Tesla Down Over 70%
2022 has been the worst year Tesla has ever had for its stock. There are certain key indicators to the value of Tesla and that is forward P/E, which is current market cap / next 12 months projected earnings.
If you go to Yahoo finance for Tesla, you can see the current market cap is about 388 billion. There is a forward P/E of 24.21 - that is what the P/E will be in 12 months at the current stock price.
The market is expecting Tesla to earn $16 billion in 2023 or a $4 billion per quarter average. There's a lot of ways to value a company - price to earnings and price earnings growth.
The market is severely discounting Tesla and at no other time in its history has Tesla been valued as little as it has. The market thinks Tesla will not sell that many more Model 3, Model Y, Model S, or Model X. The market doesn't think Tesla will produce many Cybertruck vehicles in 2023.
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Cheaper Than Coke or Pepsi
Apple is growing revenue about 8% per year and it has a forward P/E at about 23. Coco-Cola has about a 25 forward P/E with about 12% per year revenue growth. Amazon is at a forward P/E of 42.02 with a 10% estimated revenue growth per year. Google is at 16.81 for forward P/E with a 2.5% estimated revenue growth. Pepsi has a forward P/E at 24.88 with a 9% estimated revenue growth.
If you use this forward P/E growth then all these companies are priced higher than Tesla with respect to revenue growth per year. Tesla, 2 to 3 years ago, had around a 100 to 700 P/E and forward P/E ratio. The expectation was that Tesla would warrant the earnings its going to make in the future.
Tesla is growing its earnings, but the stock price is coming down greatly. There is a perceived risk to Tesla and its growth for the future. There are concerns about its growth trajectory and if Tesla can keep up this growth for the future.
The market perceives reduced demand and profits for Tesla. Some of the articles for today highlight this. Tesla stock tumbling as China registrations falter and Giga Shanghai shutting down in January, 2022.
The market doesn't feel like Tesla will keep up its growth through 2023 due to concerns in the economy and competition. Other companies provide dividends like Apple, Cocoa-Cola, and Pepsi. The FED is also raising rates which creates an alternate investment and if you can put millions of dollars in 4% to 5% with practically 0% risk, then people will put their money there instead.
Tesla simply needs to beat expectations. The market expects $16 billion for Tesla in 2023. If you compaer this for Q4, 2022 projected earnings, the market thinks Tesla will deliver 425,000 to 430,000 deliveries which is about $1.25 EPS and $4 billion net income. The market expects Q4, 2022 to simply be repeated each quarter in 2023. That's a total of 1.7 million deliveries.
Will Tesla beat these expectations? Tesla will have its Q4, 2022 earnings call in January and if they guide for 50% growth, that is positive. Will that do anything for Tesla?
Tesla could show a lot of growth in 2023, which would raise the value of its stock and the market should reward Tesla with a higher P/E than the 20 average of the S&P. This could be multiplied if earnings become mugh higher. Tesla will ventually have to go up in value.
For more information, see this video from Farzad Mesbahi:
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.