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

[ninpb]

Days like these is a good reason we need a reaction symbol for WTF!?

 

[thx1139]

Respectfully, I disagree.

Here's the portion of the call (word for word from the transcript)...

...If there is no $25,000 vehicle being worked on, is it really realistic to think that you can sell more than 3 million vehicles with two very high-volume cars and Cybertruck in 2024, or how do we think about that or what else is missing in that equation?

Elon Musk

Yes. I mean, it's apparent from the questions that the gravity of Full Self-Driving is not fully appreciated. If an asset has 5 times more utilization than the -- it's like dividing the cost of that asset by 5....


He literally answers the question about not working on the $25K EV with FSD and how people don't get the math...

To me this was Elon saying you are not going to trick me into opening the kimono until I am ready.

 

[kbM3]

We know he's a clown to be ignored but now that he's walked into my house, I must respond.

+15b (Tesla Q4 expenses)
+ 2b (Tesla Q4 Capital Expenditures)
- 6b (Remove Tesla Q4 payroll)
$11b - Total Spend with Vendors in Q4

$5.7b Accounts Payable at Dec 31.

So of the $11b in spend with vendors in Q4 (90days), Tesla owes vendors $5.7b. That means they have 47 day terms. Many Fortune 100 companies pay in 60 days. In my opinion, Tesla is paying bills too soon . . . .there's room for improvement to generate more cash flow.

Thanks for explaining that.

Is the following Interpretation correct?

Running an AP balance increases cash flow only in the case where it is increasing (Tesla is growing). If Tesla had a quarter with no growth, there would be zero cash flow and if Tesla had a quarter with slower growth there would be negative cash flow.

In my mind it’s a little like credit card float. Assume you’re charging $2k / month on credit card. The first month you have a positive cash flow of $2k because you didn’t pay cash, so your savings increases by $2k. In the months following, if the amount you charge stays the same every month, then cash flow goes to zero that extra $2k just sits in your account, giving you a higher balance from then on.

 

[lafrisbee]

It's easy to forget that a low valuation is powerful bait for attracting top talent. Even in an era of part shortages, the biggest limiting factor to Tesla's long-term growth is a lack of enough smart, capable people. Telsa's wages are only industry-leading once employee stock options are considered. Smart people get this. A lower share price could easily be the difference between an individual deciding to take the plunge and diving head-first into work at Tesla vs. taking the easy way out and living on the earnings from their last lucrative job or remaining where they are. A low share price makes Tesla a much more attractive place to work. It is also powerful incentive for people already integrated in Tesla to remain.

It's counter-intuitive but a low share price is actually very good for Tesla's long-term trajectory. And this is really an important turning point for the company in terms of transitioning into the next phases of their growth. You can't bring successful new products to market in ever-increasing numbers without an ever-increasing supply of human talent, Tesla's most limiting factor.

i disagree. Employees at the level of "Smart people" in engineering don't give significant weight to the monetary dimension of the job once it gets to "I can easily live with that."
It's, "What am i going to be doing, and with who, and what resources will I have."

 

[Discoducky]

Once you realize that E. lands rockets like clockwork, it isn't a far stretch to think he'll solve FSD.

and yes, it isn't lost on me that these are very different beasts and that he's got very little timeline cred for his FSD predictions.

But will it happen? Yes

Why? Every young, top of their field ML engineer and DS wants to work for him. It is just a matter of time.

All the complaining reminds me of Veruca Salt honestly...

 

[Fishy Fish]

Haven't seen this mentioned yet, but Nio, Xpeng, and Rivian are all also down ~7%

 

[StealthP3D]

Between 2019 and yesterday’s earnings call, things did not “go well.” There’s a matter of a global pandemic and massive supply chain disruption that forced Tesla to push back production on three previously announced models. It’s also clear that Tesla was taken by surprise by the overwhelming demand for the Model Y that’s hoovering up the available battery supply

Exactly. I think the entire premise of the $25K Tesla model was that the size of the addressable market expands as the price is lowered. The idea being that if Tesla was to hit their planned production growth of 50% plus per year, that would necessitate going down-market. But that was when the ASP of a car sold domestically was around $36K. The current average price of a new car is about $46K so things have changed quite quickly with COVID.

It appears Tesla dramatically under-estimated demand for their more expensive Models 3 and Y to the point that it looks like they can continue to expand production of the more expensive, more profitable models, as much as a limited chip supply will allow, without running out of demand. If you are production limited because of chips, it's doesn't move the mission forward to trade production of more expensive cars for production of cheaper cars with lower profit margins.

While the limited availability of chips is obviously a negative, the need to not have to go down-market as quickly, to continue selling increasing numbers of higher margin cars, more than makes up for it from a profitability standpoint. This should be like music to investors ears, not a wet rag on a smoldering fire.

 

[mongo]

Well... if they don't need more factories, I wonder how Berlin responds? Could be a strategy to get it open at least. Maybe board it up some to send the message loud and clear. (OK, no don't do that, I'm a shareholder.) But that could be a new posture following the China growth story, then say they don't need more factories this year. Now watch Berlin open...

They need more factories for growth >50% and for higher gross margin (localized delivery, reduced congestion).
Zach:

As Elon mentioned as well, from what we're seeing, the pace of growth in 2022 will, again, be determined by supply chain and logistics, which is quite difficult for us to forecast.Despite these constraints, it's important to begin the ramp of Austin and Berlin to ensure that we are prepared once limitations ease, enabling us to increase total output more quickly in the future.

Unlike the Model 3 'tents', Berlin is not on the critical path for profitability.

 

[dl003]

While I'm disappointed about the market reaction today, I can't say that I'm surprised. For the last few weeks, TSLA has shown tremendous relative strength compared the the broader market. In fact, it's one of the only high PE equity that had not tested the 200 EMA while QQQ and SPY sliced through their respective supports like butter. It's a sure sign of heavy buying the rumor. True to TSLA's fashion, today is the sell the news event, which is only amplified by the skittish sentiment in the market. I don't think it has anything to do with the product roadmap, or lack thereof. Give it time for financial channels to update TSLA's TTM EPS and 2022 EPS then we'll march upward.

 

[TSLA_Hopeful]

I know that this isn't what other people want to hear, but I've been a bull since '13. What Elon said has shaken me and the bull case significantly, and I think we are in for another period of the lost years from '14-'19.

Imo, Tesla is taking too many gambles to maintain the 50% growth per year, and I think it will ultimately bite back in the ass.

 

[abasile]

Elon should have told us why he is so bullish on FSD, and not just from a cost perspective. Is there exponential growth in the number of users having 0 intervention drives? Are there thousands of FSD Beta testers choosing to let the car drive in places they used to drive manually? How is the march of 9’s progressing? Etc. Instead he chose the “ye of little faith” approach.

I can appreciate the prioritization of Optimus, given labor shortages, and the emphasis of FSD, given that it's needed for Optimus. And as an FSD Beta user, and semi-longtime Autopilot user, I've been gratified to see Tesla's autonomy progress.

However, it seems strange that Elon can believe there's any real chance of L4 autonomy in 2022, at least without some serious geo-fencing. I say geo-fencing because FSD and Autopilot are often compromised by bad map data that doesn't seem to get updated. Over-optimistic timelines are typically not received well by investors!

On the other hand, Elon's perpetual optimism is arguably necessary for him and others to push forward with the high level of energy that we've all benefited from. So, on balance, I find it hard to be anything but appreciative of Elon's willingness to make straightforward public comments, even as the stock dips in the short term. If Tesla management needs to change course and introduce a cheaper car, I have confidence they can do so expeditiously, as they could essentially build a smaller and simpler Model 3/Y rather than pushing the envelope big-time as with Model X or Cybertruck.

Thanks for the opportunity to flesh out these thoughts in writing.

 

[Opus BC fan]

As a dedicated long, I advise...

 

[LiveLong&Profit]

Yeah, the other barrier to people choosing a robotaxi over a bus, as Elon said is a bus carries ~5x more people per lane-space than a car. Where are all the single-user robotaxis going to fit on the roads??

My lay partner pointed this out when I was glowing about the earnings call. Seems like an obvious issue, no? Requires Boring solutions?

Cars will 'park' while driving to the next customer.
Parking space on sideways and in dedicated buildings will become obsolete.

Long term, the new standard form factor of the FSD-native car will in all likelyhood become a two-seater. Or even 1+ (parent plus child).
Also FSD 'transporters' (minibuses) are likely.

So yes, a lot of new vehicles.
Elon played out this scenario mentally many years ago. The logical solution: Boring.

 

[dl003]

I know that this isn't what other people want to hear, but I've been a bull since '13. What Elon said has shaken me and the bull case significantly, and I think we are in for another period of the lost years from '14-'19.

Imo, Tesla is taking too many gambles to maintain the 50% growth per year, and I think it will ultimately bite back in the ass.

How is it a gamble to improve and increase capacity to produce the best selling vehicles Tesla has to offer, which generates billions upon billions dollars of profit?
Maths don't lie. If you don't think earning growth will increase valuation, then you shouldn't be investing at all.

 

[chiptoe]

I see no way to build a 25K car worthy of the Tesla name. Tell me what you'd skip from the Model 3 Standard to get to that price range. 25kWh battery? 10" tablet? Manual adjustable seats? 25% size reduction? Would that be enough to make the car cheap enough? And would a separate production line for manual seats, 10" tablet and downgraded software actually be cheaper?

Even European car brands have trouble reaching that price point without compromising. The Renault Zoe/Dacia Spring have abyssal crash ratings, and VW has stopped production of their supermini e-UP and badge engineered derivatives.

I don't care about a cheap Tesla - I would really just like a smaller Tesla. Either a small, sporty hatchback or a little convertible would be a blast (roadster is far over my pay grade, and certainly don't need 0-60 in 2 seconds). Would buy either in a heartbeat.

 

[abasile]

Imo, Tesla is taking too many gambles to maintain the 50% growth per year, and I think it will ultimately bite back in the ass.

In terms of production growth, 50% seems to be quite achievable at this time. Are you worried about demand? Are you considering that Tesla has yet to enter a number of large countries and that word of mouth is quite strong?

 

[TSLA_Hopeful]

How is it a gamble to improve and increase capacity to produce the best selling vehicles Tesla has to offer, which generates billions upon billions dollars of profit?
Maths don't lie. If you don't think earning growth will increase valuation, then you shouldn't be investing at all.

The long term future of Tesla is still great and that's why I'm investing, but the short-to-medium term will will be extremely painful.

 

[StarFoxisDown!]

I know that this isn't what other people want to hear, but I've been a bull since '13. What Elon said has shaken me and the bull case significantly, and I think we are in for another period of the lost years from '14-'19.

Imo, Tesla is taking too many gambles to maintain the 50% growth per year, and I think it will ultimately bite back in the ass.

Any constructive input you want to put into the discussion? Not trying to call you out, but suggesting anything like the period of 2014-2019 without acknowledging that it would mean Tesla would have a P/E in the teens is fear mongering

 

[Dan Detweiler]

I believe the way Elon handled that question turn some investors bearish. FSD is currently the only execution fails at tesla because unlike any of their other products, we are still stuck at this "dream" phase (kind of like what Elon said, we want to go to the moon but that's just a desire to which is the easy part).

If Elon framed it as "currently our demand for our 3/y products are beyond our expectations, and with the advent of FSD that we feel can drive demand further, we feel the 25k car is not yet necessary. However we do believe in making teslas affordable to all this project will be executed depending on market conditions ". That would have been a better answer.

Right now analysts are discounting high demand for teslas due to a shortage of new cars in general and may not last as supply chain ease.

Just an FYI...I drive FSD Beta every day. In my opinion, people spend an inordinate amount if time focusing on what it can't do and precious little on what it can do. No, it is not ready for wide spread release nor Level 5 status. That said, it is correct and safe 99% of the time. In fact, it has saved me from imminent accidents more than once. As it exists right now, when used in conjunction with an attentive driver, it is saving lives. It is avoiding accidents, saving people potential medical expenses and repair bills, and reducing the owner's exposure to potential rising insurance rates from accidents.

On top of that, it is getting better. With every update it is smoother, more confident, and more consistent. Let's focus on what it IS accomplishing and how it IS improving, maybe not so much on what it can't do...YET.

As Elon has said many times, this is an incredibly difficult problem to solve. One which nobody else seems willing to tackle meaningfully. The street seems only willing to give credence to the potential economics of FSD. There is far more to FSD than Robotaxis, and in the area of safety it is already saving lives. To me, that is the real focus here. Tesla is solving this problem...weather a bunch of suits and talking heads on CNBC recognize it's value or not.

Dan

 

[BigDawgz]

I know that this isn't what other people want to hear, but I've been a bull since '13. What Elon said has shaken me and the bull case significantly, and I think we are in for another period of the lost years from '14-'19.

Imo, Tesla is taking too many gambles to maintain the 50% growth per year, and I think it will ultimately bite back in the ass.

What is a gamble? They're focusing on making as many Model Y as possible this year, which has insane demand and is more of a given and delaying production on CT, Semi and Roadster, which are much more of an unknown.