![]() ![]() The $7,500 discount equates to over 12% on the above Model 3. If sales are so good, why the 12% discount? The same cannot be said about the largest incumbent automakers. If that and other bets are successful, even if they fall far short of Cathie Wood-like projections, it will still mean a massive revenue boost. Tesla has other bets, such as those related to FSD.I understand some facets of this lead are debatable but overall, even the bears agree it's true. How many people do you know that are in way over their head on a fancy new car or truck, relative to their job security and income in a boom-and-bust economy? However, contrary to consensus, this is higher-risk debt. Yes, a large portion of the automakers' debt comes from the financing of vehicle purchases. Tesla is not drowning in debt and pension obligations.Granted, margins on new vehicle sales are minimal for dealers. Tesla has cut out the middleman the dealership.Meanwhile almost all other automakers have a deficit, so they need to buy credits from Tesla and others, in order to offset their ICE sales. Tesla, being an entirely EV company, receives regulatory credits for free.They are not going through the messy manufacturing transition from ICE. Tesla is an EV company from the ground up.You should not expect Tesla to trade at an earnings multiple comparable to the legacy automakers. If they couldn't deliver alpha during the days of 100% ICE, how are they going to do so during the secular transition to EV? YCharts doesn't allow me to generate this for 20 or 30 years, but trust me, that underperformance is just as ugly. If you disagree, just look at their multi-decade history. ![]() Instead of these debt-laden and pension-bloated ICE (internal combustion engine) makers, who now have to cannibalize those sales with their money-losing EVs (electric vehicles). That's how I classify the incumbent automakers, and frankly, I feel there are better risk/reward industries for that type of investment. Since selling my business, I live entirely off my investments, so yes I do hold lots of higher yield, low- to no-growth stocks. I started learning over 20 years ago that investing based solely on low P/E's also led to low returns. Of course, the rebuttals to what I just said will be things like BMW ( OTCPK:BMWYY) trades at a P/E of 4x, or that even best of breed Toyota ( TM) is 10x. After that we're in a - gasp! - teens multiple for what was previously the posterchild of Covid mania. With the price continuing to plummet, now we are at a forward multiple of around 22-23x, for the fiscal period ending December 2023. I detailed this in my December 15th piece titled: "With A Forward P/E Of 28, Is Tesla Now A Value Stock?" As the share price dives and earnings soar, it's finally becoming a company you can fundamentally value. ( NASDAQ: TSLA) is a stock I've had zero interest in throughout the Covid bubble. ![]()
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