What do you think the value of Amazon should be then? Tech stocks don't do valuation like you might think.
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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.
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.
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.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?
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.
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.
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
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
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 these 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.
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.
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.
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 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.