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

[asburgers]

Hi, can you explain why stock market is spooked by 1.6% 10yr bond, is it 1.6% APR? Companies borrow money for much lower rate, if their stock price go up a minimum of 10% is it a bargain compared to 1.6% APR 10yr bond? Yellen and Powell already said inflation is not a concern, so WHY stock market sell off?

So this has been quite irrational in my opinion. Over the past two months or so, the market priced in about 2 rate hikes within the next year into the bond markets. This fear led to two things: fear of inflation and increased borrowing rates for companies. Despite Chair Powell and Tres Sec Yellen repeatedly affirming the opposite. There has been criticism that Powell has been too reactive, and lenient in his message. Had he been more forceful, some shorts may have abandoned their position. However, I can't fault him as he is simply doing his job mechanically.

The theory that growth companies (with higher P/E multiples vs value companies) are more sensitive to higher rates holds true on paper. However, I would be hard pressed to see analysts adjusting their discount rate by 0.50% and resulting in 30% sell-offs. Cathie said that companies would use 3-5% to discount (I've worked at ones that used 7%), so 1.6% vs 1.3% doesn't even begin to move the needle. Even increased lending rates don't begin to explain it (especially for companies with relatively low debt like Tesla). If I recall correctly, Morgan Stanley used an 8% WACC for evaluating Tesla.

Now, there is a massive short position on Treasuries and there is a theory that this is fall out from the Bank of New Zealand and Australia's yield curve control projects. I'm not too familiar with NZ but I did see that Australia had fixed their 3 yr rate down to promote lending. Bond traders who missed out on the NZ and AUS trades flocked to short the US Treasury. Just a theory though. I'm still learning about the bond world.

Yes - there is a sector rotation into value going on, but the sell off in growth smells like a whole lot of FUD. Like Auntie Cathie said today, she thinks there is a lot of paralysis in the markets.

 

[CatB]

Nobody knows. I wish I knew and I would not have bought shares at upper 700s and 600s and out of powder. Bottom is when some whales stop selling and some more whales start buying or there is new extremely positive fresh news.

In the mean while we ants bite a few more shares.

I think it is time for @Krugerrand to check with ...MOM!

 

[PeterJA]

I think you are not taking into account how irrational the Anti-Tesla crowd is. There will always be FUD against Tesla.

I agree FUD will continue. What I meant (and didn't make clear) is that FSD will destroy as a plausible argument the FUD about competition. Only the totally irrational will try to argue that competition has caught up when Tesla has an obviously game-changing technology that no one else has. But even these haters might realize they can't convince anyone and must shift to other FUD.

And true sleep-in-the-back autonomy will take a long time to penetrate the market. First off, a lot of people won't trust it. There will be a fatality eventually and that will dominate the news and talk radio and social media. Never mind that it will be ten times safer than human drivers. The FUD will explode.

Depends how we define "a long time." The rise of air travel is probably the closest analogy, but it's not close because early planes were less safe than FSD will be, and flying is scarier. My intuition is that yes "a lot of people won't trust it" at first, but most people will quickly adapt when they see others doing it. Humans are kinda sheepish that way.

Second, for a good while it will be available only in more-expensive cars that many people cannot afford.

Disagree. According to Elon's Master Plan Part Deux, Tesla Network will allow anyone to afford a Tesla (even before the $25k car arrives) because robotaxi income will allow the car to pay for itself.

The transition will be gradual as only the most technologically progressive will want it at first.

The transition will be obvious to the market, which is forward-looking and will price TSLA accordingly.

 

[Singuy]

https://twitter.com/i/web/status/1369114364813393922

edit: 15% m/o/m growth in what is seasonally the weakest car sales month in China. For perspective, Feb 2020 only had 15k EV sales across ALL manufacturers (Tesla was less than 2300 in Feb 2020). Great numbers!

For reference, they produced 24.8k units in Jan, and delivered 15.5k

Production numbers are pretty good for Chinese New Years month so I suspect they were at half production around that time.
So I guess we are expecting close to ~80k produced this quarter, and I guess about 50-55k deliveries in China, 15-20k goes to Europe, and the rest are just end of production lots not transported/inventory.

 

[Thekiwi]

Just for some perspective TSLA is trading at a pre-split price of $2,815 per share, and was trading as low as $350 a year ago (post-split equivalent to $70 per share).

The stock price is still up a phenomenal amount over the last year, and everyone who held common stock that last 52 weeks has been rewarded handsomely. Even if the stock price halves again from here, its still a phenomenal success story and no one here would have said no to the return on investment a year ago.

 

[phantasms]

Even if the stock price halves again from here, its still a phenomenal success story and no one here would have said no to the return on investment a year ago.

No way is it blowing past the lowish 400s. No. Possible. Way.

 

[EVWatcher]

I would add this.

Kathie mentioned in a recent CNBS video that she only deals with allocation and the redemption is handled by the fund manager (like a market maker for ETFs?). I have no idea on how these so called ETF market makers operate. So, I would assume that the market maker may not have ideas of individual securities and either selling based on some predefined algo or as a basket of appreciated securities.

Cathie. No k. ie, no y. Wood, no s.

Edit: if she’s going to be our guru we should show enough respect to get her name right.

Speaking of ark gurus, anyone know why Tasha has been so out of the picture?

 

[asburgers]

By golly...if Shanghai can produce that in a short month, 1MM EOY combined with Austin and Berlin is within reach.

 

[printf42]

Would you tell me what are the clues that Tesla is close/at its bottom? I learned from the 2000 crash that the big stock brokers (TDAmeritrade, Schwab, Fidelity....) always know the market direction because they have all sell and buy orders. They communicate with each others. The after hours traders have friends in those stock brokers, so they also know.

A good signal would be when everyone here says it’s going down some more.

If there is a senior member getting into a fight with others by saying the D word, then sell out, it’s a even stronger signal.

 

[buttershrimp]

i say this with all due respect, but will people please stop coming on the forum reminding us how far Tesla has come this past year? It’s reminding me of my mom trying to cheer me up after getting beat up in middle school.... “now now son, I know you got punched in the face and that you were given a power wedgie I’m front of the school.... but remember sweetheart.... one year ago? Remember how many times you got punched last year? Remember all swirlies in the toilet? And all times the kids took your money and smashed your remote control car? Look how far you’ve come sweetheart....”. Good grief !

 

[Prunesquallor]

A good signal would be when everyone here says it’s going down some more.

If there is a senior member getting into a fight with others by saying the D word, then sell out, it’s a even stronger signal.

I demand you take that back.

 

[ke6jph]

Deployed my last dry powder back in the low $800 range so I decided it was a good time to transfer shares from my IRA to my Roth for tax free growth. Tax advisor cautioned against moving more than 400 shares this year. Talked to TD Ameritrade after
faxing in the required form and was told it will take 10 days to process . Hope the share price stays low.............

 

[2daMoon]

Everything you need to know about FUD.

FUD is a staple of the 'merican diet.

The media mechanisms are greased by the fat from FUD.

FUD can be had in the thinnest of slices, or, as a loaf, depending upon your appetite for it.

You can put FUD in the fridge and it will last a long time.

Leave FUD out and it gets moldy pretty quickly.

 

[Pras]

This whole value rotation is soon going to fall on its back and people will return to the usual investment options, aapl, amzn, tsla, zm etc. The issue is that the current anti tech sentiment in market is so strong that people think buying airlines stock is better than Apple even after 20% discount. People missed that still only 50% of air traffic has returned and lucrative travel, I.e. business travel will be cut significantly for good. Also companies will use zoom video even when collocated as many will likely revert to hybrid work culture where possible. Many jobs being posted (I know my wife got one) are now permanently remote. I can go on, but this whole rotation to value is missing the forest from the trees. Yes correction was needed but what hurts my ego is that people are recommending buying oil companies and railroads over the current and future champions (And yes I venting a bit).

In a high interest rate environment valuation for all stocks should drop if the numerator in dcf equation remain as before.

Lastly the two charts below show qqq vs spy. First is from covid low to today and the second chart is from Dec 2018 low to pre-covid high. You will see that in the recent pullback qqq has given up any relative gains over spy when compared to Dec 2018 to pre covid run. This is suggesting that any realization that technology will play an even bigger role in post covid world has been washed away.

 

[woof]

<--- Hey! What happened to my head?

As for $TSLA, what would be the best YOLO "let's bet everything on 42" play for an expected shoot up of price within the next month? I've got some couch change that I'm willing to blow. Normally I'm just a boring buy and hold kinda dog, but this "down" thing seems like bluff worth calling.

 

[st_lopes]

In a high interest rate environment valuation for all stocks should drop if the numerator in dcf equation remain as before

It disportionatley hits growth/tech stocks because a 0.5% increase in risk free rate doesn’t translate linearly when deriving your discount rate in a DCF model. For each basis point change in risk free rate you’re going to get 3-5x multiple on the discount rate applied to high growth stocks. The same isn’t true for lower risk (lower reward, lower expected return) stocks where the relationship is more linear.

Morgan Stanley using an 8% WACC on TSLA is a joke. That’s just financial engineering the fact they have a lowball delivery numbers target in 2030 and using a more reasonable risk adjusted WACC for a growth company (13-15%) would have resulted in a stupidly low price target.

 

[asburgers]

China's got their plunge protection team out.

China State Funds Buy Stocks to Stem Worsening Rout ["Bloomberg - Are you a robot?"]

 

[AZRI11]

Tesla registrations killed the competition in China

 

[Pras]

It disportionatley hits growth/tech stocks because a 0.5% increase in risk free rate doesn’t translate linearly when deriving your discount rate in a DCF model. For each basis point change in risk free rate you’re going to get 3-5x multiple on the discount rate applied to high growth stocks. The same isn’t true for lower risk (lower reward, lower expected return) stocks where the relationship is more linear.

Morgan Stanley using an 8% WACC on TSLA is a joke. That’s just financial engineering the fact they have a lowball delivery numbers target in 2030 and using a more reasonable risk adjusted WACC for a growth company (13-15%) would have resulted in a stupidly low price target.

Agree but airlines or covid hit sectors would have higher Wacc too right? How about cyclicals in general. Like retail.

 

[generalenthu]

It disportionatley hits growth/tech stocks because a 0.5% increase in risk free rate doesn’t translate linearly when deriving your discount rate in a DCF model. For each basis point change in risk free rate you’re going to get 3-5x multiple on the discount rate applied to high growth stocks. The same isn’t true for lower risk (lower reward, lower expected return) stocks where the relationship is more linear.

Morgan Stanley using an 8% WACC on TSLA is a joke. That’s just financial engineering the fact they have a lowball delivery numbers target in 2030 and using a more reasonable risk adjusted WACC for a growth company (13-15%) would have resulted in a stupidly low price target.

With all due respect, this argument that inflation is bad for growth stocks is hokum.

Yes, higher inflation means a higher discount rate. But why would the net cash flows stay the same with inflation? In fact, stocks are the best place to hide during bouts of inflation because you're owning real businesses with real pricing power. In this economy, growth stocks have vastly more pricing power than value stocks.

For some vendors with multi-year contracts, I have seen the contract price linked to inflation numbers.

If anyone tells that the price of zoom or Netflix or an iphone or Tesla would be fixed in the future irrespective of inflation, obviously that would sound preposterous.

Anyways, we should give the market a few weeks to get back to it's senses . Growth had outperformed value in a huge way and the market needed some sound bite to sell off.