2017 Investor Roundtable: TSLA Market Action

[CyberDutchie]

From what I can piece together from a few news sources, AJ increased his 2018 Model 3 production estimate from 90,000 to a whopping 120,000.

He did not change his valuation on TE (which was zero the last I heard), or Tesla Mobility.

Morgan Stanley Raises Bull Case Tesla Target To $526 (NASDAQ:TSLA)
Tesla price targets raised as Model 3 mania builds

@mulder1231, do you know whether Jonas attributes any value to Tesla Semi in this valuation?

Sorry for the late response. No, only to their Automotive (Model S/X/3) and Mobility. Here is a summary of their valuation methodology and risks for TSLA achieving their $317 price target (=base case):

Our PT of $317 is comprised of 2 components: The first is a $245/share DCF value of the core Tesla Auto business on a 13% WACC, 9x exit EBITDA and exit EBIT margins of 14.7%. The second component is our valuation of Tesla Mobility at $72/share (what the company has announced as 'Tesla Network') based on a 15-year DCF and a 15% WACC. Our price target applies zero value for Tesla Energy and zero value for SCTY.

Bull Case - $526

An 11% WACC and 11x exit EBITDA multiple supports a $366/share valuation for Tesla Auto. Added to this are our base case assumptions for Tesla Mobility but at a 12% WACC, implying $128 per share. Tesla Mobility valued at a 15-year DCF with a 30% tax rate and a terminal growth rate of 3%. We add $16 for Tesla Energy, assuming 15% of Gigafactory output sold to the power sector at a 15% margin. SCTY value of $15/share is equal to the value of shares Tesla issued for the acquisition.

Base Case - $317

We believe Tesla cannot be valued on near-term metrics or multiples like traditional OEMs. We use a DCF that extends to 2030 and capture the full maturation of the Model S, Model X (and top hat derivatives) as well as the ramp-up of the Model 3. We have applied a 13% WACC with a range of 11% to 15%.

Bear Case - $175

Our $175 bear case is bounded by a 15x EBITDA multiple on our 2019 EBITDA forecast of $2.4bn. This multiple is more than a 35% discount to the EBITDA multiple Intel has announced it is paying for Mobileye on our 2019 MBLY forecast. Our bear case valuation is one of strategic value, as the level of strategic interest in the transportation sector has even taken us by surprise.

Risks to Achieving Price Target

May not make the leap to shared mobility model, limited to niche OEM status.

Execution risk on unprecedented innovations brought to market on its models and capital intensive initiatives.

Volatility in commodity prices such as oil materially changes the economic benefits of electric vehicles.

Openness of capital markets to funding Tesla's strategic and investment ambitions. Large and better capitalized technology firms emerging as competitors.

 

[ValueAnalyst]

Sorry for the late response. No, only to their Automotive (Model S/X/3) and Mobility. Here is a summary of their valuation methodology and risks for TSLA achieving their $317 price target (=base case):

Our PT of $317 is comprised of 2 components: The first is a $245/share DCF value of the core Tesla Auto business on a 13% WACC, 9x exit EBITDA and exit EBIT margins of 14.7%. The second component is our valuation of Tesla Mobility at $72/share (what the company has announced as 'Tesla Network') based on a 15-year DCF and a 15% WACC. Our price target applies zero value for Tesla Energy and zero value for SCTY.

Bull Case - $526

An 11% WACC and 11x exit EBITDA multiple supports a $366/share valuation for Tesla Auto. Added to this are our base case assumptions for Tesla Mobility but at a 12% WACC, implying $128 per share. Tesla Mobility valued at a 15-year DCF with a 30% tax rate and a terminal growth rate of 3%. We add $16 for Tesla Energy, assuming 15% of Gigafactory output sold to the power sector at a 15% margin. SCTY value of $15/share is equal to the value of shares Tesla issued for the acquisition.

Base Case - $317

We believe Tesla cannot be valued on near-term metrics or multiples like traditional OEMs. We use a DCF that extends to 2030 and capture the full maturation of the Model S, Model X (and top hat derivatives) as well as the ramp-up of the Model 3. We have applied a 13% WACC with a range of 11% to 15%.

Bear Case - $175

Our $175 bear case is bounded by a 15x EBITDA multiple on our 2019 EBITDA forecast of $2.4bn. This multiple is more than a 35% discount to the EBITDA multiple Intel has announced it is paying for Mobileye on our 2019 MBLY forecast. Our bear case valuation is one of strategic value, as the level of strategic interest in the transportation sector has even taken us by surprise.

Risks to Achieving Price Target

May not make the leap to shared mobility model, limited to niche OEM status.

Execution risk on unprecedented innovations brought to market on its models and capital intensive initiatives.

Volatility in commodity prices such as oil materially changes the economic benefits of electric vehicles.

Openness of capital markets to funding Tesla's strategic and investment ambitions. Large and better capitalized technology firms emerging as competitors.

To which year does he apply the 9x exit EBITDA multiple for Tesla Automotive?

 

[techmaven]

Right now, I believe the stock price will react primarily from Model 3 production information. If we get solid information that high volume production has started, I think the stock will move significantly.

It is good to see VIN 101 and a report of someone seeing VIN 114:
Tesla Model 3 - Fremont California • r/teslamotors

Assuming all 3xx VINs are RC's (don't know that is the case, but let's just rule those out for now), a 114 VIN means at least 64 are likely to have been made since the end of last month... that does seem a bit ahead of guidance.

 

[racer26]

Right now, I believe the stock price will react primarily from Model 3 production information. If we get solid information that high volume production has started, I think the stock will move significantly.

It is good to see VIN 101 and a report of someone seeing VIN 114:
Tesla Model 3 - Fremont California • r/teslamotors

Assuming all 3xx VINs are RC's (don't know that is the case, but let's just rule those out for now), a 114 VIN means at least 64 are likely to have been made since the end of last month... that does seem a bit ahead of guidance.

I don't believe that we can use VINs for much of anything at this low production level:

The 3xx VINs we saw were not RCs. RCs have an R in the 12th digit of the VIN (just like signature series had S and founders series had F). We know from S/X production that the factory doesn't necessarily build cars in VIN order, but rather, that VINs are issued sequentially at some point before production of the car begins. I suspect that the 3xx cars we saw were the 20 extra 'test' cars that weren't sold in July. Probably, the earliest bunch of employees got their VINs, and THEN Tesla decided to build those 20 cars, and so they got issued VINs in the 3xx range but were produced first.

 

[AlMc]

Right now, I believe the stock price will react primarily from Model 3 production information. If we get solid information that high volume production has started, I think the stock will move significantly.

It is good to see VIN 101 and a report of someone seeing VIN 114:
Tesla Model 3 - Fremont California • r/teslamotors

Assuming all 3xx VINs are RC's (don't know that is the case, but let's just rule those out for now), a 114 VIN means at least 64 are likely to have been made since the end of last month... that does seem a bit ahead of guidance.

I don't believe that we can use VINs for much of anything at this low production level:

The 3xx VINs we saw were not RCs. RCs have an R in the 12th digit of the VIN (just like signature series had S and founders series had F). We know from S/X production that the factory doesn't necessarily build cars in VIN order, but rather, that VINs are issued sequentially at some point before production of the car begins. I suspect that the 3xx cars we saw were the 20 extra 'test' cars that weren't sold in July. Probably, the earliest bunch of employees got their VINs, and THEN Tesla decided to build those 20 cars, and so they got issued VINs in the 3xx range but were produced first.

VIN counting and trying to project production and/or delivery numbers from them with regards to Tesla has been an inexact science. Many, including me, got burned a couple years ago by VIN counting and applying those numbers to project deliveries for a quarter.

That did not turn out well.

I hope @techmaven is correct. Just be careful if you do any short term option trading in particular using VINs.

 

[Chickenlittle]

Right now, I believe the stock price will react primarily from Model 3 production information. If we get solid information that high volume production has started, I think the stock will move significantly.

It is good to see VIN 101 and a report of someone seeing VIN 114:
Tesla Model 3 - Fremont California • r/teslamotors

Assuming all 3xx VINs are RC's (don't know that is the case, but let's just rule those out for now), a 114 VIN means at least 64 are likely to have been made since the end of last month... that does seem a bit ahead of guidance.

Whether 500 or 400 or 300 or 200 or 100 cars have been made so far will have no bearing on stock price in 3 months

 

[Bet TSLA]

Whether 500 or 400 or 300 or 200 or 100 cars have been made so far will have no bearing on stock price in 3 months

If it is indicative of how fast the ramp is going to be, it sure as hell will.

 

[Waiting4M3]

VIN counting and trying to project production and/or delivery numbers from them with regards to Tesla has been an inexact science. Many, including me, got burned a couple years ago by VIN counting and applying those numbers to project deliveries for a quarter.

That did not turn out well.

I hope @techmaven is correct. Just be careful if you do any short term option trading in particular using VINs.

Maybe VIN>1000 would be a better milestone. We should be seeing them in Sep.

 

[techmaven]

VIN counting and trying to project production and/or delivery numbers from them with regards to Tesla has been an inexact science. Many, including me, got burned a couple years ago by VIN counting and applying those numbers to project deliveries for a quarter.

That did not turn out well.

VIN counting is definitely inexact, but there was a period of time in both Model S and X where VIN counting was useful. The problem is that VINs get far more complicated once non-U.S. deliveries are included. Those can get reserved blocks which are then built and delivered out of order.

The 3xx VINs we saw were not RCs. RCs have an R in the 12th digit of the VIN (just like signature series had S and founders series had F).

So, to be conservative, I've essentially treated the low 3xx VINs we've seen as essentially pre-production vehicles or RCs. They aren't the RC's that were made before, but likely vehicles that could be production vehicles save a few things here and there. Hence they got production VINs. We saw 3xx VINs before we saw 2x VINs.. it was in mid July, a month ago that we saw 3xx VINs and that was before the 30 production vehicles delivered.

Whether 500 or 400 or 300 or 200 or 100 cars have been made so far will have no bearing on stock price in 3 months

My point is that once the market understands that once real high speed volume production has commenced, the stock price will move. The easiest way to see that is through VIN counting ahead of actual Tesla reports. Given the dearth of other news now and essentially the only thing standing in the way for Tesla is Tesla's own execution of the production ramp, the market will likely react to both positive and negative news with respect to the ramp. So it's good that thus far, we do see some VINs that seem to indicate that they are within guidance.

My own speculation right now is that vehicles being made off the production line are being sent for extended validation, just like the first batch of Chevy Bolts.

 

[MXWing]

The last squeeze put Tesla in bear market territory.

The market takes advantage of those who are leveraged to the point of margin calls. The market also sees 'stop limits' and blows right through them.

Be a cautious optimist. My two cents for what it's worth.

 

[ValueAnalyst]

Whether 500 or 400 or 300 or 200 or 100 cars have been made so far will have no bearing on stock price in 3 months

Actually, it's probably the most important factor for the next three months since 3Q17 deliveries will be announced first week of October, which will include Model 3 deliveries.

If you had said, one year, then I'd agree with you.

 

[ValueAnalyst]

Moderator-relocated post.

You are now my list

Joke aside, I'm not just pulling stuff out of my hat.

Of course, nobody has a crystal ball, so maybe I'm wrong.

But maybe I'm right.

 

[ValueAnalyst]

Maybe VIN>1000 would be a better milestone. We should be seeing them in Sep.

How do we "see" the VINs? Do people post them in a thread? Reddit? TMC?

 

[Waiting4M3]

How do we "see" the VINs? Do people post them in a thread? Reddit? TMC?

I follow this TMC thread on production M3 pictures, most of the new pics seem to come from reddit, so if you're familiar with reddit you can look directly there. And I imagine when non-Tesla customers start to configure, they will see VIN getting assigned to their cars like MS/X. We'll probably be well past VIN 1000 by then.

 

[hobbes]

How do we "see" the VINs? Do people post them in a thread? Reddit? TMC?

Since I can't find a Model 3 VIN tracker, I guess I'll make one • r/teslamotors

 

[SBenson]

Alright guys, here is my speculation (not that I was much right in the past).

I work in the periphery of the bond markets. My prediction is that the bonds will get priced very favorably. Based on standard ratings, the bonds would be so called non-investment grade. However, the debt market has been very hot for a few years now, thanks to near infinite liquidity by central banks around the world. Per my estimation the bonds will get priced around 5% coupon.

Secondly, I believe there will be an unexpected amount of demand for these bonds. Globally there are 100s of billions of $s looking for so called green investments. They generally look for bonds (as opposed to equity). Don't have references handy but you can search them up. I see no issue of these bonds taken up what so ever. Pricing might even come in better than expected as well.

Roadshow is Aug 7 to 10. I think either 10th evening or 11th pricing comes out. My speculation is that the stock will rally hard on the news.

Here is an interesting read about Tesla bonds and green bonds. Someone asked about it based on my comment above (can't find the question now).

Tesla Skipping Green Bond Label Keeps Fledgling Market Limited

Investors with more than $11 trillion in assets have signed onto the Paris Green Bonds Statement, aimed at boosting issuance in the market. Ethical investors, ranging from millennials to public pensions, increasingly seek out the bonds as a way to offset broader climate risks in their portfolios. Many green offerings are several times oversubscribed and underwriters report rapidly filling order books for green bonds.

 

[TrendTrader007]

Congratulations TT007! I know you’re going to have a blast! The MX is the perfect road trip machine!

Thanks bud!

 

[TrendTrader007]

OK, @TrendTrader007, I am just going to repost this from May. I am half-heartedly congratulate you on the purchase of 75D. My full-hearted congratulations are reserved until I see you getting P100D.

C'mon, life is short.

Too broke to buy P100D Lol

 

[TrendTrader007]

So what is your LLC up to? Are you going to be running the Teslas as Ubers?

I quit my MD job last year to drive an Uber in Vegas
Love it especially driving customers from McCarran to the strip over weekends
The tips are great and making $25 an hour has always been my long term career goal

 

[vgrinshpun]

Too broke to buy P100D Lol

Not for too long, I think. The main thing is to survive through the M3 ramp, you might be golden then...