원문 보기
Now this once in a century is uh is not an understatement. Uh so we have an incredible amount of fear in the market and that actually is the best time to average into these markets and now used car pricing is down 14% on a year-over-year basis. Uh so so inflation will come down and and innovation actually is going to be part of that equation.
uh the truly disruptive innovation platforms around which we have centered our research. So gene sequencing, robotics, energy storage, artificial intelligence and especially artificial intelligence as well as blockchain technology all of them are deflationary in in nature. Good deflation it should cause a boom in the products and services associated uh with with innovation.
But deflation, another source of deflation. So, uh, our confidence there is building. We've been right on the inventory build, the commodity price decline. Uh, and I think normally the the market would have responded already. The market is waiting for the Fed and uh, we think the Fed's rhetoric will change first and then its actions will change and we think that's all going to take place in 2023.
Uh in terms of our strategies, we during downturns concentrate towards our highest conviction names. Uh and so we have been doing that now for uh nearly two years and the history history would suggest that that concentration strategy plays out very well in the subsequent rebounds. Uh and we do think this rebound will be quite powerful.
Uh this year has been the most difficult year of my career worse than 089 and I would venture to say that it has been the most difficult year of many in investors career careers. Uh the only thing that worked this year was energy. It's up almost 50%. Uh and many people are asking us why don't we diversify into energy since it's working.
Well, the reason for that is we think it will stop. Uh if our uh forecasts for electric vehicles and autonomous taxi platforms are correct, then oil demand could drop by roughly 30% 30 million barrels a day during the next 5 to 10 years and we believe that demand destruction uh has already started. Uh now another question you have been buying more Tesla and other stocks during the downturn uh and and yet the prices have fallen further and our performance decline has worsened uh with interest rates and prices uh fluctuating so widely and in in this case they probably mean increasing.
Uh will an investment focus on innovation work? Well, uh we believe that the leading indicator correctly is inflation and it it has peaked. The inflation rate has peaked. Uh almost uh every measure of inflation has peaked. Uh most of those uh metrics peeking out in March or June uh of this year in the first or the second quarter.
Uh so typically that's a a a good thing for innovation. Uh but as I just mentioned, I think the market is so skittish and has been so terrorized by the most rapid increase in interest rates ever. We have never seen an 18-fold increase in interest rates within one year. It has truly terrorized the markets.
And uh I think that the fear is palpable. Uh, in fact, I think according to the Bank of America um surveys, recent surveys of fund managers and adviserss, it's probably the advisors, uh, we haven't seen this amount of cash on on the sidelines since I I think it was 2006, maybe even 2001. Uh I do know also the same survey shows that the putto call ratio uh in the US market meaning um those short relative to those long uh puts calls um is at 1.5 now and it has not been that high since 2001.
Uh I remember in uh late 20 early 21 uh we could do no wrong. anything we said uh was uh gospel at the time and and I knew that that wasn't right and at the time remember I remember saying keep some powder dry. It is for these moments or averaging down throughout a a period like this that one keeps the powder dry.
This period seems to be the flip side of the late 90s. the late 90s was an irrational uh increase in tech stocks uh appreciation in tech stocks uh and uh it was incorrect. The technologies were not ready and even if they were close to being ready uh the the um costs were way too high. So technologies not ready we didn't get the cloud till 2006.
We didn't get the big breakthrough in AI deep learning until 2012. The cost for DNA sequencing uh 2.7 billion for one genome uh back in 2013. Uh that number is down to $500 now. We are ready for prime time. And yet investors are doing the opposite of what they did during the late 90s. uh they are running away, running for the hills, running for their benchmarks.
And we think that innovation is going to pose a problem for the benchmarks. So you bet we think in innovation is going to work. We think it's going to work in a big way. We are ready for prime time for these five innovation platforms. More so than any other American company, Tesla deserves credit for making the electric vehicle industry viable.
After decades or even generations of talk about an electric car, Tesla has taken the concept mainstream, scaling production and turning a tidy profit against long odds, defying expectations. That success in an industry that many think will eventually supplant traditional combustion vehicles along with its big promises about autonomy has allowed Tesla to earn a sky-high valuation and a market cap now well over $1 trillion which compares to peers like General Motors and Ford that trade at singledigit multiples of their earnings.
According to the stock chart below, things continue to look good for Tesla. The stock has jumped 56% since the end of 2023, overcoming an earlier setback last year. However, now that Tesla's fullear results are in for 2024, a look at the numbers indicates that the business is much weaker than the stock surge indicates.
And according to one number, Tesla could be in serious trouble. Investors already knew that Tesla's vehicle sales fell in 2024, declining by 1.1% to 1.79 million. But the EV Titan just confirmed that automotive revenue was also down last year, down 6% to $77.1 billion. Total revenue still rose 1% this year to 97.7 billion thanks to growth in its energy storage and generation business and services, which are primarily softwarebased.
But vehicles are the core component of the business and its services which made up $10.5 billion in revenue depend on them as well. Tesla's decline in automotive revenue means that both volume sales of its vehicles and average selling price declined. This occurred even as it rolled out the new Cybert truck, presumably expanding its production capabilities as well.
Tesla lowered prices on its vehicles last year. It's not fully clear why, but typically businesses lower prices to stay competitive with the market and move inventory. And those rules apply to Tesla as well. According to conventional laws of economics, when prices fall, demand is supposed to go up. But that's not what happened with Tesla.
Instead, demand continued to fall. CEO Elon Musk has complained time and again about the impact of high interest rates on demand, but high interest rates have affected all automakers equally. Tesla acknowledged in its fourth quarter earnings report that affordability remains top of mind for customers.
Tesla's market share among all vehicles, not just EVs, has fallen over the last year in North America and Europe. While it's risen slightly in China, the world's largest EV market. As you can see, Tesla's market share has plateaued over the last 2 years and even begun to decline. The company's challenges extend beyond the general slowdown in the electric vehicle market.
It's also losing overall market share in the automotive industry. There isn't a clear reason for that plateau, though there are several factors that seem to have caused it. Those include increasing competition from other EV makers, a base of early adopters for EVs that seems exhausted, concerns about range and charging, and perhaps some brand fatigue, especially as Tesla has been slow to update its fleet, unlike traditional automakers that release new models every year.
Musk continues to make big promises around autonomy. And if Tesla pulls off full self-driving and robo taxes the way he envisions it, the current pause in growth won't matter. The market, however, seems to be overlooking the evident challenges the company is facing. Tesla said it has a capacity of 3 million vehicles and it expects to return to vehicle growth in 2025.
Though it didn't give specific numbers, analysts expect 19% revenue growth this year, most of which should come from vehicle growth. For now, investors seem to trust Musk as the stock rose after hours in spite of missing estimates. But Tesla could have a long way to fall if demand continues to be challenged.
Given its lofty valuation, Tesla stock seems to have more to lose than to gain at this point. Tesla has soared in the aftermath of the election as CEO Elon Musk closely aligned himself with Trump, but it's not fully clear that getting in the president's good graces is going to benefit his EV company.
After all, Trump campaigned on a plan to eliminate the tax credit for EVs and other clean energy programs. and Musk himself has complained that affordability is one of the biggest factors preventing Tesla and EVs more broadly from gaining more market share. Losing the credit, which is worth as much as $7,500 on some of Tesla's vehicles, would seem to be a clear negative for the company.
Investors are ultimately hopeful that the Trump administration will loosen up rules around autonomy, making it easier for Tesla to roll out its new robo taxi or cyber cab. But safety and public perception will be the most critical test for the vehicles. If they cause accidents and Tesla is perceived as getting special favors from the government, that would likely be a disaster for its reputation.
There's still a lot of uncertainty for the company despite Musk's cozy relationship with Trump. and the stock trades at a demanding multiple. If the Trump related thesis doesn't work out, Tesla stock could have a long way to fall. In the 3-month period that ended September, 30 Tesla generated 25.2 billion in revenue.
Although the business has operations in the energy generation and storage sector, 79% of its top line is related to car sales. Tesla is an auto manufacturer at its core and there's a high likelihood that this will still be the case a decade from now. That might not bode well for the stock price. Tesla used to register fantastic growth and improving margins as rolledout EVs in a market it had largely to itself.
But there's a lot of competition now which limits the company's ability to exert pricing power. Moreover, car companies are subject to macroeconomic forces that are beyond their control. In the past couple of years, higher interest rates have pressured consumer demand for Tesla vehicles. There's also the challenge of securing adequate commodity inputs for production.
If in 10 years Tesla still makes most of its money from the sale of EVs, I'm confident that the stock will be a loser for investors who are expecting much more from the business. Today's gains owe in part to growing enthusiasm for Tesla stock on Wall Street. Specifically, investors seem to be reacting to a new price target hike from investment bank Wedbush.
According to reports, Wedbush analyst Daniel Ives just raised his price target on Tesla stock to $400, a 33% increase. The Trump White House win will be a gamecher for the autonomous and AI story for Tesla and Musk over the coming years, predicts Ives. More than just a reward for financial support that helped him win re-election, the analyst anticipates that a new Trump administration will clear out the federal regulatory spiderweb that has slow rolled developments in artificial intelligence and self-driving cars alike.
And while it's hard to quantify what that might mean for Tesla, Ives says $1 trillion. But really, that's just a guess. Musk has positioned Tesla to capitalize on these technologies. If a Trump White House works to get these developments fasttracked, Tesla would be a logical company to benefit from that.
Is Tesla stock a buy? Enticing investors with big round numbers like $1 trillion without providing math to support the number is a great way to attract momentum traders to Tesla stock. More cautious investors, however, shouldn't ignore the math. After its runup these past few days, Tesla stock now costs a distressingly high 88 times trailing earnings and 322 times free cash flow.
Tesla's going to have to grow awfully fast to justify those multiples. Worse, it may have only four years in which to grow before regulations change again.
Comments 0