Front brakes take the majority of the friction and are still the same big four-piston Brembo calipers.
One wonders if the reporters aren't getting bonus payments, for negative articles, that affect Musk. Lol
Scandal sells better than success.
Also the best buys, are when sentiment is lowest and there in't a better way to scare the masses than constant negative press.
Today’s price action did see a strong break of the downtrend resistance coming from late September. Elevated volume as well could indicate a possible breakout from here towards the 50-day EMA.
Went in again and got day gain of 6%
Keep in mind the price of the model Y has recently reduced by $13,000, so if it is a cost reduction exercise it is being passed along.
Tesla will reduce prices to keep ahead of the competition. They will eventually release their cheap ev when it best benefits Tesla. Meanwhile other manufacturers are scrambling.
Tesla's superior profitability, relative to its competitors, definitely gives them some extra room to cut prices in an attempt to drive demand. Signs are that this tactic is already working in China, so there could be optimism over a possible similar reaction in other parts of the world.
Pessimism steering investors, but Morningstar says Tesla is undervalued
US electric car maker Tesla (Nasdaq:TSLA), one of Australia’s most popular international stocks.
Investing app Pearler co-founder Nick Nicolaides said around 90 per cent of its investors would own Tesla through a diversified ETF but it is also its most popular stand-alone stock.
He said Pearler investors favour global ETFs (to the tune of 80 per cent+) and Tesla sits in the five of its top 10 holdings (across all ETFs).
“We also offer direct US stocks on the Pearler platform and the Telsa factor is real, even for our younger investors, who are opting for passive investing,” he said.
“It’s been the No.1 direct stock holding since we launched and generally by 25 per cent plus on our No.2 holding, which is Apple.”
But while Tesla may be popular, it is also highly polarising, with those who believe in its future growth potential and others who aren’t so sure.
Thrown into the equation is Tesla’s high profile billionaire CEO Elon Musk, who has been highly controversial for years but seemed to take it to another level in 2022, with a drawn out saga to buy Twitter.
Investors seemed concerned Musk had taken on too much with Twitter, now running the social media giant along with Tesla, SpaceX and other companies.
Furthermore he sold down large amounts of his Tesla holdings to fund the $44 million buy of Twitter, which by all reports is facing increasing financial woes.
To continue Musk’s not-so-good start to 2023, he has been facing a US court to testify in a class-action lawsuit filed by Tesla investors alleging he misled them with a tweet five years ago.
And as Stockhead’s Josh Chiat reported he’s “got tongues wagging for a comment that verges on the absurd” regarding copper and lithium, using his Twitter megaphone.
The Tesla share price itself has been on a wild ride and, after a strong run in 2020 and 2021, had what can only be described as a disappointing 2022 for investors.
Tesla’s shares started 2022 at around $US400 each, but ended the year at around $US120, equating to around a 70 per cent drop.
Shares in Tesla had reached a high of $US410 in November 2021.
But while the share price took a tumble last year, Tesla has tended to reward investors over the years since it first went public. Its IPO, on June 29, 2010, was priced at $17/share.
Economic headwinds including inflation haven’t helped the car maker.
Growth in new vehicle deliveries slowed to 40 per cent last year from 87 per cent the year before and below the 50 per cent annual rate Musk had set as the benchmark.
Tesla's progress across the years. Source: Morningstar
Market pessimistic on Tesla
So to get the rundown on Tesla we woke up early to speak with Morningstar US equity strategist Seth Goldstein.
He said with a high growth stock such as Tesla, the market had to try to extrapolate what the long term growth would be and whether that was closer to 50 per cent a year – management’s annual delivery growth goal – and would revenue grow accordingly.
“Or does Tesla shift into a lower growth mode that likely means 10 to 20 per cent growth a year?” he said.
Goldstein said when growth had been above the 50 per cent goal management had set, the price had soared but when it had shifted to a lower growth, the market had become overly bearish, assuming a much lower long-term growth rate.
“We thought the market was too optimistic (in) thinking 50 per cent a year was the correct long-term growth rate, but now we think the market has gone a little too pessimistic on the name,” he said.
“Just as we viewed it as massively overvalued a year to 18 months ago, now we see it as undervalued. Even despite what has been around a 40 per cent rally from the 52-week low we think the market is still a little too pessimistic on Tesla’s long-term growth rate.”
The sweet spot
Morningstar’s fair value estimate for Tesla is currently at $US220/share, which Goldstein said assumed a five-year revenue growth rate of around 28 per cent and 20 per cent over 10 years.
He said Morningstar’s model was largely driven by the assumption Telsa’s automotive business would grow from 1.3 million vehicle deliveries last year to more than five million by the end of the decade.
Separating the man from company
While Musk is much the face of Tesla, it was founded by Martin Eberhard and Marc Tarpenning in 2003.
Musk became its biggest shareholder in 2004 and has been CEO since 2008.
So what about Tesla away from its controversial CEO? How is it holding up?
“It’s still very connected to Elon Musk and I think much of the sell-off is due to Musk and his involvement with Twitter leaving the market concerned he may lose focus on Tesla and the company’s goals may not be reached as a result,” Goldstein said.
“There is also the risk that Musk may need to sell more shares to help Twitter secure permanent financing, as a lot of the debt he took out to close the Twitter deal is likely not a sustainable financing source in the long run.”
However, Goldstein said Tesla had shown it was a large conglomerate that could sell its vehicles.
“The company seems to be very well organised where all the division heads can certainly manage the business if Musk was to step away or transition to something like a managing director on the board,” he said.
“If that happens I think Tesla will be just fine as they are opening up new factories with lowering production costs, while increasing production,” he said.
Goldstein said Tesla was regrowing demand for its vehicles, its self-driving software was progressing, the insurance business continued to expand and more chargers were being built, while interest in electric vehicles and renewal energy was also growing.
“When you look at all the long-term goals Musk has set for Tesla, the company is still making progress,” he said.
“I don’t think he needs to be as involved day to day as perhaps he once did, say like in 2018 when the Model 3 was launching.”
Driving growth in 2023 and beyond
Goldstein said he was confident Tesla would continue to grow in 2023 and beyond, even under challenging economic conditions.
“In 2023, even on the backdrop of a global economic slowdown and potential recession, I still forecast Tesla to grow to over 1.6 million deliveries, which is would be a mid 20 per cent growth rate year-over-year,” he said.
“They will continue to make progress on full self driving, expand insurance to more states, roll out more energy regeneration and storage capacity, so I’m expecting Tesla to still have a solid 2023 and forecasting about 22 per cent revenue growth.”
He said Tesla management’s lack of financial guidance hadn’t helped with investor sentiment.
“Tesla stated they want to grow vehicle delivery by an average of 50 per cent a year over a multi-year period but unfortunately that’s all management said,” Goldstein said.
“And they keep repeating this but don’t say is it 50 per cent a year from 2020 or 2021, or does it reset every year even if they grow more than 50 per cent,” he said.
“They give no other financial guidance, so when management doesn’t want to give as much near-term guidance on how they view the business or how they’re forecasting it, then that leaves the market to try and interpret what management is guiding to.
“I think the market assumes 50 per cent every year and revenue and profits will grow in line with that. Then when it didn’t happen, the market re-shifted its growth expectations and without guidance there seemed to be a much larger reset in growth expectations than if management had provided more clarity.”
So does Goldstein think Tesla investors are likely to see a return to the $US400 share price any time soon?
“We still see upside to the current price but if anyone is expecting the $400 share range, which was the 52-week high, then that is a little optimistic and the market may not be making as much optimistic assumptions in the near term,” he said.
This content first appeared on stockhead.com.au
The author held shares in Tesla at the time of writing this article.
Given the announcement by the Governor, one would assume that there have been some significant incentives by that state to get tesla to build on the existing battery making gigafactory.
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