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

[Cherry Wine]

None of these really compare… Russia is the third largest oil producer in the world. It’s also really the only OTHER superpower.. so it COULD be different.. I’m still not convinced we’re going to see an “invasion” but I always remember,,, one time in ten.

The closest analogue to the current crisis is Crimea in 2014 (which should have been on that chart) - which had very little effect on stock markets.

 

[Rarity]

About the racial discrimination lawsuit (complaint), it seems politically motivated. For one, it appears that the California DFEH rarely sues anybody. Also, the language in the complaint makes it seem like this is political payback for Tesla moving its HQ to Austin.

In another move to avoid accountability, Tesla, during its annual shareholder’s meeting in October 2021, announced plans to move its headquarters from Palo Alto, California to Austin, Texas.

Maybe the head of the DFEH is trying to make a name for himself?

One interesting fact is that Tesla employs over 36,200 in California.

 

[SN_8]

I am truly confused which political affiliation would cause one to not buy a Tesla.

The Stonecutters.

 

[StarFoxisDown!]

About the racial discrimination lawsuit (complaint), it seems politically motivated. For one, it appears that the California DFEH rarely sues anybody. Also, the language in the complaint makes it seem like this is political payback for Tesla moving its HQ to Austin.


Maybe the head of the DFEH is trying to make a name for himself?

One interesting fact is that Tesla employs over 36,200 in California.

It's extremely obvious that it's politically motivated. The sheer fact that they didn't disclose any complaints to Tesla for the past 3 years is impossible to ignore.

 

[WADan]

I had an interesting exchange today with the individual that loaded groceries into my car at Walmart pickup. He began with the usual question that we've all probably received dozens of times "how do you like your car", and before I could even finish my response, he adamantly states "I could never buy an electric car, it's against my political affiliation." I proceed to explain that I love the vehicle and never considered that buying it had anything to do with politics.

We continued the exchange as I answered the regular (FUD) talking points, knowing full well that nothing I could say to this man would have any impact on his politically derived opinion. We live in an interesting and some concerning world where political factions are literally permeating through non-political areas of people's lives, and it seems like everyone feels the need to loudly and proudly pick a side and blame the opposite side for everything that they don't like in this world.

It’s absolutely crazy when facts/truth is just one google click away. It just goes to show the power of propaganda even in the age of the internet!

 

[Knightshade]

.

The sheer fact that they didn't disclose any complaints to Tesla for the past 3 years is impossible to ignore.

It's also not actually true, according to the case filing.

They state they served many of these complaints to Tesla over the three years, but Tesla never resolved them, and more kept coming in, eventually resulting in (after also trying to resolve this with Tesla via mediation), the enforcement action we see now.


Edit- I'm actually reading through the complaint in more detail.

Assuming they're not lying about fairly basic facts (like the staffing numbers in HR for Tesla) it looks like a LOT of these problems going unresolved or not handled well can be traced to Tesla have an hilariously understaffed HR department for...basically ever.

As late as 2020 they're citing ONE HR staff member per 700+ employees.

Typically in large companies it's more like 100:1, not 700:1.

So by sheer volume it's pretty credible the HR department mishandled complaints.... (and a chunk of the lawsuit is over the fact Tesla HR apparently failed to maintain proper records- which again is pretty credible in an org that badly understaffed)

There's 13 causes of action in there, even if nothing whatsoever actually racially discriminatory happened there remains some....not legally great stuff... for Tesla in there.

 

[brantse]

It’s absolutely crazy when facts/truth is just one google click away. It just goes to show the power of propaganda even in the age of the internet!

Barely a day goes by without me hearing that the election was stolen or the vaccine is an attempt to control the population. People clearly aren't letting facts or truth get in the way of their political agenda.

 

[insaneoctane]

Weekend assignment for anyone who has not seen The Social Dilemma, a 2020 Netflix documentary on the impact of Social Media (FB, Snapchat, Twitter, Instagram, Youtube, Pinterest, Reddit, Youtube, LinkedIn, Google) to humanity. Watch it. Trailer link above. Social Media is toppling governments, changing the course of entire countries, dispanding democracy, so it's not just about Tesla. Social Media's business model, monetize for ever increasing advertising revenue, is flawed. It results in changing the perception of the masses to view more screen time and sell more products. If you currently use any of these Social Media platforms, nothing is given out for free. Either you pay for the product or you are the product. Since Tesla does not advertise, and Tesla's competitors advertise in the tens of billions of dollars, the advancement of the algorithims to target their viewing audience to believe Tesla is unsafe and a hazzard to our environment and are inferior products, and Elon is promoted as mad and an evil villain.

Earlier this week a good friend called me to state they heard of a Tesla "recall" for cars running stop signs and knowing I drive a Tesla was very concerned for my safety. Also my son's high school Business course teacher advised the class that Tesla was in great trouble because of the computer chip shortage. Good intentioned, well educated people effectively brainwashed by Social Media. I advised my friend that the "recall" was for software designed as intended (allowing 2 mi./hr rolling through stops only if all clear) and Tesla fixed the issue with an over-the-air update in less time than it took the journalist to write their article. I gave my son a screen shot of a Google search with search words only "Tesla chip shortage" and the first dozen articles were all positive how Tesla was able to ride out the chip shortage unlike all other auto manufacturers. Yes, the chip shortage is an issue, but not a critical path item for Tesla. My son showed the screen shot to his teacher who quickly retracted his statement. It is a war out there, and it is not just Tesla. Democracy has a price. Ukraine has a price. Tesla has a price. A price paid to Social Media by advertisers to cause unrest. Thank goodness for TMC and quality bloggers like Dave Lee and Rob Mauer for keeping up the truth.

The only Social Media site that I have is LinkedIn and will remove that. If you have not already, please watch the entire movie, The Social Dilemma. It will be well worth your time spent and I would encourage anyone who has a Social Media accounts to remove them. As a Ukrainian (my grandparents came to Canada from Ukraine) my prayers are with them for a peaceful resolution.

Your "Thank goodness for TMC and quality bloggers like Dave Lee and Rob Mauer for keeping up the truth. " comment really hit home.... Imagine how much harder having the huge investments and HODL strategy that many of us here share if we didn't have TMC...or Rob, Dave, etc. If we didn't have the excellent counter narrative to the mainstream media, I am positive I wouldn't have the confidence to weather these storms!

 

[Skipdd]

I think it's pretty obvious many of them actually still believe the fairytale that "the competition is coming" at least to enough of a degree to not be confident of Tesla's utter dominance looking out 2-3 years. That's because they haven't done the work to understand how Tesla has a huge advantage when it comes to pricing power. This advantage is growing with Tesla's growing production volumes and with advances in Tesla's manufacturing efficiencies. I'm sorry if I'm being repetitive on this point (cost to produce) but this is probably the most important misunderstanding in terms of Tesla's perceived competitive position and how that impacts current valuation in the market.

And this points to just how lazy big money is when it comes to understanding the things they have (or have not yet) invested in. Because it's not difficult to see how durable Tesla's advantage is when it comes to efficiency of manufacture and how that impacts their competitive position in the automotive market going forward.

The primary factor covering up this important advantage is that good, long-range EV's are still more cost intensive to build than ICE cars and this reality obscures just how efficient Tesla's manufacturing really is. The assumption is that as legacy manufacturers ramp into high volumes of EV's, that their cost of manufacture will fall to be in-line with Tesla, but the evidence is everywhere that this will not be the case at all (and Tesla's cost to produce is still declining). The latest generation of Gigafactory will have even lower costs of manufacture.

The secondary factor covering up Tesla's efficiency of manufacturer is that Tesla does not build cheap cars with low cost, flexy chassis, cheap tires, cheap brakes, cheap glass, cheap wheel bearings, cheap seats and cheap suspensions. Using first principles thinking, Tesla does not decide where to cut costs by how visible the part is. They cut costs where it doesn't matter, where it's worth it to cut costs without regard to how visible it is. Tesla's definition of "safe" is not when the structure achieves a 5-star crash rating because Tesla knows that the crash testing does not represent every real-world accident. They build safety to accommodate the real world, not to mollify the crash tests and this costs a little more. Volvo took safety to a new level and developed a reputation as a solid but somewhat heavy vehicle. Tesla focused on real world crash data and used exceptional engineering to increase safety beyond the 5-star rating without adding excessive additional weight. Most of the cost of this is in the lab and it adds very little to the cost of manufacture. The point here is that a Tesla is not directly comparable to a less safe car because the additional safety adds value to the consumer.

Finally, legacy auto has successfully obscured Tesla's big cost advantages by combining ICE and EV when reporting auto margins (and by building very few EV's). It is to legacy auto's advantage to be very opaque about this but they cannot ramp EV's to high volumes without their much higher cost of manufacture becoming increasingly apparent. So, it's only a matter of time before people figure out that legacy auto will not be catching up to Tesla in terms of how much value they can offer the customer. We know the competition is NOT coming but many people are still not convinced of that. Only when that becomes obvious to other big market participants (that the competition is NOT coming) will it be reflected in Tesla's valuation.

All of this makes sense to me - not that I could have described it at 1/5th the level you did. I read this and then I read @StarFoxisDown! ’s posts about P/E compression and wonder if he is correct? Is it possible that no matter the earnings that Tesla has, the FCF they generate, until there is undeniable market evidence that “there is no catching Tesla,” that the SP will stay lower than what would otherwise be logical. I don’t have financial acumen to assess it, but it feels to me that perhaps the market needs to see legacy companies failing and Tesla succeeding, and maybe even a legacy company going out of business or companies merging for the market to finally react in a way that properly values Tesla. I don’t like the idea of wanting a compan(ies) to fail, but on the other hand, we aren’t going to get the climate transformation we need if things don’t move more quickly.

As an aside, I have been continuing to accumulate shares and will keep doing so while the prices are low(er).

 

[bkp_duke]

Barely a day goes by without me hearing that the election was stolen or the vaccine is an attempt to control the population. People clearly aren't letting facts or truth get in the way of their political agenda.

When they ask me about Tesla and why I drive one, and it's clear they want to get into a political spat, I have found convincing arguments are to just say "if the guy can build landing rockets, why would you think he can't build the best car on the planet?", and "even Trump loved this guy", and finally "you believe the main stream media are lying to you about Trump, but telling the truth about Tesla?". That last one usually makes them pause for a few seconds.

 

[Beltsbear]

https://twitter.com/x/status/1491886221492060168

 

[Paul_SF]

https://twitter.com/x/status/1491886221492060168

Imagine all the German car makers getting copies of all that and scratching their head…. Jk of course, that can’t possibly happen in a country like Germany. Maybe in China but not in Germany… right? Right?

 

[friit]

https://twitter.com/x/status/1491886221492060168

Just to see all those binders is soul crushing. Can't imagine having to rush and write all that nor having to rush and read all that. And besides, why isn't it all digital anyway? Usually, if there's one copy, there's more. Quite wasteful and inefficient, what gives, Germany?

 

[Silent Ludicrosy]

Just to see all those binders is soul crushing. Can't imagine having to rush and write all that nor having to rush and read all that. And besides, why isn't it all digital anyway? Usually, if there's one copy, there's more. Quite wasteful and inefficient, what gives, Germany?

It has to be hard copy for the approval authority to stamp each page:

 

[WattsHappening]

I’ll take the bet that noone at Tesla is going to recommend or implement a share buyback program..

I agree with you; they are not going to do it. I just think they should. Offset some of the stock that are going to be granted to all the new employees they are hiring. But I don't have any visibility into their plans and trust Zach and Elon.

In their 2021-10K Tesla announced plans to spend between $15-17B in R&D over the next 3 years. Tesla currently has ~$17B in cash.

FCF projections are nice, but they aren't money in the bank. And we haven't dodged a recession quite yet.

No buy-backs, for now.

Cheers!

I'm not suggesting anything like drawing down their cash in the hope/anitcipation of future FCF. Start with say, up to $1B stock buyback. As it is, Tesla is generating huge positive cash flow while building two GFs. And then increase/extend it over time as FCF and cash balance supports it.

But I get it. It's not going to happen anytime soon as Tesla is very conservative with their cash and won't take any chances. Just wishful thinking on my part . I'd rather them implement a small stock buyback program than prematurely pay off more debt for example.

 

[StarFoxisDown!]

I agree with you; they are not going to do it. I just think they should. Offset some of the stock that are going to be granted to all the new employees they are hiring. But I don't have any visibility into their plans and trust Zach and Elon.


I'm not suggesting anything like drawing down their cash in the hope/anitcipation of future FCF. Start with say, up to $1B stock buyback. As it is, Tesla is generating huge positive cash flow while building two GFs. And then increase/extend it over time as FCF and cash balance supports it.

But I get it. It's not going to happen anytime soon as Tesla is very conservative with their cash and won't take any chances. Just wishful thinking on my part . I'd rather them implement a small stock buyback program than prematurely pay off more debt for example.

Well lucky for you, Tesla only has 1.39 billion of debt left to pay off

I for one, would very much be in favor of a small stock buy back of say 1-2 billion. They could announce it on Q1 earnings, but they would have all of 2022 to actually do it. If the stock is still in the 900's by Q3, start buying.

By Q3, Austin/Berlin are both past the rough parts of ramping. Tesla will have no further debt to pay off. FCF will be to the tune of 2-3 billion per quarter....and that's conservative.

 

[insaneoctane]

When they ask me about Tesla and why I drive one, and it's clear they want to get into a political spat, I have found convincing arguments are to just say "if the guy can build landing rockets, why would you think he can't build the best car on the planet?", and "even Trump loved this guy", and finally "you believe the main stream media are lying to you about Trump, but telling the truth about Tesla?". That last one usually makes them pause for a few seconds.

I find saying "Honestly,I just hated going to gas stations....what's gas up to now, almost $3 a gallon?" works really well when gas is actually $5/gal here because they HAVE to correct me! It's imperceivable to them that not everyone knows what a gallon of gas costs...

 

[Ogre]

I agree with you; they are not going to do it. I just think they should. Offset some of the stock that are going to be granted to all the new employees they are hiring. But I don't have any visibility into their plans and trust Zach and Elon.


I'm not suggesting anything like drawing down their cash in the hope/anitcipation of future FCF. Start with say, up to $1B stock buyback. As it is, Tesla is generating huge positive cash flow while building two GFs. And then increase/extend it over time as FCF and cash balance supports it.

But I get it. It's not going to happen anytime soon as Tesla is very conservative with their cash and won't take any chances. Just wishful thinking on my part . I'd rather them implement a small stock buyback program than prematurely pay off more debt for example.

I agree, Tesla would do very well to do some share buybacks. It’s been tremendous for Apple shareholders.

I think they should follow Apple’s playbook, once Tesla has zero debt, $100b in the bank, and positive cashflow, Tesla should pull the trigger on a massive buyback plan.

 

[Chunky Jr.]

I think they should follow Apple’s playbook, once Tesla has zero debt, $100b in the bank, and positive cashflow, Tesla should pull the trigger on a massive buyback plan.

I agree, end of next year would be a good time.

 

[bkp_duke]

I find saying "Honestly,I just hated going to gas stations....what's gas up to now, almost $3 a gallon?" works really well when gas is actually $5/gal here because they HAVE to correct me! It's imperceivable to them that not everyone knows what a gallon of gas costs...

Telling them I've done 6 cross-country trips in various Teslas also usually blows their minds.