Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[cricketman]

This has little to do with replication.
There's simply not that much money to be had from the ENTIRE sector- let alone whatever % of it would specifically belong to Tesla.

Sure, I understand this. We would be reaching the limits of the monetary system.

We are living in very interesting times where companies like Amazon, Apple, Google or Tesla can dominate globally with relatively little physical presence on the ground in each country. The market cap of each the first three is already bigger than the annual GDP of Spain! And they certainly don't have 45m employees (population of Spain)!

The world has never seen anything like this and the social consequences are enormous. I generally think it is a good thing, but we will see some pain a long the way. Maybe even wars of the disaffected. Autonomy could actually be a trigger, you wait until autonomy gets to Madrid. Baseball bats will meet the windscreens of Teslas and the ruling party of politicians here will encourage it!

But in the end, innovation and capitalism will win, although we may see certain countries opt for jihadic cult based autocracies from the Middle Ages. If that happens here in Spain, I will be escaping!

 

[Drax7]

40T is a ridiculous fantasy number roughly double the entire US GDP.

It's why I referenced back to the # of annual vehicles produced by Elon for 2030 to ground things a bit.

Even if they had comparable market shares of both the auto insurance and energy markets by then you wouldn't be anywhere remotely near 4T in value, let alone 40.

Examine Apple
Mkt cap 1.999 T
Revenues 273 billion
Net profit margin 21.33%
P/E ratio 35

273 billion divided by say $40,000 per car = 6,825,000 cars per year.
That number of cars is feasible.

net profit margin for Tesla at 10% versus apples 21% ,
Would imply double the number of cars (13;650,000) for an equivalent total profit.
If the p/e ratio is 35, then the mkt cap will be about 2 trillion.

Just a thought

 

[ByeByeJohnny]

I think Starlink will be the only one of Elons businesses that has a great risk of running into monopoly problems. I guess Space X in itself will have a large percentage of spacetravel but as long as they are not dumping prices just to keep others out I don't see that anyone can do much about that.

Starlink can be argued, at least as long as they are owned by Space X, that it will be impossible to compete because even if you build the satellites you can't get them up there in a competitive way.

That said, I don't see why some see a potential forced break-up in the long future as a negative. Both the ATT and Standard Oil breakups seems to have worked out well for the original share holders.

Also, there is nothing about a $20 trillion or even a $10 trillion company that I see as positive. Would you like to see Amazon or Google become that large? No way. Just because we happen to like the guy behind 'our' company doesn't mean we should ignore the potential problems of gigantic companies with too much power.

 

[StealthP3D]

Sure, I understand this. We would be reaching the limits of the monetary system.

The monetary system we have is only limited by economic productivity, something Elon is doing a good job of blowing wide open!

 

[printf42]

Elon's cryptic confirmation of S&P500 inclusion without violating any rules....................at 420 of course

Elon’s own way of rewarding support from retail investors.

This and the snake saxophone are things we all understand, but absolutely not actionable for any well managed institutional funds.

Only risk is sometimes we read too much into the output of our meme lord though, lol,
But long term it’s never wrong to buy more.

 

[Knightshade]

Examine Apple
Mkt cap 1.999 T
Revenues 273 billion
Net profit margin 21.33%
P/E ratio 35

273 billion divided by say $40,000 per car = 6,825,000 cars per year.
That number of cars is feasible.

net profit margin for Tesla at 10% versus apples 21% ,
Would imply double the number of cars (13;650,000) for an equivalent total profit.
If the p/e ratio is 35, then the mkt cap will be about 2 trillion.

Just a thought

Except Elon suggested net profit margin would be kept nearer 1 percent, not 10.

So knock a 0 off the math that flows from there.

 

[StealthP3D]

Would you like to see Amazon or Google become that large? No way. Just because we happen to like the guy behind 'our' company doesn't mean we should ignore the potential problems of gigantic companies with too much power.

That's a good "problem" for an investor to have. I was addressing the anti-trust concerns from the perspective of whether it would be a problem for investors.

By all accounts it appears the answer is a resounding "No"!

 

[StealthP3D]

Except Elon suggested net profit margin would be kept nearer 1 percent, not 10.

So knock a 0 off the math that flows from there.

Elon was not projecting out a decade or more. His comments need to be taken in context.

 

[Knightshade]

Elon was not projecting out a decade or more. His comments need to be taken in context.

Or we can go by his actual words. Let's try that.

we're not trying to be super profitable either.

Obviously, profitability is like 1% or something, this 1% or 2%. It's not crazy. Last quarter, it was only like 0.1%. So we want to be profitable.

Like I think just we want to be like slightly profitable and maximize growth and make the cars as affordable as possible, and that's what we're trying to achieve.

He didn't say "For a little while"

He made clear 1 or 2% is the long term target for profit.

They're not remotely there yet, at 0.1% for the Q he's discussing.


You can go see the added context around the quote in the transcript too- where it's clear he wants to KEEP driving down cost to the customers to push the mission of the company, rather than be super profitable instead.

So yes it needs to be taken in context- where it says exactly what I told you.

 

[Tslynk67]

First Short Shorts unboxing!

https://twitter.com/arctechinc/status/1321132846501687296

 

[Knightshade]

Since we are getting even more factories, does that mean more models or will the existing cars be able to service the market enough? Obviously the 25k car in 3 years, but what else? Van? Cyber-jeep?

Van has been mentioned a number of times so seems likely... Also an EU spec smaller truck of some kind has been mentioned specifically (though it's unclear if Berlin could handle that or they'd need another factory for it)

 

[wipster]

So, you are recommending going all in with an Iron Butterfly strategy?

In-A-Gadda-Da-Vida?

Back in my youth, I could play that drum solo by memory... now, not so much...

 

[StarFoxisDown!]

Or we can go by his actual words. Let's try that.




He didn't say "For a little while"

He made clear 1 or 2% is the long term target for profit.

They're not remotely there yet, at 0.1% for the Q he's discussing.


You can go see the added context around the quote in the transcript too- where it's clear he wants to KEEP driving down cost to the customers to push the mission of the company, rather than be super profitable instead.

So yes it needs to be taken in context- where it says exactly what I told you.

I would argue that Elon said that in reference questions about the margin at an individual vehicle level.......and I also feel like he was excluding software revenue that would then be added which would of course raise Tesla's margins and net margin much higher. He's made those comments about margin a couple times in the earning calls and it's always in response to a analyst asking about individual vehicle margins and whether they would want to expand their margins at that level or continue to drop the price of vehicles while keeping the same margin.

If we're going to take Elon at his word, he also said margins they get right now are peanuts compared to the margin they'll get on software/FSD. If he expects to be generating out of this world margin on FSD, then how could Tesla not be insanely profitable? It's just simple math to see if he expects margins to be crazy high from software that high profits are going to follow.

 

[TheTalkingMule]

Astonishingly low volume today. Can't wait to get this election over with!

Nice short shortz!

 

[Prunesquallor]

I'm more of a picture kinda guy (picture from 2016)..

So we'll see Tesla get broken up (Vehicles, Energy, Autonomy, etc) and then come all back together in 30 years even more valuable than before? So we're thinking a 50T+ Market cap?

HODL!!!!!

Fascinating. Here's the one for Standard Oil:
Chart: The Evolution of Standard Oil

 

[MP3Mike]

If we're going to take Elon at his word, he also said margins they get right now are peanuts compared to the margin they'll get on software/FSD. If he expects to be generating out of this world margin on FSD, then how could Tesla not be insanely profitable? It's just simple math to see if he expects margins to be crazy high from software that high profits are going to follow.

It depends on what profitability you are talking about. Are you talking about profitability on the vehicles/software options or for the company as a whole? Because if they keep plowing the profits from vehicles back into expanding vehicle production and product offerings the company might not be very profitable overall.

 

[Paracelsus]

S&P inclusion will be like the Spanish Inquisition - it will happen when nobody expects it.

...............it will happen when 'only a select few know about and have adequate time to act on the information'. FTFY

In addition to the 10Q and the Short Shorts cryptic message pointing towards S&P500 inclusion IMO, I will share what I believe has been another very consistent/reliable weather vane for TSLA share price movement, and one that also recently pointed to another near term TSLA upward move. Our broker called us last week 'to see how we were doing', and 'if we were happy with our current position in the market'. First time we have heard from him since just before the last long upward move started just a little over a year ago. We have a Household Investment Bylaw very similar to ARKK......except our position on TSLA is capped at 98% of our portfolio - a bit higher than ARKK's at 10%. And on a couple other occasions prior to that we received similar calls encouraging us to consider lightening up on our TSLA position since first accumulating shares in that account in early 2013 - and almost without fail, a nice move started soon after. Coincidence?

This is another example of the value of Chamath's focus of 'Observing the Present' instead of getting caught in the past or future for market observation. The usually accepted Social conditioning has attempted to program me over the years to either take my broker's advice and sell some of my position (so that WS can pick it up cheap before a move up), or to reject my broker entirely after seeing the potential for manipulation over time and move our account elsewhere. Observing the Moment means I tell my wife "Hey, our broker just called again suggesting we reduce our TSLA position.......standby for lift off!"

I would imagine my experience is not unique among the members of TMC..........and it means that there are a handful of folks that have sufficient time to act on the information before it is unveiled to the rest of us. And where better to hide a forecastable move (spike from S&P500 inclusion) than right before an election that has caused many small investors to want to reduce their positions and potential down-side exposure - which further enhances WS's ability to pick up a lot of shares that would very likely be sold off just before that inclusion. My thoughts regarding the call from our broker............TSLA Longs are holding stronger than expected and disproportionally reducing their market exposure before the election using other stocks than TSLA

 

[Knightshade]

I would argue that Elon said that in reference questions about the margin at an individual vehicle level.....

Then you'd be ignoring the words he actually said.

Him citing 1-2% as an aspirational goal, and explicitly saying they were at 0.1% for Q2 2020- can only be about net profits for the whole company.

Because 0.1% is where...net profits for the whole company were in Q2 2020.

I
..and I also feel like he was excluding software revenue that would then be added which would of course raise Tesla's margins and net margin much higher. He's made those comments about margin a couple times in the earning calls and it's always in response to a analyst asking about individual vehicle margins and whether they would want to expand their margins at that level or continue to drop the price of vehicles while keeping the same margin.

If we're going to take Elon at his word, he also said margins they get right now are peanuts compared to the margin they'll get on software/FSD. If he expects to be generating out of this world margin on FSD, then how could Tesla not be insanely profitable? It's just simple math to see if he expects margins to be crazy high from software that high profits are going to follow.

You appear to be confusing gross and net margins here (as well as per vehicle versus whole company)

As long as tesla keeps plowing gross profit into lowering vehicle prices and future products and technology, net profit will remain low.

Which is the specific intent Elon explicitly stated in the bit I quoted... they ASPIRATIONALLY IN THE FUTURE hope to run about 1-2% net profits as a company.

Versus the 0.1% they did in Q2 2020.

And they want to keep it that low (1-2%) because they want to keep making their products more and more affordable to more people year over year.

Because that is literally the mission of the company

 

[StarFoxisDown!]

It depends on what profitability you are talking about. Are you talking about profitability on the vehicles/software options or for the company as a whole? Because if they keep plowing the profits from vehicles back into expanding vehicle production and product offerings the company might not be very profitable overall.

Actually it wouldn't matter. If Elon is saying their profit margin right now is peanuts(pretty sure he was referencing the 27% gross margin since a analyst was the one that brought it up) compared to what he expects their profit margin to be from FSD/Robotaxi, then the profits will be so high that Tesla couldn't possibly reinvest it fast enough to keep the EPS and net operating profit from rising dramatically from where they're are at right now.

This is just going off of what Elon said. Its' definitely still an open question as to margins/profits from FSD/software.

Their current margins on their operations right now which don't really include any benefit from FSD since a lot of the revenue is deferred tells me their growth expansion on the vehicle side will generate more than enough profits to cover all reinvest in the entire company. So thus I think FSD and software revenue will go straight to operating profit/EPS, which is the thought process I think Elon was having when he said those comments.

 

[EVortex]

10Q drops on Monday morning.
Short shorts start shipping out on Tuesday.
How is this not a bullish sign for S&P inclusion? It's almost like Tesla is making it so obvious now that people are not ready to believe it. I think it's happening this week and I'm buying a few options based on this read. YMMV

If the email said “Short Pants” instead of “short shorts” then I might believe it, but otherwise not so much.