Tesla's earnings report was higher than market expectations, with Tesla rising more than 7% before U.S. stock markets.
But in fact, concerns about Tesla have always existed, most notably that competition is intensifying. The prediction, though, is a bit like Elon Musk's prediction of fully autonomous cars: always around, but reality never seems to come.
Lessons from Netflix
However, competition in the electric vehicle industry is indeed intensifying. Tesla bulls should seriously consider this impact, especially considering how streaming giant Netflix is competitive in the industry.
After failing to meet Wall Street and its own growth expectations, Netflix plunged into the abyss, closing down 35 percent on Wednesday.
So far this year, Netflix has fallen 63 percent, down 68 percent from last November's 52-week high. The company's market capitalization is now only about $100 billion, below its peak of $300 billion. About $209 billion in market capitalization disappeared in the blink of an eye.
The inflection point for growth stocks is very painful. Peacock, Paramount+, Disney+, Hulu, and Amazon Prime have finally done it: the streaming market is saturated and Netflix's growth is slowing.
What about Tesla?
The investor's question is: so, who is Disney+ in the EV world?
There is no answer yet, but many car companies will try. For example, Ford, General Motors, and Volkswagen are competing for Tesla's share of the dominant electric vehicle in the United States, with more advanced electric vehicles accounting for more than 80 percent of the U.S. electric vehicle market.
However, Tesla has a much smaller market share in Europe and China — for two main reasons.
First, there are more electric vehicle models on sale in both places. Second, Tesla – for now – doesn't have enough manufacturing capacity. For example, a Model Y can take up to nine months to deliver.
However, judging from the share of overseas markets, tesla's future may be likely. According to the latest data from the automotive industry, Tesla sold about 16,000 cars in the European Union in February.
But as the overall penetration of electric vehicles increases, it is difficult to track market share. Mercedes-Benz said the reason was that there were different levels of competition for electric vehicles, with it selling about 4,000 electric vehicles in February. The Mercedes EQS is one of the models it sells, starting at around $100,000. This means that EQS will never be a car that sells in large quantities.
Tesla accounted for nearly one-fifth (18%) of all electric vehicles sold in the EU in February.
According to industry data from Citigroup analyst Jeff Chung, its market share in China is about 15%, while China's electric vehicle penetration rate is about twice that of the European Union.
Tesla vs Netflix
Maybe Tesla's share is destined to be 15%. But is that enough to prop up the stock? When sales growth slows, the movement of the stock price will determine exactly what happens.
At the start of last year, Tesla's stock price was about 123 times the expected return in 2021. The company's sales volume increased by about 87 percent.
Sales are expected to grow by 50 to 60 percent this year, and the current share price is about 96 times the expected return for 2022.
Netflix's expected return in 2021 is about 42 times, and now, Netflix's stock price is 20 times the expected return in 2022.
Of course, analysts now expect Netflix's earnings to be about 2 percent lower this year than last year. The current forecast for Tesla implies a profit growth of about 60%.
"More competition is coming," said WedBush analyst Dan Ives, just not as worried. Tesla's current production capacity is several times that of other electric car companies.
With global electric vehicle penetration still on the rise, it's too early for Tesla to talk about competition for electric vehicles.
Efforts are being made to catch up
Ford and GM plan to sell millions of electric vehicles a year by mid-decade. Last year, the two companies sold about 52,000 electric vehicles in North America.
Volkswagen's ambitions are as big as Ford's or General Motors'.
In the first quarter, Volkswagen's total sales of electric vehicles worldwide were about 100,000, while Tesla's sales totaled 310,000.
Pedro Palandrani, head of research at Global X ETFs, said: "Ultimately... Oem Marketplace (FOUNDC) is a zero-sum game. "
Eventually, as the penetration of electric vehicles in new car sales slows, all companies will have to compete for market share.
Global X's self-driving and electric vehicle ETF (DRIV) owns Tesla, Toyota, Ford and General Motors.
He believes the future of the automotive industry is bright, thanks in part to electric vehicles.
But Parandrani said: "Not every car company is going to be a winner. That's why he holds a basket of auto stocks,
Perhaps this is a hedging "Netflix" risk that other investors can consider.