What do you think the value of Amazon should be then? Tech stocks don't do valuation like you might think.
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
Long-Term Fundamentals of Tesla Motors (TSLA)
- Thread starter Robert.Boston
- Start date
-
- Tags
- elon is an ass investing TSLA
I believe Tesla is just another bubble stock that will pop. In the long-run stocks ultimately come back towards their true value. It's not Enron. I do believe the company will survive in some shape/form but ultimately be much smaller. When the stock falls, the company will be forced to cut costs quickly to remain solvent. Tesla reminds me of the following companies at their peaks:
Blackberry
Nokia
HTC
3D Systems
GoPro
Fitbit
all nanotechnology stocks
all 3D printing stocks
SunEdison
If you look at the message boards, all these companies had absolutely rabid followers who defended the mindlessly high stock prices. All came back to reality.
I am actually far more optimistic on Amazon which has sustainable competitive advantages by being the largest, having best customer service, generally lowest cost of operations due to scale, and strategically placed warehouses. And Amazon trades at reasonable valuation based on revenue multiple.
Interesting discussion but I am disappointed at the lack of quantitative arguments. Seems like a lot of emotional arguments, religion, and annoyance that anyone does not believe their religion. LOL it's like Mac vs. PC, Android vs. iPhone.
Blackberry
Nokia
HTC
3D Systems
GoPro
Fitbit
all nanotechnology stocks
all 3D printing stocks
SunEdison
If you look at the message boards, all these companies had absolutely rabid followers who defended the mindlessly high stock prices. All came back to reality.
I am actually far more optimistic on Amazon which has sustainable competitive advantages by being the largest, having best customer service, generally lowest cost of operations due to scale, and strategically placed warehouses. And Amazon trades at reasonable valuation based on revenue multiple.
Interesting discussion but I am disappointed at the lack of quantitative arguments. Seems like a lot of emotional arguments, religion, and annoyance that anyone does not believe their religion. LOL it's like Mac vs. PC, Android vs. iPhone.
jesselivenomore
Member
The lack of quantitative arguments is because it is not our job to explain to you where TSLA should be valued. I am not your financial adviser, why should I waste my time? Plenty here have done their own research and made their investment decisions based on it. I presume you have done yours before going short. In due time the market will determine who is right. There is no need to copy and paste the exact same post to multiple threads to try to instigate a response. If you are right, you will eventually be rewarded. If you are wrong, there is nothing you can say here that will change that fate.
BTW I don't think there is anything wrong with shorts. Someone has to be on the other side of the trade. If they get proven right then all the credit to them. However, if they(continue to) get proven wrong, they are the ones who will provide liquidity for Tesla to fund their expansion for years to come. So good luck to you.
TRUE. There are a lot of smart shorts publishing articles in SA and I do see their logic is much better than "dummy" bulls. Paulo Santos is one of them (although most people here will disagree), I know he made quite some money by shorting TSLA right after model X reveal while a lot of bulls lost big since that.
Thanks Jesse and maoing. You guys are somewhat more balanced. It is a fascinating story playing out before our eyes. On the one hand I really think Tesla S is cool, and I'm coming around on the X. But I just can't fathom the valuation using any mathematical logic. And historically, when the math does not make sense, the stock price ultimately returns to its true value. FYI I do like solar, and I like the idea of electric vehicles. I also like the idea of electricity production getting cleaner gradually (less coal, more natural gas, hopefully more nuclear, as well as solar/hydro/wind if they make sense). Ideally these non-coal sources of electricity provide so much cheap electricity that we can then have plentiful power to do things like build tons of water desalinization plants so that we have infinite water as well. Can you tell I live in California?
There is no doubt TSLA will be hammered hard in next market crash based on its valuation, but you don't know when it'll come. With 7 years bull market, investors should be more and more cautious for TSLA trading. 2016 should relatively safe because there are many positive catalysts coming. But I'll worry about the 2017 and going forward until Tesla becomes a truely profitable and self-sustainable business.
Suggest you read some of the investment threads and quote some sections that you'd like to discuss. Your current position is well known at this point. Your arguments for Amazon I agree with in general and I'd draw very similar characteristics with Tesla.
Maybe Tesla delivers 300K in 2020 with an average ASP of $70K and dominates all markets they compete in. What would your valuation be at that point? Hypothetically of course.
That is exactly what is in my DCF model that produces $25 per share: 300,000 in 2020, much higher ASP though. I assume Tesla can maintain 25% gross margins on S and X with average ASP's of $94K and $102K respectively in 2020. But I assume only 10% gross profit for Model 3 (with average ASP of $47K) since I think Tesla will have a tough time even breaking even on Model 3. I also assume that Tesla ultimately gets to just a 4% overall operating profit margin which is not dissimilar to Toyota, F and GM. Finally I assume just an 8% discount rate even though many experts would say to use a higher rate. I think all these assumptions are optimistic for Tesla, but even so they only spit out a $25 valuation. Of course, I give no value to Tesla Energy which I am very skeptical about. If that business actually is profitable, it could make the company much more valuable. But as of today, I am unaware of any revenue for Tesla Energy.
By the way if the model spit out a $500 valuation I would be long the stock. But it says $25 so I am heavily short. Which is a shame because it's a really neat company. It just burns a lot of money and I think it will be tough to even get to overall profitability.
I should point out that my valuation of $25 is as of 12/31/2015. So it you are asking my DCF valuation as of 12/31/2020, just increase it 8%/year (discount rate) for five year. $25*1.08^5=$37
Last edited:
The phone companies on this list were hurt by a revolution in technology from smart phones that destroyed their market. Unless someone invents some radically revolutionary battery technology and one of the major car companies patents it and Tesla can't get it, it isn't applicable.
3D printing is one of those emerging technologies and its a smaller parallel to the early internet. A lot of companies become darlings of the market only to collapse when the money runs out. There will eventually be companies that are leaders in that market, but there will be a lot of casualties along the way.
SunEdison's problems are similar to what did in Solaryndra and other solar start ups. Prices have fallen dramatically in the solar market which is good for consumers, but it's hard on early players who went with more expensive technology and ended up too deep in debt to survive. Whenever technology changes dramatically in a short time, especially when the costs drop rapidly, companies that weren't prepared often get into trouble.
Tesla isn't facing those problems right now. Tesla is more in the position of the first smart phone rather than being Blackberry in a smart phone world.
And history also has examples of companies that were thought to be bubble stocks that turned out not to be. They are rare, but they do exist. In another post I pointed out Amazon and Apple were once written off as being overpriced too.
RobStark
Well-Known Member
Tesla Energy has generated over $1 billion worth of reservations since its launch in the second quarter of last year. Elon Musk believes demand for stationary energy storage products will be approximately double that of cars going forward.
If we project Tesla Energy product sales very conservatively at ~77.6k Powerpack systems and ~60k Powerwall systems globally per year by 2020 and assume a $3.25k price tag on the Powerwall and $25k for Powerpacks it suggests nearly $1.9 B in annual revenue by 2020.
Musk says margins on Tesla Energy are fairly low right now, but he expects them to increase to 20% once the gigafactory is online. If we assume half of this 20% gross margin passes through to Tesla’s bottom line then that gives Tesla an extra $190M of earnings in 2020. If we apply a 20x multiple to these earnings (and then discount to present dollars) that makes Tesla Energy worth about $3.8B, or $25.88 per share.
Then there is Tesla's automotive business.
If we project Tesla Energy product sales very conservatively at ~77.6k Powerpack systems and ~60k Powerwall systems globally per year by 2020 and assume a $3.25k price tag on the Powerwall and $25k for Powerpacks it suggests nearly $1.9 B in annual revenue by 2020.
Musk says margins on Tesla Energy are fairly low right now, but he expects them to increase to 20% once the gigafactory is online. If we assume half of this 20% gross margin passes through to Tesla’s bottom line then that gives Tesla an extra $190M of earnings in 2020. If we apply a 20x multiple to these earnings (and then discount to present dollars) that makes Tesla Energy worth about $3.8B, or $25.88 per share.
Then there is Tesla's automotive business.
Last edited:
Would your numbers change if your comparison stock was BMW, not Toyota, F and GM? It seems that would be a more apt comparison based on model types and ranges. Just curious.
Using DCF on growth companies like this is not wise. Better to stay out if you are value investing and use DCF. The market are not valuing them based on DCF, but other factors that differs per company... with Facebook it was user growth, with Amazon it is free cash flow, partly because they told everyone those metrics were the most important.
With TSLA it seems to be revenue growth, gross margin and stock dilution. If that is right or wrong is up to debate.
By 2020 I think they are going to make atleast 100k S and 100k X, asp 90k. I also think they can make 200k Model 3, asp 50k. That would be 28B in revenue. Add to that lets say 3.6 billion in energy storage sales (calculated by assuming an output of 300 000 * 60 kwh = 18 GWh for Gigafactory for storage and sold for 200 USD/kwh per pack). 31.6B in 2020 is a bit under the 50% growth per year Elon has mentioned, it is more like 35%.
I still think Tesla at this point would not turn a profit but be like Amazon with everything going back into the business. The gross margins according to guidance would be close to 30% on S and X, and I assume about 10% on 3 and the same for the storage business. I think at this point the market would value Tesla about 3x revenue for a market cap of 90B, or put another way 10% to the bottom line for a imaginary profit of 3B and then because of the growth rate a P/E of 30 for a market cap of 90B.
This is my model. I don't really see much that can stop this from happening. They will get there with a lower growth rate than the current one. That said, I think the general market can take the stock down quite a bit if things get bad. I also think it will be hard to break the 50B market cap barrier as Tesla then have a higher cap than GM, Ford, VW etc.
As for dilution and capital needs I think that will be much less than what many are predicting. This is mainly because the S and X with scale increase and vertical integration will generate more per year and also because they can start sell stationary storage to fund a good chunk of Gigafactoy. Stationary Storage should be able to scale reasonable quick as they can get the cells needed for Panasonic.
Last edited:
Actually Toyota and BMW have overall operating margins of 11% and 9%, respectively, which are much better than F and GM which are mid-single digits. So you could attack my assumption that Tesla only achieves sub-4% operating margins in the long run. You could argue that Tesla should achieve 10% or more and get twice the valuation I get.
Adjusting my operating margin assumptions for Tesla to 5% in the long run, and rolling forward the valuation date to 12/31/2015 (which gets us past some massive cash outflows), my model now says Tesla is worth around $65 per share. This includes a slight increase in vehicle deliveries assumed in 2020 (from 290K to actually the 300K that I previously rounded to). I still place no value on Tesla Energy. My model says total sales of $19.3 billion in 2020. Base on all this, again now my model says Tesla is worth $65 -- as of 12/31/2015.
But I think it is a hugely optimistic assumption to say that Tesla will go from 50K vehicles in 2015 to 300K vehicles in 2020. Also a huge assumption to assume Tesla ever makes a penny on Model 3 given they only make 25% on Model S which is 2.5x the price of Model 3. And also a huge assumption to say that Tesla makes 25% gross margins on S and X perpetually. IMHO my model now include bullish assumptions. And I think the odds are overwhelmingly against this level of success. Ultimately someday could Tesla get to 300K vehicles? Sure. I just think it will take a lot longer than 5 years from now. And EV competition is going to massively heat up (thanks in part to Tesla).
$65 per share seems more reasonable. And still 4x the IPO price of $17 back in 2010. So I am not irrationally bearish. Just trying to be impartial even though I probably have my own biases. Elon is probably right about autonomous driving. But more like 20-30 years from now, not 10. Perhaps a man way ahead of his time.
- - - Updated - - -
Our posts passed each other. Thank you for detailing your assumptions. Yours are just higher than mine. You just assume modestly higher sales (my 300K vs. your 400K in 2020) plus higher your higher gross margins on S and X (my 25% vs. your 30%). And you further give weight to Tesla Energy whereas I am very skeptical of any revenue until I see actual sales. But a good discussion.
- - - Updated - - -
Actually Lango -- the one suggestion I have for your model is that you should tax-affect your $3 billion pretax profit by say 35%. So that means ~$2 billion net income x 30 P/E using your numbers, making the stock worth $60 billion equity value in 2020. I just think it will be more difficult and take longer than you think to get "there." Further factor in the likelihood of a recession sometime during the next 5 years.
I should also add that the numbers I have for 2020 is at the end of 2020, not the start. So five years of further growth.
I think they can get to 30% margins on S and X. There is no real competition in the premium segments in the foreseeable future. Mercedes and BMW will both launch new platforms in 2016 and both are focused on ICE and hybrids, not BEV. Same can be said about the asian and the more expensive american cars. No other has Superchargers either. With Model 3 I think competition will be tougher but Tesla should still come out on top.
So where is the price pressure going to come for S and X? With no price pressure and increased production the margins will improve, not go down.
Five years from now though the competition I think will be real. But then it is very possible Tesla can keep its lead for another five years with further 30%+ growth.
Yeah, but I don't think they will make a profit in 2020. Just that it could be thought as 3B out of 30B in revenue. You can also just assume a 13% margin instead of 10%
. In any case, things will go up and down and can happen faster and slower. I am just very confident in Tesla long term based on these calculations.
I think they can get to 30% margins on S and X. There is no real competition in the premium segments in the foreseeable future. Mercedes and BMW will both launch new platforms in 2016 and both are focused on ICE and hybrids, not BEV. Same can be said about the asian and the more expensive american cars. No other has Superchargers either. With Model 3 I think competition will be tougher but Tesla should still come out on top.
So where is the price pressure going to come for S and X? With no price pressure and increased production the margins will improve, not go down.
Five years from now though the competition I think will be real. But then it is very possible Tesla can keep its lead for another five years with further 30%+ growth.
Yeah, but I don't think they will make a profit in 2020. Just that it could be thought as 3B out of 30B in revenue. You can also just assume a 13% margin instead of 10%
. In any case, things will go up and down and can happen faster and slower. I am just very confident in Tesla long term based on these calculations.Sure enough, when I plugged in your assumptions, I got a valuation per share more like $288 than my $65. So it is all about the sales and profitability assumptions. I just think it is more likely it takes much longer, with more hiccups. Those differences produce a very different valuation.
Good discussion.
Good discussion.
It is possible it will take several more years but I don't think it will. The pessimistic projections I think comes from them always being like a half year late.
After 2016 both S and X will be in full production and stationary pack assembly has started at the GF. What remains after that is Model 3 production at Fremont. Actual ramp of GF cell production is not as important for reaching my 2020 revenue number if they can sell more expensive model 3 2017-2018. It only assumes 200k Model 3's.
To me it feels they have already accomplished more between 2013-2016 than they need to do from 2017-2020.
I do think there is a risk of poor guidance in Q1 2016. I have nothing to base this on, other than a hunch. I still have a tough time believing the massive ramp of sales that occurred in 4Q 2015. Something smells fishy. We shall see when the company releases its Q4 financials. Then we can see whether there was mass discounting (implying sales to resellers) in Q4. I just don't understand how Q4 sales increased so much more than Q3, Q2, or Q1. Based on nothing other than my gut. But I wonder if they stuffed the channel. I fully admit I could be suffering from confirmation bias.
Tesla's prediction for max production of the S and X are 50K per year each. I think that's about right unless they lower their prices. They currently dominate the sedan market in that price range and it's not going to grow much.
They predicted production of 400,000 Model 3 by 2020 which is probably a bit optimistic. They may reach that by 2022, but probably not by 2020. They do have some hurdles to get over scaling up from a 50,000 car a year company to a 500,000 car a year company.
- - - Updated - - -
Tesla does not stock many inventory cars, but they always have some cars at their stores and sell them off after using them for test drives for a few weeks. They got aggressive about selling off these cars at the end of last year. They also have a second factory in the Netherlands now that builds cars from parts shipped from California. They had a big spike in sales in Denmark at the end of the year because a major tax incentive was due to expire and the tax on Teslas was going up 180% January 1. I suspect they ran the Netherlands factory full out and burned through all their parts inventory to meet the deadline in Denmark. The Netherlands factory may be out of parts right now and the Fremont factory may be short on some parts too which is contributing to the shutdown in January, though the Fremont factory shutdown is supposedly for some changes to the production lines and maintenance.
I do expect deliveries in Q1 2016 will probably be off, though not catastrophically so.
Yeah, I am aware of the 50k+50k+400k numbers they have mentioned for 2020. But I think a more likely outcome is 100k+100k+200k. We are already at 50k yearly for Model S, with most of it being in a few countries (US, Norway etc). The guidance for 2016 will help to clarify the current rate. I just don't see the growth stopping for S and X. I think Elon just recently mentioned 150k as a steady state demand for them? ICE and Hybrids are improving but not as fast comparably as Tesla with OTA updates, autopilot and SC expansion
Similar threads
- Locked
