Oct 20, 2022
3 min read
Tesla Stock: Bull vs Bear (after the latest earnings update)
TL;DR: Bullish 🐂 📈🚀
Overview 📖
Tesla is one of the most unique companies that people can invest in. It is the fastest-growing trillion-dollar company without a sign of slowing down. It has products across multiple trillion-dollar industries. It is led by one of the greatest visionaries of our time.
Products
- EV industry: Electric vehicles and charging stations
- Energy industry: Solar panel and power storage
- Semiconductor industry: FSD and Dojo Chip
- Insurance industry: Real-time insurance, which provides a real-time feedback loop for promoting safe driving habits. Its full end-to-end visibility circle also helps Tesla to identify areas of cost inefficiency, feed those back to our engineering teams, and improves the reliability of the product.
- AI industry: Dojo System, Full self-driving AI (in Beta)
- Transportation Mobility industry: Robo-taxi (in development)
- Robot industry: Optimus humanoid robot (in development)
🎙️ 7/20/22 Latest Earnings Highlights
- Tesla will not cut production “in any meaningful way, recession or not recession.” “We’re very pedal to the metal come rain or shine” said Elon Musk.
- “I see a potential path of Tesla to be worth more than Apple and Saudi Aramco combined”
- 📊 Quarterly Revenue increased to 21.45B, ⬆️ Up 55.9% YoY (from 13.76B)
- 📊 Operating Expenses increased to 1.69B, ⬆️ Up 2.3% YoY (from 1.66B)
- 📊 Operating Margin was 17.2%
- 🔗 Shareholder Deck
Bearish Arguments
- Growth: The revenue estimate was missed, and the annual 50% growth expectation is expected to be missed as well. Tesla had difficulty securing vehicle transportation capacity at a reasonable cost during peak logistics weeks.
- Profitability: Automotive gross margin was not growing (27.9% vs 30.5% a year ago)
- Valuation: The 60+ PE ratio is too high.
- Challenges: Elon will continue spending a lot of money and energy on Twitter, which could be a huge distraction.
- Challenges: Solving full self-driving, or real-world general artificial intelligence is extremely hard. Nobody has solved it before.
- Risks: The recession in China and Europe could impact Tesla’s demand.
Bullish Arguments
- Growth: Over a multi-year horizon, Tesla is expected to achieve a 50% average annual growth in vehicle deliveries.
- Profitability: Tesla is becoming a profit machine. The latest quarterly revenue grew 55.9% YoY, while the operating expense only grew 2.3 YoY. These numbers are incredible and better than Tech/Auto companies like Apple, Google, Microsoft, and Ford.
- Management: Elon Musk said Tesla could pursue a $5 billion to $10 billion share buyback in 2023.
- Moat: Best vertical integration of car manufacturing from hardware to software.
- Moat: Strong in-house technology including AI and chips. Also, Tesla could easily borrow technology from SpaceX.
- Moat: Massive supercharging network that no one else has.
- Opportunities: Many new products are in the pipeline to grow its topline, including Tesla energy, semi-truck, full self-driving software and robotaxi, Optimus robot, etc.
Conclusion
In the short term, Tesla is still encountering headwinds, especially under current economic conditions. However, I don’t see Tesla having any serious long-term problems. Long Term: Bullish 🚀
