The pioneers in medicine (IBB Biotech) vs the pioneer in automobile, battery and automated driving (TSLA, Tesla).
Notice the wave of investor recognition of the future of biotech from 2011 to 2015 matches quite well to the wave of investor recognition of the future of energy storage and EV vehicles in the stock price of Tesla.
Biotechs returned to the US Presidential Election level and Tesla has also pulled back to the level this week in the low 190's (chart to follow of the exact level). The US President supported faster drug approvals if lower drug pricing was on the table.
The President of the US hasn't done anything to support the efforts of EV's and in fact hasn't been a believer of solar and alternative energy.
It's curious that TSLA is pulling back to the Presidential election price level in the low 190's were we have seen the lows this week on the various Wall Street downgrades. Oddly, Wall Street was upgrading TSLA at the highs near $370-$380 last year . If you want to make money in stocks long term, be aware that Wall Street tends to get it wrong more than most people think. If you follow Wall Street recommendations, realize that analysts are typically reacting to old news and not regarding or weighting the potential for positive future news which will weigh more in the minds of investors. Wall Street is more concerned about having another Enron (fraud) and melt-down on their hands, so any company having short term difficulties is sold out of fear.
Full disclosure: I follow Tesla on an intraday basis and have for many years. I have positions in TSLA and will trade in and out of shares as I see opportunities to enter on bad news and exit on good news.
We discuss Tesla quite often in the Key Hidden Levels chat room where we discuss "EARNINGS LEVELS", "NEWS LEVELS", "TIME@mode TREND" and assorted sentiment and liquidity indicators like SKEW and VIX to pinpoint entry/exit levels for stocks and the market overall.
Tim West 12:04PM EST, May 21, 2019
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184 to 197 on November 8th-9th
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Elon just bought $35 million more TSLA shares yesterday (Tuesday, May 21, 2019), in addition to the $25 million he bought last week in the 2ndary offering at $243. I know there are people and hedge funds who like to squeeze margin longs and try to break them by gunning stops by breaking a stock, but I don't see that happening this time. I plotted all of his purchases on my charts that I post in the chat room. I'll just guess that on average he has purchased most of his stock in the high $200's. (I'll calculate another time).
Here's what gives me some sense of calm: Elon's stake in SpaceX could be worth more than TSLA.
More calm from the concept that there are many billionaires who are rooting for TSLA and even a new one Google founder Larry Page (read the news stories). Larry Ellison is an investor and a big fan. Apple could easily buy TSLA too.
More calm from the idea that the supercharger network is worth something around the world: Perhaps $5 billion to take a guess.
More calm from the idea that Tesla is really a battery manufacturer that makes more batteries than the rest of the world combined. The car is just one use for those batteries. I am going to buy a battery to run my house next that I download cheap energy at night and use it during the expensive daytime. The battery will pay for itself in a few years just with that arbitrage. If I add solar panels by Tesla, it would be even more interesting.
The value of TSLA is perhaps as low as $20 billion until the China Gigafactory is up and producing (versus $35 billion now at the $200 price level) China sells more cars, 28 million in 2018, than the US in a year. If China is making hundreds of thousands of cars each year and making at least $3,000 profit per car, that is 300,000 x 3,000 or $900,000,000 or nearly $1 billion. So in that instance TSLA is trading at 20 times expected earnings in a year, but growing quite strong. I'm putting in 300,000 cars for the US market. This excludes Europe, which might be another 300,000 cars each year. Competition might dent that number over time.
All in all, TSLA has been overvalued for a long time especially when it hit $60 billion valuation on only 2B-3B in sales back in 2013-2014, but then again so is almost every other stock in the market. Look at NFLX.... bleeding capital ..... huge valuation.
If someone could do Elon's Average Cost Basis of Public Stock Purchases, that would be great. Post here.
Tim
May 22, 2019 10:55AM EST
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What people DON'T SEEM TO REALIZE is that TSLA was EXTREMELY OVERPRICED when it was a momentum stock and people kept paying higher and higher prices "just because it was going up". That process of mindless buying of stocks just because of a price pattern and disregarding ALL FUNDAMENTAL INFORMATION is what causes great dislocations of stock prices to economic reality.
It sure is a great thing if you owned shares of TSLA and they appreciated far beyond imagination when it was $60+ Billion in market cap and only a $400 million - $2 billion in sales in 2012-2013. That's irrational, but it's what happened.
MSFT reached the same insane level of valuation in the year 2000 and it took 16 years for it to exceed that peak, but at no time from 2000 to 2016 did anyone ever declare that MSFT would go bankrupt or did the shorted shares reach 30% of the float, but their business model has been challenged constantly from all angles and they survived threats from the internet (Gates thought the internet was a joke for many years and even wrote a book about his disinterest of the internet), Linux (the free operating system sure to destroy Microsoft, or so they said).
What's my point? Great companies adapt. If the company is 'customer-centric' then they will come up with a new product or service to meet the demand. That's just what great CEO's and great Boards of Directors push to have happen.
As for how this relates to stock market patterns, maybe Donald Trump will look at all of the companies whose stock price is back down to or below the level where it was when he was elected and see that things are getting rapidly WORSE and it's time to get things done.
Have a great weekend.
Tim
June 1, 2019. 2:30PM EST
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Almost 3 weeks later and Tesla had a decent bounce in price from my last update.
Tesla announced nearly a 400 mile range car - sure to please everyone who has range anxiety.
Tesla has rapidly increased the speed of charging - also to reduce nervousness that people have when using an EV to go long distances.
Gigafactory 3 is going up extremely fast which shows us what people are truly capable of. Eager to see cars come off the line there by year-end.
Quarter 2 is coming to a close and another cut in the tax rebate for EV purchases happens from $3750 down to $1875 on July 1st.
June options expiration is Friday, June 21, so look for a big strike price to attract the stock price where the most people lose all of their money.
June 20, 2019 5:14PM EST
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IBB and TSLA have moved in a very similar fashion since the chart was published.
Tesla has had plenty of news too:
1. China wont charge a 10% sales tax on Tesla vehicles. 2. Production at GF3 is coming along at a very quick pace, according to Musk.
Economically speaking - 1. Interest rates are extremely low as investors move to safety over growth 2. Energy prices are low (recession fears and weaker demand, production cheats) 3. Inflation is very low (global overcapacity still) 4. Trump trade wars with China continue 5. Media focus on recession fears - scaring investors out of cyclical stocks
September 3, 2019. 11:32PM EST
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The pattern continues.... There are people that invest in "the past", "the present" and "the future". Clearly we know where Tesla falls in that schematic. Well, Biotech has recently found some strength and had some good news, as has Tesla. Tim November 5, 2019 2:29PM EST
Really interesting last update @timwest - an insider buying up his stock in masses. Can he be that wrong? They do tend to go all in
timwest
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@2use, He's definitely not "all in".
A few years down the road.... If Tesla in China is making 3 million cars a year, which is entirely likely, and capturing 10% of the market, they would make $3000 per car times 3 million or $9 billion in profit per year, just for China. The upside is there and that doesn't include pickup trucks, semi-trucks, or the battery business all by itself.
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@timwest, few years is a lot of time for competition to kick in. Actually in Sweden we have a company working on driver-less electrical trucks. It seems to me like the usual race where the pioneer may get beaten down if they lose their grip - and Tesla is not making a lot of money or progress at the moment yet (hence the rumors about Apple are being so popular, at least in popularity wise people like the rumors of new things in the market).
Meanwhile markets at all time highs but neither Tesla, nor Apple are as high (and many other too) - i wonder what kind of sentiment is that
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@2use, I too have seen driver-less trucks in the news and over here too in the US. It's possible that Tesla loses the race, but in the end we all benefit. I'm cheering for the technology. We need better "line painting" on roads too to make roads safer, which makes roads potentially sabotageable by "line painters". Twisted thinking, I realize, but realistic.
timwest
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@2use, I didn't give your question enough of an answer, but I can't possibly know for sure about any competition. I've heard the same argument for many years and no one has even come close to Model S which was released in 2012. The world is far behind. There are driverless trucks already here in the states. Despite that, TSLA has the best truck specs of anything out there in terms of acceleration under full load, uphill speed, safety, total cost of ownership/mile, maximum "up-time" and maximum "revenue" per dollar invested. No windshield breaks. Brakes that are guaranteed to last at least 10x longer, etc. I am more of a Tesla fan and watch the news feeds closely and I marvel at the speed of the construction of the China Gigafactory and I marvel every moment I am driving my Model 3. It is the safest car on the road today that you can drive. That's valuable to me. May 28, 2019. 8:22AM EST
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@timwest, Is still a good buy at these levels then?
timwest
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@2use, Yes. I believe it is a good buy. I believe it is a buy down to a $20 billion "floor" valuation level. The 2nd month of the quarter is almost in the books and deliveries could be stronger than expectations and give the stock some upside. Any good news could lift the shares and the bad news tsunami seems about over at the moment.
NIO, an EV producer and Tesla competitor in China, announced a decent level of sales despite a weak auto-sales environment in China which is stable at 28 million cars per year.
I have a 10-year time horizon on my holding period for TSLA shares, but have been able to trade TSLA back and forth in this range for the past few years. As valuation keeps building under the shares since sales have grown from 4B back in 2015 to 21B in 2018 and probably doubling from here in short order, there is less and less likelihood that TSLA shares will remain this cheap.
The media has strongly taken a stance against Elon Musk and Tesla and finds ways to talk down, cast doubt and fears into potential buyers of Tesla vehicles in a clear attempt to slow down their momentum. Time will tell, but the underhanded methods by which people are spreading false news and fake news will someday get ferreted* out and stopped.
*We need a good "ferret" to crawl down into the dark holes where the haters live and bring them to daylight. That's what ferrets do.
Tim 9:07AM EST May 28, 2019
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@timwest, thanx for sharing your insights Tim. Will keep following both your views and the stock. It is attractive, but the market is currently taking a breathe
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@timwest, "maybe Donald Trump will look at all of the companies whose stock price is back down to or below the level where it was when he was elected and see that things are getting rapidly WORSE and it's time to get things done. " Do you believe they will have a chance to turn things around that fast? (my feeling is that in summer it will continue lower just because summer is not the most active period for anyone, and the sentiment will continue for some time now)