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

[mblakele]

This roadmap page might be clearer than the announcements and tweets. It includes some guidance for manufacturers, dated today.

Resilience Roadmap - Coronavirus COVID-19 Response

http://covid19.ca.gov/pdf/guidance-manufacturing.pdf

http://covid19.ca.gov/pdf/checklist-manufacturing.pdf

However the Alameda County health officer still seems to have a veto on manufacturing in Fremont.

 

[jhm]

Just to answer for him......It doesn't matter what Musk says or thinks about the share price. There's plenty of metrics when it comes determining stock valuations and practically all of them scream that Tesla is still vastly undervalued. Based on metrics, Wall st is saying Tesla is only going to grow less than 20% for the next couple of years FROM Q1 revenue numbers. Do you really believe that Tesla is only going to grow 10-20% in 2020, 2021, and 2022?

Have you ever explored what we discuss in the BFPT thread? That would probably help you understand where I'm coming from. Using that approach, we could go from $780 to $1150 in 24 months, which is an average annual growth rate of 21.4%. Maybe upwards of 30%/y is not too much of a stretch.

Blind Faith Price Targets

The whole approach is predicated on Musk's outlook of sustained 50% annual growth in revenue, 10% profitability some 10 or so years out in the future and 20 P/E. I believe this reflects Musk's internal view of how to value Tesla (or any high growth company). That is, it is rate of revenue growth that drives fundamental value. So BFPT takes this idea an works back to how the market trades with respect to this sort of vision of growth. There is a range of belief to unbelief that the market is able to sustain, even as the company make steady progress toward its long-term vision. So the tool actually helps us avoid getting to far ahead of the long-term view or lagging too far behind. Suppose the price today is $725 today and will go to about $7250 in 8 years. So what's a steady rate of growth consistent with revenue growing 50%/y? If the price rises too fast in the near term, then stock returns will decline in the future. Or vice versa. Steady stock appreciation of 33.3%/y is a 10-bagger in 8 years. Musk tends to signal when the stock price is getting to far ahead. My belief is that he has internalized this sort of notion of steady exponential growth and organizes the whole company around maintaining high, steady rate of growth. This why it matters to me what Musk's thinks of the stock price.

 

[StarFoxisDown!]

Apple just released earnings of 58 billion revenue, which equates to 6X revenue multiple on their 1.37 trillion market cap. Yes Apple's margins are better than Tesla's, but Q1 for Tesla showed us that 30% margin is likely sometime in Q3/Q4. Now compare Apple's growth rate to Tesla's this year and for the next 3-5 years. If Apple is fairly valued, Tesla is dramatically undervalued.

Have you ever explored what we discuss in the BFPT thread? That would probably help you understand where I'm coming from. Using that approach, we could go from $780 to $1150 in 24 months, which is an average annual growth rate of 21.4%. Maybe upwards of 30%/y is not too much of a stretch.

Blind Faith Price Targets

The whole approach is predicated on Musk's outlook of sustained 50% annual growth in revenue, 10% profitability some 10 or so years out in the future and 20 P/E. I believe this reflects Musk's internal view of how to value Tesla (or any high growth company). That is, it is rate of revenue growth that drives fundamental value. So BFPT takes this idea an works back to how the market trades with respect to this sort of vision of growth. There is a range of belief to unbelief that the market is able to sustain, even as the company make steady progress toward its long-term vision. So the tool actually helps us avoid getting to far ahead of the long-term view or lagging too far behind. Suppose the price today is $725 today and will go to about $7250 in 8 years. So what's a steady rate of growth consistent with revenue growing 50%/y? If the price rises too fast in the near term, then stock returns will decline in the future. Or vice versa. Steady stock appreciation of 33.3%/y is a 10-bagger in 8 years. Musk tends to signal when the stock price is getting to far ahead. My belief is that he has internalized this sort of notion of steady exponential growth and organizes the whole company around maintaining high, steady rate of growth. This why it matters to me what Musk's thinks of the stock price.

I'll be honest I don't really have the time to read through the thread lol. No offense.

Everyone's definitely welcome to own predictions and we're all long here.

That said, I don't really care what Musk says in regards to the stock price. I look for other occurrences in stock market history where companies enter a growth period ranging from 3-6 years of 30% growth year over year and look to what happened to the stock. The roadmap to 40-50% growth is very clearly laid out over the next 5 years. If some of those years dip to 35% growth, it doesn't change the trajectory of the stock.

I feel like a lot of investors here, including myself, got very worn down by the 5 year trading range that we were stuck in, which was simply pure manipulation that was assisted by Elon's own antics and Tesla's production ramp issue. The production ramp issues with new vehicles are history, Tesla has proven that. Elon's still Elon but S&P inclusion will fundamentally change trading behavior in this stock and the manipulation that was very present for the past 5 years is going to be greatly reduced.

I go back to this example often but in Amazon's bull run, everyone kept saying the stock was going to retrace and every quarter Amazon continued their growth and the stock never looked back. It never retraced during it's bull run. I don't think this stock trades under 1,000 ever again once Q3 starts. When you break into new highs, there are no trading ranges and retracements as long as the company executes.

 

[Tim S]

It's not manufacturing and logistics associated with those manufacturers. It's
"Manufactures and warehouses that support these retailers will also be allowed to reopen with modifications."
Consistent with what he said on Monday.
California Gov. Gavin Newsom unveils health guidelines for retailers, manufacturers to reopen starting Friday

I'm disagreeing with the interpretation by CNBC, because it's dumb. I agree with Elon's interpretation. Manufacturing and the logistics that support manufacturing can start tomorrow.

Of course Alameda County has stricter rules, so they have the last word.

 

[UnknownSoldier]

This is such a wild ride. I shouldn't have sold my calls yesterday. Maybe they can delay the Fremont opening until Monday so I have time to buy calls tomorrow???

 

[StarFoxisDown!]

This is such a wild ride. I shouldn't have sold my calls yesterday. Maybe they can delay the Fremont opening until Monday so I have time to buy calls tomorrow???

I'm still waiting on funds to clear

If they don't clear by Friday afternoon, I fear I'm going to miss out on a serious rally on Monday

 

[JRP3]

Fair enough. But I think the overall impression was simply that they didn't do him much good for amount of resources they consumed. He didn't say "Well, I'm selling them because they're an attack vector", it was more him explaining all the downsides of owning all those houses. The net effect is that he sold them but I didn't get the impression it was primarily because they were an attack vector.

Since he's now saying he's getting sad about the idea of selling everything it's obvious he tweeted that in the spur of the moment and it was not a well thought out plan. The current explanations sounds more like after the fact justification.

 

[Prunesquallor]

Let's not forget the mission...

Benz, Nissan, Porsche fined for emission cheating

The South Korean government said Wednesday it will issue fines and file criminal complaints against Mercedes-Benz Korea, Nissan Korea and Porsche Korea for manipulating emissions data on their diesel vehicles.

The Ministry of Environment said that some 4,381 diesel-powered vehicles of 14 models sold in the country by the three carmakers between 2012 and 2018 were fitted with illicit devices to cheat pollution standards. The certification for the models will be revoked within this month and the vehicles recalled, it said.

Mercedes-Benz Korea faces a record fine of 77.6 billion won ($63.4 million) for selling 37,154 such cars in 12 different models, including C200d, GLC220 d 4Matic, GLC250 d 4Matic and ML250 BlueTEC 4Matic, which generated as much as 13 times more nitrogen oxide, or NOX, than standards allowed.

It marks the first time Benz Korea was caught cheating regulators’ emissions tests here, and the German carmaker faces the largest-ever fine imposed by the Korean government on automakers involved in the emissions manipulation scandal.
Audi Volkswagen Korea was fined 14.1 billion won in November 2015 for fabricating emissions test results for 125,000 diesel-powered cars it sold here.

Nissan Korea and Porsche Korea will be slapped with fines of 900 million won and 1 billion won, respectively, for selling 2,293 units of the Qashqai and 934 units of the Macan S Diesel fitted with the emissions-cheating software.

The three automakers were found to have installed illicit software on diesel-fueled cars to manipulate levels of emissions of exhaust gas recirculation and selective catalytic reduction when driving under test conditions, according to the ministry.

Man, VW needs to hire these crack software guys away from Mercedes, Nissan and Porsche!

 

[StealthP3D]

I appreciate your enthusiasm for Tesla. A week ago when the stock price was a little above $800, Musk tweeted, "Tesla stock price is too high imo" How do you interpret that? How does $800 too high today square with an expectation of $1200 just a few months later?

How does $800 is too high today square with higher prices in the near future?

That's an easy one. Elon is not the final arbiter of the value of Tesla - the market is. If anything, he's too close to the daily grind of churning out cars and too far away from the body of investors looking for productive assets to buy for him to be able to fairly value it. Only people with money to invest can properly value an asset. Everything else is just an approximation.

Having thought about the possible reasons for Elon's tweet that TSLA was high, I've concluded we'll never know for sure because the reason likely has to do with wanting to temporarily lower the share price and that would be frowned upon by the SEC. You might ask why Elon might want to temporarily lower the share price? Well, here's one plausible reason that had a deadline fast approaching when he made the tweet:

Tesla hits target to qualify CEO Elon Musk for big payday

Based on the timing of these two events I conclude the following:

1) The tweet was the direct result of him not wanting to be awarded the compensation package yet.
2) It failed to have the desired effect (unless he only needed another couple of days).

 

[Singuy]

I'm disagreeing with the interpretation by CNBC, because it's dumb. I agree with Elon's interpretation. Manufacturing and the logistics that support manufacturing can start tomorrow.

Of course Alameda County has stricter rules, so they have the last word.

If Elon, CNBC, and us are all waiting for the governor to specifically say "auto manufacturing" then we are all SOL. That will never come because auto manufacturing was an ESSENTIAL BUSINESS according to the initial guidelines to begin with. Unless Elon get him to specifically say Fremont, you can't reopen something that wasn't suppose to be closed to begin with.

The governor did mean exactly what he said, manufacturing of those items listed because they are all non essential manufacturing sectors NOT included in the original guidelines.

 

[dw4ngg]

How does $800 is too high today square with higher prices in the near future?

That's an easy one. Elon is not the final arbiter of the value of Tesla - the market is. If anything, he's too close to the daily grind of churning out cars and too far away from the body of investors looking for productive assets to buy for him to be able to fairly value it. Only people with money to invest can properly value an asset. Everything else is just an approximation.

Having thought about the possible reasons for Elon's tweet that TSLA was high, I've concluded we'll never know for sure because the reason likely has to do with wanting to temporarily lower the share price and that would be frowned upon by the SEC. You might ask why Elon might want to temporarily lower the share price? Well, here's one plausible reason that had a deadline fast approaching when he made the tweet:

Tesla hits target to qualify CEO Elon Musk for big payday

Based on the timing of these two events I conclude the following:

1) The tweet was the direct result of him not wanting to be awarded the compensation package yet.
2) It failed to have the desired effect (unless he only needed another couple of days).

he was clearly trying to prove the point that he didn’t care about his wealth. Seems pretty clear especially given the first segment of the JRE podcast today.

 

[dl003]

I'm disagreeing with the interpretation by CNBC, because it's dumb. I agree with Elon's interpretation. Manufacturing and the logistics that support manufacturing can start tomorrow.

Of course Alameda County has stricter rules, so they have the last word.

I understand where you're coming from, but CNBC didn't come up with that interpretation. I read about it as early as his plan came out
Newsom: California can reopen shops starting Friday | CalMatters
"California companies that make clothing, furniture, toys, and other goods those retailers sell can also resume operations, with appropriate worker protections."
I myself think it's weird that these manufacturers are singled out but it seems the key word here is low traffic retailers and those who support them.

 

[dl003]

Bay Area has officially declared 5/18 is the earliest it'll consider phase 2.
Coronavirus Update: San Francisco Officials Push Phase 2 Business Reopenings To May 18
Manufacturing was not even mentioned.

 

[FrankSG]

Apple just released earnings of 58 billion revenue, which equates to 6X revenue multiple on their 1.37 trillion market cap. Yes Apple's margins are better than Tesla's, but Q1 for Tesla showed us that 30% margin is likely sometime in Q3/Q4. Now compare Apple's growth rate to Tesla's this year and for the next 3-5 years. If Apple is fairly valued, Tesla is dramatically undervalued.

It really comes down to if believe in Tesla's growth for the next 3-5 years. I see 50% growth each year for the next 4-5 years. Maybe it drops to 35-40% growth in year 4 and 5. But even then, in 5 years we're talking about annual revenue of 151 billion. Even if growth slows to 25% in Year 6 and 7, we're talking 235 billion in annual revenue. So equal to Apple's current annual revenue.

I agree with your overall point, but I don't think looking at a revenue multiple is that useful. APPL's operating margin is ~25% compared to Tesla's current ~5%, and hopefully ~12.5% in the next 1-2 years. Tesla is not going to get to 25% operating margin until they solve FSD, further crank the selling price, and attach it to 100% of vehicles.

In general I find it more useful to look at an EBIT multiple. APPL's is a little over 20x. At Tesla's current market cap, Tesla would need a quarterly EBIT of about $1.75B to be valued at 20x EBIT. I think Tesla could get close to that in Q4 of this year, but should definitely achieve it by the end of 2021.

So yes, your point is still valid that considering Tesla's growth rate and future potential, it's significantly undervalued compared to APPL.

 

[capster]

Why would manufacturers that support florists(!?) and sporting good stores be any more of a priority or risk than any other manufacturers?

I can’t believe I’m even writing this sugar

Here in California, lots of people buying Peleton trainers — totally unfair to other fad-machine-to-sit-in-your-garage companies.

And, dude, Hello! Mother’s Day, ya know flowers.

Ditto on the can’t believe we’re writing this...

Actually I know a couple, both MD’s, who are both, um, kinda heavy and they’re just got a Peloton. Also trying to shed a few pounds myself. So, yes, I know that obesity is a risk factor, that America has an obesity problem and that that doesn’t bode well for a second wave. Still the wording adds yet another humorous angle on these bizarre times.

 

[StealthP3D]

Not at all confusing. His tweet is consistent with what he said on Monday. Manufacturers associated with bookstores, florists et al can open tomorrow.

Bookstores can open?

What about milk delivery and video stores?

And the question on everyone's minds, "When can the whaling fleet get back to work?".

 

[Artful Dodger]

Based on the timing of these two events I conclude the following:

1) The tweet was the direct result of him not wanting to be awarded the compensation package yet.
2) It failed to have the desired effect (unless he only needed another couple of days).

That was never going to happen. I've been tracking these 2 rolling avg SPs for months. TSLA would have had to close at below $524 on Friday even to stave off an award for 1 day. The reality is, for the 6-mth tgt, we were dropping $300 days and adding $700 days to the average. This was always going to vest, after the turn around happened at $360 on March 18

 

[Prunesquallor]

Tesla hits target to qualify CEO Elon Musk for big payday

Based on the timing of these two events I conclude the following:

1) The tweet was the direct result of him not wanting to be awarded the compensation package yet.
2) It failed to have the desired effect (unless he only needed another couple of days).

It will be a bad look, and it doesn't look like there's any way to avoid it. He's got thousands of employees furloughed, a shut down factory, and he's getting a big payday.

 

[StealthP3D]

I think the worship of the short term share price bugs Elon. He wants the focus to be on (1) the mission and (2) execution, which are what he cares about. When TSLA soars or plunges, the resulting obsession distracts from what he thinks is important.

I feel this strongly as well. Elon's view of shareholders is binary. On one hand, many of them are his biggest supporters of the mission and they were critical to the success of the business. On the other hand, many of the biggest shareholders don't give a crap about the mission and are just people with too much money making even more money without doing anything productive. And, as the business grows and develops, it becomes self-sustaining, new investors become the barnacles. He took pride in correcting a journalist that called him an "investor". He's not an investor, he's a business owner/operator/manufacturer.

 

[Artful Dodger]

After-action Report: Thu, May 07, 2020: (Full-Day's Trading)

VWAP: $783.05
Volume: 11,458,171
Traded: $8,972,368,440.50 ($8.92 B)

Closing SP / VWAP: 99.62%
(TSLA closed BELOW today's Avg SP)​

FINRA Short/Total Volume = 40.5% (41th Percentile rank Shorting)
FINRA Volume / Total NASDAQ Vol = 58.3% (61th Percentile rank FINRA Reporting)

Comment: "Whip-saw day w. Joe the Lumberjack"

*Main Session numbers approximate due to EDGAR data dropouts @ 15:55, 15:59