2017 Investor Roundtable:General Discussion

[Chickenlittle]

That is not my experience at all. Our 2002 Prizm with 145k is being driven my my oldest son and has yet to have a dealer issue. My 2004 Chevy Avalanche with 130k miles is doing just fine and has yet to go back to the dealer. My 2015 Volt with 40k has gone back 3 times all relatively minor. But my Roadster has been worked on more than my Chevy's combined and has cost more as well. The Roadster is an early car and I expected a few bugs but my Chevys have been very solid.

Better check. Gm has never notified me of these recalls despite having correct phone, email and address. We had to find them. Do get marketing mail from them though

 

[Bobfitz1]

To be clear: I am not experienced in software development/engineering, coding etc. I was pointing out that Apple and Google, who both have ambitions in autonomous systems, do not suffer from the lack of software capabilities that legacy ICE manufacturers do. This was a point of differentiation Elon brought up in an earnings call as it related to manufacturing automation, and it's important to keep in mind when analyzing the competitive landscape.

I see a lot of people bulking ICE makers and Big Tech in the same bucket when looking at potential competition for Tesla. This is not a correct approach. I personally have very different views for the two groups: I don't see most ICE makers surviving the disruption, which is happening quicker than some here expect (decades?! try five years), but I expect formidable competition from Big Tech, especially Apple.

You seem to have missed my point. Apple's gigantic cash resources mean they can't be dismissed as ever being a potential competitor.
However their current software capabilities and accomplishments are not IMO an additional reason why they would be able to compete with Tesla anytime soon in EVs.

 

[kenliles]

Wall Street's 'dean of valuation' calls Tesla’s bond buyers 'naive,' sees stock worth half as much
"<
The company is "trying to woo bond buyers with the same pitch of growth and hope that has been so attractive to equity markets. That suggests that those making the pitch either do not understand how bonds work (that bondholders don't get to share much in upside but share fully in the downside) or are convinced that there are enough naive bond buyers out there, who think that interest payments can be made with potential and promise," the professor wrote.
>"
I think he's missing the 500,000 queue of transactional growth

He's way behind the curve here- but interesting to see the perspective of a 'traditional valuation' -
another mold broken by Tesla- who'd a thunk it--

 

[ValueAnalyst]

Wall Street's 'dean of valuation' calls Tesla’s bond buyers 'naive,' sees stock worth half as much
"<
The company is "trying to woo bond buyers with the same pitch of growth and hope that has been so attractive to equity markets. That suggests that those making the pitch either do not understand how bonds work (that bondholders don't get to share much in upside but share fully in the downside) or are convinced that there are enough naive bond buyers out there, who think that interest payments can be made with potential and promise," the professor wrote.
>"
I think he's missing the 500,000 queue of transactional growth

He's way behind the curve here- but interesting to see the perspective of a 'traditional valuation' -
another mold broken by Tesla- who'd a thunk it--

Damodaran used to say similar stuff on Amazon, so this is a bullish sign as far as I'm concerned.

 

[Lessmog]

Wall Street's 'dean of valuation' calls Tesla’s bond buyers 'naive,' sees stock worth half as much
"<
The company is "trying to woo bond buyers with the same pitch of growth and hope that has been so attractive to equity markets. That suggests that those making the pitch either do not understand how bonds work (that bondholders don't get to share much in upside but share fully in the downside) or are convinced that there are enough naive bond buyers out there, who think that interest payments can be made with potential and promise," the professor wrote.
>"
I think he's missing the 500,000 queue of transactional growth

He's way behind the curve here- but interesting to see the perspective of a 'traditional valuation' -
another mold broken by Tesla- who'd a thunk it--

Damodaran used to say similar stuff on Amazon, so this is a bullish sign as far as I'm concerned.

He said something like this about Tesla a few years back also. I believe he made a retraction of sorts, much later. Maybe because he was proven totally wrong that time? So ... let's wait and see, and make use of good opportunities meanwhile.

 

[jbcarioca]

Given the usual enthusiasm most of us have for Tesla innovations, including myself, I thought it wise to remind ourselves of past events. These two are illustrative of excelelnt reasons to tewmper our enthusiasm from time to time:
The link below is to a 2009 article celebrating teh new solar tiles from Solé Power together with US Tile (only $50 per sq ft installed:
Sole Power Tile Makes Adding Solar Easy
The other link is to the 2016 shutdown of DOW Powerhouse:
https://www.greentechmedia.com/articles/read/dow-chemical-sheds-solar-shingle-business

both of these, among so many others, worked but could not overcome impediments.

We can argue that Tesla will beat the odds because they have already done so several times. Elon did it with SpaceX and PayPal.
FWIW, I bet against PayPal when I advised a couple major banks that they could not surmount the settlement issue.
I wanted SpaceX to succeed but i though reusability was a pipe dream.
Many years before my employer counseled a major electronics firm that handheld calculators had no future because slide rules were faster and only engineers would want them anyway. Luckily I was not personally part of that stupidity.

My humility of the moment is not discouraging me from TSLA, but it does cause me to raise my discount rate. It also causes me to reconsider solar roof and Tesla Semi expectations.
I remain convinced of the massive movement towards distributed storage with utilities, companies and individuals. That is not the same as expecting to make money in the process.

Another person here PMed me a serious flamer a few hours ago. he seemed to want it to be private so I'll not quote him. Frankly, I would have expected him to do it publicly because we all need contrary views to keep us honest. He had some good points regarding accounting, although I completely disagree with his conclusions.

For all our sakes we need to be certain that we do not shut out contrary views. As for me, I appreciate a challenge. I still will not ever be a pushover for sloppy thought nor weak logic, at least as far as i can discern such. It is wise for others to treat me just as I do them.

I have spent much of my life living in rigid and intolerant societies. I hope TMC never succumbs to groupthink.

 

[tftf]

This is priceless. I love it when you take such a precise stand on things. No abstract time tables, no goal post moving. Just very precise predictions. Another batting 1.000 for the other team. You know, it'll rain in Aswan sooner or later too.

Just like Elon Musk jumping from 1GW in solar capacity to 10GW and then (as soon as SCTY deal was done and voting over) back to 1GW.

A delta of 9 GW. Peanuts, right?

Same for the CFO promising positive cash-flows again and again for years...yes, it's apparently all due to "faster expansion" and "moving investments forward":

Funny thing is, the $ for Tesla's entire portion of GF1 were supposed to have been funded back in February 2014.

All the money (number of pre-oders close to 400k already done and ramp moved up from 2020 to 2018) for Model3 back in 2016.

Yet Tesla keeps raising more debt in 2017 for GF1 and Model3 while many of the "old" money from 2014-2016 has been used to plug operational expenses instead of cap-ex projects.

When it rains, it pours and new money won't flow - and that will be coupled with a sharp demand reduction for high-end S and X cars whenever the next market downturn or recession arrives..

 

[kenliles]

reminder:
launch in about 1 hr
Dragon Resupply Mission (CRS-12) | SpaceX

 

[Alketi]

My humility of the moment is not discouraging me from TSLA, but it does cause me to raise my discount rate. It also causes me to reconsider solar roof and Tesla Semi expectations.

Agree jbcarioca. It's important for everyone to remember that when Elon gives a date, he's generally giving an internal date. And it's an optimistic internal date that assumes everything will go right and everyone will work overtime. That's why he's almost always late. No other CEO would dream of doing this and that's why no one can understand it. Just follow Bill Maurer on SA. If any haven't, investors should read Elon's biography to understand how he really works.

 

[Bet TSLA]

I think I will be perfectly content with a 2018 Tesla in 2033.

Really? So you're the guy buying a 2012 Model S because it will keep you happy until 2027?

 

[Reciprocity]

Given the usual enthusiasm most of us have for Tesla innovations, including myself, I thought it wise to remind ourselves of past events. These two are illustrative of excelelnt reasons to tewmper our enthusiasm from time to time:
The link below is to a 2009 article celebrating teh new solar tiles from Solé Power together with US Tile (only $50 per sq ft installed:
Sole Power Tile Makes Adding Solar Easy
The other link is to the 2016 shutdown of DOW Powerhouse:
Dow Chemical Sheds Its Solar Shingle Business

both of these, among so many others, worked but could not overcome impediments.

We can argue that Tesla will beat the odds because they have already done so several times. Elon did it with SpaceX and PayPal.
FWIW, I bet against PayPal when I advised a couple major banks that they could not surmount the settlement issue.
I wanted SpaceX to succeed but i though reusability was a pipe dream.
Many years before my employer counseled a major electronics firm that handheld calculators had no future because slide rules were faster and only engineers would want them anyway. Luckily I was not personally part of that stupidity.

My humility of the moment is not discouraging me from TSLA, but it does cause me to raise my discount rate. It also causes me to reconsider solar roof and Tesla Semi expectations.
I remain convinced of the massive movement towards distributed storage with utilities, companies and individuals. That is not the same as expecting to make money in the process.

Another person here PMed me a serious flamer a few hours ago. he seemed to want it to be private so I'll not quote him. Frankly, I would have expected him to do it publicly because we all need contrary views to keep us honest. He had some good points regarding accounting, although I completely disagree with his conclusions.

For all our sakes we need to be certain that we do not shut out contrary views. As for me, I appreciate a challenge. I still will not ever be a pushover for sloppy thought nor weak logic, at least as far as i can discern such. It is wise for others to treat me just as I do them.

I have spent much of my life living in rigid and intolerant societies. I hope TMC never succumbs to groupthink.

I like a guy who can admit mistakes. If you cannot, you will not progress as a person and in this case an investor. I learned my lessons on APPL when I doubted and mocked the iPhone. Missed a huge opportunity that hopefully TSLA can help rectify.

As far as contrary views, they are good if they make sense. Spend a day reading $TSLA on twitter and you see what I mean. Every 10th tweet has a rational view either way, the rest is just garbage, lies and false narratives that are clearly to support an agenda. I get that some have taken a bath on their short position and that makes them angry, but if they truly believe they are right, they should stick with it. But they should also open their minds a bit and see if it makes sense to not fight the momentum. I agree this is a story stock, but its a good story and is fact based. Sure Elon is exaggerates and misses deadlines, but you need look no further then the product that finally makes it to market and it is pretty awesome.

Are we really going to be going to Mars in 2020, probably not. Are we really going to see 700,000 Model 3s a year? Maybe, but maybe Model Y takes some that wind out of the sails. Model 3 will be the car you can get today if you do not want to wait for a Y.

The thing that gets me is why does Tesla really need to sell a single product to a single person. They could build autonomous cars and take over the ride sharing world. They could build their own microgrids to power those cars. In cities they would need to partner with local businesses to put solar on their roofs. For the Semi, they could build their own logistics company and power the whole thing with the previously mentioned microgrids. In the process, Tesla would become the biggest Utility on the planet and never sold one product or service to a single non-Tesla entity. Only the solar tiles + PW2 are something they would probably have to sell to end consumers. Will they do this, no. But it shows the power of what they are doing. Is Tesla perfect, was Apple? Iphone had tons of issues over the years and in some ways its not the best phone.

Shorts will come on here and say.. Elon said they would have 100GWh or production and he said 200,000 this and 500,000 that, when it just flat out does not matter. What does matter is that Model 3 will more then likely follow a similar path of the Model S from s non-existent dream to 30+% market share in 5 years. Is it going to be a bumpy road, I would be absolutely shocked if it wasnt. When you are going through hell, just keep on going, sooner or later you come out the other end. This is not a situation without risk and everyone should take head, but I have zero doubt that next 12 months are going to magical and will solidify the future for Tesla.

 

[MitchJi]

I see a lot of people bulking ICE makers and Big Tech in the same bucket when looking at potential competition for Tesla. This is not a correct approach. I personally have very different views for the two groups: I don't see most ICE makers surviving the disruption, which is happening quicker than some here expect (decades?! try five years), but I expect formidable competition from Big Tech, especially Apple.

I believe that makes no sense. How many ICE OEM's are happily sharing the market for cars? Semi's?

Solar roofs and solar panels:
How many huge energy production companies are currently competing, Exon, Shell, BP etc.

TE:
How many giant utility companies are there in the world?

 

[SteveG3]

I see a lot of people bulking ICE makers and Big Tech in the same bucket when looking at potential competition for Tesla. This is not a correct approach. I personally have very different views for the two groups: I don't see most ICE makers surviving the disruption, which is happening quicker than some here expect (decades?! try five years), but I expect formidable competition from Big Tech, especially Apple.

It's already been five years since the Model S came out. Five years in September since The NY Times called it arguably the biggest game changer since the Model T. Five years in November since Motor Trend indicated that it was the first car ever to unanimously win their COY award, which has been given for many decades. What's more, a case could be made that the starting point for the disruption is 2008 when the first 200+ mile EV was available to consumers. Regardless of starting point, as of the end of this year, total 200+ mile EVs sold by all companies other than Tesla will total roughly 20,000, ever.

I would consider the disruption to have effectively played out (the terms used in the comment you are responding to) when long range EVs are the dominant drivetrain of new vehicle units sold (something like 80+%). I'm quite confident that this is a decades long process that we are only 5 or 8 years into depending on what you use as your starting point (some might even suggest we are 14 years into it, given Tesla's 2003 founding).

As far as lumping high tech behemoths with the ICE makers... I hadn't noticed anyone here doing that, but I don't read every post. I've repeatedly seen the opposite though... many of us repeatedly pointing out that unlike the ICE makers, an Apple or Samsung could turn squarely to EVs without the tremendous conflict of imploding their existing business that leaves ICE makers in a very vulnerable position.

It's not inconceivable that Apple could jump in and pull in Google, Samsung, etc. Putting aside how probable any of us think this is, if it did happen, I consider it unlikely we would top 80% long range EVs before 2032. Consider the article I linked about Apple's Project Titan. In 2014, when they began, they were targeting the early 2020s for a product launch. There's a point beyond which money, even Apple money, cannot further speed things up.

 

[SteveG3]

for those hoping for more attention from Jim Cramer, that's might not play out so well.

you might want to consider that Jim is one of the two co-founders of thestreet.com, and it's current chairman of the board, and then read through a sampling of thestreet.com's Tesla coverage of TSLA the past several years. off the charts, tabloid, let's say "creativity", anti-selling TSLA, at tremendous volume, including, frequently getting the their hit pieces recycled multiple times to the top of Yahoo Finance's TSLA newsfeed. Cramer himself? while, he chooses his approach carefully to not have history show him as having been absurdly backwards in his Tesla thinking, he pretty much repeated into public consciousness the notions that Tesla "is a cult stock" and "you can't value the darn thing." we hear forms of both of these narratives from many now, so you may not associate it with Cramer... but, that's because he mounted such a relentless campaign of repeating those ideas that it started to be repeated in public discussion as if it were obvious common sense.

don't get me wrong... Cramer has such a mercenary track record, he could flip and start to talk uniformly positively about Tesla if he comes to decide that's what he wants to do... but up until now, he's been among the most dogged purveyors of TSLA anti-selling propaganda.

 

[Runarbt]

MitchJi:

In another 5 years, tesla will have the capacity to produce millions of cars.

This will be when the other ICE manufacturers will feel the hurt, when their most profitable car models are effectively "killed" by Tesla competitors.

You really cant compare todays situation with many ICE manufacturers. They compete at the same level.. Tesla (with volume production) vs. ICE? It will be a massacre,

 

[SteveG3]

MitchJi:

In another 5 years, tesla will have the capacity to produce millions of cars.

This will be when the other ICE manufacturers will feel the hurt, when their most profitable car models are effectively "killed" by Tesla competitors.

You really cant compare todays situation with many ICE manufacturers. They compete at the same level.. Tesla (with volume production) vs. ICE? It will be a massacre,

In 5 years, the global vehicle market will be 90-100 million units per year. Tesla might get to 2 million units sold. This will (already has started to) put a hurt on BMW, Mercedes, etc. If Tesla has a pick up truck out in high volumes, that's where they will hurt GM, Ford, and Chrysler... but for the other 80 million or so vehicles that get sold, I think the ICE makers will still largely be kicking down the road switching to EVs. The most aggressive non-luxury maker is targeting 25% EVs for themselves in 2025... but facing a wave of internal resistance to even this goal.

 

[kenliles]

SpaceX
re-entry landing - point perfect..

Dragon- deployed- solar arrays deployed-
all good on SpaceX front

 

[22522]

for those hoping for more attention for Jim Cramer, that's might not play out so well.

you might want to consider that Jim is one of the two co-founders of thestreet.com, and it's current chairman of the board, and then read through a sampling of thestreet.com's Tesla coverage of TSLA the past several years. off the charts, tabloid, let's say "creativity", anti-selling of TSLA. Cramer himself? while, he chooses his approach carefully to not have history show him as having been absurdly backwards in his Tesla thinking, he pretty much repeated into public consciousness the notions that Tesla "is a cult stock" and "you can't value the darn thing." we hear forms of both of these narratives from many now, so you may not associate it with Cramer... but, that's because he mounted such a relentless campaign of repeating those ideas that it started to be repeated in public discussion as if it were obvious common sense.

don't get me wrong... Cramer has such a mercenary track record, he could flip and start to talk uniformly positively about Tesla if he comes to decide that's what he wants to do... but up until now, he's been among the most dogged purveyors of TSLA anti-selling propaganda.

Cramer has gone on record as a news manipulator... And trade manipulator, seeding sell trades, timed at different brokerages to look like bad news rippling through the market... Triggering robot trades to tank a stock based on false information.

His last statement was "Elon is going to win." Said stresssed out, maybe thinking about his friends who have lost.

 

[Bet TSLA]

You claim that Apple has similar/superior software capabilities as Tesla. I strongly suspect that is far from the case, but I'd like to hear how you and others rank them.

From my many years doing software development at Apple (not currently), I'd say they rate as somewhat decent on software engineering. Without getting into details, they are another Silicon Valley company where shipping dates reign supreme and software quality is only slightly relevant.

I'm pretty confident this is due to the depth of Elon Musk's understanding of SW development coupled with his ability across all disciplines to recognize, hire and motivate the best people.

Recognizing and hiring great people, sure. But I don't think Elon has much understanding of large scale software development. Remember, in software there are no "first principles" so his favorite mental tool doesn't work.

I'd argue that Tesla/SpaceX capabilities across the full spectrum of SW development far exceeds Apple.

Giving examples of what SpaceX has accomplished says little or nothing about Tesla. Pushing updates to Tesla vehicles is essentially the same thing Apple has been doing for years pushing software to its devices, so is not evidence of greater capability. I have no idea what you mean by "full spectrum".

For Tesla what measures their software engineering prowess is whether they can update their existing software into something better. That stresses their source code control, testing, and release processes. So far the evidence is not very good. From the outside it looks like much of their code is sufficiently messy that their regression rate is high -- as they fix bugs they introduce as many new bugs, and as they add features they break existing features. Some things are so ugly (e.g. the music UI) that they don't even try to fix it -- that's what you see when the guy who wrote the code is gone and nobody dares touch it.

I have discussed Tesla with one Apple software engineer who moved over there. He was more horrified than impressed, but I'm hoping his experience was not typical. My impression is that there's lots of cowboy code hacking and very little software engineering. That works for a while, but it's not sustainable. We shall see, but I'm a bit worried. I am not at all impressed with the progress in the auto-pilot software since AP2 was released.

 

[Ulmo]

Tesla’s giant new Powerpack project in Australia will use battery cells made by Samsung

• Not enough batteries from GigaFactory 1?
• Always good to have multi-supplier relationships from a redundancy perspective.
  
• Dampen relationship with Panasonic?
• A little competition under the hood to get GF1 running better?
• Relieve pressure on any ramp ups at GF1?
• Helps to soak up world supply of batteries for some moat action?

I'm trying to figure out how much Tesla -> Tesla Energy -> Tesla Energy Storage is selling. I looked at 10Q's and letters, and it seems to break down like this; they only list "Energy Generation and Storage", which includes solar (panels (and roofing?)), from what I understand, as well as PowerPack and PowerWall:

• Quarter Revenue - Cost of revenue = Gross Profit, Gross Margin %, Installed MWh
  
• 2015Q4 $11,494,000 - $10,137,708 = 1,356,292, 11.8%, ?MWh
• 2016Q1 $22,728,000 - $18,113,000 = 4,615,000, 20.3%, ?MWh
• 2016Q2 $3,947,000 - $8,159,000 = -4,212,000, -106.7%, ?MWh
• 2016Q3 $23,334,000 - $24,290,694 = -956,694, -4.1%, ?MWh
• 2016Q4 $131,385,000 - $127,837,605 = 3,547,395, 2.7%, 98MWh
• 2017Q1 $213,944,000 - $151,773,000 = 62,171,000, 29.1%, 60MWh
• 2017Q2 $286,780,000 - $203,762,000 = 83,018,000, 28.9%, 97MWh

I don't know what proportion of the "Energy Generation and Storage" the "Storage" portion is in any of those items. As we can all see, the area is growing, and the gross margins are improving. They list "Operating Expenses" (which is comprised of Research & Development, and Selling, General & Administrative) separately from the above numbers; does that mean "cost of revenue" refers solely to acquisition and manufacturing cost of the products plus installation of the products minus and without the R&D and "general & administrative"?

Does anybody have links to posts with more information about their storage product financials? It looks like to me they're doing quite a bit of business compared to historical levels, but that their storage products historically remain recently (last 3 quarters) sort of flat and historically overall minor with respect to their general company growth, which measures in the billions for automotive, not millions.

GigaFactory 1 in Nevada is producing batteries for Power{Wall,Pack} products and Model 3, from what we understand. In addition, Samsung provides batteries for PowerPack products going into Australia for now, from what we understand. Is this a correct interpretation for now?

I have yet to go listen to recent talks, so I'm probably not catching any type of color.

My USA PowerWall 2 installation was installed July 20, 2017, which fits in 2017Q3, which won't end for another month and a half.