Tesla Stock is Crashing - Here's Everything You Need to Know

Summary

The video discusses Tesla's stock performance following its earnings report, revealing a 12% drop and a lack of market enthusiasm. Despite energy and services growth, automotive revenue fell 7% year-over-year, with total production and deliveries also declining, indicating potential demand issues. The video scrutinizes Tesla's financials, highlighting a strong balance sheet but questioning the company's valuation, given its high price-to-operating income ratio compared to competitors like Toyota. The host concludes that Tesla's stock is speculative, with significant future growth priced in, and advises caution for investors.

Takeaways

• 📉 Tesla's stock dropped 12% after reporting its earnings, indicating the market's disappointment with the results.
• 🔋 Despite a 7% decrease in automotive revenues, Tesla's energy generation and storage revenue grew by 100% year-over-year.
• 📊 Operating income for Tesla declined by 33% due to a 39% increase in operating expenses, affecting profitability.
• 💰 Tesla's operating cash flow and free cash flow saw positive growth of 18% and 34% year-over-year, respectively.
• 🚗 There is a suggestion of a demand issue for Tesla vehicles, as average selling prices have been lowered, potentially impacting revenue growth.
• 📉 Tesla's total vehicle production and deliveries have decreased year-over-year, which could signal a loss of market share.
• 💼 Investments in AI projects have increased operating expenses without a corresponding boost in revenue or profitability.
• 🚀 Tesla's future products like the humanoid robot 'Optimus' are driving stock prices, but they are not yet contributing to the company's revenue.
• 🆚 Tesla's main competitor, BYD, is experiencing growth in both production and sales, suggesting a potential loss of market share for Tesla.
• 💼 Tesla's balance sheet is strong with ample cash reserves and a solid financial position, despite the challenges in other areas.
• 📈 The market may be valuing Tesla based on future potential rather than current performance, which could be risky for investors.

Q & A

Why did Tesla's stock go down by 12% after the earnings report?

Tesla's stock went down by 12% because the market seemed unimpressed with Tesla's earnings results, which showed a decline in automotive revenues and overall growth stagnation despite an increase in energy generation and storage revenue.

How has Tesla's stock performance been over the past three years?

Tesla's stock has been relatively flat for the past three years, indicating a lack of significant growth or change in the company's market value during that period.

What is Mumu, and how does it help investors stay informed about company earnings?

Mumu is a brokerage app trusted by over 22 million users worldwide. It helps investors stay informed about company earnings through its Earnings Hub, which provides an overview of business reports, conference call highlights, and audio replays. Mumu also integrates Morning Star research and has an earnings calendar feature for tracking earnings dates.

What was the main reason for Tesla's operating income decline?

The main reason for Tesla's operating income decline was a 39% year-over-year increase in operating expenses, largely driven by investments in AI projects like full self-driving and the development of new technologies such as the Optimus robot and a supercomputer.

How did Tesla's vehicle deliveries and production compare year-over-year?

Tesla's vehicle deliveries were down 5% year-over-year, and total production was down 14%, indicating that the automotive business is facing challenges and possibly a decline in demand.

What does the comparison between Tesla and BYD's vehicle sales and production suggest about the market?

The comparison suggests that BYD, Tesla's main competitor, is experiencing growth in both vehicle sales and production, while Tesla is seeing a decline. This could indicate that Tesla is losing market share to competitors like BYD, especially in the Chinese market.

What is the significance of the regulatory credits revenue for Tesla's financials?

Regulatory credits revenue, which amounted to $890 million, is significant because it represents a high-margin, profitable revenue stream for Tesla. However, its high contribution to operating income raises concerns about the company's reliance on these credits and the sustainability of this revenue source.

How has Tesla's gross margin been trending, and what could this indicate about the company's market position?

Tesla's gross margin has been consistently declining, dropping from a peak of 30% in Q1 2022 to 14.6%. This could indicate that Tesla is facing a lack of demand, leading to lower average selling prices and compressed profit margins, while competitors like Toyota and BYD are increasing their margins.

What does the trailing 12 months analysis of Tesla's key metrics reveal about the company's growth?

The trailing 12 months analysis shows that Tesla's vehicle deliveries have been declining for the past three quarters, and both operating cash flow and net income have been on a downward trend for two years. This suggests that the company's growth is stalling, and it may not be a typical growth company as its metrics are moving in the opposite direction of growth.

How does Tesla's balance sheet compare to its total liabilities, and what does this indicate about the company's financial health?

Tesla's balance sheet shows $3.7 billion in cash and cash equivalents and $53 billion in total current assets, compared to $27.8 billion in current liabilities. This indicates that Tesla is in a solid financial position, with enough cash to cover all current debts and still have a significant amount left over, making it a financially sound business.

What is the implication of Tesla's high price-to-operating income ratio compared to Toyota?

Tesla's high price-to-operating income ratio compared to Toyota suggests that the market is valuing Tesla at a significant premium, possibly pricing in future growth and product success that has not yet materialized. This implies that Tesla is considered more speculative and risky by some investors, as its current valuation does not align with its current performance as an automotive company.

What does the discounted cash flow analysis indicate about the market's expectations for Tesla's future growth?

The discounted cash flow analysis indicates that the market is pricing in a 31% compounded annual growth rate for Tesla's operating cash flow over the next five years. This level of optimism may be unrealistic given Tesla's current performance, suggesting that the stock could be overvalued and carry significant risk if the company fails to meet these high growth expectations.

Outlines

00:00

📉 Tesla's Stock Reaction to Earnings Report

The video discusses Tesla's stock performance following its earnings report, which showed a 12% drop in share price. Despite the company's energy business doubling year-over-year, the automotive segment is struggling with a 7% decline in automotive revenues. The overall revenue grew by only 2%, while operating income dropped by 33% due to a 39% increase in operating expenses. However, operating and free cash flows saw positive growth of 18% and 34% respectively. The video also mentions Mumu, a brokerage app that provides tools for investors to track earnings and company performance, and highlights the sponsorship of the video by Mumu.

05:01

🚗 Declining Demand and Market Share Concerns for Tesla

This paragraph delves into Tesla's automotive business challenges, with total production and deliveries down 14% and 5% year-over-year, respectively. The average selling price per vehicle is decreasing, which may indicate weak demand. The video contrasts Tesla's performance with its main competitor, BYD, which shows growth in both sales and production. The comparison suggests Tesla might be losing market share, especially in China, where BYD is performing strongly. The video also discusses Tesla's reliance on regulatory credits, which, while profitable, raise concerns about the sustainability of this revenue stream.

10:02

📊 Tesla's Profitability and Financial Health Assessment

The paragraph examines Tesla's profitability, noting a decline in gross margins and a comparison with competitors like Toyota and BYD, which show increasing margins. Tesla's financial health is also scrutinized, with the company having a strong balance sheet and significant cash reserves, allowing it to cover all current liabilities. Despite the financial stability, the video points out that Tesla's vehicle deliveries, operating cash flow, and net income have been on a downward trend for the past two years, casting doubt on its growth narrative.

15:04

💰 Market Valuation and Speculative Pricing of Tesla's Stock

The discussion shifts to Tesla's market valuation, comparing its price-to-operating income ratio with Toyota's, highlighting the market's high expectations for Tesla. The video suggests that Tesla's current valuation incorporates significant future growth and product success, which may not be justified given the company's recent performance. The presenter uses a discounted cash flow analysis to argue that the market is pricing in an unrealistic growth rate for Tesla's operating cash flow, making the stock speculative and risky.

20:05

🚫 Conclusion on Tesla's Stock and Investment Risk

In the concluding paragraph, the video summarizes the concerns about Tesla's stock, emphasizing its high valuation and the speculative nature of investing in the company based on future growth. The presenter states that Tesla's current financials and market performance do not justify the stock's price, and they would not consider buying the stock at its current levels. The video ends with a reminder to subscribe for more earnings analysis and a note on the potential for negative feedback due to the critical view of Tesla.

Keywords

💡Earnings Report

An earnings report is a document that publicly traded companies release periodically, detailing their financial performance over a specific time period. In the video, the earnings report is central to the discussion as it reveals Tesla's financial performance, which has led to a 12% drop in stock price, indicating the market's reaction to the reported figures.

💡Stock Price

Stock price refers to the cost at which shares in a company are bought and sold. The video discusses Tesla's stock price in the context of its earnings report, noting a 12% decrease, which suggests investor dissatisfaction with the company's financial results.

💡Operating Income

Operating income is the profit a company generates from its regular business activities, excluding any income from non-operational activities. The video highlights a 33% year-over-year decline in Tesla's operating income, which is a key indicator of the company's financial health and a concern for investors.

💡Cash Flow

Cash flow is the net amount of cash moving in and out of a business. The video points out that despite flat revenue and reduced operating income, Tesla's operating and free cash flow have grown, indicating the company's ability to generate cash, which is a positive sign for investors.

💡Automotive Revenues

Automotive revenues pertain to the income generated from the sale of vehicles. The script mentions a 7% year-over-year decrease in Tesla's automotive revenues, which is a significant part of the company's overall revenue and suggests a potential issue with demand or production.

💡Energy Generation and Storage

Energy generation and storage is a business segment focused on producing and storing energy, often renewable. The video notes a 100% year-over-year growth in this sector for Tesla, indicating a strong performance and potential growth area for the company.

💡AI Projects

AI projects refer to initiatives involving artificial intelligence technologies. The script discusses Tesla's investment in AI projects such as full self-driving and the development of the Optimus robot, which have increased operating expenses without immediate revenue contribution, affecting profitability.

💡Gross Margin

Gross margin is the profit margin of a company after deducting the cost of goods sold from the net sales. The video indicates a decline in Tesla's automotive gross margin, which is a concern as it reflects the company's ability to maintain profitability as it lowers vehicle prices.

💡Regulatory Credits

Regulatory credits are a form of financial incentive that companies like Tesla earn by meeting or exceeding certain environmental standards. The script mentions $890 million in revenue from regulatory credits, which some investors view as a bearish sign because it represents a significant portion of operating income and is not a sustainable source of revenue.

💡Market Share

Market share is the portion of the total market for a particular product or service that a company controls. The video suggests that Tesla may be losing market share to competitors like BYD, especially in China, based on comparative sales and production figures.

💡Balance Sheet

A balance sheet is a financial statement that displays a company's assets, liabilities, and shareholders' equity at a specific point in time. The video notes Tesla's strong balance sheet with substantial cash reserves and a positive current asset to liability ratio, indicating financial stability.

💡Price-to-Operating Income Ratio

The price-to-operating income ratio is a valuation metric that compares a company's stock price to its operating income. The video discusses this ratio in the context of Tesla's high valuation compared to Toyota, suggesting that Tesla's stock is priced for significant future growth that may not be justified by current operations.

Highlights

Tesla's stock dropped 12% after reporting earnings, indicating market dissatisfaction with the results.

Tesla's stock has been flat for three years, prompting many to seek opinions on its current state.

Sponsor Mumu is a brokerage app with features like an earnings hub and AI summaries of earnings reports.

Tesla's total Automotive revenues declined by 7% YoY, while energy generation and storage revenue grew by 100% YoY.

Operating income for Tesla declined by 33% YoY due to a 39% increase in operating expenses.

Operating and free cash flow for Tesla grew by 18% and 34% YoY, respectively, despite revenue stagnation.

Tesla's cash position increased by 33% YoY, sitting on $3.7 billion in cash.

Reduced vehicle average selling prices suggest potential demand issues for Tesla's vehicles.

Tesla's vehicle deliveries declined YoY, indicating a possible decrease in market demand.

Increased operating expenses were largely due to investments in AI projects like full self-driving.

Total production and deliveries for Tesla's automotive business are facing headwinds, with declines in key metrics.

Tesla's main competitor, BYD, shows growth in sales and production, suggesting market share loss for Tesla.

Tesla's reliance on regulatory credits as a significant portion of revenue raises concerns about its sustainability.

Tesla's automotive gross margin has been on a downward trend, now at 14.6% compared to peaks in 2022.

Comparing to competitors like Toyota and BYD, Tesla's gross margin is declining while others are increasing.

Tesla's vehicle deliveries and financial metrics like operating cash flow have been on a decline for several quarters.

Tesla's balance sheet is strong with more cash than current liabilities, indicating a financially sound business.

Tesla's free cash flow remains robust, adding to its overall financial health.

Despite challenges, Tesla's valuation seems detached from its current status as an automotive company.

Tesla's stock is trading at a high price-to-operating income ratio, reflecting market optimism about its future.

The market may be pricing in Tesla's future products and growth, which could be risky if those products fail to meet expectations.

Tesla's need to significantly increase operating cash flow to meet market expectations highlights the stock's speculative nature.

The video concludes with the opinion that Tesla's stock is currently very risky and overvalued based on its automotive business.

Transcripts

Tesla is one of the most followed stocks

in the market and yesterday it reported

its earnings after the market closed and

today Tesla's stock is down 12% at the

time of recording this video so it seems

like the market wasn't too impressed

with Tesla's earnings results Tesla's

stock has also been flat for basically 3

years now and I have been asked by

dozens of people to share my opinions on

Tesla's stock today so I went through

the earnings and the investor

presentation and found all of the key

things I think investors should know and

be aware of and in today video I want to

share all of my findings and my opinions

on Tesla's stock with you before we get

into the video though I want to let you

all know that this video is sponsored by

Mumu Mumu is a brokerage app that is

trusted by over 22 million users around

the world the app is also great for

staying on top of company's earnings as

they have an earnings Hub that gives you

an overview of the business's report

conference call highlights and the

conference call Audio replay Mumu even

has their own AI that summarizes the key

points from the earnings report that

investors need to aware of Morning Star

research has also been integrated into

the mumu app This research covers the

business's estimated fair value its moat

uncertainty score Capital allocation and

what the bulls and bears are currently

saying about the stock additionally Mumu

has an earnings calendar that allows you

to add the earnings date of any stock

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this is an incredibly useful tool for

staying on top of when your stocks

report their earnings so if you're

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to click the link in my description to

learn more and thank you again to Mumu

for sponsoring today's video all right

so as always I took some screenshots

from Tesla's earnings report and its

investor presentation and I want to show

you the highlights that I found so right

away we can see that the total

Automotive revenues were down 7%

year-over-year however the energy

generation and storage Revenue grew 100%

year-over-year so the energy business

over at Tesla literally doubled

year-over-year services and other

revenue is also up 21% and in total the

company did grow its Revenue by 2%

year-over-year so the company is still

growing its Revenue because its energy

and services businesses are growing very

strong but the automotive business is

definitely struggling right now and

overall this led to only 2%

year-over-year Revenue growth for Tesla

now if we also take a look the operating

income declined by 33% year-over-year

and this is because operating expenses

grew 39% year-over-year so Tesla's

operating margin and operating income

definitely dropped year-over-year but

what is interesting is Tesla's operating

cash flow grew 18% year-over-year and

its free cash flow grew 34%

year-over-year and then lastly down here

we can see that Tesla's cash position

also grew by 33% year-over-year and is

now sitting on $3.7 billion in cash so

this is a pretty interesting income

statement because revenue is basically

not growing operating income is down but

cash flow and cash is up year-over-year

so we're going to have to take a deeper

look into the financial statements here

then Tesla gives us a financial summary

right here and we can see that Revenue

declined partly because of reduced

vehicle average selling prices so Tesla

has been continuing to decrease average

selling price per vehicle and you could

argue that this is basically Tesla

having a demand issue because you don't

typically see businesses lower their

prices on their products if demand is

strong typically businesses lower the

prices of the products when demand is

weak to continue generating sales so

that could be an indication that Tesla's

demand for its Vehicles right now is not

very high we can also see that there was

a decline in vehicle deliveries so Tesla

also delivered less Vehicles

year-over-year now in terms of

profitability they say that the increase

in operating expenses was largely driven

by AI projects so Tesla's operating

income and its operating income margin

did decline year-over-year mainly due to

increased investments in all of its AI

projects like full self-driving and I

believe even Optimus and the

supercomputer that Tesla is building

however these AI Investments seem like

they are not currently boosting the

company's overall revenue and

profitability so we're going to have to

see if that does end up working out for

the company Long Term and I know that a

lot of investors do invest in Tesla's

business for its future products like I

believe that when Optimus it's uh

Tesla's humanoid robot was announced the

stock ran massively and that's basically

the stock pricing in future products

today whenever they announce a new

product which uh in my opinion adds a

lot of risk to the stock and kind of

suggest that the stock could be pricing

in a lot of future growth today already

and um again that's just increases the

risk all right now moving on to the next

screenshot we can see that total

production was down 14% year-over-year

so Tesla isn't even producing as many

vehicles as it was last year total

deliveries are also down 5% so the

automotive business over at Tesla really

does seem like it is facing headwinds

right now the average selling price per

vehicle is going down total production

is going down revenue is going down and

deliveries are also going down I don't

see how this isn't really a demand

problem like if Tesla had strong demand

these numbers would be completely

opposite so this is a red flag for me

especially when we consider that Tesla's

business today is majorly an automotive

company over 80% of the revenues come

from the automotive business so Tesla in

my opinion today if I were going to

invest in the company I would want to

Value it as an automotive business

because I don't like to pay for too much

future growth or the hope of future

products being successful when I am

investing in a business I want to invest

in what the company actually is today

then benefit from all of that future

growth so yeah this is not very good to

see however we can see that storage

deployed was up 15 8% year-over-year

Tesla locations are also up 20%

year-over-year supercharger stations are

up 23% and supercharger connectors are

up 24% so the supercharger business is

growing supercharger network is growing

Tesla locations also grew by 20%

year-over-year Which is also interesting

to me because they have more locations

around the world but they sold less

Vehicles so that actually is kind of a

red flag for me but the storage business

is also growing incredibly well now

another thing that I like to do whenever

I'm taking a look at Tesla's stock is to

check out how byd is performing and byd

is Tesla's main competitor in my opinion

and they are the number one electric

vehicle producer and automaker over in

China and right here we can see that byd

sold 145,000 vehicles in June of 2024

which was an increase of 17.73%

year-over-year and when we compare the

17.7% increase to sales year-over-year

for byid versus Tesla's Automotive

business declining it does kind of

suggest to me that Tesla could be losing

market share to some of its competitors

especially over in China and especially

to byd we can also see that byd's

production volume in the month of June

was 141,000 cars which is up

15.7% year-over-year so byd's actual

production output is continuing to grow

quite strong year-over-year as well

whereas Tesla's production actually

declined year-over-year so at least

right now it seems like byd is actually

a performing Tesla and this business is

still growing its overall sales and

production while Tesla's is declining

and the only result there the only

logical explanation I can come to there

is that byd is stealing some of Tesla's

market share or if you want to reverse

that you could say that Tesla is losing

market share to byd at least right now

all right now moving on to the next

screenshot right here this one is the

income statement and it does show us

that Tesla had $890 million in revenue

from Automotive regulatory credits now I

saw a lot of people on Twitter saying

that this was a very bearish point

because this was a very high quarter for

regulatory credits revenue and this is

basically 100% gross margin or

profitable revenue for Tesla like if you

remove this it directly impacts the

gross margins then we can see that gross

profits were $4.6 billion income from

operations was 1.6 billion and net

income was 1.5 billion and what I'm

seeing people say on Twitter at least is

that these $890 million in regulatory

credits Revenue was more than half of

the company's operating income so if

Tesla did not have this $890 million in

regulatory credits then operating income

would have been in

what would that be the $700 million

range and would have been massively

lower so this is a bearish point that

people are bringing up on Twitter and I

do think that it is worth noting that

you know this did without these

regulatory credits Tesla's Automotive

revenues would have been even lower and

the companies overall Revenue would have

been lower as well so really this

company doesn't really seem like it's

growing that much as a whole like the

whole package of this business is not

really growing that much year-over-year

I also found this image right here on

Twitter which shows Tesla's Automotive

gross margin excluding those regulatory

credits and we can see that it did peak

in the first quarter of 2022 at 30% and

it has been consistently coming down

almost every single quarter all the way

down to

14.6% now and again this is because

Tesla is continuing to lower its average

selling price per vehicle and that

obviously impacts the gross margin and

the overall profitability margins

directly and um it doesn't really seem

like this has found a floor yet and it

seems like the overall trend for Tesla

Automotive gross margin is still going

down and obviously this is not what I as

an investor want to see I don't like to

see a company's profitability going in

the wrong direction and continuing to

decline then I also wanted to take a

look at some of Tesla's competitors

which are Toyota and byd once again and

here we can see that Toyota does have a

gross margin in the trailing 12 months

of

20.8% and byd has a gross margin of

19.3% now in this new quarter Tesla does

have a gross margin of about 15% which

means that Toyota and byd now have

higher gross margins than Tesla one

other thing to note about this chart

right here is that byd's and Toyota's

gross margins are actually increasing

whereas Tesla's gross margin is

continuing to decline so Tesla is the

clear outlier here and is seeing its

profit margins continuing to shrink this

could be another indicator that the

business is losing market share or at

least seeing a lack of demand and is now

having to continue lowering its prices

and compressing its margins while at the

same time its competitors are actually

increasing their margins and their

profitability now the next screenshot

right here is from Tesla's investor

presentation which shows us the trailing

12 months of some of its key metrics and

here we can see that on a trailing 12

months basis Tesla's vehicle deliveries

have been declining for the past three

quarters now we can also see that

operating cash flow peaked in the third

quarter of 2022 and it has been

downtrending over the past two years now

and this is the same story with the

company's free cash flows then we can

also see that net income and adjusted

iata did top in 2022 as well and have

been coming down over the past 2 years

as well so basically Tesla's vehicle

deliveries have been declining for 3/4s

now operating cash flow has been

declining for 2 years and net income and

IA have also been declining for 2 years

this does not look like a growth company

to me when I look at these metrics right

here I see a business where the sales

are actually seeming like they are

stalling out revenues are hardly growing

and profitability is tanking and this is

not a good place for a business to be at

least in my own opinion this is not at

all what I like to see in my own

Investments this is quite literally

everything moving in the opposite

direction of what a growth business

actually is which is also interesting

because as we're going to see Tesla is

selling for very very very high price

ratios it this the company is pricing in

a significant amount of growth and the

business to put it plainly right now

isn't really growing all right so now

let's move on to Tesla's balance sheet

and right here we can say that the

company does have cash and cash

equivalents of $3.7 billion and total

current assets of 53 billion now if we

take look at the current liabilities

they are sitting at $27.8 billion which

means that Tesla has more cash than

current liabilities which essentially

means that the company has enough cash

right now to wipe out all of its debts

that are due within the next year

ultimately this means that Tesla is in a

very solid financial position and

additionally the company only has $46

billion worth of total liabilities and

again they have 53 billion of total

current assets so the company could use

all of its current assets and sell all

these assets over the next year and wipe

out all of its debt and still have

roughly eight billion doll left over and

be a totally debt-free company so

Tesla's balance sheet is actually very

strong and this is a very financially

Sound business and I always love to see

when a business has a strong balance

sheet so Tesla does get a green flag

right there for me now moving on to the

cash flow statement we can see that

operating cash flow is 3.6 billion and

capital expenditures were about $2.3

billion in the quarter so Tesla did

produce about $1.3 billion of free cash

flow on this quarter so the company is

actually still producing billions of

dollars in free cash flow which also

adds to the business's overall Financial

Health because remember they do have a

significant amount of cash on the

balance sheet they don't have a lot of

debt and the company is still producing

profit so they are in a good they are a

good and strong financial position right

now so now I want to head back over to

stock unlock really quickly and I want

to compare Tesla versus Toyota because

in my opinion Toyota is the best

automaker in the world right now and we

can see that Toyota's Revenue has also

been continuing to grow and actually

accelerate since about 2022 and the

trend is still clearly going up now if

we take a look at Tesla's Revenue which

is this green line right here again we

can see that the revenue is topping out

and actually declining now so Toyota's

revenue is continuing to grow strongly

at the same time as Tesla's revenue is

topping out and starting to decline and

again this could suggest that Toyota is

taking market share directly from Tesla

and Tesla is now losing market share in

the automotive industry what's also

interesting is if we take a look at

these two companies operating margins we

can see that Toyota's operating margin

is now 12% and Tesla's is sitting at

7.8% so Toyota does have higher profit

margins than Tesla as well as we saw

earlier with the gross margin but Toyota

also has a significantly higher

operating margin than Tesla as well now

if we take a look at the price to

operating income of these two businesses

today and we zoom in right here we can

see that Tesla is selling for and six

times operating income today all right

that is insane Toyota is trading for a

price to operating income of 7.8 which

is literally a fraction of the price

that Tesla is selling for today and what

we've also learned is that Toyota's

revenue is growing more rapidly and this

business has higher profit margins than

Tesla today yet Toyota is selling for a

fraction of Tesla's price which I think

is kind of unjustified I think it's

completely irrational by the market and

it also suggests to me that Tesla is not

being valued as an automotive company if

Tesla was properly being valued as an

automotive company then its price ratios

would be significantly lower and

therefore my only conclusion is that

Tesla is being valued today as something

more than an automotive company and this

is kind of what I was alluding to

earlier on in the video when I said that

Tesla introduces these new products like

full self-driving and Optimus and then

the stock sees a lot of momentum and a

lot of hype even though the business

hasn't even delivered an an Optimus

robot yet at least from what I know and

it's not really generating any revenue

or profits from that product yet so when

the stock reacts positively to these new

products that are like a decade away

then it tells me that the stock is

already pricing in the success of those

future products and again Tesla is not

being valued as an automotive company

today even though I believe that Tesla

is an automotive company today and the

reason that I want to point this out is

because whenever I talk about Tesla and

I say that it's an automotive company

today the backlash that I get is that

well hey you can't look at this business

as an automotive company and I would I

would kind of agree with that but then

you also have to take a look at the

price of the business that you're buying

and Tesla again is not priced like an

automotive company so the market is not

seeing this business as an automotive

company which also means that the market

is disagreeing with me and that's fine

but when you pay for future product

success like this and these products are

maybe a decade away what happens if the

products fail or they don't produce

profit margins or they're not nearly as

profitable as someone thinks it

basically just suggest that the stock

could fall massively if you're already

pricing in the success of a future

product today and that's why I don't

like to buy the future of businesses I

want the business to be discounted when

I buy it today and I don't want it to be

selling for a significant premium and

Tesla is most definitely selling for a

significant premium over what the

business actually is today so I think

that there is a lot of future growth

priced into this business today and that

is increasing its speculation I think

that Tesla is actually a very

speculative stock and um it's increasing

its overall risk and I think that

investors should know that this is a

very very risky company and I can

explain further if we go and head over

to stock unlocks discounted cash flow

calculator so one thing I like to do on

my channel is is figure out what the

market is currently pricing in for a

business so we're going to take a look

at Tesla's operating cash flow right

here and we're going to project it out

over the next 5 years now if we scroll

down this is what the operating cash

flow chart looks like and basically

Tesla would have to produce $44.5

billion in operating Cash Flow by the

year of 2029 from the 11.5 billion that

the company is generating in the

trailing 12 months now so it would

basically need to 4X its operating cash

flow over the next 5 years just to

produce a market average return right

now this tells me that Tesla is pricing

in a lot of optimism a 31% compounded

annual growth rate to operating cash

flow would be a significant Trend change

and shift for the business from what it

is currently doing because currently its

revenues are not really growing its

profit margins are declining its vehicle

deliveries are declining and its

operating cash flows are actually

declining as well so basically Tesla

would need to flip that Trend

immediately and then start growing

operating cash flows at 31% annually and

somehow manage to 4X operating cash flow

over the next 5 years just to produce a

market average return today that is way

too much optimism for me to even be even

be enticed to think about owning this

stock today because think about this

let's say Tesla only produces a

compounded annual growth rate of 20% to

its operating cash flow over the next 5

years well then the compounded annual

growth rate of the stock would basically

be 1% annually or essentially flat over

the next 5 years despite the business

growing its operating cash flows at 20%

annually which is still a very strong

growth rate so again I think that this

stock is pricing in all a lot of future

growth and trading for extremely high

price ratios today and that is adding

overall risk to the business because if

it does actually underperform or if

Tesla grows its cash flows at 10%

annually over the next 5 years then the

stock could still decline because of how

much future growth is priced into it

today so yeah those are my thoughts on

Tesla it makes absolute sense to me why

the stock is down 12% today I'm actually

surprised it's not down more and um

there's no way that I would be buying

this stock today I think that it is

still selling for a ridic ridiculously

high price and I'm not going to be

touching it it's not even close to where

I would want to own it and um that's

just what it is that's me being real

with you guys those are my honest

thoughts and uh I think it's a very

risky stock and I think that all

investors should be aware of that and

know how speculative the stock is before

they buy it so looking from the outside

that is my objective opinion on this

stock so that's going to wrap up the

video for today everyone if you did

enjoy this video then please remember to

leave a like on it I usually do get some

pretty negative comments whenever I talk

about Tesla this way but man that's just

what it is it's fine

um but yeah that's going to wrap up the

video for today everyone thank you so

much for watching I truly do appreciate

it and if you want to see more earnings

analysis videos like this over the

coming weeks then please make sure to

subscribe to my channel as well because

that would be pretty awesome but with

that being said that's going to wrap up

the video for today and I hope to see

you all again in my next video