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

[MFranc123]

The reaction to any news is (at least in theory) based on whether it's worse or better than what people already expect. Now, that's theory at least, and reality can differ. But, at least in theory, if bad news is expected, it should already be factored in. Your investment choices should be relative to how much better or worse you think it's going to be than what's expected.

Yes, this is exactly why I asked what bulls thought about revenue. As I said in previous messages, I'm probably going to get less short ahead of ER now that I know that no one is expecting revenues to grow YoY. For some reason, I remember looking up Wall Street consensus being a slight YoY revenue growth. That's apparently not the case, which is why I'm probably going to get less short.

Lots of great stuff in your message I'll have to chew on. But don't worry about the $TSLAQ bubble. As you can see I'm checking out the other side! Going from short to long only takes a couple of clicks.

 

[Causalien]

Hi, I'm a "short" (a student with only peanuts I can afford to lose at stake, a very small fraction of the position size most of you likely have).

I come in peace! I'd like to have respectful conversations, ask questions about the current bull line of thinking, and provide answers about the current bear line of thinking if anyone would like to know. I hope that's OK.

More specifically, I had one question in mind about revenues. Since deliveries are up YoY, do bulls generally expect revenue also to be up? I've seen some chatter and modeling suggesting revenues to be around $6.5B, which would be below 2018 Q3. I have no idea if this is going to be correct or not; just offering what I'm reading on my feed. Any thoughs on whether this is possible, expected, or unlikely would be appreciated.

Hi, I am an 8 Ball with 2 decades of experience.

If you are a student and started your trading career with shorting. You should rethink your life or maybe spend some time reading reddit.com/r/wallstreetbets or elite trader forum before you even make your first short. The first mistake new short makes is having no knowledge of your bankroll management and get margin called.

The most likely event for the ER is option players getting annihiliated while margined position gets liquidated. The margined positions include all shorts (it is the nature of a short position) and leveraged longs.

A fundamental short of Tesla at $250 when it is so close to $180 where the market value is below the actual value of Tesla is unsound. It is true that one should buy a company when its market value drop below its actual liquidation value, but that timing only occurs once every 10 years and is available on probably 15 days of a whole trading year. Most people gain more from time in market rather than timing the market. This is due to the fundamental fact that inflation, money printing, tech improvement and continued expansion will increase the fundamental value of a company over time. So you might be right that currently the liquidating value is $180, but in 2 years? Remember, real inflation is 7% to 10% and tesla improves its efficiency at about 2% per quarter (quote that take someone elses's research as my own inserted here). If the stock price never drops below $180, you just missed out.

Now don't get me started on what the fundamental liquidation value of Tesla is. Most of the people who uses a model that they read somewhere or from some book have no idea and talk out of their arse for this. If you want to get an idea of the chaos in this, try valuing one of the big american banks. If you have finally done it after combing through their tier 2 and tier 3 assets, then you can begin to have an idea of the monumental task this is. And these are supposed to be our most regulated and transparent institutions on earth LOL.

Good luck.

 

[Drax7]

More or less it does line up with the definition of gambling, yes. On the other hand, you can apply the same principle to something like long-horizon value investing where you hope that your interpretation of the financial statements of a company, its position in the market and its future cashflows is better than that other investors have (or are forced to have, as an example when they are forced to invest in companies above a certain market cap). It still is about risk and reward.

Even when you are purely a value investor in the original definition of the term, where you look at price to book, EV/income, FCF and so on, you still don't want to just buy a piece of a good company for a fair price, you want to buy companies for below their fair price, or at least buy companies for which the market price is inferior to what your guess of the company's fair value is; you want to have a margin of safety and a good risk/reward profile. I think conceptually that's similar to playing an earning release, just on very different time scales and with different kinds of information: a mismatch of fundamental factors and market valuation, compared to a mismatch of short term expectations and realized results.

Lovely propaganda

 

[Captkerosene]

The shorts you consult have moved the goal posts to ‘lower revenues’, now that sales keep going up. It is one of the last straws they hang onto. But sales and margins are what matters to investors now. And from mid 2020 revenues will start going up again too, really fast.

As a moderator: you are welcome for civilized discussion - which you say is your intent - but please show an open mind. If you cannot have an open mind, this is not the place for you.

As a moderator: you are welcome for civilized discussion - which you say is your intent - but please show an open mind. If you cannot have an open mind, this is not the place for you.

This has not been my experience. This board is an echo chamber. Global warming and politics are allowed here even though they are clearly off-topic. Those wishing to explore possible negatives in the Tesla investment thesis are insulted and accused of being "care bears." Smart investors spend much of their time looking at what could go wrong. Raising possible issues to generate discussions with the intention of learning is very productive. I am invested in Tesla. I want them to succeed. From what I know, I think they'll be a great investment over the next twenty years. But, don't expect to have a balanced discussion here. P.S. Your short position is about to get hammered.

 

[StealthP3D]

100% this. Tesla has at least the same cache as Porsche does these days, particularly with people under the age of 40 or so.

Tesla has huge recognition in a positive way even with little 8-year-old girls! I was working on installing a HPWC on a pole at my cabin in the woods when two young girls were weaving by and chatting on their bicycles. My Model 3 was parked all the way up my driveway a good 75 feet from the road. They could only see the front view of it and only briefly. One of them said "Look, a Tesla!" and the other one replied immediately "Yep!". These are girls that won't be driving for at least 7 more years - they are at the "half-life" of driving age.

I've never heard young girls say "Look, a Porche" or, "Look, a Ferrari" (although I'm sure it has happened). But I've heard little kids comment on the sight of my Tesla numerous times. It's baffling how they even know what a Tesla is because they are so young. These are the drivers when Tesla is hitting mega-mass production in 2025-2030.

 

[Singuy]

Yes, this is exactly why I asked what bulls thought about revenue. As I said in previous messages, I'm probably going to get less short ahead of ER now that I know that no one is expecting revenues to grow YoY. For some reason, I remember looking up Wall Street consensus being a slight YoY revenue growth. That's apparently not the case, which is why I'm probably going to get less short.

Lots of great stuff in your message I'll have to chew on. But don't worry about the $TSLAQ bubble. As you can see I'm checking out the other side! Going from short to long only takes a couple of clicks.

I think investors are looking at margins and Q4 guide. The revenue guarantees that Tesla is not going bankrupt and has plenty of cash in the bank. Tesla's biggest products, Semi/Y/Solar roof/FSD are not out yet. So long term wise, we only care if Tesla can keep the lights on and has enough cash in the bank to weather through a recession. The S3X cars are pretty much proof of concept. Are people willing to pay $$$ for an electric car? Will MORE people willing to pay $$ for an electric car? Is Tesla getting organic demand from just these three products? Is Tesla taking market share due to soft competitive landscape? Yes to all so carry on...break even as much as possible per quarter and be the next Apple.

With all this said, yes there's a chance that ER will cause Tesla to drop. Everything cause TSLA to drop..hell Anthonyj made a 30% return just banking on the morning dip daily.

 

[KarenRei]

Yes, this is exactly why I asked what bulls thought about revenue. As I said in previous messages, I'm probably going to get less short ahead of ER now that I know that no one is expecting revenues to grow YoY. For some reason, I remember looking up Wall Street consensus being a slight YoY revenue growth. That's apparently not the case, which is why I'm probably going to get less short.

Lots of great stuff in your message I'll have to chew on. But don't worry about the $TSLAQ bubble. As you can see I'm checking out the other side! Going from short to long only takes a couple of clicks.

Also, some general advice:

• Cover your shorted shares with purchased calls to limit your maximum liability. 100 shorted shares = 1 purchased call. You'll sleep a lot better with your liability capped.
• Turn any puts into put spreads (unless you expect the stock to go to literally zero before expiry) so that you can get a larger position for a given amount of cash. Remember that puts burn theta and shorted shares charge interest. Calculate in advance how much this will cost you so you're not caught offguard.
• Don't forget about how IV drops a lot after ERs. This reduces the value of options significantly. You pay a premium to go into an ER (or other "scheduled" news) with a position.
• Not all positions change equally. For example, short-term calls did poorly after the Q3 deliveries report, but long-term calls did surprisingly well. E.g. people were worried about the stock price in the short term, but reassured for the long-term.

 

[StealthP3D]

Even when you are purely a value investor in the original definition of the term, where you look at price to book, EV/income, FCF and so on, you still don't want to just buy a piece of a good company for a fair price, you want to buy companies for below their fair price, or at least buy companies for which the market price is inferior to what your guess of the company's fair value is; you want to have a margin of safety and a good risk/reward profile.

Question: You seem to put a lot of faith in "fundamental valuation". Do you consider growth rate to be a fundamental metric with regard to coming up with a "fair market value"? If so, how do you integrate the growth rate into your fundamental appraisal of fair market value?

 

[abasile]

Even when you are purely a value investor in the original definition of the term, where you look at price to book, EV/income, FCF and so on, you still don't want to just buy a piece of a good company for a fair price, you want to buy companies for below their fair price, or at least buy companies for which the market price is inferior to what your guess of the company's fair value is; you want to have a margin of safety and a good risk/reward profile. I think conceptually that's similar to playing an earning release, just on very different time scales and with different kinds of information: a mismatch of fundamental factors and market valuation, compared to a mismatch of short term expectations and realized results.

This reasoning sort of makes sense, but the shorter the time scale, the more like gambling a given trade strategy is going to be. It's not much like gambling to enter into a long term position based on the fundamentals and expected growth (or non-growth) trajectory of a given company. I think it's extremely likely that Tesla will continue to be a high-growth company and "eat" much of the auto market (plus storage and solar) over the coming decade. It's much harder to predict short-term fluctuations in stock prices, as short-term movements can be triggered by a virtually unlimited set of potential developments.

That being said, while I have sold more puts than calls, I have lately dabbled in selling ~30 day covered calls on TSLA. I sold a call last week and then exited it for a profit when the opportunity arose, then sold another out-of-the-money call today. I'm guessing that the share price won't rocket up during the coming month. If it does and the call gets exercised, I'll still make a profit on selling the underlying shares plus option premium, but the profit will obviously be capped. There is certainly an element of gambling in this, but it's only with a fraction of my holdings, most of which I've been keeping for the long term.

 

[Thekiwi]

I’m not a technical analysis guy, but seeing today’s price action hover around the 200 day SMA is likely not a coincidence.

a solid break above the 200 SMA would likely bring in some momentum TA buyers, so I wouldn’t be surprised to see some targeted selling to try and keep it under that level at close.

 

[Causalien]

Yes, this is exactly why I asked what bulls thought about revenue. As I said in previous messages, I'm probably going to get less short ahead of ER now that I know that no one is expecting revenues to grow YoY. For some reason, I remember looking up Wall Street consensus being a slight YoY revenue growth. That's apparently not the case, which is why I'm probably going to get less short.

Lots of great stuff in your message I'll have to chew on. But don't worry about the $TSLAQ bubble. As you can see I'm checking out the other side! Going from short to long only takes a couple of clicks.

To be honest. The day after the ER, the headline over all media is going to be Tesla delivery is falling as demand is falling YOY. They are going to tout that demand is falling so much that the scammers from Gina is going to applaud from across the ocean. Then they will ad the YOY in small print and in parentheses, pretending they can fool your mom and pop investors. Which they will probably get away with. It is going to be so much and my friend, smart guy by the way, who is the, he is the paymaster, that is is going to sound so sweet for the TSLAQ crowd and the journalist's paymaster will give them all a pat on their back.

Oh god! someone please write a Trump translator. I love the way he talks.

 

[StealthP3D]

With all this said, yes there's a chance that ER will cause Tesla to drop. Everything cause TSLA to drop..hell Anthonyj made a 30% return just banking on the morning dip daily.

Is that good? If I sold today, I made over 40% in about 4 months just sitting on my ass (buying and holding from $184). But I didn't invest with the goal of making 40%. I want a minimum of 400%.

 

[Nocturnal]

Tesla has huge recognition in a positive way even with little 8-year-old girls! I was working on installing a HPWC on a pole at my cabin in the woods when two young girls were weaving by and chatting on their bicycles. My Model 3 was parked all the way up my driveway a good 75 feet from the road. They could only see the front view of it and only briefly. One of them said "Look, a Tesla!" and the other one replied immediately "Yep!". These are girls that won't be driving for at least 7 more years - they are at the "half-life" of driving age.

I've never heard young girls say "Look, a Porche" or, "Look, a Ferrari" (although I'm sure it has happened). But I've heard little kids comment on the sight of my Tesla numerous times. It's baffling how they even know what a Tesla is because they are so young. These are the drivers when Tesla is hitting mega-mass production in 2025-2030.

Yeah it's crazy. My kids are 7 and 5 and I've never heard their friends say anything about any other car type than Tesla. I think they just share cool stories because it's not like they are on the Tesla website poking around.

2030 would be a good time for that mega production because I wouldn't mind retiring then.

 

[Singuy]

Is that good? If I sold today, I made over 40% in about 4 months just sitting on my ass (buying and holding from $184). But I didn't invest with the goal of making 40%. I want a minimum of 400%.

You have to ask him. Don't know if he made a 30% return on TSLA with the side money or 30% return on TSLA while TSLA fell 35% YTD. I mean if he did that then he is kicking ass. Ended up with a +30% return while the stock dropped since Dec 2018?

What you have are unrealized gains. I think his was realized gains while his unrealized gains are of some random number. I could be wrong so he needs to explain more if he wanted to.

 

[M3Rider]

they're working toward the production of 2TWh/yr. Try running some numbers on how many vehicles that works out to.

Karen, that's misleading. Elon already said 1TWh is for cars and the other 1TWh is for TE.

 

[Intl Professor]

While it's true that language is but a metaphor for reality (out of necessity), when language is used to describe a metaphor, then you have a metaphor within a metaphor. So it is illogical to reason that since language is but a metaphor, that justifies using a metaphor within a metaphor to make an argument.

To use a metaphor to argue this point I could say "Since ditch-digging is inherently dirty work, it's OK to dump the discarded dirt on the boots of your co-workers as you excavate the ditch."

Seriously though, metaphors can be useful to get a difficult to understand concept across, but it's very difficult to use a metaphor to argue a point in a compelling way.

I think that is covered by many models of scientific theory say the instrumental or Braithwaite model. Example the dynamical model of gasses where one system is compared to another where the model is well known. R.B. Braithwaite | British philosopher

Residue of mod hat on: Let's have any further discussion at the market politics thread where the margin of OT is wild. This high altitude talk is running out of air.

 

[MFranc123]

Also, some general advice:

• Cover your shorted shares with purchased calls to limit your maximum liability. 100 shorted shares = 1 purchased call. You'll sleep a lot better with your liability capped.

Most of you here are doing real investing. I'm mostly playing with money I can afford to lose while I study how things work. When I'm outright short, I'm short way less than 100 shares, so I can sleep well knowing even if Tesla were to open tomorrow at >$1000 I won't be losing my shorts (heh).

• Turn any puts into put spreads (unless you expect the stock to go to literally zero before expiry) so that you can get a larger position for a given amount of cash. Remember that puts burn theta and shorted shares charge interest. Calculate in advance how much this will cost you so you're not caught offguard.
• Don't forget about how IV drops a lot after ERs. This reduces the value of options significantly. You pay a premium to go into an ER (or other "scheduled" news) with a position.

I also like selling OTM call spreads sometimes to offset the theta on my puts. Might sell something again if we get close to $280 prior to ER, as some technical analyst I follow thinks might happen.

Question: You seem to put a lot of faith in "fundamental valuation". Do you consider growth rate to be a fundamental metric with regard to coming up with a "fair market value"? If so, how do you integrate the growth rate into your fundamental valuation of fair market value?

Great question. Keep in mind that, again, I'm a student and not a professional investor.

Growth rate is definitely one of the most important fundamental "metrics". Whatever method you use to value a stock, be it DCF or just slapping a multiple comparing with peers, the inputs to that method are going to be in some way or another the future cash flows, or earnings, or revenue, or whatever it might be, which are obviously going to be determined by the growth of the company.

The problem is that you can't really forecast growth accurately many years into the future. At least I can't! If we were to just slap a multiple on last twelve months revenues, Tesla would obviously be overvalued. If we instead apply a multiple assuming Tesla grows 50% a year for the next 10 years, Tesla would obviously be one of the most undervalued companies on the market.

 

[SOULPEDL]

First, I never pretended to be an Oracle.
I don't remember this post, but if it was 6 month earlier, smth like Apr then it seems the SP was higher than now, so it was in fact true that you could buy cheaper 6 months later. What exactly are you questioning?

Many people here have an opinion that there's a good chance SP might walk back some after the ER. So, the truth is nobody knows right now what's going to happen in the very near future.

Some are waiting for the imminent breakout, but nobody will be so bold as to put a date on it.

By breakout I mean more than $260 obviously.
My ASP is $350; I've added some, but unfortunately that's peanuts compared to when my new car first hand experience coincided with the take private statement and I was under the impression I won't have much time to invest into TSLA.

True story, I have been opening up TMC to this one post for the past 6 months because I bookmarked that exact page. So now it's about 6 months later, China's about to produce revenue product, and seems the prediction was more than accurate.

I just sold 50 share this minute because you know (we all know) Tesla is going to get hammered next week after EC. I hope I'm wrong. My ASP is $301 and ya I invested heavily on that same tweet. I now have 1,000 shares remaining and I have to even it out. Big loss this year (on paper).

I also believe this recurring 5 day run up is becoming old story. If my purse strings were controlled by oil, I might be inclined to bet a bit of my own money as I am also preparing for the next FUD story and attack... which has worked for years against Tesla. I don't think a cool truck reveal, 10K production Q4 in China, or even FSD feature complete (but quirky and not legal without a driver) will move the needle.

But here's as good a date as any: Sat July 4th, 2020 = $380/share. (Independence Day - from gasoline). Maybe I'll bookmark this post as my new reminder

 

[Curt Renz]

Barron's - half-hour ago: Tesla Stock Looks Better Than You Think. Take a Look at the Competition.

Barron's has a paywall after the first two paragraphs. But the full article appears in the TD Ameritrade newsfeed and that of its Thinkorswim platform.

Excerpt: All that news makes Tesla's year look OK -- even with CEO Elon Musk's SEC issues and the company's weaker-than-expected deliveries.

 

[Intl Professor]

Where does this belong? Scientists pinpoint cause of harmful dendrites and whiskers in lithium batteries