2017 Investor Roundtable:General Discussion

[sundaymorning]

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[Navin]

This was the most profound thing said on the earnings call towards the end. This was a slip of the tongue but it’s there on record.

“as Elon said, so that we're not forcing consumers to experience tariffs if you bring those cars in. That's a much bigger impact than I think the supply chain or sourcing materials issue.”

 

[anticitizen13.7]

lucky for you... none of the companies that have been compared to apple have failed... and all have succeeded to become the next apple.

... and "whoops... it's the year 2021 and there's about 20 other equivalent choices to our cars now"...

so if you expect a rise in SP from here... then you assume that Tesla will scale to greater than 1.5m/yr and then double that before any other manufacturers crush them.

Under normal circumstances, Apple should have been crushed by an avalanche of Android handset makers. iPhone should have been a product with hardly any profit margin, and been lost in a sea of similar smart phones.

But that didn’t happen.

By 2011, Samsung, LG, HTC, Motorola, and others, were selling phones with equivalent functionality to iPhone (basically access to Internet services like Facebook, Gmail, Uber, and anything else for which there is an app or mobile website). In 2017 there are dozens of Android smartphones from even more companies, especially from China. Many of these phones are high quality and have unique styling and features.

Mobile phones have traditionally been a business with paper thin margins. Competition is as fierce as it gets. Yet, Apple somehow managed to create a supply chain and manufacturing setup that allows it to command most of the smart phone market’s profit, even though Apple’s worldwide market share is fairly low (iOS accounts for about an average of 15% of mobile devices shipped each quarter from what I remember).

My example is not to say that Tesla can do exactly what Apple did. Obviously there are differences in product development, manufacturing, and lifecycle. I cite the example of Apple merely to point out that the “conventional wisdom” sometimes fails spectacularly.

That Tesla continues to defy the conventional rules of the market and car industry only fuels the hatred towards it. People who should be right 99 times out of 100, simply can’t accept the horrific possiblility that this might be the 1 time that they are wrong.

 

[TMSE]

I've already exceeded by "dislike" allotment for all 2017, but assuming I can borrow short against my 2018 "dislike" allotment, I'll try to answer:

It wasn't a growth "expectation." It was Ahuja mis-remembering historical growth "And our growth rate, I don't recall the exact numbers, but I think it's been in the 70%, 80% every year." It's unclear which metric he is referring to, but most likely either car deliveries or Revenue. (Personally, I think Net Income and Free Cash Flow are the far more critical and determinative measures, but alas both have been growing in the negative direction--primarily because Tesla has achieved delivery and Revenue growth by expanding geographically to ever thinner, ever more remote, and ever more expensive (for SG&A) markets, i.e. Mexico, Portugal, UAE, South Korea, Malaysia(?) etc.--will Taiwan be next? But I digress. I think the only meaningful starting point for calculating, growth regardless of metric, should be 2013, when Tesla first achieved its planned production rate. My record keeping shows:

YEAR /	Deliveries	ANNUAL % GROWTH	CAGR%	REVENUE $MM	ANNUAL % GROWTH	CAGR%
2013 /	22,442	NA	NA	$2013.5	NA	NA
2014 /	31,655	41%	41%	$3,198.5	59%	59%
2015 /	50,866	60%	50%	$4,046.0	26%	41.6%
2016 /	76,233	50%	51%	$7,000.1	73%	51.8%
2017 /	100,00(e)	31%	45%	$11,295	61%	53.4%

The 2016 & estimated 2017 Revenue "growth" percentages are distorted by the SCTY bailout.



I'm perennially both a buyer and a seller with Buffet's "instruments of mass (financial) destruction" , aka a gambler in Tesla's momo shares/options for entertainment. (FWIW, I'm selling OTM puts further from the share price and OTM calls closer to the share price, but adjust daily based on news.)

IMO, the ER and CC demonstrate Tesla's challenges and the lack of depth of Tesla's bench. Its 2 top executives (the CEO & CTO) are thrown full-time into the breech to solve issues that should have been avoided; but in any event, been delegated to lower level executives. The future is now here--Tesla must execute profitably on the M3. My current sentiment is negative, but I'll adjust as new filings or credible news disclose Tesla's progress.

FIRE AWAY!

Fair points, make sense. What progress are you looking for that would change your sentiment? M3 ramp? By how much?

 

[EinSV]

This was the most profound thing said on the earnings call towards the end. This was a slip of the tongue but it’s there on record.

“as Elon said, so that we're not forcing consumers to experience tariffs if you bring those cars in. That's a much bigger impact than I think the supply chain or sourcing materials issue.”

That was really interesting ....

I was also a bit surprised at the relatively small-ish numbers they were suggesting for China -- a couple hundred thousand or more 3/Y (not a direct quote but that was the gist of it). They also did not mention battery production in China or even use the word "Gigafactory" IIRC. Tempting to speculate about all that but I am hesitant to make too much of it given how short the discussion was.

 

[justin w]

In all honesty, Tesla will not reach semi-maturity until 2020-2021. The reason I say this is by 2020-2021, many of Tesla puzzles will be pieced together and bottlenecks solved by that time. Here is the list: GigaF 1 100% completed and other GigaF announced, China manufacture plant, model 3 production up and running smoothly like a baby's ass, pickup truck and model Y unveiled and being churned out like there is no tomorrow.

Perfect time to invest in Tesla is 2020 and beyond..

 

[kenliles]

I have not seen this level of anger directed at a company since Apple of the mid/late 90’s..

AAPL ER tonight
Now Worth $900B with more cash than most countries are worth...
They knew,
that’s why they were angry

 

[TMSE]

That was really interesting ....

I was also a bit surprised at the relatively small-ish numbers they were suggesting for China -- a couple hundred thousand or more 3/Y (not a direct quote but that was the gist of it). They also did not mention battery production in China or even use the word "Gigafactory" IIRC. Tempting to speculate about all that but I am hesitant to make too much of it given how short the discussion was.

Just like GF1 was upgraded from 35 GwH to 150 GwH pack/year, Elon wants to keep the big positive surprise to the China factory announcement event. My guess is that it will be an integrated GF+Car manufacturing facility of unprecedented scope and size.

 

[sundaymorning]

Tesla doesn't have to exceed BMW's current rate, it just has to drag BMW down to meet them.

I’d like to see Bummers make 25-29% margin. Looks like they’re stuck at 15% for how long now? I’d also like to see them drop prices and still maintain margins. Oh wait, their prices generally go up, not down :/

 

[EinSV]

Just like GF1 was upgraded from 35 GwH to 150 GwH pack/year, Elon wants to keep the big positive surprise to the China facory announcement event. My guess is that it will be an integrated GF+Car manufacturing facility of unprecedented scope and size.

That is one possibility. I can think of others.

 

[bdy0627]

IIRC, EM talked about announcing at least 3-4 GFs around the world by the end of this year. From the sounds of this ER/CC, that's probably not going to happen. That definitely should not be the focus until this ramp really gets going anyway.

 

[AlMc]

For those that follow him:

Option_Sniper on Twitter

 

[justin w]

IIRC, EM talked about announcing at least 3-4 GFs around the world by the end of this year. From the sounds of this ER/CC, that's probably not going to happen. That definitely should not be the focus until this ramp really gets going anyway.

Yep.. massive capital/resources are diverted to ensure model 3 assembly is running smoothly. Right now, Tesla is not in a good shape.

 

[JRP3]

Perfect time to invest in Tesla is 2020 and beyond..

More genius advice

 

[larmor]

Yep.. massive capital/resources are diverted to ensure model 3 assembly is running smoothly. Right now, Tesla is not in a good shape.

Not in good shape for a delay in one month with a production line and product cycle of ten years??? Capital spent for return for the life of this production cycle.... Seems like great money spent

 

[larmor]

Why all the Debbie Downers? Tesla's planning to improve automation efficiency and make 250k cars per year. If it takes a month or two or three to get it right why not: better get it right cuz each month is 20000 cars!!! Not bad for brand new automaker with totally new drivetrain and motive force...

 

[anticitizen13.7]

In all honesty, Tesla will not reach semi-maturity until 2020-2021. The reason I say this is by 2020-2021, many of Tesla puzzles will be pieced together and bottlenecks solved by that time.

Perfect time to invest in Tesla is 2020 and beyond..

More genius advice

It does underscore the reality that the average person on the street, or even the average person buying stock, probably does not have the risk tolerance to hold TSLA through wild price swings. Justin’s posts indicate that he is not comfortable with the level of risk in TSLA, which I would expect from most.

TSLA is down more than 20% from its highs in the 380 range this past summer. This will induce panic in most people. I feel nothing. No fear. Not even bravado. My psychology where it comes to investing is abnormal.

The median human feels the pain of stock price loss 2x as much as satisfaction from gain (the reason most people fall prey to buying high on the upswing and panic selling low in a temporary downturn). The solution to avoid this trap, for most people, is to be smart enough not to play the game in the first place. The average person should not be invested in TSLA. They should be buying index funds, not looking at their balances often, and rebalancing fund allocations at set intervals.

Justin’s advice is useless to investors on this board who have high risk tolerance and can afford to take risks.

His advice may actually be appropriate for average Joe/Jane who would lose badly trading TSLA at the exact wrong times because they can’t tolerate the volatility.

 

[ZsoZso]

Tesla Model 3 production was slow because a supplier 'really dropped the ball' said Elon Musk

All of my posts have good logic and reasoning behind it. . I am a Tesla investor too, but I recently sold all my stock. Like I said, I will reinvest once Tesla provides me with IRON CLAD DATA that model 3 production is smoothly and efficiently .

Sounds like "sell low, buy high" strategy...
Good luck with that!

 

[AlMc]

It does underscore the reality that the average person on the street, or even the average person buying stock, probably does not have the risk tolerance to hold TSLA through wild price swings. Justin’s posts indicate that he is not comfortable with the level of risk in TSLA, which I would expect from most.

TSLA is down more than 20% from its highs in the 380 range this past summer. This will induce panic in most people. I feel nothing. No fear. Not even bravado. My psychology where it comes to investing is abnormal.

The median human feels the pain of stock price loss 2x as much as satisfaction from gain (the reason most people fall prey to buying high on the upswing and panic selling low in a temporary downturn). The solution to avoid this trap, for most people, is to be smart enough not to play the game in the first place. The average person should not be invested in TSLA. They should be buying index funds, not looking at their balances often, and rebalancing fund allocations at set intervals.

Justin’s advice is useless to investors on this board who have high risk tolerance and can afford to take risks.

His advice may actually be appropriate for average Joe/Jane who would lose badly trading TSLA at the exact wrong times because they can’t tolerate the volatility.

I agree with your post other than with some of his expressions about EM : It seems he does not trust EM. If you don't trust the CEO of a company that is probably a red flag not to invest.


justin w said: ↑
that is why i am shorting TSLA at the right moments.. It doesn't mean it won't go up. I will wait until it HAS IRON CLAD PROOF/ SUBSTANTIAL DATA ABOUT MODEL 3 PRODUCTION RUNNING SMOOTHLY BEFORE I REINVEST IN TESLA. I DONT TRUST ELON MUSK RUNNING HIS DIRTY MOUTH. lol

 

[JRP3]

So you're a sell low buy high type of investor.

Sounds like "sell low, buy high" strategy...
Good luck with that!