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hey everyone we had some more unfortunate news coming out for Tesla stock investors in what seems to be a year where Tesla stock investors can't catch a break more and more bad news keeps coming out about Tesla and the stock prices down significantly already year to date so let's take a closer look at what these latest updates are and what they could mean ews items that came out was Tesla's stock price skid after China sales fell to the lowest level in over a year in looking at more detail you can see Tesla sold 60,3 65 China made vehicles in February that was down 19% from a year earlier 19% year-over-year decrease for a company that's supposedly a growth stock that's supposedly growing exponentially and EVS are going to be the car that everyone buys more and more data is coming out signaling that customers don't prefer EVs and here is another data point and this is the lowest volume since December of 2022 Tesla stock price fell 7.
2% on the back of this news of course in addition to this just last week Tesla announced more incentives roughly 10 to 15% worth of incentives for the cars it sells in China for its China sales declining sales combined with more incentives is even further pressure on Tesla's margins byd Tesla's main rival in China also announced massive price cut cutting in the double digits 10 to 15% in when you look at total incentives in terms of the purchase price the price Wars are intensifying they're not getting better that has had the impact of lowering Tesla's gross profit margin so I mentioned Tesla's stock price is down 27.2 two% already year to date in 2024 of course I made a video answering the question is Tes stock a buy for 2024 and I told investors no Tesla stock is not a Buy in 2024 the EV industry is under pressure following these intense price Wars and tepid consumer demand and I told investors to stay away if you can from Tesla stock now the reason why the stock price is falling is because of all of these fundamental aspects that are not in favor of Tesla most notably is the gross profit margin you can see it falling from the heights of around 30% 29% I believe specifically was the peak for Tesla's gross profit margin in early 2022 and that's come all the way down to 17.63% in the latest quarter now all of the data that we've had since its latest quarterly update suggests that Tesla's gross profit margin will fall further when it reports results in the first quarter for the first quarter of calendar 2024 Tesla has announced several rounds of price Cuts in addition to those price Cuts Tesla had implemented wage increases and following that the demand customer demand has appeared to be weaker than expected to start 2024 there was already weakness expected in the EV industry that seems to be worse than expected from the initial data that's coming out so far in a 2024 so those three factors are likely going to bring down Tesla's gross profit margin even further in the first quarter of 2024 I haven't even talked about how Tesla is introducing the cybertruck and Elon Musk has said that's not going to be profitable so that's going to hurt its profit margin initially as it ramps up so near term Tesla's gross profit margin is under severe pressure in the near term while longer term it could improve and then I'll also note that even though Tesla's gross profit margin is under pressure and falling it's still among the industry leaders it's still the best inclass electric vehicle company that being said it's the electric vehicle industry overall that's under pressure and that's bringing Tesla down with it even though Tesla is the best-in-class EV company Additionally the second bit of bad news came from the fire at Tesla's Germany plant Tesla evacuates its Germany plant musk blaming Eco terrorist for suspected arson and the Andre theg I'm hoping that I'm saying that right who manages the 12,500 staff at Tesla's gigafactory near Berlin said this would cost in the high igit Euro range meaning at least $100 million this will cost Tesla their shutting down production and it's going to cost them at least 100 million could be as much as 950 million if you're thinking about the highend if you're just thinking about the high n digigit uh Euro range so not looking good for Tesla seems like more and more bad news just keeps coming out already Tesla's gross profit margin is under pressure and you can see it's operating profit margin which includes all of its costs not just the gross profit not just the cost of get sold that's also been falling from the highs reached in early 2022 down to 8.2% that's likely to move lower as well as these near-term pressures continue to mount for Tesla still despite all these pressures on the stock price and despite the fact that Tesla stock price is down it's still trading at an expensive valuation a forward PE of 40 1.17 which is near the cheaper end that Tesla stock has traded for but Tesla has rarely ever been cheap Tesla has rarely ever been relatively cheap especially when you compare with industry peers it's multiples more expensive than other car companies and it's even more expensive than tech companies at its market cap right so if you compare it with let's say Ford GM dantas it's like five or six times more expensive and then if you say well Tesla is a tech company and you compare it with apple Microsoft and Nvidia even Tesla's even more expensive than those tech companies so regardless of how you measure it Tesla's stock is expensive even after this huge decline because it was tremendously expensive and now it's only moderately expensive so it's getting more favorable in terms of valuation although I still wouldn't say this is a buying opportunity just yet I want to see more I want to at least see a deescalation of the price wars in the EV industry before I could even consider recommending Tesla stock let alone an end of the price War I just want to see a deescalation uh stoppage of this Tit for Tat price cutting that's hurting profit margins industrywide for everyone really and I certainly don't want to pay a premium valuation for a company that's in the middle of this Fierce price War that's serving a market with tepid Demand with all this government stimulus that's still not getting customers to really um meaningfully increase their purchases of EVS even with these thousands of dollars of incentives and government stimulus that's going into the industry so I would still stay away if I was considering Tesla stock I wouldn't I wouldn't say this is a buying opportunity but it's getting closer it's getting closer to the valuation where you can start to say all right now might be a good time to get in but we're we're not there yet I would need to see a forward price to earnings ratio at the most in the low3s and that's at the most um preferably in the 20s if the competition stays where it's at I wouldn't want to pay a price to earn forward for Tesla in the 30s if competition is where it's at the level right now in the 20s I would start considering
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