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Tesla Investors Get Good News. It's a Value Stock. -- Barrons.com
7:10 am ET November 23, 2022 (Dow Jones) Print
Al Root
Tesla stock has been badly beaten up in recent weeks. There isn't much for bulls to be thankful for. But stock price declines prompted a pre-holiday upgrade from one analyst. And another sees Tesla approaching value stock territory.
Wednesday, Citi analyst Itay Michaeli upgraded Tesla (ticker: TSLA) stock to Hold from Sell. It isn't a upgrade to Buy, but investors will likely take it. Tesla stock has fallen about 45% since mid-October, wiping out more than $400 billion in market capitalization. The Nasdaq Composite Index is only down about 3% over the same period.
"We feel that some of the prior baked-in expectations that we didn't agree with are out of the stock," wrote Michaeli in his upgrade report. "To be sure, macro/competitive concerns are likely to remain an overhang with [EV] capacity rising, but as we've previously written, in a hard [economic] landing scenario Tesla's [long-term] competitive position likely also improves."
Tesla is the only U.S. pure-play electric vehicle (EV) company that generates free cash flow that has achieved manufacturing scale. A deep recession will make it harder for start-ups needing external capital to catch up. A downturn will also hurt traditional auto makers' cash flow, which they are using to develop EVs and build new battery manufacturing capacity.
Morgan Stanley analyst Adam Jonas laid out some of the "macro/competitive" concerns Michaeli mentioned. "Tesla is approaching our $150 [per share] bear case, driven by price cuts in China, decelerating EV demand, and other market currents," wrote the analyst in a Thursday report.
(Those other market currents include Twitter and cryptocurrency problems.)
He points out that at current prices, Tesla stock is trading at about 26 times estimated 2025 earnings. That's not bad for a company he expects to grow sales at 23% a year on average between now and 2030. Against that backdrop, Jonas wonders if a "value opportunity is emerging" in Tesla stock.
Jonas's price target for Tesla stock is unchanged at $330 a share. Michaeli raised his target to $176 a share from $141.33 with the upgrade.
The average analyst price target is now at about $289 a share, according to FactSet. That implies gains of roughly 70% from recent levels. Impressive, but something needs to change investor sentiment to get shares moving. Maybe it will be EV purchase tax credits, passed in the inflation reduction act, which come into effect in 2023. Maybe it will simply be value investors taking a look at a stock they once felt was too expensive.
Whatever turns the sentiment tide for Tesla stock, Tesla bulls will take it.
Tesla stock is up 1.7% in premarket trading Wednesday at just under $173 a share. S&P 500 and Dow Jones Industrial Average futures are flat.
What's Driving Tesla Shares Higher On Wednesday
6:51 am ET November 23, 2022 (Benzinga) Print
Tesla Inc. (NASDAQ: TSLA) shares were advancing for a straight session in premarket trading on Wednesday.
What Happened: Ahead of Tuesday’s session, the stock had dropped to a three-year low, which wiped out about half a trillion off its market capitalization.
The upside seen in the premarket session may be traced back to positive analyst commentary on the stock. Late Wednesday, Morgan Stanley analyst Adam Jonas said he will continue to own Tesla stock as it offers 100% upside potential from the current levels.
See Also: How To Invest In Tesla (TSLA) Stock
Jonas noted that Tesla is the only pure play electric vehicle maker in his coverage universe that generated a profit and positive free cash flow.
On Wednesday, longtime Tesla bear Citigroup raised its investment rating on the stock to Neutral from Sell and raised the price target from $141.33 to $176, Yahoo Finance reported.
Analyst Itay Michaeli predicated the action on the year-to-date pullback that has balanced out near-term risk/reward. The analyst moved to a Sell rating on Tesla in September 2018 and had maintained the rating since then.
Price Action: In premarket trading on Wednesday, Tesla rose 1.63% to $172.68, according to Benzinga Pro data.
Latest Ratings for TSLA DateFirmActionFromTo
Feb 2022Daiwa CapitalUpgradesNeutralOutperform Feb 2022Piper SandlerMaintainsOverweight Jan 2022Credit SuisseUpgradesNeutralOutperform
Got it last night, amazing!! When all get Full FSD watch the tape
I wish you luck my friend
I'm at 100% bullish! Cover your shorts
I think they are already out, look at volume last two weeks, available float is 450M
Available float I'm talking about
About 50M
I'm estimating Q4. We already traded the entire float in the past week
Q4 450k × 4 = 1.8m / yr
1.8 × 55k ASP x .24 margin = 23.7B profit
23.7 - 6.8 OpEx & Tax = 16.9B net
16.9B / 3.2B shares outstanding = 5.3EPS
That would put go forward PE at 32..
For a company growing 45% YoY...
NVDA is PE of 65 and expects 10% growth
Record revenue, profit and cash flow in Q4 2022. The entire float has traded in a week well below $200 so will these buyers sell with a loss?
Tesla tries to squash rumor of low demand in China
?Fred Lambert | Nov 22 2022 — 3:13 am PT
?
Tesla is trying to squash rumors of low demand in China following new discounts offered by the automaker. Tesla China says there will be no more price cuts this year.
Over the last few months, Tesla has pulled on several “demand levers” to boost demand in China.
We reported last month that Tesla reduced the price of the Model 3 and Model Y in China and launched a new referral program. It was the first time in two years that Tesla cut prices on its electric vehicles.
Later, the automaker also launched a new cash rebate with its insurance partners in China.
At first, local media in China reported that these strategies to boost demand worked and even crashed Tesla’s Chinese website with people looking to configure a car.
However, now several media reports out of China claim that the incentives didn’t actually have the expected impact.
Sina Technology News reported that the demand levers only brought about half the amount of orders that were expected:
It is reported that Tesla has launched two rounds of heavyweight price cuts and promotions in the past month. However, the two rounds of promotions did not receive the desired effect from Tesla. After announcing the price cut, Tesla China’s official website was “paralyzed” by the influx of traffic, but according to Sun Shaojun, the founder of Auto Fans, only about 50,000 orders were received by Tesla in this round. Rather than the 100,000-170,000 rumored by the outside world.
In another report from Huxiu, it was rumored that Tesla planned to lower further its prices in China (translated from Chinese):
After two sales promotions, Tesla’s order increase is still lower than expected, and it will launch a new “price reduction method” before the end of the year to boost sales.
However, Tesla China has since denied the rumors – indicating that there will be no further price decrease this year, which ends either in under 40 days or 60 days depending which calendar they are referring to.
Unlike in the US, Tesla still has a press relations department in China and still communicates with the press – sometimes denying reports like this one.
While Tesla denied further price decreases this year, it could eventually still reduce the price next year in China where rules for EV incentives are expected to change in 2023.
Gary Black on Twitter:
$TSLA -59% since 11/4/2021, its 2nd largest drawdown on record (2020 Covid drawdown #1). We all know what happened next.
Meanwhile TSLA 2022 EPS ests +48% since 11/4/2021. TSLA 2023 EPS ests +51%. TSLA fundamentals haven’t changed. P/E compression due to macro and TWTR noise.
2/ Approx 40pp or 2/3 of $TSLA -59% drawdown due to macro:
- NDX -29% since 11/4/2022
- With TSLA beta 1.38x, TSLA should be -40%.
Charts:
- 2022 EPS +48% since 11/4/2021
- 2023 EPS +50% since 11/4/2021
- TSLA -59% vs NDX -29% since 11/4/2021
- TSLA 1-yr beta vs NDX 1.38x
3/ For those who didn’t get my riddle about what happened after the 2020 record Covid drawdown, $TSLA soared from $24 on 3/18/2020 to $235 by 2020 year-end (post split adjusted), finishing 2020 with a +743% YTD increase (vs NDX +48%).
Charts:
- 2022 EPS +48% since 11/4/2021
- 2023 EPS +50% since 11/4/2021
- TSLA -59% vs NDX -29% since 11/4/2021
- TSLA 1-yr beta vs NDX 1.38x
We have traded the entire float in a week
No idea, something's not right
NEWS: Tesla publishes first job postings for proposed lithium refinery in Texas.
TSLA vs AAPL and AMZN
AAPL Revenue has grown by 7.79% in the last year, projected growth 3%
AMZN Revenue growth 15% Q3 2022, projected growth for Q4 is 2-8%
TSLA Revenue Growth is 45-50% current and forward
AAPL market cap $2.4T
AMZN Market cap $963b
TSLA market cap $552b
AAPL Net Income Q3 $19.4b, expected to grow 1.5%
AMZN Net Income Q3 $2.9b, expected to decline
TSLA Net income Q3 $3.3b, expected to grow 40%
TSLA is already past AMZN in Net Income yet has a market cap $400b less
TSLA is projected to equal AAPL Net Income in 5 years everything being equal
Christopher Dungeon
@ChrisDungeon
·
Nov 17
Replying to
@ChrisDungeon
Note: My 25% (subjective) probability is not a formal mathematical calculation.
Instead, it is my own personal belief and judgment that an accumulation of at least some small scale (less than $1B) is currently happening behind the scenes.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
1. Charlie Munger recently had nice things to say about $TSLA & Elon Musk after having just been negative on Tesla in February of this year.
Why the sudden change?
Because you don't talk bad about a company you own.
Becky Quick in a recent CNBC interview never followed up with
Christopher Dungeon
@ChrisDungeon
·
Nov 17
Munger to ask if he or Berkshire was accumulating $TSLA. That would normally be an immediate follow-up question but likely never asked because that talking point was off the table prior to the interview taking place.
While Buffett & Munger love a good deal, they are willing
Christopher Dungeon
@ChrisDungeon
·
Nov 17
to pay a fair price for a good/great business. That's their motto now.
They would love to scoop up $TSLA at even cheaper prices today (most people think TSLA is still overvalued at these levels. It's not. Those people are just lazy in their evaluation models, or have none), but
Christopher Dungeon
@ChrisDungeon
·
Nov 17
I believe they are more interested in protecting the bottom since it's on their balance sheet now, possibly at prices >$200.
Munger's positive statements on $TSLA & Elon could have an anchoring effect.
Elon also had nice things to say about Munger in response to his interview
Quote Tweet
Elon Musk
@elonmusk
·
Nov 15
Replying to @Umbisam
Mr. Munger’s words are much appreciated
Christopher Dungeon
@ChrisDungeon
·
Nov 17
2. Buffett & Munger love when a companies stock is disconnected from the underlying business fundamentals.
This creates opportunity.
They've taken advantage of countless similar situations.
3. They don't care about macro when investing in individual businesses.
Google it.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
4. It behooves Elon, Buffett & Munger to get along.
Why?
Because Elon owns a lot of $TSLA stock and Berkshire has the capital to buy large chunks directly from Elon.
5. Berkshire's stock purchases are a self-fulfilling boost. If a 13F is filed mid-Feb 2023, then it'll
Christopher Dungeon
@ChrisDungeon
·
Nov 17
automatically send shares up making any additional $TSLA purchases for Berkshire that much more expensive on the open market.
Remember, Berkshire started small with their $AAPL investment, then they went in heavy totaling $5B.
Will Buffett & Munger do the same here or will they
Christopher Dungeon
@ChrisDungeon
·
Nov 17
want to make the bulk of their purchases in secret prior to that mid-Feb 13F. It would be in their best interest to do just that.
6. Elon hasn't talked much positive about $TSLA lately. He's been pretty quiet.
Weird, right, but why?
If you knew heavy hitters in your
Christopher Dungeon
@ChrisDungeon
·
Nov 17
corner were buying, then why would you make it more expensive for them to acquire.
Secondly, if they're buying, then Elon can feel some comfort in knowing $TSLA is being backstopped by the best long-term investors out there.
7. Berkshire recently sold off BYD shares
Christopher Dungeon
@ChrisDungeon
·
Nov 17
Does it make sense that Buffet & Munger would take some BYD off the table and roll that into $TSLA, an American company with plenty of BEV exposure in China?
I think it makes perfect sense.
8. Geico
Berkshire is likely seeing a hit to their accounts thanks to $TSLA insurance.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
This is something that Buffett & Munger can see as it's happening. Why sit there while $TSLA takes small (and eventually large) bites out of your business.
Insurance Float is Berkshire's moat. They want to protect that at all costs and will likely partner with TSLA in the future
Christopher Dungeon
@ChrisDungeon
·
Nov 17
9. Munger lives in California
So what?
So he would see that Tesla vehicles and charging stations are all over the state.
$TSLA is literally the No. 1 selling vehicle (not just EVs) in CA. Easy to take notice and see the disruption.
10. What about Bill Gates shorting $TSLA?
Christopher Dungeon
@ChrisDungeon
·
Nov 17
Buffett is friends with Gates but Buffett's not going to let that affect any investment decision he makes on Berkshire's behalf. No one bats 1.000, and Gates clearly misunderstands $TSLA. Bill's Ego is getting the best of him here.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
11. Berkshire's upcoming 13F filed mid-Feb 2023 is roughly 90 days away.
That's a long time to accumulate a large sized portion of $TSLA before anyone even catches on.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
12. $TSLA has pricing power. They were able to raise prices throughout 2021/2022 in the US with limited demand destruction. Buffett loves pricing power.
13. Buffett didn't think twice about $AAPL until he saw everyone had an iPhone. Similar moment happening in the US with Tesla.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
14. Berkshire suffers from the Law of Large Numbers. To move the needle they need to invest large sums of money in growing businesses. That's a lot harder than it sounds.
$TSLA's high growth rate and favorable operating margins are exactly what Berkshire needs to grow at scale.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
15. Buybacks
On $TSLA's Q3 earnings call Elon mentioned that the Tesla Board will meet to vote on any upcoming share buyback.
Buffett loves buybacks.
Why?
Because this is excess capital (after all expenses & capex requirements) that go into making his share of the pie bigger.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
16. Elon specifically mentioned that $TSLA buybacks were a possibility in 2023, not Q4
If he knew Buffett & Munger we're accumulating $TSLA in Q4 then it would make no sense for Tesla to compete with Berkshire in buying TSLA in Q4. The announcement alone would raise share prices
Christopher Dungeon
@ChrisDungeon
·
23h
17. Buying $TSLA now is the ultimate contrarian move. Nobody wants to touch it. PMs don't care about the underlying fundamentals. They care more about Twitter and Elon selling more shares. Elon's sales have absolutely zero to do with Tesla's value. Zero.
Buffett thinks long term
Christopher Dungeon
@ChrisDungeon
·
23h
18. $TSLA CEO succession plan
At a minimum, Buffett & Munger would want a definitive plan in place. They've done it for Berkshire and asked all of their subsidiary CEOs to do the same.
19. Bitcoin sell-off
Munger detests Bitcoin. Wouldn't be surprised to see a zero balance.
Christopher Dungeon
@ChrisDungeon
·
22h
20. $TSLA Semi
Berkshire owns McLane (trucking) Company and is set to acquire Pilot Flying J in 2023. Pilot Flying J is a chain of truck stops in the US & Canada.
If Semi takes off, TSLA is a good hedge in setting up partnerships with Megacharging & efficient Semis for McLane.
Christopher Dungeon
@ChrisDungeon
·
Nov 17
Replying to
@ChrisDungeon
What probability would you assign?
Don't think in certainties, think in probabilities.
Those responding that'll it'll never happen are just as unrealistic as those saying it's ?? certain.
Not everything is binary. Use your brain and put some thought into it.
Christopher Dungeon
@ChrisDungeon
·
19h
For those asking about BYD, Berkshire recently sold several times with two instances occurring this month (right near Elon selling $TSLA):
1: https://reuters.com/markets/deals/berkshire-trims-stake-chinas-byd-h-shares-worth-hk560-million-filing-2022-11-04/
2: https://reuters.com/markets/deals/berkshire-hathaway-sells-145-mln-shares-chinas-byd-filing-shows-2022-11-11/
3: https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-byd-china-ev-stock-sales-auto-2022-9
reuters.com
Berkshire trims stake in China's BYD H-shares worth HK$560 million - filing
Berkshire Hathaway Inc, the investment firm owned by Warren Buffett, has sold 3.297 million Hong Kong-listed shares of electric vehicle maker BYD for HK$560.05 million ($71.35 million), according to...
That Twitter thread is worth the read
Check Twitter user Christopher Dungeon
Rumor: Buffett and Munger accumulating $TSLA
Twitter post:
Assigning a 25% probability that Warren Buffett & Charlie Munger have been accumulating $TSLA for Berkshire Hathaway.
Feels very reminiscent of the time I beat them both to $AAPL
Let's take a look at some rational & theoretical reasoning ????
None of that should matter, complete disconnect. Something's up as if someone wants it down
There's no correlation between the chart and the fundamentals anymore
The revenue, profit and cash is 10 times what it was in March 2020
Forget about it
Hit piece
$500 end January
Those who don’t see the relationship between Elon buying $TWTR and $TSLA underperformance since 4/14 (when Elon made his TWTR bid) are fooling themselves. TSLA’s beta vs NDX over the past year is 1.375, so beta adjusted TSLA should be down -21.3% vs actual -41.7% since 4/14.
Moron who can't sell his own software
Yes, single stack
Double that
High volume this week, hmmm
Year old news, Mullen does not have a chance nor a factory
Cybertruck hiring now in full gear
Tesla manufactures millions of self executing AI PC's on wheels manufactured by robots. Let that sink in
Nio, Rivn and lucid have infinite p/e as they're losing money. People don't see the first for the trees. When Berlin and Austin equal Shanghai output there 3 of them will produce 1M cars annually each. Including California we're then approaching 4M annually. This can double with expansion and another 4 factories will get us closer to 20M. Look at there miniscule volume there competition is producing. They also have yet to experience growing pains and will realize they have the wrong DNA and the wrong factories (legacy companies). Retooling people and factories will take 5+ years.
131M Shares is slowing volume. Look at the fundamentals, severely oversold and short squeeze coming imeo
Short squeeze?
They're only 2M cars behind. Don't see any factories
I'd take space x