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

[Mike Ambler]

Oh, it’s bad. I’m not too close to any fires (fingers crossed) but the air is so polluted that it smells like a campfire inside, visibility is only a few hundred meters, we’ve been warned not to go outside, and I’ve been told to work from home for the next several days. Even New Year’s Eve was cancelled. Everyone seem to agree that we’re living through the apocalypse.

Yeah, Aussies are generally modest in their hand waving (we just get on with it). Comes from a bunch of (white) generations of scratching out a living in the hot dirt and (I'd like to think) the quiet dignity of native Australians that has rubbed off on us.

I am deeply saddened by the damage to flora and fauna, and to the people caught in this mess. However, I am unable to feel much empathy for a nation that willing chooses to be represented by parties disinterested (for whatever motive) in facing the climate facts.

I really feel we are ready for admission by our sovereign governments that:
"we are screwed",
"the money wants us to keep allowing them to make it",
"we don't know how to make the transition to zero carbon without disrupting everyone's lives",
"we don't want to go first, especially if the big boys/girls won't"

Utopia, I know....back to my box!

 

[bhtooefr]

No. Tesla did that because they wanted to amend their EPA range ratings, but the EPA will only rate vehicles once per model year. This has been discussed on this forum.

Cheers!

It is worth noting that there are other ways to get around that if you specifically don't want to increment the model year.

New powertrain configurations - different batteries, motors, and gearing - count as new models for the purposes of EPA testing, and those new configurations can be updated as soon as they come out.

But then, changing the model name counts too. (It's something I'm familiar with due to VW doing it in the past due to them launching new generations alongside old ones - so in 1999, you had the Jetta/Golf and the New Jetta/New Golf with what the EPA would've otherwise considered the same powertrains, but because the "New Jetta" and "New Golf" were officially called that to distinguish it from the previous generation, it got an entirely new set of retests. Of course, they were also different cars.) It's not something that I could see Tesla wanting to do, but it is a workaround for that limit.

Apple, while not a monopoly, dominated smartphone profits for something like 10 years: they are taking in north of 80% of all profits from the smartphone market, which is in large part reason for their current 1 trillion dollars market position.

For that matter, there was a while where Apple had over 100% of the smartphone market profits, if you counted losses as negative profits.

At that time, IIRC, Samsung also had profits, but the entire rest of the industry was losing so much money so as to offset any profits Apple or Samsung were making.

 

[Fact Checking]

I have read it all. He makes a few very good points. However his basic premise is, frankly, absurd. No company ever has a monopoly in anything without government mandate prohibiting competition. The closest one comes is large commercial aircraft.

There's quite a few examples of naturally grown high-tech monopolies or quasi-monopolies, which were created without a government mandate:

• Microsoft dominated the desktop PC market for like 30 years and even got convicted for it. They are still milking their Windows dominance in the corporate world.
  
• Apple, while not a monopoly, dominated smartphone profits for something like 10 years: they are taking in north of 80% of all profits from the smartphone market, which is in large part reason for their current 1 trillion dollars market position.
• Google's dominance of the search and online advertising markets is pretty much a naturally grown de-facto monopoly as well, even though they try not to abuse it like Microsoft abused their Windows monopoly in their first decade of the monopoly.
• Facebook is a de-facto monopoly of personal and corporate social media presence. Google with their near infinite resources tried to break through their inertia but failed.
• SpaceX has a de-facto monopoly on the global commercial space launch market, ArianeSpace can only keep a minority stake through government intervention.
• PayPal is the global leader in online payments and close to a de-facto monopoly.

If Tesla has a significant first-mover advantage, which advantage can be decisive in high-tech markets, then I can very much see their dominance in the premium market lasting 10 years, which is plenty of time to realize the kind of valuation @FrankSG's thesis outlines. Getting there with self-driving first, while competitors fail, could alone justify well above 1 trillion dollars of valuation.

The PayPal and SpaceX examples also show that Elon has already done this for two of his companies: gain a quasi-monopoly through being early enough, combined with unparalleled high-tech innovation focused on cost efficiency.

Also note that @FrankSG doesn't say this will happen, just that there's a non-zero probability. There's large spectrum of very lucrative Tesla valuations between the current one and the top end of @FrankSG investment thesis. He's also not alone with his six-digit hyper-bull Tesla investment thesis.

Not advice.

 

[Tslynk67]

Just checked my emails and for what it's worth, 18Q4 P&D Report was released an hour before markets opened on 2nd Jan '19.

 

[Fact Checking]

Just checked my emails and for what it's worth, 18Q4 P&D Report was released an hour before markets opened on 2nd Jan '19.
View attachment 495518

Yes, the SEC filing timestamp was 2019-01-02 08:38:32 ET, on a Wednesday.

I still think there's a chance for the delivery report to be delayed to after the market closes, due to the much broader international delivery paperwork compared to Q2'2018 and to allow European and Chinese delivery paperwork to trickle in during the day/evening - but between 8:30-9:30am ET is the most probable time window for the time being.

Usually if the delivery report is delayed there's a negative short-term price reaction, because bearish investors interpret delays as Tesla waiting for a few hundred deliveries to come in to meet guidance. (This was a correct interpretation of the delay that the Q1'2019 delivery report exhibited for example, Tesla was waiting for 50k Model 3 deliveries.)

 

[engle]

Note that tech start-ups MSFT, APPL, GOOG, and FB were all DRIVEN in high-growth phases by extremely strong founders, with the exception of the late Steve Jobs firing and later re-hiring by an ignorant BOD.

That's exactly what we have here with Elon Musk on intellectual steroids.

Another company that was dominant for quite a while was ORCL under current TSLA BOD Larry Ellison. I once did s/w consulting for a manager who direct-reported to him. She said he was extremely demanding of his people. Sound familiar? These founders have more than extra $$$ on the line -- it is their reputations and egos.

Note Elon's first 1% stock option tranche will be awarded at a $100B market cap:

"The first of those milestones would be a combination of Tesla reaching a market capitalization of $100 billion and either revenue of $20 billion or earnings of $1.5 billion (formally, adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA). According to the company's earnings report for the first quarter of 2019, it has hit those second two." [Business Insider]

Looks like he's doing everything in his power to get us there. The milestone will be:

$‭554.816 per share. At that point, Elon will receive approx. 1,802,400 additional shares.

Note this is only 31.4% above $422.11 pre-market so it is entirely possible it will be touched this year if several things all go well as hoped, and the market rises in the U.S. POTUS [NO! ] re-election year.

There's quite a few examples of naturally grown high-tech monopolies or quasi-monopolies, which were created without a government mandate:

• Microsoft dominated the desktop PC market for like 30 years and even got convicted for it. They are still milking their Windows dominance in the corporate world.
  
• Apple, while not a monopoly, dominated smartphone profits for something like 10 years: they are taking in north of 80% of all profits from the smartphone market, which is in large part reason for their current 1 trillion dollars market position.
• Google's dominance of the search and online advertising markets is pretty much a naturally grown de-facto monopoly as well, even though they try not to abuse it like Microsoft abused their Windows monopoly in their first decade of the monopoly.
• Facebook is a de-facto monopoly of personal and corporate social media presence. Google with their near infinite resources tried to break through their inertia but failed.

If Tesla has a significant first-mover advantage, which advantage can be decisive in high-tech markets, then I can very much see their dominance in the premium market lasting 10 years, which is plenty of time to realize the kind of valuation @FrankSG's thesis outlines. Getting there with self-driving first, while competitors fail, could alone justify well above 1 trillion dollars of valuation.

Also note that he doesn't say this will happen, just that there's a non-zero probability. There's large spectrum of very lucrative Tesla valuations between the current one and the top end of @FrankSG investment thesis.

 

[lklundin]

Does not look good for 2020:

View attachment 495413
/S

Cheers!

As an optimist I will say that Sparta now only has relevance in the annals of history...

BTW, my limit orders for my optimistic call options were all filled when Frankfurt opened this morning, they are
500$ April 17,
540$ May 15, (highest available strike via my broker)
600$ June 18,

The bet is that by:
mid April the Q1 P&D is out and the market will start to price in S&P 500 inclusion,
mid May the Q1 ER is out and the market will have priced in S&P 500 inclusion,
mid June the S&P 500 will have made their decision on TSLA...

I am giving myself one in three odds on this actually happening, with an additional, smaller chance that the strikes can be reached even without S&P 500 inclusion.

 

[Artful Dodger]

Near realtime data has commenced at NASDAQ: (updates in ~90 sec intervals)

$423.29 +4.96 +1.18%
*Real-Time - data as of 1/2/2020 06:07 am​

Cheers!

 

[Artful Dodger]

The bet is that by:
mid April the Q1 P&D is out and the market will start to price in S&P 500 inclusion,
mid May the Q1 ER is out and the market will have priced in S&P 500 inclusion,

Er, you might want to check Ur dates:

• 2020Q1 P&D Report should be out ~ Thu, Apr 02, 2020
• 2020Q1 Earnings Report should be out ~ Apr 22-29, 2020

Cheers!

 

[mars_or_bust]

@️ELECTROMAN️ @printf42 @mars_or_bust What part of that you disagree with? That the driver is fully responsible or that the NHTSA is likely going to be investigating how AP/NoA contributed to this collision? (Surely you can't think they are just investigating why somebody ran a red light and hit another car do you?)

Tesla AP or FSD do not do red lights at all, so there should be nothing to investigate. FSD with HW3 in the latest release only has a preview where it only indicates lights, but does nothing with it yet, so there is really nothing to investigate. The driver ran through a red light, this caused the very unfortunate accident, the driver and the driver only screwed up.

 

[lklundin]

Er, you might want to check Ur dates:

• 2020Q1 P&D Report should be out ~ Thu, Apr 02, 2020
• 2020Q1 Earnings Report should be out ~ Apr 22-29, 2020

Cheers!

We are in agreement on the expected dates for Tesla's Q1 P&D report and ER.

The expiry of my mid April options is thus at the earliest date available to me that follows the expected P&D report and ditto for my May options w. the Q1 ER - my thinking being that my options should expire (shortly) after these events that I believe will cause upward SP movement.

 

[Artful Dodger]

The fires in Australia are terrible. The smoke is creating air quality and visibility issues in New Zealand, 1200 to 1500 miles away. It's a huge deal and should be getting more coverage and assistance

During the worst of the B.C. wildfires during the Summer of 2018, you could smell the smoke in Toronto.

For those of you that don't know how big Canada is, let's just say that its 3 TIME ZONES to the East.

TL;dr From California to Fort McMurray, wildfires are causing $100s of Billions in damages all over N. America, and its getting worse each decade.

 

[FrankSG]

I have read it all. He makes a few very good points. However his basic premise is, frankly, absurd. No company ever has a monopoly in anything without government mandate prohibiting competition. The closest one comes is large commercial aircraft. Even there two large companies battle fiercely for ever sale and both are more systems integrators than pure manufacturers so there are hundreds of major suppliers. A few major components of those have only three or four major suppliers (e.g. engines, brakes, pitot tubes).

with automobiles, solar panels, li-ion storage batteries there has never been a monopoly provider. Even Ford ca 1915 was nowhere approaching a monopoly.

Frank loses credibility by adopting such an obvious flawed premise. Nearly all his work was useful data aggregation with superficial analysis.

That said I thought it was useful data aggregation. Nothing more.

First of all, thanks for reading all of it! And I'm happy to hear you found it useful in some way. Here are a few clarifications on my stance:

• There's a small part in the beginning of the automotive section where I point out that a literal monopoly is of course not going happen.
• The blog's overall theme is potential, which kind of means best possible outcome. If Tesla achieves it, they won't achieve this full potential by 2030. It will take them longer than that.
• Google effectively has a monopoly on search. I would argue that actually a lot of the recent tech giants have quasi-monopolies. Facebook on social media, Google on search, Microsoft on PC operating systems. Amazon I'm not super familiar with, but it's kind of heading that way too is the impression I get? So even if you want to reason by analogy, it doesn't seem impossible for Tesla to have a similar quasi-monopoly.

I too sometimes find myself skeptical of my own numbers to be completely frank. The model that predicts $50-60k by 2030, I think is conservative in various ways, but $10T market cap just seems so crazy.

So I'm kind of conflicted in that on one hand you have all the data that suggests Tesla is very very hard to compete with in each of Automotive, Autonomy, and AMaaS individually, and even harder when you combine them. There are risks/uncertainties of course, such as battery supply which is a big one right now, but even when you account for these, it seems that in all likelihood Tesla will absolutely dominate road transportation in the future.

But then on the other hand, I run the numbers and things pop out that just don't seem possible. Like the data I put in that leads to $50k in 2030 is aggressive yet quite reasonable. But then a $10T market cap is just such a crazy number, that I start to feel maybe it should be half or a third of that. Even though I shouldn't let my feelings influence this, and I should just trust the data and numbers.

 

[Mike Smith]

Cannacord Upgrade

https://www.thestreet.com/investing/tesla-shares-gain-after-canaccord-boost-price-target-past-500

'Dorsheimer lifted his price target on Tesla by $140, to $515 per share, and expects fourth quarter deliveries to bring its 2019 total past 360,000 units.'

 

[lklundin]

Austria total Tesla sales for December 2019 are: 281,

Kraftfahrzeuge - Neuzulassungen

PS. Number has been submitted to Tesla Europe Registration Stats

 

[engle]

Can someone with more knowledge/experience please help me understand something. Are enough human traders AWAKE 6:23 AM EST or 3:23 AM PST to "trade" enough volume on this incredible "analysis" to move the stock +1.2% pre-market? No. I don't think so. My theory is DNN (Deep Neural Network) AI has been trained with labeled ML (Machine Learning), and historical price moves after analyst reports and press releases, to instantaneous "read" them and decide programmatically to "buy" or "sell". The game is rigged against the little trader which is why I just buy what I think is good after due diligence and go long.

Perhaps someday there will be AI/ML for computerized trading released to individual investors...

https://www.thestreet.com/investing/tesla-shares-gain-after-canaccord-boost-price-target-past-500

'Dorsheimer lifted his price target on Tesla by $140, to $515 per share, and expects fourth quarter deliveries to bring its 2019 total past 360,000 units.'

 

[Right_Said_Fred]

But then a $10T market cap is just such a crazy number, that I start to feel maybe it should be half or a third of that. Even though I shouldn't let my feelings influence this, and I should just trust the data and numbers.

It's okay, I'll gladly take half or a third of a $10T market cap.

That's an SP of $20,000 to $13,200 (assuming 250 million shares).

 

[heltok]

Tesla setting up Israel R&D office
The electric car venture's new office, managed by Adi Gigi, will scout for Israeli startups and technologies

US-based electric carmaker Tesla (Nasdaq: TSLA) is setting up an R&D representative office in Israel, sources inform "Globes." The news comes at the same time as Elon Musk's electric car giant is set to begin marketing its cars and solar energy products in Israel.

In the first stage, Israel R&D operations will focus on scouting for local startups and technologies involved in areas of interest for Tesla as well as talks and information exchange with Israeli companies, with some of whom Tesla has already had a business and technological relationship over the past two or three years.


These include at least two to three auto-tech companies as well as artificial intelligence (AI) developers and advanced avionics companies as well as companies in other fields.

According to one source close to the matter, Tesla is also mulling establishing an R&D center that will work directly with the company's R&D center in Palo Alto. If Tesla sets up an Israeli R&D center, it would employ several dozen engineers and be of similar dimensions to the Israel development centers of many other carmakers and Tier 1 car parts manufacturers and suppliers.

Tesla EVTOL in the works?

 

[Jack6591]

The shorts have a terrible cognitive dissonance hangover — turns out, their beliefs went to a party thrown by everything that they know just ain’t so.


JB Leonard

 

[KarenRei]

We are in agreement on the expected dates for Tesla's Q1 P&D report and ER.

The expiry of my mid April options is thus at the earliest date available to me that follows the expected P&D report and ditto for my May options w. the Q1 ER - my thinking being that my options should expire (shortly) after these events that I believe will cause upward SP movement.

I personally advise against this strategy. A single adverse advent can be devastating. Your investment hypothesis can be perfectly sound, but you can be torpedoed by external factors beyond your control. Happened to me late last year / early this year, when I was focused on Tesla proving the naysayers wrong and getting its second consecutive profit. Perfectly sound hypothesis, but a terrible investment regardless because the US economy tanked, the US went to trade war with one of Tesla's most important markets, one of Tesla's largest investors bailed, and Deepak left during the Q4 call.

Now, my options are all in September - and they'd be even further away, except I don't want the strikes to have to be so high that I'd be wiped out by a go-private event. Theta decay will be quite mild on them for quite some time. I have the time to weather an unexpected bad event, and will continue to give myself time to do so.

But to each their own. You certainly will earn more by optimizing for April. But there's sharks in those waters.