Evening Stock Market & Crypto Livestream 4-3-2024

Meet Kevin Market Live
3 Apr 202444:05

TLDRThe transcript discusses Deutsche Bank's analysis on Tesla, highlighting concerns over flat volume in 2024 and limited free cash flow. It also touches on Tesla's revenue projections, gross margin adjustments, and lowered earnings per share for 2024 and 2025. The video further explores market reactions to Tesla's Q1 performance, industry growth comparisons, and the potential impact of a market correction on Tesla's stock performance. Additionally, the script covers various financial and economic topics, including gold prices, oil markets, and political updates, providing a comprehensive overview of current financial trends and potential risks.

Takeaways

  • 📉 Deutsche Bank expects flat volume for Tesla in 2024 and limited free cash flow, which could be a potential risk factor.
  • 💰 Tesla's free cash flow is a significant area of contention, with the bank's estimates differing from Tesla bulls' assumptions.
  • 🚗 The bank has lowered its revenue projections for Q1 and adjusted the gross margin expectation to 13.5% due to lower volume.
  • 📈 For 2024, the full year volume is cut to 1.84 million vehicles, indicating only about 2% growth.
  • 📉 The price decline for Tesla's vehicles is expected to be 8.6% year-over-year, leading to lowered earnings per share (EPS) estimates.
  • 🔽 Tesla's PE ratio is high at about 94 times based on the current low earnings and even with a recovery to 20% growth, it remains over 4 times.
  • 🚨 There's skepticism about Tesla's ability to maintain growth, especially considering the competition and challenges in the market.
  • 🌐 The broader market and other automakers are showing growth, which contrasts with Tesla's performance and suggests non-industry-wide issues.
  • 💡 Tesla's potential to license its FSD software to other automakers is mentioned, but no deals have been made yet despite previous claims.
  • 📊 The speaker advises considering various factors including market trends, potential corrections, and company-specific challenges when evaluating stocks.

Q & A

  • What is Deutsche Bank's expectation for Tesla's free cash flow?

    -Deutsche Bank is expecting limited free cash flow for Tesla, which is a point of contention and a potential risk factor for the company.

  • How does the speaker view Tesla's current financial situation compared to the broader market?

    -The speaker believes that Tesla's financial situation does not reflect an industry-wide phenomenon, as most of the industry is actually growing, including BYD on a year-over-year basis.

  • What is the speaker's perspective on the claim that Tesla has over $20 billion in free cash?

    -The speaker disagrees with this claim, stating that it does not take into account payables and assumes that Tesla's cash position is healthier than it actually is.

  • What is the speaker's opinion on Tesla's revenue projections for Q1 and the gross margin adjustment?

    -The speaker notes that Deutsche Bank has lowered its revenue projections for Q1 and adjusted the gross margin to 13.5%, reflecting lower volume and the cost of producing cars without corresponding revenue.

  • How does the speaker view the potential impact of a market correction on Tesla's stock performance?

    -The speaker suggests that if Tesla continues to have bad quarters and a market correction occurs, the company could potentially suffer more pain, and the stock performance could be negatively affected.

  • What is the speaker's take on Tesla's strategy to license its FSD software to other automakers?

    -The speaker is skeptical about the success of this strategy, as Elon Musk has made similar claims before, but no other automakers have taken up the offer yet.

  • What does the speaker think about the recent surge in gold prices?

    -The speaker finds it unusual because gold typically rallies when the 10-year real yield is very low, which is not the current situation. The speaker speculates that this could be due to gold trying to price in Fed rate cuts or negative market sentiment.

  • What is the speaker's outlook on the US economy and stock market?

    -The speaker believes that the US economy is in a great place but thinks the stock market is poised for a near-term correction, which could be painful for certain specific stocks.

  • What are the speaker's thoughts on the wage price spiral and its potential impact on inflation?

    -The speaker expresses concern about the potential for a wage price spiral, which could lead to longer-term issues with inflation if wages continue to rise and prices adjust accordingly.

  • What is the speaker's view on the recent developments in the Middle East regarding Israeli settlements?

    -The speaker acknowledges that the expansion of Israeli settlements into the West Bank is creating more tension with the Palestinians and is considered illegal under international law.

Outlines

00:00

📉 Deutsche Bank's Analysis on Tesla's Financial Outlook

This paragraph discusses Deutsche Bank's analysis of Tesla's financial situation. The bank predicts flat volume in 2024 and limited free cash flow, highlighting the importance of not letting it go negative. It mentions Tesla's Q1 revenue projections being lowered and gross margin reduced to 13.5% due to lower volume. The 2024 full year volume is cut to 1.84 million vehicles, showing only 2% growth. The bank also notes a potential risk factor of Tesla needing to raise funds due to limited cash flow. The discussion includes Tesla's stock performance, the impact of bad quarters on investor sentiment, and the broader market context. The paragraph concludes with a mention of other Tesla bulls' views and a summary of the bank's price target adjustments.

05:00

📈 Market Comparison and Gold's Unusual Behavior

This paragraph compares Tesla's performance with other major automotive companies, noting that while Tesla experienced a year-over-year negative growth, other companies like Nissan, Toyota, Honda, and GM showed positive growth. It also discusses the unusual rise in gold prices despite a high real yield, which typically indicates a looming economic concern or potential monetary policy changes. The paragraph touches on oil prices, Trump's legal issues, and the impact of production cuts on the oil market.

10:01

🤖 AI and Auto Industry Competition

The focus of this paragraph is on the increasing competition in the AI and automotive industry. It discusses the wage price spiral and its potential long-term effects on inflation, the Strategic Petroleum Reserve's low supply, and Apple's exploration of personal robots. The paragraph also mentions Biden's political standing in swing states, the Middle East tensions over Israeli settlements, and Jerome Powell's views on interest rate cuts.

15:04

🌏 Earthquake Impact and Political Updates

This paragraph covers the impact of an earthquake in Taiwan, showcasing the dramatic footage of boulders falling and causing destruction. It also touches on political developments, including a Wall Street Journal poll indicating Biden's falling support in swing states, and the ongoing legal and political issues involving Trump and his business dealings.

20:05

🚗 Tesla's Market Performance and Future Prospects

The paragraph delves into Tesla's market performance, noting the stock's significant drop despite the overall market rally. It discusses the potential reasons for Tesla's underperformance, including the company's need to bottom out before regaining growth. The speaker shares his thoughts on various topics, such as the potential for Tesla's growth, the impact of federal policy, and the significance of year-over-year comparisons. The paragraph also addresses the idea of whether other Tesla-related ventures like Neuralink and SpaceX are priced into the company's stock.

25:05

🌐 Global Economic and Political Developments

This paragraph covers a range of global economic and political developments. It discusses the potential for a US economy correction, the impact of wage growth on the economy, and the speaker's concerns about the CPI report. The paragraph also touches on the legal and financial support Trump received from a California billionaire for his bond in a New York fraud case. Additionally, it mentions the rise in weed stocks following Germany's push for legalization and the speaker's cautious optimism about the US economy.

Mindmap

Keywords

💡Deutsche Bank

Deutsche Bank is a prominent global financial institution that provides banking and financial services. In the context of the video, Deutsche Bank has released a piece on Tesla, indicating a forecast for flat volume in 2024 and limited free cash flow, which is a significant area of contention for the electric vehicle company. The analysis by Deutsche Bank suggests potential risks for Tesla, including the need to raise funds due to negative free cash flow.

💡Free Cash Flow

Free cash flow (FCF) refers to the cash a company generates after accounting for cash outflows to support operations and capital expenditures. It is a key indicator of a company's financial health and its ability to generate cash to maintain and expand its business. In the video, the presenter highlights that Tesla's limited free cash flow is a major concern, as negative FCF could lead to the need for the company to raise additional capital.

💡Gross Margin

Gross margin is a financial metric that indicates the percentage of total sales revenue that a company retains after incurring the costs associated with producing or delivering its products or services. It reflects the profitability and efficiency of a company's core operations. In the context of the video, Deutsche Bank has adjusted its gross margin expectation for Tesla downwards, reflecting a lower volume and the costs associated with maintaining factories without corresponding revenue.

💡Earnings Per Share (EPS)

Earnings Per Share (EPS) is a measure of a company's profitability, calculated by dividing the net earnings by the number of outstanding shares of common stock. It indicates the portion of a company's profit allocated to each share of common stock. In the video, the presenter mentions that Deutsche Bank has lowered its EPS estimates for Tesla, which could affect the company's valuation and investor confidence.

💡Market Correction

A market correction is a decline in the market value of assets such as stocks, bonds, or commodities, typically by at least 10% from their recent peak. It is a natural market phenomenon that occurs when asset prices are considered overvalued and need to be adjusted. In the video, the presenter expresses concern that if Tesla experiences consecutive poor quarters during a market correction, it could face increased pressure and potential pain for investors.

💡Competition in China

Competition in China refers to the rivalry among companies operating within the Chinese market. This can include both domestic and international firms competing for market share, customers, and resources. In the context of the video, the presenter discusses the increased competition Tesla faces in China, particularly from Chinese automakers that are introducing new electric vehicle models.

💡Full Self-Driving (FSD)

Full Self-Driving (FSD) is an autonomous driving technology that aims to enable a vehicle to operate without any input from a human driver. It is a significant area of investment and development for Tesla. In the video, the presenter mentions that proving the capability of FSD is crucial for Tesla to achieve a meaningful upgrade to its EPS and to maintain its competitive edge in the market.

💡Gold Rally

A gold rally refers to a significant increase in the price of gold, often driven by market conditions that make the precious metal more attractive to investors. This can be due to various factors, including economic uncertainty, inflation concerns, or changes in interest rates. In the video, the presenter finds it unusual that gold is rallying despite a relatively high real yield, which typically would not support such an increase.

💡Strategic Petroleum Reserve

The Strategic Petroleum Reserve (SPR) is a stockpile of petroleum maintained by the United States government to store large quantities of crude oil for use in case of emergencies such as natural disasters, supply interruptions, or military conflicts. In the video, the presenter notes that the SPR is down to just 17 days of supply, indicating potential energy security concerns.

💡Wage Price Spiral

A wage price spiral refers to a situation where rising wages lead to higher prices for goods and services, which in turn leads to further wage increases. This cycle can contribute to inflation and economic instability if not managed properly. In the video, the presenter expresses concern about the potential for a wage price spiral due to increasing wages in industries like fast food and technology, which could lead to longer-term inflationary pressures.

Highlights

Deutsche Bank expects flat volume in 2024 and limited free cash flow for Tesla, which could lead to a need for fundraising.

Tesla's free cash flow is a contentious issue, with some bulls misinterpreting the balance sheet and overestimating the available funds.

The market's reaction to Tesla's Q1 results reflects an increased understanding of the company's near-term challenges.

Tesla's revenue projections for Q1 have been lowered and gross margin adjusted to 13.5% due to lower volume.

Deutsche Bank cuts full year volume for Tesla to 1.84 million vehicles, indicating a growth of about 2%.

Tesla's 2025 earnings per share are lowered to $215, leading to a high PE ratio even with a recovery to 20% growth.

The broader market shows growth, with companies like Toyota, Honda, and Ford experiencing increases in sales, unlike Tesla.

Elon Musk's idea of licensing Tesla's FSD software to other automakers has been mentioned multiple times but not yet materialized.

Gold broke $2,300, which is unusual as it typically rallies when the 10-year real yield is low, indicating a potential shift in market sentiment.

There's a discussion about wage price spirals and their potential impact on long-term inflation, driven by rising wages in sectors like fast food and AI.

Apple is exploring the development of personal robots and other devices, indicating a shift from their previous focus on an EV project.

A Wall Street Journal poll suggests that Biden is falling behind in six out of seven swing states.

There's tension in the Middle East with Israelis expanding settlements into the West Bank, creating more conflict with Palestinians.

The Strategic petroleum Reserve is down to just 17 days of supply, with refill efforts delayed due to high prices.

Elon Musk's mention of licensing FSD software has been met with skepticism due to the high price and lack of industry interest.

The speaker shares a personal anecdote about playing RuneScape and owning a coffee cup related to the game.

The speaker expresses concerns about Tesla's stock performance, noting it has dropped significantly despite market rallies.

The speaker discusses the potential impact of a market correction on Tesla and the importance of considering short-term challenges alongside long-term growth prospects.

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