2017 Investor Roundtable:General Discussion

[larmor]

007 is a doctor with a guaranteed income of at least $500,000 per year.
From his vantage point being aggressive with Tesla is actually not that risky
To his overall financial situation.

Incorrect. Most physicians are dealing with up to 50% drop in reimbursement for all procedures and codes over the last 10 to 15 years-ask any physician in the US. In that time, the lease, the staff salaries, the EHR, the vaccines, the malpractice insurance, etc have not matched. Those costs have stayed the same or risen. So your doc is seeing more patients, in order to keep their practice afloat- or sell out to a huge hospital system. No doc wants to keep their patients waiting or delayed or rushed. So any scratch that a doc is investing represents massive amount of work and liability-- each patient encounter is another door open for liability. Unlike a banker, IB, ceo, real estate agent, financial planner, etc who are working on a percentage of the money they manage.

 

[JRP3]

I didn't read it because I don't have the desire to slog through all the details but Paulo Santos recently did an article on Solar City financials on SA if anyone is interested in his viewpoint.

 

[anticitizen13.7]

Regardless of not agreeing with the commentary that comes with the content, I do feel it is important to give credit where credit is due. And while the commentary with myusername's posts can be pretty bearish and a little harsh, the charts that have been presented have proven pretty accurate, both looking forward and from a historical perspective - and I would encourage folks to look past the message when they don't agree with it and give some thought to the content of the charts presented.

What I don't understand is why people looking to make quick $$$ trading TSLA off chart lines would care about fundamentals or comparison to Ford or Honda.

Even if company XYZ is overvalued or appears overvalued, that really has little to do with market momentum at a particular moment.

Technical analysis is mumbo-jumbo to me, anyways. It's like Professor Trelawny's divination class in Harry Potter: wizards make vague predictions and then fit future events to those predictions retroactively. But what do I know? I'm too much like Hermione Granger... lacking in the "inner eye" or something of that sort.

 

[The Blue Owl]

The Case for a Tesla-GM Merger

Just threw up a little in my mouth.

He makes a good case.

Also, Apple should merge with McDonald's. For the same reasons.

 

[mmd]

tesla's equity is more valuable than ford and gm's equity. yes.
however remember the equity is "last in line", equity holders get value after creditors have been paid. ford and gm, they have a lot of liabilities - 208 billion for ford, 177 billion for gm. tesla has only 16.7 billion in liabilities. adding liabilities + market cap of equity you can see tesla's market value of equity could triple and the overall value of the company would still be less than gm and ford.
but that doesn't make for sensationalist headlines!
.

It does not make sense to look at only the liability and ignore the assets. Those don't make headlines because you are using wrong metrics. Leverage is a ratio, not absolute number. See below.
Looking at only the debt will make a new startup with $1m liability and $0 in revenue and assets look much much better than Tesla.

What is a 'Debt Ratio'
A financial ratio that measures the extent of a company’s or consumer’s leverage. The debt ratio is defined as the ratio of total – long-term and short-term – debt to total assets, expressed as a decimal or percentage. It can be interpreted as the proportion of a company’s assets that are financed by debt.

Read more: Debt Ratio Debt Ratio
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GM has total assets of $222 B and stockholder equity of $44 B, which is 90% of its market cap. This is after payingout handsome dividends every quarter.
Tesla has total assets of $22 B , so stockholders equity is $4.7 B, which is 10% of its market cap.

 

[neroden]

007 is a doctor with a guaranteed income of at least $500,000 per year.
From his vantage point being aggressive with Tesla is actually not that risky
To his overall financial situation.

Totally true. Unless his hands get crushed in a car accident like Dr. Strange. Safe driving, 007!

 

[neroden]

I didn't read it because I don't have the desire to slog through all the details but Paulo Santos recently did an article on Solar City financials on SA if anyone is interested in his viewpoint.

Uh, no. Paulo's "analyses" are not to be trusted. I'll wait for luvb2b's consultant.

My personal view, after slogging through a lot of details, was this.
-- SolarCity makes a little gross profit on cash sales and bank loan sales
-- SolarCity makes somewhat higher profit on PPAs and leases, because they are effectively charging high interest rates to the customers
-- Unfortunately SolarCity must then finance those by borrowing at interest rates which... vary. So sometimes the spread is good, sometimes it sucks, may be losing money on the spread sometimes.
-- The spread is not decipherable from the financial statements
-- Prior to the merger, the combined income from profits-on-sales and profits-on-spread was not covering the overhead of a huge sales force
-- Due to competition, it was not in a position to cover this with increased market share
-- But the acute problem was the need to refinance
-- This is being addressed by pre-locating financing for new leases and PPAs for the full 25 years, and "monetizing" the old ones
-- and in the future switching to cash / bank loan sales
-- With the long term sales cost problem being addressed by firing them, selling online and through Tesla stores
-- and the problem of competitive pricing being addressed by product differentiation with the solar roof.

Do I think it's going to be a big source of big money? No. Do I think under Musk's management it'll be profitable? Yes, after the restructuring is done, I think it'll be better than breakeven and worth what he paid for it (because he needed *some* solar panel company to sell solar panels with his stationary battery sales; lots of people want to buy both at once).

 

[larmor]

Solarcity combo was for ease of contracting that was difficult and redundant with tesla and solarcity being separate.... What are those contracts/projects? Enquiring minds want to know...

 

[techmaven]

Do I think it's going to be a big source of big money? No. Do I think under Musk's management it'll be profitable? Yes, after the restructuring is done, I think it'll be better than breakeven and worth what he paid for it (because he needed *some* solar panel company to sell solar panels with his stationary battery sales; lots of people want to buy both at once).

My simplistic view on it is that as a public company, SCTY's stock price had be be supported by growth rates. And it was spending large amounts of money to try to maintain that growth rate. By going private, the pressure to keep up the growth rate goes away... and the underlying slightly to significantly positive business model can come through. Before the merger, several factors made the growth story a problem in the short term... the demand environment for solar PPA's dropped with the convulsions over the ITC tax credits, the attacks by the utilities changing the state net metering incentives, and the COGS side wasn't getting much cheaper and there wasn't much more to squeeze from efficiency gains. The demand environment with stationary storage was only just getting started and commercial and utility solar is robust, but the price competition is fierce. But by going private, the pressure to support the stock price isn't there and the borrowing environment also changes. And therefore, they don't need to spend nearly that much on the sales and marketing side, which would help profitability dramatically.

Going forward, Tesla Energy actually needs a lot of what Solarcity had in terms of expertise in labor. Without buying Solarcity, Tesla would have to build that portion up anyways. And Tesla Energy can help diversify the revenue streams as well as provide an ongoing cash flow. The fear is obviously around all that financing and that's so relatively difficult to understand if you want to go beyond the high level words of management.

 

[electracity]

Do I think under Musk's management it'll be profitable? Yes, after the restructuring is done,

Yes. When the restructuring done they just need to control customer acquisition cost. Sizing the ongoing solar business to match the many easy sales they can make with their differentiated position in the solar market should accomplish that goal. The national solar model of grow fast because the ITC will make it all work out is done.

 

[Mike Smith]

The Case for a Tesla-GM Merger

Just threw up a little in my mouth.

'Forget the Gigafactory and all those headaches. General Motors has factories aplenty.'

 

[brian45011]

It's good that you are seeking professional help. Don't expect to understand it or to be able to communicate it to others. At a minimum it will cause competent CPAs to drink heavily. Worse can happen to the rest of us. It is dark, very dark.

Agreed. The half life of SCTY's CFOs seems to be shrinking:

NAME START END DURATION
Bob Kelly 10/11 8/14 34 months

Bradford Buss 8/14 2/16 18 months

Tanguy Serra 2/16 9/16 7 months

Randford Small 9/16 ? ?

Tesla's CFO Wheeler, a 43 year old, resigned after only 15 months in the position. Cynics have posited that he did not want to certify the SCTY component in TSLA's quarterly statements. PWC also tiptoed by any problematical issues for another audit year:

"As described in Management’s Report on Internal Control over Financial Reporting, management has excluded SolarCity Corporation from its assessment of internal control over financial reporting as of December 31, 2016 because it was acquired by the Company in a purchase business combination during 2016. We have also excluded SolarCity Corporation from our audit of internal control over financial reporting. "

 

[Mike Smith]

I don't have a link, but in an interview last week Adam Jonas said the reason he's valuing TE at $0 is that Morgan Stanley's utilities analysts told him grid battery storage is uneconomical. Very odd.

 

[neroden]

It is always a mistake to assume that something you don't understand is worthless.

When it was an independent company, I didn't bother to analyze SCTY -- too much work! But when the merger was announced, I had to, so I did my best. It is an unbelievable hairball of accounting (and this is the fault of both GAAP and the very odd way the Production Tax Credit law is written), but I think the evidence shows that (a) they are doing their best to straighten it out and simplify it, and (b) it really is at its core breakeven-or-better, if you eliminate the very high sales costs and the refinancing risk, both of which they are trying to do. (Yes, it's OK even if they have negative growth.) It's kind of a classic "turnaround" situation. Not my usual investing style but it'll work out OK.

 

[neroden]

Solarcity combo was for ease of contracting that was difficult and redundant with tesla and solarcity being separate.... What are those contracts/projects? Enquiring minds want to know...

Kauai, Tau, individual homeowners buying solar + Powerwalls, et c. Yes, Tesla is NOT making press releases about them. I think they're saving this for later when they need something to "wow" with.

 

[Reciprocity]

Kauai, Tau, individual homeowners buying solar + Powerwalls, et c. Yes, Tesla is NOT making press releases about them. I think they're saving this for later when they need something to "wow" with.

Tesla does not have a demand problem, they have a probably fulfilling all the demand. There is such a huge market for their products and no way to grow fast enough to fulfill it. If they could build 3 million cars next year, they could sell everyone. If they could build 3 million packs, they could sell every single one of them. Gigafactories are not being built fast enough.

 

[neroden]

Headline cracked me up when I saw it on the Google Finance news feed:

Tesla Inc Stock Surprises Even Perma-Bulls: Is The Rally About Out Of Gas?

Come on, everyone knows this rally is powered by *electricity*, not gas!

 

[neroden]

Tesla does not have a demand problem, they have a probably fulfilling all the demand. There is such a huge market for their products and no way to grow fast enough to fulfill it. If they could build 3 million cars next year, they could sell everyone. If they could build 3 million packs, they could sell every single one of them. Gigafactories are not being built fast enough.

To be clear, when I say that Tesla's saving press releases about Tesla Energy until they need something to "wow" with, I don't mean "wowing" consumers. I mean "wowing" financiers and investors with the excitingly high reservation and installation numbers. For instance, they might save this until shortly before Tesla starts raising financing for Gigafactory 3, or before they try for a major bond refinancing, or something similar.

 

[kenliles]

Guys n Gals
Don't let this happen to your TSLA please
Leon Cooperman regrets selling Apple early: 'We out traded ourselves'

 

[Zaxxon]

To be clear, when I say that Tesla's saving press releases about Tesla Energy until they need something to "wow" with, I don't mean "wowing" consumers. I mean "wowing" financiers and investors with the excitingly high reservation and installation numbers. For instance, they might save this until shortly before Tesla starts raising financing for Gigafactory 3, or before they try for a major bond refinancing, or something similar.

In the meantime, feel free to wow yourselves with this Engadget video that I found to be fairly well-done. Sure seems like when this sort of story starts to hit on a monthly or weekly basis, TE will start to get some traction with the public.