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

[Darkfox021]

FSD prices continue to rise. All they have to do is force FSD on every used car and the prices will continue to increase (or at least the profits will).

Ok, but this is a lever they could have pulled at any point in the past or any point in the future.

My point is that Tesla is currently getting a big advantage of higher selling prices for used cars that have been returned on closed-end leases. This is a good thing, I'm not sure why it's so controversial.

I am simply saying that this situation may have finally turned the "Service" line item into a profit, whereas it has always been a net loss.

 

[printf42]

All these discussions around multiples over twitter and here really makes me tired.

Tesla need to make another none-profiting quarter to remind them multiple doesn’t matter to company in high growth stage.

They keep missing forests for a tree, one wrong tree after another

/s

 

[petit_bateau]

OK, my questions for you all working on valuation models.

1. What modeling does wall street use? How far out? How do they value? What discount rate? Why for each of these things.

2. If different, why do you use your chosen method, time frame, and discount rate?

Feel free to direct me to a link explaining #1 if you wish.

I ask, because it just seems like going 20 years out is ridiculous (not a critique of anyone, just not how I think of it). When I was changing my own investing from the futures markets, day trading, and short term trading, I struggled with these things as I started groping with TSLA as an investment. I do not recall any texts that I read that discussed such things and could not find in person or online mentors to help me understand. What I did do, was look at statements TSLA made, figured on them capturing some percentage of the market at profit points they aimed for (I recall 10% margin on the unyet named model 3). I played around with earnings per share to come up with a price point we have long since passed. I discounted 20% per year for a present value.

I really felt brilliant doing such things by myself but you all amaze me with how thorough you all are (Rob Maurer also)

I've watched VCs do whatever analysis it takes to get it past the investment committee. I'm sure the public-facing analysts are even more malleable depending on who is paying them to cover a stock In serious long-term industry we would typically run a NPV (or IRR) grid of three price (or volume) scenarios x three discount rates. The duration would be the duration of the asset in question, typically 15-40 years for significant durable assets and would include costs of eventual disposal. I've also seen bankers etc doing the same stuff.

More generally these analyses are a way to aid our thinking. We should not consider them to be mechanistic calculators giving us a perfect answer. I am not at all surprised that TheAccountant gets 2x or 0.5x my result. If anything I consider that to be a pretty close outcome. It suggests we are in close agreement on the data (i.e. the story) and the analytical method (the tool). By probing these analyses all we are really doing is quantifying what we already know to be weak points in the story (FSD, cell supply, energy, etc) and also illustrating to ourselves that others in the market may come at this stuff from very different directions wielding different analytical tools, And then the short-term traders turn up wielding weapons !

 

[The Accountant]

OK, my questions for you all working on valuation models.

1. What modeling does wall street use? How far out? How do they value? What discount rate? Why for each of these things.

2. If different, why do you use your chosen method, time frame, and discount rate?

Feel free to direct me to a link explaining #1 if you wish.

I ask, because it just seems like going 20 years out is ridiculous (not a critique of anyone, just not how I think of it). When I was changing my own investing from the futures markets, day trading, and short term trading, I struggled with these things as I started groping with TSLA as an investment. I do not recall any texts that I read that discussed such things and could not find in person or online mentors to help me understand. What I did do, was look at statements TSLA made, figured on them capturing some percentage of the market at profit points they aimed for (I recall 10% margin on the unyet named model 3). I played around with earnings per share to come up with a price point we have long since passed. I discounted 20% per year for a present value.

I really felt brilliant doing such things by myself but you all amaze me with how thorough you all are (Rob Maurer also)

I have seen the detailed research papers for TSLA from 3 Wall Street firms. All three used a 20 year DCF (Discounted Cash Flow) model using WACC (weighted average cost of capital) for the discount rate.

I can't give you the deep theory behind the DCF model. I learned it "on the job" working with the Mergers & Acquisition teams during my career (I'm not an MBA). When we were valuing an acquisition target we used a 15 year model (terminal value in the model accounts for the difference of a 15yr vs 20yr model).

The problem with the DCF model is the "garbage in, garbage out" problem. And often there is a lot of garbage in.
It's also a lot of work . . .I update my model only 1 - 2 times per year.

Perhaps there is a member here that has worked on Wall Street and can provide more insights on the DCF model.
I will send you a DM with the Piper Sandler research report.

 

[unk45]

Not really. If it’s used car sales, it’s likely all of the model 3’s that are just starting to come off their 3 year lease. This dynamic will actually increase, and be sustainable for not just a couple quarters but at least a couple years, since this was just the start of the model 3 ramp. In fact this “benefit” won’t level out until Tesla stops ramping current production and flatlines for at least 1-2 years

Tesla determined the residual value of these 3’s and soon to be Y’s 2-3 years ago. Since then the value of used 3/Y’s skyrocketed and are much higher than the residual value Tesla estimated 3 years ago. We’re talking double the residual estimated value

The residual value is NOT estimated, it is established by policy. Some OEMs set very high values for some vehicles (called subvention, if it is blatant). Some set low money factors. Tesla has never done either. Since typically about 50% of leases have early termination, which invariably generates profit for the lessor.

Tesla practices are so conservative it seems the supply of high quality lease termination Tesla’s will grow in line with lease originations two years prior. From now on this category will have similar % profits as now, but with growth at the rate of US sales. Non-US leases are treated differently country by country. We do not presently have enough data to value them.

 

[WADan]

Sorry if this had been posted. But we need to support this man:

The only way to stop BS is to call it out in all glorious detaill

Round 2:

 

[Xepa777]

There is a pretty logical and quite rational reason to think Energy has either turned the corner or is about to turn the corner where it comes to sustained growth and especially margin growth.

The Megapack factory was completed in April. Energy growth has been stalled simply because they didn’t have the supply to ramp it. Ramping storage should be quite simple and logistically much easier than auto manufacturing. Tesla has stated multiple times now that they have plenty of battery capacity coming in.

Since Energy has been capped from further growth, any solar expansion causes a hit on margins. Once the Megapack lines are running at capacity, energy storage is going to dwarf solar and solar negative margins won’t hit overall energy margins anymore in any meaningful way

Does Tesla have negative margin on this solar panels? I thought it’s still profitable but cheap because they just don’t have sales people. Sorry if I’m misunderstanding.

 

[MC3OZ]

Does Tesla have negative margin on this solar panels? I thought it’s still profitable but cheap because they just don’t have sales people. Sorry if I’m misunderstanding.

My understanding is the negative margin is on the solar roof, and mainly because the ramp hasn't scaled to high volume production/sales.

They are working on issues with the Solar Roof, it isn't impossible that this will eventually be at least breakeven,

Also with the SolarCity leases, a lot of the income comes towards the back end of the lease.

For regular solar installs I assume they make a margin. Powerwalls and Solar were often bundled, it should be safe to assume that the bundled combination is profitable.

Long story short, I am optimistic that energy business margins can continue to improve, Because the worst case scenario is, battery storage carries solar along for the ride.

 

[MikeC]

This Twitter thread from @MmeAlexandraS finally got me to vote my shares. It was easier than I remember, just click the link in the email and that's it.

https://twitter.com/x/status/1551262583801331712

 

[Webeevdrivers]

We are small investors, but one concern we have is the affect of opening up the Tesla network to non Teslas. From an investment point of view I have always looked at the supercharger network as a moat. A way to keep sales strong and stay in the lead. I’m not sure why Tesla feels it is a good idea to open it up.

And so many unanswered questions.
Is it just the new V4’s that will be open to the public?
Will they have captive adaptors? Will tesla migrate to CCS? Ugh.
What will the V4 speed be?
And of course timeline.

I’m sure they will have thought this thru,,, I hope.

If any of our more learned members want to comment please do. Wondering what others are thinking.

 

[Artful Dodger]

In Your Opinion Sir... What Might Happen To The Short Sellers, Hedge Funds, M.M. ETC. If Tesla Pursued An Aggressive " Buy - Back " Policy/Program?

Some, maybe a few, will move on to greener pastures. The hardcore (and most criminal) hedge funds will continue double down until they go bankrupt (like Melvin Capital just did, after being caught out naked short $AMC/$GME in Jan 2021).

When will this all end? When the SEC finally recinds the "Madoff Exemption", which allows Options Market Makers an exclusive exemption from the prohibition against naked short selling (these pigs are more equal) . This is the root of all evil.

In the mean time, Tesla has a business to run in the world we have, and a World to save in the time we have. Money is a sideshow to the Mission. Godspeed, Tesla Team.

Cheers!

 

[SOULPEDL]

https://twitter.com/x/status/1550995927296614402

Crank up the volume.

That looks bigger than others I've seen. Is this a structural pack type giga casting, or something new and consuming more of the vehicle %?
(Noticing the slots on the bottom to each side of the large round solid ball in the center.)

 

[Knightshade]

Second, your 2018 quote is out of context. The discussion was "service and other". Break even non-warranty service covers more fixed costs allowing the profitable used cars and merch to shine through.
Tesla Motors Inc (TSLA) Q3 2018 Earnings Conference Call Transcript | The Motley Fool

Except, no, it's not out of context.

You're using Deepaks one mention of "other" only because it's the full category name to ignore all the actual things Elon said after.



Here's the longer set of the quote, where he's specifically talking about PROFITABLE non-warranty service.

I bolded the most relevant bits.

Elon Musk

Yeah. Long-term, I would expect [/B]service to be a significant revenue item, and to be a positive margin contributor[/B}, as it's going to be a function about fleet size…

not "and other"- just service...

But sure let's see the additional context-

Deepak Ahuja

And age.

Elon Musk

Yeah, and it's essentially…

Deepak Ahuja

Exactly. And if the car is under warranty now.

Elon Musk

Exactly, we're under warranty. Just like a lot of stuff is under warranty. But as the warranty expires, so there is like non-warranty items then we'd expect service to positive gross margin.

That is explicit that Elon expects future profits- and increasingly so- from non-warranty service.

At no point is he discussing "other" like used cars or retail merch as providing those profits- but service specifically doing so-- Certainly the big bump in used car pricing is going to provide even more- but it's crystal clear that wasn't what he was talking about in 2018.




Elon certainly does prefer NO service--- you can tell by how underfunded the # of service centers has continued to be, something even some pretty major bulls like Sawyer and Omar have commented on-- something Elon has admitted was a problem than that he'd fix soon- multiple times since, and still hasn't fixed--- but he absolutely changed his mind from 2013 when he thought it was terrible to make any profit on service- to by 2018 explicitly saying they expect to make a profit on service.

 

[MP3Mike]

I believe it will happen this year yet, in 2022. There really isn't any viable reason NOT to upgrade Tesla anymore, it's almost become comical at this point.

I thought that the rating agencies pretty much said that Tesla has to introduce more models before the next upgrade. So sometime after the Cybertruck and Semi start shipping.

The ratings could be upgraded if Tesla successfully expands its global footprint, maintains a strong competitive global presence as other automakers offer an increasing number of battery electric models, and improves its product breadth.

 

[GOVA]

We are small investors, but one concern we have is the affect of opening up the Tesla network to non Teslas. From an investment point of view I have always looked at the supercharger network as a moat. A way to keep sales strong and stay in the lead. I’m not sure why Tesla feels it is a good idea to open it up.

And so many unanswered questions.
Is it just the new V4’s that will be open to the public?
Will they have captive adaptors? Will tesla migrate to CCS? Ugh.
What will the V4 speed be?
And of course timeline.

I’m sure they will have thought this thru,,, I hope.

If any of our more learned members want to comment please do. Wondering what others are thinking.

Why are you concerned?

Tesla will still own the network and will be in full control of what happens there. In addition, they will control and see who charges there and when. The network is expanding rapidly and opening it for others is not free. This is profit for Tesla.

 

[Sparky4life]

New paint job in Hollister, California. FSD edge case for sure.

Apparently meant to slow traffic (traffic calming) for the crosswalk instead of using speed bumps.

Here's my video from this morning with FSD 10.12.2:

 

[MC3OZ]

We are small investors, but one concern we have is the affect of opening up the Tesla network to non Teslas. From an investment point of view I have always looked at the supercharger network as a moat. A way to keep sales strong and stay in the lead. I’m not sure why Tesla feels it is a good idea to open it up.

And so many unanswered questions.
Is it just the new V4’s that will be open to the public?
Will they have captive adaptors? Will tesla migrate to CCS? Ugh.
What will the V4 speed be?
And of course timeline.

I’m sure they will have thought this thru,,, I hope.

If any of our more learned members want to comment please do. Wondering what others are thinking.

At the risk of lowering the bar on learned members.

Opening up Superchargers will raise the utilisation rates marginally and make supercharging itself marginally more profitable, in turn funding further expansion.

Outside of China, Tesla will probably scale vehicle production faster than most others, and demand is currently not a problem. Inside China, Tesla is already adhering to the Chinese standard.

Eventually the whole world will have very good fast charging options everywhere were they are needed, owning the network and building it, means that others may build less. Not doing it, means others will build more,

It may be a moat, but it is a moat that can easily and quickly be filled in,

Eventually I think CSS will be supported for most cars in most countries, if Tesla keeps the proprietary connector for the US and Canada, that is a likely marginal expense of dual cables at each Supercharger stall.

I'm sure the CSS standard isn't the best we can do, but Tesla would need to work with the official standards process.

 

[The Accountant]

https://twitter.com/x/status/1551388575735767040

 

[Discoducky]

Good news! A diesel advocacy group has determined that diesel is better than electric trucks!

Phew; I knew it! /S

Adding supposed journalist Tom Berg to list of paid FUD marketers posing as journalism.

And maybe this is a sign that the Semi is close to shipping!


Land Line Media: new-diesels-can-cut-emissions-faster-than-electric-trucks-study-says/

"Converting to modern diesel engines is a quicker and less costly way to lower harmful emissions than adopting of electric vehicles, especially if now-available near-zero-emissions diesels run on renewable biofuels, says a study commissioned by a diesel advocacy group."

 

[Webeevdrivers]

Why are you concerned?

Tesla will still own the network and will be in full control of what happens there. In addition, they will control and see who charges there and when. The network is expanding rapidly and opening it for others is not free. This is profit for Tesla.

I like that perspective. My concern is the attitude of. I was going to buy a tesla so I could use the tesla network. But now that’s open to everyone I’ll buy a Hyundai.

I’m probably just being paranoid. But that’s my concern.