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Following Tesla’s weaker-than-expected fourth-quarter results, Elon Musk said Chinese automakers would all but eat up the industry if protective measures were not taken against them, according to CNBC. This statement is formulated very clumsily in several respects: on the one hand, it gives the impression that the entrepreneur would simply give up competition with them, and on the other hand, he is demanding protective tariffs, whereas up to now he himself has been demanding protective tariffs and is a supporter of free world trade because he also promotes his products want to sell worldwide.
He is moody
Anyone who has observed Musk’s facial expressions knows that he is a moody person and that one should not take them literally and deduce one’s further plans from them, but at the same time one should not expect investors to include Elon Musk’s psychology in the process of analysis of investments. That is understandable
You make a quick decision based on numbers and statements and look for a cheaper stock with possibly better growth parameters.
You may lose first place
It’s not unusual in the American stock market for a stock to move so much based on a result or news, but this is particularly spectacular in the case of Tesla because Musk is the richest man in the world, but in second place is Bernard Arnault, The main owner of Louis Vuitton, Moët Hennessy, is now on the verge of taking this place again. If Tesla falls a little more than that again (not necessarily in one day) and Louis Vuitton stays stable, the swap will already happen.
Pricing
There is no doubt that Tesla stock was extremely highly valued even after the sharp decline, with a P/E ratio (stock price divided by earnings per share) of 60, while this value is often below 10 for automakers and technology companies with stable ones Results around 15-20. Depending on how much margin you can work with in the long term, Tesla will have to increase its profit by 3 to 6 times to justify this price.
After Musk’s announcement, many may think that he has given up on growth, but there is no question about it, because the future plans include the introduction of the cheaper type of car in 2025, no matter how big the Chinese competition is, on the Western ones Tesla will be the Chinese one for a long time to come. Compared to other types, like the iPhone compared to other phones: It can command a significant premium.
It has solved everything so far
It also cannot be ruled out that Musk intentionally made a scary statement after the results were released, pushing down the stock price so that he or fellow investors who voted with him could buy, thereby increasing his voting rights in the company. Finally, we must not forget this
Musk has often solved seemingly hopeless situations, both at Tesla and at his space company SpaceX.
Given this, competing with Chinese manufacturers in Europe and America does not seem to be such an insurmountable task, so it is unlikely that the stock will fall to such a low level that it would no longer be valued at significant earnings growth.
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