Thread by @EzerRatchaga

/1st Principles argument for investing in #Tesla. A thread on how I model #tsla at 3k by 2025 and 6k by 2030.

My objective is not to maximize Tesla but to look at it in the most conservative way to see if it's worth the risk reward. See thread.

2/ First, what is the question. @elonmusk always said, asking the right question is the hard part.

So,my question for myself and people I recommend to Tesla is this.

What is the risk reward? Remember if you're diversifying and only investing in 1 company, you better be right.

3/ So, once I understood the problem, the solution is simple. There is no point drawing the most rosy picture. Because when you maximize everything, chances of being wrong is high. So, I want to take a very conservative approach.

What do I know for sure?

4/ Answer: Tesla sells EVs

They have been executing really well and have reiterated their target of producing 20m cars by 2030.

Even if they miss their 20m I'll still be ok because I purposely left out energy in my model so that it'll take up any slack in their car business.

5/ I also didn't include robo taxis, robots, insurance, etc etc....these are there to surprise me on the upside. No need to include if your objective is just to figure out whether its a good, safe investment. If any of these other things pan out, all the better.

So, with 20m cars as target. I'll now have to ask the next question. Is this achievable?

Here I'll look at these fundamentals to determine the answer to that question.

1. Is there demand?
2. What about the supply chain?

7/ 1. Is there demand?

The answer is yes. Once you start looking at the cost curve of batteries, you start to see that producing an EV is already cheaper than an ICE equivalent in China now. And EVs will continue to be cheaper in the upcoming years.

8/ So, base on cost alone, it's already going to look like the world will transition to fully EVs by 2030 or thereabouts. So, Tesla will sell every car they can make in this time period. Basic economics, when something is cheaper n better, people will always choose it.

9/ 2. Supply chain

Raw materials will be an issue but since Tesla is thinking years ahead, locking up supply from every mining company they can get their hands on, I don't worry about Teslas supply issues so I think they can make their 20m target. Delayed by a year? Who cares

10/ So, the 20m looks like a good start for my calculation.

I'm using 10k profit per car. That's 200b in profit.

At 30 PE, that's 6T marketcap, thus my 6k price target base case.

11/ Remember, my goal is not to be accurate. I do not believe anyone can create an accurate price target no matter how much in details their plans include. Almost nothing they include will come true over 10 years. So, to me, trying to predict is useless. That's not the goal.

12/ What I'm trying to do is figure out if it's worth investing in. At a base case of 6k, the answer is a big yes. Especially when I have removed all the option calls Tesla, no doubt, comes with - Robotaxis, Optimus, Insurance, AI, etc.

13/ I am already very conservative here. Even if I was off by 70%, that would still get you a 2k return. Which is still more than a doubling in 8 years. So, this is truly a no brainer.

I cannot think of another company that is so safe, and with such high growth potential.

Investing in Tesla is a no brainer.

Don't let this opportunity of a lifetime skip you by.

Sell everything, Retire with #TSLA

If you like my take, please share and and follow me. Would help others along the way.