CA - Tesla: The Thesis Is Stronger Than Ever

2024-04-30 18:18:36 ET

Summary

• Today, we will start with a brief consideration of Tesla, Inc.'s business through the lens of the nature of business broadly.
• I will then share the core pillars of the thesis.
• I will then walk you through a brief valuation exercise, which, at present, is necessarily a bit unorthodox.
• That said, I will provide concrete math that underlies the potential of the Tesla business.
• While nothing is guaranteed in equity investing (hence we generate return through risk, i.e., risk = return), I believe Tesla to be more compelling as a vehicle for capital allocation than it's been in the last half decade.

Non-Linearity

I often share that business is non-linear, in the sense that no company on earth will grow sales at a steady 15% or 25% annually in perpetuity. Especially for companies that generate tens of billions in sales, as is the case for Tesla, Inc. (TSLA), we should expect periods in which sales growth declines, accelerates meaningfully, and everything in between.

For Tesla specifically, it is undoubtedly going through a period of non-linearity presently, as most clearly communicated by its recent 8.5% decline in overall sales, which followed a year of steadily declining sales growth rate....

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