Musk responded to a analyst 's speech on the stock price of Tesla .
Tesla's stock price has worried analysts. On December 9, Tesla's closed at $179.05. Since he announced the acquisition of Twitter in April this year, its stock price has fallen by half. As the stock price has been falling, Musk briefly lost the position of Forbes as the richest man in the world a few days ago.
That night, Pierre Ferragu, an analyst at NewStreet Research, tweeted to analyze the reasons for the decline in Tesla's stock price.
Before reading Pierre Ferragu's tweet, I would like to say that Pierre Ferragu not only has long-term tracking and in-depth understanding of Tesla, but he is also a senior "special blower".
In August this year, Pierre Ferragu participated in an analyst event held at Tesla's Berlin factory, and visited the factory and communicated with Tesla's management team. He praised the operating efficiency of the Tesla factory and also gave the company's target share price. In his opinion, Tesla may become a $10 trillion company in 2030, provided that Tesla can achieve its annual production target of 20 million vehicles.
Back to the tweet on December 9, Pierre Ferragu's ten analysis mainly focuses on two aspects: the impact of Twitter and the changes on the demand side.
Pierre Ferragu's tweet received a response from Musk himself, saying: When there is macroeconomic risk, it is generally wise to avoid using margin loans for any company, because stock may move in a way that is decoupled from the company's long-term potential.
Musk not only reminds investors that the stock market is risky, but should be cautious when investing. On the other hand, it can also be believed that Musk recognized Pierre's judgment on the company's basic situation.
(Statement: This article does not constitute any investment advice)
The key is to the demand side
The following are ten tweets from Pierre Ferragu. We have translated and added relevant background.
1. It must be combined with market . Two-thirds of this is the return of value to long-term growth enterprises (correction).
That’s right, Tesla’s stock price performance is consistent with the US technology market trend this year. However, this also reflects the fact that Tesla is no longer a model student in growth stocks. Compared with this, the stock price of Apple fell by 19% this year.
As Pierre Ferragu said, Tesla's ten-year expectation is the next-generation automobile leader, with annual production and sales reaching 20 million vehicles. Now it seems that the market is not so sure about this future. There is still uncertainty in Tesla's position in the world's automobile industry.
2. One of the concerns related to Twitter: Musk is selling more Tesla stocks. The burn rate of Twitter consumes about $2-3 billion in a year, but it should be optimized soon. Twitter should also raise another $3 billion. But for Tesla's market value and stock trading volume, this amount of funds is not worth mentioning.
3. The second concern related to Twitter: Brand. The current news and public opinion are causing damage to Tesla's brand, but it does not affect the favorability of the Internet. It may be only temporary (just like uber in 2017, no matter how much everyone scolds you, it will be used), and it is unlikely that it will affect loyal fans. They are the real buyers of Tesla.
4. The third concern related to Twitter: Musk was distracted by Twitter. Can this person who operates and inspires Tesla, SpaceX, Boring Company, Neuralink and Open AI (now left) be distracted by Twitter? Tesla is running smoothly, and although Elon is still at the helm, it is already very loose. This risk does not exist.
In summary, Pierre Ferragu believes that the acquisition of Twitter affects more market confidence, and does not have much impact on Tesla's fundamentals .However, considering that Musk wants to build a super app, Twitter may consume more than 20 to 30 billion yuan in a year.
Another huge fan of Musk and Wall Street star fund manager Cathie Wood revealed last month that Musk is considering a super app like WeChat Pay. In Wood's view, Musk started his business with payment, and later sold the company to cross-border car manufacturing. Therefore, he cooperated with Twitter co-founder Jack Dorsey to build Twitter into a super application.
5. One of the concerns related to the decline in market demand. Tesla's production of increased by 50% year-on-year. Some inventory accumulation or marginal production adjustments (20% of Shanghai's Model Y-cars in December were 2-3% of quarterly production) are expected and should not be understood as a negative signal of market demand.
6. The second concern related to the decline in market demand. The U.S. market may be in a bad mood in the near future, as buyers are waiting for subsidies in 2023. Tesla's approach is to launch a short-term discount, which may bring Tesla's gross profit down one point this quarter.
7. Third concern about the decline in market demand. Tesla is gradually reducing prices to promote demand and absorb the growth of production capacity. Relying on the U.S. subsidy policy and the two localized Gigafactories it is building in Europe to reduce costs, Tesla has the ability to reduce prices without affecting gross profit margins.
8. Musk wants to leave Tesla. Tesla is now very perfect and should move towards SpaceX (that is, the boss doesn't care much, but he is running well). Musk's very low-key CEO, Zhu Xiaotong, , is managing global business, but the technology and product manager still reports to Musk. Not long ago, Jerome Guillen's responsibilities were similar.
9. The economy is downward. Compared with the current growth of about 50%, next year's delivery growth may drop by 10-15 percentage points, while also reducing gross profit margin by several percentage points (compared to the current level of about 30%. But at the same time, it will crush existing manufacturers and may even bring them close to bankruptcy. The economic downturn is just Tesla's competition accelerator.
10. Summary: This is not an investment advice, it is just his own sharing.
Tesla's weakness
The weakness of growth stocks lies in growth, and Tesla's sales growth has not been so reassuring recently.
Recently, Tesla's market news has shifted from a supply shortage that has lasted for many years to a price war. Even, according to previous Reuters , Tesla's Shanghai factory may cut production capacity by 20% in December. Although Tesla subsequently denied it, the news still caused the stock price to fall by 6.37%.
In the middle of this year, according to Troy Teslike's analysis report, as of the end of July, Tesla's order backlog was 504,000 units, which has been ranked in 2023. By the end of September, the backlog of orders had dropped sharply to 317,000 vehicles.
Although Tesla's sales in the Chinese market still achieved double-digit growth in November, it also faces increasingly fierce competition, and the production capacity of Tesla's super factory is accelerating.
On the other hand, the overall supply and demand relationship of electric vehicles seems to be changing. In the past two years, the penetration rate of for electric vehicles has been soaring, greatly exceeding previous expectations. However, since October this year, the penetration rate has not increased.
According to data from the China Passenger Car Association, the penetration rate of electric vehicles in the Chinese market was 5.8% in 2020, 14.8% in 2021, and exceeded 30% in one fell swoop by 2022. However, although it was still as high as 30.2% in October this year, decreased by about 1.67% month-on-month compared with .
Some analysis pointed out that this round of electric vehicle penetration has increased significantly, and the demand for online car-hailing, bus rental and other operational categories accounted for a high proportion, but the growth space for this market is limited. On the other hand, the efforts that electric vehicle manufacturers can make have reached a peak. Since the beginning of this year, many brands have been under pressure from rising raw materials and have to announce price increases.
Overall, the decline in market demand will be the biggest pressure on Tesla's stock price in the future.
Bearish analysts' opinions
Wall Street analysts are not all Musk's fans. Bernstein analyst Toni Sacconaghi is one of the few remaining analysts on Wall Street who bearish Tesla.
According to the report of WSJ, Sacconaghi's report released on December 7 mentioned that due to the increasingly fierce competition for electric vehicles, Tesla's product line is "narrow" and high pricing. In addition, the weakening of global economy , demand seems to be increasingly becoming a problem facing Tesla. This should be one of the reasons for Pierre Ferragu’s ten tweets, and analysts’ attitudes towards Tesla are becoming increasingly differentiated.
Moreover, compared with the current average target price of Tesla stocks of $289, Sacconaghi's target price is only $150, which means his rating is Sell.
Sacconaghi estimates that the price reduction measures will reduce the global average selling price of Tesla cars by about 2.6%, equivalent to a drop of US$1,400 per car. He believes the net impact may be lower, but Wall Street's expectations of Tesla's fourth-quarter profit margin "could be at risk."
He also said, "More importantly, we believe that Tesla may need to take additional price cuts in the Chinese market in 2023 to stimulate demand." And it will require permanent price cuts in the United States to meet the tax refund conditions stipulated by the Inflation Reduction Act.
Sacconaghi's worries are not groundless. People familiar with the matter revealed to Phoenix Technology that Tesla will shorten the shift time of its Shanghai factory as soon as next Monday and postpone the induction of some new employees. This is considered to be the demand for Tesla in the Chinese market and has not caught up with Tesla's expectations of its Shanghai factory.
Tesla Shanghai factory
Specifically, Tesla Shanghai factory now works two shifts a day, working 11.5 hours per shift. It will still maintain two shifts in the future, but the working time for each shift will be reduced to 9.5 hours.
According to sales data, Tesla's sales of electric vehicles in China exceeded 100,000 in November, still setting a record high for its Shanghai factory. More than 60,000 of Tesla's sales in November were sold in China, accounting for more than one-tenth of the market share of in China's electric car , and the rest were exported. But even so, Tesla still has the spare capacity to cut off, which means that the situation does not develop completely as they expected.
For more cautious analysts, how Tesla can grasp the relationship between profit margins and sales will become a new investment focus.
