Hey everyone! Kevin here in this video. I'm going to break down exactly what happened to Tesla stock today and what it fundamentally means for the stock going forward. First, I'm going to start with some basics in terms of why might the stock have moved so volatility over the last 72 hours and what could it pretend for the future? So the first thing that I'd like to do is look at the technicals when we understand the technicals. I Think we can understand that Tesla actually was set up for a very high hurdle today.

It was set up against knocking on the door of the 200-day moving average which right now sits at about 2 15 and the next Fibonacci retracement line sitting at about 211.. that means we really didn't have a lot of upside before. We needed a lot of pressure to push through and break through to the next level, which we've already been rejected at on February 16th. And so for the last 61 days we have been trading sideways on Tesla and that is okay.

It shows that we've been able to hold on to support. Elon Musk is no longer selling, leading to this massive decline that we had last year. Now, of course, there were other fundamental factors. Yes, we did have to get into some price cutting for EVS, but in my opinion, much of this drop was driven by selling by Elon Musk and this isn't to blame.

Elon Musk It's a totally okay for him to do that. After all, he's the owner of the stock just like you are, and if you decide to pay per hand and sell, that is okay. But what's more important is that Elon sold about 24 billion dollars of Tesla stock to about 15 billion dollars that retail bought. That put a lot more selling pressure and created this downward Trend that is nowhere near what we're seeing here.

In fact, we are seeing stability here as Elon Musk is not selling. But not only are we seeing stability, but if we actually undo the information of the average candlesticks, we can see that we ran up about the six percent that we lost today. We ended up closing at about 207.79 on Friday The day before we were sitting at a close of 195.28 which is substantially similar to where we sit now at about 194 77. So it was really a give back and in my opinion, the number one reason we had a sell-off today is because a we're up against hard technicals B we're in no man's land See, nothing really has fundamentally changed for Tesla and D This is not a comfortable place for a Trader to sit.

So I think a lot of folks may have loaded in here hoping for a big big beat, closed their positions Monday morning and exited the stock as we didn't have the Catalyst to break the next retracement levels and so those losses were realized. and that's why I Think we're right back to Thursday The day before, we had the sort of catalyst run-up I think that's probably the biggest reason, but there are also other fears. There are fears that wait a minute is Tesla's growth slowing down and this is a very reasonable fear that I think is worth talking about. It's something we talked about as well in our course member live stream this morning.

But one of the things that I thought was very impressively important was that the company grew a quarter over quarter by about four percent. Now that is actually very typical that from Q4 to Q1, the company slows its growth down as usually there's a rush to capture an electric vehicle tax credit at the end of the year, and so usually Q1 is seasonably bad. However, when you do the math and you don't actually go into recognizing yes, hey, maybe this is normal. There is some fear that is created when you annualize a four percent quarter over quarter growth, you get a 16 growth rate for Tesla which Elon Musk's goal is growing somewhere between 35 to 50 percent.

That annualized growth rate from Q4 to Q1 is not fantastic. Now that might not be fair to do. and a better example might be looking year over year because hey, we want to get closer to 50. Well, year over year, we hit about 36 percent on growth.

Well, 36 percent is at the low end of production growth and or I should say delivery growth and we're not actually delivering substantially more in Q1 to maybe give people discomfort that oh yeah, we're definitely going for 50 this year. Instead, we look like we're definitely more on that 30s trajectory and any kind of adjustment on EPS growth rates is generally going to affect the valuation of a growth company. That makes sense. after all, if we look at the fundamental tools of the company and we go ahead and pull up a fundamental analysis spreadsheet like one that I have for the end of 2025..

we could see this very very simply remember my assumptions: 47k per vehicle 4 million Vehicles Nothing here has changed, but if we scroll here and we assume a PEG ratio of 1.67 which is a very reasonable PEG ratio for a Growth Company Apple's a little bit above that right now. End phase is a little bit below that right now, but if we assume a 1.67 PEG ratio and we multiply that by a 30 percent assumed growth rate on earnings per share, which is conservative because we could be at a 50 growth rate maybe. but let's go with 30. Well, that would give us a P E of 50.

which means in the future we should be sitting around a reasonable stock valuation of about 531 which represents a compounded annual return of about 38.5 percent. But if we drop this 15 or this 30 assumed growth rate to 15 we have did the P E ratio would drop to about 25 which would drop the stock talk value to about 265 which actually still would represent about a 10 annual gain uh, per year for the next three years. And if I drop that to where the stock is trading. for now, it puts us at about almost 11.

So even with a growth rate of just 15 on EPS Tesla does very well still for us compounded over the next three years. So even if you took this terrible Q1 growth rate this Q4 to Q1 growth rate and annualized it that is, you took that nominal four percent here and you annualized it. which you shouldn't do because most of the sales are going to occur in Q4 more sales occur in Coupe 3 and then Q1 is usually your sort of give back and pause period, right? And this is. there's also a reason why Tesla happens to enjoy taking off 14 days sometimes like they did this year for Giga Shanghai and Chinese New Year shutdown 14 days represents quite a bit of a quarter.

Orderly production cycle actually represents 15.5 percent. So if we actually multiply the production that we had here of production of around 441 000. assume about half of those are made in China. So 220.

Let's just say that would bring us another 33 000. Vehicles. Well, if we produced another 33 000, Vehicles, we would actually be sitting at Vehicles produced of about 474 instead of 471.. So that kind of lets us know where production is in terms of a rate of production growth.

Well, 474, rather, in production growth compares to Q4 2022 quite well. Let's look: Q4 2022. Uh, production. Tesla Let's go ahead and pull those delivery numbers for Q4 and what we'll find on the Tesla website, which is right here: We produced 439 700 Vehicles Well, wait a minute.

That means we basically didn't grow at all between Q4 and Q1, right? No, we actually did grow. If you assume that the factory wasn't supposed to be closed for those 14 days for Chinese New Year. So go 474 divided by 439 701. Let's actually add those digits in.

Over here. There we go. We're growing at about 7.8 percent per quarter in production growth. That means production is growing about 31.2 percent.

Okay, so if I lost you on any of that math, let me simplify that. and I'm going to simplify that by just drawing it out very, very simply for us. what I'm going to do is I'm going to say production is growing right now between Q4 to Q1 by 31 and deliveries grew between this period by 16 annualized. But we'll put an asterisk on that because that's Q1.

So instead we'll take the year over a year which is basically favorable to Tesla which is right here on this and we'll assume 36 percent year over year. So let's draw that in right over here. 36 percent and So what do you have for Tesla Well, you don't have anything near 50 growth and that could be the second reason why Tesla took a little bit of hit today. Production is growing at an annualized adjusted rate adjusted for the Shanghai shutdown of 31.

Deliveries are growing at an annualized rate or I should say not annualized. What's an annualized rate of 16 but an annual rate year-over-year rate of 36? Neither of those are close to 50. So I Think the reality is markets may be adjusting the fact or to the fact that they need to assume a growth rate for Tesla of 30 to 35 percent rather than 50. and the fact that we only took a six percent hit in the stock market today we basically just gave Friday back to me is a signal that markets really weren't actually pricing in a 50 growth rate.

anyway. In fact, given that we basically just gave up the speculating speculative trading of Friday it to me almost feels like this is potentially just perfectly in line with What markets were expecting. Anyway, yeah, some analysts expectations were higher somewhere lower. but if you're doing your PEG ratio analysis or you're assuming EPS growth, run it at a 30 percent and anything more than that in my opinion would be conservative.

Something that I like to do in my course member live streams is I purposely like to be conservative with companies I like to do my fundamental analysis and not try to add in every little bit of minutia I can because in my opinion, that makes you potentially too optimistic for the company and that's dangerous because you want to be realistic. Don't get me wrong, I'm bullish I think Tesla is one of the companies with the largest amount of pp the largest PP We know the most amount of pricing power and I think that is incredibly powerful for Tesla and I think that pricing power will stay as long as we don't go into a deep hard recession. shallow recession Tesla will get right through it now. Look, are there some questions potentially around the balance sheet? Of course Tesla really doesn't have as much cash as it seems like.

like it does because a lot of people like to pull up the statement of cash flows and the balance sheet for Tesla and say, but Kevin Tesla has 22 billion in cash. That's fine, but you have to realize they also have about 22.3 billion dollars in accounts payable that are just sitting there. Bills do and payable so that cash is really zero. What's more important is that they are burning about 1.8 billion dollars in operating uh or cap.

X I should say expenses every single quarter and when they burn about 1.8 billion dollars that comes off with their operating cash flow which fortunately they have a lot of. but the problem is it's shrinking. They're operating cash flow, shrunk from about 3.3 billion to 1.4 billion, and we are trending towards a recession. So while I believe that Tesla has a substantial amount of pricing power, no company is going to survive a hard recession very well.

But I do think that Tesla has a lot of potential for even in the face of a shallow recession, not re-testing the lows that we've seen in the past. So personal. I'm not opposed to adding on some of the dips that we see for Tesla, especially when we Trend closer to that 175 level. Not a terrible level in my opinion because it's a good Fibonacci retracement level that we have recently.

Revisited You can see that on screen here this platform by the way right here when this is a paid partnership uh with Weeble is Weeble you could trade on Weeble if you wanted to. It's a great platform and if you sign up using my link down below or you go to Metcaven.com free, you'll actually get up to 12 totally free stocks and it's a really awesome platform to play with. Options on to value options I Mean in fact, if we go out right now 46 days and look at Tesla for May and sell some at the money puts, let's see what kind of money we're looking at today. so we're on puts we're May 19th, let's go to 195.

we'll call those about at the money that's going to yield us about 16 dollars per contract. so 16 divided by 194, It's going to yield us about eight percent. Right now, selling puts on Tesla and these puts just went up about 35 percent on this selldown. So it could be a good opportunity to farm some yield.

And if you were to get exercised at 190 puts, it would really be like not getting a yield, but instead it would be like buying the shares for 174. Which guess what? That's exactly where the Fibonacci retracement line is. So if you're like yeah, I mean I'd go buy oh sorry I made that mistake. It's actually 195 is what we calculated off.

It puts you at about 179. okay, well, close enough so it gets you relatively close to the Fibonacci retracement. So if you were thinking hey, I wouldn't mind buying somewhere around that FIB retracement 179 175 Fantastic. Here's a way you could potentially sign yourself up to buying Tesla essentially today at that level.

Downside is if the stock never revisits those levels, you wouldn't be buying the shares. You'll just keep your premium right. But anyway, if I wanted to go out a little further I went out 200 days which usually I don't go out that far, but in that case I'd be getting about a thirty dollar, uh, premium. Which is pretty incredible because 30 on 190 5 puts me at about a 15.3 percent return.

Just selling puts on Tesla that is being willing to buy more Tesla shares. In that case, I'd actually be buying the shares below the FIB retracement at about 165. by the way, if any of that's confusing, you can learn more by checking out my zero to millionaire program link down below Uh, or the stocks and psychology of MoneyGram as well as Weeble Metcaven.com Free! So now some people online are comparing Tesla to Rivian or are suggesting that competition is rising. but what I would like to do is I'd Just like to say if I were a company that was willing to spend nearly five billion dollars to make revenues of 1.6 I too could sell as many vehicles as Tesla could because I'm losing money hand over fist and I don't know how to actually manufacture.

Now some people like to say oh, but Kevin Rivian is just ramping up I'm sorry when you're spending 288 dollars for every 100 of Revenue you make, you're a money losing machine. Tesla did not even lose lose this much money when they were delivering the same amount of vehicles as Rivian. That's even without the tax credits. Tesla had a 20 gross margin.

Yeah, they had an overall net loss just like Rivium, but their gross profit was at least positive when they got to the level that Rivian is at. So it's ludicrous in my opinion to compare Tesla to Rivian because they don't know how to make money. They know how to burn money, light money on fire. You want to see your revenues grow I could grow your revenues a hundred dollars as well.

Pay me 288 for every 100 of Revenue growth you want and I'll be your Rivian too. It's absolutely ludicrous. Not only is that ludicrous, but it's also worth remembering that a lot of media companies are comparing a Tesla to Byd, but they're not actually subtracting out the plug-in hybrids from their battery electric numbers. Fortunately, there's this uh Twitter account and we have to always remember we we want to verify sources whenever we can I'm not able to independently verify this.

Apparently this is from the Chinese Elect Electric Vehicle Post, but a Berlin Energy on Twitter posted this and I Think it's uh, worth taking a peek here. They posted quarterly battery Electric Vehicle sales and they actually noticed a 19.6 percent decline for Byd battery Electric sales and a 4.3 percent increase for electric vehicle sales at Tesla. This, despite the fact that plug-in hybrid sales are blowing up for Byd, those are doing quite well. And then over here you could see new battery electric registrations and it shows the Tesla Model, Y and three well above the number three and four Byd positions.

Uh, very nice here. In fact, the Model 3 outpace is about number three and four over here, and the Model Y just blows the others out of the water. So pretty impressive. Honestly, for a Tesla here and a lot less fuddish than really.

The six percent move on Tesla today. uh forces I think uh, there's a lot of fud fear, uncertainty and down and look, I'll take any any kind of data, head on and discuss it. I'm not trying to say any kind of negativity is fake news here, right? like I'm willing to look at anything. For example, I'm willing to look at Goldman Sachs projections for Tesla and I'm willing to jump on over to their sheet and give them credit for suggesting that their price target for Tesla at the 12 month is 225, leading to about an 8.5 percent.

Uh, upside. They do give very reasonable concerns, They say, look, there is Automotive stress today. Financing is very expensive. It looks like Tesla's buying down some of the rates on their vehicles, so you could get about in the mid fives for a raid on the Tesla as opposed to what a lot of people are paying at dealerships like six to seven percent.

But there is the potential for a continued production in prices. Yes, there's clearly long-term growth, which is true We completely agree with. and they do make the argument here that a Tesla is likely reasonably going to be able to get to about 20 margins for the rest of the year. But yeah, margins probably will end up in getting squeezed at the same time as we are seeing the inflation reduction.

Act tax credit no longer in effect potentially for the entire quarter, but right now, maybe only the first 18 days of the quarter. so that could lead to Future price reductions for Teslas. But if the margins couldn't hold up in this quarter which I think will be the hardest or one of the hardest quarters, then I'm pretty optimistic will be okay in further quarters. So I'm optimistic here now.

That kind of gives you an overview of what I think on Tesla and why Tesla stock fell today Now to conclude which of the reasons I gave I think is the most Salient for why Tesla fell I actually think it's the first I think we had a lot of Trader activity thinking that Tesla might Moon shot after a beat today and it did not so positions had to be closed that were opened on Friday It's as simple as that. Do you like my information? Check out the programs on building your wealth down below. Get yourself those 12 free Stocks by go to Metcaven.com free and folks appreciate you being here. We will save you in the very next.

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