2017 Investor Roundtable: TSLA Market Action

[Zhelko Dimic]

Well, the basic question is how long can Tesla keep growing at 50% or better. At this rate, $7B revenue in 2016 grows to $4.6T in 2032. Further assume 10% net income and 20 times price earning and you get $9.2T market cap. And if that's not big enough for you, just wait till 2033.

The biggest assumption here is 16 years of 50% revenue growth. For $4.6T revenue, Tesla needs to be a player in a number of markets with perhaps over $20T combined addressable market. You can see why Musk likes vertical integration. The new vehicle market in 2032 is maybe $4T. But charging all those vehicles is another $1T, service perhaps $1T. Stationary storage is maybe $1T. And so on. So $20T in addressable market seem plausible, but it would seem to go well beyond the current scope of Tesla. Automating factories, logistics services, tunneling, robotic mining, what else?

Or perhaps we should just start with the global GDP. By 2032 the world economy could be about $130T. So Tesla may need to address about 15% of all markets and capture about 3.5%. When you start to consider the limits of global economy growth on Tesla's growth, the question becomes what can Tesla do to advance the economy? Specifically there are opportunities to help developing economies advance. Perhaps solar and battery backed microgrids could bring new economic growth to energy poor communities. By developing these economies the global economy grows faster. Say 4.5%, instead of 3.5%. This would growth global GDP to $150T instead of $130T in 2032. As powerful a fossil fuel based global economy has been, it has still left some 1.2 billion people without access to electricity. Energy and transport is still too expensive grow these underdeveloped economies. Perhaps Tesla can help change the trajectory.

It will be much easier for Tesla to continue to grow at a high rate if the global economy is growing well.

Oh, I was talking 10B market cap, so our 'estmates' are within 10%. I'm good with that, please carry on.
Does your 3.5% includes effects of inflation?
And BTW, knowing Musk, that lazy loiter will probably take 18 years to get to 10B market cap instead of 15

 

[vgrinshpun]

Gene Munster is not impressed by the idea that Apple might successfully compete with Tesla on self driving technology: "I think that option of competing directly with Tesla is a daunting task. They will have difficult time doing that" (0:30)

Tech investor weighs in on Apple's self-driving technology

 

[luvb2b]

just to clarify: the fed's portfolio holdings from q.e. are largely longer maturity treasury notes/bonds and agency notes/bonds.
t-bills are shorter term instruments (< 1 year maturity), and their yields are more determined by the fed funds rate.

i think you mean note/bond prices (longer term rates) will get hit from the fed releasing their holdings, and yes that's a definite possibility. lower note/bond prices = higher rates.

there will be a definite impact on liquidity. as this q.e. unwind takes place, cash will be slowly drained out of the economy. how exactly the impact will be felt remains to be seen.

Anyway, the short-term effect will be a crush in the price of T-bills (rising yields) and likewise rising yields on mortgage bonds. This should cause some rotation out of stocks. The longer-term effect is harder to gauge because most liquidity is created by banks or shadow banks, and it's very shadowy.

 

[Snapdragon III]

Well, the basic question is how long can Tesla keep growing at 50% or better. At this rate, $7B revenue in 2016 grows to $4.6T in 2032. Further assume 10% net income and 20 times price earning and you get $9.2T market cap. And if that's not big enough for you, just wait till 2033.

The biggest assumption here is 16 years of 50% revenue growth. For $4.6T revenue, Tesla needs to be a player in a number of markets with perhaps over $20T combined addressable market. You can see why Musk likes vertical integration. The new vehicle market in 2032 is maybe $4T. But charging all those vehicles is another $1T, service perhaps $1T. Stationary storage is maybe $1T. And so on. So $20T in addressable market seem plausible, but it would seem to go well beyond the current scope of Tesla. Automating factories, logistics services, tunneling, robotic mining, what else?

Or perhaps we should just start with the global GDP. By 2032 the world economy could be about $130T. So Tesla may need to address about 15% of all markets and capture about 3.5%. When you start to consider the limits of global economy growth on Tesla's growth, the question becomes what can Tesla do to advance the economy? Specifically there are opportunities to help developing economies advance. Perhaps solar and battery backed microgrids could bring new economic growth to energy poor communities. By developing these economies the global economy grows faster. Say 4.5%, instead of 3.5%. This would growth global GDP to $150T instead of $130T in 2032. As powerful a fossil fuel based global economy has been, it has still left some 1.2 billion people without access to electricity. Energy and transport is still too expensive grow these underdeveloped economies. Perhaps Tesla can help change the trajectory.

It will be much easier for Tesla to continue to grow at a high rate if the global economy is growing well.

I love this post, but you forgot the most important developing economy of the next millennia.. MARS!! Elon is not about to be held back by the limits of "global GDP!"

 

[neroden]

I should clarify that when I said I would support a stock issuance "now", I of course meant in a couple of months. (Remember, I'm a long termer!) At the very least it's worth waiting for Model 3 to be delivered to see where the stock price is then.... but probably not much longer.

Obviously it should be clearly stated that the cap raise is for accelerating the deployment of service centers, Gigafactories, semi factory, Y factory, etc. Even though Model 3 sales will generate piles of cash, it won't do so until next year, and getting a year's head start on a bunch of that stuff would actually be extremely valuable. Time is money in this business: getting to market a year earlier is worth a huge amount. It is also important to Tesla's mission: to accelerate the adoption of sustainable transport and energy. Emphasis on accelerate.

FWIW I know nothing about technicals but I've been staring at them for a couple of days and multiple different technicals are pointing to the 450-480 range before the rally runs out (if it does!) It'll be interesting to see whether that pans out. We are predictably having resistance are 380 but it is not looking like it'll be strong resistance... we'll see.

 

[Snapdragon III]

I should clarify that when I said I would support a stock issuance "now", I of course meant in a couple of months. (Remember, I'm a long termer!) At the very least it's worth waiting for Model 3 to be delivered to see where the stock price is then.... but probably not much longer.

Obviously it should be clearly stated that the cap raise is for accelerating the deployment of service centers, Gigafactories, semi factory, Y factory, etc. Even though Model 3 sales will generate piles of cash, it won't do so until next year, and getting a year's head start on a bunch of that stuff would actually be extremely valuable. Time is money in this business: getting to market a year earlier is worth a huge amount. It is also important to Tesla's mission: to accelerate the adoption of sustainable transport and energy. Emphasis on accelerate.

FWIW I know nothing about technicals but I've been staring at them for a couple of days and multiple different technicals are pointing to the 450-480 range before the rally runs out (if it does!) It'll be interesting to see whether that pans out. We are predictably having resistance are 380 but it is not looking like it'll be strong resistance... we'll see.

I think Elon hinted at this on the last earnings call. He said something along the lines of "We have a choice on whether to grow super fast, or hyper fast."
Personally I am not loosing a minute of sleep over capital raises, because I feel like Elon's interests are nicely aligned with ours, as the largest share holder, and he is smart enough to deeply understand the math involved. I have no doubt that what ever he decides will be the right move at the time.

 

[GoTslaGo]

Curt, what do your Elliot wave tea leaves tell you about a local top? I think it used to be 380. Is that a place to be concerned?

Ok, I'm not Curt, but here's a link:

Elliott Wave Theory: Rules, Guidelines and Basic Structures

My working hypothesis is that we are in Wave 3 motive wave.

Wave 1 was the initial run up from (conveniently) 180 to 280 (100 dollar difference).

Wave 2 was the pull back from 280 to 240 or so.

This puts us in wave 3. We are now at 380 (so 240 to 380 = 140, recall Wave 3 can NEVER be the shortest wave. Wave 1 = 100, so we passed that test).

Based on that site, a Typical wave 3 is 161.8% x wave 1. So using round numbers, that's around 160 dollars (since Wave 1, conveniently is 100 dollars). So Wave 3 should go up to 400 [240 + 160 = 400].

However, Wave 3 is famous for having extensions. Basically additional run ups in the context of wave 3. The website lists additional calculated value targets at: 200%, 261.8%, 323.6%, and 423.6%.

So running the numbers:

200% ===> 240 + 200 = 440
261.8%==> 240 + 262 = 502
323.6%==> 240 + 324 = 564
423.6%==> 240 + 424 = 664

Now I am guessing we will have additional extensions to Wave 3, especially since we are almost at 400, and the Model 3 hasn't even been sold/officially revealed. Also we will have the Semi coming out pretty soon. So the most bullish scenario would be that we have additional extensions up to and beyond the Semi, leading up to one of the listed target prices.

That being said, the time interval between Model 3 in the wild and the Semi could be enough for Wave 4 to develop, and conceivably Wave 5 could form around the Semi. This would be a more neutral scenario.

The most bearish scenario is that we are topping out of Wave 3 soon (at 400), and will move into the corrective Wave 4 which would bottom out at the lowest around 280-290. Then move into Wave 5, which can also have additional extensions.

Hope that helps.

Now I have more reading to do...

 

[Starno]

I guess we're in for a red day ?

 

[WarpedOne]

No.

 

[T3slaTulips]

I guess we're in for a red day ?

I was going to post the one line rhyme about the color of the sun in the am, and advisements that sailors should take from it, but I realized it might be considered poetry...
EDIT: looked around and Tech/NASDAQ sure looks deep red this morning.

 

[AlMc]

I guess we're in for a red day ?

Yes, futures look bleak. TSLA may not be as affected as the overall NAZ but I will be pleasantly surprised with any signs of strength today.

 

[bdy0627]

Any ideas on what's driving the sharp drop in futures?

 

[bdy0627]

What do you guys use to look at futures/premarket action?

 

[SBenson]

 

[AlMc]

What do you guys use to look at futures/premarket action?

There are many sources. Here is one.

Pre-Markets

Edit: My personal favorite: 24 Hour Stock Market and Forex Data - After-Hours Trading - CNNMoney.com

 

[22522]

Looks like a weak hold day in that some shorts are getting off the hook. I don't think it will be all.

(Note: I don't know what I am talking about, just experimenting with vocabulary and trying to sound like I do.)

 

[bdy0627]

There are many sources. Here is one.

Pre-Markets

Edit: My personal favorite: 24 Hour Stock Market and Forex Data - After-Hours Trading - CNNMoney.com

Thanks. I actually had the CNNMoney site bookmarked and didn't know it.

 

[myusername]

Any ideas on what's driving the sharp drop in futures?

US government destabilization resulting in stagnant government and no tax plan
continued interest rate increases
tech sector so over valued it's news worthy
"TSLA up 75% for the year... yes that's not a typo" headlines
TSLA just gapped up 2 days in a row -- for no reason -- and for some reason this same question was not asked in reverse
monthly max pain is $40 below yesterday's close
oil is cratering

i mean... isn't a better question: "why is TSLA up $130 (or 50%+) in 3 months... and why don't I think that's overbought and am asking questions about $7 drops in pre-market"?

 

[AlMc]

US government destabilization resulting in stagnant government and no tax plan
continued interest rate increases
tech sector so over valued it's news worthy
"TSLA up 75% for the year... yes that's not a typo" headlines
TSLA just gapped up 2 days in a row -- for no reason -- and for some reason this same question was not asked in reverse
monthly max pain is $40 below yesterday's close

i mean... isn't a better question: "why is TSLA up $130 (or 50%+) in 3 months... and why don't I think that's overbought and am asking questions about $7 drops in pre-market"?

Based on this how are you investing your money now? Getting out of 'tech', puts on TSLA? Bonds? I will not take it as investment advice but curious about how you take your investment thesis/algo driven TSLA and put your own money to work.

Serious question. Not bashing. Just interested in all sides/investment thesis.

Edit: If you would rather PM me with it that is OK by me.

 

[myusername]

Based on this how are you investing your money now? Getting out of 'tech', puts on TSLA? Bonds? I will not take it as investment advice but curious about how you take your investment thesis/algo driven TSLA and put your own money to work.

Serious question. Not bashing. Just interested in all sides/investment thesis.

my form of "discipline" is to not change strategy... so it's the same as it's been since a year ago. extreme short term is weekly options trading typically leaning towards short with calls for hedging longer term short position of otm long dated puts which I fluctuate based on general long term direction. i decided to wait until the end of June/early July to load up on Jan 18 puts with some sort of hedge for the beginning of the M3. my focus is on TSLA.