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

[Atomsla]

Yup. People need to stop thinking just because TSLA was over $400 a 18 months ago means it "deserves" to get back there when market gets back to all time highs.

Tesla at that time had extremely high margins, now they are just "good" to "very good". Wall Street is going to value TSLA on forward earnings looking 1 year out, maybe 2. Right now the 2024 estimated EPS is like $4.5, so the forward PE ratio is like 58. That's... healthy. That's not a low forward PE ratio. NVDA's forward PE ratio might even be lower than TSLA's.

Tesla's gross margins are too low and going in the wrong direction for Wall Street to assign high probabilty that they will go up from here. That means they won't revise EPS estimates upwards until they seeing strong signs. So 2 big triggers for Wall Street will be:

1) Auto gross margins & revenues increasing

2) Energy gross margins & revenues increasing.

We should see #2 happen hopefully in Q3 report. I don't expect Wall Street to have any foresight before that for Energy. For Auto, they may be able to see the rise in ASP before it hits earnings (such as following @Troy or looking at used car price trends), but those aren't looking up yet. With interest rates seemingly staying high for at least another 6 months, it's hard to see ASPs going back up. We can only hope gross margins increase from further COGs reductions.

When Tesla prints a quarter with a $1.5 EPS, wall street might forecast the following 4 quarters to make $7. With a forward PE of lets say 60, Tesla could finally reach the golden $420 share price. But I don't see a path to reaching $1.5 EPS until at best Q4 earnings in January, but more likely around Q2 2024 earnings next July.

Until then, we are probably stuck around $300.

This all sounds very sensible, logical and thought out, which is exactly what the share price is the opposite of. Your predictions are only likely to be true when you're looking at a company like Coca Cola. There are too much near and far future possibilities in Tesla's stock price to call out price targets with any degree of certainty. Might try it for Nikola though.

 

[Max Plaid]

Seems to me like he's only partially right. First, this video is 2 weeks old and he predicted a rate pause, so he got that prediction wrong.

Second he says some nonsense in the middle. He said the politicians want rates to go higher so that the excess money printing the govt did (and thus the debt) will be inflated away. This makes zero sense. Sure, the politicians might want to inflate their spending away, but you do that by taking actions that would keep or increase inflation. Raising interest rates do not keep inflation high, of course, they do the opposite. Politicians ALWAYS want low rates because that DOES inflate their spending away and it usually gooses the stock market and the economy as well.

But yes, he is right that inflation numbers are indeed heavily influenced by shelter which has a huge lag built into it since people only get affected by higher interest rates when they are forced to get a new mortgage. This is why housing inventory is so low right now, no one wants to sell since doing so would result in a huge monthly mortgage increase.

It is almost as if the fed is waiting for the last sub-market to capitulate, ie. housing prices, before lowering rates. If so, expect them to not lower rates for a long time. What this means for the stock market is anyone's guess still.

Well yes, he predicted a pause, because that's the minimum-best thing to do right now, although a 0.25 cut would have been better, so his prediction was wrong, but only because the FED care more about looking important than actually doing a good job

Anyway, seems the 0.25 was baked-in and markets don't care any more what the FED do, although some of the consequences of their myopic actions might start to impact in the coming months...

 

[Tronguy]

In theory, maybe, but fed funds is cheaper than deposits. Banks have stigma borrowing from Fed, vs peers. That’s why Libor was always higher than fed funds. Fed is cheapest money, but borrowing from them implies trouble for banks.

Um. “The Fed is the cheapest money” is the aberration. That only started happening when there was this crisis in 2000 or so and the Fed dropped the discount window interest to keep the too-big-to-fail banks from going under. Yeah, with free money (more or less) the banks didn’t actually fail in large numbers and Main Street basically kept on chugging anyway.

The naysayers at the time held their breath and waited for inflation to zoom to crazy levels. Which didn’t happen, either. So, after the immediate crisis was over, the Fed didn’t raise interest rates back up but kept them low. Besides, every couple of years (as per normal) there was always another crisis, so, why not? So long as inflation didn’t actually take off, the only people hurting were those that were expecting 3%+ interest rates on their savings accounts.

There was grumbling about how the Fed was going to control inflation in a more dynamic way with a discount window rate of zero, but, with bank lobbying to keep things this way, it became a new normal. And depositors money fled to Wall Street (motto: Uninsured!).

Right up until, due to Russia’s shocks to the world economies, inflation really did take off. At which point the Fed did what the Fed’s supposed to do and raised interest rates right on up there. Note that not all Fed-like entities did this, Turkey being a notable example, and they got 20% inflation as a result, or worse, just like the Weimar Republic.

So, inflation is being controlled. And, interestingly, many banks are doing things the old-fashioned way: getting deposits for loans by offering decent interest rates. Bankrate.com shows a bunch of these with savings rates up to 4.5% or so; which, for the banks in question, is cheaper than getting working capital from the Fed, and that’s the point. Free markets, man!

Those banks that are still offering 0.01% savings rates are getting away with it because they’re betting that depositors won’t notice the change; in the meantime, they’re getting extraordinary profits because the loan rates are higher than the Fed rates, making that gap in interest rates upon which they thrive larger than ever. But people are going to eventually notice and capital will flee those banks for higher rates elsewhere.

All good, clean fun.

 

[willow_hiller]

Way sooner than anyone expected, Tesla already has an early build of FSD V12. Elon has said in the past that this would be the version with an end-to-end neural network:

https://twitter.com/x/status/1684471747104616448

 

[cliff harris]

FSD improvements are welcome... but frankly wall st, and probably most retail investors are not going to care until its certified as being safe for the driver to sleep or read a book.
A LOT of people were made promises regarding FSD and paid money for it, and still do not have it. There is a definite overhang on the stock from both the brand damage that generates, and also the possibility of Tesla being liable for refunding those people.
I bought FSD AGAIN on my 22 model Y and love using the crippled UK version, but I wouldnt recomend anyone outside of the US bother. Every time elon tweets about how amazing it is I cringe, both as an owner and investor.

Elon really needs to be patient and not brag about functionality that nobody has yet, and nobody outside the US will see for a year.

 

[willow_hiller]

I bought FSD AGAIN on my 22 model Y and love using the crippled UK version, but I wouldnt recomend anyone outside of the US bother. Every time elon tweets about how amazing it is I cringe, both as an owner and investor.

I can understand how it's difficult to get a full picture when you can't experience something yourself. FSD Beta in particular is very difficult to get an accurate sense of through other's experiences. But between the complaints, there already is something mind blowing available today, and it really is hard to imagine is getting even better.

Came across this video yesterday, of some Austrian Tesla drivers getting to experience FSD Beta for the first time. I don't speak German, but their emotions speak for themselves:

https://twitter.com/x/status/1684090419901272066

 

[heltok]

Way sooner than anyone expected, Tesla already has an early build of FSD V12. Elon has said in the past that this would be the version with an end-to-end neural network:

https://twitter.com/x/status/1684471747104616448

So we are going from beta to alpha now? But anyway, it seems that Tesla has done some major rewrite of something that turned out to be easier than they thought. And version 12 will no longer be beta, so pretty much expect it to be safe and have full functionality. So everyone is left wondering what exactly 12 can do that 11 could not.

Imo one major part that is missing is reversing for the times the car needs to do it. This should coincide with actually smart summon(ASS). Maybe that's the one big rewrites they did, add summon functionality to the big neural network rather than having an entire summon stack like they do now. Maybe that's the mindblowing part how well it handles parking lots and other complex environments.

 

[Buckminster]

FSD V12 (end to end AI)

 

[Singuy]

So we are going from beta to alpha now? But anyway, it seems that Tesla has done some major rewrite of something that turned out to be easier than they thought. And version 12 will no longer be beta, so pretty much expect it to be safe and have full functionality. So everyone is left wondering what exactly 12 can do that 11 could not.

Imo one major part that is missing is reversing for the times the car needs to do it. This should coincide with actually smart summon(ASS). Maybe that's the one big rewrites they did, add summon functionality to the big neural network rather than having an entire summon stack like they do now. Maybe that's the mindblowing part how well it handles parking lots and other complex environments.

V12 main defining feature imo is not a driving feature but a new training feature. It can finally train within itself, ai vs ai without human input. No more labeling, and it's the path to be 10x safer than a human. This has been the holy grail the ai self driving community has been chasing after but it was difficult to translate image space into vector space. Tesla's occupancy network was a just building block phase to get it done.

This is the alpha go zero of fsd.

"AlphaGo Zero, a version created without using data from human games, and stronger than any previous version.[1] By playing games against itself, AlphaGo Zero surpassed the strength of AlphaGo Lee in three days by winning 100 games to 0, reached the level of AlphaGo Master in 21 days, and exceeded all the old versions in 40 days.[2]"

AlphaGo Zero - Wikipedia

en.m.wikipedia.org

 

[Featsbeyond50]

You have posted this several times now, and gotten significant pushback. It's time to post a link to what you claim Elon said, instead of just posting your claims.

Lot's of Analysts have called CT 'niche' over the past 3 years. Is that what you're misremembering? For example:



Universally, it's analysts with a 'Sell' rating that are disparaging the market potential of CT.

He just said it at the latest earnings event, I'm surprised some of you didn't watch it. I might have time to skim through tonight but if not, it will have to wait for the weekend.

 

[Mengy]

He just said it at the latest earnings event, I'm surprised some of you didn't watch it. I might have time to skim through tonight but if not, it will have to wait for the weekend.

Compared to the volumes both Model Y and "Model 2" will do in the future, I agree CT by comparison will be relatively "small" in volume, and could be considered niche in a way. Still important and very profitable at 250K - 500K per year, but small compared to Model 2 down the road.

 

[Singuy]

He just said it at the latest earnings event, I'm surprised some of you didn't watch it. I might have time to skim through tonight but if not, it will have to wait for the weekend.

The word "niche" is not on the q2 earning transcript. Did he say it in a different way? Please post the quote, thanks.

 

[petit_bateau]

SUV issues ahead ........ be real nice to see the Model 2/Z announced

France has had the guts to crack down on SUV drivers. Why doesn't Britain? | Laura Laker

These vehicles are lethal to pedestrians, disastrous for the environment and have no place on city streets, says urban transport writer Laura Laker

www.theguardian.com

 

[AudubonB]

This is the INVESTOR thread. Keep the FSD discussion where it belongs.

 

[Artful Dodger]

He just said it at the latest earnings event, I'm surprised some of you didn't watch it. I might have time to skim through tonight but if not, it will have to wait for the weekend.

Thanks for looking for that. Here's the transcript of the 2023 Q2 Conference Call, and the word "niche" does not appear:

Tesla, Inc. (TSLA) Q2 2023 Earnings Call Transcript

Tesla, Inc. (NASDAQ:NASDAQ:TSLA) Q2 2023 Results Conference Call July 19, 2023 5:30 PM ETCompany ParticipantsMartin Viecha - VP, IRElon Musk - CEOZachary...

seekingalpha.com

Perhaps you are thinking of something else? Here's what Elon said about Cybertruck on the Q2 Conf. Call:

With regard to our Cybertruck, we continue to build our release candidates of the Cybertruck on our final production line in Austin. I’m actually here in Austin at the Gigafactory. This is the first truck that we’re aware of that will have four doors over a six foot bed and will fit into a 20-foot garage. So, it’s sort of biggest on the outside, but it’s even bigger on the inside. So it’s -- I think that’s a -- one of the elements of good design is it should feel bigger on the inside than it looks on the outside.

And this is no small car, but we really cared about the exterior dimensions of the Cybertruck down to the last millimeter. So just -- we try to get right in the middle of the Goldilocks zone, not too big, not too small and then really maximize the utility of the volume. And we can’t wait to start delivering it later this year.

Martin Viecha:

Right. The next question, when will we give more information about the Cybertruck orders, estimated delivery schedules, pricing and specifications?

Elon Musk:

Demand is so far off the hook, you can’t even see the hook. So, that’s really not an issue. I do want to emphasize that the Cybertruck has a lot of new technology in it, like a lot. It doesn’t look like -- it doesn’t look like any other vehicle because it is not like any other vehicle. So -- and the production ramp will move as fast as the slowest and least likely elements of the entire supply chain and internal production. So, I wouldn’t expect -- I hope it’s smooth.

We’re certainly better at production ramps that -- we’ve got a lot of experience with the production ramps. But first order approximation, there’s like 10,000 unique parts and processes in the Cybertruck. And if any one of -- it will go as fast as the least lucky, least well-executed element of the 10,000. So, it’s always difficult to predict the ramp initially, but I think we’ll be making them in high volume next year, and we will be delivering the car this year.

Lot's of talk about demand, and the schedule, and ramping, but nothing I see from Elon about Cybertruck being "niche".

Cheers!

 

[scaesare]

Interesting quote from the article:
"The unusual coalition of competitors said the new joint-venture company would aim to become the leading provider of fast charging in North America with a target of rolling out 30,000 chargers, starting along major highways and in cities.
...
Tesla, which accounted for more than 60% of U.S. EV sales last year, has the largest current network of fast-chargers with almost 18,000 Superchargers in the United States."

Of course the author didn't compare apples-to-apples, using a target for North American chargers (30,000) by some unknown future date, compared to Tesla's current status of almost 18,000 superchargers in just the US. I'm pretty sure Tesla will have 30,000 North American superchargers long before this coalition reaches that achievement.

But either way: This is good for all EV's, including Teslas and Tesla .

Another article on it:

Ars EV Charging Article

I see most comments here tending to disparage this... not sure why. I see this as a good thing. After all, "a rising tide raises all boats."

Elon originally started Tesla with the idea that he could demonstrate the practicality of EV's and spur the automakers to start producing them as well. He then realized that wasn't happening and decided they had to take on the greater burden themselves. Now finally, moving the industry is gaining traction. I think we all agree that's good, even if the products need improvement to be even more compelling.

I believe charging is similar. Tesla built out the Supercharger network because they had to, as nobody else really was. But that doesn't mean that others joining in is unwanted.

Yes, we need to standardize on a single plug (the new joint venture also includes CCS in addition to NACS, but I suspect that's just base-covering at this point). And the payment systems, interoperability, and reliability all need to improve, but I'm hopeful that the example NACS provides, and its subsequent adoption will help pave the way for that.

So, just like with the initial Bolt (before the Model 3), and the subsequent EV offerings from traditional auto manufacturers, I root for their success. I'd prefer them be so popular the manufacturers have no choice but to do more. The same for charging: I root for success. Just as there are lots of gas station companies, more ubiquitous charging options are good for all. I suspect Elon would agree.

 

[Tony73]

FSD improvements are welcome... but frankly wall st, and probably most retail investors are not going to care until its certified as being safe for the driver to sleep or read a book.
A LOT of people were made promises regarding FSD and paid money for it, and still do not have it. There is a definite overhang on the stock from both the brand damage that generates, and also the possibility of Tesla being liable for refunding those people.
I bought FSD AGAIN on my 22 model Y and love using the crippled UK version, but I wouldnt recomend anyone outside of the US bother. Every time elon tweets about how amazing it is I cringe, both as an owner and investor.

Elon really needs to be patient and not brag about functionality that nobody has yet, and nobody outside the US will see for a year.

Wall Street will care if the take rate for the current product explodes.

 

[GSP]

You might want to ask @MP3Mike for a 2nd opinion on that. I think IRA rules for China-sourcing of batteries only applies to the EV side, not to the stationary storage side.

Futher, the USA needs two (2) plants the size of Lathrop running at 80GWh/yr to even meet current demand. What was that again? ... "quasi-infinite".

Don’t forget the $35/kWh cell manufacturing credits and $10/kWh for module manufacturing. AFAIK, these credits apply to all cells and modules manufactured in the US, regardless of what application they are used in or if they are exported.

GSP

 

[M|S|M MYP]

All signs point to $TSLA to the moon

 

[Unpilot]

Tesla at that time had extremely high margins, now they are just "good" to "very good".

Is it better to have extremely high margins in 1 million widgets....or good to very good margins on 2-3 million widgets?

Also how do you price in new widgets (FSD,AI,Teslabot)?