Is Tesla DOOMED? Dissecting the Future of TSLA and Elon Musk
Well, it’s been quite an eventful week. I started writing an article on Tesla on Tuesday and every day another batch of massive stories comes out.
Is Tesla finished? The headlines sure make it feel that way.
A lot has happened for Tesla in the month of April and it’s hard to come by anything good.
Investing in Tesla has been challenging to say the least over the past 3 years and it’s been getting worse. Bulls are definitely feeling the pain and beginning to break. The problem is the stock price got way ahead of the company while simultaneously the economy has faced massive challenges. Far and away projects that may or may not ever happen like Robotaxi and the Optimus humanoid robot all became baked into the stock price like they were right around the corner. The reality is this was always going to be a multi-year, even decade(s), story.
There is no question Tesla has one of the best company cultures and quite a deep roster; if anyone is going to bring these things to reality it will be them. Before our current not a recession recession began, investors were happy to enjoy record deliveries each quarter with industry leading automotive margins while they waited for these sci-fi projects to become mainstream. Nothing changed at TSLA 0.00%↑ , they continued to deliver, the economy just tanked. They continue to drive down the costs of the cars but thanks to inflation and high interest rates, the auto market has quickly returned to the cyclical less than ideal business it’s been historically
There are some positives which people seem to quickly forget. The Model Y became the best selling vehicle globally, not just electric, in 2023. The Cybertruck has started to roll out. While it will have some kinks in the short term, as all new product releases do, the problem (or benefit) is that Tesla and Elon Musk generate the most clicks for the media. Sensationalism abounds.
I mean, have you seen this thing? It is sure to reinvigorate interest in Tesla.
“The best selling car in the world is made in America.”
The Tesla growth story was still alive and well as of the end of 2023, as you can see in their total deliveries outlined below.
Q1 2024 did see a slowdown which has spooked many. I do think short term Tesla stock will continue to go lower, it may be ugly short term but long term the only legitimate threat to Tesla’s auto market share is Chinese car manufacturers. No one else can compete with them, how many “Tesla killers” have come and gone. China poses legitimate competition, but purely looking at it as a car business, Tesla’s out can still be the Apple card. While the iPhone has many cheaper competitors and AAPL 0.00%↑ only has ~20% of the global smartphone market, it captures the majority of the profits. I see a similar path for Tesla, should they ever lose their sheer dominance in EV volumes. This does not even factor in full self driving and the possibility of robotaxis.
Over the last 4 years revenue growth has slowed but is still impressive at nearly 19% for 2023.
The company has a strong balance sheet, their cash position continues to grow.
Tesla peaked in November 2021 at over $400 a share and it has been on a slow and steady decline ever since. But, if we zoom out just a little more, you can see that over a 5 year period, even with this tremendous decline, the stock is still up 850%. In the same 5 year period, the S&P 500 is up 70%. Hm.
2019 was when I began investing in Tesla and it was a fundamentally different story.
Back then it had just begun successfully ramping the Model 3, there was virtually zero competition and demand was quasi infinite. This continued for a few years, Tesla succeeded during the pandemic years thanks to perspicacity while many other auto makers’ supply chains were wrecked. The result was Tesla posting record delivery numbers every quarter with seemingly impossible and increasing profit margins. That’s changed and margins have declined quite a bit from their highs. Still, since the company is well capitalized, they can essentially sell cars at or near cost just to take market share for as long as needed, with the possibility for a future upsell with full self driving/FSD. They just dropped the price from $199 a month to $99 a month.
There is a lot of recent news, I’ll quickly touch on the important stuff.
There is an asinine court case regarding Elon’s pay package from 2018 that suddenly became a problem 6 years after the fact. Elon accepted a compensation package that required him to hit company goals that seemed impossible, if he did not he would receive no compensation. Well, shareholders voted in favor of it and he did hit every benchmark, making shareholders rich in the process as the stock went up over %1,000. But an unhappy shareholder who owned 9 (NINE) shares brought suit and somehow won, you cannot make this stuff up.
Elon recently announced a Robotaxi Unveil event on 8/8 but I think this was more to brace for 2 terrible quarters, (the first of which is set for 4/23 and I’ll cover it here) and give us something to look forward to. At this rate it seems Tesla’s humanoid Optimus robot will hit the market before robotaxis.
A future with FSD and/or robotaxis still seems possible, but I don’t think it hits mainstream adoption anytime soon. It will be years before that, let alone getting past regulators. There will definitely be more pain short term, but nothing seems to have changed fundamentally with Tesla the company. It is all economic issues which will not last forever.
The company just announced it’s laying off 10% of employees. Tesla is between 2 growth curves and needs to streamline the company for the next phase.
Warren Buffett says to judge companies on their 5 year performance as it tells you more than quarterly or even yearly results. I’d say that 5 year performance chart I posted at the beginning says a lot. But short term, the numbers don’t look good.
Tesla is and always has been a long term story. I’m still looking 3-5 years out if not more, short term this is not going to be a fun time.
More and more, the ability to delay gratification is becoming a super power and those able to delay gratification instead of seeking immediate gratification, yours is the world, in investing and beyond.
Luckily while Tesla stock has continued its decline I’ve been able to make an extra $8,018.53 through options trading strategies in 2024. Below is a screenshot of all my Tesla trades from the past week, which I share in real time with community members. Consider subscribing below: We do weekly zoom calls and I share all my investments.
Until next time!