2017 Investor Roundtable:General Discussion

[Mike Smith]

What Brian Johnson at Barclays doesn't seem to understand is that Tesla doesn't need to 'dominate' the car industry, as he claims the bull case represents. Tesla currently has 0.1% market share and they're already near profitability. As they scale up and battery costs fall the margins on producing EV's is going to be far higher than those for ICEs. If Tesla can only get to 3% market share they will be extremely profitable and have a huge advantage over the legacy makers who will still have to deal with making ICEs (and every new EV sale is the loss of an ICE sale). Tesla doesn't need to dominate, but over time they probably will.

 

[luvb2b]

continuing my lunacy of trying to understand the solarcity acquisition and its impact.

one of the clear trends that had been affecting solar city is that the value they were receiving per watt had gone down around 50c/watt from mid 2015 to mid 2016. at the same time the cost per installed watt had shot up for them, primarily as a result of higher sales expenses due to having too large a sales organization for the volume they were doing. the combination of the two had reduced the "margin" per watt down to less than 40c.

elon must have understood that he could solve both of these problems at once. the high sales cost could be cut meaningfully by reducing dedicated solarcity sales force and combining sales with tesla's vehicle galleries and stores. the declining value per watt installed could be addressed by reducing reliance on commodity panels and offering premium product (solar roof tiles) instead.

solar city had already start to bring their costs down at the time tesla acquired them but they had no way to increase value per watt because the installation business is a commodity business. and they could never bring costs down as much as tesla because sales resources could be shared.

 

[replicant]

[Off-topic. Feel free to remove this post of it is of no value to the TMC community]

Is any of you on Mastodon already? It's a social network similar to Twitter but open-source and fully decentralized. Like email but for tweets, except they're called toots there.

Since Twitter is frequently linked in the forum as a source for news and comments, I hope to find members of TMC in the Fediverse. I've encountered some of you on Twitter by chance, so we'll see where this will go. Perhaps we'll end up with our own TMC instance, with fine moderation rules about Trump, f**res, shorts, and poems.

Stay free, my friends.

 

[Ovulation]

Thanks. You made my day. Trump consorts with the wrong Russians. Send this to him. Maybe it will have the same effect on Ivanka as the gassing of children by Syria.

They made also a documentary

and
Woolly Mammoth Revival – Revive & Restore

btw. Have you seen the "You've Been Trumped" documentary ? After all you guys have been trumped
You've Been Trumped Movie Review (2012) | Roger Ebert

MODERATOR INPUT:

Mastodons and mammoths in two consecutive posts? Folks, I think we're meandering a level too far afield here.

Thank you.

 

[Intl Professor]

Tesla doesn't need to dominate, but over time they probably will.

Here's grist in agreement, sort of.

https://www.nytimes.com/2017/04/06/business/tesla-story-stocks.html?_r=0

 

[cziegler]

The Earth is our spaceship. When are we going to get serious about maintenance?

When the notion of 'raping the earth is essential for prosperity' is (widely) debunked - The renewable sector would do well to up their game in terms of offsetting pro-FF groups such as the API et al..... except that won't happen until the production constraint issue is behind us. Shorter answer: soon!

 

[schonelucht]

if you're point is simply that we don't really know how the run up, and delivery of the Model 3 will impact Model S/X sales, I would surely agree with you. You also wrote about this situation, "Not very confidence inspiring from an investor point of view." Perhaps, like TFTF, you think Tesla would have been better off remaining a niche automaker of $100K EVs.

Come on, don't build a strawman. TFTF has their arguments, I have mine.

My point with that sentence is simple : many of the models have Tesla moving in the mass market (good) while at the same time expanding their luxury segment (even better). That combo is the basis for the sky high price targets maintained for this stock. And the fact that the stock is moving up shows confidence in that combo. The blog as posted however is a counter signal to that confidence.

 

[luvb2b]

<apologizing profusely for quoting a paulo santos article>

seems paulo santos over at sa is sort of coming around to the same thing i am thinking, which is that solarcity has the potential provide a solid kick up to gaap and non-gaap eps for tesla.

he says (warning seeking alpha link to paulo santos article here):

• Finally, if Tesla did this in Q4 2016, it's now going to do it on all quarters. This is an effect which can easily add up to $200 million in a single quarter, or as much as $1.23 per share. It's a massive effect. It's what can ultimately make Tesla report positive non-GAAP earnings, and maybe even as soon as Q1 2017.

i think he misses the fact that it could boost tesla's gaap earnings by quite a bit too. the non-gaap is boosted by changing the way non-gaap is calculated (as he describes), but the gaap numbers are boosted by keeping the accounting the same.

i'm estimating the effect, if similar to q4 2016, would be on the order of 100-180 million, or maybe 60 cents to 1.15 per share in bottom line eps impact.

for historical reference, this is not nearly as confident as i was of the beat in 2013. also the cost to wager on a beat like this is far more expensive than 2013 (by orders of magnitude), so it's not something i anticipate betting on meaningfully.

 

[Mike Smith]

continuing my lunacy of trying to understand the solarcity acquisition and its impact.

one of the clear trends that had been affecting solar city is that the value they were receiving per watt had gone down around 50c/watt from mid 2015 to mid 2016. at the same time the cost per installed watt had shot up for them, primarily as a result of higher sales expenses due to having too large a sales organization for the volume they were doing. the combination of the two had reduced the "margin" per watt down to less than 40c.

elon must have understood that he could solve both of these problems at once. the high sales cost could be cut meaningfully by reducing dedicated solarcity sales force and combining sales with tesla's vehicle galleries and stores. the declining value per watt installed could be addressed by reducing reliance on commodity panels and offering premium product (solar roof tiles) instead.

solar city had already start to bring their costs down at the time tesla acquired them but they had no way to increase value per watt because the installation business is a commodity business. and they could never bring costs down as much as tesla because sales resources could be shared.

The main reason Tesla bought solar city is the solar roof. All new roofs will be solar roofs eventually, just like all new cars will be electric, and Tesla couldn't have done this without SC's gigafactory and installers. In the meantime they'll be able to install panels on current roofs profitably since they'll have the competitive advantage of the powerwall and economies of scale without having to chase high acquisition cost projects like SC had to do when on their own.

 

[drinkerofkoolaid]

Long term, Tesla is either worth $100 or $2000, according to Goldman Sachs. Take your pick.

This doesn't mean Tesla won't follow the broad market when the broad market returns to reality. I strongly encourage everyone who is long to exercise caution. The next few weeks are likely to be very strange.

I'm very concerned that the US Debt Ceiling and the US credit rating are not being discussed. My guess is the ratings agencies have been warned to not downgrade US debt, and media groups have been encouraged to not report on certain things.

Trump's trumpeting of certain economic indicators is not reassuring. A confident CEO/president shouldn't need to or want to trumpet specific data points, especially when the US economy is EXTREMELY comlex. Trump's parading about economic indicators (that he has no business taking credit for) comes off to me as a form of "selective disclosure" intended to control what the media reports, and what the public is paying attention to.

It's very strange that no-one is reporting on the debt ceiling.

 

[Zaxxon]

If you think Musk is prepared to allow the Bolt to be superior to the base version of the Model 3 on any metric, you don't know Musk's style very well.

I don't think he's looking to allow the Bolt to be superior to the base on any metric. I'm simply pointing out that folks are taking that tweet to imply something that it does not.

Will the Model 3 base exceed 238 miles EPA range? We shall see. I won't be surprised if it does. I'm fairly certain it will exceed 215 at the very least given prior 'we hope to exceed this minimum' commentary from the company. That's not a reason to infer from tweets things that aren't there. As we all know, there's a miasma of misinformation that surrounds all things Tesla. Let's not contribute to that.

 

[mmd]

I think you are missing a much larger point, focusing in on Telsa vs AES
look at the link from KUIC itself, the utility purchasing renewable power and their overall goal for the island of Kaua'i
69+ megawatts of renewable enery, 37% of their needs in 2015, 125+ megawatts of renewable energy by 2025 , >75% of their needs (with another 25% elsewhere)
LOOK at the map of completed and in progress projects on the island
The GOAL is to switch from FOSSIL fuels to SUNLIGHT powering the island, NOT "are your renewable electrons from sun or hydro or biomass cheaper than his renewable electrons. FOCUS on the goal and the path to it
(note the 21 megawatts of distributed solar on customers roofs, with 6.6 more under construction)
{If you would be so kind, please point to the ?100?megawatt of AES on Kaua'i renewableenergy page, either completed, under construction or under consideration}

Renewable Energy Projects | Kauai Island Utility Cooperative

Yes, I agree with you, that all energy sources can compete against the Tesla BES. There could be constraints, like "50% needs to be renewable" etc. set by the utility commission. I just used AES BES as an example, to make it easier to see how new competition may be bad for future income from the Tesla-SCTY BES. It is just like car business. Every other car is a Tesla competitor, whether gas, electric, fuel cell or PHEV.

May be you are lookign for the link @techmaven posted earlier for the AES project. Here it is again. Since you have connections in Kauai, you may be better positioned to find more info.
http://www.hawaiienergypolicy.hawai...ve-briefings/_downloads/2017-march-Reeves.pdf

I'm posting this picture from one of KICU presentation:
http://kiuc.coopwebbuilder2.com/sites/kiuc/files/PDF/presentations/2015-0528-pumpedstorage.pdf

Notes:
* Unlike solar, timing of biomass and hydro generation can be controlled. So, they can easily supply the peak hours in the evenings. So, in 2023, 30% power from hydro and biomass, which are renewable, can be supplied during peak hours in the evening without needing to store the generated electricity (assuming enough mw capacity in them).
* Electric car charging is a 'shiftable' load. If prices are lowered during day time when sunshine is aplenty, solar can be used directly to charge the cars. Utility scale solar is less than 4c/kwh. No need to store the solar power in batteries or anywhere else. Increase of electric cars will increase electricity demand, but not storage demand. It may actually reduce storage demand.

 

[racer26]

Long term, Tesla is either worth $100 or $2000, according to Goldman Sachs. Take your pick.

This doesn't mean Tesla won't follow the broad market when the broad market returns to reality. I strongly encourage everyone who is long to exercise caution. The next few weeks are likely to be very strange.

I'm very concerned that the US Debt Ceiling and the US credit rating are not being discussed. My guess is the ratings agencies have been warned to not downgrade US debt, and media groups have been encouraged to not report on certain things.

Trump's trumpeting of certain economic indicators is not reassuring. A confident CEO/president shouldn't need to or want to trumpet specific data points, especially when the US economy is EXTREMELY comlex. Trump's parading about economic indicators (that he has no business taking credit for) comes off to me as a form of "selective disclosure" intended to control what the media reports, and what the public is paying attention to.

It's very strange that no-one is reporting on the debt ceiling.

As has been said here multiple times - nobody is reporting on it because its a non-issue. The debt ceiling is an arbitrary limit imposed on the fed by itself. It can simply increase the ceiling if it needs to, and since the same party holds majority control in all three levels of government, they can hammer it through with little fanfare or opportunity for the Democrats to stop them.

 

[Drax7]

Negative comments by the Lutz and Barclays are not impacting the stock today.
Their points are now mute, and for good reason.

A worry of mine has been that the autopilot will be delayed considerably and
What if any impact that may have.

Nonetheless, nobody else has a compelling autopilot solution for at least until
Next year, hence this Issue may not be relavent for a long time. I would guess
Considerably after the model 3 is in production. The delay may well be a non issue.

 

[Bet TSLA]

The blog as posted however is a counter signal to that confidence.

To you. And only because you're reading it wrong.

 

[AudubonB]

Didn't know you'd actually talked with these guys! Wow.

I didn't respond to the above last night. A bit too much Very Different Things To Concentrate on yesterday.

That is what I did, and for many, many years. Ken Lay was a truly likable, charismatic person... Skilling, not so much.

A lot of caribou have crossed my path since those times and most details now escape me, but I think I saw a lot of myself in Ken.

In my lifetime, the number of blow-ups that have affected me is legion. In the short list that follows, that does NOT mean I lost money, but it could be friends, relatives, iconic heroes, "served 'em right" good feelings....it is not, of course, necessarily a good idea to dwell on such failures but learning from them is an essential part of developing an investment process. So, going backwards chronologically, a supremely cursory list would include -

GTAT
Bernie Madoff
AIG
Enron
Worldcomm
Bear Stearns...Shearson Lehman...Merrill Lynch....&c
MTC
a hundred thousand penny stock gold miners
Bernie Cornfeld & IOC
Billy Sol Estes - yes, tho I was indeed pretty young then

Of those, it was the implosion of AIG that did and does hurt the most. I lost a few 10 or 100K there; my family perhaps one zero more. But for my entire life, in so many ways, it was CV Starr & Hank Greenberg whom I idolized, and their creation I admired more than I can relate. For me, Goldman Sachs's complicity and duplicity in destroying that firm is the overriding reason I despise everything about them...and everyone at it.

 

[AudubonB]

It's very strange that no-one is reporting on the debt ceiling.

They are. Your comment is, unfortunately, a self-indictment that you're not casting a wide enough net in your readings.

 

[GoTslaGo]

Moved this comment over here:

As it happens quite a lot of people take larger cars for smaller ones, not necessarily cheaper ones, Years ago I recall the most common car traded in for a BMW M3 was a BMW 5-Series. In the current case I think there are a fair number of Tesla S owners who'd prefer a smaller car and have Model 3 order because it is to be smaller. Some of them ('us' since I'm one, intend to trade a P85D, and in a perfect world wold replicate the performance I now have in the Model S. Price is not a factor in that calculus. How many of those people are there? I doubt that anybody know, but it certainly could have a significant increase in CPO's. The last time that happened to Tesla it was the Model s P85 owners trading for P85D. For some months the landers were all P85's and CPO deals were cheap. I'll wager that the impact on new Model S sales will be negligible, but the influx of attractively priced Model S will bring many owners who want a larger car but cannot afford a new S or X. That is what the CPO does, increase the buyer pool.

Despite the uncertainty I suspect the sales of X will be unaffected, but S volume will be lower, with average sale price rising by at least 40%, as many of the former buyers of new S60 and a fair number of S75 will opt for Model 3 instead. Much depends on how well-equipped Model 3 variants will be. There are many of us who'll keep our S's and wait until a PxxD will be available. If Model 3 at launch has nice options then the deferrals might be fewer.

These question probably are keeping some people awake nights.

Either way the TSLA price impact will probably be very positive because overall sales and profits will rapidly rise.

And in reply:

That's why, hopefully, Jerome et al. are busy working on a Pick-up on the S skateboard...

 

[neroden]

It's not so much that they choose to promote the S. It's the fact that they are doing it by quite explicitly talking down their new product.

15 month backlog. I've seen train and airplane manufacturers do the same thing when their new product has an absurdly high backlog. Pretty normal when there are severe backlogs to talk down the backlogged product in favor of a product with low backlog -- we just aren't used to seeing backlogs in the car industry.

 

[SteveG3]

Come on, don't build a strawman. TFTF has their arguments, I have mine.

My point with that sentence is simple : many of the models have Tesla moving in the mass market (good) while at the same time expanding their luxury segment (even better). That combo is the basis for the sky high price targets maintained for this stock. And the fact that the stock is moving up shows confidence in that combo. The blog as posted however is a counter signal to that confidence.

1) you write of "sky high price targets" as if that were a fact. you may view them as "sky high", I consider them grossly undervalued... the average analyst estimate is ~$230/share, well below my valuation last fall at $350. we can disagree about assumptions, and so valuations, but how do you justify presenting your view as if it is a fact?

2) those analyst price targets are based on ultra conservative estimations of Model 3 sales vs. company guidance. I don't know what they each have in for S/X sales, but given their conservatism on the Model 3, I'm quite skeptical that they are assuming the luxury (S/X) segment is expanding. do you have some examples to back up your assertion that you can link of higher than current S/X sales in analyst models in the out years?

3) I didn't create a straw man, I wrote perhaps as I tried to imagine a scenario in which your statements might make sense. I did not assume you agree with TFTF.