Realistic threats remaining for Tesla Motors business?

[TSLAopt]

Anyone else planning to make their first millions off of TSLA's success? I think many of us in this forum have done quite well so far but feel we're still not even close to the potential stock price gains that will come.

My feeling is that this is just the beginning and that Tesla Motors will eventually be a staple technology/auto company with a big boy market cap of 100bn + sooner than we think. If this happens my original 30k investment in TSLA options (which I plan to do a combination of selling and exercise/hold soon) will have become 5mm USD+

Am I dreaming for thinking that this is very likely to happen within 3-5 years? I just can't think of any realistic reason why they won't be super successful now. The last realistic obstacle i saw was the state legislatures getting in the way in the US sales but now that threat seems to have diminished significantly with what just happened in NY and NC.


I'd like to hear what others see as REALISTIC threats to Tesla Motors' continued success at this point?

(cannot include anything Tesla would do to itself as we all know Elon will not let Tesla shoot itself in its foot)

 

[DaveT]

Anyone else planning to make their first millions off of TSLA's success? I think many of us in this forum have done quite well so far but feel we're still not even close to the potential stock price gains that will come.

My feeling is that this is just the beginning and that Tesla Motors will eventually be a staple technology/auto company with a big boy market cap of 100bn + sooner than we think. If this happens my original 30k investment in TSLA options (which I plan to do a combination of selling and exercise/hold soon) will have become 5mm USD+

Am I dreaming for thinking that this is very likely to happen within 3-5 years? I just can't think of any realistic reason why they won't be super successful now. The last realistic obstacle i saw was the state legislatures getting in the way in the US sales but now that threat seems to have diminished significantly with what just happened in NY and NC.


I'd like to hear what others see as REALISTIC threats to Tesla Motors' continued success at this point?

(cannot include anything Tesla would do to itself as we all know Elon will not let Tesla shoot itself in its foot)

I'm super bullish on TSLA (got most of my position in 2012 and plan to hold LT) but I don't see $100b market cap for Tesla in 3-5 years. Maybe more like 6-8 years from now if I'm being very optimistic. Gen III will realistically come out in 2017 and won't reach full production until 2018. That's 5 years from now. And initially they probably won't be making much margin on each car because they're ramping up. So, you might not see decent margins on Gen III until 2019 or so.

Also, Elon Musk said in the Reuters interview a few weeks ago that he alluded that he doesn't see himself CEO of Tesla in the very long-term. In 5 years or so (when Gen III is in full production) he'll re-assess and might step down.

But to fuel your enthusiasm, Elon Musk (at the swap event) did say that the benchmark price point for Gen III would be $35,000 with no tax credits and for it to be at least 200 mile range. Can you imagine a car like that and it even drives better than a BMW 3 series? That's going to fly off the shelves/lots. And they're going to be making a smaller crossover SUV as well for Gen III.

To me the biggest threat is another car company releasing an electric car that has 200+ mile range. But I haven't heard anything coming out soon before Gen III.

Other risk factors could be:
- gasoline becoming really cheap (but that would only delay things a bit)
- Elon Musk dying unexpectedly (I'd rather not think about this)
- Tesla having a huge safety problem that they've overlooked that hurts/kills people somehow
- more states ban their sales (but that would just slightly damper sales)
- a new technology that's discovered that makes EVs no longer competitive (but I don't see anything on the horizon for this)

On another note, one of the reasons I don't think we'll see $100 billion market cap in 3-5 years is because TSLA is too tempting of a stock to short for some people (almost 20 million shares are still shorted). I think there will be skeptical people all the way until Gen III hits full production. As a result we'll see a more controlled stock rise (vs if there were no shorters).

 

[cwerdna]

Have you read the risk factors in their SEC filings? See that section of Tesla Motors - Quarterly Report.

You can see the rest of the filings at Tesla - SEC Filings.

 

[AudubonB]

Well - this is just me, now - as an investor, I believe TSLA is an excellent long-term investment and, even with my having sold off enough shares to pay for both the ST gains AND the Model S with the realized profits, I have retained enough shares to hope to prosper very handsomely with them in the decades to come -

as a speculator, I think you're nuts. All that in what appear to be naked options? Using options thus is - again, just my opinion - the finest way to make a small fortune.

If you start with a large one, that is.

However, if I'm wrong I'll still end up quite wealthy and you wealthier. So good luck to us both.

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My prior post notwithstanding, I apologize for not having answered your thread's title. So here's a direct answer:

The single largest threat I see for Tesla is the untimely demise of Mr Musk. Were that to occur in 2013 or probably 2014, my belief is it would horrifically cripple TM. The most likely Best Available Alternative would be the otherwise unlikely takeover (Google, etc., are the most oft-mentioned suitors).
Within 2015-2018 or so, one can foresee the company being stable enough to be able to handle that a little less cataclysmically. After five more years - thus beyond 2018 - there is a fair chance he no longer will be at the helm and thus the threat close to vanishes.

 

[Norse]

My biggest consern is the battery Technology, this HAS to improve before GEN III, it probably will aswell. The Hydrogen cars I dont worry to much about, even thou Natural gas is pretty cheap, EV-cars has proven to be great.

 

[TSLAopt]

I'm super bullish on TSLA (got most of my position in 2012 and plan to hold LT) but I don't see $100b market cap for Tesla in 3-5 years. Maybe more like 6-8 years from now if I'm being very optimistic. Gen III will realistically come out in 2017 and won't reach full production until 2018. That's 5 years from now. And initially they probably won't be making much margin on each car because they're ramping up. So, you might not see decent margins on Gen III until 2019 or so.

Thanks for your feedback and your risks which I agree with as valid but unlikely.
as far as above, I think your right in that Tesla could not justify being a 100bn market cap stock for another 5-8 years but my feeling is that the stock price valuation comes way ahead of that justification...similar to what happened with Google and Amazon. That's why I'd expect a 100bn market cap probably leading up to the anticipation of the first Gen III deliveries even if they're already doing 60-100k Models S/X per year internationally by then.

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Have you read the risk factors in their SEC filings? See that section of Tesla Motors - Quarterly Report.

You can see the rest of the filings at Tesla - SEC Filings.

yes, this is good info too.

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The single largest threat I see for Tesla is the untimely demise of Mr Musk. Were that to occur in 2013 or probably 2014, my belief is it would horrifically cripple TM. The most likely Best Available Alternative would be the otherwise unlikely takeover (Google, etc., are the most oft-mentioned suitors).
Within 2015-2018 or so, one can foresee the company being stable enough to be able to handle that a little less cataclysmically. After five more years - thus beyond 2018 - there is a fair chance he no longer will be at the helm and thus the threat close to vanishes.

thanks for this, I agree with that, but provided Mr. Musk stays healthy (he is young) and sticks by his word of staying with Tesla Motors for another 5 years then I think we will be ok.

 

[sleepyhead]

I'm super bullish on TSLA (got most of my position in 2012 and plan to hold LT) but I don't see $100b market cap for Tesla in 3-5 years. Maybe more like 6-8 years from now if I'm being very optimistic. Gen III will realistically come out in 2017 and won't reach full production until 2018. That's 5 years from now. And initially they probably won't be making much margin on each car because they're ramping up. So, you might not see decent margins on Gen III until 2019 or so.

Also, Elon Musk said in the Reuters interview a few weeks ago that he alluded that he doesn't see himself CEO of Tesla in the very long-term. In 5 years or so (when Gen III is in full production) he'll re-assess and might step down.

But to fuel your enthusiasm, Elon Musk (at the swap event) did say that the benchmark price point for Gen III would be $35,000 with no tax credits and for it to be at least 200 mile range. Can you imagine a car like that and it even drives better than a BMW 3 series? That's going to fly off the shelves/lots. And they're going to be making a smaller crossover SUV as well for Gen III.

To me the biggest threat is another car company releasing an electric car that has 200+ mile range. But I haven't heard anything coming out soon before Gen III.

Other risk factors could be:
- gasoline becoming really cheap (but that would only delay things a bit)
- Elon Musk dying unexpectedly (I'd rather not think about this)
- Tesla having a huge safety problem that they've overlooked that hurts/kills people somehow
- more states ban their sales (but that would just slightly damper sales)
- a new technology that's discovered that makes EVs no longer competitive (but I don't see anything on the horizon for this)

On another note, one of the reasons I don't think we'll see $100 billion market cap in 3-5 years is because TSLA is too tempting of a stock to short for some people (almost 20 million shares are still shorted). I think there will be skeptical people all the way until Gen III hits full production. As a result we'll see a more controlled stock rise (vs if there were no shorters).

I agree with everything DaveT said. I would expect a $500 share price in 5 years and $800 max IF everything goes well and the world doesn't suffer a huge recession.

I will add to the risks:
- Earthquake hits Fremont and destroys factory
- Toyota just said yesterday? that they will be releasing a fool cell car in 2015 that will replicate the success of its Prius line.
- GM just said yesterday that it will be coming out with a 200 mile range Chevy in 2014.

The earthquake is a remote possibility and the other two are not big threats in my opinion. The biggest threat I see is if a company (like Nissan) decides to throw $10bn at electric vehicle research and creates a product that can compete with Tesla in functionality; and then that company starts selling at lower margins. This is what could hurt Tesla the most. But I don't see that happening.

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TSLAopt - What kind of options did you buy? Are they all J15? ITM or OTM?

 

[TSLAopt]

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TSLAopt - What kind of options did you buy? Are they all J15? ITM or OTM?

originally Jan 13 then rolled them about a year ago to Jan 14 and then at the beginning of May bought a lot of cheap Sept 75 Calls on a hunch that an epic short squeeze was starting given the short interest.
i think part II could be starting now too, we shall see.

the Sept 75s ill probably exercise and try and hold the shares to avoid the short term cap gains. The J14s I am selling some of at LT tax rates to help finance holding the shares.
Also considering taking a bit of the gains and buying a ton of cheap high strikes for Dec or Jan 14 in case epic short squeeze part II happens between now and end of year (could be starting right now though so I may have missed that boat)

 

[NigelM]

I'm sorry, the title "Realistic threats left for Tesla Motors business" kept making me think someone had left threatening messages outside Fremont. :crying:

I updated the title.....

 

[Zzzz...]

Biggest concern - continuation of demand.

Tesla expected to sell 20k units this year and 35k next one. This year target would probably be met. But not so sure about next year. And then question as how strong demand for Models S would be in 2015...
Once again, new models of motorcycles usually see strong demand first year and then demand fades away. Luxury sedans do not follow this pattern, but Model S/X is something very new to market - and EV luxury sedan/SUV.

Second biggest concern - few car fires that press blow out of proportion. The cause of fires could be not even Tesla related, like house burned down with Tesla in the garage. As long as real cause undetermined - stock could go down. And Tesla image could be severely damaged.

 

[Nicu.Mihalache]

Biggest concern - continuation of demand.

Tesla expected to sell 20k units this year and 35k next one. This year target would probably be met. But not so sure about next year. And then question off how strong demand for Models S would be in 2015...
Once again, new models of motorcycles usually see strong demand first year and then demand fades away. Luxury sedans do not follow this pattern, but Model S/X is something very new to market - and EV luxury sedan/SUV.

Second biggest concern - few car fires that press blow out of proportion. The cause of fires could be not even Tesla related, like house burned down with Tesla in the garage. As long as real cause undetermined - stock could go down. And Tesla image could be severely damaged.

I fully agree with the first concern. It is the biggest one and it was completely overlooked here. Great initial demand does not tell you if a new tech crosses the chasm or not. It only tells you something about innovators and early adopters.

From my point of view, the second largest concern is not fires / recalls, but meeting GM targets. We shall see soon enough if there are problems / delays. This also extends for several years, if battery prices (be it for economical, technical or raw material prices reasons) do not go down fast enough to enable the hockey stick in demand / production to justify the recent similar behavior of the stock.

For 6-9 months Tesla seems fine wrt to cash, but if they bite more than they can chew and do not get to sustainable profitability soon, the next raise will not be so gentle. A stock downturn / crash may not only limit possibilities for Tesla, but may also leave employees less enthusiastic / motivated to work their heats out.

I may also mention black swans here, which by definition are unpredictable events. So as soon as one thinks of a new one, it becomes white

 

[TSLAopt]

That's all good stuff...however the demand issue I do see as a non-issue unless there is a black swan global economy meltdown where a lot less people can afford an 80k car. This car has already proven it is the best car in the world. Not just the best electric car, but hands down the best car. I've had mine for 5 months and sold 1 or 2 people to get one without even trying other than giving casual test drives (would have been more if more of my friends could afford it, many of these people I'm sure willbe lined up for Gen III though)

 

[Norse]

If the Model S gets 4x4 in 2014 or 2015 it will sell alot. And the competitors will start loosing Money.

 

[MikeC]

Demand will be there. Europe is just beginning and Asia hasn't started. Leases for Mercedes, BMW, etc. are ending every day.

Plus, in the next 1-2 years, many early adopters will be moving on to MS 2.0 and selling their cars to people who want one but can't afford a new one. I'm planning on keeping mine for awhile, but I can pretty confidently say my next car will be a MS as well (or at least a Tesla).

 

[Norse]

http://wallstcheatsheet.com/stocks/can-toyota-do-for-hydrogen-what-tesla-did-for-the-ev.html/

"However, hydrogen technology still hasn’t caught the widespread support of many, unlike battery EV technology, which is picking up followers. Even Tesla’s CEO Elon Musk said, “Fuel cells should be renamed ‘fool cells,’ they are so stupid,” in an interview with Bloomberg last month. “You could take best case of a fuel cell, theoretically the best case, and it does not compete with lithium-ion cells today. And lithium-ion cells are far from their optimum.”

In Musk we trust!

 

[TSLAopt]

Demand will be there. Europe is just beginning and Asia hasn't started. Leases for Mercedes, BMW, etc. are ending every day.

Plus, in the next 1-2 years, many early adopters will be moving on to MS 2.0 and selling their cars to people who want one but can't afford a new one. I'm planning on keeping mine for awhile, but I can pretty confidently say my next car will be a MS as well (or at least a Tesla).

I already put my reservation down for a Model X in anticipation of the stock price reaching 150-200 by then

 

[Nicu.Mihalache]

I already put my reservation down for a Model X in anticipation of the stock price reaching 150-200 by then

Are you also prepared for $50 or less? Otherwise I think your thread was not started by an honest question, just a feel good chat among friends. If any share price would be known in advance, everybody on earth would be a millionaire. I'm afraid this game is not played this way.

 

[TSLAopt]

Are you also prepared for $50 or less? Otherwise I think your thread was not started by an honest question, just a feel good chat among friends. If any share price would be known in advance, everybody on earth would be a millionaire. I'm afraid this game is not played this way.

Good question, the purpose of this thread is exactly what you suggest, to look for realistic event(s) that could cause the stock to go down to 50. Unfortunately the stab you took earlier we collectively dismissed as unrealistic (ie. lower demand going forward) because it is the best car in the world and there are no competitors for it anytime soon to take away the increasing demand. Perhaps news of a similar new electric car by Apple or Google being developed and introduced next year though could stall demand...but I don't think the public has faith in any major car company doing it due to all the fails they've had in electric cars until now.

 

[sleepyhead]

I think the bigger risk in demand is on the upside. Once these cars start selling in Europe people will be like, "why again am I paying $8/gallon for gas?"

Once they start selling in China, Tesla might not even have to introduce Gen III anytime soon.

 

[Nicu.Mihalache]

Good question, the purpose of this thread is exactly what you suggest, to look for realistic event(s) that could cause the stock to go down to 50. Unfortunately the stab you took earlier we collectively dismissed as unrealistic (ie. lower demand going forward) because it is the best car in the world and there are no competitors for it anytime soon to take away the increasing demand. Perhaps news of a similar new electric car by Apple or Google being developed and introduced next year though could stall demand...but I don't think the public has faith in any major car company doing it due to all the fails they've had in electric cars until now.

It was not a stab at all, just the main risk in my view. The fact that you see it this way tells me that you have indeed permanently glued pink glasses to your nose.

Despite being the best whatever, products in the real world have many parameters and different people have different reasons to buy or avoid some products / tech. If you have not read "Crossing the chasm", I recommend it warmly. Most people are afraid of new tech, not that they would not touch it, but simply wait to see many happy campers with lots of arrows in their back before spending their hard earned cash.

MS is still a very expensive car with unproven reliability, and the fact that we are in love it it doesn't mean that most people will be and will open their wallet. Even a slowdown of 6 months before a tsunami of orders may seriously disturb Tesla's plan and destroy investor's confidence.

As a scientist (maths), a teacher and an investor, I have learned that most of the time we say something is obvious, it is because we have no clue how to prove it. Take a minute to think each time something seems beyond any question, you may discover wonderful and scary things!

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PS: oh, I now see this "collectively dismissed". There is no greater danger in the markets than running with the heard. You only see sweaty posteriors and will miss the traps.