Tesla: TSLA // Blue 2 // Strike Price = $222
- 10 year CAGR = 45.6% (May 5, 2013 to 2023)
- 5 year CAGR = 53.2% (May 5, 2018 to 2023)
- Future Growth Rate Estimate: 30%
- based on our analysis of past financial results, qualitative research, and analyst estimates of future revenue and earnings
- Analyst estimates have come down of late and we wouldn’t be surprised if they will look low-ball in the future, so 30% is more of a base case
- 5 year Price Target = $620 at a Price to Revenue multiple of 9
- sector median is 0.8 and Tesla is 5.9 with a 5 year avg. of 10
- 0.8 is surprisingly low for the consumer discretionary sector, but if we use Nike as a proxy for the upper ranks of the sector we find they have a 5 year avg. of 4.2 but we would assign them a growth rate of, at best, half that of Tesla, so we feel using 9 as our PR multiple is reasonable
- Price to Free Cash Flow / Share = 92.4 🤔
- Return on Invested Capital = 23.3% 😀
- Long Term Debt to Total Assets = 0.01% 😀
- Cash & Equivalents to Total Operating Expense = 313.3% 😀
// TL;DR
Normally with a company of the size, stature, earnings and growth rate like Tesla, we would use 50% off intrinsic value at most, which would be about $360 in this case, but because of the volatility of the stock and polarizing nature of Elon, we will use a Margin of Safety of 69%.
There are precious few mega cap companies with 30% future growth rates and so many significant catalysts. You should at least have a little exposure to the Musk-wagon.
There are a million videos and articles about Tesla, analyzing production volumes, autonomous driving, etc., so we are not going to provide that kind of research here at the moment.
However, we will mention two factors:
- There is a lot of Tesla-FUD. They have put a lot of noses out of joint over the years by forcing the paradigm shift in the transportation and energy industries that is happening now. Beware of that even if you don’t like Elon because he’s too weird or insensitive or conservative or liberal or autistic or Dogey or whatever.
- Cutting vehicle prices in this macro environment is an offense-oriented strategy to snatch market share from those with inferior margins. Short term pain for long term gain. The patient will be rewarded. EVs are more than cars, they are operating systems. People are adverse to switching from their preferred OS. There are generally only two or three OS’s per product category. In a decade there won’t be the plethora of vehicle manufacturers there are today. Even if that is incorrect, many will share the same few dominant operating systems.
We are publicly posting our Strike Price of Tesla in an effort to promote our subscription service for semi-DIY retail investors who wish to outperform the market. Growth Investing with a Value Mindset // Abide the Strike Price
// WHY BUY
They may be volatile and polarizing but if you want to maximize your CAGR over the next decade you will want to have exposure to the Musk-wagon.
// ChatGPT: WHY BUY
Tesla is a leading electric vehicle manufacturer and has been growing rapidly in recent years. The company has also been expanding into other areas such as energy storage and solar panels.
There are several reasons why someone might consider buying a Tesla vehicle.
Firstly, Tesla vehicles are known for their high performance, with quick acceleration and handling that is often compared to sports cars.
Secondly, Tesla is a leader in electric vehicle technology, and their vehicles have a longer range than many other electric cars on the market.
Thirdly, Tesla has been investing heavily in developing a network of Supercharger stations, which allows Tesla owners to quickly recharge their vehicles on long road trips.
Lastly, many people are attracted to Tesla’s focus on sustainability and reducing carbon emissions. Overall, whether or not to buy a Tesla depends on individual preferences and needs.
// CONCLUSION
Buy on sale and HODL.
// CATALYSTS
Cybertruck, the affordable Model ?, more gigafactories and metals refiners, FSD, robotaxis, humanoid robots, energy storage systems, charging networks, insurance, Semi, etc.
// RISKS
Elon goes insane, Elon dies, an apocalypse. Competition (long shot).
// NEWS & COMMENTS
May 4, 2023
SA // buy: Charles Munger Made Some Good Points
“TSLA’s profit vs BYD’s. Munger lauded (see this BusinessInsider report) BYD for growing rapidly in its home market and leaving Musk in the dust. “BYD is so much ahead of Tesla in China it’s almost ridiculous,” The billionaire investor pointed out that Tesla cut its car prices in China last year, while BYD was able to raise prices.”
“Overall, Tesla’s profit margin was higher than that of BYD (or other EV makers) as seen from the chart below since 2020. To wit, BYD has been maintaining an average margin of 3% ~ 4%. It is a remarkable margin compared to traditional car makers like Ford Motor Company (F). And the fact that BYD was able to maintain it consistently in a highly competitive and cyclical sector shows its strength. However, since 2020 after Tesla has become profitable, TSLA’s margin is significantly higher than BYD.”
“Elon Musk vs. Chuanfu Wang: Munger had mixed comments about Musk. And the latest comments made during Daily Journal’s annual meeting probably summarized his overall thoughts. He said that “My policy on Elon Musk is that he’s a very talented man but also peculiar, so I don’t buy him and I don’t sell him short.” On the other hand, his comments on Wang are one-sided. He praised the man as “a combination of Thomas Edison and Jack Welch – something like Edison in solving technical problems, and something like Welch in getting done what he needs to do. I have never seen anything like it.”
“To wit, both BYD and TSLA have been consistently improving their ATR over the years. Their ATR [asset turnover ratio or utilization of its resources to generate revenue] both hovered around 0.6x a few years ago. And both have steadily improved to ~1.1x now, an improvement of around twofold. To better contextualize things, the ATRs for traditional automakers such as Ford and General Motors (GM) are on average ~0.5x.”
// GGI 💬
Munger on Tesla vs BYD profit: Think BMW 3 vs Corolla. The latter may get the volume but the former get the margins. It’s good that both exist. Musk vs Wang: Musk may be polarizing but if you listen to a long-form interview you will see his thoughtful sincerity and not the poker-of-all-things antics he displays on Twitter to entertain himself. Dunno ‘bout Wang, but what he has accomplished with BYD is very impressive.
