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

[22522]

I know you're being sarcastic, but I actually read through many of them, and they don't seem to do any kind of analysis that answers my questions.

There is some guy named Gary Black on twitter that posts all sorts of spreadsheets telling you when exactly to sell. I don't know if these are your questions or your friends questions, but pretty sure you will go away content. You are both from Jersey.

I cannot be helpful as I believe that money should be put to work making jobs for people and the world a better place.

Gold and crypto may deliver better returns.

 

[StrongGuy]

What margins and asp will tesla have in 2030? Who knows.

Dont even know what the breakdown of 20m vehicles would be..
1m model 3
3-4m model Y
1m Cybertruck
3m mini cybertruck
10m '25k car'
1m Van
200k specialist vehicles (roadster/s/x)
5000 Semi

?

Assuming that Tesla will maintain a 30% gross margin and ASP of $35,000.
Gross profit will be $210 billion. Maybe profit margin will be 15%, which is outstanding for a mass-market auto company leading to a net income of $105 Billion.
I think the company would stop growing then, and so P/E ratio will be something modest like 5-8.

I'm just having trouble justifying Tesla's valuation if Tesla doesn't solve FSD.

 

[SN_8]

I have to admit that getting called a moron by friends and people online for investing in TSLA has been making me second-guess my investment choice. Hoping that some of you can bring a different opinion on the matter.

My serious answer is to check out a few of the easy to digest valuation models on YouTube, e.g. from Tesla Daily.

My slightly less serious comment... If you base your investment decisions on online insults, would it help if we call you a moron for wanting to sell?

 

[JusRelax]

Assuming that Tesla will maintain a 30% gross margin and ASP of $35,000.
Gross profit will be $210 billion. Maybe profit margin will be 15%, which is outstanding for a mass-market auto company leading to a net income of $105 Billion.
I think the company would stop growing then, and so P/E ratio will be something modest like 5-8.

I'm just having trouble justifying Tesla's valuation if Tesla doesn't solve FSD.

Are you just as bearish on Energy, Teslabot, AI, HVAC, EVTOL, Robotaxis within Boring tunnels (i.e. - FSD within a closed system), and in-car gaming/software/entertainment/productivity as you are on FSD?

 

[RobDickinson]

External FSD licencing, cloud/NN training services, battery supplies etc etc too.

 

[Tachyon]

Hey, guys. I'm new here.

I bought TSLA pre-SP500 inclusion at average price of under $400. I sold at $880ish and then rebought at $600.

With the marketcap approaching close to $1 trillion, I'm starting to wonder if all of the growth from the automotive side has been priced in already and if I'm better off investing in something else. Yes, I'm well aware of the potential of robotaxis, but I'm a FSD-bear and don't think it's ever happening.

If we're valuing Tesla solely as a car company and assuming they can manufacture 20 million cars annually, would their current valuation be justified? I'd imagine most of the cars sold then would be a cheaper $25K model with lower margins, so my initial instinct is no.

I have to admit that getting called a moron by friends and people online for investing in TSLA has been making me second-guess my investment choice. Hoping that some of you can bring a different opinion on the matter.

The first principle of investing is to do due diligence and know the company you are investing in.
This will require a lot of reading and putting in the hrs .
This forum is an excellent resource for such information on Tesla.
Please feel Free to read through the posts over past 10 months and all your questions will be answered.
Unfortunately, there is no easy money to be made anywhere in the world.
No spoon feeding specially here at TMC.
Hope you will stay on.Good luck.

 

[StrongGuy]

My serious answer is to check out a few of the easy to digest valuation models on YouTube, e.g. from Tesla Daily.

My slightly less serious comment... If you base your investment decisions on online insults, would it help if we call you a moron for wanting to sell?

I got into a pretty constructive argument with a Tesla bear on reddit, and he's the one who convinced me to do some simple napkin math assuming very generous sales volumes and margins for Tesla.
I understand the argument for robotaxis.

The only reason I'm in Tesla right now is that I have a hunch the valuation could go into the multi-trillions even if I can't explain it with numbers.

 

[Singuy]

I know you're being sarcastic, but I actually read through many of them, and they don't seem to do any kind of analysis that answers my questions.

Long story short, Tesla is a story about operating margins which dictates it as a car company, or a tech company.

Tesla is not valued as a car company because it's operating margins are much higher even at the early stage of growth. We are at 11% operating margin, hitting 13% this q. In comparison, F's operating margin last Q was negative, Nissan is at 1-3%. Toyota/GM are between 5-10%. These are car company operating margins.

Tesla's operating margins however are heading toward 20%+ because

1. FSD roll out. People will likely pay 10k or subscribe to FSD more as it's an actual software that provides value. It doesn't need to be robotaxi ready nor are buyers expecting it to be. The roll out also have Tesla realize more than 75% of all money collected vs only 50% today.

2. Increase production efficiencies: Fremont is Tesla's worst efficient production plant and also the highest in operating cost. Once Tesla have higher production moved away from Fremont via Berlin/Texas/Shanghai, we should see even more in operation savings.

3. Continue to simplify process on production: It takes Tesla today only 10hrs to make a Model 3 from raw material to completion. It takes the best car manufacturing company Toyota to make a car in 18 hours. Musk wants Tesla to reduce this 10hr number further, but as of right now you see where all the operational cost savings come more

4. As supply chain issues ease, energy will be less draggy on operation costs

Just to put things in perspective, Tesla is valued as a tech company because it has forward operating margins like a tech company. Car companies are in the mid single digits, companies like Apple are at 25%. Tesla will be among the techs as the years go by, except that Tesla's total addressable market will blow Apple's out of the water and ends up making a stupid amount of high revenue at 20m cars/year+50% FSD take rate vs what Apple can do. Apple's yearly revenue is 260 billion. Tesla will be hitting over a trillion in revenue at 20m cars plus whatever energy can do.

So Tsla's valuation is not all made up by apes being strong together. Q2 2021 opened the eyes of whales and analysts. Q3 will be Tesla shouting from the rooftops that they are not a car company.

 

[RobDickinson]

The only reason I'm in Tesla right now is that I have a hunch the valuation could go into the multi-trillions even if I can't explain it with numbers.

The basis for tsla is growth and disruption, Energy & transport. By 2030 that could include aircraft, robots etc too.

 

[StrongGuy]

Long story short, Tesla is a story about operating margins which dictates it as a car company, or a tech company.

Tesla is not valued as a car company because it's operating margins are much higher even at the early stage of growth. We are at 11% operating margin, hitting 13% this q. In comparison, F's operating margin last Q was negative, Nissan is at 1-3%. Toyota/GM are between 5-10%. These are car company operating margins.

Tesla's operating margins however are heading toward 20%+ because

1. FSD roll out. People will likely pay 10k or subscribe to FSD more as it's an actual software that provides value. It doesn't need to be robotaxi ready nor are buyers expecting it to be. The roll out also have Tesla realize more than 75% of all money collected vs only 50% today.

2. Increase production efficiencies: Fremont is Tesla's worst efficient production plant and also the highest in operating cost. Once Tesla have higher production moved away from Fremont via Berlin/Texas/Shanghai, we should see even more in operation savings.

3. Continue to simplify process on production: It takes Tesla today only 10hrs to make a Model 3 from raw material to completion. It takes the best car manufacturing company Toyota to make a car in 18 hours. Musk wants Tesla to reduce this 10hr number further, but as of right now you see where all the operational cost savings come more

4. As supply chain issues ease, energy will be less draggy on operation costs

Just to put things in perspective, Tesla is valued as a tech company because it has forward operating margins like a tech company. Car companies are in the mid single digits, companies like Apple are at 25%. Tesla will be among the techs as the years go by, except that Tesla's total addressable market will blow Apple's out of the water and ends up making a stupid amount of high revenue at 20m cars/year+50% FSD take rate vs what Apple can do. Apple's yearly revenue is 260 billion. Tesla will be hitting over a trillion in revenue at 20m cars plus whatever energy can do.

So Tsla's valuation is not all made up by apes being strong together. Q2 2021 opened the eyes of whales and analysts. Q3 will be Tesla shouting from the rooftops that they are not a car company.

Ok, this actually makes some sense.
I guess if robotaxis don't come, the FSD add-on would provide Tesla with a pretty significant boost to their margins if FSD continues improving.

Tesla's last quarterly report was really impressive at an 11% operating margin. I've read up on manufacturing innovations at Tesla to reduce costs (Like the Octovalve and Gigapresses), so how easy would it be for other companies to copy Tesla and achieve similar cost savings, which would then pressure Tesla to lower prices & margins?

 

[SO16]

That would be my guess. He shorted it about New Years or so and then it fell a few hundred and he could get out with a big profit and then short Ark which looks to me to be a much better short. I'd love to hear an interview where he gave his insight on valuation of Tesla.

He was short on Dec 2.

'Big Short' investor Michael Burry reveals he's short Tesla, tells Elon Musk to issue more stock at its 'ridiculous price'

"That's not dilution. You'd be cementing permanence and untold optionality," Burry said late Tuesday on Twitter.

markets.businessinsider.com

 

[MC3OZ]

I think we're really way ahead of things if we are guessing battery chemistry and a service offering that is more than 3 years away. Battery costs will be falling. Also not sure why battery capacity should be low in a robotaxi instead of high. I'd want that returning to the depot as few a number of hours as possible.

What do shorts on Uber look like? Markets can stay irrational longer than you can stay solvent is the one concern there. If the public beta looks at all useful I'd be wishing I had some extra dollars to short Uber. Just on general principle.

LFP is currently the best option as it can be cycled daily for 100% of pack capacity... so each robotaxi starts a shift at close to 100%, it could even charged to 100% multiple times within a 24 hour window and still have a reasonable lifetime.. and it is currently the cheapest option..

There are some promising battery chemistries, but most look more like they are at least 5 years away.

Tesla can only make their plans on what they know can do the job today...

IMO ideal timing is working roboraxis when LFP based Model 3s and the new compact model are in high volume production, and some off-lease Model 3s are available. I assume the compact model will be LFP, because to hit the $25,000 price target that is currently the best option.

 

[StarFoxisDown!]

I got into a pretty constructive argument with a Tesla bear on reddit, and he's the one who convinced me to do some simple napkin math assuming very generous sales volumes and margins for Tesla.
I understand the argument for robotaxis.

The only reason I'm in Tesla right now is that I have a hunch the valuation could go into the multi-trillions even if I can't explain it with numbers.

As others have said, there’s been many discussions in this thread about future estimates of volume in the next couple of years, margins, operating leverage, earnings, comparisons to other auto makers’s margins and profits and what would happen to Tesla’s P/E and other metrics over the next 4 years…… all without factoring in FSD. Not trying to be rude but you’re saying you’ve went through past posts/discussions on this thread and still can’t find a reason for TSLA going higher without FSD……so I left to assume you haven’t.

As someone said, we don’t spoon feed or hold hands here which is for the better of the thread/discussion. All the information you need is in Tesla’s current earnings from Q2 which you can then extrapolate and apply to higher production volumes. I feel you should probably do these calculations on your own to better understand the company you’re invested in instead of asking for us to give you a reason to hold your shares. If you come to the conclusion that there is no further upside in the stock unless FSD happens, then you’re essentially saying you don’t believe Tesla will be growing 30% at minimum over the next 5 years

 

[22522]

Try this.

Thank you for posting this. The problem I have is that the guy seems to understand market acceptance time constants - he is probably right enough on every point.

 

[Singuy]

Ok, this actually makes some sense.
I guess if robotaxis don't come, the FSD add-on would provide Tesla with a pretty significant boost to their margins if FSD continues improving.

Tesla's last quarterly report was really impressive at an 11% operating margin. I've read up on manufacturing innovations at Tesla to reduce costs (Like the Octovalve and Gigapresses), so how easy would it be for other companies to copy Tesla and achieve similar cost savings, which would then pressure Tesla to lower prices & margins?

If other car companies can achieve what Tesla can achieve by reducing cost/increase software revenue which increase their operating margins but keep the price the same(because we don't need a world with just because there are competitors doesn't mean the cars should be free), then they would start getting tech like valuations vs Tesla losing tech like valuations.

Only reason why car companies having PEs less than 10 is because they freaken suck at making money from making cars. Also they throw too much money away at interest payments and advertisements.

 

[MC3OZ]

Ok, this actually makes some sense.
I guess if robotaxis don't come, the FSD add-on would provide Tesla with a pretty significant boost to their margins if FSD continues improving.

Tesla's last quarterly report was really impressive at an 11% operating margin. I've read up on manufacturing innovations at Tesla to reduce costs (Like the Octovalve and Gigapresses), so how easy would it be for other companies to copy Tesla and achieve similar cost savings, which would then pressure Tesla to lower prices & margins?

Very few companies are good and Science/Engineering, Manufacturing and Software..

Elon states superior Manufacturing as a goal, but Science/Engineering and Software are almost as important.

Science/Engineering dictates what can be done, Manufacturing and Software determine how quickly it can be built, the features and the cost of the finished product.

This skill set isn't limited to cars, we can see it applies,to energy storage solutions, grid software tools, robotics, insurance, etc...

The is a wide array of products Tesla don't currently make, that they may make one day, including Humanoid Robots, home HVAC and probably a few more we don't yet know about..

The ability to attract the best, brightest and hardest working talent is also a big plus..

If there is another company that ticks all of these boxes, that would be handy to know...

IMO Chinese car companies tick more boxes than EU, Japanese and some US carmakers, Apple ticks more boxes than most other companies, but Tesla is the only company I know of that ticks all the boxes.

 

[Gigapress]

Hey, guys. I'm new here.

I bought TSLA pre-SP500 inclusion at average price of under $400. I sold at $880ish and then rebought at $600.

With the marketcap approaching close to $1 trillion, I'm starting to wonder if all of the growth from the automotive side has been priced in already and if I'm better off investing in something else. Yes, I'm well aware of the potential of robotaxis, but I'm a FSD-bear and don't think it's ever happening.

If we're valuing Tesla solely as a car company and assuming they can manufacture 20 million cars annually, would their current valuation be justified? I'd imagine most of the cars sold then would be a cheaper $25K model with lower margins, so my initial instinct is no.

I have to admit that getting called a moron by friends and people online for investing in TSLA has been making me second-guess my investment choice. Hoping that some of you can bring a different opinion on the matter.

Why would the $25k necessarily have lower margins? Even so, $25k (in 2021 dollars) * 20 million *0.20 net margin = $100 billion per year profit by 2030 or so. This would roughly equate to today's market cap if discounted back today at 5% + inflation.

But what about solar roof, power wall, megapack and autobidder? Insurance? What if average selling price is higher than $25k? What if net margins are 30%? What about non-FSD software revenue? What about new product introductions we haven't heard about yet? Etc.

 

[goinfraftw]

Hey, guys. I'm new here.

I bought TSLA pre-SP500 inclusion at average price of under $400. I sold at $880ish and then rebought at $600.

With the marketcap approaching close to $1 trillion, I'm starting to wonder if all of the growth from the automotive side has been priced in already and if I'm better off investing in something else. Yes, I'm well aware of the potential of robotaxis, but I'm a FSD-bear and don't think it's ever happening.

If we're valuing Tesla solely as a car company and assuming they can manufacture 20 million cars annually, would their current valuation be justified? I'd imagine most of the cars sold then would be a cheaper $25K model with lower margins, so my initial instinct is no.

I have to admit that getting called a moron by friends and people online for investing in TSLA has been making me second-guess my investment choice. Hoping that some of you can bring a different opinion on the matter.

Ok, this actually makes some sense.
I guess if robotaxis don't come, the FSD add-on would provide Tesla with a pretty significant boost to their margins if FSD continues improving.

Tesla's last quarterly report was really impressive at an 11% operating margin. I've read up on manufacturing innovations at Tesla to reduce costs (Like the Octovalve and Gigapresses), so how easy would it be for other companies to copy Tesla and achieve similar cost savings, which would then pressure Tesla to lower prices & margins?

Some thoughts:

- you do indirectly take into market sizing for Tesla and re-apply that line of thinking back to company fundamentals in its valuation
- you do take into account margins due to software margins

so, kudos! you know how to read quarterly reports and decipher what they're trying to say which is awesome and definitely shows you're not a newbie, so take some credit!!

Now:

- a reliance on just FSD as the only software package Tesla will be making is a qualified incorrect way of thinking about tesla. Something that helped me out was looking at it as the perspective of time horizons and development of software features over time and how high value, quality, and quickly they churned out at Tesla. With only a million+ car fleet, there's so much room to go for Tesla to realize to a 10M -> 100M car fleet over time and the data and software that could be built, based on variety of world-wide use cases that we have no idea of.
- i think this board over emphasizes, sometimes, the ability of perfect or near-perfect execution that Tesla has proven time and time again. meanwhile, the media under emphasizes and draws a narrative of doom and gloom that things won't work out. Past is never a predictor of future. So, take that as a caveat to posts here (IMO).
- read this by Walt Mossberg back in 2015: Mossberg: Battery tech isn’t keeping up
- now, read this by Michael Liebrich: Liebreich: Peak Emissions Are Closer Than You Think – and Here’s Why | BloombergNEF

 

[Blue horseshoe]

I got into a pretty constructive argument with a Tesla bear on reddit, and he's the one who convinced me to do some simple napkin math assuming very generous sales volumes and margins for Tesla.
I understand the argument for robotaxis.

The only reason I'm in Tesla right now is that I have a hunch the valuation could go into the multi-trillions even if I can't explain it with numbers.

Crossovers and pickups account for the lion share of US vehicle production. I post this to note the compact segment is much smaller. However I have done some bad napkin math to ignore energy, fsd, production efficiency, increased margins, etc.

I guessed at numbers produced and used the lowest cost version of each veh and rounded down average sale price (ASP) for model compact, 3, y and x since Tesla will try to lower cost over time and I ignored higher priced models since this is a bear valuation guess.

I used $1,000 over cheapest model cybertruck accounting for teslas attempt to lower costs, but didn't go lower as truck owners tend not to choose the lowest cost options and I think this will happen too with the cybertruck.

At a price to sales ratio of 10 (since this assumes Tesla has failed at most things, but has managed to hit 20M veh produced) Tesla could be valued at around $6,800 per share in 2030.

You should come up with your own assumptions and calculate your own valuation.

I recommend reading this forum, religiously, as it is the answers to this open book test.

 

[SPadival]

Hey, guys. I'm new here.

I bought TSLA pre-SP500 inclusion at average price of under $400. I sold at $880ish and then rebought at $600.

With the marketcap approaching close to $1 trillion, I'm starting to wonder if all of the growth from the automotive side has been priced in already and if I'm better off investing in something else. Yes, I'm well aware of the potential of robotaxis, but I'm a FSD-bear and don't think it's ever happening.

If we're valuing Tesla solely as a car company and assuming they can manufacture 20 million cars annually, would their current valuation be justified? I'd imagine most of the cars sold then would be a cheaper $25K model with lower margins, so my initial instinct is no.

I have to admit that getting called a moron by friends and people online for investing in TSLA has been making me second-guess my investment choice. Hoping that some of you can bring a different opinion on the matter.

First, try to wrap your head around Elon's ambition (and he's nearly there) - in 2023, he plans to make more Model Ys than the world's top selling car (Toyota Corollo) AND have better margins than the world's top selling premium car (BMW 3 series).