2017 Investor Roundtable:General Discussion

[EinSV]

Following up on the Bloomberg article earlier today that Tesla is targeting 2GW eventually at Buffalo, I did a little napkin math:

2 GW/year GF solar cells at GF2 from the article. Tesla Starts Production of Solar Cells in Buffalo

Previous target was 1GW in 2019 so assume (conservatively) 2GW is for 2021.
5kw=average solar panel on US roofs

=solar panels and roofs for 400,000 houses/year

Assume/guess 50/50 roofs and panels
200,000 solar roofs/yr
$40K/roof (probably higher initially, assumes price reduction over time)
$8B revenue

25%GM
12.5% EBIT margin
10% after taxes and interest

$800M earnings/year by 2021 with rapid growth so P/E of 50 or more = $40B+ in 2021.

Can potentially be scaled to solar GFs in Europe and/or Asia.

What am I missing?

 

[MitchJi]

2) Obviously yes. Elon said recently he thinks there is one new chemistry that may be a game changing breakthrough. I think he was talking about the John Goodenough fronted sodium glass battery invented at the University of Texas at Austin.

I believe that the odd are almost 90% that it will be successfully developed and that is the technology that he was talking about. But I wouldn't say obviously they can do that. I'm hoping to get more information from Austin before I put together a post. IMO if both of those things are correct it's going onto make a huge impact on both Tesla and the transition to sustainable energy. I believe at the end of the day reducing or eliminating cobalt is gnats nuts.

Three things to consider are:
1. Tesla will be able to at least double the current capacity of the Gigafactory. The goodenaugh cells have 2-3x the capacity of conventional cells, which means that if they produce the same number of cells that those facts alone would yield 2-3x output.


2. That will trigger a substantial increase in "competition". A lot of oem's will jump on that. They will probably be behind Tesla, if not in developing the technology, in the time and scale of their response. Even then I don't believe for a second that they will,pose any type of threat to Tesla.

3. Tesla wil probably be extremely secretive about that. There were people saying that they were going to hold off on their MS-MX purchases because they thought that the 2170 cells might be superior. That's just the form factor, how would buyers respond if they knew that game changing cells were imminent?

 

[ValueAnalyst]

Reading through the 10-Q again... can anyone else confirm that Tesla had spent nearly as much capex on Gigafactory 2 as Gigafactory 1 as of June 30?

If this is correct, we may be significantly underestimating revenue/profit contribution from Gigafactory 2 in 2018 and beyond.

As today's news showed, we were in fact underestimating annual Gigafactory 2 output, which is now guided to be 2 GWh.

Capex spending levels show this may even increase further in later years.

 

[MitchJi]

What am I missing?

You left out the profit on the non solar (glass tiles) portion of the roofs.

 

[ValueAnalyst]

Following up on the Bloomberg article earlier today that Tesla is targeting 2GW eventually at Buffalo, I did a little napkin math:

2 GW/year GF solar cells at GF2 from the article. Tesla Starts Production of Solar Cells in Buffalo

Previous target was 1GW in 2019 so assume (conservatively) 2GW is for 2021.
5kw=average solar panel on US roofs

=solar panels and roofs for 400,000 houses/year

Assume/guess 50/50 roofs and panels
200,000 solar roofs/yr
$40K/roof (probably higher initially, assumes price reduction over time)
$8B revenue

25%GM
12.5% EBIT margin
10% after taxes and interest

$800M earnings/year by 2021 with rapid growth so P/E of 50 or more = $40B+ in 2021.

Can potentially be scaled to solar GFs in Europe and/or Asia.

What am I missing?

1. Your 5 kW estimate may be too low. I estimate this number to be 8.
2. Your $40k ASP estimate is too low. It's starting at $80k+ ASP and Tesla won't cut this in half for many years, if ever. So say $60k.
3. Some would say GM should be 15%, but I'm estimating at 20%. 25% may be too high.

So my estimate is somewhere around $75B value. The ASP makes a big difference.

 

[EinSV]

You left out the profit on the non solar (glasss tiles) portion of the roofs.

Sorry it wasn't more clear -- I was just assuming $40K for the roof "all in," including tiles with and w/o solar. Admittedly a SWAG assuming some price reduction. To simplify things I did leave out the whole solar panel side of the business since revenues would be quite a bit smaller.

 

[EinSV]

1. Your 5 kW estimate may be too low. I estimate this number to be 8.
2. Your $40k ASP estimate is too low. It's starting at $80k+ ASP and Tesla won't cut this in half for many years, if ever.
3. Some would say GM should be 15%, but I'm estimating at 20%. 25% may be too high.

Thanks for the input! Here are my thoughts/reactions:

1. I used the number here. 2017 Average Cost of Solar Panels in the U.S. | EnergySage Your thoughts on why it should be higher with the solar roof?
2. You could be right. With a new product like this I expect they will find ways to slash prices quickly -- how far that takes them is not clear. I'll stick with a more conservative $40K for now.
3. I don't think Tesla would bother developing a major new product with less than a 25% GM target. They haven't said so I can see going with a more conservative estimate. But I will stick with 25% since I think it is more likely. I think this could be a repeat of the Model 3 -- most of the GM estimates were way too low, including mine (early 2016 I assumed 15% GM until Elon disclosed the 25% target in ~Fall 2016).

 

[RobStark]

The goodenaugh cells

Lets give credit where credit is due.

The lead researcher in the sodium glass battery is Maria Helena Braga.

I called Goodenaugh the front man because he is more the spokesman for the Braga team and an eminence grise in the battery world.

 

[Intl Professor]

gnats nuts.

Look, young fellah, did Elon coin the phrase mice nuts or was it mouse nuts? I admit he has moose nuts so often speaks in a slurry as he's always in a hurry but also because the ground moves because of them anytime he does (or tweets). Besides, for old windbreakers like me gnatnuts is easier to say than gnatsnuts, unless one speaks a Germanic language, don't believe in silent "g's," and have the remarkable ability to pronounce the entire alphabet in one word. (If you think that's bad, try Thai--it has vastly more characters in the written language, and it's tonal as well!)

Audie, the resident grammarian in my personal experience, should arbitrate this usage before it becomes more coin of the realm! I know, more white power from the white tower, but it's the frilling language, man.

By the way, Henry Kissinger (with no accent because he was a mere associate professor in the late fifties) also slurred a language when he told a joke by Anatole France. When he was asked if he knew Kant, France replied: "I don't know. I've read nine volumes, they tell me the verb is in the tenth."

 

[jbcarioca]

I had already done that. It does make the forum a little funny when you're reading responses to nonexistent arguments though.

OTOH they were nonexistent when (s)he was not on ignore

 

[jbcarioca]

Lets give credit where credit is due.

The lead researcher in the sodium glass battery is Maria Helena Braga.

I called Goodenaugh the front man because he is more the spokesman for the Braga team and an eminence grise in the battery world.

I have made that point a few times. Ms Braga is the brains.

 

[jbcarioca]

So, I just looked at my results and noticed I'm back in seven figures of gains. Nothing makes one more bullish than does a consistent, though volatile, pattern of gains.

 

[Waiting4M3]

1) I am most worried about Cobalt. Chile has given Albemarle massive new lithium brine concessions. Albemarle and SQM are also ramping up production in Argentina( with a new free market President allowing profits to be repatriated).

2) Obviously yes. Elon said recently he thinks there is one new chemistry that may be a game changing breakthrough. I think he was talking about the John Goodenough fronted sodium glass battery invented at the University of Texas at Austin.

3) Cobalt prices have risen in large part by hedge funds speculating on cobalt. Not primarily on increased demand from end users.

4) I don't think so but not sure. Elon has said Tesla was "talking to the miners directly." In order to sign long term deals where price volatility risk would be shared between Tesla and the mining companies. Cutting out the middleman, the spot market makers in London.

Regarding @ValueAnalyst question 3: How quickly can miners bring additional supply online?

I had similar concerns, but found answer on TMC:

cobalt can be produced from tailing streams of almost any nickel or copper mine; the same processes that concentrate nickel and copper (and a number of other minerals) also concentrate cobalt. DRC will always be a major producer because it has the most concentrated (known) cobalt sources in the world, so they're cheapest - but you can get cobalt all over the world. The more the demand, and the higher the prices, the more abundant the supply. And unlike opening up a brand new mine, adding in a new recovery system to the tailings stream doesn't take years to accomplish.

 

[ValueAnalyst]

So, I just looked at my results and noticed I'm back in seven figures of gains. Nothing makes one more bullish than does a consistent, though volatile, pattern of gains.

Given your level of knowledge, I thought you were an eight or nine-figure player. You know so much.

So I'll guess that TSLA doesn't make up more than 20% of your liquid portfolio.

 

[Starno]

Given your level of knowledge, I thought you were an eight or nine-figure player. You know so much.

So I'll guess that TSLA doesn't make up more than 20% of your liquid portfolio.

9 figures on TMC... I doubt it though. I'm sure 9 figure guys can have more first hand quality information than on this forum.
Not downplaying the quality of the users here, just that 9 figure guys could literally call a Ron Baron to have dinner with him and discuss Tesla.

 

[Drumheller]

9 figures on TMC... I doubt it though. I'm sure 9 figure guys can have more first hand quality information than on this forum.

Well... just how many digits after the decimal point are we including here?

 

[ValueAnalyst]

9 figures on TMC... I doubt it though. I'm sure 9 figure guys can have more first hand quality information than on this forum.

I don't think so at all. The level of knowledge on this forum is insane. Ludicrous.

And honestly, I don't think we even need half of everything we collectively know to conclude TSLA is a good long-term investment.

Ask this: if you had a nine-figure+ investment in TSLA, why would you spend any second anywhere else but on this forum?

 

[RobStark]

Regarding @ValueAnalyst question 3: How quickly can miners bring additional supply online?

I had similar concerns, but found answer on TMC:

I have no doubt oil is functionally infinite at $500/barrel.

Equally, I have no doubt cobalt supply is infinite at $300/lb.

 

[Starno]

I don't think so at all. The level of knowledge on this forum is insane. Ludicrous.

And honestly, I don't think we even need half of everything we collectively know to conclude TSLA is a good long-term investment.

Ask this: if you had a nine-figure+ investment in TSLA, why would you spend any second anywhere else but on this forum?

Sorry I edited my post to add : a 9 figure could manage to meet Ron Baron over dinner to discuss Tesla for example.

Yes the level of knowledge here is top notch, but users here don't have first hand infos (friend of Elon Musk or his brother, friend of CEO of large shareholder of Tesla...) . A 9 figures could have those first hand infos easily I think.

But maybe I'm wrong

 

[Starno]

Though I say that but I'll probably be near 9 figures in 10 years, and I guess I will still have to meet Elon Musk friends...