I agree that "sell" is too strong language. My own practice is never to sell for price reasons. (I've only sold in the past for non-investment reasons like raising cash to buy Model S.) I think perhaps that I will omit action labels altogether because everyone's strategy is different, and it is not for me to say.The Strong Buy and Buy cut points make sense to me and the data you have compiled suggest good results so far with that approach.
Personally I would not use the model as guidance for "sell" levels and instead would think of those levels as something like a "cautionary" signal for short-term moves. I have explained my thinking before (posts 164, 166, 168, 223, 225) but long story short even a 27% discount rate, which is a "Strong Sell," is extremely high and would be difficult to match with other investments.
I continue to believe that if Tesla executes on the Model 3 ramp (including gross margin targets) and barring macro hiccups or other surprises we are likely to see an inflection point between now and 2020 (as we had in 2013) where the SP pops and the implied discount rate to the LTPT drops from ~30% to a more "reasonable" number -- perhaps something closer to 20%. I'd hate to sell and miss out on the fun.
Also note that in the backtest based on prices 1 to 3 years ago, the average annual return was a mere 16.4%. That is good, but I actually think future return is much better than that. In fact, if you really believe the LTPT of $5455, then your prospective expectation is about 30% annual return. Thus, our backtest, which omitted intentionally the rise from $30s to mid-$100, may well understate future performance. So the average decline of a few percent that we saw with discount under 29% need not mean an expected loss in a stretch of years where average return is nearer to 30%.
So any backtest should be taken with a grain of salt. The value of it is to challenge the basic assumptions we been making that buying when discount is high is better than buying with low. History seems to confirm this basic idea. At least know it is not pattenly stupid had we been unable to demonstrate any correlation between implied discount and returns over a reasonable timeframe.
So at some point in time we may see discount fall to say 26%, and that need not be the best time to sell. The context makes a big difference. If Tesla is posting solid earning at that time, the market may well be justifying the price more on near-term free cash flow than on some long term vision that compels patience with years of cash burn. This also illustrates a key difference between Blind Faith and a DCF valuation model. Blind Faith essentially says to ignore near-term cash flow and earning and focus on some point well in the future when in the revenue and earnings will be massive and support a huge valuation. That is how it is blind faith. A DCF approach, however, insists on being able to model cash flow out from now to eternity and to know what sort of discount the market ought to put on one's imagined cash flow model. Thus, the DCF analyst is very focused on earnings over the next few years and may ignore altogether potential revenue streams that cannot be delineated at this time. For example, no one to my knowledge is modeling how much revenue the sale of food and beverages at Supercharger restaurant will bring in over the next ten years. It would seem utterly silly to do so at this time. But in the Blind Faith approach, we simply trust that Musk and management will be able to keep growing revenue 50% per years for the next ten years or so. If that means selling veggie burgers while customers change, so be it. It could also mean solar roofs or massive battery farms. It matters little exactly what business lines will generate future cash flow, so long as management keeps pace with an appetite for 50% annual growth. If this appetite changes or proves unsustainable, then the LTPT gets adjusted downward and we continue on.
So Blind Faith is agnostic about which business lines will deliver 50% growth. FWIW, revenue was $7B in 2016. So 50% growth is merely a $10.5B target for 2017. I think 2017 will actually come in around $11.8B, even without much help from Model 3 sales. Is $18B too much revenue to hope for in 2018? How about $27B in 2019 or $40.5B in 2020? At what point in time does Tesla run out of innovative growth opportunities? If the opportunities are there, the rest is just execution and macro events.
So particularly where we see Tesla's fundamentals come to support valuation above simple Blind Faith, we could see implied discounts decline without much risk of an annual loss. So sell signals need to be about a much more fundamental shift in business outlook than just a low discount rate.
