing

well that has since turned on its head

but why does it seem like a company like

McDonald's with shrinking revenues and

low growth forecasts would be flat in

2022 when companies with real growth

like apple are plummeting and of course

Tesla even more so

well what's happening is a trend towards

a recessionary rotation this is actually

very normal in institutional money

management an Institutional money

management hedge funds and professional

money managers move in anticipation of a

recession by going into

consumer staple stocks or Industrials or

energy related stocks this is exactly

what happened in 2022. if you look at

the military industrial complex

oil companies or Staples like McDonald's

these stocks fared pretty dang well you

can even look at companies like John

Deere and see similar pretty decent

performance relative to growth stocks

like Tech that's because when you head

into a recessionary Time the

fundamentals aren't what matter what

matters is the trend the trend is your

friend it's a short-term bet that as you

head towards a recession growth is what

you sell and Staples are what you move

into and that's why you actually see a

substantial detach from fundamentals and

stock prices and that's why when you

look at a company like Tesla you're

starting to see a company that's trading

for well somewhere around 22 times 2023

expected earnings per share which is one

of the lowest valuations that we've ever

seen for Tesla and with a growth rate of

at least 40 percent you're looking at a

PEG ratio of nearly 0.5

so what happened today and why is Tesla

trading at the time of this recording

down nine to ten percent

well Tesla reported deliveries however

these deliveries missed expectations

many folks when they first saw the

numbers quoted this Miss as a huge miss

a terrible Miss for Tesla yet when you

actually do the numbers and you see that

wait a minute the numbers of 405

278 deliveries was actually only off

expectations of 420 760 by about three

percent so deliveries missed by three

percent and the stock is down about 10

percent

and at the same time when we consider

the fact that last quarter Tesla

delivered 343

000 Vehicles Wall Street seems to be

blind to the fact that Tesla is actually

growing substantially faster than it

thinks it is see Wall Street is looking

for a 50 year-over-year growth rate rate

for Tesla deliveries and unfortunately

we delivered about 40.33 that's below 50

percent clearly and we're going to look

at the earnings call in just a moment to

see what kind of hints we got that we

might

in the near term Miss some of these 50

targets but what's remarkable is the

following look at this next tweet that I

sent just this morning

Tesla stocked down nine percent after

missing delivery Expectations by three

percent yet Wall Street conveniently

forgets that deliveries growing from 343

000 in the third quarter to over 405 000

in the fourth quarter represents an 18

gain quarter over quarter a sequential

gain and a gain of 72 percent annualized

what that means is if Tesla's deliveries

continue to grow at 18 per quarter the

annualized growth rate which is a

multiple it is not an X phone and it's a

multiple it's a path that you're on it's

the speed you're traveling would mean

that Tesla would actually be growing

deliveries by 72 if they just stay on

the growth trajectory that we saw

between Q3 and Q4

that's absolutely phenomenal

yet Wall Street isn't paying attention

to this Wall Street is paying attention

to the short-term Trend and quite

frankly the trend is your friend it

makes a lot more sense to be short

stocks in this environment that it makes

sense to be long stocks in this

environment because the trend is your

friend the trend of being short makes

sense because we're heading into a

recession however if you have a

long-term mindset there's some pretty

amazing opportunities to pick up

inexpensive stocks in my opinion on

companies that are actually growing

substantially more than Wall Street is

seeing while at the same time

discounting them because of the cyclical

trend of moving away from growth and

into Staples and things like McDonald's

which is shrinking Revenue

at a time where

we're heading into a recession and

that's just what people do when they

trade so what did the earnings call tell

us in terms of a heads up

well here's what the earnings call

suggested here Elon Musk tells us that

yeah demand is a little bit harder than

it otherwise would be specifically not

only because the FED is Raising interest

rates the way they are but also because

of the recession in China now

exacerbated by the covet explosion where

we're actually seeing Subway ridership

plummet year over year but it's actually

started just today taking back up at

least in data released today so

potentially a sign that maybe some of

the worst of the covet surge is behind

us which would be great for China we'll

talk more about China in just a moment

but Elon Musk here suggests so yeah

demand is a little harder than it

otherwise would be but I said earlier

we're extremely confident of a great Q4

which this is 18 sequential growth 72

percent annualized is phenomenal and

anticipate continuing growing our

vehicle production and deliveries by on

average 50 percent a year as far into

the future sure as we can see now that

doesn't mean we might not miss that 50

Target in the short term in fact Elon

Musk here talks about trying to smooth

out deliveries but one of the difficult

issues being hey we don't have enough

cars trucks boats trains whatever we

need to actually get vehicles delivered

and that's one of the issues that we see

in the difference between production and

deliveries here if we go back to the

actual numbers released as Tesla

actually produced 439 000 Vehicles we've

got about 34

000 vehicles that still need to be

delivered if we delivered all of those

Vehicles this quarter holy smokes the

numbers would have beat phenomenally but

these are already great growth numbers

343 to 405 phenomenal growth numbers

already but what does Elon tell us about

the future well take a look at this

regarding that 50 annualized growth Elon

Musk says the following we want to focus

on a high level about what we think is

possible to our best to the best of our

knowledge we believe that Tesla will

continue to grow deliveries in Revenue

production at 50 or greater at a

compounded annual growth rate it might

occasionally be a year that is a little

less and then some years will maybe be a

little more or a lot more some of our

out-year planning we see the potential

annual growth rates in excess of 50 so

in other words the hints were laid

in the last earnings call

and even in other segments of the

sortings call that look yeah in the near

term we might be slightly below 50

especially on deliveries as Supply

chains and delivery Supply chains

actually catch up with the insane level

of production that Tesla is at

but if you just look at the numbers of

the actual deliveries

and realize we're growing deliveries at

a 72 percent annualized rate elon's not

wrong to say that growth rates in the

future year over year could actually

exceed 50

especially when we start looking into

the whole of some of the slow times that

we saw in 2022 every single quarter uh

in the last three quarters that Tesla

has reported deliveries have missed that

hopefully sets up for easy beats in 2023

no guarantees of course we'll see but

why are we potentially seeing this

softness in Tesla is it because these

vehicles are just so expensive is this

just a situation where all of a sudden

we're selling luxury Vehicles is that

the problem with Tesla well let's

consider this when the model 3 was first

introduced it went into production at a

price of thirty five thousand dollars

and at the time in 2017 the average

price paid for a car in 2017 was

thirty four thousand nine hundred forty

four dollars which means the Tesla Model

3 was actually perfectly in line with

the average price of a vehicle sold in

America that's not indicative of a

luxury car brand that's actually

indicative statistically of a model 3

being right in line with the average

price of a vehicle in America

today thanks to inflation and a lot of

money printing the average car sells for

forty seven thousand six hundred ninety

two dollars

the model 3 today is priced at forty six

thousand nine hundred ninety nine

dollars right before of course the

seventy five hundred dollar incentive

that the US government is now picking up

the tab for on model threes and model

y's making the model 3 actually

significantly less expensive than the

average price of a vehicle in America

now some folks argue that oh but Tesla

only had these delivery numbers because

they had to aggressively cut pricing

and while it's true that in China Tesla

did have to incentivize demand

specifically because not only are we

seeing a large property recession in

China but we're probably in a depression

as China is releasing itself from the

prongs of covet zero and finally

allowing the economy to try to reopen

China's going through quite a bit of a

coveted wave and a lot of people aren't

traveling or commuting in fact consider

this tourism is just at 35 of the level

of Tourism we saw in China in 2019 just

43 percent of the number of trips have

been taken 35 representing uh tourism

spend and movie theater spending is down

46 percent from just last year

Subway ridership is as low as it was in

May of this year during substantial

coveted lockdowns now fortunately we are

seeing a little bit of a rise again in

Subway ridership suggesting that maybe

covid in China has finally hit a peak

but yeah look in China you've got big

problems you've got crematoriums that

talk about ordinarily burning 40 bodies

per day now burning 140 to 150 bodies

per day with bodies stacked up so high

that individuals are starting to resort

to burying people who have died in their

neighborhoods because there's nowhere

else to bring them

iPhone city is back at 90 capacity and

we're finally actually starting to see

China potentially be on the course to a

recovery which will probably be

substantially beneficial to Tesla and

sure Tesla did discount some of their

vehicles 3 750 and then seventy five

hundred dollars in December of 2022 here

but now the government is picking up the

tab in q1 and for the next foreseeable

years at the same time as Elon Musk has

at the very least pledged not to sell

any more stock for at least the next

year potentially not until 2025 which

don't kid Yourself by looking at the

daily volume of Tesla stock suggesting

that Elon musk's shares could easily be

absorbed by the volume that Tesla trades

that's wrong elon's taking shares that

used to be huddle shares and selling

them actually eradicates a lot of hodler

demand for the stock in fact Elon sold

about 50 percent more than retail

actually bought and held on net for

Tesla stock that means even if every

single retail buyer bought 50 more Tesla

stock in 2022 Elon Musk would have still

outsold them or I guess Elon Musk in

that case if everybody's bought 50 more

Elon Musk would have still matched every

single buy with a cell himself

that puts a lot of downward pressure on

the stock and it's one of the big

reasons in my opinion we've seen the

collapse of Tesla stock valuation as

much as we have but it creates a pretty

neat long-term buying opportunity in my

opinion especially when we look and

compare to companies like GM GM has a

gross profit margin of just about 13 and

a net margin around seven to seven point

nine percent Tesla earns about the same

net income as GM does with about half of

the total revenue of GM that means Tesla

has about twice the bottom line margin

of GM and about twice the gross margin

of GM in other words they make twice as

much money as GM does that's remarkable

now something else to know is that GM is

really only slated to grow between three

to maybe six percent each year for the

next about four years whereas Tesla we

just saw is delivering cars at a 72

percent annualized growth rate even if

we just sat at 40 percent growth for the

next four years

you're still nearly 10 Xing the growth

rate that GM is looking at so look in a

world where McDonald's can shrink

revenue and the stock can be flat in a

year and apple can grow revenue

explosively and Tesla can deliver 72

percent more vehicles on an annualized

basis quarter over quarter and these

stocks are substantially underperforming

my view is that fundamentals are out the

window right now the only thing that

matters in the stock market is the trend

and that trend is down that's all that

matters however that creates a really

good opportunity to continue to build my

exposure and quantity of ownership to

things that I personally value very

highly for example I just added more

shares to an actively managed ETF that

has a big allocation to Tesla that way

when Tesla finally gets back to its

appropriate fundamental valuation in the

future in my opinion I believe they're

going to be massive capital gains had

for stocks or shares bought now in in

Tesla or in ETFs that have a large

percentage of their allocation dedicated

to Tesla and in an ETF you could be

potentially shielded from large capital

gains and that's because of the amazing

tax benefits of ETFs now of course no

guarantees right I can't provide you

personal financial advice even though I

am a financial advisor but I can tell

you I'm quite optimistic about the

fundamentals that I see for Tesla now of

course if it is true that Tesla does

have a demand problem and demand all of

a sudden falls off a cliff and Tesla

never makes it to actually producing

four to five million Vehicles a year and

Tesla doesn't actually get to the the

trajectory of being able to produce and

sell 10 million Vehicles a year over

time in the future Say by 2030 2035

yeah then if the growth story is over

for Tesla Tesla stock collapses but

based on the fundamentals that I'm

seeing I personally don't see that

whatsoever and again could be wrong so

no guarantees but let's look briefly at

the Wall Street consensus estimate for

earnings per share for Tesla next year

so that's going to put us at an EPS

projection for 2023 and we're going to

look at the year ended 2023 so year end

2023 we're looking at about five dollars

and 18 cents of expected EPS that's Wall

Street consensus it's five bucks let's

go with five bucks even at 110 bucks

this stock is trading for 22 times again

about half on a p e ratio if you go out

to 2026 at nine bucks a share this stock

is trading for just 12 times 22 26

earnings now go ahead and compare that

for example to a company like GM its

multiple is going to be lower but

remember the growth rate for Tesla you

have to consider the growth rate for

Tesla if you take 2022 and divide it by

a 40 growth rate you're looking at a PEG

ratio of about

0.55 if we do the same thing for GM next

year we'll go ahead and go to an annual

estimate for GM and we'll see that the

annual 2023 estimate for GM is also

about

5.90 per share and GM stock right now

is trading for 33.84 divided by 590 is a

p e ratio of only 5.7

but they're only growing at best at five

percent over the next four or five years

on average that puts them at about a PEG

ratio twice as high as Tesla that means

right now you are paying twice as much

money for a dollar of growth at GM as

you are at Tesla that's incredible it is

incredible how much the Tesla growth

story has been discounted by Wall Street

and in my opinion

if you can huddle boy I'm very

optimistic that's all I'll say no

guarantees could be wrong growth story

goes away You're Gonna keep losing lots

of money growth story stays we're gonna

look back in five years and go damn wish

I bought more thanks so much for

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