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Hey Team

People were surprised by the Tesla video today. 

One thing I want to get across.

Albert Einstein is often quoted as saying that "Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it." This quote highlights the power of compound interest, which is the process of earning interest on your interest. Over time, compound interest can have a dramatic impact on your wealth.

Tesla is a company that has the potential to grow its earnings at a continually high rate. This could have an exponential impact on its stock price. What makes Tesla special is that it has a number of high-margin businesses, including electric cars, full self-driving (FSD) software, robots, megapacks, and insurance. I focus on companies that can continue to grow their earnings rapidly, as this will reflect in their stock price over time.

This chart here highlights that eg if they can grow earnings by 50% thru 2027 Stock Price will go to $911 and $3075 by 2030. This is the game!!!! This is the impact of high earnings growth. 

Another view based on the color code of earnings growth. 


Comments

Anonymous

Hey James, not sure if you heard Elon say that Tesla shareholders would benefit from his purchase of Twitter which I think would put a cherry on top of your valuation model !!

Anonymous

It is so hard to understand exponential growth. My cost basis in Walmart is $0.17 a share. I’ve held it since I was 15.

Anonymous

Compound interest is amazing, makes me feel good charting out future projections, aiming for 100 TSLA by end of year

Anonymous

It’s a surprise for me about today video Thanks James ❤️

InvestAnswers

i listen to every word he says. Twitter has the power to kill traditional media. Twitter has a massive reach, with over 229 million active users worldwide. Twitter is a real-time platform that allows news and information to be shared and disseminated quickly and easily. Twitter is a highly interactive platform that allows users to engage with each other and with news organizations.

Anonymous

Earning growth, no matter how fast, is not compound interest. Sorry, just a fact.

Anonymous

Appreciate the data

Anonymous

Is it just me or … Would Tesla stock price be doing much better if Mr. Musk would shut his pie hole? I am fully invested in Tesla but I keep wondering about the sanity of the person who has his hand on the ships wheel. Who cares about how good the product is… Elon makes a statement about Doge, Soros, mars, or fictional comic book characters and the world loses it. When is he… or … better question… should he just keep his opinions to himself and focus on Tesla, SpaceX, batteries. ?? Inquiring minds want to know!!

Anonymous

thanks James for the info.

Anonymous

"The greatest shortcoming of the human race is our inability to understand the exponential function." Albert Bartlett

Anonymous

I think you're right just wondering with recession coming how much the stock will fall before it bounces.

Anonymous

The Madness of Genius is seldom understood. He himself says it is a curse - think yourself lucky you are not him! I would like to take him fly-fishing just so he could be allowed to switch off just for a few hours. In the world o the blind tha man with one eye is king!

Anonymous

Further question, if this exponentially plays out, wouldn’t this make it more likely Tesla spins out several of its units. If what you are saying comes true it also makes it easy to see the potential for Auto, Bots, and Energy to become three separately traded companies at some point. I believe you have said this before (if not sorry for the confusion), That Wall doesn’t like conglomerates and doesn’t value them appropriately.

Anonymous

I have changed my mind on Elon, I actually like the man now. "A Man o independent mind is higher rank than awe that " - R. Burns: A Man's a Man.

Anonymous

While I agree with the theory, things sadly don't work that way. Earning 2022 beat and price down. It 'could' also continue that way through 2030...up, down, up down. Not necessarily dependant on earnings. So yeah, it could happen, and I am very long TSLA too. But these charts are purely theoretical and very unlikely to play out in a similarly linear form even if Tesla kill it with al these products.

Anonymous

IMO, he should keep being who he is and doing what he is doing. His open honesty will benefit in the long run. Hiding his opinion simply for stock price is just unethical.

Anonymous

Good morning James and team, I'm in Australia and new to the investment game. If anyone could advise me how to buy Tesla it would be greatly appreciated. Thanks

Anonymous

I have discovered the power of negative compounding with ARK Invest and Celsius Network! Haha

Anonymous

I use the stake app. A few Aussie’s on here put me on to it.

Anonymous

Well said. I used to be on the fence with him. The more truth bombs he drops the more respect i have.

Anonymous

I am sold! LFG fam

Anonymous

Agree in practice not linear but over time as earnings rise, will not be possible for market to ignore and reflected in stock price.

Anonymous

Yep, agee, I just highly doubt any of these numbers out till 2038. Black Swans and things that we can not envisage between now and then WILL occur.

Anonymous

An Interactive Brokers or Boom account may also get the job done for you.

Anonymous

It’s Amazing the knowledge you can retain James , hoping osmosis will deliver some of this one day the penny drops

Anonymous

Let's apply some critical thinking to this model... "The U.S. equity markets are the largest in the world and continue to be among the deepest, most liquid and most efficient, representing 41.1% of the $107 trillion global equity market cap in 2023, or $44 trillion. This is 3.6x the next largest market, China." "Just" for a 100x from the price today (18,000$) we are looking at an over 50$ trillion market cap, so larger than all of the U.S. equity markets today, and that is considering Tesla does not issue anymore stocks. Now let's consider significant currency debasement at 15% annually for the next 15 years (until 2038) and an equal allocation to the equity markets, we arrive at a 358$ trillion market capitalization. Even in such a case, $TSLA would have a market capitalization which is a seventh of all of the US equity markets, and we are only looking at a bit over 35% CAGR. Now imagine the 45%+ CAGR models, something here smells fishy! P.S. I understand this may be a completely theoretical model, and we are mostly trusting the 50% CAGR up to a certain point, but still I believe it is important to highlight this as people may become overly optimistic and not analyze it profoundly.

Anonymous

Which one to invest in - Tesla or sol?

Anonymous

I'm building my Tesla bag just like I did my BTC bag while i was buildinĝ BTC everytime BTC spiked I felt like I didn't have enough so bought more when it dropped. Am grateful for the prolonged drop i Tesla, it gives me more time to learn and accumulate

Anonymous

I get worried about price predictions because they hardly ever take a bear market into account

Anonymous

James I am not so sure that Tesla is in such high-margin businesses. I see their massive margins as temporary and fleeting, due to competition and market maturity. Though I have little doubt that Tesla will grow massively, I doubt their ability to generate such great profits (aka "earnings" in accountant dialect) into the future. Therefore I wish you had included earnings growth rates of 0%, 10% and 20% in your chart as well.

Anonymous

The growth in earnings is automatic. Giga Austin, Berlin, Mexico are just starting to produce. New streams of income from Cyber truck, Semi's & Mega packs are all online which are just starting to ramp. Tesla has no competition in the car business that is profitable. All other companies can not match cost of production of their cars. Tesla can reduce profit margin by 10% if needed and still make money. No competition. Just my understanding of the company

Anonymous

Let me rephrase then - which one has the higher upside ? Same question, different letters on the screen.

Anonymous

By just starting to ramp, you mean have not actually started yet. Both of those have zero sales. They will sell zero semis this year, they will sell less than 50k cyber trucks this year. It’s another 18 months before these things are actually generating meaningful revenue.

Anonymous

I suppose Tesla has vertical integration, like Apple does, and this keeps their priduction costs low? Or is it Tesla's volume which keeps costs down? I would guess it is more of the latter, high volume = lower costs. It is only a short matter of time before every major carmaker gets a large electic vehicle volume, they have no choice as most vehicles sold in the rich world will soon be electric. At that stage all carmakers will compete on price and quality, and carmakers may even make lower than normal profit margins as they all fight for electic vehicle market share. If I am correct, Tesla's margins will shrink. As to software and batteries, these will also be available from multiple suppliers. Yet who has the best software is important and a differentiating factor, but that may not end up being Tesla. In any vehicle, the main things people are buying are a low self-esteem booster and private transportation, something all vehicle brands provide. So Tesla is primarily a vehicle company, not a tech company. With Tesla there is no lock-in like Facebook, nor economies and margins like tech companies. While I am really optimistic about Tesla vehicle volume growth, I am negative on profit margins.

Anonymous

I'm loving the discussion, questioning makes a healthy community

Anonymous

PS it's very unlikely Einstein ever said something like that (it doesn't even match the way he communicated) - https://quoteinvestigator.com/2019/09/09/interest/?amp=1 But it does make for a catchy phrase...

Anonymous

Albert was spot on Unsurprisingly. What a monumental intellect that man had. Damn.