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

[Tslynk67]

Open interest and daily trading volume are high for both TSLA puts and calls for the $1000 strikes that expire Friday. Big option writers (mainly hedge funds and market makers) may want to do what they can to keep the share price near $1000. Of course news or ordinary trading interest could upset their plans.

Or put another way "I've no frickin' idea"?

 

[kengchang]

So any chance of Tesla releasing Q2 P&D on July 2nd Thursday? July 3rd is holiday and market is closed. July 6th Monday release?

 

[Don TLR]

I thought Tesla solar doesn't do flat roof, did that change?

OT and after hours.
When I ordered my 2 powerwalls they initially said they were installing them but I missed the cutoff date. When the powerwall installers were here they informed me of the newly dedicated flat roof team. Anyhow the yes/no answers have been all over the place but as you can see, as of today they are in my area.

Nice to see the share price still staying close to the psychological 1K mark, I did miss out on the lower price last week but I’m still averaging low 300’s so it’s all good..

 

[jhm]

Can you explain to a moron what "low leverage stock" means/implies?

This is based on the loan-to-equity ratio, which is total liabilities divided by equity (assets minus liabilities). Leverage is about how much debt is boosting equity so that a company can get the assets it needs. A low leverage company is using proportionately less debt than its industry peers.

For example,

Tesla $37.25B assets, $28.08B liabilities, $9.17B equity, 3.06 D/E.
GM $246.6B assets, $206.5B liabilities, $40.1B equity, 5.15 D/E.
Ford $258.5B assets, $225.4B liabilities, $33.2B equity, 6.79 D/E.

Tesla has substantially less leverage than Ford or GM. Corporations often like to use greater leverage to improve the return on equity. That is, the cost of capital from debt is typically less than for equity, so higher leverage allows a smaller equity investment to yield higher returns. Companies with thin margins and little growth, like Ford and GM, are only able to deliver an attractive return on equity through leveraging. The downside, of course, is that more debt means more risk for shareholders.

Tesla, OTOH, has been using positive free cash flow to delever, reduce the D/E ratio. So far, the market seems to appreciate the reduction in liquidity risk that this implies, while the opportunity to grow equity remains very high for Tesla. So Tesla does not need to use lots of debt either to grow fast or to spice up ROE. Indeed, the equity only $2.3B capital raise a few months ago seems to be a substantial part to supporting the current high valuation around $1000/sh. That one raise improved D/E from 4.09 to 3.06. Shareholders are more confident that Tesla has both plenty of liquidity and capital for expansion. Had Tesla issued $2.3B in debt instead, the D/E ratio would have been 4.42 instead of 3.06. Either way, liquidity and capital available for expansion would have improved, but Tesla would have substantially more leverage had it borrowed. Likely, investors would have worried more about the ability to pay back $2.3B in incremental debt than an concern about dilution.

I think part of this issue here is that that Tesla has been so traumatized by shorts attacking the stock as a potential bankruptcy case that it is simply a relief to have low leverage. Lower leverage destroys the TSLAQ case. Total debt (excluding non-recourse product financing) is just $8.3B while cash is $8.1B. For a company with market cap over $180B, this is really quite a trivial debt load. That is, Tesla is in a very strong position to be able to raise more capital from equity and delever even more. It doesn't need to, and further deleveraging might not be as well received by shareholders. But for now, I think the last equity offer was a really savvy move.

Edit. Note that there are different variants of D/E ratios floating around. Some focus only on the long-term portion of debt while others include all liabilities in the numerator. I am following the latter, most inclusive definition, per Debt-To-Equity Ratio – D/E.

 

[Motor Mouth]

Barron's - half hour ago: Lyft’s Move Shows Electric Vehicles Are Taking Over

Excerpt:

Ride-hailing company Lyft is getting rid of gasoline-powered cars in its fleets by 2030. That's the goal announced Wednesday. Batteries, and not gas, will power Lyft rides of the future.

The move isn't doing much to lift Lyft (ticker: LYFT), Uber Technologies (UBER), or EV-maker stocks today. But the news is another sign to investors that battery-powered cars are here to stay.

In the past, one of the biggest knocks against battery-powered cars was that they are more expensive to purchase up front. The electric drivetrain -- batteries and electric motors -- is pricier than a traditional internal combustion engine and gas tanks.

For its drivers, Lyft says it's committed to making the EV transition a "financial no-brainer," offsetting any higher costs with incentives. Details of purchase plans weren't disclosed.

I read this one too. Oddly, while the author acknowledges the cost of EV for high mileage applications is lower than ICE, they only reference the lower cost of electricity vs. gas. No mention of the vastly lower maintenance cost which, if I were a Lyft driver, would really be the "financial no-brainer." Nonetheless, I suppose they get points for coming to the right conclusion.

 

[Tslynk67]

This is based on the loan-to-equity ratio, which is total liabilities divided by equity (assets minus liabilities). Leverage is about how much debt is boosting equity so that a company can get the assets it needs. A low leverage company is using proportionately less debt than its industry peers.

For example,

Tesla $37.25B assets, $28.08B liabilities, $9.17B equity, 3.06 D/E.
GM $246.6B assets, $206.5B liabilities, $40.1B equity, 5.15 D/E.
Ford $258.5B assets, $225.4B liabilities, $33.2B equity, 6.79 D/E.

Tesla has substantially less leverage than Ford or GM. Corporations often like to use greater leverage to improve the return on equity. That is, the cost of capital from debt is typically less than for equity, so higher leverage allows a smaller equity investment to yield higher returns. Companies with thin margins and little growth, like Ford and GM, are only able to deliver an attractive return on equity through leveraging. The downside, of course, is that more debt means more risk for shareholders.

Tesla, OTOH, has been using positive free cash flow to delever, reduce the D/E ratio. So far, the market seems to appreciate the reduction in liquidity risk that this implies, while the opportunity to grow equity remains very high for Tesla. So Tesla does not need to use lots of debt either to grow fast or to spice up ROE. Indeed, the equity only $2.3B capital raise a few months ago seems to be a substantial part to supporting the current high valuation around $1000/sh. That one raise improved D/E from 4.09 to 3.06. Shareholders are more confident that Tesla has both plenty of liquidity and capital for expansion. Had Tesla issued $2.3B in debt instead, the D/E ratio would have been 4.42 instead of 3.06. Either way, liquidity and capital available for expansion would have improved, but Tesla would have substantially more leverage had it borrowed. Likely, investors would have worried more about the ability to pay back $2.3B in incremental debt than an concern about dilution.

I think part of this issue here is that that Tesla has been so traumatized by shorts attacking the stock as a potential bankruptcy case that it is simply a relief to have low leverage. Lower leverage destroys the TSLAQ case. Total debt (excluding non-recourse product financing) is just $8.3B while cash is $8.1B. For a company with market cap over $180B, this is really quite a trivial debt load. That is, Tesla is in a very strong position to be able to raise more capital from equity and delever even more. It doesn't need to, and further deleveraging might not be as well received by shareholders. But for now, I think the last equity offer was a really savvy move.

Which is all very ironic given the bleating from the $TSLAQ cretins about "Tesla's debt mountain".

It also implies extremely sound financial management, which much instil confidence amongst investors, especially institutional.

And yeah, makes you wonder about those Moody people...

 

[Curt Renz]

I read this one too. Oddly, while the author acknowledges the cost of EV for high mileage applications is lower than ICE, they only reference the lower cost of electricity vs. gas. No mention of the vastly lower maintenance cost which, if I were a Lyft driver, would really be the "financial no-brainer." Nonetheless, I suppose they get points for coming to the right conclusion.

Indeed, and not only does EV minimal maintenance lower costs, it increases the time available for a taxi (Lyft, Uber, etc.) driver to be making money.

 

[dl003]

Which is all very ironic given the bleating from the $TSLAQ cretins about "Tesla's debt mountain".

It also implies extremely sound financial management, which much instil confidence amongst investors, especially institutional.

And yeah, makes you wonder about those Moody people...

Some are even tricked into thinking since GM and Ford have a financing arm, their debts increase without a corresponding increase in assets since they don't own the cars anymore, saying it's apples to oranges. That's not how it works. When customers finance with them, that debt goes on their balance sheet as receivable, financed by debts. During COVID when auto delinquencies are through the roof, GM and Ford are in for a world of hurt. Not only is their D:E is higher, but the quality of the assets used as collateral for their debts also got a lot worse.

 

[StealthP3D]

Nice to see the share price still staying close to the psychological 1K mark, I did miss out on the lower price last week but I’m still averaging low 300’s so it’s all good..

When it comes to determining how much you can profit from your TSLA position over the coming years, your cost basis/share will be dwarfed by how many shares you managed to collect.

 

[AlMc]

This is based on the loan-to-equity ratio, which is total liabilities divided by equity (assets minus liabilities). Leverage is about how much debt is boosting equity so that a company can get the assets it needs. A low leverage company is using proportionately less debt than its industry peers.

For example,

Tesla $37.25B assets, $28.08B liabilities, $9.17B equity, 3.06 D/E.
GM $246.6B assets, $206.5B liabilities, $40.1B equity, 5.15 D/E.
Ford $258.5B assets, $225.4B liabilities, $33.2B equity, 6.79 D/E.

Tesla has substantially less leverage than Ford or GM. Corporations often like to use greater leverage to improve the return on equity. That is, the cost of capital from debt is typically less than for equity, so higher leverage allows a smaller equity investment to yield higher returns. Companies with thin margins and little growth, like Ford and GM, are only able to deliver an attractive return on equity through leveraging. The downside, of course, is that more debt means more risk for shareholders.

Tesla, OTOH, has been using positive free cash flow to delever, reduce the D/E ratio. So far, the market seems to appreciate the reduction in liquidity risk that this implies, while the opportunity to grow equity remains very high for Tesla. So Tesla does not need to use lots of debt either to grow fast or to spice up ROE. Indeed, the equity only $2.3B capital raise a few months ago seems to be a substantial part to supporting the current high valuation around $1000/sh. That one raise improved D/E from 4.09 to 3.06. Shareholders are more confident that Tesla has both plenty of liquidity and capital for expansion. Had Tesla issued $2.3B in debt instead, the D/E ratio would have been 4.42 instead of 3.06. Either way, liquidity and capital available for expansion would have improved, but Tesla would have substantially more leverage had it borrowed. Likely, investors would have worried more about the ability to pay back $2.3B in incremental debt than an concern about dilution.

I think part of this issue here is that that Tesla has been so traumatized by shorts attacking the stock as a potential bankruptcy case that it is simply a relief to have low leverage. Lower leverage destroys the TSLAQ case. Total debt (excluding non-recourse product financing) is just $8.3B while cash is $8.1B. For a company with market cap over $180B, this is really quite a trivial debt load. That is, Tesla is in a very strong position to be able to raise more capital from equity and delever even more. It doesn't need to, and further deleveraging might not be as well received by shareholders. But for now, I think the last equity offer was a really savvy move.

Edit. Note that there are different variants of D/E ratios floating around. Some focus only on the long-term portion of debt while others include all liabilities in the numerator. I am following the latter, most inclusive definition, per Debt-To-Equity Ratio – D/E.

This would be an excellent post to 'pin'. Thanks @jhm

 

[Curt Renz]

Benzinga - 9 minutes ago: Can Tesla's Stock Maintain The Magic $1,000 Level?

 

[tinm]

I read this one too. Oddly, while the author acknowledges the cost of EV for high mileage applications is lower than ICE, they only reference the lower cost of electricity vs. gas. No mention of the vastly lower maintenance cost which, if I were a Lyft driver, would really be the "financial no-brainer." Nonetheless, I suppose they get points for coming to the right conclusion.

Most people in the media still simply do not grok EVs. Even in 2020. I talk to media folks often and unless you are covering EVs on your daily beat as a reporter, you probably define “EV” by guessing it means “electronic vehicle,” you know, made by companies like “Telsa” in “Silicone Valley.”

 

[Nocturnal]

Model S Tesla - Broken Visor - Under Warranty - Tesla Offers to Glue it Back On

Someone on this post was saying that Overlord Musk is "pumping the stock" to sell the company.

Like, Whiskey Tango Foxtrot?

He clarified that he didn't own stock, so possibly doesn't follow the ins and outs like we do, but just a few weeks ago Overlord Musk did the exact opposite of stock pumping "Stock price is too high imo".

Ha, yup. A sizable number of investors here (myself included) were pissed at him for doing exactly that. (on top of this covid shenanigans)

Is this new? Obligatory Fred alert.

https://electrek.co/2020/06/17/tesla-massive-megapack-projec-replaces-gas-peaker-plant/

Read about that a few days ago. Kinda went under the radar but it's huge news IMO.​

 

[davecolene0606]

A Form PX14A6G has been filed with the United States Securities and Exchange Commission.
Nia Impact Capital has a new shareholder proposal:

Is complaining that Teslas' employee arbitration dispute resolution system is preventing Tesla from increasing its diversity of employee group and is a risk to investors. They attempt to bring examples of employees who have had poor outcomes from the arbitration process to support their case for increased reporting on arbitration cases. It seems to use some of the same incidences that where brought up during the union drives. While not a fan of arbitration clauses that we all sign up for when we go to work, (union or not) the case being made here seems not to have the purpose to which it purports.

Who are they? From their website:
Investing with Purpose
Nia Impact Capital invests in forward-thinking companies poised to play a key role in our transition to an inclusive, just, and sustainable economy. We apply a gender-lens across our investment decision-making process and live our values as a women-led team of activist investors.

The form has rebuttal from the B.O.D. towards the end of the document. Interesting read. I can see the source of the next FUD slam.

Fire Away!
(Its STILL the batteries, Stupid)

 

[mongo]

When it comes to determining how much you can profit from your TSLA position over the coming years, your cost basis/share will be dwarfed by how many shares you managed to collect.

If only speaking of net worth at a fixed time, sure, # of shares is all that matters. However, the number of shares you have is directly proportional to the amount of money you put toward TSLA and the average price per share you pay...
If you and I both buy $100k worth of TSLA and I pay twice as much per share, I will always have half as much profit as you.
If you and I both buy 1,000 shares, but one of us did it in 2013 and one in 2019. The 2013 buyer will always be ahead, profit wise.

 

[Nocturnal]

If only speaking of net worth at a fixed time, sure, # of shares is all that matters. However, the number of shares you have is directly proportional to the amount of money you put toward TSLA and the average price per share you pay...
If you and I both buy $100k worth of TSLA and I pay twice as much per share, I will always have half as much profit as you.
If you and I both buy 1,000 shares, but one of us did it in 2013 and one in 2019. The 2013 buyer will always be ahead, profit wise.

Of course but it's not like you can go back in time and buy on the cheap. Now it's a question of maybe getting lucky and buying more at $800 or missing out and having to buy (or not) at $1200.

 

[Motor Mouth]

Ha, yup. A sizable number of investors here (myself included) were pissed at him for doing exactly that. (on top of this covid shenanigans)

Read about that a few days ago. Kinda went under the radar but it's huge news IMO.​

In a word - WOW! I'm guilty of not picking up on the Ventura project and, thus, was totally ignorant of the scale. 3X the size of the Australia installation is incredible. Love to see TE competing so successfully in this market and thrilled that somebody is actually using this responsible alternative to peaker plants. Awesome find!

 

[Bet TSLA]

Benzinga - 9 minutes ago: Can Tesla's Stock Maintain The Magic $1,000 Level?

Curt, are you posting links to these articles in order to provide a flavor of what's being said about Tesla? As such, perhaps they're useful. But they're useless as a source of new or accurate information, at least so far as I can tell.

 

[M|S|M MYP]

Nikola — The hybrid truck manufacturer’s stock whipsawed and fell 2% after the closing bell. Bloomberg reported Wednesday that company founder Trevor Milton exaggerated the capability of Nikola’s debut vehicle in 2016. Milton suggested during the unveiling of the company’s prototype that the Nikola One truck was drivable even though it wasn’t, according to the report. Milton refuted the Bloomberg article on Twitter.


Doesn't surprise me to be honest.....

 

[StealthP3D]

If only speaking of net worth at a fixed time, sure, # of shares is all that matters. However, the number of shares you have is directly proportional to the amount of money you put toward TSLA and the average price per share you pay...
If you and I both buy $100k worth of TSLA and I pay twice as much per share, I will always have half as much profit as you.
If you and I both buy 1,000 shares, but one of us did it in 2013 and one in 2019. The 2013 buyer will always be ahead, profit wise.

All true. I was addressing the case of the person trading in/out with a portion of their investment. If they end up with fewer shares because of this behavior, over time their profit will likely be dramatically less (even though their effective amount of original money on the line might be lower due to SOME profitable trades).