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

[elasalle]

Elog mugs for the camera yesterday with his kids, and his good friend Sergey Brin:

SEC, WSJ.

Cheers!

The peeps that EM and Tesla *ducked**and keep ... are the shorties, big Oil, etc etc ....

 

[Ogre]

OK - but THIS piece looks like it is the central piece of a total set of body castings: FRONT and REAR (known to be in production), and CENTRAL (this one).
Question is, for which vehicle? My (amateur) guess would be the Cybertruck. Any casting/ exoskeleton pros know better?

Bullish ? meaning CT production is on schedule (well, ahead of delayed schedule ;D )


View attachment 832537

It does look bigger than the Model Y front end I've seen. But I can't say I've paid too close attention to this. If so, the Cybertruck frunk looks a little smaller than I hoped.

Also wouldn't be the first time they've slipped an Easter egg in one of these videos. They had Cybertruck glass in one a while ago. But that didn't mean a whole lot, could just be testing out an early mould.

 

[WADan]

This is very much in line with my thinking and experience. I do think as the customer base expands with Model 3/Y and Cybertruck, some fraction will want a larger or more upscale option such as Model S/X. My family has both an X and a Y. These are not really substitutes for each other. I am very glad to have both and appreciate the differences. I use my X in was that our Y is simply not adequate. So I'm saying it's all good. Consumers need a lot of model choice. As Tesla approaches making some 10M cars a year, customer will demand a broad portfolio of products to choose from. At this scale, producing some 1 million units of Model S/X, Roadster 2, and maybe some other high end products is not unthinkable. Robotaxi does not change this in my thinking. Model Y or something close to it will become the dominant model for robotaxi. When this happens, buyers of higher end private vehicles will probably not want to buy anything that looks like a robotaxi. What would be the point? There will be ten million or so robotaxis on the road, and if you bother to own your own car you'll want something special and distinctive, something that fits your family just right or expresses your version of fun and lifestyle. So I'm all in favor of mass prodroducing the Model Y, Model 3 and robotaxis. But I do think that other products like the Models S/X should be fresh, fun and exciting and well on point with the mission. I do believe there is an unsatisfied market for a $60k Model S and Model X, and if Telsa has a path to produce it at $45k, then we could see demand in the range of 500k to 1M units, all while Models Y/3 starting at $30k push out to 4M or even 8M units per year. Affordability is all relative. A Model S will never be as affordable as a Model 3, but within the Model S line we could still have a range from $60k to $120k, making some much more affordable than others. So really I am point to a gap that I believe will be closed over the next 8 years, either by Tesla or by competitors.

I understand that this is not in the cards for immediate action. So please spare me lectures about how Tesla has other priorities right now. I totally get that. And if anyone thinks I don't get that, they simply misunderstand me. I am talking about a pathway to 10M cars. Unless Tesla has something up their sleeve for something better, I do believe that Models S and X are a material part of that future, more than 10% of automotive revenue. Absolutely Tesla must massively scale up the Model Y and Model 3. Cybertruck will be a massive cult hit and can't be put into production fast enough. And actually the product that I am most eager about is the Semi. It's absolutely essential for addressing climate change. So all this takes alot of Gigafactory capacity and massive battery supply. I totally get that. But Tesla also needs a platform about the size of Models S and X that can support various van configurations. If Tesla could invent a flexible common platform for vans along with the S and X, that would be awesome. I am not saying that I know that Tesla can or will do this. I'm just saying it would be a worthy challenge for Musk and his engineers to move in this direction. I think that Musk is thinking more about flexible architecture these days. It's really important if you want to master the economies of scale while being able to deliver niche products at fewer than 300k units per year. A flexible platform for van, S and X could deliver more than 1M units per year. Again, don't anyone give me grief for this suggestion. I'm not saying that Tesla is capable of doing this or will ever make it a priority. I am just saying that flexible architecture is a worthy challenge that masters the economics of smaller volume products. Along the path to a 10M unit portfolio, I do hope that Tesla finds a way to master the economics of lower volume products. If not flexible architure, maybe advanced robotics, i.e., Optimus.

I agree. I see more and more model Y around my neighborhood. Mine was the first one, and now there are quite a few. Model Y is becoming like Honda CRV or Toyota RAV, and I am ready to get a different EV (preferably a Tesla, of course).

 

[StarFoxisDown!]

Pretty active campaign to cap today. MM's clearly trying to keep the stock in check in case of positive macro movements this week from earnings, Fed, or GDP data.

They're already flying rather close to the sun when it comes to the 850, 870, and 900 Call Walls

 

[Discoducky]

Uh no, this Mercedes EV was built on an ICE platform and is being eliminated in favor of newer EQ BEVs designed from the ground up.

EQS is that 'designed from the ground up' car and still not competitive. It is decidedly much better, but is still not in the league of the S. Maybe in 2015 it would have been competitive...Maybe the EQS SUV will compete against the Model Y later this year? Highly unlikely

Much less range, much more money, much less efficiency due to much heavier. Configure one here and see for yourself.

 

[henchman24]

Pretty active campaign to cap today. MM's clearly trying to keep the stock in check in case of positive macro movements this week from earnings, Fed, or GDP data.

They're already flying rather close to the sun when it comes to the 850, 870, and 900 Call Walls

The whole market is really stuck in neutral. Dow, Nasdaq and SP500 are being kept below 32k, 12k and 4k respectively. Vix hovering in an area where it could shoot up to 30, but away from the 22.50 breakdown. The fireworks start tomorrow after hours and roll through Thursday. It is likely to be bumpy with good and bad news all around.

 

[ZeApelido]

I recommend starting here:

Amazon.com

After that I recommend this:
Value Investing: from Graham to Buffett and Beyond and Competition Demystified: A Radically Simplified Approach to Business Strategy

These books are blatantly about Value Investing. The basic problem is how to define 'value'.
@The Accountant uses a traditional (in value investing terms) assessment of earnings quality with, in Tesla's case, not emphasizing debt coverage because Tesla has negligible debt. I'm sure he'll speak up if I seem to represent him.

disclosure: I am a graduate of Columbia Business School, where value investing has been a constant message since Graham and later, Dodd. That includes considerable attention to derivative and option pricing, although Value Investing and Speculation are opposite poles, with Momentum following closely on speculation. From an institutional investor perspective value forecasts mostly cede to rating agencies and advisory services; notable exceptions are strict adherents of value investing such as Ron Baron (who actually never had academic background in the investment philosophy he follows.

All this may seem irrelevant to the forecasting methodology one chooses. As several people point out the discount rate is one crucial point (In Value Investing the discount rate is meant to be the 'blended incremental cost of capital' but most Wall Street 'analysis' uses arbitrary numbers.)

One major problem with forecasting methodology is to accurately cost equity, and that is very hard to do without a regular track record of primary offers. In Tesla's case new issuances would be silly because of the cash generating nature fo the business. However, it's equally obvious that the Tesla cost of equity would be very, very low. We also do not know what Tesla cost of debt would be since the only debt they have offered recently has been lease and loan securitizations. An added complication is that Tesla has unusual pricing power so can anticipate regulatory pressure. Hence setting the proper discount rate for tesla is not easier, either.

The largest problem in forecasting Tesla is that there is no precedent. Many of us try with the 1910's Ford, Amazon, Google, Apple etc. We almost never think of Xerox, Kodak, Kaiser etc. We are just beginning to try to consider Tesla Energy, Supercharger network, used car sales as potentially material factors.

Hence long forecasts are important, but fraught more in Tesla's case than in many. Even the competitive outlook is largely imagined but not yet really in evidence. That is only exacerbated when we consider key executive risk (Elon is not the only one), regulatory impediments and the overwhelming climate risks.

Nobody has published much about how to value a company with a ~50% growth rate, several months of backlog and lack of presence of any kind in half the world. That is probably why we obsess on the things we can know, and why we want good critical thinking rather than FUD.

As for blended capital cost, at present and for some time, Tesla manages to have positive cash flow even while growing at >50% per year and starting new technologies, new factories at the same time. That is unheard of; I know of no such case ever, anywhere. Thus the cost of financing for Tesla is now negative since they are realizing sales before they must pay suppliers. That, in turn, keeps their supplier costs very low.

So, to be accurate in these circumstances the discount rate for Tesla would likely be roughly equal to the inflation rate in major supplier countries and major sales countries. Not precise but close, Tesla has roughly equal exposure in US dollar (9.1%), China (3.0%) and Eurozone (8.6%). Blending those would yield average inflation of 6.9%, so as good a discount rate as we might have.

FWIW, nobody so far is using such a low discount rate. Why? Because they all seem to think Tesla is somehow higher risk than may be others. Personally I think the positives for Tesla outweigh all the questions so I'd discount at 6.9%.
So the higher the discount rate the shorter the term value chain will be. By choosing the one I do, forward values really go at Plaid speed, which as we know from Spaceballs, is very high risk.

That is our dilemma. The facts seem too optimistic. It seems wildly implausible. Yet such things have happened, but most of them were a century ago or more. Thus our realistic analogues are probably Amazon and Apple. If this approach to Tesla is wrong, we'll have much more serious problems than correct valuation of securities.

Obviously all this is my opinion, driven by decades of experience and study. A huge caveat is that I would never, ever vote for anybody within a decade of my age. That may apply to my investment approach too, although I don't think so. Old and opinionated, I am.

just impressed
by your
collection of
anecdotes
requiring
impressive knowledge
of
cars
and accounting

 

[traxila]

FYI DATA POINT:

My long range Model X ordered in December 2021 and promised in early 2023 suddenly changed last week to August delivery!

And as I wrote this I checked again and now it says November to January delivery...

Was going to write about possible demand falloff and batch manufactures for particular models and areas but now I got nothing. Now I really have no idea what point I was going to make outside of 'damn these things move around'.

Probably I need to make sure that all the field are 100% filled out concerning my preparation for delivery.

 

[wtlloyd]

It starts.
"Free money, get'cher free money here!"

U.S. Energy Department set to loan GM battery joint venture $2.5 bln

The U.S. Energy Department on Monday announced it intends to loan a joint venture of General Motors Co and LG Energy Solution $2.5 billion to help finance construction of new lithium-ion battery cell manufacturing facilities.

www.reuters.com

 

[bkp_duke]

It starts.
"Free money, get'cher free money here!"

U.S. Energy Department set to loan GM battery joint venture $2.5 bln

The U.S. Energy Department on Monday announced it intends to loan a joint venture of General Motors Co and LG Energy Solution $2.5 billion to help finance construction of new lithium-ion battery cell manufacturing facilities.

www.reuters.com

What a bunch of horse *sugar*.

I hope they get the same "terms" that Tesla got back from the DoE 15 or so years ago. You know . . . terms that were so bad that Tesla decided to pay the entire loan back early and take a penalty.

 

[Blue horseshoe]

Once Tesla receives its investment grade credit upgrade I wouldn't be surprised to see many of these funds benchmarked to the SP500 increase and/or open positions in Tesla to be equal weight with the index.

Feels similar to Tesla's delayed SP500 addition which was a foregone conclusion. Pulling a number out of the air, I could see price to sales valuation tick up to the vicinity of 15 resulting in a price around $960.

For reference we hit a low price to sales valuation of 10.3 and have been creeping up for the last few months. Currently sitting just under a price to sales valuation of 13. In Q1 we hit a high P/S valuation of over 19, which if reached today would equate to a $1,219 share price based on trailing twelve month revenue.

 

[thesmokingman]

What a bunch of horse *sugar*.

I hope they get the same "terms" that Tesla got back from the DoE 15 or so years ago. You know . . . terms that were so bad that Tesla decided to pay the entire loan back early and take a penalty.

The thing that gets me with this and other Acts like the Chip Act, is that well so much for free markets lol. And they are backing known losers like the the Chips Act, Intel a perennial loser not unlike GM in the EV space.

 

[bkp_duke]

The thing that gets me with this and other Acts like the Chip Act, is that well so much for free markets lol. And they are backing known losers like the the Chips Act, Intel a perennial loser not unlike GM in the EV space.

Bingo. The gov is picking winners and losers, instead of the companies competing in a normal market situation and competition being encouraged.

Tesla is eating everyone's lunch by out-competing them . . . so Uncle Sam has to step in and help their union-buddy GM. Unfreaking real corruption.

 

[CLK350]

FYI DATA POINT:

My long range Model X ordered in December 2021 and promised in early 2023 suddenly changed last week to August delivery!

And as I wrote this I checked again and now it says November to January delivery...

Was going to write about possible demand falloff and batch manufactures for particular models and areas but now I got nothing. Now I really have no idea what point I was going to make outside of 'damn these things move around'.

Probably I need to make sure that all the field are 100% filled out concerning my preparation for delivery.

You realize there are a few new Model S Plaid available right now in the NE area for not much more. Granted they don't have the wings appeal, but they have the latest /best tech ...

 

[Nocturnal]

What a bunch of horse *sugar*.

I hope they get the same "terms" that Tesla got back from the DoE 15 or so years ago. You know . . . terms that were so bad that Tesla decided to pay the entire loan back early and take a penalty.

We will be lucky if it's ever paid back at all.

 

[traxila]

You realize there are a few new Model S Plaid available right now in the NE area for not much more. Granted they don't have the wings appeal, but they have the latest /best tech ...

View attachment 832608

Thanks!

But I need the six seats.

 

[StarFoxisDown!]

FYI DATA POINT:

My long range Model X ordered in December 2021 and promised in early 2023 suddenly changed last week to August delivery!

And as I wrote this I checked again and now it says November to January delivery...

Was going to write about possible demand falloff and batch manufactures for particular models and areas but now I got nothing. Now I really have no idea what point I was going to make outside of 'damn these things move around'.

Probably I need to make sure that all the field are 100% filled out concerning my preparation for delivery.

It's pretty silly to mention demand falloff when Tesla isn't even delivering the S/X anywhere else in the world besides the US. Yes there will eventually be a balance as S/X ramp back up to full production, but that has really nothing to do with a demand falloff but instead just organic demand levels in the US/Canada for S/X. When Tesla starts delivering outside of North Amercia, then we know that production has finally out up with JUST the organic demand for the US/Canada.

Which, btw, I would expect to be relatively soon since it seems like they'll be at 20k/quarter rate for Q3. I mean S/X are very high priced vehicles, you'd think they'd hit that demand balance in the US pretty soon (1-2 quarters)

 

[WattsHappening]

You realize there are a few new Model S Plaid available right now in the NE area for not much more. Granted they don't have the wings appeal, but they have the latest /best tech ...

View attachment 832610

I haven't been paying attention (Plaid is not an option for me, at least not until SP hits all time high), but 48 mile range difference just for the 19" wheels? That's a huge difference!

 

[dano-oly]

It's pretty silly to mention demand falloff when Tesla isn't even delivering the S/X anywhere else in the world besides the US. Yes there will eventually be a balance as S/X ramp back up to full production, but that has really nothing to do with a demand falloff but instead just organic demand levels in the US/Canada for S/X. When Tesla starts delivering outside of North Amercia, then we know that production has finally out up with JUST the organic demand for the US/Canada.

Paging the cat. Looks like 5 more shares for you.

 

[SmokyPeat]

We will be lucky if it's ever paid back at all.

I think the odds of a loan default go down significantly with LG signed on. I have mixed feelings about this loan, but it should help to accelerate the transition, so that's a positive at least.