I write this not because I hate Tesla, but because I think things financially are broken and Ford is about to right the ship on Tesla. Tesla has held the position of the “green” energy darling EV company. And I’m about to invest in Ford. Soon. Not this minute. More on that later.
What we have seen over the last 5-6 years is Tesla…and then everyone else, when it it comes to EVs. There have been whispers recently that companies are catching up to them. Well. I think it just happened.
I like Tesla. Not that Elon reads my damn blogs, but I was part of a team of 4 in 2016 who wrote our grad thesis in marketing on the concept of auto maker Tesla marketing their cars in South Korea. It was a 125 page paper we eventually had to trim down, but it went over the concept of the car, the batteries, the demographics of South Korea, political risk, etc. It was in senior marketing class, and we had to pick an industry, company, and country to market to – and the country had to be one of the BRICS+16 countries. The BRICS are, for those of you who don’t know, Brazil, Russia, India, China, and South Africa. The other 16 are countries like South Korea, Vietnam, etc. Countries like Germany, the US, Italy – we are the “mature” economies, and we wrote this as if these countries are saturated with Teslas already.
Anyway – I do love Tesla, and I have two Powerwalls coming here as part of my solar solution. But their stock price is otherworldly. Musk knows it, and even tweeted about it before the split. I’m sure shareholders were not happy with him then.
Right now, Tesla is a “nice” story. It’s a tech company that happens to sell cars, kind of. But what has happened is the bloat that is the share price is about to come down like a cheap deck of cards – someday – and when it does, holy shit. For now, some of my buddies just tell me I don’t understand today’s markets. Right. That’s it. I just have no idea what a 383x P/E ratio is.
Furthermore, we were seeing the charts that came out showing Tesla has more market share than the next 15 top auto makers – COMBINED.
So this tells me that Tesla must be selling a LOT of cars, right?
It’s listed as number 12 by revenue at $31b. For a market cap over $1T?
Basically, on that chart Tesla would have to DOUBLE revenue just to tie the next place up.
At issue here with Tesla is all of these people bidding for these shares and driving the price up – expecting worldly returns every year. Wait. They don’t seem to care about returns. Correction. With a market cap of over $1T, it sold $31b. That’s 3% of its market cap.
Ford, on the other hand, has a market cap of $70.5B and had sales of $127B. Let that sink in for one second. Just let it percolate for a moment. Savor that….
Sales for Ford were 1.8x that of market cap. Tesla was 1/30th of market cap.
Ford’s P/E ratio was 24.31x. Tesla’s P/E ratio was not 15% higher than Ford’s, it was 15 times that of Ford’s.
Ford has dealerships and infrastructure all over the world to produce vehicles and service them. Tesla doesn’t.
Let’s go to investopedia to kind of bring the classroom all up to the same page here, so I’m not talking down to those of you who are professional investors and speaking above those of you who saw Tesla and stonks and are waiting for me to say something nice about Musk.
It goes on…
So Tesla is on the Nasdaq. You can see Ford is a little higher at 24x, but as mentioned this COULD be investors expecting growth. And growth I VERY much expect after seeing the F150 lightning.
But Tesla, to me, is EXTREMELY OVERVALUED by ANY MEASURE you can find. BY A LOT. Let’s look at that chart.
What most people might not realize is there have been a lot of short attacks on Tesla, and all of them have been wiped off the face of the earth by Gamma-type squeezes by insane, cult-like followers. And, for those who hoard Tesla stock and clench their ass cheeks like BTC HODL’ers, their stock has moved vertical.
Let’s now look at Ford’s chart. I once owned a Ford Taurus. Shitty car. Kept me from going back. However, the F150 lightning is changing that for me – but first the charts.
Ford at the moment is trading at $17.74. But let’s look at this weekly chart. Seems to be hitting a weekly resistance going back to 2002 or so. The weekly RSI is high. I don’t want to buy today, that’s for sure. But could we see it spike way above this resistance? Sure. Given all of the macro stuff going on this week, I’m going to pause on buying anything, as tempting as it is. If you look at the 3 green circles, you are seeing the 2001 dot com bust low, the global financial crisis low, and the march 2020 low. While we have a STRONG move up of 5x or so in that last 18 months, many think we may have a 5-10% correction in the markets. It’s hard to disagree with that.
So the fundamentals would suggest to wait on either to buy.
The game changer
While the videos of these have been out now on YouTube for 4-5 months, I JUST discovered them yesterday. Oh man. That’s the F150 lightning. I own a RAM 1500 in black. It was the first pickup truck I ever bought, and wanted it to help with my basement and other construction projects. I own some rental units so it would be handy to have a pickup truck. Putting mulch in the back of my Highlander was a nightmare. So with the RAM, dear god I had some hemi power.
I bought it with the 4WD and I’m finding the 4WD wasn’t exactly as I thought. The tires now have 44,000 miles and may have to get a new set. It runs great, but it is also the standard model, so no real bells and whistles. While working from home, I didn’t really care. I’d use it here and there. But now that I may have to go back to work 90 mins away, and rising gas prices are coming, I am starting to re-think my RAM.
So when I stumbled on to these videos, I was just expecting some song and dance about trying to sell me a $90,000 EV which I had no idea how I could afford. As luck has it, I’m getting two powerwalls with solar, and will be potentially producing 16% more than I need. I started running the numbers in my head.
But what are the key elements of the F150 I fell in love with?
- It’s a pickup. Now that I have one, I always want one.
- It’s an electric pickup truck
- It has 300 miles with the extended range. This is carrying 1,000 pounds on it. It is suspected it could get 480 miles on a full charge if just you are driving it.
- It seems to have a 150+ kWh battery – WOW. This is 5x more than my home consumes in a day. It has 11 outlets so you can plug power tools into it.
- If you are using this for your job, you no longer have to bring a generator, as it can feed 9.6 kW of power.
- No engine or transmission to maintain parts
- Low center of gravity, so this can drive like a sports car
- Can tow 10,000 pounds. My RAM can only tow 9500 pounds
- modern display like a Tesla that can help you with a ton of things like reversing into a hitch, finding a charging location, etc.
- When I ran the numbers, at $.13 per kWh, it would cost me $.04 per mile to drive it on electric and $.20 per mile with gasoline with my RAM.
- Potential $7500 tax credit
- Can generate a decent amount of the power for it with my solar.
- It can act as another battery in a grid down scenario. This battery is FIVE TIMES as much energy as my two Powerwalls, COMBINED.
- Sharp colors and look
- Large “frunk” where you can store all kinds of stuff like groceries. No engine, remember?
- Large Ford dealer network, so if there are issues, you are close by one of them to stop in.
The big deal here is Tesla has a $1T market cap. Let’s assume for a moment, that in a parallel universe, Tesla’s market cap was 1.8x sales.
X * 1.8 = 31.5B
X = 31.5 / 1.8.
X = $17.5B
Their current market cap is $1.179 T. This means, essentially, that Tesla is 673x overvalued relative to sales.
My suggestion is….
That it is POSSIBLE that even 1/3rd of that market cap can be taken by someone like Ford. While Tesla’s stock is ridiculously overstretched at clownish levels, Ford right now is relatively high for its price. We have all seen how Tesla went vertical.
Now imagine for a moment, Ford caught up to Tesla, and they are able to sell a shitload of these EVs in the next year or two. Imagine if that have the ability to mass produce production of cars 10x that of Tesla. Imagine if you can sell these things cheaper than Tesla’s, relatively, due to production gains. If you are Ford and you are trying to place orders for the same resources Tesla is, you can simply outbid them. Ford has about twice their cash and has relationships with vendors going back 50-100 years. Tesla could get frozen out of critical supplies. I’m in the silver side of things, and understand that just because Ford wants to make a million EVs, doesn’t mean them and Tesla have the backend supply there to do it. I’d assert that Ford has superior abilities to source and use global supply chains, where Tesla has had one production back log after another.
I’m also using this to stake a long term position to NOVA Royalties for a long hold. This is going to go nuts.
So IF Tesla starts to have some selling off and perhaps loses $300b of market share – where does it go? Think about how many people would have LOVED to have been in Tesla at $17? That’s what Ford is, now. And then, if Ford can do the same things as Tesla, but perhaps better, faster, and cheaper, why the hell would you spend $1100 for a share when you can buy Ford for $17?
Remember that marketing paper I wrote about above? Well, Ford isn’t marketing to those who are already buying Teslas. Think about the tree huggers out there who spent $90,000 for a Model Y. Who the hell has that kind of money? Not your coffee barista who is advocating for no meat and EVs for all who cannot afford a taco at Taco Bell. You need some SERIOUS cabbage to buy a Tesla.
Then they came out with the Model 3s – and the pre-ordering. They were supposed to be $35,000. I haven’t seen a lot of these on the road, have you?
They are going after the blue collar guy who already buys F150s. The best selling auto in the US. Not car. Auto. That one. And for about the same price, if not cheaper. And it promises 500+ HP. 10,000 pound towing capacity. And all of that power in that battery???? Holy shit.
So they aren’t going after your coffee baristas. They are going after your small business owners. Your contractors. Your plumbers. Painters. Welders. Landscapers. They are showing these guys you can actually have a better truck, at the same price. It will cost less per mile to drive by about 5x, and you’ll get a $7500 tax credit.
Meaning, they already HAVE buyers. It’s just a matter of time before these guys migrate. And once they can plug in all of their shit to their truck to do work, and don’t need a generator, dear god. More space in the frunk?
The costs for the base model start at about $40k. The regular F150 is about $28,000 or so, but by the time you add 4WD and some basic shit, you are at $37,000. Then, you have the tax credit.
Wait until some fleets start running the numbers and see how much they can save with tax credits and fuel prices.
As Tesla has demonstrated, there’s a rabid fan base out there for EVs. As Ford has demonstrated, they know how to make trucks. And have a LOT of buyers of these. The questions were mostly, “how far behind Tesla was everyone else”. I thought we were 3-5 years away from this pickup truck. Obviously not.
I will be watching the stock market over the next few weeks to see if there’s a good time to buy in to Ford. IF this is another Tesla in the making, except with TERRIFIC fundamentals, this stock price can go vertical too. It might not matter if you buy it at $17 or $18 when it is $100 or $250.
We have seen that there are crazy people buying into the EV market – for a company that cannot possibly fulfill the sales and profits needed for a $1T market cap. Sooner or later, you will have the rapid buyers of EVs hopping on to Ford, and you will starve out new buyers of Tesla. THIS is where the shorts start attacking, when the depressed prices start driving them to a product with better fundamentals and a cheaper price.
I feel Tesla will collapse by 1,000 cuts – and Ford is about to take 100 of them. When Volkswagen and Toyota come to market with car offerings – this will be direct competition for the Tesla and may choke off more supply and provide more alternatives to EV than Tesla.
I love Tesla – but they can’t do shit about their stock price. You cannot shit talk your company, but you also cannot dilute and issue shares to get cash – because what they hell do you do with the cash? They barely have the materials to make what they sell. I think it’s possible when these other companies ramp up production, Tesla will need to dilute to get more cash to compete for resources. This will depress the stock prices and drive up unit prices, while giving the shorts some red meat to attack.
Tesla is a $50 per share price stock right now, but owners of the stock just don’t know it yet. The funny thing is, $50 is still overvalued by a lot. That means the market cap would be about 1/20th of now. Or, about $60B. Given it had $31B in sales, it’s still perhaps then overvalued by 4x.
The stock price is coming down. Might want to cash in some winnings, boys.