Valuewalk: $TSLA is the next $NFLX

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%**

Top models

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
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
XPENG	         P7	         13
DS	         3 CROSSBACK	 12
XPENG	         G3	         12
VDL	         CITEA SLFA-180	 10
MERCEDES-BENZ	 EQV	         10
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
FUSO	         CANTER	         1
BMW	         IX M60	         1
MAXUS	         MAXUS E-DEL9	 1
RENAULT	         MEGANE	         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?

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Cohen just lowered its “Market Perform” price target on $TSLA to $700 per share.

Last trade in pre-market was $735.02, down -5.26%.