Quote (S3th @ Jan 19 2022 07:25pm)
While many want to box Tesla into the automotive market segment, it doesn't fit the line of businesses Tesla is in. When you understand this, you will see that Tesla is vertically integrating far more than its competition ever will. Tesla already achieves margins twice that or more of its competitors and will continue to grow its margin based on securing supply chains and reduced cost that comes from R&D and scale. Additionally, Tesla has ROIC, CAGR, etc. at rates significantly higher than its automotive peers. Tesla's non-gaap forward 2022 E/P is ~85x and 2023 ~53x; not that expensive. Remember, P/E is based on forward growth rates; not the industry in which it competes. Tesla could easily hold it's current P/E if it continues to grow at +50%/year and the rest of the automotive segment continues to shrink.
2022 catalysts
- $12K FSD (increase of $2,000)
- 4Q EPS/production road map
- WS raises EPS/PTs
- Austin/Berlin open
- Investment-grade credit rating
- Bidens $8K EV Credit
- FSD full release
- 4680 scale production
- generate >$10B in FCF after CAPEX (so unprofitable) and could be debit free if they wanted by 2023.
Q4 2021 production numbers have already been released.
- Analyst consensus was ~267K in Q4 and 897K FY21
- Actuals: 309K in Q4 and 936K; an annual increase of 87% versus 2020. (note that the EV market grew by 86% in 2021)
I believe the current estimate for Q4 is $2.25 and not $1.57. Additionally, you will likely see 2022 EPS rise to over $12 after earnings.
Tesla will grow deliveries by 50-70% in 2022. Tesla continues to capture massively needed, in limited supply raw material supply chains dating past 2025.
Automotive competitors are
- old and move slow
- cannibalize their own offerings with unprofitable/low-profit EVs
- require massive CAPEX investments for scale production
- short-term outlook
- burdened with debts, dividends, unions, and an outdated dealership model that reduces profitability and passes increased cost to the consumer
& all of that is based on the automotive segment... now you can start pricing in FSD, AI, Energy, Semi, and unfathomably Robots and start to see where Tesla will be in 2030, 2040, 2050+
PS the only automotive competition will come from China.
TSLA can't continue to grow at 50% for a sustained timeframe, nor do they expect to. ~50% growth rates in revenue (and we hope income) are possible when your market share is a fraction of Toyota's. Toyota has 7-8x the revenue, it would take 5-6 years of growing at 50%, not a certainty, for Tesla to catch up.
All of this growth has been baked into the current price. TSLA has a market cap 3-4x that of Toyota, sells a fraction of the cars, and generates a quarter of Toyota's income. Other car manufacturers are investing in EVs at scale, Tesla cannot reasonably expect to dominate the EV market for a sustained timeframe.
But leave all of that aside, and assume that Tesla is successful, does scale, and accomplishes everything it's set out to do. The car market is only so big. Their trillion dollar market cap dwarfs the other, far larger and more established manufacturers. Even if they capture the entirety of the market, which they can't do without dramatically lowering price (and hurting profitability), their market cap is capped unless they suddenly become the world's electric utility company, taxi company, and any other number of ventures that have never been demonstrated and have no certainty of success.
A side note on FSD. Elon has been promising FSD for years, it's always one year away. It hasn't materialized. Their software is faulty. Their manufacturing isn't up to par. They are incredibly efficient and their vertical integration has panned out. But chalking obscene evaluations up to "robo-taxis" and "FSD is here 2022!" is not the basis for a dispassionate analysis of the company. They haven't demonstrated the ability for autonomous driving.
There's also no certainty that they will end up dominating the market. They're facing intense competition from other EV manufacturers, hence the attempt in court to get the Federal government to either discontinue subsidies they no longer need, or raise costs on manufacturers for non-EV vehicles they hope will damage their competition's bottom line.
All of this isn't to say that Tesla can't be successful, that it won't capture a significant share of the auto market, or that it won't eventually solve FSD. Those things may eventually happen. But we need them to all happen, along with robo taxis, electric charging stations as a utility, and probably space exploration for it to justify the obscene price targets some people are floating. The upside has been baked in, if Tesla falters, it has a long way to go down, and it needs consistently exceptional, historic results for years straight just for it to justify where it is.