Fund a big percent of your M3 purchase by buying Tesla Stock

[JeffK]

If I remember correctly, Elon stated he wanted/needed to show at least some positive cash flow for the third quarter, since Tesla was going to need a capital raise in the fourth quarter. Yet, he said that prior to the SC deal...

The odds are in his favor considering in transit Q2 deliveries will count towards Q3 revenue...

 

[Skotty]

There is not a lot to be gained anymore without a huge upfront investment, and Model 3 buyers largely won't have that. Tesla stock was a winner back when it was $30 a share. Assume someone had 100 shares and sold at $130 a share. This would have given them close to $10,000 for a Model S down payment. Original investment was $3,000. How would that work out now at $200 a share? To make that same amount, stock price would need to go from $200 a share up to $300 a share. That's possible, but the problem is the initial investment for the same amount of stock is now $20,000. That's a much taller order.

There's also the chance the stock will just remain flat. I do think there is potential for it to go up. Two things in particular could make that happen. One is a near perfect execution of the Model 3 plan. Two is success with Tesla Energy and the Solar City acquisition. Most people seem somewhat down on Tesla Energy and the whole Solar City thing, but it has potential to be a sleeping giant. That potential comes in part from all the doubt surrounding it. Just like before the Model S launched, there was lots of doubt. That's why the stock was only $30 a share, and why it flew up like a SpaceX rocket after Model S went into production. But even if those things work out, you still have the prior noted issue that you are now starting at a much higher stock price than those who were able to fund part of their Model S with early investments.

 

[WarpedOne]

To make that same amount, stock price would need to go from $200 a share up to $300 a share. That's possible, but the problem is the initial investment for the same amount of stock is now $20,000. That's a much taller order.

As tall an order as is getting a 10k profit out of 30 >> 45 SP rise.
Stocks don't rise and fall in $$$, they rise and fall in %.
From $30 to $130 there was 430 % growth, same growth today puts us around $860.

You think it won't happen?
There was much higher chance at $30 of SP never hitting 45 as is today for it not to hit 2000.
And then go and triple again.

Just you wait for tesla to reach market saturation and is 'forced' to turn in profits. Apple profits will look like peanuts.

 

[winfield100]

As tall an order as is getting a 10k profit out of 30 >> 45 SP rise.
Stocks don't rise and fall in $$$, they rise and fall in %.
From $30 to $130 there was 430 % growth, same growth today puts us around $860.

You think it won't happen?
There was much higher chance at $30 of SP never hitting 45 as is today for it not to hit 2000.
And then go and triple again.

Just you wait for tesla to reach market saturation and is 'forced' to turn in profits. Apple profits will look like peanuts.

this may be a bit OT but since you are talking stock price, to my sorrow, I bought AMER for $30 (100 shares) and sold at $40. nice tidy profit of $1,000,
and missed out when it changed it's symbol from AMER to AOL and split 144x. ie my 100 shares could have been 14,400 shares, peaking at $100/share post split. this happens once or twice in a lifetime for most folks. sometimes patience is rewarded.

 

[Skotty]

As tall an order as is getting a 10k profit out of 30 >> 45 SP rise.
Stocks don't rise and fall in $$$, they rise and fall in %.
From $30 to $130 there was 430 % growth, same growth today puts us around $860.

You think it won't happen?
There was much higher chance at $30 of SP never hitting 45 as is today for it not to hit 2000.
And then go and triple again.

Just you wait for tesla to reach market saturation and is 'forced' to turn in profits. Apple profits will look like peanuts.

That's a good point. A lot of people seem to incorrectly think that Tesla can't turn a profit. At some point Tesla will stop expanding so rapidly and profits might start to poor in. Stock price will likely go up significantly when that happens. But I still think stock price would probably top off around $350. I could be wrong.

 

[flamingoezz]

I don't like to put all of my eggs in one basket. it may have worked out well for people who invested a couple years ago -- but that doesn't mean if you start investing in tesla now, that it will pay dividends in a year or two when deliveries are taken...in fact, some would argue that after 7-8 years of gains, the market is due for a decline. a bank account may be a safer bet for a short term purchase than putting it into stocks.

 

[dsvick]

That's a good point. A lot of people seem to incorrectly think that Tesla can't turn a profit. At some point Tesla will stop expanding so rapidly and profits might start to poor in. Stock price will likely go up significantly when that happens. But I still think stock price would probably top off around $350. I could be wrong.

Entirely possible, in fact quite probable. For the purposes of this thread though in order for them to turn a profit they'll need to be producing and delivering a lot of Model 3s, and by the time they're doing that, a lot of the people with a reservation will have already needed to come up with the money they need for their Model 3.

 

[Canuck]

I agree with you. TSLA price currently probably reflects all the uncertainties and misgivings that investors have rather than all the success that this company is on the verge of having. Once the market realizes what could go right instead of what could go wrong(as current stock price reflects) then TSLA will finally break out to upside and scale unprecedented heights. This could happen sooner and faster than most investors realize a stock price of $500 is not out of question by 2018 or so

The current price reflects "uncertainties and misgivings that investors have"?

"Most investors realize a stock price of $500 is not out of question by 2018 or so"?

Here's some reality for you:

"Tesla’s market capitalization is currently about $31 billion—equivalent to $620,000 for every car it delivered last year, or $63,000 for every car it hopes to produce in 2020.

By comparison, General Motors’s $48 billion market value is equivalent to about $4,800 for every vehicle it sold last year.

Tesla’s heady valuation—about 125 times the next 12 months of expected earnings—and the implication that shareholders may be overpaying for Musk’s small but fast-growing luxury car company have made the stock a favorite of short sellers."

Now, I hope the shorts are wrong, and if the past is any indication of the future, they will be, but at the same time $500/share by 2018 or so? That's just plain nuts.

 

[TrendTrader007]

The current price reflects "uncertainties and misgivings that investors have"?

"Most investors realize a stock price of $500 is not out of question by 2018 or so"?

Here's some reality for you:

"Tesla’s market capitalization is currently about $31 billion—equivalent to $620,000 for every car it delivered last year, or $63,000 for every car it hopes to produce in 2020.

By comparison, General Motors’s $48 billion market value is equivalent to about $4,800 for every vehicle it sold last year.

Tesla’s heady valuation—about 125 times the next 12 months of expected earnings—and the implication that shareholders may be overpaying for Musk’s small but fast-growing luxury car company have made the stock a favorite of short sellers."

Now, I hope the shorts are wrong, and if the past is any indication of the future, they will be, but at the same time $500/share by 2018 or so? That's just plain nuts.

"This could happen sooner and faster than most investors realize"
"A stock price of $500 or so in not out of question by 2018 or so"
This is how I meant it to read
So a $500 SP means a market cap of $74 Billion approx
There is nothing magical about that
Tesla is not an auto company so to compare it to GM is like comparing Google to IBM or Amazon to Wal Mart or Apple to Dell or Facebook to MySpace or whatever
Tesla is a cutting edge technology company which is arguably the most innovative tech company in the world and it will always be valued in the same league as AMZN or GOOGL
If you wanna invest in cutting edge disruptive rule breakers like TSLA you've got to throw away traditional valuation metrics out the window
I can easily foresee TSLA being a $100 Billion market cap within the next 5 years, probably sooner
Which means a SP of approx $650 (assuming no dilution)
And you think Elon Musk is an idiot for claiming that TSLA could eventually be a trillion $ market cap which gives us a SP of $6700 or so in the next 20 years
Elon Musk is a lot of things but an idiot he is not
I can assure you pal

 

[Canuck]

Elon Musk is a lot of things but an idiot he is not
I can assure you pal

Right, and here's his comments on the value of the shares:

Elon Musk: Tesla Stock Price More Than We Deserve

If you wanna invest in cutting edge disruptive rule breakers like TSLA you've got to throw away traditional valuation metrics out the window

Well that's strange since I bought TSLA years ago, and APPL, GOOGL, and SIRI, years before that, using my traditional valuation metrics and I've done quite well thank you.

 

[S'toon]

Right, and here's his comments on the value of the shares:

Elon Musk: Tesla Stock Price More Than We Deserve



Well that's strange since I bought TSLA years ago, and APPL, GOOGL, and SIRI, years before that, using my traditional valuation metrics and I've done quite well thank you.

Because, you know, a comment of his from October 2013 is really relevant to a discussion to what's happening with the stock now.

 

[TrendTrader007]

Right, and here's his comments on the value of the shares:

Elon Musk: Tesla Stock Price More Than We Deserve



Well that's strange since I bought TSLA years ago, and APPL, GOOGL, and SIRI, years before that, using my traditional valuation metrics and I've done quite well thank you.

well then i guess we are not all that dissimilar in our investing philosophy since my success stories include GOOGL which i bought at 220 or so in February 2005, CMG which i bought at $32 in February or March 2006, VMW at $55 in august 2007, BIDU at $300 in may 2008 (that is another story), $FB at $31 in January 2013 among numerous others.
i must admit i missed AAPL entirely and i missed TSLA in 2013 to my great regret (although i made a killing couple of times trading large quantities of options plus stock in 2014 and most recently in early 2016)
also i missed AMZN
so my deal is that i just made an absolute killing holding FB most recently from july 2015 at $88 to July 2016 at $117 and now i hope to make an absolute fortune in TSLA holding it for the next several quarters if not years
we will see
there is many a slip
between the cup and the lip

 

[Canuck]

Because, you know, a comment of his from October 2013 is really relevant to a discussion to what's happening with the stock now.

And he repeated it a year later in September of 2014:

Elon Musk: Tesla Stock Price 'Kind Of High Right Now'

And I have no doubt he'd say the same thing today. You have to have blinders on to think TSLA is going to $500/share by 2018. It won't happen in my opinion -- and I'm holding the stock long so I hope it does -- but I'm also a realist.

 

[xav-]

Does buying Solar City solve a "house of cards" problem for Tesla?

... Essentially buying time for the Model 3 revenue to glue everything together?

I really don't like that purchase. For the well being of tesla I hope shareholders reject it. Solarcity is going to hurt Tesla.

Debt will be much higher for sure.. I believe between the $2.5 billion buyout and Solarcity debt the balance sheet will increase by $8 billion.. Somebody may need to confirm.

Then earnings will be worse. Solarcity loses money at every solar installation. It's nothing like tesla.

Adding that purchase to the already massive expansion plans of the company just seems too much in my opinion.

Did I even mention that Solarcity debt was trading at 20 percent yields prior to Elons announcement of the merger??

 

[Warden182]

Given that Tesla is currently producing about 25k cars per quarter and to get your car before about 2020 Tesla will be producing something like 25k per month why do you believe that your M3 can roll off the line and the stock price not be higher than it is now?

I haven't read all the posts yet, but this is a surprising thread around financial investing advice. I wanted to give at least one quick answer to this assumption that TSLA will skyrocket with the M3, though it's probably my answer has already been given later in the thread.

By investing in TSLA, you are NOT betting on the company's future performance. You are betting on the actual performance being significantly better than what the "market" believes it will be. Because everything is already baked into the current price today. The market is well aware of the number of pre-orders and what a big deal this will be (or should be). The only way the price goes up is when expectations are surpassed.

 

[erthquake]

By investing in TSLA, you are NOT betting on the company's future performance. You are betting on the actual performance being significantly better than what the "market" believes it will be. Because everything is already baked into the current price today. The market is well aware of the number of pre-orders and what a big deal this will be (or should be). The only way the price goes up is when expectations are surpassed.

But aren't there a lot of shorts baked into the price as well? If the Model 3 launch is successful and it becomes apparent to them that Telsa isn't going to fail, won't the short covering contribute to a significant increase in the share price?

 

[MitchJi]

I am a little hesitant to make the following replies. I am not trying to convince anyone that I am correct. I am confident that our investment in Tesla is going to be one of our best investment decisions, both between now and the M3 ramp and longer term, so I decided to present some of the results of hundreds of hours of research, in the hopes of helping someone else. So my current intention now is to add some balance and accuracy to this discussion.

I am not too surprised that you actually believe a some of what you have posted below (typical conventional investment beliefs), but IMO the absolute confidence that you are correct, and that anyone who disagrees with you is "nuts" totally disqualifies you as a reliable source of financial advice:

Of course, because there is no production yet. But all you need to do is look at TSLA's P/E ratio to know that the stock price today is based completely on production of the Model 3.

I can't even believe I'm having this discussion, it's so obvious. Elon Musk has even said it won't be until 2020 that Tesla turns a profit so what else could have TSLA at such a high number given its low P/E ratio? Maybe anticipated production of the Model 3?

Here's some reality for you:

Now, I hope the shorts are wrong, and if the past is any indication of the future, they will be, but at the same time $500/share by 2018 or so? That's just plain nuts.

Ron Baron clearly has a different opinion. I'm not saying that he is correct and you are wrong (even though I think he it is obvious he is), but your conviction that anyone who disagrees with you is "nuts" is over the top. Link to a six minute video interview:
Billionaire investor bets on Tesla being one of the world's biggest companies

Billionaire long-term investor Ron Baron said Tuesday that Tesla Motors could be a stock he owns for the next 10 to 20 years. "I think in this one investment we can make $6 or $7 billion" over that time period, he said."I think this could be one of the largest companies in the United States and the whole world," Baron told CNBC's "Squawk Box." In a wide-ranging interview, he also said the overall stock market is cheap at current levels. Baron said it's taken three years to amass a $300 million stake in Tesla, with an average cost per share of $210. "So we've made very little so far. But often times it takes us a very long time to [make money]." Tesla shares closed Monday at just over $220 per share. "I go there every three or four months. I look at the factory and see how much is changing," said the chairman and CEO of Baron Capital, which has $21 billion in assets under management. Baron said he's investing in Tesla CEO Elon Musk and the 14,000 workers at the electric-car maker. "The competition is not anywhere. They could have caught him four or five years ago. But they can't catch him now. he's too far ahead."

Tesla CEO Elon Musk interviewed by Investment Icon Ron Baron

Disclaimer: I’m a huge fan and investor in Ron Baron’s funds and Tesla Motors (TSLA) and I couldn’t have been more happy to see these two mavericks take the stage for an in-depth “back and forth” at this year’s investment conference. It’s hard to hold back my admiration and respect for these two, but, without editorializing (too much) I wanted to provide you with a recap of these two "facing off" in this epic convergence of two genius thinkers.

Famed mutual fund manager and investment icon Ron Baron of Baron Capital is known for his relatively conservative, long-term approach to stock picking. He's been compared to Warren Buffett (both for his investing style and outstanding track record), and last year he boldly forecasted that Tesla (TSLA) investors will make 10 times their money over the next ten years.

Most recently, the 24th Annual Baron Investment Conference* took place in New York City drawing over 5,000 shareholders at the Metropolitan Opera House at Lincoln Center and Baron's surprise guest was Tesla Motors CEO Elon Musk. And, at the event, Tesla vehicles were on display for shareholders to check out and (for some) test drive. In an interview with billionaire founder and investing legend Ron Baron, Musk discussed a wide range of topics including his focus on safety, his early days at Tesla, the Tesla Gigafactory, Battery Technology, and forthcoming Model 3. My recommendation: check out this video in full, don't miss a minute of it.

The reason I bolded the section about his factory visits is that retail investors don't have access to that level of information, and Ron attributed the information learned in those visits as a major reason for his confidence. He has a better investing track record than you, and much better access to information than you do, but if he disagrees with you he is nuts?

 

[Canuck]

I am not too surprised that you actually believe a some of what you have posted below, but IMO the absolute confidence that you are correct, and that anyone who disagrees with you is "nuts" totally disqualifies you as a reliable source of financial advice

Good. Because no anonymous poster one on the internet should ever be considered "as a reliable source of financial advice.' That's just plain nuts... Look to Warren Buffett - not me! He never says anything controversial like me calling people nuts.

By the way, I don't give financial advice, and no one should ever listen to me for financial advice (truthfully, I am not being sarcastic), but if I was looking for a Tesla related stock today, I would say that this stock will go up more in the next two years than TSLA:

Panasonic Corp. ADR

Panasonic ups ante in Tesla gigafactory investment

The good thing about these debates is that we can come back in two years and see who is right. (I say that but then forget the conversation one week later... )

He has a better investing track record than you, and much better access to information than you do, but if he disagrees with you he is nuts?

How do you know he has a better investing track record than me? Of course, he has much higher volume, but my gains in percentage points have been quite high, having bought mostly google, apple and sirius years ago, along with Canadian bank stocks for dividends. Also, I bought those american stocks, in US funds, when our dollar was at or above par, adding another ~25% to the profits.

But to answer your question, yes, anyone who disagrees with me is nuts. Just ask my wife...

 

[ApauloThirteen]

People are sometimes anamored by potential return rather than trying to analyze risk (even broad categories of risk). Agree there might be huge returns, but the risk here, ugh... just please understand your risk profile.

Also one can love the co products and hate the stock. Perfectly fine.

I like to do a check and see what the big investors are doing. For instance, Goldman Sachs, figure they know what's up, right? They sold 1.4M shares of TSLA as of their 6/30/2016 reporting. Now they still hold 1.4M shares. But if one unloads half the position, what's that phrase? Actions speak louder than words.... or analyst recs?

Good luck to everyone. Just don't risk it all on one stock..... please. And first to market doesn't always equal last one standing.

 

[MitchJi]

Mitch, I should have been more clear I earlier:

"SolarCity buyout. IMO, it will be a significant drag on the car business." Really, a drag on earnings that will be reflected in the stock price.

There is a spectrum of feelings about the SCTY merger mirrored by knowledge. In general the more people know, the more likely they are to be in favor of the merger. Elon said that the fund managers he explained the merger to are 100% in favor of the deal. Retail investors don't have access to that level of information. The obvious question is what did he tell the fund managers that he didn't tell everyone else? I believe it was plans for new products and price reductions, because he doesn't want to Osborn SCTY and TE sales. When he was asked questions on the call about new products he refused to answer. I believe that the new products will be compelling. We know whatever he told them compelling enough to convince 100% of the major fund managers. I believe that when Tesla and Elon are free to reveal the complete SCTY information it will switch from a drag to a catalyst.

My personal thinking is that I agree with Elon that Solar Energy and storage will be dominent. When Tesla stock was selling for about $30 per share and Elon said that Tesla was going to produce a compelling affordable EV, I didn't believe it was possible. I thought how compelling can an affordable EV be? A Leaf with a 200 mile range? When I was waiting in line for four hours to reserve a M3 I felt grateful that we have an affordable EV worth waiting for. So when I heard Elon say that the SCTY merger is compelling I thought that left a lot of money on the table once when I didn't believe Elon. I'm not going to make the mistake again when Elon says that he has a compelling solution to a huge business opportunity. Particularly now, when the "cost" of investing in that opportunity means getting a discount on buying shares of Tesla