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Tesla rose 57% in January! How can we tell from the fundamentals that the market will come to the moon, or will the bubble burst?

With a one-month increase of 57%, Tesla became the 5th company in stock history to reach a total market capitalization of 1 trillion US dollars.

However, what is different from the other 4 is:

Tesla's imagination doesn't seem to have reached the ceiling yet!

Will this stock with a price-earnings ratio of 400 actually go to the moon in the future, or will the bubble burst? We might as well start with financial reports, analyze fundamentals, find opportunities, or avoid traps!

We shared an article by Glonghui to see how they analyzed Tesla's earnings report? And how to judge fundamentals and Tesla's valuation

To learn more financial analysis skills, please click on the blue text link Advanced investment in US stocks Course to learn Chapter 2: Fundamental Investment Techniques.

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$Tesla (TSLA.US)$ The rise in stock prices all came from the bullish three-quarter report:

The cumulative sales volume for the first three quarters was 627,000 units, exceeding the sales volume of 500,000 units for the full year of 2020. Revenue for the third quarter was US$13.76 billion, up 57% year on year and 15% month-on-month, slightly exceeding the market's agreed expectations of US$13.6 billion;

The gross profit margin was 26.6%, up 3.1 percentage points year on year and 2.5 percentage points month on month. Among them, the gross margin of the automobile sales business was 30.2%, a record high, mainly due to a sharp increase in the scale effect of production and sales. After deducting point revenue, the gross margin of the automobile sales business for the quarter was 29%, which is also a record high;

GAAP net profit was US$1,618 million, up 389% year on year, up 41.7% month on month, achieving nine consecutive quarters of profit. Net interest rate also reached a record high of 12.1%, up 7.8 percentage points year on year and 2.2 percentage points month on month.

Tesla remains optimistic about growth over the next few years, believing that with the delivery of new models and the construction of new factories, it will be able to maintain the target of a 50% growth rate in car sales. According to the latest news, the new plants in Austin, USA, and Berlin, Germany are expected to be put into operation by the end of 2021.

Being able not only to hand over satisfactory answers about the “present”, but also to give a good expectation for the “future,” the rise in stock prices makes sense. And as the “anchor” of new energy vehicles around the world, Tesla soared, and other young players would follow suit.

However, this rise is only a follow-up, and the risk of a pullback is accumulating as currency tightening gradually changes from expectations to reality.

Tesla's earnings report is indeed very strong, but if you look at it from a rational point of view, its valuation has already been reflected, and there is nothing new.

I think there are three main reasons why funding is still being fervently chased:

One is the high-tech company that is most likely to replicate Apple's success, and the glorious history of Apple in the past is the firm belief of many people;

The second is the proliferation of global currencies. Tesla is the easiest company to obtain a liquidity premium;

Third, the track it is located on, represents high growth, scarcity, and future “stories”, such as autonomous driving, data resources, and carbon credits. The benefit of these things is that they always give people a good expectation, but they are not fully realized, so it is difficult to falsify. Under the influence of the flock effect, you can easily choose to believe it.

It might look like a bubble right now, but you just can't break it. The market is more willing to give it time and wait patiently for it to use performance to digest the valuation.

However, I've always been wary of this kind of fanatical crowd, and I'm more concerned that it's high up against the cold.

First, it should be acknowledged that compared to the high level of 900 US dollars in February, the fundamentals of this break are strong, because the financial report showed a real high level of growth, as well as optimistic expectations for the future. Therefore, two of the three factors mentioned previously have not substantially changed and are still playing an important supporting role. This time, 900 US dollars is a solid foundation compared to the previous 900 US dollars.

However, the monetary situation is less optimistic. It's already late October. If the Federal Reserve Taper announces opening next month, then currency contraction will officially begin. Federal Reserve Chairman Powell also recently announced that if there is a serious risk of rising inflation expectations in the middle of next year, interest rates will be raised.

Technology companies such as Tesla, which are already used to enjoying liquidity premiums, will be under pressure in their valuations, and it seems inevitable that there will be a wave of sluggish valuations.When liquidity tightening expectations were popular in February, Tesla fell by a wave, falling 40% within a month. It is conceivable that how many shareholders who entered the market when they finally caught up to the peak were buried. This is a lesson that must be prevented.

Of course, there are also people who will jump right in and say that if you use valuation to decide whether it's Tesla, you'll miss not only its past, but also its future. Also, aren't all companies like Tesla coming back now, even if they plummeted?

Indeed, even Buffett was ridiculed for being so old-fashioned that he missed Tesla; it seemed like people couldn't stop Tesla anymore.

The value Tesla brings to humans to the world is unquestionable, and everyone who has used Tesla has deeply felt it. Its car is indeed a cow. The driving experience, human-vehicle interaction, and various intelligent applications are all full points. More importantly, there is Musk, a leader full of ideals, ambition, and paranoia.Tesla has surprised us much more than what we see and think now.

So, in the long run, Tesla will definitely continue to create brilliance. I have no doubt that Tesla can recreate Apple's miracle or even surpass Apple; in fact, it has already done so.

If Tesla is shorted at any cost due to overvaluation, what awaits you will be the miserable fate of bears in the past. For long-term investors, there is no need to consider capital costs; they can just lie down like Buffett invested in Coca Cola. However, it must also be acknowledged that most investors are unable to do the old people of Pakistan. Even without considering capital costs, it is difficult to have a “turn a deaf ear” mentality. It is still necessary to avoid short-term downside risks.

Judging from Tesla's transaction data last night, the turnover rate was over 8%, and the turnover was 62.2 billion US dollars, which is a huge increase in volume. Previously, the turnover rate was usually 2%-3%, and turnover rates of over 8% have also occurred. For example, when the sharp rise began in August and November 2020, there was also an accelerated peak in January and a major pullback in March.

If we look at it from a conservative perspective, every major pullback must have been a frenzy before, and stock prices are rising in a straight line. Only in this way can we attract a large influx of capital to the greatest extent possible, that is, a large amount of leeks to follow the trend. Only when things rise and fall in this way can they seem clean and make a lot of money.

Tesla's stock price has surged 32% in the past two weeks, and this is how it feels. Of course, there is also a high possibility that bulls will be shorting. After May, short positions continued to decline, precisely because they were being pushed out.Bears need to buy positions to hedge against the risk of being liquidated, which also adds fuel to the rise in stock prices.

From the perspective of risk control, continuing to chase Tesla now is undoubtedly dancing in the midst of risk. What is more important to consider is a profit exit, or opening a certain short position as a hedge. Wait until the negative side of this wave of monetary tightening is realized, and it won't be too late to take it back.

The best strategy for investing in Tesla is to keep a certain amount of bottom position, wait patiently to enjoy its long-term growth value, avoid missing the opportunity because you “get out of the car”, then use a certain amount of positions as a band. It's too high to sell a little bit of goods, recycle profits, and buy a little more goods after a big pullback, continuously reducing costs, increasing profits, and not losing sight of long, medium, and short opportunities.

You don't need too many good stocks; it's enough to be able to grab one.

What I want to explain is,Tesla is in the limelight and has strong fundamentalsThe potential negative risk this time is mainly focused on liquidity, so only the Federal Reserve can put an end to its insanity.

As for the magnitude of the pullback, the conservative base was 20%.

Speaking of Tesla, I have to mention a small domestic brother. In particular, the new forces are all companies founded as a result of Tesla's announcement of electric vehicle patents.

When the stock market was good, shareholders were like people who drank their heads up, talking about who who is China's “Tesla,” but to be honest, I haven't seen any one that can actually play in front of Tesla. This is probably just a simple and crude way to grab attention; it's a kind of propaganda strategy.

One of the most important reasons has to do with people. People who regularly follow Musk will discover his distinct personality. In addition to his attributes as a businessman, he is also a physicist, plus a dream to change the world. However, the leaders of domestic electric vehicle companies, other than businessmen or businessmen, cannot find the slightest momentum that will change the world.

Of course, this is related to the country's environment, cultural environment, and level of economic development; domestic entrepreneurs cannot be completely required to be Musk. I'm just trying to explain how ridiculous it is to describe a domestic car company as the Chinese version of “Tesla” at every turn. If anyone believes this and then uses Tesla's logic to invest in domestic electric car companies, then it's really foolish.

Apart from following Tesla's progress and decline in industry, the same goes for investment. Domestic capital, apart from the so-called clustering factor, is basically nothing less than Tesla's lead. Tesla is rising, and they are also rising, so if Tesla pulls back up, the selling pressure of these car companies will not decrease.

Although the stock prices of several new forces have not been able to follow Tesla and return to the high levels at the beginning of the year, they themselves have not achieved profit, and the storyline is much weaker than that of Tesla. There is no undervaluation. I prefer to believe that the market gave reasonable pricing and did not “lose money” on them.

Therefore, as for Tesla's operating strategy, it also applies to these new forces. If they are still profitable, it is better to escape and avoid this wave of potential downsides before making plans.

Author: Shen Peng Reprinted from the official account: Glon

$Tesla (TSLA.US)$ $Nasdaq Composite Index (.IXIC.US)$

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