Any thoughts on the current share price, Julian?
Well....
There is a part A, B and C to that.
Part A. I think it is a fair and honest reflection to state that the longest of longs could not genuinely imagine why the stock should rise above $194 ATH, and if $194 cannot be defended then how can $150 for example or any other figure for that matter. I think that Musk and co are clearly not currently interested in selling equity to raise capital and are likely more interested in scrambling to prevent convertible bond holders converting bonds into stock to prevent dilution of control. They tried it with hedging and then the stock kept going up. End result: Musk and co not currently interested in slamming the shorts or defending the stock price. Q3 Earnings was remarkable for its focus on long term and practically irrelevant negatives (the need to build a giant factory to supply cells for 500,000+ annual vehicle production. Basic group psychology would preclude harping on about such a thing in discussion of Q3 results. The opportunity to slam the shorts with the fact that Tesla is now in cash flow positive hyper expansion globally was readily available.
Part B. Dumping the stock on the basis of lowered expectations for the company's future is fully retarded. Ridiculous beyond all comprehension. The company has a monopoly on the future of transportation and just proved ALSO that its business model functions as expected and required to fund hypergrowth on internally generated cash. Fires? What a load of bull. I want a Model S, I will buy one as my net car to replace my BMW 750i and nothing that has occurred has given me any pause for thought on that subject. For goodness sake how can you compete with a car that has a 416Hp drive train unlike any other on the road? You have to go back to old and outdated technology to consider any other car and I will not do that because it is stupid. (I have a fax machine to sell anyone that is of a mind to disagree - it works just like email to transmit messages electronically with the added convenience that you can quickly refuel it with paper and toner cartridges - jeeez). My internal sanity check states simply no problem for Model S demand, Model X demand or Model E demand: Model S collides with BMW M5 - M5 totalled, Tesla passengers safe (same with Honda Civic but that does not really count - unless you happen to be an idiot claiming that the Nissan Leaf is somehow in contention, in which case I suspect the Leaf and the Civic drivers would have all been killed in a similar head-on rather than Civic passengers wiped out and Model S driver emotionally scarred only). Same with a Mexican driving through walls and hitting a tree etc. If I happen to be driving in a country that permits temporary trailer hitch installations (the USA for example) I might consider setting the suspension of my Model S a little higher as a precaution especially if I was on a lazy cruise and wanted to relax about it. Otherwise I would consider maintaining a longer distance between myself and the vehicles ahead in order to allow me the opportinity to avoid running over something lethal to low-to-the-ground cars like Ferarri, Lambo and Model S on low setting. I am guessing Lambo drivers are already familiar with the concept. As it happens, Tesla has released a firmware update 5.8 that sets the suspension higher - voila. Show's over guys - note that Tesla apparently intends to lead the autonomous driving revolution as well. More than likely they can come up with a system to spot road debris and raise the car automatically for firmware 5.9 or 6. Merc have a system for looking at the road ahead already and Kroeger (head of Merc electronics just so happens to be a Tesla Board Member).
Part C. The market exists to punish the complacent. Right now the complacency rests with the shorts - and the shorts NEVER had a business case and they don't have a business case now either. GAAP lease accounting - give me a break. If you want to punish the seller of luxury vehicles for selling cars on a basis that can be assessed for lease accounting then the more cars Tesla sells, the less the stock ought to be worth. Go figure, considering lease accountable sales is the business of luxury car sales for the most part. Especially considering that in the case of Tesla it gets the money the other manufacturers have to give away to their dealer networks - the commission for introducing their customers to 3rd party financiers like US Bank and Wells Fargo for example. The other thing to note is that GAAP Lease Accounting talks of a paper liability (residual guarantees) that cannot possibly bite Tesla's cash flows until 2016 at the earliest (3 years from a 2013 date of sale). In 2016 at current growth rates, ALL of 2013 lease accounting sales will represent no more than 3.2% of total revenues. I cannot believe that anyone is dumb enough to be fooled by the bear argument on this score - in 2016 perhaps 50% of the vehicles will be redeemed (1.6% of total revenues), those cars will be factory refurbished and resold (~0% of total revenues). It is a mathematical FACT that this is absolutely irrelevant - you want to sell or short on that basis? Really? Sure go ahead, but remember that the greater fool on this score is the short.
TSLA @ $120. I do not know if this is the bottom. I suspect so, but I do not know so. I think the signs of short-complacency are setting in, maybe we will see $110 to $115. Is $120 good value for the buy and hold investor: YES, DEFINITELY. This I do know. The catalyst for the next rally may perhaps be official NTHSA clearance. The Price Target ought to be $184 for the relatively short term, above that level Tesla is exposed to bond conversion.
Footnote: This is Tesla's internal sales figure targets for 2017, 2018 and 2019. 200K, 400K, 700K (Vehicles). Reference:
JB Straubel | Energy@Stanford SLAC 2013 - YouTube (minute 22:09).
Remembering that this is a company that has proven itself capable of setting these goals on cash flow positive internally generated cash, not debt, not dulution. To sell or short this stock is to sell or short absolutely the number one most valuable growth stock that has been in existence for the past 100 years. While one must be on guard for irrationality, there is no rational reason to do that. JC.
