Hey guys, it's sasha, tesla stock has grown by about a hundred dollars in the last week from a low of about 594 dollars on thursday last week to about 690 dollars. I'm recording this video that's right in the last week. That is a huge gain. 16.

In a week is big, especially as we haven't really had any major news come out and elon's not been tweeting. Anything weird, so is it now too late to go and invest in tesla? Are the shares too expensive? Well, the short answer for me is no, and let me explain exactly why that is the case and share a few important truths about investing in growth stocks like tesla. First off: let's talk about tesla's valuation, because a lot of people out there will point out the obvious. Tesla is trading at a huge pe ratio of about 700..

That is an insane figure to traditional investors, who don't really understand how to properly value a growth stock, and the reason i'm saying this is, i see so much advice out there. That is really really bad. People who just tell you that everybody's wrong everyone's an idiot, because that kind of traditional investor will tell you that the way to value a company is to look at their earnings or free cash flow or ebitda or whatever metric that they prefer and multiply by 15.. That's it that's the sum of their entire research.

That's the sum of their forecasting, that's the sum of everything they want to know any company that is trading much higher than that is horribly overvalued and overhyped, because you know 15 times whatever. That number is is the only magic solution, because you know everybody out there, who isn't that person obviously doesn't understand how to invest. Except here is the problem using the same way of thinking a year ago. Tesla would have no value whatsoever, it would be worthless because it was actually losing money.

So this sort of traditional investor would tell you to avoid the stock at all costs. And yet here we are, they are actually earning revenue and that revenue is transpiring into some kind of profits. So how come today that value has a company, whereas a year ago it was worth nothing. The thing is forecasting.

A company's performance is more complex than taking. Last year's numbers and multiplying them by something if i spend a year building a huge factory or maybe two factories in different parts of the world. If i go and spend a ton of money on buying the land, building, the factories, kitting them out, hiring and training. Thousands of people spending record amounts of money on r d so that i can manufacture better quality cars more quickly than anybody has ever done in history.

The only way that that entire amount of effort will reflect in my p l for that year is through a whole load of cost and absolutely zero upside. So if you go and try to value me doing that at that point in time with that sort of mentality, you're gon na account for absolutely nothing in terms of earnings, because today's spend is essentially only buying earnings for tomorrow and people who don't look at investments Of growth companies in that way will miss out on thinking about those kind of things so with tesla. The share price is approaching 700, and the question is: is that a good price is that too high? Is it still good for investment, or should you not put any more money in it? Well, let me share my view and remember this is just my view. This is my personal opinion.

I am not a financial advisor. I can't provide financial advice to you and if you do need financial advice, please make sure you're going to seek the help of a suitably qualified professional now putting aside tesla's potential with their energy business, their insurance business, self-driving and everything else, and just focusing on cars Alone, the factories that currently already exist in fremont over in shanghai and some of the smaller facilities in the netherlands and the places where they do the final assembly, just those factories alone, plus the two that are being built over in austin and over in berlin. That are nearing completion that are going to be producing cars, probably within the next six to nine months. Um.

Those factories alone have the capacity to produce over 2.2 million cars per year, still not the levels of ford or toyota, but just just let's, let's listen out for what these numbers actually mean. Now i expect that tesla will probably be hitting close to that 2.2 million car number sometime in late 2023 and probably reach those numbers in 2024.. Now the demand for tesla card globally is exploding. If you look on their website right now, their fremont and shanghai factories are sold out for three months ahead.

If you order a car today, you're only going to be able to get it in september and in the past that used to be much much shorter. In terms of lead times, that is an incredible incredible achievement in the current environment, where many other car manufacturers are struggling to sell existing inventory, so without any new factories or any other businesses doing well, we may well be seeing a company that is running on a Run rate of about 120 billion in revenue sometime in the second half of 2023, that's in just two years and the gross margin on that using today's ratio. So without any improvements whatsoever will be about 32 billion dollars and if i then proportionally scale their r d and all the other costs and add nothing for all their other business lines, i assume they earn nothing from any of them. I end up getting about 16 billion dollars in income before tax and about 12 billion as free cash flow in my model.

So if i then go and reduce the multiplier from the 700 that it is trading at today by a factor of 10 going completely nuts to just 70. remember, this is just a two year period and i'm then using my 70 multiplier. Looking at a one trillion dollar company, which is already a 50 plus upside on today's share price heck, even if i use the valuation methodology that these traditional investors use myself and just take that 16 billion in income and multiply it by 15, the company has a 240 billion valuation at that point in two years time, assuming no other growth, no other businesses, no nothing, and that is up from 13 billion. If you were to do that exact calculation on 2020 data today, so that is almost a 20 times rise in that value.

In two years time, if they just do what they are currently doing and don't do anything else, that's a pretty interesting way to think about it right. So there's a valuable lesson in here. Valuing different kinds of companies requires different methodologies using a screwdriver to tighten a nut, isn't going to be very effective, so my personal valuation of tesla has a target price of 1800 on their car business alone and 2 800. If i include the other potential businesses, as i value them now remember, that is just my personal target price.

I am a random guy in youtube. So if you want to go, invest in tesla, do your own research and do not follow anybody. That tells you to go and invest in something make sure that you always know what your own target price is, what you're happy with, and what your goals and objectives are, because everybody is different. So here's how i see this latest rise in price.

Let's say you turn into a shop to buy your favorite snack, and you think that a good price for that snack is ten dollars and the snack is on sale for just two dollars: ten cents, you think hey. That is an amazing price and you go and buy that snack in you very, very happy. You got a huge discount. A week later you come back to the same shop and you head over to buy the same snack.

Its price has gone up. It is now 2.46, are you annoyed? Do you refuse to buy it? Are you frustrated? Are you really really angry? Do you decide that you don't want to buy it because it is now a little bit more expensive? No, it is still amazing value. Doesn't matter that it was even cheaper last week to me it doesn't really matter at all the way i see it is this if i have a target price and my target price for me, this last week was offering an opportunity to invest in shares of a Company, where i feel there is a theoretical potential of up to 375 over the next few years - and i know that sounds crazy - i'm a long-term, regular investor - i i to me this number is insane, but that is what i am currently looking at for me personally. If this week, i have a different offer - and i can invest in something that has a 306 percent potential instead to me, both of those offers are equally bonkers, and that is why i'm continuing to invest in tesla, because for me the upside is still so huge For somebody else who has a different way of valuing companies, my views may be completely alien and they might declare that i just don't get it, but that is the beauty of investing.

There is no one-size-fits-all approach and we all get to make our own choices based on our own methods. Now i've made a living, valuing companies and portfolios, including high growth and pre-revenue financial companies such as challenger banks. That's what it is a job for many years. I got to do this sort of work for private equity companies for investment firms and banks, but remember i am just one guy.

I might be wrong. I might be very very wrong. My decisions are for me, but you need to do your own research before you're. Investing and make sure that you are happy with the choices that you're making.

Don't listen to anybody. Thank you so much for watching. After all that, i really really appreciate it and, as always i'll see you guys later.