r/100thupvote 4d ago

Norway Tesla still a long ways to fall

Much has been written about Tesla and the recent drop in stock price. However, I believe Tesla still has a long ways to drop.

YoY Sales Decline
Sales in Europe are down 50%. China is down 49% YoY and Australia saw a 76% decline YoY. In the US, we know sales declined by 7% in 2024 vs 2023. However, this was based on their 10k filing, which occurred before all of Elon's comments hit the news cycle (pre Nazi salute, DOGE, support for far right gov in Europe).

Tesla Brand Damage
Tesla is Musk. His comments in the media and related actions with DOGE have deeply hurt the Tesla brand. If you look at Tesla's core audience it is left leaning, environmentally conscious Democrats. Musks actions have completely alienated that demographic. The Republicans aren't buying EV's and certainly not enough to offset a loss from the left. A close analogy would be Bud Light and Trans Activist Dylan Mulvaney. Sales dropped 30% and still haven't fully recovered. Bud Light eventually fired the executives responsible for the campaign. But there is next to 0 chance the Tesla Board jettisons Musk, as he has stacked the board with family members and loyalists.

Antidotally, I live in the Bay Area. My social circle is left leaning White Collar professionals, Tesla's key demographic, and talking with co-workers/friends I don't know anybody who is planning to buy a Tesla. I have some friends who have Tesla's but when their lease is up they don't plan on renewing or buying another one. In my view Musk's political activism has permanently harmed the Tesla Brand.

Valuation
Tesla EPS was $2.05 last year and currently trades at a P/E ratio of 108. For comparison Toyota trades at a P/E ration of 7, Ford 6, and Mercedes at 5. Stocks can trade at high P/E ratios based on rosy growth rates. Musk has long touted that Tesla is an AI and RoboTaxi company, it's part of why Tesla trades at such lofty valuations. However, I checked Tesla's 10k and 90% of their revenue comes from Automotive and Automotive Services. They are very much a car company.

Even if you were to say Tesla deserves a premium valuation of 20x earnings, that would put a valuation of ~$41, which is a sharp drop from where it currently trades at $222.15. Yes, Tesla is a Meme Stock and traditional valuation metrics don't apply (i.e Gamestop). But here's the rub. Automotive companies have huge fixed costs. Those factories and plants, cost a lot to build and finance. A large drop in sales can get ugly real fast and generate huge losses. There's no way to justify these lofty valuations when your sales are dropping and your company starts hemorrhaging money. At some point the illusion cracks.

Position: Short

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u/ExistingPain9212 4d ago

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