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

[dc_h]

Not just this guy -- few analysts ascribe any meaningful value (or any value at all) to Tesla Energy.

For example, none of Ark's valuations -- including their $6000/share in 2023 bull case -- includes a TE component.

Pretty wild considering Elon has said several times that he thinks Tesla's energy business could be as big as the auto business.

I made a suggestion a while back that they include one but they haven't done it yet and I think they are still getting their heads around the energy business. (If anyone has a good model for Ark to consider you can post it on github. ARKInvest/ARK-Invest-Tesla-Valuation-Model)

Seems like most analysts are unwilling to put any significant value on the energy business until it grows enough to make a meaningful impact on Tesla's financials and can no longer be ignored. If Solarglass roof ramps anywhere near as fast as Elon has suggested, that could start happening within the next year or two.

I think TE has to hit 1 billion in quarterly revenue and contribute to cash flow to begin impacting valuations. Once TE provides 100 million to the bottom line, it will be much easier to map out 60-75% growth for 5-7 years and expected margins to rise from 15 to 30% over x quarters. I’d guess TE to hit 1 billion per Q next year and battery margins to get over 20%. If they get over about 22%, it should be cash flow positive and fund its own growth. Once that happens Ark and analysts like Alex will add another 100 or so to valuations.

 

[ggr]

Both revenue multiples and earnings multiples are valid ways to value a company - and both can lead to bogus results.

Earnings multiples (P/E ratios, etc.) are typically used for established, slow growing companies.

P/E ratios are meaningless for growth companies, so revenue multiples are used. Not because they work better, but because there's not much else to use.

(I think for Tesla all established valuation methods are bogus due to the complexity and uncertainty of the business plan, but this is not advice. )

Yes. The 10x revenue "Rule of Thumb" is commonly used in the Venture Capital world. It certainly wasn't meant to apply to Walmart or GM.

Even that fails when the company is small, new, and has no revenue at all.

 

[printf42]

1) China luxury market may be tougher to crack. It’s all about prestige, impressing in-laws, demonstrating value. The leaders are Bentley, BMW and Audi. It may be tough to crack for Tesla, as a newcomer, Chinese not as familiar with Tesla because of the Great fireWall, and because the vehicles might be lumped as just another EV.

BBA brands burned to people’s mind over the last couple of decades when China opened the door and people started to see cars in their lives as a possibility.
Why Audi is even in there has something to do with the history of this period too.
His talk shows he knows Chinese market and consumers really well.

He has doubts about whether Tesla would beat BBA and raise to number one in every segment they enter, as they did pretty much everywhere else.

I would have the same doubts for S&X too, but that is mostly because Model S and X were too new and not luxury(material wise, Chinese LOVE leather) enough to please their target customers in China.

But Model 3(and Y) are not set in stone yet, they are still new there, and their target customers don’t just change cars every other year. Tesla brand appeals has all the qualities needed for that segment and it’s finally hitting the right price level. We will see.

Also note, he mentioned he has the doubts, so his model give Tesla only a tiny market share for now, so this is less of a worry for his current price target, but more of a hope for massive upside if it turns out well.

 

[Maitri982]

But you're forgetting the savings on government spending and the items that aren't applicable to cars, or that are only applicable to ICE.

1. BEV pay tolls the same as anyone (At least in my state), so zero difference there.

2. Most road damage is caused by heavy trucks, they don't pay nearly their fair share.

3. Each gallon of gas or diesel burned cause $12 to $17 in healthcare costs. ICE car drivers should pay their fair share.

4. ICE vehicles spill contaminants over the roads which have to be cleaned up. BEVs reduce that by at least 90%.

5. BEVs don't have oil changes so there is almost no recycle oil cost. (just the reduction gear oil, 0.5 liters every 100K miles or so).

Oil and gas companies get billions in subsidies, makes the BEV programs look like less than pocket change. I'd be all for dropping any BEV subsidies if all the oil and gas subsidies were also dropped. Note that besides the direct subsidies to the fossil fuel industry, there is also all the military spending to protect the oil supply. Why don't the oil and gas companies pay for that?

Don't forget the very large transportation infrastructure to ship the resource to where it can be used. With electric if is sent over existing power lines.

 

[M3Rider]

Among the many guests we host at our Lodge, we try to learn something about most of them. Especially if we find that their home address is "Stuttgart" or "Fremont" or "Dearborn" or "Grosse Pointe" - and so forth. Or if their reservation forms are from a business e-dress like "[email protected]".

The idea of using small hotels in Swiss Alps to plant interested parties, who check registrations and then follow up with guests from specific geographic locations is not original. I guess you're one of them, huh?

Regardless of level 5 timing, level 3 is close and the safety data versus unassisted human driving will become more torturous to deny.

Did you hear Ed Markey? I don't think these kind of people care about statistics. Seemed to me like a type of battle of trying to be logical with Trump. Did it ever work?

Hopefully, more reasonable types from NHTSA can overrule these fear mongerers.

 

[kbM3]

I think TE has to hit 1 billion in quarterly revenue and contribute to cash flow to begin impacting valuations. Once TE provides 100 million to the bottom line, it will be much easier to map out 60-75% growth for 5-7 years and expected margins to rise from 15 to 30% over x quarters. I’d guess TE to hit 1 billion per Q next year and battery margins to get over 20%. If they get over about 22%, it should be cash flow positive and fund its own growth. Once that happens Ark and analysts like Alex will add another 100 or so to valuations.

Elon has stated 100%-200% growth for Tesla Energy vs 50%-100% for Tesla Automotive. So there’s a few problems:

1) Elon did some damage to his credibility last year and earlier this year, plus he’s known for optimism in his goals, plus 100%-200% growth just sounds nuts, plus Solar Roof is really late. Last year Storage hit 1 GWh. If they hit over 2 GWh this year, that will help some (I don’t think Wall St. analysts even fully understand exponential growth, much less super exponential growth). If they have a successful Solar Roof Ramp, that will REALLY help.

2) Wall St. needs to see the margins.

I.e. if you fully believe Elon’s growth and gross margin estimates, TSLA would be a screaming buy anywhere south of $1k/share or even more. If you do not and have to wait to see the growth and margins, you’ll be too late. That’s why we’ve been so lucky to be able to purchase shares so cheaply (at least those in a position to still be buying and not have to be selling shares).

 

[kbM3]

$423 should be reachable soon if shorts keep capitulating. 2019's whole move can be explained by shares shorted. So if you extrapolate and eliminate the 23 mil shares shorted that has been persistently there since the beginning, we should reach $500.

Maybe that’s because shorts place way too much emphasis on a single quarter’s profit/loss performance, so they were the biggest buyers after q3 results, just like last year.

But one would think all of the other q3 good news would have caused a lot of institutional buying as well?

 

[AudubonB]

As much as I hate acronyms AND WISH YOU WOULD NOT USE THEM in this forum, I'll put forth the following.

Add Lexus to the Benz/BMW/Audi blend of high-falutin' statusmobiles.

That way, you can use

BLAB.

 

[Opus BC fan]

3. TE is really just starting to gather ...um steam

I know this is anecdotal but it may be significant to TSLA valuation in 2020. I have been hoping to build a new house with a Tesla glass roof. I was talking with Tesla about building in 2020 and no longer waiting for the roof to come to my market. They told me that they expect to be offering the glass roofing in Colorado in March. It will be wonderful if that is a firm target...

 

[EinSV]

I think TE has to hit 1 billion in quarterly revenue and contribute to cash flow to begin impacting valuations. Once TE provides 100 million to the bottom line, it will be much easier to map out 60-75% growth for 5-7 years and expected margins to rise from 15 to 30% over x quarters. I’d guess TE to hit 1 billion per Q next year and battery margins to get over 20%. If they get over about 22%, it should be cash flow positive and fund its own growth. Once that happens Ark and analysts like Alex will add another 100 or so to valuations.

The “problem” is that with Model Y launch and with GF3 getting up and running for Model 3 (definitely) and Y (likely) Tesla auto could grow 75-100% next year. TE may have to grow faster than auto for analysts to start taking it seriously.

The good news is that significantly greater than 100% TE growth could happen next year — esp if Solarglass roof takes off.

 

[wipster]

Meanwhile, re: fires: Ford Also Recalls Roughly 550,000 Trucks Over Potential For Seat-Belt Systems To Cause Fires (Jalopnik)

Especially fire-prown when being dragged backwards by Teslas!

 

[ZachF]

Can we get a green Christmas for 2019 next week?

 

[KarenRei]

Especially fire-prown when being dragged backwards by Teslas!

Fire prawn?

 

[EVNow]

1) China luxury market may be tougher to crack. It’s all about prestige, impressing in-laws, demonstrating value. The leaders are Bentley, BMW and Audi. It may be tough to crack for Tesla, as a newcomer, Chinese not as familiar with Tesla because of the Great fireWall, and because the vehicles might be lumped as just another EV.

I found this strange.

Do people not buy cars after marriage ?

I'd like to see what native Chinese say, rather than someone from outside (even if he knew the language).

ps : I think we all understand why people buy high prestige brands. The reasons are the same in all countries.

 

[wipster]

Fire prawn?

View attachment 488188

The new Ford F-ireprawn! Tonnage depends on Bubba Gump!

 

[Bet TSLA]

To someone on Reddit, Rob explained that Alex is a bigger optimist on TSLA valuation, than the $423 price target would indicate. But Alex feels he needs to put very highly defensible and quantifiable numbers in there, so that his clients can’t argue against his result.

I thought Alex was pretty clear that his customers pay for his analysis, but don't really care about his opinion about what it means. So he rightly has no analysis outside his competence. And reflecting that non-analysis in his price target would really be indefensible and not of interest to his customers.

I thought it was quite informative and interesting that such things as price targets aren't really intended to be accurate, just defensible within the proper context. Clearly their customers don't demand that they get additional analysis of the company by experts in its other areas of business, or at least aren't willing to pay for it. Why that would be is anybody's guess.

 

[wipster]

Earl of FrunkPuppy on Twitter

A true must see

 

[gene]

Among the many guests we host at our Lodge, we try to learn something about most of them. Especially if we find that their home address is "Stuttgart" or "Fremont" or "Dearborn" or "Grosse Pointe" - and so forth. Or if their reservation forms are from a business e-dress like "[email protected]".

This is not so useful as sitting in the WallSt catbird seat of fund management and being feted week-in and -out by the corporate world, but properly played (or improperly), it gives me a stealth-innocence that can lead to revelations that otherwise might stay closely held.

Knowingly hosting one of the seniormost managers of the Chevy Bolt project, for example, enabled me to share with you well in advance of the car's unveiling some of its aspects, as well as how GM at that time was viewing Tesla.

But, to the point at hand. Most recently, we hosted a soon-to-retire highly placed engineer from Ford. He shared with me - and in no uncertain terms revealed that his beliefs were corporate gospel* - his understanding of EVs, as follows: "We know how to build an EV. The purported advantage that Tesla has? It doesn't exist. There is, in fact, nothing easier than building an electric car. It's a chassis/frame/body, electric motors, and some batteries."

And THAT hubris is indicative of the crow that Mercedes, and Jaguar, and Audi, and ..... now are eating.

And don't forget! I also was a guest at your Alaskan lodge. It was a fabulous stay!


NON-Mod edit: And what inside info did I pump you on? I think it was mostly regarding Kachina dolls and LandCruiser wiring....

 

[dc_h]

Elon has stated 100%-200% growth for Tesla Energy vs 50%-100% for Tesla Automotive. So there’s a few problems:

1) Elon did some damage to his credibility last year and earlier this year, plus he’s known for optimism in his goals, plus 100%-200% growth just sounds nuts, plus Solar Roof is really late. Last year Storage hit 1 GWh. If they hit over 2 GWh this year, that will help some (I don’t think Wall St. analysts even fully understand exponential growth, much less super exponential growth). If they have a successful Solar Roof Ramp, that will REALLY help.

2) Wall St. needs to see the margins.

I.e. if you fully believe Elon’s growth and gross margin estimates, TSLA would be a screaming buy anywhere south of $1k/share or even more. If you do not and have to wait to see the growth and margins, you’ll be too late. That’s why we’ve been so lucky to be able to purchase shares so cheaply (at least those in a position to still be buying and not have to be selling shares).

I don’t disagree with anything you’re saying, it’s just hard for analysts at large firms. They likely have structured analysis procedures that may be obvious to the analysts, but not an option based on their algorithms. Or they might be ignorant hedgehogs who don’t see outside the box.

 

[Green Pete]

I found this strange.

Do people not buy cars after marriage ?

I'd like to see what native Chinese say, rather than someone from outside (even if he knew the language).

ps : I think we all understand why people buy high prestige brands. The reasons are the same in all countries.

My mother in law from a 3rd tier city who speaks no english (cannot drive, and didn't know how to put on a seat belt because she never wears one in China)came to visit and was very excited to take a picture sitting in my model 3. Tesla is a known brand in china. Yes the chinese internet has a fire wall. But its not north korea. Elon Musk was on ****ing stage with Jack Ma at a Chinese event. People in china know who he is.