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

[EinSV]

A possible mistake in your assumption is that you revert back to a 50% growth rate after two years of 100% growth. That may be too optimistic, as 50-50-50-50-50 cannot simply be replaced by 100-100-50-50-50. More likely is something like 100-100-40-40-30.

Maybe, but not necessarily. After two years (2017-2018) of massive unit and revenue growth, 2019 and the first half of 2020 were spent building capacity without much of a production ramp. As production ramps in 2H 2020 through 2021 it is highly likely that annualized unit and revenue growth will be far higher than 50%. In that context, a resumption of 50+% average annual growth rates in both revenues and units in 2022-2025 is consistent with Elon's projections. It is also not hard to imagine growth at that level given the products in the pipeline as well as likely future products, even without fully functional FSD.

Note: Tesla (Elon) is not guiding for an average of more than 40-50% compounded growth over the next five years. His predictions on FSD may be off, on total production he is more accurate: Elon was spot on when in 2015 he predicted production of 500,000 cars in 2020.

Elon has repeatedly guided for at least 50% growth in both units and revenues. In the past year or so, he has mentioned 50-100% growth (Q2 2019 call quoted in my previous post), and also repeated the projection for over 50% growth for both units and revenues on multiple occasions since.

While people commonly use the shorthand of 40-50%, that's not really accurate, or at least lacks important context.

For example, on the Q1 2020 call, Elon reiterated the 50% growth target yet again. Significantly, he specifically rejected 40% as being "more realistic." He said 50% probably was "the likely number." 40% growth was described as a lower boundary or worst case scenario, not a target.

Speaker 1: (23:33)
Thank you. Now let’s go to questions from retail investors. Question number one, Elon has mentioned a 50% compound annual growth target for Tesla in the past. Is this still in line with Tesla’s ambitions for the next 5 to 10 years? This would 4 million vehicles in 2025 and more than 20 million vehicles in 2030. Is 40% a more realistic target?

Elon Musk: (23:57)
Well, it’s always difficult to predict what the macro situation is going to be. I think very few people would have predicted the unexpected sort of roundhouse that Covid came up with that sort of came out of nowhere. I think in the absence of some massive force majeure event, like quite massive, I think probably 50% is the likely number. It’s possible that it’s 40%. I would be very shocked if it’s less than 40%, even with a force majeure, short of World War Three. Tesla (TSLA) Q1 2020 Earnings Call Transcript - Rev
​

I think it is worth getting this straight. There is a lot of confusion around the topic of Elon's growth estimates and it probably doesn't help that some of the transcripts badly butcher this quote to read as though Elon is suggesting a 40% growth rate going forward. The transcript quoted above matches what Elon actually said on the call.

While we are on the subject it is also worth correcting an error Rob Maurer recently made on this subject in claiming that Elon's >50% growth rate estimates are in the context of units not revenue. It is more correct to say that Elon has estimated growth rates for both auto units and total revenues to exceed 50%.

In 2015 Elon estimated 50% or greater annual revenue growth through 2025. Elon Musk's 'insane' call: Tesla is worth $700 billion

On the Q4 2019 call Elon reiterated this 50+% revenue growth target:

Elon Musk -- Co-Founder and Chief Executive Officer

Yeah. I think a few years ago, I said I -- yes, I think on our [Indecipherable] a few years ago, I said in my estimate, for us is that, Tesla would grow at an average compound annual rate -- average rate of in excess of 50%. I still hold to that belief.

Tesla, Inc. (TSLA) Q4 2019 Earnings Call Transcript | The Motley Fool​

It's of course fine to discount Elon's estimates, but I think it's important to be clear about what he has actually said on the topic.

 

[MABMAB]

Anyone look at history of stock splits for different companies and how the market reacted to them after the split?

Carrying this elsewhere: Stock splits, study of the action in history

 

[smorgasbord]

I think the issue here can be broken into multiple categorizations.

(1) Shorts who intended to profit, mostly a mix of long-term and short-term positions. Andrew Left, Big Short Guy, David Einhorn, r/realtesla, and all of the other retail shorts. They are all done covering and have closed their positions when it became clear they would not profit. This is why I actually believe the nutjobs in r/realtesla when they claim none of them are short, because they have all been blown out of their positions already with massive losses and all they have now is their bitterness and hatred for Elon.

(2) Shorts who intended to use Tesla’s death as a prestige play. Jim Chanos. He will never cover, because his short position is a small part of the Kynikos short portfolio, and he will absorb infinite losses because his reputation as a genius short seller who called the collapse of Enron or whatever ego nonsense drives his smooth brain is on the line.

(3) Shorts who are trying to destroy Tesla because otherwise their survival is at risk. Oil companies, major auto companies, Russia, etc. These are industry-level plays and geopolitics plays, with positions held through proxies. They will never cover, because they literally need Tesla to fail or their entire industries and countries are at risk.

So one of the most interesting issues about Tesla is that there are essentially “permanent” shorts who will not or cannot ever cover, fighting against hedge funds and institutionals who have discovered the infinite money glitch in the current market structure. In summary, Market Makers are supposed to remain delta neutral because it’s their job to supply liquidity in the form of the day’s trading shares to buyers and sellers. But now people have found that you can purchase vast quantities of far-OTM calls and unbalance the MM’s neutrality requirement, forcing them to buy shares on the open market to hedge against their own sold calls. This drives the share price upwards, which forces the eternal shorts to cover part of their positions to maintain whatever position size they limit themselves to, which causes more buying of far-OTM options, which drives the price upwards. You can see the problem here.

So basically all we have to do is keep buying shares and far-OTM options and we can drive the share price upwards in a kind of slow-motion infinity squeeze, because the shorts who are still short absolutely will never cover and will continue to give us money forever or until someone who is a big hedge fund or instutitional whale finally decides enough is enough and starts a massive selloff, triggering everyone who is FOMO’ing into also selling their positions. Be vigilant, watch your TSLA portfolio daily and hourly, when the infinity squeeze ends it will be as sudden as the end of the legendary VW squeeze.

While I find your arguments on far-OTM options and MM necessity to hedge compelling, I do take issue with your "permanent shorts" thesis. It costs money to remain short. Purchased PUTS expire, and there is a monthly cost to borrowing shares. As TSLA climbs, staying short is no longer a prestige play.

What's interesting is that the "Big Short Guy," Steven Eisman, covered in Feb not because he saw Tesla's business turn around, but because he didn't want to fight the cult. Even 'Big Short' Steve Eisman is giving up on betting against Tesla

 

[hobbes]

10 min siren for Starship SN6 150m hop!

 

[theschnell]

So I'm seeing something now in TD Ameritrade that I haven't seen anyone else post. My shares are split, but the price is not the old price, nor the calculated new price. It's $554.24. It appears they got the number of shares correct ( the most important part), but divided the closing price by 4 instead of by 5.

I would love if the shares open tomorrow at $554.24

 

[Joe F]

A true review of the threads' histories will show a very mixed bag. What you're saying is 20-20 hindsight, and those who went all in then were often wrong on the timing of their leveraged invests and suffered large losses as TSLA stagnated longer than their option expirations.

While Tesla had the right product, business model, and plan, execution was always a risk, as was legacy OEM's potential to wake up. Sometimes it's better to be lucky than smart, but even just Elon at his word at how close Tesla was to failing on a number of occassions shows that investing in Tesla was never as easy as some people make it out to be today.

One should never go all in, IMHO. Believing in and understanding where Tesla was headed could have been an exception, but even then, all in would not have been advisable.

Sometimes it’s better to look past the FUD, than be fooled into believing it.

 

[Bet TSLA]

What you're saying is 20-20 hindsight, and those who went all in then were often wrong on the timing of their leveraged invests and suffered large losses as TSLA stagnated longer than their option expirations.

Raises hand.... And being all in and leveraged and on margin makes it even more painful. I got back to even on TSLA only a couple of months ago. But now I'm up more than ever.

Definitely playing with fire being all in and more. Much entertainment value.

 

[EVDRVN]

So I'm seeing something now in TD Ameritrade that I haven't seen anyone else post. My shares are split, but the price is not the old price, nor the calculated new price. It's $554.24. It appears they got the number of shares correct ( the most important part), but divided the closing price by 4 instead of by 5.

I would love if the shares open tomorrow at $554.24

I just saw that as well, thank you TD for the extra cash!

 

[smorgasbord]

Car & Driver clickbait article title: The Adjustment Factor Tesla Uses to Get Its Big EPA Range Numbers

While the title makes you think Tesla is doing something nasty, in truth, it's the OTHER companies that are using the "secret adjustment factor":

This is where it gets interesting. The default adjustment factor reduces the window-sticker range by 30 percent. So a car that achieves 300 miles of range during the city-cycle dynamometer test ends up with a 210-mile city rating. However, the EPA allows automakers the option to run three additional drive cycles and use those results to earn a more favorable adjustment factor. Currently, only Tesla and Audi employ this strategy for their EVs, and Tesla scores the most advantageous results, with adjustments that range from 29.5 percent on the Model 3 Standard Range Plus to 24.4 percent on the Model Y Performance. If Tesla had used the standard adjustment factor of 30 percent, the Model Y Performance's window-sticker range would drop to 292 miles. But because Tesla takes advantage of the EPA's alternate methodology, the company can instead claim a 315-mile range.

This is worded to make it sound like Tesla is taking advantage of some secret loophole, when in fact Tesla is running all the actual tests while other companies are taking advantage of the "30% rule" to avoid having to run additional tests. So, the article is completely biased and backwards in how it characterizes what's going on, even if it's covering the facts properly.

Naturally, we wanted to spot-check Tesla's best-in-class road load, so we ran coastdown tests on a Model 3, a Model Y, and a Model S. Although the 1.5-mile straight we used is far from perfectly smooth and our test vehicles had no special preparation, our results were within a few percent of Tesla's. That's solid evidence that the company isn't gaming coastdown tests and that its ability to optimize efficiency really is ahead of the rest of the pack.

Finally, admitting the truth.

My main take-away from this article is that the other OEMs don't care about how well their EV offerings sell. That is, they have opted to not run some EPA tests that would probably show them with a higher efficiency than the 30% opt-out the EPA provides. Why would they do this except to save a little bit of money at the expense of selling more vehicles?

 

[StateoftheArt]

So I'm seeing something now in TD Ameritrade that I haven't seen anyone else post. My shares are split, but the price is not the old price, nor the calculated new price. It's $554.24. It appears they got the number of shares correct ( the most important part), but divided the closing price by 4 instead of by 5.

I would love if the shares open tomorrow at $554.24

We must have checked at the same time because I just about to post the same thing. Same broker.

 

[Khamul]

So Starlink launch was scrubbed due to weather, the second attempt at SN6 hop has just been aborted, likely due to weather, and the SAOCOM 1B launch in a couple hours (I think, timezones are not my thing) currently has a 40% chance of good weather, ie very high risk of a scrub. Sigh

 

[Dave EV]

Raises hand.... And being all in and leveraged and on margin makes it even more painful. I got back to even on TSLA only a couple of months ago. But now I'm up more than ever.

Definitely playing with fire being all in and more. Much entertainment value.

Checks post - yep, username fits.

 

[Dave EV]

Car & Driver clickbait article title: The Adjustment Factor Tesla Uses to Get Its Big EPA Range Numbers

While the title makes you think Tesla is doing something nasty, in truth, it's the OTHER companies that are using the "secret adjustment factor":



This is worded to make it sound like Tesla is taking advantage of some secret loophole, when in fact Tesla is running all the actual tests while other companies are taking advantage of the "30% rule" to avoid having to run additional tests. So, the article is completely biased and backwards in how it characterizes what's going on, even if it's covering the facts properly.



Finally, admitting the truth.

My main take-away from this article is that the other OEMs don't care about how well their EV offerings sell. That is, they have opted to not run some EPA tests that would probably show them with a higher efficiency than the 30% opt-out the EPA provides. Why would they do this except to save a little bit of money at the expense of selling more vehicles?

Yep, I thought the exact same thing reading the article. All the facts are there and appear to be correct, but 98% of the article is written to make it paint Tesla in a bad light or insinuate that Tesla is cheating or minimize the efficiency advantages Tesla has.

That said, I do think that providing constant speed efficiency numbers and range would be informative for the consumer. Look at how many YouTubers do their own efficiency tests and people on forums have been performing their own efficiency and range tests as well forever.

 

[tinm]

incorrect. Elon projects 2M / year between Model 3 & Y. Cybertruck should do 1M / year and then there’s SX and Semi.

‘So your argument is with Elon not me. In the next 5 years, we just don’t need cheaper vehicles to drive demand. After that, then most definitely.

You’re right, we don’t need cheaper vehicles to drive demand.

But that isn’t Tesla’s mission. The mission is to accelerate the transition to sustainable energy. Cheaper vehicles accelerate the transition. So we need cheaper vehicles ASAP.

 

[Opus BC fan]

I just saw that as well, thank you TD for the extra cash!

Now 443.50 per share on TD Ameritrade...

 

[Kalani]

I should mention that Russia and China are quietly in a proxy war here over electrification, because Russia’s economy is a ruin and dependent entirely on oil and gas sales but China is a net importer of energy which is all-in on electric vehicles and is trying to use development of an electric vehicle industry to try and take over the world automobile industry because they obviously cannot take over the ICE industry. So there is a geopolitical battle going on between Russia, the “old” opponent of America from the Cold War era, and China, the “new” opponent of America in this burgeoning information age. When Tom Clancy imagined the Bear and the Dragon going to war, he was correct when he predicted it would be over energy, but he ended up being 20 years too early and predicted a shooting war instead of an economic one.

Tesla is meanwhile fighting a lonely battle against Big Auto, which is a multi-national juggernaut that is a key industry to the economy of multiple nations, most notably Germany which is the most important economy in the European Union. The geopolitical aspects of this are also notable, because traditionally strong economies and nations also had strong auto industries. The EU is at significant economic and geopolitical risk if their auto industry collapses and is replaced by (American) Tesla and Chinese electric vehicle manufacturers.

The United States, being the birthplace and home of Tesla and also China’s primary competitor, is the player around which all these geopolitical battles revolve. Russia has already signaled they are willing to try and undermine the US by covert means, and the recent attempt at a cyberattack on Giga Nevada is just the opening play on a growing geopolitical theater involving electrification. Entire nations and industries will be reshaped and destroyed in the next 20-30 years.

Your two posts are the most concise, to the point analysis I have read for a while. Thank you!

 

[jpsgoneev]

Greg from TeslaFanInsight YT channel has some comments on split and post-split expectations. I’ve read opposing views in both direction and in scale.

So, we shall see when we see it. Either way, it’ll be fun to watch. As a HODLer, I’m prepared to buy or sell if the opportunity/need arises.

 

[Prunesquallor]

Now 443.50 per share on TD Ameritrade...

442.68 on E*TRADE

 

[Singuy]

Minor dive into technicals and what to expect next week based on historical runs. But this is Tesla so nobody knows.

 

[ggr]

Same here. Some options are up a crazy amount and some are present but zeroed out. Core shares seem ok.

The strike prices that already existed in the system pre-split are showing the last trade prices for those options, which of course were deep in the money, so much more valuable in general than the options were before. The ones with "odd" strike prices like $276 or $294 have never traded before, so show as zero. It'll all work out tomorrow.