Tesla stock analysts debate future equity values on rate hikes

[Hydrogen]

Image link:  https://i.ibb.co/zJ14qKK/tesla-tsla-future-price-projection.jpg

Analysts have been slow to slash their target prices on Tesla — despite a price drop that's destroyed more than half a trillion dollars in paper gains over the last year.

The big picture: The fact that analysts still think Tesla should be worth $290 a share — 70% above the current market price of $170 — reflects the difficulty the market is having in adjusting to the new reality of higher interest rates.

• (H/t to Bloomberg, which spotlighted the growing gap between analysts and the market on Tesla.)

Between the lines: As we've written (again and again and again) high-interest rates are kryptonite for share prices of tech-driven companies. This is especially true for companies that make relatively little money now but expect vast profits in the future when their products inevitably change the world.

• Tesla is the textbook example of just such a company.

Catch up quick: After the Fed cut interest rates to almost zero during the COVID crisis in March 2020, the stock exploded upward.

• It rose a seemingly absurd 1300% between late March 2020 and early November 2021, when the Fed signaled it would start raising rates to combat inflation.
• Since then, Tesla has collapsed by nearly 60%, vaporizing more than $700 billion in market value.

Yes, but: Tesla is not alone here. Other highly valued technology shares have gotten crushed by the change in interest rates, most notably Meta.

Tesla's tumble also reflects the fact that Elon Musk ended up buying and running Twitter on a whim, forcing him to sell billions of dollars worth of shares to help pay for the purchase.

• And Meta's share doldrums are partially driven by CEO and founder Mark Zuckerberg's pet virtual reality environment, which has cost the company billions (and the red ink will likely grow "significantly." )
• The two companies' year-to-date stock losses — 50% and 70%, respectively — are far worse than the Nasdaq composite's 30% drop this year.

The bottom line: Given the incredible run that Tesla had at times over the last couple of years, it's understandable why analysts are slow to recognize the new reality. But when they do, it could set off a new bout of selling.



https://www.axios.com/2022/11/23/tesla-stock-analysts-resist-harsh-market-reality

Some analysts claim demand for tesla EVs will decline, due to interest rates on car loans rising. It is possible they failed to take account teslas being higher priced vehicles purchased by higher income bracket earners who can afford higher interest rates. Tesla is known for having a considerable backlog of orders and a waiting list for vehicle pickups. Which raises a question for why the lowball price projection of future TSLA decline has gained such a large following.

Not that this is a new trend. Tesla short sellers were known for having lost $40 billion shorting tesla stock in 2020 alone:

Tesla short sellers lost $40 billion in 2020

Tesla has long been a favorite play for short investors, who controlled about 19% of the shares as 2020 began. For all those who believe the company is a paradigm-changing, clean energy leader of unlimited potential, other investors maintain it is an overhyped niche player soon to be overwhelmed by larger, more established automakers.

Many of the shorts were forced to admit defeat last year. About two-thirds of the short positions were unwound during 2020, which in itself was a factor that helped drive Tesla shares higher, as the short investors were forced to buy higher-priced shares to exit their positions.

https://www.cnn.com/2021/01/06/investing/tesla-shorts-losses-elon-musk-win/index.html

It appears short sellers have returned in 2022. To short tesla stock yet again. Will history repeat itself?

[davis196]

The Tesla EVs are expensive. The upcoming US(and global) recession will force many car buyers to change their minds a choose a cheaper new car(or a second hand car) instead of an expensive EV.
Tesla is profitable only because of the carbon credits they sell. Maybe their EV business is going to crash so badly, that the revenue coming from selling carbon credits won't be enough to cover the losses. Raw materials like Lithium are about to become more expensive, which means higher priced Li-Ion batteries and higher production costs.
2023 is going to be completely different than 2020. The bears are going to dominate the stock markets and the shorters are about to make profits.

[franky1]

a tesla is not "expensive" i can think of alot of luxery cars more expensive than a tesla

however a 500billion market cap. does not mean the company has 500billion of hard cold fiat stored in some reserve. its just a share valuation multiplier game

if a tesla costs $50k base model with a 10% profit mark up from parts cost to retail sale
thats $5k a car. meaning to put $500b into a reserve would mean that tesla would need to sell 100,000,000 cars

it is this sticking point that will hurt most

years ago tesla was the sole EV car manufacturer of any prominance. and so they "owned" the ev market. meaning if 120million US cars needed to convert to EV by 2030 the thought process was that telsa would take on the 100m cars and leave 20m for other brands. thus numbers fit the market cap

however now most brands are in the ev market, so tesla dominance is diluted. meaning chances of building 100m cars and selling them is less demanded and less chance of achieving.

and thats before all the economic drama about "loans" that will sway people away from buying tesla compared to a VW or smaller car.

..
i feel tesla needs to diversify, instead of building whole cars that need to meet some safety standard (impact of a wall or other vehicle) they can just manufacture the power trains(motors) and licence it out to other brands

..
that being said. on the whole scheme of things. teslas EV car business model is not to just be a car retailer. its actually to use the car retail market as a R&D experiment to develop EV's for the space colonist plan . where he has received many many grants and investment tfor space mining research which afforded him to bumb start the earth retail car market stuff.

its also why he is doing "boring" (dirt digging) and solar and such. 

[el kaka22]

I guess that the market consensus is aware of the interest rates, and aware of what's going on, and even aware of the twitter deal he is focusing on instead of tesla, but that doesn't mean that this will keep growing for a long time. We should realize that Tesla is a great company with a bright future, they already established a great deal with many car types and even now a semi on the testing road.

So that means we should not be really focusing too much towards what it is currently, but what it could be and when you do that 290 dollars is not impossible. I still think it is a bit overrated, but there is a logical argument on why it is overrated so I am fine with that.

[hugeblack]

I think that at one time, people were buying Tesla shares just because they were Tesla shares or because of Elon Musk without even checking the company's data, and therefore this created an increase in the price of something that encouraged others to invest blindly for fear of missing the opportunity.
Therefore, when things start to deteriorate, then investors will think about what they were thinking.
The story and everything in it is that it was a pioneer in the field and now there is a lot of competition.