AI Summary:
Tesla’s 2024 financial results were disappointing, with several key points highlighted:
- Automotive Revenues: Fell by 8% in Q4 2024 compared to Q4 2023, totaling $19.8 billion.
- Energy and Storage Revenues: More than doubled, growing by 113% to $3 billion in Q4 2024.
- Services: Grew by 31% in Q4 2024, contributing $2.8 billion.
- Total Revenue: Increased by 2% in Q4 2024, but income fell by 23%, with an operating margin of 6.2%.
- Net Profits: Dropped by 71% to $2.3 billion in Q4 2024.
- Annual Performance: Automotive revenues decreased by 6% to $77 billion in 2024. Energy generation and storage increased by 67% to $10 billion. Services grew by 27%, bringing in $10.5 billion.
- Gross Profits: Fell by 1%, with net profits dropping by 53% to $7.1 billion for the year.
- Free Cash Flow: Decreased by 18% to $3.6 billion.
- Regulatory Credits: $2.8 billion of profit came from selling regulatory credits, not from core business activities.
- Future Predictions: Tesla expects energy storage revenues to grow by at least 50% year-over-year and aims to grow automotive sales by more than 60% in 2025.
Despite the poor financial results, Tesla’s share price increased by 103% over the same period.
Value investing isn’t dead. There are tons of value investors, and they aren’t the ones buying Tesla.
My point is, if this is how markets react to worsening sales and an actually insane CEO how can you trust a rational bet to pay off?
Value investors don’t invest in Tesla, so you should not expect its share price to reflect fundamentals.
But they do invest in stocks like Coca Cola and American Express, so you should expect the share prices of those companies to better reflect fundamentals.
That’s just another way of saying buyer sentiment is the only thing that matters, in which case we’re back to square one.
Pretty much the definition of bubble stocks. If you don’t want emotion driven stocks, don’t ride the hype train. There are many many more stock opportunities, most of whose value is related to actual facts
If you’re a value investor then you believe that the actual value of a company depends on its current and future earnings and the market price will tend towards the actual value in the long run.
But naturally there are other factors that also influence the market price. In fact, the whole point of value investing is to find stocks that are “underpriced”. For various reasons, they are currently priced at a discount to their actual value. Those are the stocks you should buy, and you should expect their price to increase.
Conversely, for various reasons some stocks are “overpriced”, like Tesla. You should not buy those, because you expect their price to decrease in the long run.
A corollary is that value investors expect seemingly irrational price movements like we see with Tesla. If share prices perfectly reflected fundamentals, then it would be impossible to find a “good deal”.
Right. So anyway, the market does often appear oversensitive to buzz and under-responsive to fundamentals. What’s your take on market reforms? Are there any changes you’d like to see, regulatory or otherwise?
I don’t care if the market is under responsive to fundamentals. That just means some investors are exercising poor judgment by paying too much attention to irrelevant factors. It also gives an opportunity to investors with better judgment.
Do you get why this is starting to feel very circular? If not, please don’t trouble yourself to respond. Sincerely.
I’m not sure what you mean.
You seem to be starting with the assumption that market prices should reflect fundamentals, and questioning why they don’t. But why do you assume that?
“In the short-run, the stock market is a voting machine. But in the long-run, it is a weighing machine.”
You can’t ignore or eliminate either machine.