Tesla Price Prediction: A Blow-off Top Followed by Epic Collapse

  • Hertz Announced an initial order of 100,000 Tesla’s to be filled by year-end 2022.
  • Tesla skyrocketed from a $913-billion market cap (October 22, 2021) to $1.21 trillion.
  • The bullish response added $300 billion, implying a $3-million price tag per vehicle ordered (not sold).

Tesla Daily Chart

Tesla shares skyrocketed above $1000 on the Hertz announcement. Tesla is now worth more than all the auto manufacturers combined. More on that later.

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Tesla Market Cap

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https://ycharts.com/companies/TSLA/market_cap

Gross Profit

Let’s say Tesla makes a generous $20,000 profit per vehicle ($20,000 X 100,000). That indicates a gross profit of $2 billion, far shy of the $300-billion increase. What is going on here?

Ford Motor Company

By comparison, Ford Motor Company currently sports a $72-billion market cap, so Tesla adding $300 billion in market cap is like adding four (4) Ford Motor Companies.

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https://ycharts.com/companies/F/market_cap

Major Auto Companies by Market Cap

Below is a quick rundown of all major auto manufacturers by current market cap. Tesla is worth more than all and sells less than 1% of the vehicles.

With a market cap of $1.21 trillion, TSLA is trading at a 25% premium above all auto manufacturers on the planet!

Tesla looks, acts, and smells like a bubble. The question is…when will it pop?

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here, or follow AG on Twitter at https://twitter.com/ag_thorson

Fiat Chrysler Shares Jump Over 12% on PSA Merger Deal Revision

Fiat Chrysler Automobiles’, an international automotive company, shares jumped over 12% in Milan on Tuesday after the car marker agreed to revise certain terms of their merger deal with its French partner Peugeot SA, with the world’s eighth-largest auto maker’s shareholders receiving a smaller cash payout but a stake in another business.

The Italian-American multinational corporation, FCA, said it has agreed to the amendments in order to address the liquidity impact on the automotive industry of the COVID-19 pandemic while preserving the economic value and fundamental balance of the original Combination Agreement.

The world’s eighth-largest automaker said the special dividend to be distributed by FCA to its shareholders before closing is set at EUR 2.9 billion (previously EUR 5.5 billion) while Groupe PSA’s 46% stake in Faurecia will be distributed to all Stellantis shareholders promptly after closing following approval by the Stellantis Board and shareholders.

As a result of these amendments, FCA’s and Groupe PSA’s respective shareholders will receive equal 23% shareholdings in Faurecia (capitalisation EUR 5.867 billion at market close, 14th September 2020), while their 50/50 ownership of Stellantis – a group that will now have EUR 2.6 billion more cash on its balance sheet – will remain unchanged.

Additionally, it has also been agreed that the Boards of both Groupe PSA and FCA will consider a potential distribution of €500 million to the shareholders of each company before closing or, alternatively, a distribution of €1 billion to be paid following the closing to all Stellantis shareholders, the company said.

In July FCA said that the terms of its alliance with Europe’s second-largest car manufacturer Peugeot SA had not changed after Il Sole 24 Ore newspaper reported that it is considering ways to cut a planned 5.5 billion euro ($6.2 billion) of special dividend distribution to its shareholders.

Fiat Chrysler’s shares jumped over 12% to EUR 11.21 on Tuesday; however, the stock is down about 16% so far this year. Also, the Peugeot SA shares rose about 5%to EUR 16.9850.

Fiat Chrysler stock forecast

Bank of America set a EUR 16.00 price objective on Fiat Chrysler Automobiles. The brokerage currently has a buy rating on the stock. UBS Group set a EUR 9.00 price objective and gave the company a neutral rating. Jefferies Financial Group set a EUR 9.50 price target and gave the company a buy rating.

The one listed on the U.S. stock exchange, nine analysts forecast the average price in 12 months at $12.16 with a high forecast of $19.00 and a low forecast of $9.50. The average price target represents a 1.93% increase from the last price of $11.93. From those nine equity analysts, three rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

Analyst views

“Our base-case fair value estimate of EUR 29 per share assumes, thanks to coronavirus-induced factory and dealership closures, sales plunge 21% in 2020, rebounding slightly by 5% in 2021, and more normalized revenue by2023. We estimate 3% annualized growth in revenue during our Stage I forecast. Our base-case adjusted EBIT margin assumptions average 3.6% during our five-year forecast, including near break-even 2020 margin due to COVID-19,” said Richard Hilgert, senior equity analyst at Morningstar.

“Fiat Chrysler’s five-year business plan had an adjusted EBIT margin target of 9.0%-11.0% in 2022. However, our forecast terminates with a normalized sustainable midcycle adjusted EBIT margin assumption of 5.7%, 140 basis points above the 15-year historical median of 4.3% to reflect the dramatic turn around the company has experienced during the past five years,” Hilgert added.

Upside and Downside risks

Upside: 1) Global expansion of Jeep, Maserati, and Alfa Romeo strengthens average revenue per unit and improves economies of scale. 2) Leading share position in Brazil and presence in other developing markets enhance long-term top-line growth prospects. 3) On a relative-size balance sheet basis, Fiat Chrysler has one of the largest available liquidity positions of the global auto manufacturers, highlighted by Morningstar.

Downside: 1) The global auto industry suffers from overcapacity that increases pricing pressure, in turn limiting economic profits. 2) Fiat Chrysler’s workforce is highly unionized, a threat to profits if workers demand wage increases or refuse labor cuts. 3) In the event of a substantial volume downturn, industrial debt service would divert significant cash from reinvestment in the business.

Check out FX Empire’s earnings calendar

Fiat Chrysler Says Terms of PSA Merger Unchanged After Dividend Cut News

Fiat Chrysler Automobiles, an Italian-American multinational corporation, said the terms of its alliance with Europe’s second-largest car manufacturer Peugeot SA had not changed after Il Sole 24 Ore newspaper reported that it is considering ways to cut a planned 5.5 billion euro ($6.2 billion) of special dividend distribution to its shareholders.

Fiat Chrysler Automobiles confirmed that it would remain committed to the deal agreed with Peugeot SA in December last year. “The structure and terms of the merger are agreed and remain unchanged,” a spokesman for the Italian-American automaker told Reuters in an interview.

The world’s eighth-largest automaker has agreed to the conditions laid down for a state-backed 6.3 billion euro loan, including a promise not to relocate or cut jobs to weather the ongoing health crisis.

According to Reuters, Italian business newspaper Il Sole 24 Ore reported that Fiat Chrysler Automobiles could conserve cash by reducing the special dividend, possibly by handing shareholders assets as compensation.

Fiat Chrysler outlook and price target

Six analysts forecast the average price in 12 months at $9.94 with a high of $12.37 and a low of $6.75. The average price target represents a -0.10% decrease from the last price of $9.95, according to Tipranks.

From those six, three analysts rated ‘Buy’, two analysts rated ‘Hold’ and one rated ‘Sell’. HSBC raises target price to EUR 11.4 from EUR 11. Jefferies raises target price to EUR 9.50 from EUR 8.

Analyst comment

“We are reducing our 2020 US SAAR estimate to 15.5 million from 16.5 million due to the coronavirus demand shock. Our new Bull Case is 16.5mm with our Bear Case at 14.5mm. We make reductions to 2020 EPS for GM, F and FCA and the dealers accordingly,” Morgan Stanley noted in March.

“Our 2020 EPS falls to EUR 1.93 from EUR 2.85 previously. Of the EUR 0.92 decrease, about EUR 0.60 is a result of our 1mm unit SAAR forecast cut, where we have NAFTA shipments declining 8% Y/Y vs. our previous expectation of -2.5% Y/Y. Consistent with our forecasts for GM and Ford, the majority of the decrease vs. our previous expectation comes in Q2/Q3 where we now forecast NAFTA shipments down 12% and 8% Y/Y respectively vs. our previous expectations of -2% and 2%,” analyst added.

“Looking internationally, we forecast APAC shipments down 11.4% Y/Y with Q1 -30% / Q2 -14% / Q3 -8% with an uptick in Q4 of ~7%. Looking to EMEA, we forecast shipments down ~13% Y/Y vs. -2% previously, with the largest downward revision coming in Q2/Q3, where we are modelling shipments -20% and -12%, respectively. We have made no changes to mix or price in any region,” MS noted.