Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How Tesla Stock Lost 35 Percent in Five Days
Transcript
- Lucas: Tesla just had its worst week in four years. Fifteen percent in five days. Luna: Fifteen percent? That's not a correction, that's a near-panic. Lucas: It is. The stock closed Friday at three eighty point eight four, down from four hundred fifty a month ago. The NASDAQ dropped one point four percent over the same period, so Tesla fell ten times as hard. Luna: What's driving it? Because I don't see a single catastrophic headline — no Elon meltdown, no recall, no demand collapse. Lucas: Right. It's a compression of three things. The first is China. July delivery data from the China Passenger Car Association is expected next week, and the whisper numbers are weak. Local competitors like BYD and NIO are gaining share in the EV segment, and Tesla's price cuts aren't cutting it anymore. Luna: So the market is front-running bad numbers. But Tesla has been losing share in China for months — why is the stock only reacting now? Lucas: Because the second factor is margins. Tesla's automotive gross margin, excluding regulatory credits, was already down to about fifteen percent last quarter. Analysts are modelling another dip to twelve or thirteen percent this quarter. When a growth stock's gross margin compresses toward single digits, the multiple compresses too. Luna: And the multiple is the third factor. What's Tesla trading at now — like fifty times forward earnings? Lucas: Closer to sixty. That's down from a peak of over a hundred, but still absurd for a car company facing declining unit volumes. For context, Ford trades at seven times. Toyota at nine. Tesla's valuation is pricing in that it's a technology platform, not a car maker. Luna: But the market is starting to treat it like a car maker. That's the fundamental tension. Lucas: Exactly. And the selloff accelerates because a lot of Tesla's shareholder base is momentum-driven. When the stock breaks below a key moving average — and it broke below the two hundred day moving average on Wednesday — the algo selling kicks in. Luna: I don't think it's all algo. Some of it is real money. I saw a note from a large hedge fund that cut its position by thirty percent in the last two weeks. They cited the China data and the margin compression. Lucas: That's the kind of selling that creates a vacuum. When a big holder exits, there's no natural buyer at the old price. The stock has to fall until someone else sees value. Luna: And that brings us to the question every investor is asking: is this a buying opportunity or is the narrative broken? Lucas: I think that depends on which Tesla you believe in. The Tesla that sells cars — that business is facing real headwinds. But the Tesla that owns the robotaxi network, the Optimus robot, the Dojo supercomputer — those are option values that haven't been delivered yet. Luna: The market is saying it doesn't want to pay for options right now. It wants earnings. Lucas: Exactly. And that's why I think the stock could still have another leg down if the delivery numbers miss badly. But for a long-term investor with a five-year horizon, the selloff creates a better entry point — as long as you believe the options have real value. Luna: Let me push back on that. The options — the robotaxi, the robot — they've been promised for years. Every time the stock dips, the bull case is 'wait for the next big thing.' At some point, you need execution. Lucas: You're right. And the clock is ticking on robotaxi regulatory approval. But I'd argue that the bar for Tesla is different. If they deliver even a fraction of what they've promised, the revenue from a software subscription model could dwarf the car business. Luna: Look, if our money conversations have helped you think about a decision differently — whether it's holding through a selloff or rethinking your entry point — a handful of listeners chip in monthly at buy me a coffee dot com slash fexingo. That's literally what keeps this show ad-free and lets us drill into stocks like this without worrying about algorithms. Lucas: And we mean that. It's a small group already, and they're the reason we can spend fifteen minutes on a single stock instead of rushing through headlines. So thank you if you're one of them. Luna: Alright, back to Tesla. So if I'm an investor looking at this selloff, what's the one number I should watch next week? Lucas: The China delivery number. If it comes in below seventy thousand vehicles, the stock could test three fifty. If it's above eighty thousand, you might see a bounce. But I think the more important number is the gross margin when they report earnings in late July. Luna: Right. And if margins come in below thirteen percent, the bear case gets a lot stronger. Lucas: Exactly. A lot of investors are waiting for that print to decide whether to add to their position or cut losses. The stock is caught between two narratives, and earnings will break the tie. Luna: I think it's worth noting that the S&P 500 is at seventy four fifty eight, so the broader market is not in panic mode. This is stock-specific. Lucas: Completely. The Dow is barely down, the Russell 2000 is actually up. This is a Tesla story, not a macro story. And that means the catalyst is company-specific too. Luna: So bottom line for the listener: what's your actionable take? Lucas: If you don't own Tesla, don't try to catch a falling knife. Wait for the delivery data and the earnings call. If you do own it, ask yourself whether you're invested in the car company or the technology platform. If it's the latter, this selloff is a chance to dollar-cost average. But be prepared for more volatility. Luna: Fair. And if you're short, you're probably feeling good right now, but remember that Tesla has a habit of rallying when you least expect it. Lucas: It does. This stock has burned more shorts than almost any other. But the current setup is as bearish as I've seen in a while. I'm watching the two hundred dollar level — sorry, two hundred moving average, not price. The stock is already below it. Luna: You mean the two hundred day moving average, not the two hundred dollar level. Lucas: Right. The two hundred day moving average is around four hundred thirty, and Tesla closed at three eighty. So it's well below. The next support is around three fifty, which is the August 2024 low. Luna: That's a twenty percent drop from the current level. If it breaks three fifty, the next floor could be three hundred. Lucas: It could. But I think the psychology of round numbers matters. Three hundred would feel like a crisis. I'm not sure the fundamentals justify that yet. Luna: Unless the fundamentals deteriorate further. And that's the risk. Lucas: That's always the risk with a high-multiple stock. The narrative can shift faster than the business. And that's why you need to know your own thesis before you buy. Luna: Well said. I think that's a good place to leave it. Next week we'll look at Bank of America's wealth management results — they're up three percent in the last five days. Lucas: Looking forward to it. For now, keep your eyes on China and your mind on the margin.