The Magnificent Seven is now the Super Six.
Shares of Tesla are now down 32% from the December 27 high of $265, including a 13% post-earnings drop today. The fall to $180 is the lowest since May 2023.
Shares are wildly oversold with the daily RSI at 16.8 but the chart isn’t a pretty picture with no major support until $150.
Shares are now barely positive year-over-year.
A year ago at this time, analysts were forecast $7 in earnings for Tesla this year. Now it’s looking more like $3 as the revisions roll in after yesterday’s numbers rolled in. The company didn’t offer guidance about deliveries this year and ignored a question about a huge tax-reversal that accounted for virtually all of last quarter’s profits.
At these levels, Tesla still has an extremely high multiple and sentiment around company CEO Elon Musk isn’t exactly glowing, especially after he said he won’t work on AI and robotics at the company unless his shares are nearly doubled, something that would be hugely dilutive.
I don’t see much to like here but Tesla is a bit of a cult and those are tough markets to bet against. The company revolutionized transportation has still has a lead in self-driving. However when I see Morgan Stanley notes saying that robotaxis account for $76/share of its valuation of the company, I can’t help but getting skeptical.
Here’s an excerpt from a pre-earnings MS note:
Drivers of price target reduction to $345 from $380:
- We rolled our DCF to year-end FY24 which, all else equal, was nearly a $20/ share tailwind to the share price, from which we made more substantial
negative revisions to our fundamental assumptions. - Core auto business moves to $75/share from $86/share previously. Cut FY30 volume forecast to 7mm from 7.4mm previously. Exit year Auto EBITDA margin at 17.5%.
- Network Services (SaaS) value cut to $109/share from $115/share
previously. Reflects lower number of installed base of vehicles in the fleet (18.3mn MAUS by 2030 vs. 22.1mn previously) generating recurring revenues (FSD, charging, maintenance, licensing, etc). - Tesla Mobility (rideshare/robotaxi) valuation cut to $76/share from $82/ share. We now assume a fleet of ~220k vehicles by 2030 (vs. ~577k previously), whereas our 18.5% OP margin, ~$1.8/mile, and 3% terminal growth rate estimates remain unchanged. Lowered Mobility valuation is driven by our fleet size estimates being pushed out to the right (fleet size forecasted to begin at ~2k in FY25 vs. ~5k in FY24 previously) similar to Network Services, margin assumptions remain unchanged.
- Other changes: Reduced value of Tesla Energy to $39/share (vs. $48/share previously) on slower solar and ESS growth, Insurance cut to $6/share (vs. $8/share previously) on lower fleet/penetration, 3rd party EV powertrain valuation trimmed slightly to $39/share.