Yeah, the key reason I am comfortable with full margin right now is that I think there’s almost 100% probability that Tesla’s earnings in the next two years
just on car hardware with the existing, proven S3XY lineup + Cybertruck will be a profound wake-up call for the market, so I have exploited the drop to load up on LEAPS. My earnings estimates for 2023 and 2024 are more than triple Wall Street’s.
I expect Q2 ‘24 to have around 1M vehicle deliveries after Shanghai, Berlin and Austin have had two years to ramp. Cybertruck, Roadster and next-gen Ys will have incredible margins.
Company-wide gross profit per vehicle will be $20-25k, up from $17k last quarter. It sounds crazy but the trend is obvious if you look at the financials with ZEV credits excluded to show core profitability:
| Gross Profit per Vehicle | Gross Margin | OpEx as Percentage of Gross Profit |
Q1 2021 | $ 10.1 | 22.0% | 87% |
Q2 2021 | $ 12.6 | 25.8% | 62% |
Q3 2021 | $ 14.1 | 28.8% | 49% |
Q4 2021 | $ 14.8 | 29.2% | 49% |
Q1 2022 | $ 15.7 | 30.0% | 38% |
ZEV credits usually add about $1k bonus per car on average.
With rising demand, improving mix and predictable cost reductions on the horizon it is reasonable to expect the margin improvements to continue if not accelerate. Tesla has been posting these results with one hand tied behind its back and none of the benefits of the new factories in a time when the entire car industry is going down in flames.
Simple linear extrapolation using the average increase of $1.4k per quarter across 8 quarters is $11.2k increase expected which goes to $15.7k + $1k ZEV + $11.2k = ~$28k gross profit per car by Q2 ‘24. If the trend accelerates from its rate in the last 5 quarters, gross profit per car could tickle $30k. High trim Cybertrucks, refresh S&X, new model Ys, and more Shanghai could easily drown out lower-margin sales on Model 3 and Fremont Y. For instance: if you sell a Berlin Y for $70k and it costs $38k to make, that’s $32k gross profit. Sell a quad-motor Cybertruck for $90k at $50k cost, that’s $40k profit.
Let’s go with the original more conservative estimates of the profit trend slowing down:
- 1M cars * $20-25k gross profit = $20-25B gross auto profit in one quarter
- $80-100B annualized
- Net income of ~$50-75 per share annualized and still growing fast!
Even at only 50x P/E ratio that puts TSLA at $2,500-$3,750. If the crazy earnings results increase market optimism push TSLA’s P/E back to 100, it’s $5,000-$7,500. Not by 2030; by Q2 2024, without an FSD miracle and with upside on delivery volume, insurance, and energy. Even casual TSLA traders can recognize that the Tesla bull narrative is a lot more believable once Tesla is making way more money than Toyota ever has, with 40%+ gross margin and unstoppable exponential growth still happening amidst multiple highly publicized bankruptcies and/or bailouts for competitors.
For my current trading strategy, this is where LEAPS come in. LEAPS above $1500 have dropped like 20x while the stock has only dropped 0.5x. If and when the stock price goes back up I’ll have far more portfolio value when it returns to ATH than I had originally and then it can go to Mars if we blow past $3,000.
For example, a 16 Jun 2023 $1800 call is going for $28 right now. TSLA at $2000 is a 5th percentile outcome in my opinion by the expiration date, which would give 6x ROI for that option, more than double the stock gains. $3000 is my 50th percentile guess for a whopping 42x ROI, 10x better than the stock.
This is just my thoughts, not investment advice.