$TSLAQ ‘s core short thesis is there is insufficient TAM to justify TSLA’s $170B valuation - a thesis I’m about to shoot holes in. They argue only a small % of global SAAR of 85MM and US SAAR of 17MM veh. are priced >$45K. So, $TSLA ‘s $170B valuation would require >100% of TAM.
..First, the avg. US light vehicle price in 2019 was $39K; by 2024 avg will be $45K. $TSLAQ doesn’t accept the $39K ASP since it incl. SUVs (only 8% SOM), pickups (18% SOM), and CUVs (41% SOM). With the Y, $TSLA now competes in ALL segments, and TSLA TAM has effectively TRIPLED!
...Second, with Gates, Fink, and now Bezos getting on the climate change bandwagon, US EV penetration is about to go through the roof; govts everywhere will offer tax credits/deductions to stimulate EV purchases, which will bring down net prices and increase TAM. $TSLA $TSLAQ
..Third, TAM for >$45K vehicles will grow in the same way iPhone redefined TAM for $800 handsets. The perceived value of EVs relative to ICEVs will soar when buyers consider gas/oil savings, lower maint,longer useful life, higher residuals, and environ. friendly. $TSLA $TSLAQ
...Fourth, potential TAM explodes if $TSLA adopts an iPhone type usage pricing model, where monthly cost is computed over 72 or 84 months, and the residual value reverts to TSLA. Given TSLA’s much higher residuals, monthly cost of a $45K EV would surely be less than a $39K ICEV.
With EV global penetration likely to soar from 2.2% to 25% by 2024, even if $TSLA EV share dropped from 17% to 8.5%, TSLA vols would still QUADRUPLEto 2.1MM by 2024. If veh. >$45K are 1/3 of global SAAR, TSLA’s 2.1MM units would represent just 7.4% of TAM, which seems likely.
Bottom line: By 2024, if TSLA has 7.4% of TAM and 2.5% SOM of SAAR, those 2.1M units @ $45K ASP and 25% GM, $7.5B OthExp, $650MM IntExp and 20% TaxRt would generate $12.4B NI. At $AAPL P/E of 25x, TSLA market cap would be $310B, and $TSLA stock would be $1,600. Bye Bye $TSLAQ.
