Tesla rallied 10% yeterday, post earnings. A move we have not seen in a while. Tesla long held the mantle of poster boy in the US 2020/21 tech rally, fanned my the biggest monetary expansion in history. Does its rally herald a comeback in tech, or is it one last dead cat bounce for the most over-hyped and over-priced stock in history?
To be fair to Tesla, there was some mis-reporting of Free Cash Flows being negative without its BitCoin sales. Not true (FCF = Operating Cash Flows – Cap-Ex), so the $621 million free cash flow was true, the BTC sale an investment cash flow. That said, the $0.8 billion reported net change in cash would have been negative without the BTC sale – which of course saw some loss of credibility to Musk given previous comments on the subject.
Perhaps a better understanding of the motivation for that decision on cash by its CEO and CFO can be helped by seeing the fall in free cash flows:
3Q21: $1,328M, 4Q21: $2,775M, 1Q22: $2,228, 2Q22: $621
On a quarterly and trailing 12 month basis, Tesla announced:
Revenues of $16.93 billion ($67.166 billion, 12 month ttv)
Net (GAAP) profits of $2.259 billion ($9.516 billion, 12 month ttv)
Free Cash Flow of $621 million ($6.952 billion, 12 month ttv)
Tesla trades then at:
13 x Price to sales;
89 x Price to earnings;
122 x Price to FCF
Heady numbers, but Tesla is of course a growth stock and all about its future earnings potential in EV cars, semis, pick-ups, robo-taxis, business to business/customer tech sales, battery sales and artificial intelligence. Lets take a look at those areas vs its competitors…
China and Europe's large automobile markets (26 and 12 million sales in 2021) now have 1 in 5 cars sold as plug-ins (BEV/PHEV's) unlike the US mkt still showing only 1 in 20 EV sales from the 15 million vehicles sold in 2021. Tesla of course dominates US EV sales. It no longer does global markets outside of the US. BYD is now the leading global seller of EV's for those investors not paying attention (yes that includes hybrids, but increasingly dominated by BEV's):
https://techstory.in/byd-overtakes-tesla-in-china-vehicle-sales-in-the-first-half-of-2022/
Whilst Tesla still tops individual BEV model lists, its sales are only really across two models now (S and X sales very slight). VW group (presently trading at a measely $85 billion market cap vs Tesla's $845 despite selling 8.6 million cars in 2021) for example produces over a dozen EV models across Audi (e-tron; e-tron Sportback; e-tron GT), Man (electric semis), Porsche (Taycan), Seat (Cupra Born), Skoda (Enyaq/Enyaq Coupe) and VW (ID3; ID4; ID5; e-up; e-golf) brands.
Tesla was surpassed in EV sales by company in 2021 in China and Europe and has now been globally in 2022 It is no wonder with the sheer numbers and quality of alternative models of EV's on sale outside of US markets, for example in China the Xpeng P7 has proven a fierce rival to Tesla (particularly models coming with LIDAR) along with the BYD Han, essentially both mid-range luxury sedans, the equivalents of a Tesla Model S, for the price of a Model 3.
Whilst Tesla kept Cap Ex to almost maintenance levels in 2020 to help become cash flow positive, Xpeng aggressively ploughs cash inflows into R&D. Hence Xpeng now offers far superior hardware including LIDAR in its self drive hardware/software package, for a lot less money:
XPeng XPilot: $3,900; 2 LiDAR; 5 radar; 12 sonic sensors; 12 cameras
Tesla FSD: $10,000; no LiDAR; 1 radar; 12 sonic sensors; 8 cameras
Whilst investors eagerly await the production of the Tesla semi, first revealed in 2017 (and the Cybertruck, first revealed in 2019) and its market lead on EV trucking, BYD, Daimler, MAN and Volvo, etc have long been selling them in global markets including the US:
https://northamerica.daimlertruck.com/emobility
Whilst Tesla robo-taxis have gone quiet and NHSTA oversight looms, Apollo (Baidu) self-driving taxis are up and running in Beijing WITHOUT accompanied human drivers – genuine FSD level 5. Waymo meanwhile has been offering driverless taxis in Phoenix to employees since 2020:
https://asia.nikkei.com/Business/China-tech/Baidu-s-self-driving-taxis-now-a-common-sight-in-Beijing
Whilst Tesla is apparently the market leader in lithium battery technology, the long founded rumours have finally been confirmed, BYD is going to supply Tesla with batteries:
Whilst we still await Tesla's superior auto-chips, companies like Infineon, NXP, and Renesas have always led the market supplying companies like XPeng (and Tesla) and providing ever improving technology like 'systems on a chip' for self-driving:
https://www.nvidia.com/en-au/self-driving-cars/drive-platform/hardware/
No, alas Tesla just remains all hype and the last US tech bubble to fall to anywhere near its realistic future earnings valuation, as other US and overseas companies plough far ahead of it in most areas, that myopic Tesla investors, who lack any global perspective, expect Tesla to lead the world.
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