Tesla Stock: Bull vs Bear (after the latest earnings update)

Invesdea πŸ’° Investing Ideas
3 min readOct 20, 2022

TL;DR: Bullish πŸ‚ πŸ“ˆπŸš€

Overview πŸ“–

Tesla is one of the most unique companies that people can invest in. It is the fastest-growing trillion-dollar company without a sign of slowing down. It has products across multiple trillion-dollar industries. It is led by one of the greatest visionaries of our time.

Source: Tesla

Products

  • EV industry: Electric vehicles and charging stations
  • Energy industry: Solar panel and power storage
  • Semiconductor industry: FSD and Dojo Chip
  • Insurance industry: Real-time insurance, which provides a real-time feedback loop for promoting safe driving habits. Its full end-to-end visibility circle also helps Tesla to identify areas of cost inefficiency, feed those back to our engineering teams, and improves the reliability of the product.
  • AI industry: Dojo System, Full self-driving AI (in Beta)
  • Transportation Mobility industry: Robo-taxi (in development)
  • Robot industry: Optimus humanoid robot (in development)

πŸŽ™οΈ 7/20/22 Latest Earnings Highlights

  • Tesla will not cut production β€œin any meaningful way, recession or not recession.” β€œWe’re very pedal to the metal come rain or shine” said Elon Musk.
  • β€œI see a potential path of Tesla to be worth more than Apple and Saudi Aramco combined”
  • πŸ“Š Quarterly Revenue increased to 21.45B, ⬆️ Up 55.9% YoY (from 13.76B)
  • πŸ“Š Operating Expenses increased to 1.69B, ⬆️ Up 2.3% YoY (from 1.66B)
  • πŸ“Š Operating Margin was 17.2%
  • πŸ”— Shareholder Deck

Bearish Arguments

  1. Growth: The revenue estimate was missed, and the annual 50% growth expectation is expected to be missed as well. Tesla had difficulty securing vehicle transportation capacity at a reasonable cost during peak logistics weeks.
  2. Profitability: Automotive gross margin was not growing (27.9% vs 30.5% a year ago)
  3. Valuation: The 60+ PE ratio is too high.
  4. Challenges: Elon will continue spending a lot of money and energy on Twitter, which could be a huge distraction.
  5. Challenges: Solving full self-driving, or real-world general artificial intelligence is extremely hard. Nobody has solved it before.
  6. Risks: The recession in China and Europe could impact Tesla’s demand.

Bullish Arguments

  1. Growth: Over a multi-year horizon, Tesla is expected to achieve a 50% average annual growth in vehicle deliveries.
  2. Profitability: Tesla is becoming a profit machine. The latest quarterly revenue grew 55.9% YoY, while the operating expense only grew 2.3 YoY. These numbers are incredible and better than Tech/Auto companies like Apple, Google, Microsoft, and Ford.
  3. Management: Elon Musk said Tesla could pursue a $5 billion to $10 billion share buyback in 2023.
  4. Moat: Best vertical integration of car manufacturing from hardware to software.
  5. Moat: Strong in-house technology including AI and chips. Also, Tesla could easily borrow technology from SpaceX.
  6. Moat: Massive supercharging network that no one else has.
  7. Opportunities: Many new products are in the pipeline to grow its topline, including Tesla energy, semi-truck, full self-driving software and robotaxi, Optimus robot, etc.

Conclusion

In the short term, Tesla is still encountering headwinds, especially under current economic conditions. However, I don’t see Tesla having any serious long-term problems. Long Term: Bullish πŸš€

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