TSLA - Tesla: The Second Tsunami Heading Towards Shareholders - The Path To $85

2024-05-07 09:30:00 ET

Summary

• Tesla's stock value is threatened by the smaller-than-expected overall EV market, causing concern for its future sales.
• Tesla's valuation is significantly overvalued according to a DCF model, even with generous growth assumptions.
• Tesla's position as a leader in autonomous driving and robotics is questionable, with other companies showing more advanced technology and capabilities.

Investment Thesis

Last December, we highlighted the intensifying competition threatening Tesla's ( TSLA ) EV dominance in the US, adding to the company's challenges in Asia. Since then, Tesla temporarily lost its position as the largest BEV maker to BYD ( BYD ) in Q4 2023 and reported the first-ever unit volume decline in Q1 2024 (excluding the pandemic disruptions), leading to a 13% decline in automotive dollar sales during the quarter. In the US, Tesla sold 21,443 fewer vehicles than it did in Q1 2023, while BMW ( BMWYY ), Hyundai ( HYMTF ), Ford ( F ) Rivian ( RIVN ), Mercedes-Benz ( MBGAF ) added a combined 35,656 EV units during the same period, highlighting the increasing competitive dynamics facing Tesla in North America. The disappointing quarter was also highlighted by the company's first negative Free-cash-flow 'FCF' since Q2 2021, and the steepest in its history, with unsold inventory piling up. At their lowest, shares declined 41% before recovering some of the losses on speculations tied to Elon's recent visit to China and Tweets about a potential Robotaxi unveil next August....

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