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Short traders and Tesla bears (NASDAQ: TSLA) don’t know how to stop. Research company GLJ Research, one of many equity study companies that says it has been promoting Tesla’s percentages for years as inventory soared like a rocket, recently made headlines calling TSLA’s percentage value “separate from reality.”
And by detached, it means detached.
GLJ Research expects Tesla’s inventory to increase from more than $2,000 to $87 in a year. That’s a 95% drop in Wall Street’s top popular inventory.
This is why.
First, let’s temporarily review the GLJ bear’s thesis on TSLA action.
The research company says Tesla’s expansion story is broken, indicating that revenue peaked in the fourth quarter of 2018 and since then the festival’s expansion has diluted demand and eroded market share. At the same time, GLJ Research does not believe that Tesla is a technology leader in the electric car industry and believes that the exaggeration of autonomous driving is exaggerated.
To that end, GLJ Research does not believe that Tesla’s expansion of profits is as physically powerful as many think.
In addition, the company issues that Tesla has twice Volkswagen’s market capitalization (OTCMKTS: VWAGY), but Volkswagen sold 11 million cars last year for Tesla’s 370,000 deliveries.
All in all, these bearish observations lead GLJ to slapping a $87 price target on TSLA stock.
The claim that Tesla’s expansion narrative, i.e. profit and market percentage, peaked at the end of 2018 is misleading, short-sighted and lacking context.
Automotive revenue peaked in the fourth quarter of 2018 with $6.3 billion and has fallen since 2019 and the first part of 2020. But it’s due to two things beyond Tesla’s control: 1) governments around the global cut in electric car subsidies in 2019 that diluted global call for electric vehicles, and 2) the Covid-19 pandemic killed the automatic call for the first part of 2020.
Therefore, declining Tesla’s profits in recent quarters is not a challenge for Tesla. In any case, Tesla plays smoothly and dramatically increases its share of the global market. On the other hand, what is that the electric vehicle market has been unstable.
This chop will be over soon.
Governments around the world have largely reaffirmed subsidies to electric vehicles by 2020, with structural promises to announce the continued adoption of electric vehicles in the coming years. The Covid-19 pandemic is fading in terms of having an effect on customer spending. Low rates deserve help bringing automotive calls to life everywhere. In addition, the category is growing, thanks to advanced technology, the expansion of the charging infrastructure and the reduction of battery costs.
Tesla is at the epicenter of all this, launching new cars, renovating old cars, expanding its geographic success and strengthening global production capacity.
GLJ Research doesn’t think Tesla is a generation leader in electric vehicles.
However, Tesla’s 3 electric cars, Model X, Model 3 and Model S, are number one, two, and 3 in the entire electric vehicle category in terms of range. In addition, those cars score much faster than electric vehicles.
Obviously, Tesla is doing anything with the battery generation that no one else is doing. Or they do it better than everyone else. In any case, the numbers speak for themselves here. Tesla has a transparent and convincing advantage in generating electric batteries.
This breakthrough will only grow in the coming years, as the Tesla brand attracts the most productive skill.
But engineers need to paint on Tesla.
Of course, the polls prove it. But it’s also a no-brainer. Imagine that you are a young graduate of engineering from MIT or Caltech. Need to paint on Tesla, a logo known for its innovation and next-generation technology? Or Ford (NYSE: F), a legacy company that hasn’t been known for anything cutting edge for a long time?
The selection is painfully obvious.
The most productive skill is the one that enables innovations and technological advances. So the more Tesla gets the more productive skill, the greater its technological leadership, and Tesla cars will be better for the festival in terms of reach, charging time, and overall performance.
Again, it’s for a lot of reasons. Probably the same reasons Tesla attracts talent. Elon Musk. A revolutionary innovation. Attractive long-term goals and ambitions.
But consumers, especially younger consumers, love the Tesla brand.
It’s more than just a car logo. At this point, it is an ambitious logo that represents innovation, disruption and global advancement.
Who doesn’t need to be those things?
This unparalleled logo symbol and loyalty, combined with incredible battery generation, will enable Tesla its initial leadership in what will one day be a massive global electric vehicle market, and in the end will be equated to the corporate promotion of millions of electric cars each year. on favourable terms. costs and margins.
Tesla has been a wasted company.
But the same is true for all capital-intensive corporations that have not yet reached their scale. Fortunately, Tesla is achieving a giant scale and over the past 4 quarters, Tesla has been profitable.
Of course, some of this profitability is derived, as indicated by GLJ Research, from regulatory allocations.
Therefore, Tesla has 10 to 15 numbers more successful than classic automakers and operates in a slimmer opex style, as the company does not promote it in an industry that generates a ton.
How does this constitute giant profit margins on a giant scale?
Actually, it’s.
Automotive and truck corporations generally spend about 7 to 8% of their opex revenue. On a giant scale, Tesla deserves to be similar. About 25% of gross margins, you’re talking about operating margins of 15% more.
The company also has a burgeoning autonomous vehicle business that is unique (Tesla drives its autonomous driving with cameras, not industry-standard lidar sensors) and has exciting features (Tesla has more knowledge than anyone in terms of and because knowledge is powered by Array autonomous driving algorithms, this more physically powerful knowledge set can be used to create greater autonomous driving technology).
So don’t rule out the autonomous business. This activity may one day be part of a very valuable stack of audiovisual software that will componently increase the average sales costs and profit margins of Tesla cars.
At the same time, Tesla owns one of the world’s largest solar companies, at a time when solar prices are falling and innovations in garage generation are making implementation more available.
In short, these two corporations can seamlessly charge significant firepower to Tesla’s long-term expansion narrative into its already physically powerful EV core expansion narrative.
So, what do you do with TSLA’s stock?
The rally went too far, very fast. The valuation is extensive. And it’s a long-term expansion company. So there’s no want to rush and continue this rally here and now.
Be patient. If you own a home, stay on course and expect a 10-20% drop to add. If you do not own it, stay away and expect a 10-20% drop to create a position.
But don’t do it waiting for a 95% dive.
Luke Lango is a market analyst for InvestorPlace. He has been a professional equity researcher for several years, in the past he served on various hedging budgets and recently managed his own investment fund in San Diego. Luke, a Graduate of Caltech, has been identified as one of the most productive inventory selectors in the world across various other analysts and platforms, and has earned a reputation for leveraging the expertise of his generation to identify expansion inventories that deliver exceptional returns. Luke is also the founder of Fantastic, a social discovery company subsidized through an Internet company founded in Los Angeles. At the time of writing, it did not occupy a position in any of the above values.
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