I'm seriously considering breaking my rule on not investing in individual stocks to short Tesla.
It's fallen enough that the fear of shorting is gone. My rough math says that even a 10% drop in sales will roughly cut their profits in half this year. And 2024 profits were half of 2023.
I don't think sales are quite as "doom" as some of the headlines suggest. But the stock has a LONG way to fall if it's not valued like a growth company. My guesses for 2025:
1. Tesla's energy business will continue to grow substantially. It's about 10% of revenue, and this will increase.
2. Sales in the US will decline modestly on the politics factor. Maybe 10-20%.
3. Sales in Canada and the EU will drop between 30-50% for the full year. Q1 will be particularly bad.
4. Sales in China will be flat-ish, with maybe slight growth. Less than the 9% growth they saw last year.
I'm intrigued! The brand damage being done is astronomical. Earnings growth has reversed and shows early indications of getting worse. And yet this negative-growth stock still has a PE of 148.
The bull case revolves around FSD, and Musk has positioned himself to ensure the US government only approves his "if you trust it" FSD solution. But at what price will this monopoly be established? A third of the U.S. population has sworn off Tesla products forever, and the company's international reputation will only be hurt worse as his administration's tariffs lead to recessions in Europe, Asia, and Latin America. The -45% drop in European sales is particularly damming, since the EV market there is growing like crazy.
I made the case earlier that Musk joined the Trump administration to protect his investments in the Chinese market. He could, for example, influence the administration not to intervene in the coming invasion of Taiwan. Yet I wonder how successful he will be in this endeavor, and how long he can maintain a post under Trump. Perhaps our Manchurian candidate gets credit with the CCP for trying, but if heated rhetoric breaks out between Trump and Xi, then Musk could be on his way out, and his company's future in China could be questionable. In this scenario, Musk's foray into politics would have cost him half the markets in Europe and the U.S. while also failing to save China.
Yea, the bull(shit) case is entirely FSD, and that case falls apart upon even modest scrutiny.
Let's for a moment assume that Tesla has a path to actually building cars that can drive unsupervised on any road in any weather. If you can suspend your disbelieve without collapsing into uncontrollable laughter, we see:
1. In the US there are about 1.7M rideshare drivers. However, most of these work part time. Let's say there's a real market for maybe 250k full time robo-cars since Uber and Lyft will continue to exist as well. With Waymo further along than Tesla, let's assume they split the market 50/50. So Tesla might get 125k cyber-whatevers in the US market.
2. Let's assume an average trip is $25, and a car will do an average of 15 trips per day. That's $375 in revenue per car per day. Used 320 days per year (assuming maintenance, downtime, etc) gets to $144k in revenue per car per year. That works out to a revenue opportunity of $15B in the US.
$15B is a sizeable number, but remember Tesla already is a nearly $100B/yr revenue company.
Then take a realism factor and consider these things don't work in inclement weather, some people don't want to do business with Tesla, and they'll practically work only in geofenced areas.
FSD is something that might boost top-line revenue by 10-15% by the middle of next decade after burning billions in capital during the interim. On an annualized basis I could do better buying a CD.
