To The Moon

$Tesla Motors(TSLA)$

Tesla: A Stock Built on Hopes and Promises?

Hello Tiger! In this article, we’re going to discuss what I call the "Tesla Delulu" Is Tesla's stock price driven by solid fundamentals, or is it merely fueled by hopes and promises? That’s the question we’ll explore today. So, without further ado, let’s dive in.

To begin, let’s set the stage with some context. On the screen, you can see Tesla’s current market capitalization, which stands at approximately $1.3 trillion—a massive valuation that places it among the world’s largest companies. But the key question is: does this valuation make sense? Is Tesla’s stock price justified by its financial performance? Looking at the latest Q4 earnings, I have serious doubts, and here’s why.

Earning Overview

First and foremost, Tesla’s latest earnings report was underwhelming. Revenue grew by just 2%, and the company’s core automotive segment actually declined. Margins have come under pressure, cash flow is negative, and yet—somewhat surprisingly—Tesla’s stock still surged in after-hours trading, at one point adding around $100 billion in market capitalization. While that gain eventually tapered off, it raises an important question: is Tesla’s stock driven by fundamentals, or is it based on hype and speculation?

Tesla’s Growth: Slowing Down

I’d argue that for the past five to six years, Tesla has largely been trading on hopes and promises rather than solid financial metrics. Just take a quick look at Tesla’s ticker symbol on social media, and you’ll find bold claims—such as a $5,000 price target per share—without any real valuation analysis to back them up. Even CEO Elon Musk frequently makes similar lofty projections, which I’ll touch on later in this article.

Tesla’s Profits and Valuation: A Reality Check

Now, let’s analyze Tesla’s financials. As you can see, Tesla’s revenue growth has slowed dramatically in recent quarters. In fact, much like Apple—which is also trading at a stretched valuation—Tesla’s revenue has remained relatively flat. While the company delivered impressive top-line growth over the past two or three years, that momentum has now stalled. Whether growth will reaccelerate remains an open question.

Tesla bulls argue that the company isn’t just an automaker and should be valued based on its potential in areas like self-driving technology and robotics. However, if we look purely at the numbers, Tesla is still very much a car company. Its gross margins, which currently sit between 17% and 18%, are typical for an automotive business and far from impressive. The company’s EBIT margin is around 7%, and its automotive segment continues to generate the bulk of its revenue.

Of course, stock prices often reflect future expectations, not just current performance. But Elon Musk has been promising breakthroughs in AI, robotics, and self-driving technology for years—yet these innovations have yet to materialize in any meaningful way. As someone who follows Tesla with a reasonably objective perspective, I see a significant gap between the company’s actual financials and the ambitious promises made by its leadership.

Looking deeper into Tesla’s latest earnings report, we see that net income is actually declining. Notably, around 25–26% of Tesla’s most recent net income came from gains in digital assets like Bitcoin—something you typically wouldn’t find in a high-quality, cash-generative business. The world’s top companies are known for their strong free cash flow, high margins, and consistent growth—qualities that Tesla, at this moment, does not exhibit.

Fundamentals Analysis

So, does Tesla prove that we’re in a stock market where fundamentals no longer matter? I wouldn’t go that far, but when it comes to Tesla specifically, it certainly seems detached from traditional financial metrics.

I recently came across an interesting tweet from James Chanos, highlighting that Tesla’s projected earnings per share (EPS) have returned to levels the company had already achieved before its stock experienced its massive parabolic run in recent years. Adjusted EPS is now back to around $3. To be fair, this doesn’t necessarily reflect Tesla’s long-term earnings potential, and as I mentioned earlier, revenue has grown at a solid rate over the past few years. However, when we look at Tesla’s valuation in context, things start to look questionable.

Tesla’s Profits and Valuation: A Reality Check

For example, if we compare Tesla’s free cash flow to that of other major tech companies—like Meta and Google—the numbers don’t quite add up. While it’s not a perfect apples-to-apples comparison since these are different types of businesses, Tesla currently has a market cap of $1.3 trillion, while Meta sits around $1.7 trillion, and Google is valued at roughly double Tesla’s market cap. Despite that, Tesla’s free cash flow generation is only about $3.5 billion, whereas Meta and Google are producing around $54 billion each. When viewed through this lens, Tesla’s valuation appears extremely stretched.

Tesla’s net income is declining, and nearly 25-26% of its most recent profits came from gains in Bitcoin and other digital assets—an unusual characteristic for a "high-quality" business.

For perspective, let’s compare Tesla’s free cash flow to other big tech names:

• Tesla: $3.5 billion in free cash flow.

• Meta (Facebook): $54 billion.

• Google (Alphabet): $54 billion.

Yet, Tesla’s market cap is comparable to these companies, despite generating far less cash flow. Put it bluntly: Paying over 100 times operating income for a declining car company is extreme.

Could Tesla Be a $40 Stock?

This brings me back to the argument that Tesla is no longer trading based on fundamentals. Some Analyst seems to share this view, calling it absurd to pay more than 100 times operating income for a car company—especially one that is currently experiencing slowing or even flat revenue growth. Looking at Tesla’s valuation multiples, they are indeed extremely high:

• Price-to-Free Cash Flow Ratio: ~350

• EV/EBIT Multiple: ~150

• Price-to-Earnings (P/E) Ratio: Over 100

If you don’t buy into the narrative that Tesla will dominate self-driving technology and robotics, you might argue that Tesla should be valued more like a traditional automaker. Some analysts even suggest a fair valuation closer to $35 per share, which I’ll explain now.

Currently, Tesla’s diluted EPS stands at about $2.60 annually. If we compare this to established automakers like Volkswagen, Toyota, and even premium brands like Porsche and Ferrari, we see that these companies typically trade at P/E multiples of 10 to 15. Applying a similar multiple to Tesla’s EPS of $2.60 gives us a fair value estimate of around $35–$40 per share—a massive drop from today’s levels. Of course, this assumes Tesla is simply a car company with modest growth and average margins, which many Tesla bulls would strongly disagree with.

Of course, Tesla bulls will argue that it’s not just a car company. But the question remains: When will the futuristic promises turn into reality?

The Musk Effect: Hype vs. Reality

Elon Musk continues to make extraordinary claims:

• "Tesla could be worth more than the next five biggest companies combined."

• "Optimus (Tesla’s robot) could generate over $10 trillion in revenue."

To put that into perspective, Tesla’s total revenue today is $100 billion. Musk is essentially predicting a 100x increase, which, as he admits, is "bananas."

Even JPMorgan analysts found Tesla’s stock rally perplexing. They sarcastically noted that perhaps investors were simply reacting to Musk’s epic promises rather than any real financial metrics.

This leads us to the question: what narrative do you believe? I found this particularly amusing, as it highlights the central issue—Tesla seems to be the only trillion-dollar company whose CEO spends more time discussing hypothetical, non-existent product lines than the core business.

To illustrate this point, let’s look at a few recent statements from Elon Musk:

• “There is a path where Tesla is worth more than the next five most valuable companies combined.”

• “Optimus (Tesla’s humanoid robot) has the potential to generate over $10 trillion in revenue.”

These kinds of statements are not something you typically hear on corporate earnings calls, and it raises the question: is Tesla’s valuation based on realistic projections or simply speculation?

Conclusion

So, is Tesla proof that fundamentals no longer matter in today’s stock market? Not entirely—but Tesla’s valuation certainly seems detached from reality. To Tesla bulls out there: I encourage you to embrace opposing viewpoints. It’s valuable to consider different perspectives and challenge your own beliefs. I know there are many passionate Tesla bulls out there, and I respect differing opinions. As an investor, it’s important to engage with viewpoints that challenge your own—sometimes, those who disagree with you might be onto something.

For full transparency: I don’t own Tesla stock. I don’t short Tesla. I’ve never shorted a stock in my life.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub