I totally understand your position. Statistically I should live another 10+ years, but I may not make it to tomorrow. Analysts are in the prediction business and many times they are wrong. I am just pointing out that we have a slight edge over your blackberry analogy because we have Elon and JB who have been executing near flawlessly. I will risk some of my retirement money betting that TSLA is a good investment in the long term. If there were 10 year LEAPS I would buy them and I have NO idea what Tesla will look like in 10 years.
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I totally understand your position. Statistically I should live another 10+ years, but I may not make it to tomorrow. Analysts are in the prediction business and many times they are wrong. I am just pointing out that we have a slight edge over your blackberry analogy because we have Elon and JB who have been executing near flawlessly. I will risk some of my retirement money betting that TSLA is a good investment in the long term. If there were 10 year LEAPS I would buy them and I have NO idea what Tesla will look like in 10 years.
How about SpaceX? I'm researching ways to buy SpaceX now...it appears to have a valuation of 8bn now and I think in 10 years it could IPO with a market cap in the hundreds of billions and potentially be the largest IPO ever.
Dave,
Great synopsis once again...do you happen to remember if the report said anything specific about China upside surprise? Perhaps about China deliveries/demand potentially exceeding everyone's highest expectations or the potential wildcard benefits of working with a Chinese manufacturer?
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GS's report made no mention of China deliveries/demand.
But if China demand exceeds everyone's expectations this year (ie., shows 30-40k annual reservation run rate) that could be a huge catalyst for TSLA.
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You need some kind of forecast to be effective in investing as investing deals with the expectation of future earnings.
10 years might sound like a long time out, but 1 year in tech/internet is like 3 years in the auto world. So projecting 9 years out for the auto industry is like projecting 3 years out with tech/internet companies. Tech/Internet changes so fast and I can understand how 10 years in the tech/internet world can seem like an eternity. But in the auto industry, things move much slower since product development of a new cars takes several years and it takes many years to build production capacity as well.
Mario Kadastik
Active Member
If one were to take the Google vs Blackberry comparison, then Blackberry at $100 was already an established player with majority in market share of that sector. That's basically what one could take for GM, Toyota or other major auto company that holds a major stake of the auto business. A disruptive technology can grow VERY FAST if it's a revolutionary product, not an evolutionary product (iPhone 1 was revolutionary, iPhone 3G was evolutionary etc). Therefore a trenched in established player with majority stake in the industry has everything to lose unless they continue to innovate and outpace competition. Blackberry didn't do that and ended up in the single digits.
Tesla is more like Google in your comparison. A proprietary ranking algorithm that works better than any of the competition with growing ad revenues, but still a relatively minor share of the market. Or even better example would be Apple at around the time they introduced iPhone 3G. So they had a revolutionary year with seriously limited distribution of iPhone behind them (remember, the original iPhone was only sold in US even though everyone and their cousin unlocked and shipped worldwide, including to me), had proved the business case and how they differentiated from everyone and all the major competitors still laughed at the product, but were slowly starting to think about it. Apple at the time had already grown beyond just the Mac business and was trading at around $100. Now even with the major recession hitting a year later Apple went to $700 in 5 years time and now has settled between 500-600 having basically conquered the markets high margin business.
The difference in Apple comparison is the timescale of a product cycle. For Apple and competitors the cycle is 1-2 years to go from nothing to a product that is hitting the market in millions. Therefore the moat Apple had only lasted a few years until Android based phones started to catch up. Yet they still command majority of the profit. For car companies the cycle length is more likely 5-7 years from nothing to a product that is selling and even longer to get it selling millions of units. Therefore we need to expand the Apple timeframe of 5 years by a factor of 5 or so. This means that Apple hitting 7x the original price in 5 years could be translated to TSLA hitting 7x the current price in ca 25 years. So predicting the cycle out to 10 years and considering that TSLA is even earlier in the curve (we should probably look at iPod introduction, not iPhone), the multiplication in 10 years could easily be 3-4x or we could be semi-flat due to some recession in the middle.
And as an aside, I can predict my employment future out multiple decades unless I decide to shake things up myself. Researcher careers are relatively stable and I've only just gotten the position of senior researcher (at the age of 32) that basically guarantees employment for the next 20+ years
I could probably live as a researcher in HEP until I retire or kick the bucket (which ever comes first), but I might shake up things and start something instead in that 10 year time. Still, it's not that hard to predict. And 10 years ago I had just started working in research and could easily predict that in 10 years I'd be still in research except maybe a researcher or senior researcher (the latter with lower probability, but a bull case).
Tesla is more like Google in your comparison. A proprietary ranking algorithm that works better than any of the competition with growing ad revenues, but still a relatively minor share of the market. Or even better example would be Apple at around the time they introduced iPhone 3G. So they had a revolutionary year with seriously limited distribution of iPhone behind them (remember, the original iPhone was only sold in US even though everyone and their cousin unlocked and shipped worldwide, including to me), had proved the business case and how they differentiated from everyone and all the major competitors still laughed at the product, but were slowly starting to think about it. Apple at the time had already grown beyond just the Mac business and was trading at around $100. Now even with the major recession hitting a year later Apple went to $700 in 5 years time and now has settled between 500-600 having basically conquered the markets high margin business.
The difference in Apple comparison is the timescale of a product cycle. For Apple and competitors the cycle is 1-2 years to go from nothing to a product that is hitting the market in millions. Therefore the moat Apple had only lasted a few years until Android based phones started to catch up. Yet they still command majority of the profit. For car companies the cycle length is more likely 5-7 years from nothing to a product that is selling and even longer to get it selling millions of units. Therefore we need to expand the Apple timeframe of 5 years by a factor of 5 or so. This means that Apple hitting 7x the original price in 5 years could be translated to TSLA hitting 7x the current price in ca 25 years. So predicting the cycle out to 10 years and considering that TSLA is even earlier in the curve (we should probably look at iPod introduction, not iPhone), the multiplication in 10 years could easily be 3-4x or we could be semi-flat due to some recession in the middle.
And as an aside, I can predict my employment future out multiple decades unless I decide to shake things up myself. Researcher careers are relatively stable and I've only just gotten the position of senior researcher (at the age of 32) that basically guarantees employment for the next 20+ years
I could probably live as a researcher in HEP until I retire or kick the bucket (which ever comes first), but I might shake up things and start something instead in that 10 year time. Still, it's not that hard to predict. And 10 years ago I had just started working in research and could easily predict that in 10 years I'd be still in research except maybe a researcher or senior researcher (the latter with lower probability, but a bull case).
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Great synopsis Dave!
I wonder how much Bonnie's call to GS and feedback to their VP about the poor note they put out just after ER had to do with this comprehensive report coming out?
I wonder how much Bonnie's call to GS and feedback to their VP about the poor note they put out just after ER had to do with this comprehensive report coming out?
I think Bonnie might have contacted BofA ML and not GS. They've put out miserable reports on TSLA with little substance and efforts.
I'm okay with analysts having a bear position against TSLA as long as they go in-depth to explain and articulate their position. But when an analyst like John Lovallo (BofA ML) puts out a bearish TSLA price target ($65) after a stellar Q4 earnings then he really ought to release a substantial report backing up his price target. However, instead he releases a flimsy report of a few pages with little substance. Compare that to the other analysts covering TSLA. It's embarrassing to BofA ML. You have a guy bearish on TSLA all last year and this year and who sets your company's recommendation on TSLA. And if your clients listened to him they would have bought zero TSLA shares all last year (or sold everything early on) and would have taken a short position on the company. Guys like Lovallo need accountability from BofA ML management. Not only because he cost their clients a ton of money but because he did so carelessly with flimsy research notes that expressed little more than doubt and lacked substance.
If I was a BofA ML client and was urged to sell TSLA anytime over the past year, I'd be pissed.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
DaveT: of course you are correct and I'm mixing up BoA and GS. Now that you corrected me I want back and checked the report and you are right, it's quite remarkable to put out at resarch note/price target AFTER the announcement of the Gigafactory and not even mention it or it's potential impact on future valuation, as BoA did. Thanks again for your great insight.
InTheShadows
Active Member
I used to work in the IT field and 10 years ago I knew nothing about stocks but I knew which products would succeed. Blackberry was crap, Palm was ok, I was always an apple fan since the first time I touched one in the late 80's and never lost faith in them, even through the 90's. Hotbot was the best search engine before google dethroned them and the speed that it happened made it obvious that google would be huge.
marvinat0rz
Member
Second that. (If the price is reasonable). But I doubt you'll find shares anywhere, and certainly not if you're not an accredited investor.
DaveT: thanks for your summary of GS's report above.
For those that are interested, someone posted the entire GS report here:
Tsla Goldman
For those that are interested, someone posted the entire GS report here:
Tsla Goldman
I don't see Tesla introducing a "Gen IV" vehicle in the <$20k range, ever. The strategic plan Elon laid out years ago lined the company's Tesla marque up against BMW and Audi, not Toyota and Honda. That I think is more likely, and completely overlooked in the GS report, is a substantial amount of revenue in making drivetrains for other OEMs. Along with these revenues would be revenues from the sale of SuperCharger access for those cars.
While I agree that sub-$20k is unlikely, it is worth noting that Elon did mention a Gen IV car that is even less expensive than the Gen III car:
Gen 4 mentioned by Elon
Gen 4 mentioned by Elon
Agree. I have some issues with the GS report and its assumptions. I thought it was strange quite frankly in the way they laid out the different scenarios.
I think the Gen IV vehicle is not necessary for tesla to be a major mass market car manufacturer. the gen 3 car will likely be an extremely compelling car on its own. even if it is priced like a bmw 3 series, the total lifetime cost of ownership will put it on par with the 25k to 30k ice vehicles. customers might not get it initially, but over time they will get it. people learn very quickly when their own dollars are at stake. i see tesla expanding Gen 3 much more than expected rather than having to go further down market to gen iv.
also, i think the stated time line to get to the gen 3 vehicle is a bit too aggressive. the giga factory still has to be built. despite what tesla says, i don't see gen 3 coming out until 2019.
i agree with mario in that it's going to take tesla a long time to ramp up, relative to how long apple took with its iphone. while that may not be great for growth, i think it does make the moat that much wider for would be competitors.
I think the Gen IV vehicle is not necessary for tesla to be a major mass market car manufacturer. the gen 3 car will likely be an extremely compelling car on its own. even if it is priced like a bmw 3 series, the total lifetime cost of ownership will put it on par with the 25k to 30k ice vehicles. customers might not get it initially, but over time they will get it. people learn very quickly when their own dollars are at stake. i see tesla expanding Gen 3 much more than expected rather than having to go further down market to gen iv.
also, i think the stated time line to get to the gen 3 vehicle is a bit too aggressive. the giga factory still has to be built. despite what tesla says, i don't see gen 3 coming out until 2019.
i agree with mario in that it's going to take tesla a long time to ramp up, relative to how long apple took with its iphone. while that may not be great for growth, i think it does make the moat that much wider for would be competitors.
Totally agree about Gen IV. That speculation came put of nowhere. As far as I know, Elon has spoken about Gen III sedan and SUV derivatives, a new Roadster, and a light duty pickup truck. There is no doubt Tesla will continue to pick off automotive segments one by one but for GS to run their analysis on a Gen IV <$20K vehicle is reckless.
Edit-
Just saw the post above about gen IV per Elon. Ok, guess I missed that.
A sub 20K car would have to be under a different brand, maybe Edison
Sub-brands discussed here:
If Tesla Motors created a sub-brand, what would it be named?
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