I'm a long term TSLA Bull but...

[hershey101]

I think the analysts start to realize that Tesla has an awesome business model for the afterlife of batteries.

Lets say you get a new battery after 10years, so you have your old 85kw battery, lets assume worst case and it has 40kw capacity left.
those 40kw are bad a a car battery, but as a local grid storage for a solar house that tries to balance its peak consumption it will be almost an overkill.
So the Batteries would have a second live, notice that the batteries packs have awesome logistic capabilities, there are complete and can be attached to their new home in a matter of hours.
It would be definitely more profitable to use those batteries for a second live instead of recycling them. So after a second life of about 10years Tesla can finally recycle them.

And since Tesla is working in a close cooperation with SolarCity it will have a much better access to the market of grid storage.

To be honest I also only recognized the implications of this in the last couple weeks, before that I was always thinking that grid storage is a small market for straight out the factory tesla cells, since its not price competitive. But as SecondHand batteries it becomes an awesome business.

Such a long live cycle also means that the Integrated Recycling facility in the Gigafactory can wait for at least another 15years, thats when a huge amount of batteries will come in that already had a CarCycle and a GridCycle behind them and are ready to be recycled.
Before that there wont be to many Tesla Batteries packs to be recycled, the amount will be so small that it can be done by some small company.

That is brilliant!

 

[FluxCap]

That is brilliant!

That is the future that Adam Jonas of Morgan Stanley now believes in, and hinted at in his report. He is the #1 rated analyst covering Tesla Motors, and his predictions thus have more power to move the stock right now than anyone else. Hence, today.

The fact that he and I think alike is also an awesome feeling. His report reads like I could have written it (as could many here on our forum).

I see $380 as a reasonable price target for the end of this year. Conservative, in fact.

 

[100thMonkey]

I'm a trading newb and basically feel a bit like the gardener in "Being There" when it comes to investing or maybe a bit like Zuckerberg's twitter reference, like a "clown car that fell into a gold mine" and I have to admit it's hard to stay rational on days like this. I do my best to not gamble what I cant afford to lose. But TSLA seems to be breaking all the rules, it's off the chart, no "rational" guidance could have predicted that we'd be here today from a year ago and the temptation to take even bigger risk tugs at me. If you bought in early and are sitting on a huge gain, I'd wait till that one year mark passes to reduce taxes, pick a peak time on a peak day and enjoy some of the profits, enough to help defray the risk of loss to principle if something truly catastrophic happens to the stock, enough to understand that your gains are real. Otherwise, stay in and enjoy what could be your "golden road to early retirement"! Basically, Tesla has no rivals, it could very well be "a wrecking ball to the old and constructor of the new" in both the energy industry and the auto industry. The breadth and scope is unprecedented, it's global and maybe even interplanetary, and while success is not a sure thing, it's looking more and more like it's growth is likely to be wildly exponential, unlike any other investment available today.

 

[SteveG3]

Fair enough. But 80% over 6 years, while decent, is not what one wants to see from a growth stock. When people realize this, they will dump the stock and look for better opportunities, and this is going to cause the type of volatility we had post Q3. Thats what I want to avoid.

hershey, I certainly agree that any new money that is now coming into TSLA hoping for the kinds of returns of the past 18 months continuing as we go forward will exit if they realize the numbers we are both looking at. I don't worry about this, as I didn't worry about those who thought the drop to $120 this past fall was a precursor to a $50 share price. I think the market is expensive and I will be very happy with Tesla at $450 in 6 years, (and a higher price if the ancillary businesses take off). it's simply a more appealing risk/reward to me than anything else I see (and a lot of fun to be a part of). if you see something with a better risk/reward profile I can certainly see why you'd reduce your holdings... a lot of fun to be a part of only goes so far if you see better investment opportunities.

fwiw, that $450 target is a weighted average of a robust success scenario and a disappointing scenario on the Model S, X, and E.

 

[hershey101]

That is the future that Adam Jonas of Morgan Stanley now believes in, and hinted at in his report. He is the #1 rated analyst covering Tesla Motors, and his predictions thus have more power to move the stock right now than anyone else. Hence, today.

The fact that he and I think alike is also an awesome feeling. His report reads like I could have written it (as could many here on our forum).

Thanks for the analysis. I would still like to see the numbers behind all of this. I'm a car guy, I understand cars, I know a good car when I see one, and thats why I bought Tesla (the car and the company) last year. This green energy stuff, while great, honestly isn't my interest area, and so I thank all of you guys for doing the research and providing it on this form. I would appreciate it if someone can post the MS research report, or if you can post your own numbers as well.
Also, thanks for sharing the knowledge on the Google hangout last week.

 

[FluxCap]

Thanks for the analysis. I would still like to see the numbers behind all of this. I'm a car guy, I understand cars, I know a good car when I see one, and thats why I bought Tesla (the car and the company) last year. This green energy stuff, while great, honestly isn't my interest area, and so I thank all of you guys for doing the research and providing it on this form. I would appreciate it if someone can post the MS research report, or if you can post your own numbers as well.
Also, thanks for sharing the knowledge on the Google hangout last week.

I'm very pleased to give back to this community, no problem.

I will not post the full Adam Jonas report because it's not public information. I'm a Morgan Stanley client so have access to their analyst reports for free, and Adam Jonas happens to work for Morgan Stanley. I believe his numbers are sound.

If you want to develop your own financial model to value TSLA or any stock, you can always start with one of the ones posted last year by DonPedro or others. That might help you dig in if interested.

 

[hershey101]

hershey, I certainly agree that any new money that is now coming into TSLA hoping for the kinds of returns of the past 18 months continuing as we go forward will exit if they realize the numbers we are both looking at. I don't worry about this, as I didn't worry about those who thought the drop to $120 this past fall was a precursor to a $50 share price. I think the market is expensive and I will be very happy with Tesla at $450 in 6 years, (and a higher price if the ancillary businesses take off). it's simply a more appealing risk/reward to me than anything else I see (and a lot of fun to be a part of). if you see something with a better risk/reward profile I can certainly see why you'd reduce your holdings... a lot of fun to be a part of only goes so far if you see better investment opportunities.

fwiw, that $450 target is a weighted average of a robust success scenario and a disappointing scenario on the Model S, X, and E.

I wholeheartedly believe that the cars will be a great success. Tesla will definitely bring the big car manufaturers to their knees and may be the GM/Ford of this century. Assuming that production can keep up with demand, I see no reason for them to have a smaller market share than Mercedes or BMW. But this energy storage business is definitely new and puts a lot more variables into consideration when modeling Tesla's future.
Neverthless, I'm an options trader, I like to ride the momentum, trade the volatility, and get out before I get burned like I did post Q3 when I played with emotions instead of with my head. So I sold at the open this morning most of my holdings, then traded in and out throughout the day, and finally got out around $256. I want to see this settle down a bit before I take a long term position. Although 50% porfolio growth in a day can't be looked down upon

 

[SteveG3]

I'm very pleased to give back to this community, no problem.

I will not post the full Adam Jonas report because it's not public information. I'm a Morgan Stanley client so have access to their analyst reports for free, and Adam Jonas happens to work for Morgan Stanley. I believe his numbers are sound.

If you want to develop your own financial model to value TSLA or any stock, you can always start with one of the ones posted last year by DonPedro or others. That might help you dig in if interested.

interesting tidbit on Jonas, he called the VW short squeeze (a short squeeze that made the moves we've seen in TSLA look pedestrian). According to linked article below, Porsche dismissed his (and another analyst's) call on this as a "fairytale" (sound familiar?)

Porsche and VW: Squeezy money | The Economist

he also was WAY out in front of other analyst's on Tesla's potential with his initial report (think that was in 2010).

 

[ItsNotAboutTheMoney]

I assume you're referencing the "Thermal Management System"? That doesn't much matter when they're inside a controlled environment (e.g., inside the house) does it? And it means it can be used outside, right?

I suppose that in a house the charge/discharge-rates involved would be relatively low, but I still think that using degraded batteries/cells would lead to poor economics for small-scale systems. I think there are better economics in reversing the idea and have TCUP* sell/rent new ones and then take back the degraded ones for use at large-scale central facilities until they get put into recycling. Each end-user transaction is relatively expensive, while individual transactions in automated, centralized large-scale facilities are cheap, so to get the most economic value from the battery/cells you'd want durability at the small-scale end.

* Tesla (Solar) City Umicore Panasonic

 

[eepic]

I'm a trading newb and basically feel a bit like the gardener in "Being There" when it comes to investing or maybe a bit like Zuckerberg's twitter reference, like a "clown car that fell into a gold mine" and I have to admit it's hard to stay rational on days like this. I do my best to not gamble what I cant afford to lose. But TSLA seems to be breaking all the rules, it's off the chart, no "rational" guidance could have predicted that we'd be here today from a year ago and the temptation to take even bigger risk tugs at me. If you bought in early and are sitting on a huge gain, I'd wait till that one year mark passes to reduce taxes, pick a peak time on a peak day and enjoy some of the profits, enough to help defray the risk of loss to principle if something truly catastrophic happens to the stock, enough to understand that your gains are real. Otherwise, stay in and enjoy what could be your "golden road to early retirement"! Basically, Tesla has no rivals, it could very well be "a wrecking ball to the old and constructor of the new" in both the energy industry and the auto industry. The breadth and scope is unprecedented, it's global and maybe even interplanetary, and while success is not a sure thing, it's looking more and more like it's growth is likely to be wildly exponential, unlike any other investment available today.

Here's some quick math with what I think is a very reasonable case. Let's assume by 2017 Tesla is at or near 100k Model S/X and 400k Gen 3, with average selling price of $90k and $40k respectively.

Revenue
100k * $90k = 9B
400k * $40k = 16B
Total = 25B

Long term, they say that they could have a "mid-teens" net margin, so let's say 15%. 15% x 25B = $3.75B profit. Let's say there's 160 million shares outstanding by then, then the profit would be about $23/share. At a 15x P/E multiple (I doubt it would be this low given it's potential growth from there) it would mean $345/share.

This is my assumed case with no miracles required, all they have to do is execute according to the current plan. So the credible base case outside of any force majeure is another 50% up from here. Not sure I can name many other stocks where you have that degree of surety. Add in other revenue streams, growth prospects with multiple factories, and any improvements in these factories and you have tons more upside.

Remember that this is not the end game picture for Tesla, at that time it will be looking what prospects are two years out from that. I'm staying long.

 

[hershey101]

Here's some quick math with what I think is a very reasonable case. Let's assume by 2017 Tesla is at or near 100k Model S/X and 400k Gen 3, with average selling price of $90k and $40k respectively.

Revenue
100k * $90k = 9B
400k * $40k = 16B
Total = 25B

Long term, they say that they could have a "mid-teens" net margin, so let's say 15%. 15% x 25B = $3.75B profit. Let's say there's 160 million shares outstanding by then, then the profit would be about $23/share. At a 15x P/E multiple (I doubt it would be this low given it's potential growth from there) it would mean $345/share.

This is my assumed case with no miracles required, all they have to do is execute according to the current plan. So the credible base case outside of any force majeure is another 50% up from here. Not sure I can name many other stocks where you have that degree of surety. Add in other revenue streams, growth prospects with multiple factories, and any improvements in these factories and you have tons more upside.

Remember that this is not the end game picture for Tesla, at that time it will be looking what prospects are two years out from that. I'm staying long.

There is no way they will be able to ramp up manufacturing 10x from 2015-2017. I don't think you will see 500K cars manufactured from tesla before 2020. That's not to say that demand won't reach 500K by 2018. I think Tesla will remain production constrained well into the next decade.

 

[c041v]

Just to add my experience based on today's wonderful news, I am peeling off the short term options a little at a time, and will offload the last of them in the next week or so.

if the stock continues to soar during then, great, but if not , I still walk away way ahead. I've hit the point where it is beginning to. Make sense to use my gains to pay down mortgage/plan for another house and other more pressing life goals that demand capital. I'm getting caught tying up huge amount of money in a very overweight portfolio and I don't like that. I have purposely kept my retirement savings TSLA free so as to not distract from more traditional investing.

I am looking at today as a gift from the heavens, and I'd be a fool to not walk away with some chips now.

I do however have 2015 and 2016 LEAPs across other accounts that I fully intend to exercise.

 

[eepic]

There is no way they will be able to ramp up manufacturing 10x from 2015-2017. I don't think you will see 500K cars manufactured from tesla before 2020. That's not to say that demand won't reach 500K by 2018. I think Tesla will remain production constrained well into the next decade.

I would disagree, they'll be at 50k/year run rate of Model S by end of year, with the pieces in place to do the same volume Model X by mid next year (according to Elon recently). With focus shifting then to preparing to produce Gen 3, it's possible with the battery constraint solved they'll be ready to do six figure volumes of Gen 3, or at least have a lot of clarity into reaching it prior to end of decade.

I concede that the Model X delays show that their timelines tend to slip, but I think given Gen 3 is a much more important goal to Elon then it is a reasonable possibility.

 

[FrozenCanuck]

I will not post the full Adam Jonas report because it's not public information. I'm a Morgan Stanley client so have access to their analyst reports for free, and Adam Jonas happens to work for Morgan Stanley. I believe his numbers are sound.

FWIW, it's well understood in the brokerage community that analyst reports should be considered proprietary for about a day or two. Two days is pushing it. While firms publish reports for their clients to use, they all know (and are with with the fact) that they get out quickly. So feel free to post tomorrow if you wish.

- - - Updated - - -

Here's some quick math with what I think is a very reasonable case. Let's assume by 2017 Tesla is at or near 100k Model S/X and 400k Gen 3, with average selling price of $90k and $40k respectively.

Revenue
100k * $90k = 9B
400k * $40k = 16B
Total = 25B

Long term, they say that they could have a "mid-teens" net margin, so let's say 15%. 15% x 25B = $3.75B profit. Let's say there's 160 million shares outstanding by then, then the profit would be about $23/share. At a 15x P/E multiple (I doubt it would be this low given it's potential growth from there) it would mean $345/share.

I think this is a great starting point for the analysis. Personally I would not be surprised to see the average price of the S/X be higher than $90k due to AWD models, more features constantly being added, and well understood high take rates on options right now. I think you might be low on the Model E also, since I'd expect a base of $30-35 as Elon has suggested, plus a good take rate on options (bigger battery being the obvious extra $10k).

Also, on volume, Elon says the X may very well have higher demand than the S. This was a bit of a surprise coming out of the Q4 conf call, and if they'll be at a run rate of 50k Model S by 2014 year end it suggests they could do over 100k S/X combined globally.

I think you're probably too early on the Model E ramp though. But that's my only little nit pick, and I don't think it matters if they hit that number in 2018 or even 2019. No big deal to the long term result.

For shareholders, the question is just how comfortable are you in paying up front for the execution risk. But then again, since Tesla has delivered 2 cars already and has a 3rd on its way, wouldn't we have to agree that risk on the 4th car is much lower? Model E is not as risky as Model S was.

Great thread, gang.

 

[WarpedOne]

The real question is should I buy more shares now or wait for it to 'tank' a bit.
I had exactly the same dilemma when the price was still 210...

 

[Robert.Boston]

I suppose that in a house the charge/discharge-rates involved would be relatively low, but I still think that using degraded batteries/cells would lead to poor economics for small-scale systems. I think there are better economics in reversing the idea and have TCUP* sell/rent new ones and then take back the degraded ones for use at large-scale central facilities until they get put into recycling. Each end-user transaction is relatively expensive, while individual transactions in automated, centralized large-scale facilities are cheap, so to get the most economic value from the battery/cells you'd want durability at the small-scale end.

* Tesla (Solar) City Umicore Panasonic

Sumitomo is selling grid-scale storage built with used Leaf batteries, and Leaf batteries (lacking a TMS) are more abused than Model S batteries. I know at least one major industry player is looking at this offering seriously, so I'd wager that they've got the durability/reliability issue covered.

- - - Updated - - -

Long term, they say that they could have a "mid-teens" net margin, so let's say 15%. 15% x 25B = $3.75B profit. Let's say there's 160 million shares outstanding by then, then the profit would be about $23/share. At a 15x P/E multiple (I doubt it would be this low given it's potential growth from there) it would mean $345/share.

I can see 15% gross margin, but 15% net ​margin seems high.

 

[eepic]

Sumitomo is selling grid-scale storage built with used Leaf batteries, and Leaf batteries (lacking a TMS) are more abused than Model S batteries. I know at least one major industry player is looking at this offering seriously, so I'd wager that they've got the durability/reliability issue covered.

- - - Updated - - -


I can see 15% gross margin, but 15% net ​margin seems high.

Gross margin for S was a touch above 25% as of Q4, and projected to be 28% (assuming a decreasing take rate in high margin options for the car). Net margin right now is close to 0% right now because they are plowing everything back into expansion and growth. To paraphrase Deepak and Elon from last week's call, if they decided to level off the business (with respect to growth) at any given point, mid-teens net margin is quite achievable. Of course, this won't happen until next decade at the very earliest as I don't think Gen 3 (Model E, small crossover, etc) demand will be anywhere near satisfied with Fremont alone and Gigafactory1 so almost everything will be reinvested to continue growing and rightly so.

 

[dmunjal]

I was around for the dot com boom and bust as well. From what I remember the Fed had nothing to do with that cycle.

Then you weren't paying attention. The Fed was absolutely behind the dot Com boom. After the 97 Asian contagion and the fears of Y2K, the Fed pumped in hundreds of billions of dollars of liquidity into the system.

This time is no different.

However, I do agree on the premise that Tesla is a player and not a one trick pony. They have a lot of upcoming announcements that can juice the stock up some more.

I'm holding until I see the general stock market and economy start to go down.

 

[stoebs]

I would disagree, they'll be at 50k/year run rate of Model S by end of year, with the pieces in place to do the same volume Model X by mid next year (according to Elon recently). With focus shifting then to preparing to produce Gen 3, it's possible with the battery constraint solved they'll be ready to do six figure volumes of Gen 3, or at least have a lot of clarity into reaching it prior to end of decade.

I concede that the Model X delays show that their timelines tend to slip, but I think given Gen 3 is a much more important goal to Elon then it is a reasonable possibility.

I appreciate your enthusiasm...and I agree with your assessment of Model S/X production at 50k/year each (100k/year combined). But I have to agree with Hershey on Model E run rate.

I would argue that it's specifically because the Gen 3 is such an important milestone to Elon, that he will very cautiously bring it to market; building the production ramp very slowly. He realizes that the most important step in the "secret master plan" is hitting it out of the park with the Gen 3. And if that means that it takes an extra year to accomplish, then he won't hesitate to delay it.

As much as it pains me (my Gen 3 deposit goes in the day it's revealed), I don't think customer Gen 3 cars hit the road till late 2017/early 2018; and only 20k/year at that point. Maybe 100k/year by end of 2019, and 500k/year by end of 2020 if everything goes according to plan.

I will happily be proven wrong, and enjoy my new Model E paid for with TSLA shorts' tears as soon as Elon says the word. :wink:


Edit...just read through FrozenCanuck's reply...yeah, what he said :smile:

 

[30seconds]

Then you weren't paying attention. The Fed was absolutely behind the dot Com boom. After the 97 Asian contagion and the fears of Y2K, the Fed pumped in hundreds of billions of dollars of liquidity into the system.

This time is no different.

However, I do agree on the premise that Tesla is a player and not a one trick pony. They have a lot of upcoming announcements that can juice the stock up some more.

I'm holding until I see the general stock market and economy start to go down.

still going to disagree with you. The Fed was holding rates steady through the mid 90s when the dot com revolution was happening. yes at the mid point of 99 they dropped the fdfd in front of y2k, but i can tell you first hand that the dot com craze was in full swing by that point. yes the qqq shot up after that and there was the subsequent crash, but the high valuations and sketchy investment rationales were way before.

now the rate has been low for what? five years? unless you are expecting the fed to add two to three points within the next year I think you will be holding for an entry point for some time.