Blind Faith Price Targets

[jhm]

$346 on 11/08 (next Wednesday) - which is quite possible - is at 0.2% of the Nominal BFPT !

I think you're looking forward to the 2019/10 target at 0.2%. (Sorry the columns are not lined up well.) Heaven help us, if such sour sentiment persists that long!

As for 2018-11-08 the Blessed Range is from $326 to $377 (10% to 30%). Even with this morning's sell off, we are still comfortably blessed with good prices for accumulating shares.

I know, even the Israelites got tired of eating Manna for Heaven everyday in the desert. Yup, still a buying opp.

 

[EVNow]

I think you're looking forward to the 2019/10 target at 0.2%. (Sorry the columns are not lined up well.) Heaven help us, if such sour sentiment persists that long!

As for 2018-11-08 the Blessed Range is from $326 to $377 (10% to 30%). Even with this morning's sell off, we are still comfortably blessed with good prices for accumulating shares.

I know, even the Israelites got tired of eating Manna for Heaven everyday in the desert. Yup, still a buying opp.

That's right. It's the problem of columns not lining up. Usually I screenshot the spreadsheet and insert here as an image to get it right.

 

[jhm]

That's right. It's the problem of columns not lining up. Usually I screenshot the spreadsheet and insert here as an image to get it right.

Once upon a time, TMC had the functionality to format tables.

 

[jhm]

Gather around, brethren and sisters, the price of Tesla is leaving the blessed zone if it keeps going up, unless your faith exceeds that of the Nominal Long-Term Price Target. Yea, even the unwashed doubters are starting to believe. But be on guard, lest the elixir of rising stock prices beguile you. Remain sober minded when all the market is pounding on the door to Noah's ark. You are safely on board, while the unfaithful down in the rising flood. Listen not to their screams. In the next 6 months, we may safely breach $400, but do not let $600 deceive you in the coming year.


Nominal $3250

Percentile    ImpDisc    2018-12-13    2019-01-12    2019-06-13    2020-01-01    2021-01-01    2022-01-01
29.9%  26.7%     $377      $384      $424      $483      $613      $776
 2%    29.8%     $303      $309      $345      $398      $517      $671
10%    28.5%     $331      $338      $375      $431      $554      $712
30%    26.7%     $377      $385      $425      $484      $613      $777
50%    25.5%     $409      $417      $458      $520      $653      $820
70%    24.3%     $448      $456      $499      $563      $700      $871
90%    23.0%     $493      $501      $546      $613      $754      $927
98%    22.2%     $524      $533      $579      $647      $791      $967

Sport $5250

Percentile    ImpDisc    2018-12-13    2019-01-12    2019-06-13    2020-01-01    2021-01-01    2022-01-01
21.8%  33.5%     $377      $386      $435      $511      $683        $911
 2%    36.5%     $307      $315      $359      $427      $583        $796
10%    34.7%     $348      $357      $404      $476      $642        $865
30%    32.5%     $404      $413      $464      $543      $720        $954
50%    31.3%     $439      $449      $503      $585      $768      $1,009
70%    29.6%     $493      $504      $562      $648      $841      $1,090
90%    27.9%     $557      $569      $630      $722      $924      $1,182
98%    26.9%     $598      $610      $673      $768      $976      $1,239

Insane $7250

Percentile    ImpDisc    2018-12-13    2019-01-12    2019-06-13    2020-01-01    2021-01-01    2022-01-01
17.7%  38.3%     $377      $387      $443      $530        $734      $1,016
 2%    41.4%     $310      $318      $368      $446        $630        $891
10%    39.2%     $357      $366      $421      $505        $704        $979
30%    36.6%     $422      $433      $493      $586        $801      $1,095
50%    35.2%     $466      $477      $541      $639        $865      $1,169
70%    33.4%     $526      $539      $607      $712        $951      $1,268
90%    31.2%     $612      $626      $701      $814      $1,069      $1,402
98%    30.2%     $653      $668      $745      $863      $1,124      $1,464

 

[jhm]

Time to update. I've done some analysis that finds if I compute percentiles over 3 years rather than over 4 years (as I had been doing), then the relationship between annual return and percentile is stronger. So believe that 3-year percentiles are a better basis for anticipating annual return. Also with this change the blessed range is not really from 10% to 30% percentile, but more like just below the 20% percentile, this is especially the case when higher LTPT target ($7250) is uses. For the lower $3250, the expected return between 20% and 30% percentile is positivity, but it is pretty meager. For substantially lift you want to be below the 20% percentile.

But, Good News the current price is in the 3.9% percentile so it looks like an excellent time to buy. See targets below. So consider prices below as blessed. Not an advice, just a blessing for the faithful blind.

For those needing to bolster their faith, recall that our church's teaching is that Tesla's revenue will grow by 50%/y or more for many years to come. 2018 revenue came in at $21.46B, up 82.5% over 2017. Moreover we our guided cautiously to believe that revenue will grow 45% to 65% in 2019. Do not be troubled that 45% is less than 50% as this is only meant to test our faith. Even if we were lead through the spiritual dryness that a mere $31B in revenue in 2019 compare that to the $11.76B in 2017. So 50% growth is sound doctrine indeed!

So be blessed and keep the faith!

Nominal $3250

Percentile    Implied Discount    2019-02-06    2019-03-08    2020-01-01    2020-02-06    2021-01-01    2022-01-01
3.9%    29.6%     $319      $326      $403      $414      $523      $678
  2%    30.5%     $298      $305      $379      $390      $496      $647
10%     29.0%     $332      $339      $417      $428      $539      $695
20%     28.2%     $350      $358      $438      $449      $563      $721
30%     27.7%     $363      $371      $453      $464      $579      $739
50%     26.4%     $399      $407      $493      $505      $623      $788
70%     25.5%     $425      $433      $521      $533      $654      $821
90%     24.1%     $470      $479      $571      $583      $709      $880
98%     23.1%     $506      $515      $611      $623      $752      $925

Sport $5250

Percentile    Implied Discount    2019-02-06    2019-03-08    2020-01-01    2020-02-06    2021-01-01    2022-01-01
3.0%    36.7%     $319      $328      $423      $437      $579        $792
  2%    37.7%     $300      $308      $400      $413      $551        $758
10%     35.4%     $347      $355      $456      $469      $618        $836
20%     34.6%     $368      $377      $480      $495      $647        $870
30%     33.9%     $384      $394      $500      $515      $670        $897
50%     32.2%     $430      $440      $553      $569      $732        $968
70%     31.3%     $457      $467      $584      $600      $768      $1,008
90%     29.8%     $509      $520      $643      $660      $835      $1,084
98%     28.8%     $545      $556      $684      $702      $882      $1,136

Insane $7250

Percentile    Implied Discount    2019-02-06    2019-03-08    2020-01-01    2020-02-06    2021-01-01    2022-01-01
2.9%    41.7%     $319      $329      $437      $453      $620        $879
  2%    42.6%     $301      $310      $414      $429      $592        $844
10%     40.1%     $353      $363      $479      $495      $671        $940
20%     39.0%     $379      $389      $510      $527      $710        $987
30%     38.2%     $400      $411      $536      $553      $741      $1,024
50%     36.3%     $451      $462      $596      $615      $814      $1,109
70%     35.2%     $486      $499      $638      $658      $864      $1,168
90%     33.7%     $538      $551      $699      $720      $935      $1,251
98%     32.7%     $574      $587      $740      $761      $983      $1,305

 

[jhm]

Let's see were 50%/y growth and 10% NI margin lead us at this point. Revenue is 21.46B up 82.5%, NI margin in H2 2018 is 3.2%, and shares are at 172M, up 2.21%.

Growing profit 50%/y leads to $1,237B in 2028. Growing shares at 2.21%/y leads to 214M shares in 2028. Assuming 10% profit margin, we arrive at $578 EPS.

Thus, a PE ratio of 12.5 gets us to the Insane target of $7250/sh. Likewise, 9.1 and 5.6 PE ratios get us to the Sport $5250 and Nominal $3250.

The gains in 2018 were quite strong and have positioned Tesla well to keep all three LT price targets in play.

ValueAnanlyst would point out that the strong shift into positive free cash flow also mitigates against the 2.21%/y dilution rate I've assumed above. And I would agree. Without this dilution EPS could be as high as $719 and a mere 10.1 PE hits the Insane Target. Either way, the Insane Target is well in reach if Tesla keeps to the Precepts of Blind Faith. It's nice to know that modest dilution can be tolerated.

 

[Paracelsus]

Let's see were 50%/y growth and 10% NI margin lead us at this point. Revenue is 21.46B up 82.5%, NI margin in H2 2018 is 3.2%, and shares are at 172M, up 2.21%.

Growing profit 50%/y leads to $1,237B in 2028. Growing shares at 2.21%/y leads to 214M shares in 2028. Assuming 10% profit margin, we arrive at $578 EPS.

Thus, a PE ratio of 12.5 gets us to the Insane target of $7250/sh. Likewise, 9.1 and 5.6 PE ratios get us to the Sport $5250 and Nominal $3250.

The gains in 2018 were quite strong and have positioned Tesla well to keep all three LT price targets in play.

ValueAnanlyst would point out that the strong shift into positive free cash flow also mitigates against the 2.21%/y dilution rate I've assumed above. And I would agree. Without this dilution EPS could be as high as $719 and a mere 10.1 PE hits the Insane Target. Either way, the Insane Target is well in reach if Tesla keeps to the Precepts of Blind Faith. It's nice to know that modest dilution can be tolerated.

Just wanted to say 'Thanks' for what you do here @jhm , and thanks for all the positive energy and enthusiasm you put behind it. It is contagious. Very much appreciated and hoping this finds you well.

 

[jhm]

I should share the backtest chart for Nominal Target.

And Insane Target

As you can see, these are pretty similar. In the range of 20% to 30% sentiment, the one return based on Insane Target is about zero. Either target looks good when sentiment is below 20%.

Note that this recalibration is because I am guaging sentiment over a 3-year horizon rather than 4-year.

This backrest is for stock price date from 2014-08-07 to 2018-02-02. Before this period there was some very high growth that happen when sentiment was also extremely high. I don't think we will see that sort of exuberance happen again. It also got way ahead of the company's value IMO. The test period ends in 2018-02-0, a year ago, because we need to be able to see where the stock price landed a year later.

 

[jhm]

I guess the charts above could be a bit disheartening. Why is it that with modest sentiment the annual return tends to be negative. My sense in watching this over the years is that the bears have gotten very good at punishing bullish sentiment. They grind down the stock with negativity until it gets to places where they just can't sustain a low price. If you by at those times of extreme bearishness, the stock goes up to return to equilibrium.

If the market for TSLA shares was truly efficient, I should not be able to build such a chart. There really should be no persistent trend between any metric of "sentiment" and annual returns. But the whole efficient market hypothesis gets mangled when there are significant forces trying to push the price in a certain direction by means of disinformation. That is, some group of manipulators must be so bent on suppressing the price, that they are willing to lose money consistently on the effort. That willingness to lose money shorting Tesla is what causes that negative slope from 0% to 30% on our sentiment scale. We can trade against that and keep making money off the price distortion just a long as these manipulators are willing to lose money.

From this perspective, it is probably good for us to look at this sort of chart periodically to see if the price distortion is continuing to happen. The battle with the infidels will be over when that trend disappears.

Until then the Faithful Blind will trade against the Infidels of FUD!

 

[jhm]

It shall be written of the Faith Blind, "And they did in that dark season back the truck up."

It's always darkest before the dawn.

Nominal LTPT $3,250​
Percentile​	Implied Discount​	2019-03-22​	2019-04-21​	2020-01-01​	2020-03-21​	2021-01-01​	2022-01-01​	2023-01-01​	2024-01-01​
2%​	31.4%​	$292​	$298​	$361​	$383​	$474​	$623​	$819​	$1,075​
10%​	29.4%​	$333​	$340​	$407​	$430​	$527​	$682​	$883​	$1,142​
20%​	28.5%​	$355​	$362​	$431​	$456​	$554​	$712​	$915​	$1,176​
30%​	27.9%​	$370​	$377​	$448​	$473​	$574​	$733​	$938​	$1,199​
50%​	26.4%​	$409​	$417​	$491​	$517​	$621​	$786​	$993​	$1,256​
70%​	25.5%​	$436​	$444​	$520​	$547​	$653​	$820​	$1,030​	$1,293​
90%​	24.1%​	$483​	$491​	$571​	$599​	$709​	$880​	$1,092​	$1,355​
98%​	23.1%​	$519​	$528​	$611​	$639​	$752​	$925​	$1,139​	$1,401​

[td]

0.0%​

[/td] [td]

32.7%​

[/td] [td]

$266​

[/td] [td]

$272​

[/td] [td]

$332​

[/td] [td]

$353​

[/td] [td]

$441​

[/td] [td]

$585​

[/td] [td]

$776​

[/td] [td]

$1,031​

[/td]

Sport LTPT $5,250​
Percentile​	Implied Discount​	2019-03-22​	2019-04-21​	2020-01-01​	2020-03-21​	2021-01-01​	2022-01-01​	2023-01-01​	2024-01-01​
2%​	38.6%​	$294​	$302​	$379​	$407​	$526​	$729​	$1,010​	$1,399​
10%​	36.2%​	$343​	$352​	$437​	$467​	$595​	$810​	$1,103​	$1,502​
20%​	34.8%​	$374​	$383​	$472​	$504​	$637​	$859​	$1,159​	$1,562​
30%​	34.1%​	$391​	$401​	$492​	$525​	$661​	$886​	$1,189​	$1,595​
50%​	32.3%​	$443​	$454​	$552​	$586​	$730​	$966​	$1,277​	$1,689​
70%​	31.4%​	$471​	$482​	$583​	$619​	$766​	$1,007​	$1,322​	$1,737​
90%​	29.8%​	$525​	$536​	$643​	$681​	$835​	$1,084​	$1,406​	$1,825​
98%​	28.8%​	$562​	$574​	$684​	$723​	$882​	$1,136​	$1,462​	$1,883​

[td]

0.0%​

[/td] [td]

40.1%​

[/td] [td]

$266​

[/td] [td]

$273​

[/td] [td]

$346​

[/td] [td]

$373​

[/td] [td]

$485​

[/td] [td]

$680​

[/td] [td]

$953​

[/td] [td]

$1,336​

[/td]

Insane LTPT $7,250​
Percentile​	Implied Discount​	2019-03-22​	2019-04-21​	2020-01-01​	2020-03-21​	2021-01-01​	2022-01-01​	2023-01-01​	2024-01-01​
2%​	43.6%​	$296​	$305​	$393​	$426​	$565​	$811​	$1,165​	$1,673​
10%​	40.9%​	$349​	$359​	$457​	$493​	$644​	$908​	$1,280​	$1,804​
20%​	39.4%​	$385​	$396​	$499​	$537​	$697​	$971​	$1,354​	$1,887​
30%​	38.6%​	$406​	$417​	$524​	$562​	$726​	$1,006​	$1,394​	$1,932​
50%​	36.5%​	$463​	$475​	$591​	$632​	$807​	$1,102​	$1,504​	$2,053​
70%​	35.3%​	$502​	$515​	$636​	$679​	$861​	$1,164​	$1,575​	$2,130​
90%​	33.7%​	$556​	$569​	$697​	$743​	$933​	$1,248​	$1,669​	$2,232​
98%​	32.7%​	$593​	$607​	$740​	$788​	$983​	$1,305​	$1,733​	$2,300​

[td]

0.0%​

[/td] [td]

45.4%​

[/td] [td]

$266​

[/td] [td]

$274​

[/td] [td]

$356​

[/td] [td]

$386​

[/td] [td]

$518​

[/td] [td]

$753​

[/td] [td]

$1,095​

[/td] [td]

$1,591​

[/td]

 

[jhm]

One more...

Weed LTPT $420​
Percentile​	Implied Discount​	2019-03-22​	2019-04-21​	2020-01-01​	2020-03-21​	2021-01-01​	2022-01-01​	2023-01-01​	2024-01-01​
24.2%​	5.3%​	$266​	$267​	$277​	$280​	$292​	$307​	$323​	$340​
2%​	7.4%​	$224​	$225​	$236​	$240​	$254​	$273​	$293​	$315​
10%​	6.5%​	$241​	$242​	$253​	$256​	$269​	$287​	$306​	$325​
20%​	5.6%​	$260​	$261​	$271​	$274​	$286​	$302​	$319​	$337​
30%​	4.8%​	$277​	$278​	$287​	$290​	$301​	$316​	$331​	$347​
50%​	3.5%​	$310​	$311​	$319​	$321​	$330​	$341​	$353​	$365​
70%​	2.6%​	$336​	$336​	$342​	$344​	$351​	$360​	$369​	$379​
90%​	1.8%​	$359​	$360​	$364​	$366​	$371​	$378​	$384​	$391​
98%​	1.2%​	$379​	$379​	$382​	$383​	$387​	$391​	$396​	$401​

 

[adiggs]

Good grief! This thread didn't just exit the first page of the investor forum - I didn't find it in the first 3 or 5 pages either.

With the recent lovely (irrelevant to long term investing, but fun) run in the share price, and maybe as an end of year thing, would you update the current status @jhm?

I know that plenty think this is silly - for me this has become an excellent barometer of where the market is pricing Tesla and thinking about the company - I have a suspicion that the implied discount is still awfully high.

 

[jhm]

Good grief! This thread didn't just exit the first page of the investor forum - I didn't find it in the first 3 or 5 pages either.

With the recent lovely (irrelevant to long term investing, but fun) run in the share price, and maybe as an end of year thing, would you update the current status @jhm?

I know that plenty think this is silly - for me this has become an excellent barometer of where the market is pricing Tesla and thinking about the company - I have a suspicion that the implied discount is still awfully high.

Sure, I'll get to it in the new year.

 

[winfield100]

Market-Cap each day from history starting from Jan 2014 and computed implied return to 650Bil at 1/23/2028.

View attachment 275307

Note the chart is using market cap (not prices). So it is accounting for dilution as it happens, instead of theorizing it too much.
So as you see, despite all the noise in the media and social-media, the implied return (or discount rate) has been as steady as it can be. Rarely came anomalies like the Xramp and the SCTY bailout, where the discount shot up. But steady as she goes otherwise....

@SBenson @jhm
Going back through to comments, any update upon this graph esp over last year?
The total market cap. It would seem that it has done an inflection point up, as about ??~17 million?? “Synthetic”(whatever they are called) have been covered and “vanished”
Short shares down from appx 42 million to about 25million
(I’m just a beginner)

 

[winfield100]

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.
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.

@EinSV
We seem to be in that inflection point?

 

[EinSV]

@EinSV
We seem to be in that inflection point?

@winfield100 I believe the main condition I described in my post below for triggering an inflection point bringing the discount rate down from the stratosphere has now taken place, which is that there has been a fundamental shift in the auto industry where most would now acknowledge that electric cars are the future and that Tesla is the clear leader. This was not the case in March 2016 when I made that post.

But it's not clear that will be sufficient to trigger an inflection point just yet. As @jhm mentioned in his post above, the forces of FUD have been extremely effective at amplifying fears and negativity around Tesla so despite Model 3 proving that the future is electric, with Tesla the clear leader, the market does not yet believe Tesla can sustain the 50% annual growth rate it has enjoyed since this thread began.

Although a few cracks have started appearing recently, most of the media is still steadfastly negative toward Tesla, as are most analysts. There is also a new narrative seeded by people like Adam Jonas that seeks to defuse any short term success by suggesting that while the share price may rise in the short run, it will fall back to earth for various reasons.

If I am reading @jhm's most recent charts right, even with the recent run-up we are still down near the 10th percentile for the "nominal" price target, which is quite bearish. Even with the Model 3 exceeding almost everyone's expectations, GF3 being built and cranking out cars in no time, Model Y ahead of schedule and the competition's dismal showing so far, the market still significantly discounts Tesla's ability to maintain its growth and become profitable.

As a result, it may take more time for the market to recognize the likelihood that Tesla can maintain hypergrowth for years to come, and grow into a massive, profitable company that would justify the "blind faith" price targets.

On the other hand, if Tesla continues to execute as it has in 2019, 2020 has the potential to be quite a remarkable year. GF3 gearing up, Model Y coming on line, Solarglass roof production beginning, FSD features rolling out, GF4 build beginning, Semi, Plaid S/X, battery day, storage reaching critical mass and more could help investors see the light.

Almost no one took Elon seriously in 2015 when he said Tesla would grow 50% per year, but it has. Now Elon is saying he expects it to grow 50-100% per year for the foreseeable future. The market is again not taking that seriously, but that could eventually change if Tesla continues to execute.

Either way, I'm a patient man and content to just let the story continue to play out.

As I've thought more about this type of approach and especially in light of the pending Model 3 launch, I have wondered about whether there is another factor that should be worked into the model for a company like Tesla.

When Tesla started out as a small startup building a few prototype Roadsters, there were enormous perceived hurdles to its success. By the time of the IPO in June 2010, it had started to chip away at those hurdles by introducing its first elegant proof of concept, an EV sports car that could outperform similarly priced ICE competitors. This, and the Secret Master Plan, was enough to raise enough excitement among investors to fund a successful IPO in June 2010.

Only a few years later, by late 2012, it had introduced the Model S and demonstrated to the satisfaction of virtually every car magazine (if not the general public yet), that it could similarly bring a premium EV to market that was better than the existing ICE competition. A few months later, this opinion was borne out in rapidly increasing sales of the Model S.

A second, even more convincing, proof of concept.

If you apply the BFPT targets backwards to the period between the IPO and the initial commercial success of the Model S and project it all the way forward to 2025, the expected rates of return for investors who believed that the Secret Master Plan could result in something like the "blind faith" targets, you find rates of return that exceed a whopping 40% per year over that entire period:

June 2010 (IPO): $17: 41%
Nov. 2012 (Car Magazines Rave About Model S): $31: 43%

Fast forward just a few months -- to June 2013 -- and the stock had shot up, after Model S's initial commercial success.

Since that time, the expected return for long-term investors who believe in something like the BFPT targets has dropped from a little above 40% to a "mere" 30%:

June 2013 (Model S sales ramp): $110 32%
June 2015: $268 28%
March 24, 2016 (today): $227 33%

Thus, while the expected rates of return remain extremely high they are significantly lower than for early investors. I.e., there was a significant discontinuity/drop between the time of the IPO and June 2013, when the Model S provided proof that EVs could be successful in at least one (very important) market segment.

But, and here is where it starts getting interesting (finally, you may say!), the expected rate of return that is currently implied by the BFPT -- around 30% -- is still extraordinarily high. Such an outsized rate of return can only be explained by the fact that most investors don't think Tesla has much of a chance of growing into a company of the size and profitability implied by the BFPT.

In other words, the Model S proof of concept was not enough for the average investor. It was still too easy to believe that EVs would never be economical or accepted by the general public, and would be stuck as niche vehicles, playthings for the rich or EV fanatics.

But if Tesla continues to ramp 50% per year with a successful launch of the Model 3 the perception that EVs can only be niche vehicles will be disproven to all but the most stubborn bears. I believe it is impossible for Tesla to stay on the fast growth track that would permit it to meet the BFPT in 2025 but continue to permit investors to enjoy such a massive discount rate. Why? For the simple reason that as major risks are taken off the table, more investors will jump in. Sorry, but no one is allowed to enjoy a 30% return year after year on anything but a stock that is perceived by the market to be extremely risky.

But here is the kicker: Once those perceived risks are reduced, as I believe they will be if Tesla is able to launch a successful and at least marginally profitable Model 3, the expected rate of return has to drop. The central bear thesis ---- that EV's are nothing more than niche vehicles -- will no longer be credible for most investors.

If that happens, and I believe it very likely will, there could be a second inflection point (akin to what happened in 2012/2013) in the perceived risks to Tesla. Proving the EV model -- perhaps the greatest source of skepticism/perceived risk to Tesla in the market -- will no longer be tenable. Instead, the bear case will have to focus on more mundane things like competition, perceived quality, etc.

With the EV model proven and this central risk to Tesla largely off the table, the case for Tesla growing into a company with the market cap Elon predicted will be much more likely. All of a sudden it is a market leader in the new automobile industry centered around EVs. And with reduced risks of meeting the BFPT revenues/profits, expected returns will necessarily be reduced significantly.

What does this mean if you are one of those who believe that something along the lines of the BFPT market cap assumptions for 2025 are reasonable?

It means that a version of the BFPT model that assumes a constant discount rate significantly understates the potential returns between now and 2020.

If you keep all the other assumptions of the BFPT model the same, but assume a still very high 20% expected rate of return for 2020-2025, that implies a median expected stock price of $1442 on December 31, 2020. If you assume a 15% expected rate of return from 2020-2025, that implies a median expected stock price of $1785 at the end of 2020, if Tesla remains on track with the Secret Master Plan, 50% growth per year, and a successful Model 3 launch.

In other words, if you believe the Secret Master Plan will work and that Tesla is on track to continue growing at a 50% clip, the next four to five years have even more upside than the BFPT model predicts (which are ridiculously high to begin with).

This is without taking account the views that have been expressed in other parts of this forum that the 500,000 target in 2020 is too low. And it ignores potential breakthroughs in the battery business or other Tesla innovations that none of us even envision yet.

Ok, it is time for me to have a drink (or two). In the meantime, if anyone wants to take potshots at all this crazy talk, please have at it.

And apologies that I could not present this concept with a nifty graph. That sort of thing would really help here but is not my strong suit.

 

[winfield100]

@winfield100 I believe the main condition I described in my post below for triggering an inflection point bringing the discount rate down from the stratosphere has now taken place, which is that there has been a fundamental shift in the auto industry where most would now acknowledge that electric cars are the future and that Tesla is the clear leader. This was not the case in March 2016 when I made that post.

But it's not clear that will be sufficient to trigger an inflection point just yet. As @jhm mentioned in his post above, the forces of FUD have been extremely effective at amplifying fears and negativity around Tesla so despite Model 3 proving that the future is electric, with Tesla the clear leader, the market does not yet believe Tesla can sustain the 50% annual growth rate it has enjoyed since this thread began.

Although a few cracks have started appearing recently, most of the media is still steadfastly negative toward Tesla, as are most analysts. There is also a new narrative seeded by people like Adam Jonas that seeks to defuse any short term success by suggesting that while the share price may rise in the short run, it will fall back to earth for various reasons.

If I am reading @jhm's most recent charts right, even with the recent run-up we are still down near the 10th percentile for the "nominal" price target, which is quite bearish. Even with the Model 3 exceeding almost everyone's expectations, GF3 being built and cranking out cars in no time, Model Y ahead of schedule and the competition's dismal showing so far, the market still significantly discounts Tesla's ability to maintain its growth and become profitable.

As a result, it may take more time for the market to recognize the likelihood that Tesla can maintain hypergrowth for years to come, and grow into a massive, profitable company that would justify the "blind faith" price targets.

On the other hand, if Tesla continues to execute as it has in 2019, 2020 has the potential to be quite a remarkable year. GF3 gearing up, Model Y coming on line, Solarglass roof production beginning, FSD features rolling out, GF4 build beginning, Semi, Plaid S/X, battery day, storage reaching critical mass and more could help investors see the light.

Almost no one took Elon seriously in 2015 when he said Tesla would grow 50% per year, but it has. Now Elon is saying he expects it to grow 50-100% per year for the foreseeable future. The market is again not taking that seriously, but that could eventually change if Tesla continues to execute.

Either way, I'm a patient man and content to just let the story continue to play out.

@EinSV
Thank you for your response
I’m a small investor, retired, so I have to DCA shares, so it will be tough getting to 500+ shares, thou slowly closing in.
The melt up will take longer so I can get less expensive shares over this year 2020, less expensive meaning not $500/share
(I would have a bunch more but 2 vaca to Kaua’i to visit daughter and car etc were partially financed)
I remember fellow member of EVADC electric car club.
“I don’t know Robert, $70/share is really pricey for Tesla”, just prior to one of last melt ups”
I’m extremely intrigued by the graph of “market cap”
Ie, ?daily? Market price times shares and how it’s affected by the 25-42 million “synthetic” shares created and destroyed by shorts.
Does it have any effect
(I was including inflection point in total cap and SP, like I said tho I’m in my 70’s, I’m just a beginner

 

[adiggs]

@EinSV
Thank you for your response
I’m a small investor, retired, so I have to DCA shares, so it will be tough getting to 500+ shares, thou slowly closing in.
The melt up will take longer so I can get less expensive shares over this year 2020, less expensive meaning not $500/share
(I would have a bunch more but 2 vaca to Kaua’i to visit daughter and car etc were partially financed)
I remember fellow member of EVADC electric car club.
“I don’t know Robert, $70/share is really pricey for Tesla”, just prior to one of last melt ups”
I’m extremely intrigued by the graph of “market cap”
Ie, ?daily? Market price times shares and how it’s affected by the 25-42 million “synthetic” shares created and destroyed by shorts.
Does it have any effect
(I was including inflection point in total cap and SP, like I said tho I’m in my 70’s, I’m just a beginner

The synthetic shares doesn't affect the market cap - that's share price * issued shares. The synthetic shares net out to 0 change in issued shares due to each of those shares having 2 owners plus 1 lender (net 1 share). Of course, all of that additional ownership does act as a damper on the share price, but that additional ownership has to be redeemed at some point to.

 

[SebastianR]

Bump. @jhm...

 

[jhm]

Little Flock, it is time for an update. We have traveled through the valley of FUD. Our faith has been tested mightily. But we who have endured have overcome and rise still.

In terms of our Nominal Target $3250, $369 is now in the 55th percentile. Blessed prices for accumulating are below the 20th percentile, roughly under $350.

I've also refreshed the back testing on the Nominal Target. Last year or so has been so severely bearish that a whole cloud of observations are substantially below the regression curve. Basically, the market was not bouncing back from low sentiment as we had seen before, but was stuck in longer lasting pessimism. This we call the Valley of FUD, also the Valley of Despair. Some lost their faith in these dark months. Behold the vindication of Tesla is manifest, and the world is awakening to a new day. The regression curve still suggests that positive annual returns are expected when buying below the 30th percentile of sentiment, and more recent data points are at or above the regression curve. We have reason to believe that the dark night is past, but I would not be eager to accumulate above the 30th percentile.

Truly today is a New Day for the Faithful Blind. Perhaps having gone through such a difficult pass, our beloved stock will trade differently. But we should be wary of that ancient foe who FUD doth spread. Rejoice in the bounty of this day.

Nominal LTPT $3,250​
Percentile​	Implied Discount​	2020-01-07​	2020-02-06​	2021-01-06​	2022-01-01​	2023-01-01​	2024-01-01​	2025-01-01​	2026-01-01​
55.4%​	27.2%​	$469​	$478​	$597​	$757​	$963​	$1,225​	$1,559​	$1,983​
2%​	37.9%​	$245​	$252​	$338​	$464​	$640​	$883​	$1,219​	$1,680​
10%​	36.4%​	$268​	$275​	$365​	$496​	$677​	$923​	$1,260​	$1,719​
20%​	32.5%​	$339​	$347​	$449​	$592​	$784​	$1,039​	$1,378​	$1,825​
30%​	30.4%​	$385​	$394​	$502​	$652​	$851​	$1,109​	$1,447​	$1,886​
50%​	27.7%​	$455​	$464​	$580​	$739​	$944​	$1,205​	$1,540​	$1,967​
70%​	26.0%​	$508​	$518​	$640​	$803​	$1,012​	$1,275​	$1,607​	$2,024​
90%​	24.1%​	$571​	$581​	$709​	$877​	$1,089​	$1,352​	$1,680​	$2,085​
98%​	23.1%​	$613​	$623​	$754​	$925​	$1,139​	$1,401​	$1,725​	$2,123​

Sport LTPT $5,250​
Percentile​	Implied Discount​	2020-01-07​	2020-02-06​	2021-01-06​	2022-01-01​	2023-01-01​	2024-01-01​	2025-01-01​	2026-01-01​
43.6%​	35.0%​	$469​	$481​	$633​	$852​	$1,150​	$1,553​	$2,099​	$2,834​
2%​	46.0%​	$251​	$259​	$366​	$531​	$776​	$1,132​	$1,655​	$2,416​
10%​	44.3%​	$275​	$283​	$396​	$569​	$821​	$1,185​	$1,713​	$2,472​
20%​	40.2%​	$347​	$356​	$486​	$678​	$951​	$1,333​	$1,871​	$2,624​
30%​	37.6%​	$403​	$414​	$555​	$760​	$1,046​	$1,439​	$1,982​	$2,727​
50%​	34.4%​	$487​	$499​	$654​	$876​	$1,177​	$1,582​	$2,129​	$2,861​
70%​	31.9%​	$566​	$579​	$746​	$981​	$1,294​	$1,707​	$2,254​	$2,973​
90%​	30.0%​	$638​	$652​	$829​	$1,074​	$1,395​	$1,814​	$2,359​	$3,066​
98%​	28.8%​	$687​	$702​	$885​	$1,136​	$1,462​	$1,883​	$2,427​	$3,125​

Ludicrous LTPT $7,250​
Percentile​	Implied Discount​	2020-01-07​	2020-02-06​	2021-01-06​	2022-01-01​	2023-01-01​	2024-01-01​	2025-01-01​	2026-01-01​
38.0%​	40.6%​	$469​	$482​	$659​	$922​	$1,297​	$1,823​	$2,565​	$3,605​
2%​	51.7%​	$254​	$263​	$386​	$582​	$883​	$1,339​	$2,033​	$3,084​
10%​	50.0%​	$278​	$288​	$418​	$623​	$934​	$1,401​	$2,104​	$3,155​
20%​	45.7%​	$352​	$363​	$513​	$744​	$1,083​	$1,578​	$2,301​	$3,351​
30%​	42.6%​	$417​	$429​	$595​	$844​	$1,204​	$1,717​	$2,452​	$3,498​
50%​	39.0%​	$512​	$526​	$712​	$986​	$1,370​	$1,905​	$2,652​	$3,687​
70%​	36.1%​	$607​	$622​	$826​	$1,120​	$1,525​	$2,076​	$2,828​	$3,850​
90%​	34.0%​	$687​	$704​	$921​	$1,230​	$1,648​	$2,210​	$2,964​	$3,974​
98%​	32.8%​	$742​	$760​	$986​	$1,303​	$1,730​	$2,297​	$3,053​	$4,053​