Tesla, like all the major indices, like bitcoin, and like so many individual stocks, is on the brink of collapse right now:
It is sitting on major multi year support (the horizontal line), and a drop below would mean a free fall down to around 140-160. We’re already talking about a stock that’s down more than 50% from its bubble peak.
I personally think Tesla is headed for sub-100 a share, probably even sub 75 a share. I think Tesla is the most overrated and overvalued stock on the market today, and the bull case is little more than mass delusion.
To have a greater market cap than every other major automaker COMBINED in the world is insanity. They will never be able to deliver anywhere near enough cars to justify that market cap. And electric vehicles (or should I say coal powered vehicles) are one of the biggest scams of all time. And don’t even get me started on the lithium batteries.
Reality will catch up to Tesla sooner or later. You’re already seeing Elon sneakily try to cash out by purchasing Twitter. He knows his company’s share price is vastly over inflated, so he’s stealthily liquidating.
But once Tesla really goes into free fall, it’s going to hurt a lot of people. There’s been no single stock out there that created more new overnight millionaires over the past few years than Tesla. Not to mention that Tesla was the crown jewel of the Cathy wood ARKK hype train.
It’s a cult stock in every sense of the word. It’s more than just a stock to these people. They have an emotional attachment to it. Maybe it changed their lives with how much money they made off it. Maybe they really do believe the company is going to change the world. Maybe they’re just big Elon musk fanbois and girls.
But many of them will never sell. Owning Tesla stock has become their personality now, just like people who own Tesla cars. It’s not just a car that gets them from point A to point B, it’s who they are. It’s their identity. They’re cutting edge, they’re Ending Oil, they’re Saving the Planet, they’re ahead of the curve–They’re Just Plain Better Than You because they drive a Tesla. That South Park episode about hybrid cars and all the “smug” they generate applies to Tesla owners.
The bottom line is, Tesla is the bubble within the bubble. I think it’s the single biggest stock bubble in modern history. When all is said and done, it will have been the biggest money loser in history—in terms of just the raw amount of money that will be vaporized from peak to trough.
This is what I’m talking about:
Tesla investors have lost a collective $306 billion over the past 30 days. That is a staggering sum of money in such a short period of time.
See what I mean? Tesla got inflated in value so much that there’s no way it doesn’t become the biggest collective loss of money in history.
I’m getting Enron vibes from Tesla. I don’t know if there will be as much crime and malfeasance at the heart of it, but it will definitely be a bigger collective loss of money. In fact it already is by a significant margin:
Enron at its peak was worth $60 billion in market cap. Tesla at its peak was $1.2 trillion. And since it’s currently sitting at about $630 billion, it’s already about a 10x bigger loss than Enron.
Inflation adjusted, Enron’s $60 billion market cap in 2001 would be about $100 billion today, perhaps as much as $120 billion. So even in real terms, Tesla is still a much bigger financial disaster than Enron. Just in terms of how much money its investors have lost already.
And I think it’ll get a lot worse.
Once these massive stock bubble pop, and the economy goes into a downturn largely due to rising interest rates, it’s like Warren Buffett says: the tide gets pulled out and you can see everyone who’s swimming naked.
So much chicanery, fraud, nonsense and bullshit gets exposed during an economic and stock market collapse. It’s only once the free money spigot turns off that you can see who is for real and which entities were only viable at low interest rates.
Tesla was in many ways a product of the regulatory and monetary regime of the past 10 years. You had the government pushing the green movement and subsidizing EV purchases. You had rock bottom interest rates and easy money. You had a massive bubble where anything associated with tech was bid sky high on the back of optimism that the company was going to “change the world.”
At the end of the day, it’s all about profits and Tesla is a car maker. The car business is not very high margin.
But the biggest thing here with Tesla is that the hype over the company grew to ridiculous levels. It was and still remains a cult stock and company.
As the party comes to an end and Elon musk clearly has his focus turned to cashing in while the getting is still good, the true believers (the stockholders) are going to be left holding the bag. And it will be one of the biggest bagholds ever.
Tesla could not have gotten this big without buy in and support from institutional Wall Street. How many hedge funds are going to blow up when Tesla really goes into free fall? It’s not just Cathie wood. Tesla is now part of the S&P 500. It will drag the market down when it collapses.
This article discusses just how far Tesla would have to fall to reach a fair valuation:
“Say Tesla were trading for 25X free cash flow. That’s a reasonable multiple for a fast-growing company. Then say it doubles free cash flow to $6 billion. At 25 times $6 billion, Tesla would have a $150 billion market cap. That would represent a wild 78% decline from here.
Now imagine Telsa were trading in line with Facebook’s valuation. It would have to fall over 90% to get there. Crazy.
Every bubble has its indicator stocks…
During the dot-com bubble, it was tech conglomerate Cisco Systems (CSCO). The company soared 1,045% over 4 years to reach a high of $80.06 in 2000.
Cisco was and is a great company. It generated revenue in 2000 and it generates revenue and profits today. But its dot-com era valuation made no sense. The stock crashed 84% when the bubble burst. And it still hasn’t returned to its 2000 high.
I see something similar playing out with Tesla (TSLA). That’s why I watch the stock closely to gauge how much froth is left in tech. And there’s still quite a lot.”
I fully expect Tesla stock to drop by 80-90% by the time the dust settles.
But because so many investors—both individuals and institutions—piled on to the bandwagon and are so heavily invested in the company, its collapse will take down everything.
So many proverbial wagons are hitched to Tesla. The Tesla collapse cannot just be an isolated incident. There will be contagion just given the massive level of exposure that so many important institutions have to the stock.
Think of all the hedge funds that have TSLA as their largest holding. It’s going to bring down everything.
So now we get in to last night’s Tesla earnings call.
The stocks is currently down by about 5.8% in the morning trading. Tesla missed revenues by about $500 million, but beat on EPS–of course on a non-GAAP basis.
This is a supposed “growth” company that is missing on revenues. There is no other way to categorize Tesla other than “growth” company, given the astronomical market cap it boasts.
But once people really started digging in to the numbers, it became clear that things aren’t adding up:
Insanity.
And now Tesla is being sued by a dumpster company for not paying:
More inconsistencies:
The numbers just don’t add up:
This whole thing is a house of cards.
I might have to revise my earlier prediction of Tesla going to $75 a share. It might go a heck of a lot lower than that once things really get exposed.
Here is the stock chart right now, and you can see the narrowing of the price action taking place. That typically means a big move is coming, and I don’t think it will be to the upside:
I do not know enough about Tesla stock to comment on the matter; however, I do work in an area largely populated by the headquarters of large petrochemical companies. Additionally, I live in an area that experiences its share of tropical storms of all sorts. Therefore, it surprises me to see the numbers of Tesla vehicles in this area. Obviously there is both a disconnect for those owners at the points of:
1. Their driving a vehicle that is one-step-further-down the energy chain (as all the local power generators primarily use methane to drive their generators and some local Tesla charging stations are powered by diesel generators)
2. They are either oblivious to the frequent floods in this area, unaware of the effect of flooding on an electric car, or very well insured and willing to wait
In the past 2+ years I have made gains with the extreme disconnect between the Tesla/Elon lovers and the Tesla/Elon haters. The volatility has been tremendous, and all one has to do is buy calls or puts when one of these groups gains traction.
Without the haters, like this author or Gordon Johnson above, my profit opportunities would be nil. So, thank you.
PS: I think we are at one of those moments now.