A very long read from the valuewalk website. This is actually valuewalk republishing a Q1 investor note from a firm short $TSLA shares, Stanphyl Capital:
Tesla Is Netflix
For years I’ve said “Tesla is Blackberry”—the maker of a first-generation version of a product that—once the market was proven—would be supplanted into niche obscurity by newer, better versions; now I can provide a much more recent analogy: Tesla is Netflix. For years Netflix had an absurd valuation based on its pioneering position in streaming media, but once it proved that such a market existed myriad competitors swarmed all over it, and in April the stock collapsed when we learned that not only is Netflix no longer in “hypergrowth” mode but for the first time since 2011 (when it transitioned from physical DVDs) it actually lost subscribers. I believe Musk knows that Tesla is “the next Netflix” (hence his recent “Twitter buying distraction”), with VW, Hyundai/Kia, Ford, GM, BMW, Mercedes, BYD & other Chinese competitors and, in a few years, Toyota & Honda, being the Disney, HBO Max, Amazon Prime, Peacock, Hulu, Paramount +, etc., of the electric car market, stealing Tesla’s share and eventually pounding its stock price down 95% or so from today’s, into the valuation of “just another car company.”
In fact, in April Tesla reported that Q1 deliveries were sequentially nearly flat (just 1398 additional cars, a gain of just 0.45%) vs. the previous quarter, and even that was only “achieved” by a sneaky redefinition by Tesla of what “a delivery” is. Yes, the company is chip-constrained, but its competitors (who, unlike Tesla, are unwilling to delete safety equipment or use untested chips to maintain production) are even more constrained, and in fact waiting times are longer for Tesla’s direct EV competitors than they are for a Tesla; for instance, Ford’s Mustang Mach-E is so in demand that it has even halted additional orders for the 2022 model year. (Current annual Mach-E production capacity is around 65,000 for the U.S. & Europe and tens of thousands more for China, but in 2023 U.S. & European capacity will expand to 200,000.) The worst thing that can possibly happen to “the Tesla story” will be when its German and Texas plants are fully operational and the subsequent excess capacity stares the world right in the face, thereby ending its myth of “unlimited demand” (especially at current, drastically-raised prices, where the cheapest Model 3 now starts at $47,000 and the cheapest Model Y begins at $63,000); in fact, look for margin-destroying price cuts by late this year or early 2023.
Meanwhile, the “record” profits that accompanied Q1’s nearly flat delivery number were obtained via myriad one-time items, including $679 million of emission credit sales that will disappear over the next year or two as every automaker ramps up its EV sales, a mysterious $502 million reduction in SG&A expense (of which only $140 million was due to reduced stock comp) despite opening new factories in Germany and Texas (what is Tesla capitalizing instead of expensing???) and a combination of FIFO accounting and multiple sticker price increases that allowed Tesla to expense rapidly rising raw materials costs at older, lower prices while selling cars built from those materials at new, considerably higher prices. Adjusting for these factors, Tesla had GAAP earnings for the quarter that were at least $1/share lower than the posted $2.86, and annualizing that realistic $1.86/share to $7.44 means that at April’s closing price Tesla (on a no-growth quarter) had a PE ratio of around 117 vs. an industry-wide figure of less than 10. (Also, Tesla’s Q1 free cash flow was only around $1.8 billion, a drop of almost $1 billion vs. the previous quarter, despite a massive increase in net accounts payable.)
And for those of you who think that Tesla is “really an energy company,” in Q1 “Tesla Energy” had revenue of just $616 million (down 10.5% sequentially) and cost of revenue of $688 million, meaning it had a negative gross margin. So if Tesla is “really an energy company,” it’s even more screwed than if it’s just a car company!
p.s. Now that MAY 2022 has ended, let’s see how Tesla is faring against competition in Norway, the country with the highest registration of EVs in Europe. Note that Ford does NOT have an EV factory in Europe, and it is now outselling Tesla in EVs in Norway. Also, if it were not for the Model Y, Tesla would be a rough spot with only 5 sales of the Model 3 and none for Model X or S.
**Top brands** **MAKE # SHARE** **BMW 1059 12.2%** **VOLKSWAGEN 1056 12.2%** **HYUNDAI 642 7.4%** **AUDI 580 6.7%** **VOLVO 543 6.3%** **POLESTAR 465 5.4%** **MG 418 4.8%** **MERCEDES-BENZ 370 4.3%** **KIA 369 4.3%** **FORD 309 3.6%** **BYD 293 3.4%** **OPEL 277 3.2%** **SKODA 269 3.1%** **PEUGEOT 231 2.7%** **TESLA 228 2.6% 👈** **NISSAN 188 2.2%** **MAXUS 175 2%** **CITROEN 161 1.9%** **MAZDA 148 1.7%** **TOYOTA 136 1.6%** **FAW 136 1.6%** **CUPRA 113 1.3%** **NIO 77 0.9%** **PORSCHE 77 0.9%** **FIAT 62 0.7%** **RENAULT 47 0.5%** **MINI 46 0.5%** **XPENG 34 0.4%** **YUTONG 33 0.4%** **LEXUS 24 0.3%** **JAGUAR 24 0.3%** **HONDA 21 0.2%** **DS 12 0.1%** **VDL 10 0.1%** **SCANIA 8 0.1%** **DFSK 7 0.1%** **SMART 2 0%** **FUSO 1 0%** **TOTAL 8651 100%**
MAKE MODEL # VOLKSWAGEN ID.4 880 POLESTAR 2 465 BMW IX 458 VOLVO XC40 394 HYUNDAI IONIQ 5 361 FORD MUSTANG MACH-E 309 BMW I4 302 SKODA ENYAQ 269 MG MARVEL R 255 BYD TANG 255 AUDI E-TRON 242 AUDI Q4 E-TRON 230 TESLA MODEL Y 223 👈 HYUNDAI KONA 209 BMW IX3 190 NISSAN LEAF 188 KIA EV6 185 MAZDA MX-30 148 VOLVO C40 146 FAW EHS9 136 CITROEN E-C4 135 KIA NIRO 125 TOYOTA PROACE 124 PEUGEOT E-2008 118 MAXUS MAXUS EUNIQ 6 113 CUPRA BORN 113 BMW I3 108 MERCEDES-BENZ EQA 97 MG ZS 91 VOLKSWAGEN ID.3 90 VOLKSWAGEN ID.5 82 OPEL MOKKA-E 79 PORSCHE TAYCAN 77 NIO ES8 77 OPEL CORSA-E 76 PEUGEOT E-208 73 HYUNDAI IONIQ 72 MG MG5 72 MERCEDES-BENZ EQC 71 MERCEDES-BENZ EQB 70 FIAT 500E 62 AUDI Q4 E-TRON Sport 60 KIA SOUL 59 OPEL COMBO-E 49 OPEL VIVARO-E 49 MINI COOPER 46 RENAULT ZOE 46 MERCEDES-BENZ EQS 38 MERCEDES-BENZ EVITO 38 BYD ETP3 38 AUDI E-TRON SPORT 34 MERCEDES-BENZ EQE 33 YUTONG ZK6121BEV 33 MAXUS E-DELIVER 32 MAXUS EUNIQ 29 PEUGEOT E-EXPERT 26 JAGUAR I-PACE 24 LEXUS UX 300E 24 HONDA E 21 OPEL COMBO-E CARGO 18 CITROEN JUMPY 15 AUDI E-TRON GT 14 MERCEDES-BENZ SPRINTER 13 XPENG P7 13 DS 3 CROSSBACK 12 XPENG G3 12 TOYOTA PROACE CITY EV 12 CITROEN E-BERLINGO 10 VDL CITEA SLFA-180 10 MERCEDES-BENZ EQV 10 PEUGEOT E-TRAVELLER 8 DFSK SERES 3 7 OPEL ZAFIRA-E 6 TESLA MODEL 3 5 👈 XPENG P5 5 SCANIA P230 4 XPENG G3I 4 SCANIA P 230 4 PEUGEOT E-RIFTER 4 VOLKSWAGEN UP! 3 VOLVO FE 2 SMART FORTWO 2 PEUGEOT E-PARTNER 2 FUSO CANTER 1 BMW IX M60 1 VOLKSWAGEN CRAFTER 1 MAXUS MAXUS E-DEL9 1 RENAULT MEGANE 1 VOLVO FM ELECTRIC 1 CITROEN E-SPACETOURER 1 TOTAL 8651
That’s the Norway look. To see the 14 countries of Europe where registrations are kept on this website, this link for MAY 2022 shows Tesla with but 2.5% market share in the EU, selling only 554 Teslas total in MAY 2022 inside these 14 countries:
What happens when you have three new factories, such as Tesla has in Austin, Berlin and Shanghai and the demand plateaus as the valuewalk/Stanphy Capital piece suggests?