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

[Mike Smith]

More good work from Keen Labs, finding another security flaw in Tesla vehicles. Tesla has already fixed the problem and Keen will get another bounty payment from Tesla.

Exploiting Wi-Fi Stack on Tesla Model S

 

[jbcarioca]

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.

Market dominance in an original product is distinctly separate than is one that transforms an existing segment. Thus MS comes closest of your analogies, but even there numerous issues cause questions, although their anti-competitive actions with PC seller inclusion did allow for legal recourse.

None of your others even approach the question of monopoly. FWIW, Apple has lions share of segment profits. So what? That is not remotely like monopoly.
PsyPal is nowhere anywhere close to monopolistic; only in consumer PtoP, PtoC in the US do they have high market share. Facebook and Google have had dominance in online advertising revenue and Google comes close for search. Both US-centric dominance. As for SpaceX, nothing remotely like monopoly, but obvious and stunning competitive advantage as well as largest market share.

My issue in in using the word monopoly too loosely. Monopoly exists when there are no competitors. Monopolistic behavior can easily exist without actual monopoly. Thus MS, Google, Facebook are all accused vociferously, sometimes successfully.

The example I expected was Amazon, specifically AWS. Of course that isn’t monopoly either.

Obviously high market share confers advantages in numerous ways, most often evidenced by anti-competitive actions (I.e. ‘monopolistic’ in accusations). Apple doesn’t usually qualify on pricing but they repeatedly are hit with APP store accusations. SpaceX might get such accusations soon.

Tesla almost certainly will never be so accused because various forms of competition are always available. Incompetent competitors does not mean they are not competitors nor the the competent one has a monopoly.

Anyway, the thesis is ridiculous because of emerging Chinese, Korean and German competitors in autos, among others as well as myriad solar panel and energy storage suppliers. Why waste otherwise strong arguments on fallacious suppositions?

Were the thesis have been that Tesla is likely to command the lion’s share of profits I would not argue. That is the MS, GOOG, AMZN and AAPL argument that has clear potential validity.

 

[The Accountant]

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

Thanks for your thinking...what strike prices would be acceptable to you for a Sept option

Happened to me late last year / early this year,

haha - We are all going to be doing this for a day or two. We're in 2020...you meant late 2018 early 2019.

 

[KarenRei]

Thanks for your thinking...what strike prices would be acceptable to you for a Sept option

I finished closing out my $420s during the runup; now my lowest are $440s, and my highest are $500s. Average strike around $470. I'm overwhelmingly in spreads rather than pure calls; the sold ends now start at $560 and go up to $600. I take stock out as profit as I roll the spreads up.

 

[lklundin]

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.

Thanks for your helpful comments. As I wrote in my OP on this, I give myself 1 one 3 chances that something like S&P 500 inclusion will bring them ITM - and the invested amount reflects this. I did think about your earlier advice, that being right but at the wrong time leads to a complete loss. My back-up plan in case something unexpected brings the SP way down during the spring/early summer, is to then think about buying other options cheaply. My Jan. 17 320c + June 420c that I got in early December are looking good and I expect at least the former to provide me with new funds for continued experimentation with options.

 

[Fact Checking]

None of your others even approach the question of monopoly.

Maybe there's some confusion about the definition of a monopoly here.

For valuation purposes I'm not using the layman definition of 90%+ market share and total dominance. Instead I use the economic definition of monopoly: dominant market position with pricing power. In the U.S. there are precedents of companies with just 40% of market share to be convicted of being predatory monopolists.

Tesla already has a significant pricing power in their favor, but instead of rent seeking and profit maximization they chose to price aggressively to transform the ICE market faster and grow.

All the other examples I gave have dominance and pricing power in their markets: Microsoft, Google, Paypal, SpaceX and even Apple with their ridiculous profit margins.

Pricing power in their segments is what is required to gain the market valuation of a monopoly - which is the primary factor to @FrankSG's thesis.

JFYI, Warren Buffet almost exclusively invests in quasi-monopolies, and yes, they exist all around us.

 

[KarenRei]

Maybe there's some confusion about the definition of a monopoly here.

For valuation purposes I'm not using the layman definition of 90%+ market share and total dominance. Instead I use the economic definition of monopoly: dominant market position with pricing power. In the U.S. there are precedents of companies with just 40% of market share to be convicted of being predatory monopolists.

Tesla already has a significant pricing power in their favor, but instead of rent seeking and profit maximization they chose to price aggressively to transform the ICE market faster and grow.

All the other examples I gave have dominance and pricing power in their markets: Microsoft, Google, Paypal, SpaceX and even Apple with their ridiculous profit margins.

Pricing power in their segments is what is required to gain the market valuation of a monopoly - which is the primary factor to @FrankSG's thesis.

JFYI, Warren Buffet almost exclusively invests in quasi-monopolies, and yes, they exist all around us.

My ideal scenario ends with Tesla controlling about 20% of the global auto market, by revenue (plus ballpark-comparable solar, storage, and - hopefully - autonomy revenue streams). I don't see anywhere near a monopoly as ever being likely. But nor does it need one to be a monstrous success.

 

[Mike Smith]

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.

I felt the same way until recently, but a go private now would have to be at around $100B, which has a low enough probability of being possible that I've started buying far OTM calls.

 

[NakedLong]

Maybe there's some confusion about the definition of a monopoly here.

For valuation purposes I'm not using the layman definition of 90%+ market share and total dominance. Instead I use the economic definition of monopoly: dominant market position with pricing power. In the U.S. there are precedents of companies with just 40% of market share to be convicted of being predatory monopolists.

Tesla already has a significant pricing power in their favor, but instead of rent seeking and profit maximization they chose to price aggressively to transform the ICE market faster and grow.

All the other examples I gave have dominance and pricing power in their markets: Microsoft, Google, Paypal, SpaceX and even Apple with their ridiculous profit margins.

Pricing power in their segments is what is required to gain the market valuation of a monopoly - which is the primary factor to @FrankSG's thesis.

JFYI, Warren Buffet almost exclusively invests in quasi-monopolies, and yes, they exist all around us.

I just had a read of this:

Monopoly - Wikipedia

You both seem to be oversimplifying and cherrypicking to me.

 

[Prunesquallor]

More good work from Keen Labs, finding another security flaw in Tesla vehicles. Tesla has already fixed the problem and Keen will get another bounty payment from Tesla.

Exploiting Wi-Fi Stack on Tesla Model S

This type of thing is still the black swan event I fear most. Much more likely than a Richter 10 at Fremont IMHO.

 

[FrankSG]

Market dominance in an original product is distinctly separate than is one that transforms an existing segment. Thus MS comes closest of your analogies, but even there numerous issues cause questions, although their anti-competitive actions with PC seller inclusion did allow for legal recourse.

None of your others even approach the question of monopoly. FWIW, Apple has lions share of segment profits. So what? That is not remotely like monopoly.
PsyPal is nowhere anywhere close to monopolistic; only in consumer PtoP, PtoC in the US do they have high market share. Facebook and Google have had dominance in online advertising revenue and Google comes close for search. Both US-centric dominance. As for SpaceX, nothing remotely like monopoly, but obvious and stunning competitive advantage as well as largest market share.

My issue in in using the word monopoly too loosely. Monopoly exists when there are no competitors. Monopolistic behavior can easily exist without actual monopoly. Thus MS, Google, Facebook are all accused vociferously, sometimes successfully.

The example I expected was Amazon, specifically AWS. Of course that isn’t monopoly either.

Obviously high market share confers advantages in numerous ways, most often evidenced by anti-competitive actions (I.e. ‘monopolistic’ in accusations). Apple doesn’t usually qualify on pricing but they repeatedly are hit with APP store accusations. SpaceX might get such accusations soon.

Tesla almost certainly will never be so accused because various forms of competition are always available. Incompetent competitors does not mean they are not competitors nor the the competent one has a monopoly.

Anyway, the thesis is ridiculous because of emerging Chinese, Korean and German competitors in autos, among others as well as myriad solar panel and energy storage suppliers. Why waste otherwise strong arguments on fallacious suppositions?

Were the thesis have been that Tesla is likely to command the lion’s share of profits I would not argue. That is the MS, GOOG, AMZN and AAPL argument that has clear potential validity.

All of these arguments (except for Chinese/Korean/German competition) are arguments based on analogies. Those can sometimes help to illustrate points, but I don't think you should rely on comparative arguments too much.

And with regards to the competition argument, I'm not too optimistic about the position the rest of the automotive industry is in right now, which you may already be aware of if you read my blog from last month on the automotive industry. I'm not the only one with this opinion either, Sean Mitchell for example often mentions how he is worried about where things are headed for the rest of the automotive industry. And Lex Fridman says the same thing about Tesla's competition in the autonomy industry.

Again, I'm not saying Tesla will have a literal 100% monopoly and no non-Tesla car will ever be sold again, far from it. But I do think it's very likely they'll end up as the major player, and will like only face competition from much smaller companies in automotive, autonomy, and AMaaS.

 

[Artful Dodger]

There were 112,721 shares of TSLA traded Pre-Market by 08:00 hrs EST (New York).

08:05 am SP was $425.00 on volume of 3,073 shares.

EDIT: Lol, can't keep up


Now 426.71 @ 08:25 hrs...

Cheers!

 

[KarenRei]

This type of thing is still the black swan event I fear most. Much more likely than a Richter 10 at Fremont IMHO.

While a "fleet hack" is very much a concern (thankfully one Tesla takes very seriously), this specific sort of stuff is not that concern (as far as I can tell). They send bad wifi data to a vehicle within wifi range (e.g. single vehicles), compromising the MCU. This is very different from compromising the Autopilot computer. Unless you can do the latter, you can't tell the car to do something explicitly dangerous. You could give it bogus routes to take, but... not particularly devastating.

I have more concerns about Tesla's end. I hope that their server that signs updates is properly airgapped; has good physical security; code is audited regularly for malicious insertions; and that their system for distributing updates is an independent network with its own security. But again, they seem to recognize the seriousness of the threat.

 

[Artful Dodger]

This type of thing is still the black swan event I fear most. Much more likely than a Richter 10 at Fremont IMHO.

Meh. This type of hack happens to ICE cars all the time, it just doesn't get reported by the WSJ.

The advantage that Tesla has is they can distribute the FIX via OTA Update that same day. Try that with your Dodge RAM...

Cheers!

 

[Mkorpal]

Well, if today is the day, the report should be out in the next few minutes. Premarket seems to be optimistic.

 

[Tslynk67]

Well, if today is the day, the report should be out in the next few minutes. Premarket seems to be optimistic.

That's more the Canacord upgrade, I think.

Of course if the P&D is good, or very good, then who knows!

 

[madodel]

Premarket is up over $8 as I write this. Is this just people expecting a make on Q4 deliveries? Anyone expect this to continue into the normal market hours? Or will the shorts try to drive down the price to start the new year with the usual MMD?
Tune in later today starting at 9:30 EST as we watch As the TSLA Ticker Turns.

 

[elasalle]

Well, if today is the day, the report should be out in the next few minutes. Premarket seems to be optimistic.

More fun for MM and max pain afficionados if report comes out tomorrow
Also, the Canaccord PT /macros should carry today. ~ cheers!!

+Congrats to All who bought the recent dip

 

[Artful Dodger]

Premarket is up over $8 as I write this. Is this just people expecting a make on Q4 deliveries? Anyone expect this to continue into the normal market hours? Or will the shorts try to drive down the price to start the new year with the usual MMD?
Tune in later today starting at 9:30 EST as we watch As the TSLA Ticker Turns.

Canaccord Capital upgraded TSLA to $515 price target

Tesla price target raised to $515 from $375 at Canaccord TSLA - The Fly

 

[Prunesquallor]

More fun for MM and max pain afficionado if report comes out tomorrow
Also, the Canaccord PT /macros should carry today. ~ cheers!!

+Congrats to All who bought the recent dip

Where do you all check for the deliveries report?