BYDDY - Tesla: The Disappointment Continues

2024-03-11 10:23:47 ET

Summary

• Tesla's Q4 earnings were disappointing, with sluggish growth in car sales and declining margins.
• The company faces growing competition and weaker demand, leading to price cuts to stimulate sales.
• Tesla's valuation should primarily be based on its car segment, which has a fair value of $78 to $110 per share, well below the current price.

Dear readers,

I've been bearish on Tesla ( TSLA ) stock for a while.

Most recently, I wrote on the stock in early November 2023, when I issued a SELL rating at $205 per share, after disappointing Q3 2023 earnings , released on October 18th. Since my last article, the stock has lost about 13%, while the S&P 500 (SP500) has rallied by 23%.

My thesis was simple. I liked the Tesla business and recognized that the company might see substantial growth in things like robotics, AI and self-driving. But at the same time, I realized that few of these promising business lines even existed, let alone generated any earnings. Whether you want to call Tesla a car company or not, the fact of the matter was that Tesla was generating about 85% of their earnings from car sales, while trading at a crazy expensive valuation of 70x earnings....

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