If it's not a bull market, how can Tesla's 64x 'dream valuation' be sustained!

Tesla$Tesla(TSLA.US)'s Q2 results are out

For those trading Hong Kong and US stocks, Tesla is unavoidable as it involves peers (Xiaomi$XIAOMI-W(01810.HK), BYD$BYD COMPANY(01211.HK), and various new EV makers$Li Auto(LI.US)) for tracking purposes

Even for those solely focused on A-shares, Tesla remains a must-track, whether for BYD's partners, upstream battery and separator suppliers, or the Tesla concept stocks favored by speculators
 

Thus, Tesla's quarterly results are always a major topic across Hong Kong, US, and A-share markets
 

Last quarter, Tesla's net profit fell 55% YoY, yet unbelievably, its stock price doubled within three months after Q1 results
 

This was partly due to the "rosy future vision" presented during the earnings call, but undeniably, it also coincided with the current tech stock bull market in the US
 

If these results were released in Hong Kong or A-shares, two consecutive limit-downs would be the bare minimum
 

.......
 

Tesla's performance this quarter improved slightly from last quarter but remains underwhelming

1. While revenue grew 2.3% YoY, returning to positive growth, net profit plunged 43% YoY, still mired in difficulties

Revenue growth with profit decline, from a pure financial perspective, typically stems from gross margin erosion, rising expenses, one-time factors, or tax rate impacts

For Tesla, this quarter's overall gross margin dipped slightly (vehicle-specific margins not yet detailed), with stable tax rates

Regarding one-time factors, the earnings report showed $622 million in restructuring costs. Excluding this, non-GAAP earnings (adjusted profit) declined approximately 7.7% YoY

Viewed this way, the profit picture looks better, but compared to the doubled stock price, these results still reflect overvaluation
 

2. As Tesla's core business remains vehicle sales, let's examine this segment closely

Automotive revenue totaled $19.878 billion, down 7% YoY, indicating continued erosion of the fundamental business

Breaking down the revenue formula: Revenue = Volume × Price, we identify the key issues
 

This quarter, Tesla delivered 444,000 new vehicles, down 5% YoY, marking its first consecutive quarterly YoY delivery decline

Price-wise, focus on automotive gross margins, specifically excluding regulatory credits!

Q2 automotive gross margin (ex-credits & leasing) was just 13.9%, down nearly 2 percentage points from 15.7% YoY

Thus, Tesla's core business saw both volume and price declines, showing its EVs—even after price cuts—aren't selling as well as before
 

Broker Cai predicts intensified domestic and global EV competition is eroding Tesla's competitive edge (or moat)

With its moat breached by heavy artillery, Tesla's current 64x P/E seems fraught with uncertainty!

3. While automotive revenue fell, overall growth came from Tesla's second engine—energy generation and storage

Energy business nearly doubled this quarter, with higher margins than automotive, stabilizing overall gross margins

Energy was Tesla's sole bright spot, but at just 10% of revenue, its impact remains limited
 

Thus, with automotive still dominant, recent stock gains have already priced in energy's potential!

In summary: Tesla's moat is crumbling under Chinese EV assaults, making its 64x "dream P/E" unsustainable
 

.......
 

Two primary factors explain this valuation:

① The US tech bull market

This year, the Nasdaq and "Magnificent Seven" either hit new highs or are en route
 

Thus, Tesla benefits from this tech momentum!

However, other tech giants maintain intact competitive advantages despite record highs

Take leader Nvidia$NVIDIA(NVDA.US)

At writing, Nvidia's P/E is 72x—only slightly above Tesla's 64x
 

But Nvidia's profits are growing exponentially, with consecutive quarters of multi-fold or even 10x growth

Thus, next quarter, Nvidia's 72x P/E could drop to ~52x (assuming flat share price) from earnings growth
 

Whereas Tesla, with its weakened moat and likely stagnant profits (probably throughout 2024), could see its 64x P/E rise to ~70x
 

Currently, if investing in US tech, many alternatives offer better certainty than Tesla—unless its stock falls below $180

② "Pie in the sky" must eventually face reality

Tesla's second rally driver was its "bright future" narrative—essentially promises

On this, Broker Cai concludes with a team member's observation:
 

Since Q1 earnings, Tesla has outperformed the Nasdaq and broader market

Key characteristics include:

Deafness to negatives, hypersensitivity to positives
 

This dynamic can't persist indefinitely—without escalating positives, negatives will eventually dominate
 

Thus, if next week's Q2 results disappoint, all previously ignored negatives may exact delayed revenge