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

[Zaxxon]

Hypothetically, where would stock price head to if GAAP profit for the full FY2019 was achieved?

 

[Artful Dodger]

As for more interior space, I'd need to see the original comments again

It's pretty simple: the dual drive unit based on Model 3 SRPM motors is smaller in diameter than the older high performance AC motor used in P-model S/X. I don't have the ref but IIRC the switch frees up about 4 inches for rear row passenger, which is also why Musk tweeted that the Plaid S will be a 7 Pax config again.

Cheers!

 

[tinm]

So like did anything big happen this week while I was away?

About 7-8 months ago I began the process of trying to figure out who I needed to talk to to get permission to go to Pier 80 in San Francisco, meet with the longshoremen there, watch and observe the unloading of Teslas off the car-carrier trucks (very slow process) and load the cars onto the huge ro-ro (roll-on, roll-off) vessels.

Well I got permission and this was the week I went out. Got on a plane, flew from New Mexico to Oakland, then on Wednesday spent most of the morning with the union workers af Pier 80, got to board the Morning Catherine ro-ro ship (that ramp? very steep and very slippery to walk on!), watch ‘em securely lash down each car with straps for the voyage, etc. It was amazing. Even got to keep a bright yellow union safety vest to bring home. Got home at midnight last night. Meanwhile the ship sailed for South Korea.

All this was research for my upcoming Tesla book. Stay tuned!

 

[Cherry Wine]

Yesterday there were two downgrades of TSLA, one of them Ben Kallo who raised his price target significantly but went from buy to hold.
Today there are two upgrades is an upgrade and a positive article from Barbara Corcoran (I've never heard of her but apparently she has a following).
Barbara Corcoran on Tesla CEO Elon Musk: ‘That guy is a winner’
Tesla Target Hiked 30% by Piper Sandler Based on China Potential $423 -> $533

Hmmm... earlier I saw an article about Piper Jaffray, but now it's gone. I think someone must have confused Piper Sandler and Piper Jaffray (which to me would be bigger news). Up in pre-market. Looking good, to me.

The Piper Sandler upgrade is to $553 FYI. (Not that it really matters)

 

[Fact Checking]

Hypothetically, where would stock price head to if GAAP profit for the full FY2019 was achieved?

Hypothetically, to the moon and beyond, at escape velocity.

But close to $1b in Q4 GAAP profits is not going to happen: the $200m profits estimated by @luvb2b is from a reliable model with a good track record.

 

[dc_h]

While i agree wth most of your excellent points, I would say it would be REALLY BAD to name the small China Tesla Model 4.
Four has a bad connotation as far as I know, spoken the same as death, so no please no Model 4 coming out of China.

As for the market for a compact car, I think some of you are missing a point. It is not so much about addressing the low end market, with low margins, but also giving the more affluent customer a choice for a small, sexy city car. With the right features (as in M3 equivalent), high quality interior etc. such a car could be priced sub 30k (CHF/USD) and would IMO sell a ton. Look at what prices the BMW Mini Cooper, Cooper S etc are selling and its not niche , at least not over here in EU / CH-Land. I would love to see a Mini CyberP City Car.

A Corolla class car with a same platform CUV would make the most sense. Something that can be sold as a city car in China, India, Europe and developing world. Like Karen says, whatever it is, don’t expect a Corolla. A smaller then 3 car in the 20k USD range makes sense.
tesla still needs a delivery truck and a smaller pickup and a Range Rover style SUV and California is busy with current plans. We might want a thread for the subject, there are limitless options for China R&D at this point.

 

[jhm]

It took 30 years of importing Japanese cars with excellent Consumer Reports ratings before Americans would accept a 5 Series E Class priced Japanese car.

It took another 10 years for Americans to accept a 7 Series S Class priced car from Japan.

It seems Europeans still don't accept premium cars from Japan.

Cars are not phones. Chances of getting killed by a defective phone are trivial compared to a car.

I Phone did not give consumers a choice. You could not buy something comparable made in Germany or the US.

Blackberry phones made in Hungary doesn't sound all that great.

These are good points, but being a Tesla vehicle makes the customer value proposition fundamentally different. So you got a product that has all of the tech and styling of a Tesla, it is a Tesla and uses all of Tesla's sales, service and charging channels, it is built just as well if not better than in Fremont, and the price is right. I think this is a compelling value proposition. The rest of where the vehicle was designed and built is just a branding or image kind of issue. It plays on nationalistic perceptions that actually have little to do with the product itself.

As a thought experiment, suppose Tesla were to manufacture technically equivalent Model X in US, Germany and China. While badging may indicate country of origin, the product is otherwise identical. So which one would you buy? Depending on where you live, transport costs, exchange rates and so, one place of origin may be lower cost and have quicker delivery than the others. Would you be willing to pay a premium or wait longer to receive the product from the country of your choice? Some people would. But what is that really based on? It's not the product, not the local channels that you access. More likely it's just some nationalistic stereotype that floats around in your head for which you are willing to pay a premium. If this bias is strong enough, Tesla will exploit it to extract a higher profit margin.

Yes, those nationalistic biases do exist, but do they rise to the level that Tesla can profit from them. As long as Teala is most supply constrained, logistically challenged, and competing mostly with unexciting ICE vehicles, I don't think playing to nationalistic biases is anywhere on the list of priorities for Tesla. Customers will want the best Tesla they can afford with minimal delay.

 

[LJS22]

Washington Post letting us know how far ahead Tesla is in their own way
https://www.washingtonpost.com/technology/2020/01/10/tesla-battery-range/
Said Tesla is taking more risk and being too liberal with their battery tech which may or may not be in correlation to the dozen of fire from Tesla batteries. Other auto makers are essentially doing the right thing by doing it the “right way”. Some mention of Tesla downgrading batteries through software and using less cobalt which may be cause of more fires.
But if you can read between the lines then the article says Tesla is miles ahead of competition

sorry if this doesn’t belong in here. Just doing some light reading before markets open. Maybe give some confidence to our investors that it is 2020 and journalist still don’t understand Tesla.

 

[Todd Burch]

Washington Post letting us know how far ahead Tesla is in their own way
https://www.washingtonpost.com/technology/2020/01/10/tesla-battery-range/
Said Tesla is taking more risk and being too liberal with their battery tech which may or may not be in correlation to the dozen of fire from Tesla batteries. Other auto makers are essentially doing the right thing by doing it the “right way”. Some mention of Tesla downgrading batteries through software and using less cobalt which may be cause of more fires.
But if you can read between the lines then the article says Tesla is miles ahead of competition

sorry if this doesn’t belong in here. Just doing some light reading before markets open. Maybe give some confidence to our investors that it is 2020 and journalist still don’t understand Tesla.

Bahaha, I'm sure the article is written by a reporter who is an expert on Li-Ion battery technology.

 

[willow_hiller]

Hypothetically, to the moon and beyond, at escape velocity.

But close to $1b in Q4 GAAP profits is not going to happen: the $200m profits estimated by @luvb2b is from a reliable model with a good track record.

Just tried my hand at making a TMC diluted GAAP EPS estimate "consensus." Could only find four posted diluted GAAP EPS estimates since the P&D report, however. From @EVNow, @Todesbuckler, @FrankSG, and @luvb2b; posts linked here, here, here and here.

Unweighted average is 1.47. Average weighted by number of total posts on TMC is 2.02.

 

[printf42]

Also, for those not in on the geek culture reference our dear Buff Mage made overnight...

“Toss a coin to your Witcher”
Makes me want to buy the Model 3 AWD performance upgrade just to help Q1 numbers.

If Q4 came in dangerously close to break even the whole year, I would be kicking myself really hard for not reading the tea leaves right.

 

[kengchang]

It's pretty simple: the dual drive unit based on Model 3 SRPM motors is smaller in diameter than the older high performance AC motor used in P-model S/X. I don't have the ref but IIRC the switch frees up about 4 inches for rear row passenger, which is also why Musk tweeted that the Plaid S will be a 7 Pax config again.

Cheers!

SRPM motor is at the front for Raven S/X not at the back

 

[humbaba]

Washington Post letting us know how far ahead Tesla is in their own way
https://www.washingtonpost.com/technology/2020/01/10/tesla-battery-range/
Said Tesla is taking more risk and being too liberal with their battery tech which may or may not be in correlation to the dozen of fire from Tesla batteries. Other auto makers are essentially doing the right thing by doing it the “right way”. Some mention of Tesla downgrading batteries through software and using less cobalt which may be cause of more fires.
But if you can read between the lines then the article says Tesla is miles ahead of competition

sorry if this doesn’t belong in here. Just doing some light reading before markets open. Maybe give some confidence to our investors that it is 2020 and journalist still don’t understand Tesla.

Since the source for their information is "car industry experts" I wouldn't put any stock in their statements or conclusions. If the article wanted to seriously address the alleged "increased risk" of Tesla having higher efficiency* they would have quoted actual incident rates for fires in Tesla vehicles, other EVs and ICE vehicles. They might also have mentioned the numerous (and recent!) recalls for fire risks.

But doing so would have destroyed their framing (which is that Tesla vehicles are fire hazards, but there are other reasons to get them).**

* they are setting up the false proposition that Tesla vehicles have better range due to "making its batteries ever-denser and out of different materials than competitors" rather than having a superior drive train moving vehicles with superior drag characteristics.

** the reason for this is pretty transparent. A common goal of modern "journalism" is balance. And the author mistakenly believes that by presenting cons and pros that somehow that makes their article balanced. If only they had something like truth or accuracy as their goal.

 

[Artful Dodger]

You might be right - but this was just a side argument, Tesla can, of course, use any Model 4 production lines prototyped in China and build them at GF4 as well. (I don't think the Model 4 would have much of a market in the U.S.)

If your argument for naming the China-designed world car 'Model 4' is based on a sequential model numbering scheme (with 'S' being 1st, 'X' 2nd, etc) then the new car would have to be either Model 5 (since Cybertruck will be the 4th Tesla body-style) or Model 6 (if the Roadster beats Cybertruck to market).

At any rate, to avoid confusion, I suggest we stick with the commonly-used name 'Model 2', based on its $20K+up target price range.

This also leave room for a future 'Model 1' which I hope will be Elon's electric bicycle (discussed during the reCode interview with Kara Swisher)... or does that have to be a UNICYCLE?! BAH! That clearly has to be the 'Model 0'

Cheers!

P.S. thanks for all your outstanding efforts today documenting the derivatives market and its potential to affect SP.

 

[Zaxxon]

“Toss a coin to your Witcher”
Makes me want to buy the Model 3 AWD performance upgrade just to help Q1 numbers.

If Q4 came in dangerously close to break even the whole year, I would be kicking myself really hard for not reading the tea leaves right.

An interesting twist on the Law of Surprise!

 

[gerebgraus]

I want to see Tesla peak at around ~20% global automotive market share; I think that's achievable (more than that, I'm skeptical about, even with as much of a lead and pace as they have). Gotta be more downmarket than they are today for a 20% market share. But there's plenty of time.

Apple's mode of operation: Let us have a modes market share while having most of the profits. That is not Musk's MO.

 

[KarenRei]

Hypothetically, to the moon and beyond, at escape velocity.

But close to $1b in Q4 GAAP profits is not going to happen: the $200m profits estimated by @luvb2b is from a reliable model with a good track record.

As much as I appreciate @luvb2b's work - and use it as one of multiple baselines when making my own estimates (tweaking various parameters, so I don't have to model every little detail on my own) - it's important to point out that for Q3 luvb2b predicted:

Auto revenue: $5,2B (actual: $6,0B)
GAAP auto margins: 19,9% (actual: 25,8%)
GAAP net income: -$238M (actual: $261M)
EPS: -$1,33 (actual: $1,91)

I remember calling that forecast (and others in that thread) way too pessimistic in several regards, and was considered to be unreasonably bullish at that time. Lots of people around here were deleveraging based on that forecast, and partly missed out on a big jump. Of course, the actual results were more bullish than I was!

That said: a 2019 GAAP profit is just not going to happen. Or anything close to it.

 

[jhm]

All the points you made in post seem sound. My only quibble is with exporting the lower price Model 4 to the U.S. and Europe when it's MIC price unlocks such a huge segment of new China demand. Why export from additional Gigafactories in China rather than build those in U.S. and Europe? There is little doubt that a MIC M4 will cost less to produce than ones built in new U.S. or Europe factories. However there is going to be even more automation and less manual labor to build new models in five years (around the time when M4 has been mass produced for a year or more and is ready to be the template for production in follow on GFs). The amount of new demand 20 - 25K M4 would unlock in U.S. and Europe (a few more years out when understanding of EVs and Tesla is fully developed) will be massive. Just not as massive as in China. Given where we think Tesla's financial situation should be in 3+ more years I can't think of any good reasons why it should not also build M4 GFs to meet western demand. Lastly, building locally saves shipping costs, which won't decline much over next few years, and maintain Tesla's positive image as a company building its cars world wide and employing people in the countries where the demand exists.
Another point in favor of moving down market is that pretty much everyone working for Tesla will be able to afford one or more Tesla models. Like at Ford a century or more ago.

I mostly agree with the build regionally approach, but there are still reasons why shipping makes sense. As we scale up, it takes too long and is too costly to make every model and variant in each region. So to bring a full product suite to market some shipping is cheaper and quicker.

But let's think in terms of net imports. Suppose a ship full of S and X transports from California to China. Would it not make logistical sense to fill it back up with 3/Y/4 or whatever in China to be delivered along the way to or even in California. My point is that there are better logistical efficiencies to be had than one-way only product flow.

So I think a certain amount of shipping is compatible with the vision of regional production.

 

[lklundin]

Most people here are dubious and think that's just awkward wording referring to Q3.

Yes.

Further, a GAAP net profit for 2019 would require Tesla to post a Q4 GAAP-profit of close to 967M $ - which is about four times above the most optimistic estimates I have seen.

 

[Aeon]

I mostly agree with the build regionally approach, but there are still reasons why shipping makes sense. As we scale up, it takes too long and is too costly to make every model and variant in each region. So to bring a full product suite to market some shipping is cheaper and quicker.

But let's think in terms of net imports. Suppose a ship full of S and X transports from California to China. Would it not make logistical sense to fill it back up with 3/Y/4 or whatever in China to be delivered along the way to or even in California. My point is that there are better logistical efficiencies to be had than one-way only product flow.

So I think a certain amount of shipping is compatible with the vision of regional production.

The two-way shipping argument is very sound (and implies insourcing RO-RO ships ;-) ).

But the GF4 plans reveal that a typical Gigafactory might end up having completely duplicated (up to 4x) stamping, BIW, painting AND assembly segments + Central Utility Building. As to follow the template for the machine that builds the machine. Therefore 4 different models might be built locally.

Aeon De on Twitter
Aeon De on Twitter (includes translation for image #2)