2017 Investor Roundtable:General Discussion

[anticitizen13.7]

Valuation is great -- the only way I've ever profited in the stock market -- and easy to do. I have followed the old principle that *simpler models are more robust*. A really simple model might look like this:

In 2018, Tesla will sell X Model 3 at average sales price Y and gross margin Z, with overhead costs of A. Divide by number of shares to get profit per share.

Even a simple model like this is tough to get right. I have no idea how well or badly the Model 3 ramp will progress. Tesla estimates the ASP around 42-43k, but I don't know if that will actually be the case. Gross margins impossible to predict.

And there is no way to know how the market will actually react. I suppose one could develop numerous different scenarios to get a fuzzy range of where the price should be, but it's not something with which I'd make financial plans.

Perhaps the Model is good for general business potential, but I think not good for predicting stock price.

 

[Waiting4M3]

Apple and Google win simply by having their technology integrated into existing vehicles. Google's entire mission is gathering and organizing data: they only need to get info, not make the car.

This reminds me of some parallels in Tesla:

Tesla win simply by having their battery integrated into existing vehicles. Cars are not new, making batteries cheaply is, and Tesla is way ahead. Tesla's entire mission is to use battery to replace carbon-based fuel as energy source, to eliminate carbon emission, car and battery storage are just the entry points where the battery-based ROI makes it feasible.

Also regarding similarity with Apple iPhone vs China/Samsung, Tesla could co-exist with competition from China/Korea. The competition can even dominate the Asia market and Apple can still make enough $ from the rest of the market. Given China's EV push I think their domestic market will soak up any domestic battery supply and need more, leaving plenty of demand for Tesla to fill.

 

[racer26]

No one has to believe either of us. Tesla is operating like there is going to be a lot of competition in the near future. And that's why I feel very comfortable that they are not thinking like you and that they are thinking more like me. The model 3 could have been just a little better then the Bolt and they could have sold hundreds of thousands of them, but that's not good enough for the competition that is coming. They are pushing every limit they can find to keep ahead. But based on what your saying they could just cruz into a million cars a year. I am glad they see the future and the future will be crowded, which is good. Its great for their mission, its great for solar and its great Tesla. Without the competition, there would be a limit to how many electric vehicles they could sell, because not everyone knows what Tesla even is and they arent going to search it and Tesla doesn't advertise.

Truly, I think we're just arguing different sides of the same coin.

Tesla is going whole hog. Yes, partly to stay ahead of the competition, but also partly because if they didn't, then the demand goes unmet, and that's bad.

Tesla is building GF's 3-6 to supply more cars and batteries, because that's what their customers want. Failing to do what your customers want in a timely fashion is a great way to lose customers, assuming there is a competitor there to take them. Currently, there isn't, but that is starting to look like it might change. I believe that change will take years to materialize, and there will be lots of warning that it is happening. Tesla is trying to make a lot of hay while the sun is shining.

 

[myusername]

I keep hearing this "story" narrative and maybe I am naive as I am not a paid analyst and I dont speak in buzz words. I read stories to my daughter at night and she loves Star Wars which is an awesome story full of all kinds of cool futuristic tech. The difference hear is that Tesla is a great story that is also full of futuristic tech and the fact is that the tech is actually real and you can touch it. As a matter of fact, I touched some of that tech with my butt on the way to work today. A car that everyone said was impossible. With FWD that where full of hubris.

Its actually not just a story, its an actual reality. This silly narrative that its just a great story, is just that.. a sad, sad story. Its a story told by childlike people who cant understand or with whom all this tech is just so foreign and seems so unreal like light sabers and Jedi to my 8 year old daughter.

i don't even know why i bother... but oh well.

you know... I am completely aware that Tesla made a car... but what I refer to as a story is:

"Tesla will replace auto companies... energy companies... solar companies... etc... so therefor therefor a greater than GM valuation today makes total sense."

that's the story... and it's completely insane.

 

[jhm]

That's from a standard capacity calculation -- I think I got it from an Australians source.

This can be brought down to 1.5 minutes, but most of the numbers I've seen use 3 minutes.

Anyway, there's actual measurements of this stuff.


So 10 cars carries, typically, less than one quarter as many people as a *bus*, let alone a train.

And no, the cars in traffic actually travel at a slower average speed. Go figure out why you got this wrong (hint: it partly has to do with exits and entrances and the associated disruption to traffic flow. To avoid this, Musk would have to add acceleration lanes to every tunnel which would double their size....)

I'm not interested in doing remedial education on this unless it's for someone like Musk who's actually doing a project. Believe whatever stupid crap you want to believe, or do your research.

@neroden, I usually enjoy your thoughtful and intelligent post, but I find this one condescending and insulting. There is no need to talk down to me or anyone else on this list.

As I mentioned in my full post, there are opportunities to coordinate the flow of traffic that have not been yet been realized in ordinary auto traffic. I believe this is the primary reason for the sleds, platforms or whatever they will be called. Subtle differences like that change the mathematics quite alot.

You may think this is remedial education, but what it is is an opportunity to go back to first principles. If just one assumption can be altered, very different results may be possible. So the only way to check these assumptions is to do a lot of remedial education, to struggle to explain all over again the most fundamental ideas of a theory.

So go back to your point about needing an acceleration lane. Think about how much one may be able to minimize that requirement in a system where all electric platforms are fully coordinated and can accelerate quite well. This gives you at least two elements of control that a freeway designer does not have presently. So how can you exploit the ability to control and coordinate the movement of all vehicles in a system?

Of course, if you wish not to engage such questions here, that is fine. We are all adults.

 

[myusername]

Toyota is still on the hydrogen bandwagon, although they have a high-level group looking at EV adoption. Latest story from them is a fuel cell big rig.

I doubt Apple will build their own cars, because cars do not have the kinds of margins that the company enjoys. Apple and Google win simply by having their technology integrated into existing vehicles. Google's entire mission is gathering and organizing data: they only need to get info, not make the car. Uber is in chaos with severe cultural problems.

The other companies like GM, VW, and Ford may or may not survive, but I don't see that they have the same growth trajectory as Tesla.




Emotional responses are the enemy of profits. Frantically posting about hype is not going to help your investment strategy.

I would recommend Index funds, since they naturally balance over time and have broad exposure to the companies on your list.

ok... that last comment is a common statement to be made for insulting reasons only... another statement of emotion... i made a ton of money yesterday... i'm good.

"I doubt Apple will build their own cars, because cars do not have the kinds of margins that the company enjoys"

then why does Tesla keep being suggested as the next Apple?

"The other companies like GM, VW, and Ford may or may not survive"

and this is what I was talking about earlier... this idea that Tesla... a company at step 2 of 100 of world domination... and you guys are like... GM should be shaking in their boots!

that's just silly.

 

[Reciprocity]

i don't even know why i bother... but oh well.

you know... I am completely aware that Tesla made a car... but what I refer to as a story is:

"Tesla will replace auto companies... energy companies... solar companies... etc... so therefor therefor a greater than GM valuation today makes total sense."

that's the story... and it's completely insane.

I never heard that story, it sounds like pure fantasy. I guess people exaggerate when they are trying to make a point. Tesla will not replace any of those things and really doesn't have to to be as big as Apple. 10% of each those markets would be enough for massive evaluation. But ok, maybe your right and they are a complete failure because they dont control 100% of the auto market, solar market and energy market.

 

[myusername]

No, I really did mean products, not producers. If GM or Ford had to scrap their ICE business within 6 years and only get by on their EV products going forward, would either one be a good investment? I could care less about hype. What I am interested in is a good nearly pure play in EV makers and other companies that will do well in a post carbon world.

newsflash... ICE will not be replaced in 6 years... do you think Tesla is going to be producing 80 million vehicles per year in 6 years because they just produced 80k last year?... or might produce a couple hundred thousand next year?

this is exactly what i'm talking about... i can only attribute this to child-like wishful thinking... sorry to sound demeaning.

 

[myusername]

I never heard that story, it sounds like pure fantasy. I guess people exaggerate when they are trying to make a point. Tesla will not replace any of those things and really doesn't have to to be as big as Apple. 10% of each those markets would be enough for massive evaluation. But ok, maybe your right and they are a complete failure because they dont control 100% of the auto market, solar market and energy market.

that story is LITERALLY being stated repeatedly to THIS THREAD

 

[Reciprocity]

that story is LITERALLY being stated repeatedly to THIS THREAD

I must only read posts from rational people, which begs the question of why I bother reading yours. I have never once read a projection from anyone on this forum of 60 million cars. I have ready about 4 mil cumulative by 2020 and I thought it would be more like 2021. I think that would put the Market more then GM + F and it would be justifiable because it be at higher ASP and higher margins and not even including TE which will grow faster then the cars have already, which is not a story, because its actually documented fact as it happened in the past.

 

[MitchJi]

@DaveT said:
Just fyi, it's not a "reveal" event. It's just a factory tour (albeit a "VIP" one that's slightly longer) for referral program winners. And they'll be showing a Model 3... but we don't know if it'll be a prototype or release candidate. I don't expect anything new or exciting from the event. They already have shown the Model 3 in previous events - M3 reveal, GF tour, Employee party, and Solar roof event.
I believe that they are going to show a release candidate. Unless they want to hide something they have a lot more release candidates than prototypes.

 

[ValueAnalyst]

Are y'all seeing this as well?

Since The Boring Company video surfaced, I've been hearing a lot more people talking about Elon Musk and Tesla.

I'm really curious about next quarter's Customer Deposits number.

I'm estimating $700,000,000 in 2Q17 Form 10-Q, $1,000,000,000 in 3Q17, and $1,300,000,000 in 4Q17.

 

[jhm]

newsflash... ICE will not be replaced in 6 years... do you think Tesla is going to be producing 80 million vehicles per year in 6 years because they just produced 80k last year?... or might produce a couple hundred thousand next year?

this is exactly what i'm talking about... i can only attribute this to child-like wishful thinking... sorry to sound demeaning.

Who says building ICE vehicle will still be profitable in 6 years? I am looking for companies that are agile enough to compete in the EV market.

If it takes more than six years for a company to divest out of an obsolete product line, then such a legacy may be more of a liability than an asset. At some point in time EVs will become more profitable than ICEVs, and when that happens automakers will want to switch over pretty quickly. Do you believe that legacy automakers lack the agility to phase out ICE within a six year period?

 

[scaesare]

BBzzzzzttttt. Can't do it. Any physical hardware failure in the sleds, which does happen, causes a pile up. It'll never be authorized as safe

Why? If 3 seconds following distance behind the car in front of you is safe for humans, why isn't a 10 second following distance safe for an autonomous system?

Following distance expressed in time at a given speed scales such that the speed doesn't matter. At 120MPH, that's a 3rd of a mile distance between sleds. That's far greater relative following distance than many freeways with traffic moving at 70-80MPH.

Physics is a real limit.

Indeed.

 

[Reciprocity]

newsflash... ICE will not be replaced in 6 years... do you think Tesla is going to be producing 80 million vehicles per year in 6 years because they just produced 80k last year?... or might produce a couple hundred thousand next year?

this is exactly what i'm talking about... i can only attribute this to child-like wishful thinking... sorry to sound demeaning.

This guy from some small school in California called Stanford says 8 years:

All fossil-fuel vehicles will vanish in 8 years in twin ‘death spiral’ for big oil and big autos, says study that’s shocking the industries

 

[Oil4AsphaultOnly]

BBzzzzzttttt. Can't do it. Any physical hardware failure in the sleds, which does happen, causes a pile up. It'll never be authorized as safe.

Physics is a real limit.

Causing a backup I can understand, but why a pileup? The sleds are automated and the tunnels are unidirectional. Any breakdown of a sled will have that fault propagated through the system. If anything the faulted sled should still be able to limp to the nearest elevator on momentum alone, while the sleds behind it slow-down. Or maybe the closest sled can push the faulted one to the nearest elevator. That's what bumpers used to be for, and since all the sleds will belong to TBC, there shouldn't be any issues of liability. It's amazing how well machines and computers can handle faults in a system when you constrain enough variables.

 

[anticitizen13.7]

ok... that last comment is a common statement to be made for insulting reasons only... another statement of emotion... i made a ton of money yesterday... i'm good.

I said it because it is true. And I put my $ where my mouth is: the bulk of my holdings are in Total Market index funds and Bond index funds.

And if this didn't irritate you I don't know why you insist on writing hyperbolic posts.

"I doubt Apple will build their own cars, because cars do not have the kinds of margins that the company enjoys"

then why does Tesla keep being suggested as the next Apple?

Beats me. Elon is the one who said he sees a path to 700B. Ask him.

When TSLA market cap was around 3.1-3.2B in 2012, my expectation was 60B market cap at most in 10 years.

"The other companies like GM, VW, and Ford may or may not survive"

and this is what I was talking about earlier... this idea that Tesla... a company at step 2 of 100 of world domination... and you guys are like... GM should be shaking in their boots!

that's just silly.

I didn't say GM and Ford would go under. I don't know what will happen to them.

newsflash... ICE will not be replaced in 6 years... do you think Tesla is going to be producing 80 million vehicles per year in 6 years because they just produced 80k last year?... or might produce a couple hundred thousand next year?

this is exactly what i'm talking about... i can only attribute this to child-like wishful thinking... sorry to sound demeaning.

I agree with this. Cars stay in the marketplace for a very long time. A Honda from the mid-90's could go 15 years without need of major repairs so long as it was well maintained. They usually went to the scrap heap only because they rusted out. I believe that most new ICE today can last 15-20 years if maintained, though some repair needed along the way.

Many cars new today will be around in 2035.

 

[anticitizen13.7]

This guy from some small school in California called Stanford says 8 years:

All fossil-fuel vehicles will vanish in 8 years in twin ‘death spiral’ for big oil and big autos, says study that’s shocking the industries

I'm skeptical of that claim, simply because it will take years to build up Gigafactories to handle the volume of production. Not just forcars, but busses, delivery trucks, maintenance vehicles, agricultural equipment, and big rigs too.

The transition from petroleum to electricity will take place, but at a more deliberate schedule IMO. I would change my mind if after the next 5-year cycle, automakers like Honda started transitioning their bread and butter cars like CR-V to fully electric platforms.

 

[erthquake]

To anyone still clamoring about the long tailpipe:

"Early Saturday afternoon, renewable sources produced a record 67.2 percent of the electricity on the portion of state’s power grid controlled by the California Independent System Operator. Based in Folsom, the ISO runs 80 percent of the state’s grid.

More than half of the renewable energy flowing across the grid at that moment — 58.7 percent — came from large solar facilities. And the ISO’s numbers do not even include electricity from rooftop solar arrays."

State breaks another renewable energy record

 

[Reciprocity]

I'm skeptical of that claim, simply because it will take years to build up Gigafactories to handle the volume of production. Not just forcars, but busses, delivery trucks, maintenance vehicles, agricultural equipment, and big rigs too.

The transition from petroleum to electricity will take place, but at a more deliberate schedule IMO. I would change my mind if after the next 5-year cycle, automakers like Honda started transitioning their bread and butter cars like CR-V to fully electric platforms.

Oh, I didn't claim to not be skeptical. But there are those outside of this forum who's name does not end with usk.. that thinks things will change quickly. People who study this stuff. I think things will change faster that most people, I mean people living there lives and not on this board, believe is possible. The model 3 will be a very big eye opener for a lot of people who dont even know what Tesla is. I think this will actually sell a lot of S/X because the 3 will be hard to get for 18 months and you can get an S/X today.