2017 Investor Roundtable:General Discussion

[WarpedOne]

I usually criticize DaveT for being/playing(?) a carebear. He got a heart from me for #33483.

Can you add in Semi business model, that should kick in about 2 years? Also what are your thoughts regarding TE and adding that in to the model?

And a ride/drive hailing service, and a possible 'hyperloop' service. (Who will provide those electric pods for the tunnels, spaceX? Think again!)
And a their DNN processesing platform (you think they will only build those chips for cars? Think again!).

One sees the future or he does not. There is no argumentation that can make one to see the light if he still refuses to see.

 

[schonelucht]

After this weekend, here are updates to some of charts I posted before:

Good work! The step increase with 1000 cars took about 4 weeks, so 250/w was past production rate. The only operational reason I can see for Tesla to produce cars in such a step function would be if battery delivery from Nevada is still a relative trickle and it is cheaper to operate the main assembly line in 'burst mode' than to have it run at a pace that more or less matches incoming battery packs.

 

[SwTslaGrl]

A 220 mph Tesla

View attachment 244827
Elon Musk shows what Tesla/SpaceX’s hyperloop pod pusher can do

It'll be interesting to see the tech behind the SpaceX/Tesla Hyperloop pod and the new Tesla Roadster - Both are high speed vehicles.

 

[Hogfighter]

@MitchJi First, I think your friend is actually quite articulate and thoughtful. I just think he hasn't really done a deep dive into TSLA, especially with numbers/forecasting 3 years out. It seems like he's more a person who's read readily available articles on TSLA but as we know those articles are rather shallow.

Send your friend this which I wrote elsewhere several months ago...

I've been invested in TSLA since 2012. And there's always been people saying it's "over-valued", especially the media or folks who don't believe in Tesla's mission or potential. The best thing I've found is to work the numbers a few years out and see what you come up with. Sure, each person's forecasts will be different, but I base my numbers off of company forecasts and also Tesla's track record.

2020 deliveries: 1M vehicles (according to company guidance) Average sale price per vehicle: 900k Model 3 and Model Y x ASP $42k = $37.8B. Plus 110k Model S/X x ASP $90k = $10B. Total revenue $47.8B

Gross margin = 25% (company guidance is 30%+ for Model S/X and "mid-20s" for Model 3/Y).

Gross profit = $12B

Operating expenses = $6B (note: It's difficult to predict operating expenses 3 years out, but Tesla will likely experience a lot of operating leverage as their sales will grow much faster than R&D and sales.)

EBITDA: $6B

P/E multiple: 30 (note: If targets are achieved in 2020, Tesla likely to be growing 50% year in revenue and would likely fetch a 30-40 P/E multiple.)

Market cap: $180B

# shares outstanding: 185M shares (currently 164M outstanding)

2020 stock price = $972

A few comments:

1. The above are my forecasts based on my beliefs that Tesla can reach their own forecasts of # vehicles delivered in 2020 and gross margins.

2. Each person has their own beliefs/ideas of Tesla. So, I'm not trying to convince anyone.

3. This model can be tweaked based on changes in # vehicles delivered, gross margin, or operating expenses... to name a few factors. So, it's not perfect but it gives the basics.

4. If you find someone bearish on TSLA and who thinks it's "overvalued", ask them to give you numbers like I have. Chances are they won't be able to.

5. The Model 3 will be the iPhone moment for autos. A sexy car that redefines transport and brings in high margins. This is why Tesla has potential to be the most valuable company in the world by 2025.

6. Tesla's moat grows as they execute faster than any other auto company. It's not appropriate to value TSLA based on other auto makers. It's like valuing AAPL in 2007 based off of Nokia and Blackberry.

So many investors compare TSLA to GM or F. It's true that if TSLA is just another car company, then it's way overvalued.

But...if its ANYTHING other than just a car company, then it's wildly undervalued. Check out its price/revenue ratio compared to Home Depot, or McDonald's, etc.

Just depends on what you believe Tesla the company is.

 

[Todd Burch]

So many investors compare TSLA to GM or F. It's true that if TSLA is just another car company, then it's way overvalued.

But...if its ANYTHING other than just a car company, then it's wildly undervalued. Check out its price/revenue ratio compared to Home Depot, or McDonald's, etc.

Just depends on what you believe Tesla the company is.

Preaching to the choir here mostly, but IMHO it's not difficult to prove that it's different:
-Owns its own "dealerships" (distribution network).
-Owns its own service centers/repair shops
-Owns its own refueling infrastructure

There are other examples of course, but the above 3 facts are irrefutable and, since no other car company owns any of these 3 things, by definition proves they cannot be valued as such.

 

[Hogfighter]

Preaching to the choir here mostly, but IMHO it's not difficult to prove that it's different:
-Owns its own "dealerships" (distribution network).
-Owns its own service centers/repair shops
-Owns its own refueling infrastructure

There are other examples of course, but the above 3 facts are irrefutable and, since no other car company owns any of these 3 things, by definition proves they cannot be valued as such.

Not to mention solar, stationary storage, etc

 

[Todd Burch]

Not to mention solar, stationary storage, etc

Don't ask me how I missed the biggest examples. Must be Monday morning.

 

[22522]

@MitchJi, if this doesn’t convince him to get in then you’ll need to just avoid the Tesla conversation with him altogether.

If your friend is an investor and likes what Tesla is doing, stay in (goodwill motivated).
If your friend is a speculator, that is different.

Holding a stock can expose you to risk. Better not to tell people what to do with their money.

 

[kbM3]

Thanks for the advice everyone!

Make sure you post your friend’s response to the factor of 1000 math error.

I am dying to know.

 

[kbM3]

@MitchJi First, I think your friend is actually quite articulate and thoughtful. I just think he hasn't really done a deep dive into TSLA, especially with numbers/forecasting 3 years out. It seems like he's more a person who's read readily available articles on TSLA but as we know those articles are rather shallow.

Send your friend this which I wrote elsewhere several months ago...

I've been invested in TSLA since 2012. And there's always been people saying it's "over-valued", especially the media or folks who don't believe in Tesla's mission or potential. The best thing I've found is to work the numbers a few years out and see what you come up with. Sure, each person's forecasts will be different, but I base my numbers off of company forecasts and also Tesla's track record.

2020 deliveries: 1M vehicles (according to company guidance) Average sale price per vehicle: 900k Model 3 and Model Y x ASP $42k = $37.8B. Plus 110k Model S/X x ASP $90k = $10B. Total revenue $47.8B

Gross margin = 25% (company guidance is 30%+ for Model S/X and "mid-20s" for Model 3/Y).

Gross profit = $12B

Operating expenses = $6B (note: It's difficult to predict operating expenses 3 years out, but Tesla will likely experience a lot of operating leverage as their sales will grow much faster than R&D and sales.)

EBITDA: $6B

P/E multiple: 30 (note: If targets are achieved in 2020, Tesla likely to be growing 50% year in revenue and would likely fetch a 30-40 P/E multiple.)

Market cap: $180B

# shares outstanding: 185M shares (currently 164M outstanding)

2020 stock price = $972

A few comments:

1. The above are my forecasts based on my beliefs that Tesla can reach their own forecasts of # vehicles delivered in 2020 and gross margins.

2. Each person has their own beliefs/ideas of Tesla. So, I'm not trying to convince anyone.

3. This model can be tweaked based on changes in # vehicles delivered, gross margin, or operating expenses... to name a few factors. So, it's not perfect but it gives the basics.

4. If you find someone bearish on TSLA and who thinks it's "overvalued", ask them to give you numbers like I have. Chances are they won't be able to.

5. The Model 3 will be the iPhone moment for autos. A sexy car that redefines transport and brings in high margins. This is why Tesla has potential to be the most valuable company in the world by 2025.

6. Tesla's moat grows as they execute faster than any other auto company. It's not appropriate to value TSLA based on other auto makers. It's like valuing AAPL in 2007 based off of Nokia and Blackberry.

Love the analysis!

I am not a finance guy so if the following question is ignorant please excuse me.

Don’t you think it will be difficult for Tesla to show $6B profit AND still maintain 50% growth in such a capital intensive industry in 2020?

 

[Zaxxon]

Looking to be a big week for Model 3 deliveries...

 

[DurandalAI]

Looking to be a big week for Model 3 deliveries...

I’m glad it is getting better, but honestly I was hoping for higher numbers.

 

[Zaxxon]

I’m glad it is getting better, but honestly I was hoping for higher numbers.

Sure, I think we all were. But this is a major improvement over what we've actually gotten thus far. Also, while Fremont is surely the most-concentrated delivery center, it's not the only one. I would postulate that this is not the only place gathering up Model 3s for delivery this week.

 

[doctoxics]

Good work! The step increase with 1000 cars took about 4 weeks, so 250/w was past production rate. The only operational reason I can see for Tesla to produce cars in such a step function would be if battery delivery from Nevada is still a relative trickle and it is cheaper to operate the main assembly line in 'burst mode' than to have it run at a pace that more or less matches incoming battery packs.

Step function may be result of bringing four lines of module assembly into service one-at-a-time.

 

[Waiting4M3]

Preaching to the choir here mostly, but IMHO it's not difficult to prove that it's different:
-Owns its own "dealerships" (distribution network).
-Owns its own service centers/repair shops
-Owns its own refueling infrastructure

There are other examples of course, but the above 3 facts are irrefutable and, since no other car company owns any of these 3 things, by definition proves they cannot be valued as such.

Exactly, some of those things like Tesla stores, service center, super-charging stations are part of the OpEx and losing money now, but as M3/Y/Semi gets out, simplicity in design leads to easier maintenance and lower cost, suerper-charging pays 7c/kwh (for semi) or more (for M3/Y), super-charging stations starts selling other stuff from coffee to solar roof, and economy of scale kicks in, those part of Tesla could become way more profitable than what they are now.

 

[schonelucht]

Step function may be result of bringing four lines of module assembly into service one-at-a-time.

No. That would show up as a step function in the daily number of VINs. The step function appears in the total number of VINs.

 

[ValueAnalyst]

Typed up quick thoughts on Tesla's cash balance; would appreciate any feedback:

Cash Balance Rollfoward

 

[Waiting4M3]

No. That would show up as a step function in the daily number of VINs. The step function appears in the total number of VINs.

The height of the steps increased from 500 to 1000 and now to 2000 in y-axis. And in x-axis, the length shortened from 6-7 weeks bwteen 500-1000 to 4 weeks between 1000 to 2000. I don't know how long the current step at 2000 will last. If the exponential were to hold, I think the next step should occur significantly quicker than 4 weeks, maybe 2-3 weeks, and the height should double again to close to 4000. That would mean that the current range of registered VINs up to 3926 should be exhausted very soon, and we should see Tesla register more VINs in the next 1-2 weeks. I even think it's a little weird that Tesla hasn't registered more VINs already.

I also have a WAG that Fremont factory floor space allows Tesla to stage parts and build ~1000 cars in a batch. If the next step increase in y-axis is significantly larger than 1000, I have no idea how Tesla would batch the parts and assign VINs to WIP cars/parts.

So both in terms of VIN registration and build batching, I think we're entering unfamiliar new territory. It's unclear what pattern VIN sighting will show in the coming weeks. The only thing I can say for sure is if the exponential holds then highest VIN sighted should start mushrooming very quickly from here on out.

 

[Curt Renz]

Forbes - this morning: https://www.forbes.com/sites/consta...icity-cheaper-and-more-reliable/#6a0303ed6042

 

[schonelucht]

If the exponential were to hold, I think the next step should occur significantly quicker than 4 weeks, maybe 2-3 weeks, and the height should double again to close to 4000.

It won't for the simple fact that there is close down of the factory around the holiday.

Regardless, we still need to factor in the possibility that this step up is a 'forced' stepup by Tesla to show wallstreet that they are making progress while they regroup and take their sweet time in Q1. Remember the production rate given for the X in the last week of 2015 which was making everyone feel very positive about the ramp up only to learn this was more or less fabricated by Tesla.