Updated thoughts on Tesla
2Q24 earnings review plus an assessment on the stock's prospects going forward.
Disclaimer: The information contained in this article is not and should not be construed as investment advice. This is my investing journey and I simply share what I do and why I do that for educational and entertainment purposes.
If you’ve read this newsletter for a while, you may recall that I used to be a huge Tesla bull. I covered the stock in great detail with tons of of articles over several years, some of which ultimately converged in the 2030 bull case below:
The essence of my investment case went like this:
Tesla is uniquely positioned to ride energy storage and AI, two of the most important megatrends of our time. They have huge moats and operate powerful flywheels in both themes and they are in the very early innings of monetizing their expertise. Over the coming years, their business model will be transformed from a unit sales model to a fleet model. This transformation has happened before to both Big Tech and to legacy auto OEMs, both of which are relevant peer groups for Tesla. It’s therefore the natural next step in the company’s maturing process and it will come with a huge revenue and earnings acceleration.
Over the course of 2023, this investment case was compromised, at least for me personally. I finally pulled the plug after 3Q23 earnings as growth expectations faltered due to a lack of demand and a disappointing product strategy and execution. I was particularly disappointed how casually Elon had walked back the 50% CAGR goal which I considered essential for the company’s DNA. If interested, my last article was this one:
From that point on, I was not a bull anymore. But I was also not fully a bear. After all, upside potential still existed if some of their moonshot projects paid off. It also felt wrong to pivot 180° in my coverage. I have had an emotional journey with this stock and I owe it a lot. Its spectacular run in 2020 and 2021 built the foundation of the life I am living today. Without it, I would almost certainly not have the time today to write my weekly emails to you. That’s why I decided it’s best to simply stop covering Tesla.
I appreciate however that many subscribers were and are reading my work specifically because of my prior Tesla coverage and quite a few people have unsubscribed due to this content change. I understand such frustration. However, I have to follow my curiosity with this publication to keep its quality consistent and to keep enjoying it. These are excerpts from my investment process. That’s what gives FA the authenticity that I want it to have. Yes, I’m trying to make some money by selling subs, but this is first and foremost an art project for me than it is a business model.
I am going to make an exception to that decision today because an update to Tesla remains the number one requested article from readers. After writing so much about it, I feel like I owe this update to you. And 2Q24 earnings are a suitable opportunity to do so.
I am putting this article behind the paywall. Not because I believe it lends itself as a fabulous tool to generate alpha (I am not trading Tesla either way), but because I am a bit tired of the controversy surrounding this stock. Most people have formed their opinion and won’t accept any alternative views, whether they are good or bad. I have sparsely tweeted about Tesla over the past year. Responses have always caused me headaches and followers have been lost along the way. I really only want to have those people reading this article who genuinely value my work.