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

[steve3]

Here is the "blockbuster Reuters report" (according to our friends at Seeking Alpha):
Exclusive: Apple targets car production by 2024 and eyes 'next level' battery technology - sources

...It remains unclear who would assemble an Apple-branded car, but sources have said they expect the company to rely on a manufacturing partner to build vehicles. And there is still a chance Apple will decide to reduce the scope of its efforts to an autonomous driving system that would be integrated with a car made by a traditional automaker, rather than the iPhone maker selling an Apple-branded car, one of the people added.​

So not committed to making a car. If they make only self-driving software, how will they compete with Tesla's training data? Especially by 2024?

Two people with knowledge of Apple’s plans warned pandemic-related delays could push the start of production into 2025 or beyond.​

So not committed to 2024.

Apple has decided to tap outside partners for elements of the system, including lidar sensors, which help self-driving cars get a three-dimensional view of the road, two people familiar with the company’s plans said. Apple’s car might feature multiple lidar sensors for scanning different distances, another person said. Some sensors could be derived from Apple’s internally developed lidar units, that person said.​

I guess they missed Elon's comments about lidar, and want to compete with Waymo, not Tesla.

As for the car’s battery, Apple plans to use a unique “monocell” design that bulks up the individual cells in the battery and frees up space inside the battery pack by eliminating pouches and modules that hold battery materials, one of the people said. Apple’s design means that more active material can be packed inside the battery, giving the car a potentially longer range.​

Or you could make the cells structural to save space and weight. Guess they didn't think of that.

Apple is also examining a chemistry for the battery called LFP, or lithium iron phosphate, the person said, which is inherently less likely to overheat and is thus safer than other types of lithium-ion batteries. ”It’s next level,” the person said of Apple’s battery technology.​

Uh huh. (Note to noobies: Tesla uses LFP for some products.)

Apple had previously engaged Magna International Inc in talks about manufacturing a car, but the talks petered out as Apple’s plans became unclear...​

Sounds like Magna needs to wait some more.

So how will analysts react to this blockbuster report? SA quotes Loup Ventures' Gene Munster:

• "We see little fundamental risk to Tesla if Apple were to release a car. EV's today account for 3% of cars sold; in 5 years we expect the share of EVs to be closer to 30% of all auto sales."
• "We believe in 5 years Tesla will hold around one third global EV market share, leaving two-thirds of the market up for grabs. The bigger impact of an Apple Car will be on traditional automakers," he adds.

Right on, Gene, but...

• In the near-term, Munster thinks the Apple Car development will likely weigh on shares of TSLA as investors integrate a new risk factor into their investment thesis, although he predicts anticipation of an Apple-branded car will likely level off in the months ahead.

My anticipation leveled off in the last 4 seconds.

• In the longer-term, the Apple topic is expected to remain and likely have some negative impact on TSLA’s multiple in 2023 and beyond.

In 2023 and beyond, Tesla will have gigafactories on at least 3 continents gushing millions of vehicles and energy products, more factories on the way, who-knows-what other products on the way, and non-lidar FSD making all other systems and robotaxis obsolete. I'm not too worried about the longterm impact of the Apple topic.

Here’s Gene’s video. Loup tv tonight, Gene Munster with Doug Clinton:

 

[kemallette]

With a few exceptions, TSLA has always been expensive by conventional wisdom.
I hate to say this, but the level of speculation in the market right now can rival that from the dot com days. AAPL is trading at 33 P:E with piss poor growth. By my own calculation, we are at about 100 - 110. Not at all expensive, considering the immense runway TSLA is staring down. We are in a steep long term upward trend and as long as TSLA keeps executing briliantly, we should stay with the trend.

I get the sentiment. I even agree with it in regards to certain companies and perhaps the EV and related space. Seeing companies with no product in market and 0 to virtually 0 revenue (NKLA, QS) commanding multi-billion dollar valuations is astronomically absurd.

However, those are the exception rather than the rule. The numbers just don't point to another dot-com bust. Here's a nice thorough write-up penned in Sept on why. No, This Isn't a Repeat of the Dot-Com Bubble – Of Dollars And Data

Here are some key takeaways from the article:

Note: I've also adjusted some of the numbers to show where we are now vs when this was written in Sept as well as added a few tidbits not in the article

1. Nasdaq 5-year performance:

95 - 2000: +456%
2015-Current: +156%
​

2. Sampling of biggest individual performers:

95-2000 (avg 11x - 40x)
Intel: +998%
Cisco: +3,910%
Oracle: +1,220%
Microsoft: +1,600%

2015-2020 (avg 2.5x - 6x)
Apple: +401%
Amazon: +375%
Netflix: +361%
Facebook: +155%
Zoom: +559%
TSLA: +1,234% <---- Noteable exception I address at the end of the post​

3. P/E Ratios are still below the dot-com average: 44 vs 29-30ish

4. Yields (TINA - there is no other alternative)

Current average earnings yields (E/P) are:

Now: ~3-3.3% (1/29.5)
Dot-com: ~2.2% (1/44)​

Meaning, investors expect about a 3-3.5% return for every dollar they put in a stock now vs 2% during the dot-com bust.

That doesn't seem like a big difference, but when compared against a MUCH safer investment, the 10 year treasury, there's a huge difference.

10-year US bonds:

Now: <1%
Dot-com: ~6%​

In the dot-com bust, you were taking a risk on companies barely earning anything for a meager 2.2% yield versus a 6% virtually guaranteed return in bonds! Now, you're lucky to get 1% on bonds versus 3% or better in stocks. Needless to say, it's not crazy to hear folks saying Amazon and Apple are better than bonds for storing your dollars.

To sum it up

Yes, TSLA is absolutely a performance outlier. However, unlike in the dot-com bust, investors are being forced to stick their dollars somewhere and mega-cap tech in the world's largest TAMs (total addressable market) is one of the best places to do that.

TSLA is:
- credibly competing in the two largest TAMs and arguably leading technology driven disruption in both
- TSLA's technology and business model has already proven economical -- an important distinction when comparing against dot-com businesses that were not economical
- led by a truly once in a generation level leader in his prime with decades of experience
- incredibly resilient having survived two MASSIVE economic disasters, one of which was the largest seen since the great depression and early in TSLA's existence

I don't have a crystal ball, but I can tell you that this valuation isn't irrationally exuberant by any means.

 

[geometro]

Maybe Apple will build a car, but maybe they won’t. If Jobs was around I would be more inclined to believe the story, but Cook hasn’t really made any big investments — he did the $5bn Beats deal and rolled out a Watch.

Everything else has been incremental changes on existing product lines. Just doesn’t seem to be in the dna to do something truly big (and as someone else pointed out, move into a lower margin product line).

 

[jw934]

I take this as very bullish for production and delivery numbers due to be released in about 10 short days.

Gary Black supports your take. He is saying Elon was probably at the delivery center today to help deliver the 500,000th car for 2020. https://twitter.com/garyblack00/status/1341508497570226178?s=20 This would be a great achievement to show all the naysayers from June 2015 who said that was a pipe dream. Tesla Motors Inc.'s Model 3 Ambitions May Be More Realistic Than You Think | The Motley Fool

(For reference, this is in regards to the meaning behind Elon's tweet today: "Thanks to everyone who worked so hard to make Tesla successful. My heart goes out to you." ) https://twitter.com/elonmusk/status/1341006575650140161?s=20

 

[MC3OZ]

Nope, I’m good. Got my mountain, while everyone was looking in the island direction. Already have my general contractor and I start building next spring. Going to try and beat Giga Texas build.

I suggest a mini replica of Giga Texas, the stamping press will be great for ironing... and Piranhas in the ponds might come in handy.

 

[TheTalkingMule]

Not so fast:

"7 mins ago — Trump did not explicitly threaten to veto the bill, but said he was dissatisfied with its final state. The President's position could threaten to torpedo the carefully ..."​

Covid relief bill: Trump throws stimulus in doubt by asking Congress to amend it - CNNPolitics

EDIT:

POTUS asking for $2,000 checks for individuals instead of $600. House Dems already declared unanimous support. This issue is NOT going to stop a Bill from completion this week. Macro dump after-hrs is algo's.

Trump pushing $2k to the Robinhood bro's instead of $600 is A-OK with me!

 

[Singuy]

Gary Black supports your take. He is saying Elon was probably at the delivery center today to help deliver the 500,000th car for 2020. https://twitter.com/garyblack00/status/1341508497570226178?s=20 This would be a great achievement to show all the naysayers from June 2015 who said that was a pipe dream. Tesla Motors Inc.'s Model 3 Ambitions May Be More Realistic Than You Think | The Motley Fool

(For reference, this is in regards to the meaning behind Elon's tweet today: "Thanks to everyone who worked so hard to make Tesla successful. My heart goes out to you." ) https://twitter.com/elonmusk/status/1341006575650140161?s=20

Well that customer needs to show off a picture and announce it somewhere online because Musk is banned from talking about delivery/production numbers.

 

[UncaNed]

Electrek - hour ago: Pete Buttigieg wants to put 'millions' of electric cars on US roads - Electrek

Excerpt:

Pete Buttigieg, casually known as “Mayor Pete” since he was mayor of South Bend, Indiana, for eight years, was nominated last week by President-elect Joe Biden to be secretary of transportation. Buttigieg reiterated what he wants for the future of electric cars in the US late yesterday afternoon.

Wouldn't it be great for Tesla to lobby against any further subsidies or tax credits for the EV industry other than matching the ones already taken by Tesla (out of fairness to competitors) and any typically offered by federal, state, localities to attract other new businesses and factories (fairness to Tesla)?

Elon would be totally taking the high road, putting all the legacy automakers on the spot if they ask for or take any help to build out a charging network like the one Tesla is doing quite well with mostly at it's own expense, one that works much better and, from what I've heard, more reliably than alternative charging networks. Let TSLA loudly demonstrate how to be a grownup big boy.

I'm thinking of all the subsidies legacy auto makers need to cover years of retirement/pension funding and union related costs of doing business that Tesla doesn't have. Not fair the gummint' pays for that, and who has a link to ~last week's post I can't find suggesting we contact our reps AGAINST subsidizing ICE OEM'S transitioning to EVs?

 

[AudubonB]

I get the sentiment. I even agree with it in regards to certain companies and perhaps the EV and related space. Seeing companies with no product in market and 0 to virtually 0 revenue (NKLA, QS) commanding multi-billion dollar valuations is astronomically absurd.

However, those are the exception rather than the rule. The numbers just don't point to another dot-com bust. Here's a nice thorough write-up penned in Sept on why. No, This Isn't a Repeat of the Dot-Com Bubble – Of Dollars And Data

Here are some key takeaways from the article:

Note: I've also adjusted some of the numbers to show where we are now vs when this was written in Sept as well as added a few tidbits not in the article

1. Nasdaq 5-year performance:

95 - 2000: +456%
2015-Current: +156%
​

2. Sampling of biggest individual performers:

95-2000 (avg 11x - 40x)
Intel: +998%
Cisco: +3,910%
Oracle: +1,220%
Microsoft: +1,600%

2015-2020 (avg 2.5x - 6x)
Apple: +401%
Amazon: +375%
Netflix: +361%
Facebook: +155%
Zoom: +559%
TSLA: +1,234% <---- Noteable exception I address at the end of the post​

3. P/E Ratios are still below the dot-com average: 44 vs 29-30ish

4. Yields (TINA - there is no other alternative)

Current average earnings yields (E/P) are:

Now: ~3-3.3% (1/29.5)
Dot-com: ~2.2% (1/44)​

Meaning, investors expect about a 3-3.5% return for every dollar they put in a stock now vs 2% during the dot-com bust.

That doesn't seem like a big difference, but when compared against a MUCH safer investment, the 10 year treasury, there's a huge difference.

10-year US bonds:

Now: <1%
Dot-com: ~6%​

In the dot-com bust, you were taking a risk on companies barely earning anything for a meager 2.2% yield versus a 6% virtually guaranteed return in bonds! Now, you're lucky to get 1% on bonds versus 3% or better in stocks. Needless to say, it's not crazy to hear folks saying Amazon and Apple are better than bonds for storing your dollars.

To sum it up

Yes, TSLA is absolutely a performance outlier. However, unlike in the dot-com bust, investors are being forced to stick their dollars somewhere and mega-cap tech in the world's largest TAMs (total addressable market) is one of the best places to do that.

TSLA is:
- credibly competing in the two largest TAMs and arguably leading technology driven disruption in both
- TSLA's technology and business model has already proven economical -- an important distinction when comparing against dot-com businesses that were not economical
- led by a truly once in a generation level leader in his prime with decades of experience
- incredibly resilient having survived two MASSIVE economic disasters, one of which was the largest seen since the great depression and early in TSLA's existence

I don't have a crystal ball, but I can tell you that this valuation isn't irrationally exuberant by any means.

~~~Welcome to TMC. That's a fine first post; thank you for your contribution.~~~

 

[AudubonB]

Wouldn't it be great for Tesla to lobby against any further subsidies or tax credits for the EV industry other than matching the ones already taken by Tesla (out of fairness to competitors) and any typically offered by federal, state, localities to attract other new businesses and factories (fairness to Tesla)?

Elon would be totally taking the high road, putting all the legacy automakers on the spot if they ask for or take any help to build out a charging network like the one Tesla is doing quite well with mostly at it's own expense, one that works much better and, from what I've heard, more reliably than alternative charging networks. Let TSLA loudly demonstrate how to be a grownup big boy.

I'm thinking of all the subsidies legacy auto makers need to cover years of retirement/pension funding and union related costs of doing business that Tesla doesn't have. Not fair the gummint' pays for that, and who has a link to ~last week's post I can't find suggesting we contact our reps AGAINST subsidizing ICE OEM'S transitioning to EVs?

Here it is:

I like your attitude and the gist of your post. I don’t think it’s written in the right tone for the following but - I do think that, carefully crafted, then all who favor a responsible transition away from a hydrocarbon-intensive transportation sector should adorn - again and again - their D.C. representatives (edited to correct a wacko Autocorrect) with such letters; such also should go to Sec’y of Transportation Buttigeig’s and Sec’y of Energy Granholm’s offices, too.

 

[Big Time]

 

[ZeApelido]

View attachment 620329

Gonna go out on a limb and say you cannot access his Twitter profile anymore.

 

[Cosmacelf]

Sorry if this is a repost. Fascinating dissection of tslaq.

Chapter 4: Meet $TSLAQ

 

[Buckminster]

Alternative threads for your iCar discussions:

Where is Apple?

Apple Car apparently back on

 

[StealthP3D]

Instead of endless AAPL dribble, let’s discuss something much more interesting: Expiring Jan 15, 2021 monthly options. Has anyone else looked at the $190 max pain and the huge number of calls below $200? What will the MMs do? This is not your normal weekly max pain manipulation. Thoughts experts? @Bet TSLA @Right_Said_Fred @Papafox

I'm not an expert on this but it's pretty much common sense that MM's have already hedged/written those off as a loss. They are basically not relevant unless you are the happy soul holding them.

 

[Boomer19]

I get the sentiment. I even agree with it in regards to certain companies and perhaps the EV and related space. Seeing companies with no product in market and 0 to virtually 0 revenue (NKLA, QS) commanding multi-billion dollar valuations is astronomically absurd.

However, those are the exception rather than the rule. The numbers just don't point to another dot-com bust. Here's a nice thorough write-up penned in Sept on why. No, This Isn't a Repeat of the Dot-Com Bubble – Of Dollars And Data

Here are some key takeaways from the article:

Note: I've also adjusted some of the numbers to show where we are now vs when this was written in Sept as well as added a few tidbits not in the article

1. Nasdaq 5-year performance:

95 - 2000: +456%
2015-Current: +156%
​

2. Sampling of biggest individual performers:

95-2000 (avg 11x - 40x)
Intel: +998%
Cisco: +3,910%
Oracle: +1,220%
Microsoft: +1,600%

2015-2020 (avg 2.5x - 6x)
Apple: +401%
Amazon: +375%
Netflix: +361%
Facebook: +155%
Zoom: +559%
TSLA: +1,234% <---- Noteable exception I address at the end of the post​

3. P/E Ratios are still below the dot-com average: 44 vs 29-30ish

4. Yields (TINA - there is no other alternative)

Current average earnings yields (E/P) are:

Now: ~3-3.3% (1/29.5)
Dot-com: ~2.2% (1/44)​

Meaning, investors expect about a 3-3.5% return for every dollar they put in a stock now vs 2% during the dot-com bust.

That doesn't seem like a big difference, but when compared against a MUCH safer investment, the 10 year treasury, there's a huge difference.

10-year US bonds:

Now: <1%
Dot-com: ~6%​

In the dot-com bust, you were taking a risk on companies barely earning anything for a meager 2.2% yield versus a 6% virtually guaranteed return in bonds! Now, you're lucky to get 1% on bonds versus 3% or better in stocks. Needless to say, it's not crazy to hear folks saying Amazon and Apple are better than bonds for storing your dollars.

To sum it up

Yes, TSLA is absolutely a performance outlier. However, unlike in the dot-com bust, investors are being forced to stick their dollars somewhere and mega-cap tech in the world's largest TAMs (total addressable market) is one of the best places to do that.

TSLA is:
- credibly competing in the two largest TAMs and arguably leading technology driven disruption in both
- TSLA's technology and business model has already proven economical -- an important distinction when comparing against dot-com businesses that were not economical
- led by a truly once in a generation level leader in his prime with decades of experience
- incredibly resilient having survived two MASSIVE economic disasters, one of which was the largest seen since the great depression and early in TSLA's existence

I don't have a crystal ball, but I can tell you that this valuation isn't irrationally exuberant by any means.

nice find...
(rambling post incoming)
...but to add some color, most of my anxiety comes from the results the country has posted against the backdrop of 2008 until our current position in the middle of covid. there are numerous points in history that we look back and say, “well, that was avoidable”. it’s hard not to believe we are in one of those times.
aside from the anticipated woulda shoulda coulda, buy and hold, and whatever...
had we not refused to get a handle on derivatives, run up wild deficit bailing out the culprits, maybe we’d have been more prepared, or at least, able to weather the fiscal impact of a covid (let alone the $ part of it is the least of my concern..but we’re talking markets). or tell me that the repeal of glass steagle, ~9 years prior to 2008, led to the melt up that enabled meltdown. can’t have one without the other, right? so who’s wrong? of course i blame govt. it sure as hell wasn’t our fault here at TMC!

but these boom bust debt cycles recur. there’s models of the behavior of the cycles, bubbles, etc. but these phases can take months/years. it’s exhausting trying to pinpoint where we are on the timeline. decent timeline of historical deficit to gdp US Deficit by Year Compared to GDP, Debt, and Events
but to paraphrase another unnamed culprit
...we’d have to turn more unknown unknowns into known unknowns and known knowns in order to know

btw i’m agreeing that is now is a different beast than 2000. but i’m also weary of just thinking about part of the picture.

and with tesla still seemingly in the momentum column, it’s possible we see some exaggerated swings, despite s&p addition.
we may just be witnessing a great migration that is looking for a new watering hole. since the market ‘looks forward’, what is next? is this when we see legacy autos start to have a run taken at them? do we go 180 from tslaq to gmacq? dunno.
hopefully these birds find a watering hole where 600 or above is the preferred amperage from here on out. ok, 550 for some of the gamblers.. but no less.

 

[Oil4AsphaultOnly]

The whole business of heat pumps is very relevant, but not yet urgent for TSLA.

At the moment TSLA can take 80kWh (=$8,000) of battery and put it in a mobility wrapper using a highly automated high volume production line and sell it for $50,000 at a GM of ~30% with some add-ons, and have no effective competition and a simple sales/delivery process. Or TSLA can put 6 Powerwalls together (80kWh) in a stationary wrapper using a very mandraulic low volume batch-build process and sell it for 6 x $8k = $50k at ~10% margins with competition that is half the price for 80% of the value (typical LG product), i.e, highly competitive (and would be even more so if they hired some one like me !) and a complex sales/delivery process..

(we are not exactly sure of the numbers because they are not breaking out the detail we require - I am giving some of my own insight here)

On that basis TSLA should ramp stationary only so fast as is required to not lose the #1 position, which is exactly what they are doing.

When there comes the day that the TSLA product reaches sufficient scale to grab the value associated with the rejected (battery management) heat for trivial associated extra product or delivery chain cost, then, and only then (unless LG etc get there first ....) should TSLA start to go aggressively after the higher %GM that are intrinsically available in the homepower (and office/etc) power markets.

Until then the best strategy for TSLA is to hang back, which I say with some regret.

regards, dspp/pb

You're like an old buddy of mine, very application specific thinking.

Octo-valve on the model 3/Y has already demonstrated that DC HVAC is solved as far as heating/cooling is concerned. Not having to convert Solar/battery into AC and then back into DC again means they can power the HVAC directly from the batteries to minimize conversion losses, AND connecting HVAC to the batteries, means they can optimize the power levels of the HVAC with the power delivery of the solar panels.

There are huge gains in a home's energy efficiency (a marketing bullet point) to be had with further integration of Tesla energy products. There would be zero additional batteries needed with this side project.

However, I agree that this isn't a near term project, since Tesla is also tight on engineering time.

 

[Paul_SF]

Great suggestion!

 

[Bet TSLA]

Dilution
So what's going to happen with Tesla in hypergrowth mode? All those tens of thousands of employees. It's not just Elon getting stock. Every share is created from thin air (not really -- they're typically bought at the price current when they were originally granted), resulting in the dreaded dilution of investors' holdings.

Are we worried? Is there enough to matter?

 

[StealthP3D]

Disagree on the “close to Mission Acommplished on clean energy and transport” part. Not by a long shot. The transition needs to be much faster to ensure its success (climate change averted).

1). 65% of oil production is burned as automotive petrol/diesel and heating oil which must be eliminated ASAP. BEVs and renewable/battery stationary need to scale much faster by demonstrating clear production and operating economic superiority over ICE and oil heating. Scale and economy of existing tech/products/batteries must take priority before any of the "fun stuff".

2) Renewable battery/stationary costs must decrease to the point of making NG power production clearly uneconomical (as in the deliberate retirement of existing assets).

FSD, Mega-casting, battery efficient/production are all the right things, but we need more of the same. There needs to be another round of innovation that puts oil/NG burning out of business within 10 years.

I agree with everything except it's important to realize we cannot avert climate change because it's already happening. And no matter how successful the transition to zero net carbon, AGW will continue to happen for an unknown amount of time. The point of this exercise is to minimize the severity of it. There is no way to avert something that is already happening. And this is where the science of AGW is the weakest - how much worse will climate change become even after we become carbon neutral?

Of course none of this means we should throw our hands up and give up. It means we don't know how bad it will get and we should pour as many resources as possible, as early as possible, at the problem so we don't have to look back, full of regret, and say "We should have moved with more urgency."

It appears that Elon understands this with a clarity that most people lack. It's really foolish that more humans don't take this more seriously and with more urgency. The planet and the climate will not wait for us to get up to speed. We can fight corruption, we can fight communism, we can fight fascism, but none of it really matters if we cause our only climate to run away from us in such a way as to leave us with a horrifically difficult, uncomfortable and uneconomic future.