Apologies for making yet another tesla post but I feel like this is worth discussing.
At the time of writing this post TSLA is worth $685.47 with a market cap of $710B. I don't own any shares of Tesla at all.
My claim is that at this price and point in time the stock seems to be priced fairly and arguably is a pretty decent buy.
My reasoning:
- Extreme growth: They have a 51% revenue CAGR starting with the realease of the model s in 2013 up until last year. This year they will probably have another 50% growth and <
> another 50% in 2023. The point is that so far over the long run TSLA has grown extremely quickly and consistently. They will also have new models such as Semi, cybertruck and roadster arriving < > next year. AND they sell their cars with excellent margins. So their growth is very sustainable. - Diverse and unique side businesses: As of this moment tesla gets the vast majority of its revenue and profit from selling cars, thats undeniable. But they have a lot of aspirations. Firstly, energy storage is going to be cruicial in transitioning the world to sustainable energy and tesla is at the forefront of this industry and are therefore in a prime position to capitalize on that. Secondly tesla is dabbling with insurance and juding by their lates report that business unit seems to be breaking even and soon will become profitable. It has only launched in a few states so far and there is a lot of room to grow. Solar shignles and solar in general is also another potential area for growth although tesla doesn't seem to be prioritizing it.
- Autonomy: Elon has many times over estimated his own timelines so this point is a little weak BUT if tesla does indeed manage to actually get FSD working properly (im guessing 2025 is the year where they start driving tens of thousands of kilometers without any issues) then tesla is poised to make a ridiculous amount of money. Since the vast majority of teslas by that time will have the hardware necessary to become autonomous, teslas will turn from depreciating cars to profit producing assets. This will have a massive effect on the whole auto industry and no doubt make tesla a lot of money. This is of course very risky but even if they have a 10% chance of pulling it off, id say its worth it.
- With all the infrastructure tesla is developing for AI, they could conceivably rent it out to other companies such as AWS but for AI training. Tesla hasn't spoken about this to my knowledge but once FSD is fully trained and has incredibly low failure rates, this would be a great use for all that hardware.
- Tesla bot? Similar to point 3 but 1% chance of succeeding. But again if they do succeed, trillions of dollars could be made.
Potential issues:
- they need to fix vehicle quality and service. It doesn't seem to be a problem right now since demand is so much higher than supply but in the future it could become a problem.
- Elon should probably tweet less.
- There seems to be a massive minerals shortage (lithium) coming. Not sure how tesla will handle this but even if they do secure all the materials they need, their price will be extremely high.
General thoughts:
With all of this being said tesla right now has a PE ratio of about 90. To give some context back in 2017-18 amazon had a similar PE while growing slower. They were already maxing out all their business lines. Tesla on the other hand is just getting started. They seems to have all the core technologies nailed and with a very solid roadmap ahead. So all in all, at this point in time, tesla seems to be a solid buy, just like amazon was 5 years ago, probably even better.
Im curious to hear counter arguments to this. I keep seeing posts about how tesla is incredibly overpriced and that was true a year or two ago but imo not anymore.
Leave a Reply