• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Black Friday Brings a Darker Outlook for Tesla

Tesla was painted as a China Play, and with China slowing so much that its Central Bank is throwing open the monetary spigot, look for Elon to focus his energies elsewhere.
By JIM COLLINS
Nov 25, 2022 | 11:30 AM EST
Stocks quotes in this article: AMZN, TSLA, TWTR

When Black Friday comes.... Steely Dan is dominating my mental soundtrack this morning. But, as I mentioned in my column earlier this week, I like to stay away from the herd. So, instead of focusing on mall traffic or Amazon Prime (AMZN) activity, I will focus on a much larger consumer base than the one in the U.S.: China.

The People's Bank of China reportedly will cut the reserve requirement ratio for most banks by a quarter percentage point by Dec. 5, which would pour in about $70 billion of liquidity into the economy. 

I spend so much time on the energy sector that I have adopted its lingo. We always talk about the marginal demand for a barrel of oil. So, if we look at the global economy, China is counted upon to be the marginal demand for ... just about everything.

Yes, that obviously impacts oil, and the recent zero-Covid lockdowns in Beijing and other cities have indeed pressured oil via its Brent crude pricing benchmark. Brent is flat now at $85.30/barrel.

But energy is still the best of a bad bunch of U.S. stocks. I saw the stat the other day that energy is the only one of the 12 S&P 500 sectors that has posted a gain thus far in 2022. Rest assured that I am not selling any energy names now, nor do I plan to before Dec. 23.

But when I look at the Chinese consumer, I am focused on purchases of goods, not commodities. The first name that jumps to mind as a China Play is Tesla (TSLA) .

China's auto safety regulators announced yet another recall action Friday on older Teslas (models that were actually made at Tesla's California facility). A terrible record on initial quality combined with a softening macro environment in China does not bode well for Tesla's global growth prospects. Elon Musk knew that he had to grow where the marginal growth was in the global economy, so he opened Tesla Shanghai. But macro rules the micro, just as much in China as it does in the U.S.

Earlier this year, the Insane Clown Posse of sell-side analysts that pretends to follow Tesla were climbing all over each other to raise forecasts for Tesla's unit deliveries for 2022. The highest forecast I saw was 1.7 million units, but now, with a slower China and an awful Europe (Tesla opened a factory in Germany this year) it looks as if consensus is sitting at 1.35 million units delivered for Tesla in 2022. I think they will struggle to get to 1.3 mm units.

Those unit delivery forecast declines were largely a factor of analysts lowering forecasts for Tesla's deliveries in China. As delivery wait times mysteriously disappear on Tesla's Chinese website, we can see that demand has dissipated there. The Model 3 is 5.5 years old and is no longer selling well in China (or anywhere else,) and the Y, while still selling well, is expensive for the average Chinese consumer.

Tesla was painted as a China Play, and with China slowing so much that its Central Bank is throwing open the monetary spigot, look for Elon to continue to focus his energies elsewhere. As TSLA shares have declined by around 50% this year, I don't blame him for doing so.

(For some bonus content, and if you were understandably more focused on family and football yesterday than Brazilian financial media, this is my interview with Brazil Journal regarding Elon Musk, Twitter (TWTR) and Tesla that posted yesterday on that excellent site.)_

Black Friday comes for everyone. Just make sure your portfolio doesn't have one today, or any other Friday in the foreseeable future.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins' firm owns puts on TSLA.

TAGS: Investing | Stocks | Automotive | China

More from Stocks

5 Factors to Watch in an Oversold Bounce

James "Rev Shark" DePorre
Oct 4, 2023 11:35 AM EDT

If you're stalking a counter-trend upswing in the market, then pay attention to how these scenarios play out.

Apple to the Core: Is It Better to Reduce Than Add Here?

Stephen Guilfoyle
Oct 4, 2023 10:45 AM EDT

The firm's products are profitable, but they are just the key. The key that unlocks much higher margin businesses elsewhere and going forward.

What's Next for Bank of America as the Charts Turn Ugly?

Bruce Kamich
Oct 4, 2023 9:50 AM EDT

Future declines may be likely.

The Uglier Equities and Economic Conditions Get, the More Conservative I Become

Bret Jensen
Oct 4, 2023 9:30 AM EDT

My portfolio definitely isn't sexy as it is focused more on preserving capital than aggressively trying to grow it.

Tom Lee: When a Trade Becomes Obvious, That's Often When the Trend Can Reverse

Tom Lee and the FSI Team
Oct 4, 2023 9:15 AM EDT

Is this becoming a 'single issue' market singularly focused on yields? That will eventually change, but the turning point seems a bit away.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:13 PM EDT BRUCE KAMICH

    8 Trading Rules from T. T. Hoyne

    You just read the header for this missive and prob...
  • 08:42 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How Elite Traders Make Big Profits
  • 02:58 PM EDT BRUCE KAMICH

    Classic Trading Rules From Bernard Baruch

    Bernard Baruch listed the rules (below) in his aut...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login