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

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Sure, my 2021 MY LR has the single piece rear casting in it.

OK - but THIS piece looks like it is the central piece of a total set of body castings: FRONT and REAR (known to be in production), and CENTRAL (this one).
Question is, for which vehicle? My (amateur) guess would be the Cybertruck. Any casting/ exoskeleton pros know better?

Bullish ?
meaning CT production is on schedule (well, ahead of delayed schedule ;D )


TESLA.GigaCast.jpg
 
I've come to value the financial expertise on this forum more than the "talking heads" on most of the network financial programs, so I figured I'd ask. Q2 GDP results are coming out this week. So-what will the impact be on the market as a whole, and TSLA in particular? If GDP is down, we fit the "classic" definition of a recession, with 2 consecutive negative quarters. At the same time, I hear the "talking heads" spinning it that that's no longer the "proper" definition of a recession. So, either way, if GDP is down, will the market be badly impacted, or is it priced in? Conversely, if there is a surprise and it's positive, will this be a significant boost, indicating that perhaps we have bottomed and are in a "recovery" (yes, not proper def if we're not formally in a recession). The claim is that "unemployment is at record lows", but lots of companies in tech in particular are either laying off or reducing hiring plans, not sure how that hits the labor market as a whole. The slowdown in housing starts should be a negative employment indicator in that sector. What does the local brain trust think? Thanks.
The 2 quarters being a recession has always been short hand, it has never been the cut and dry rule. I don't recall the time off hand, but at least for a few decades the NBER has been responsible to call a recession. GDP contraction is a part of it, but not the full picture. Sometimes you don't even need a full quarter to call a recession (Feb-April 2020 was a recession). It seems this gets picked up as a political point from whatever party is not in power, but it has been this way for a very long time. Don't listen to the hive mind of Twitter thinking this is a new thing, it isn't.

As for my thoughts on recession, we aren't there yet... but signs are getting worrisome. Housing showing cracks could be the catalyst that brings recession to a reality, and that is the industry that is probably the most impacted directly by the Fed's moves where the inmates are running the asylum at this point.
 
OK - but THIS piece looks like it is the central piece of a total set of body castings: FRONT and REAR (known to be in production), and CENTRAL (this one).
Question is, for which vehicle? My (amateur) guess would be the Cybertruck. Any casting/ exoskeleton pros know better?

Bullish ?
meaning CT production is on schedule (well, ahead of delayed schedule ;D )


View attachment 832537
That's just a rear casting before it gets the extra trimmed off. One wheel well.
Shanghai video:
 
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Tesla credit rating talk is pointless. First, Tesla isn’t issuing debt, so it doesn’t affect the company. Second, even if it did, actual market rates are based on real world perceptions of Tesla, not a rating agency’s opinion. So a rating change might make a headline that slightly affects the stock price for half a day, but that’s about it.
 
Tesla credit rating talk is pointless. First, Tesla isn’t issuing debt, so it doesn’t affect the company. Second, even if it did, actual market rates are based on real world perceptions of Tesla, not a rating agency’s opinion. So a rating change might make a headline that slightly affects the stock price for half a day, but that’s about it.
Disagree here... there are funds that could buy Tesla that are restricted from doing so due to Tesla being junk bond status. There will simply be more buyers for the stock once the credit rating gets changed. How much extra? That's the real debate.
 
Tesla credit rating talk is pointless. First, Tesla isn’t issuing debt, so it doesn’t affect the company. Second, even if it did, actual market rates are based on real world perceptions of Tesla, not a rating agency’s opinion. So a rating change might make a headline that slightly affects the stock price for half a day, but that’s about it.
It isn't totally pointless. There are some funds/plans that can only invest in companies with an investment grade, or higher, credit rating so they can't invest in Tesla right now. So if/when Tesla is upgraded it opens it for additional money to be invested in Tesla.
 
Samsung's multi-billion dollar Chip Fab is now under construction just 23 miles away from Giga Texas. Over the course of the next several years, Tesla will assemble a literal home-grown industry of EVs in Texas, from steel to silicon, and of course, lithium and nickel.

"Samsung Chip Plant" Samsung - Tesla - Texas 7/24/2022 9:18AM 4K Model Y


Remember, people are saying Tesla can't possibly continue to grow at 50% per year by 2024. I beg to differ. Just because Tesla hasn't shared their plans publicly does not imply its safe to bet against them!

Cheers to the longs!
 
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There are alternative nonlinear explanations for these figures. For example in 2018 there was general demand for Teslas, people wanted a good long range electric car with autopilot and supercharger network. The only option was the expensive and large S/X. I got a Tesla Model X when I probably would have bought a Y if it was available. So now when Y is available this would have stolen me from the S/X pool. So in 2019 3 comes and steals some of this demand for Teslas from S/X. Then as Tesla’s becomes more and more common, many people who were driving Audi A6 and BMW 5 series got to sit in a Tesla and demand for Tesla goes up. Some of these were converted to 3, but some also S/X AND demand for S/X started to pick up again after 2019. Today I think if they lowered S/X to 30% margin and could make 200k/year they would probably sell out as so many people have been exposed to 3/Y which has been growing the demand for Tesla‘s in the “I want a large expensive car” population.
This is very much in line with my thinking and experience. I do think as the customer base expands with Model 3/Y and Cybertruck, some fraction will want a larger or more upscale option such as Model S/X. My family has both an X and a Y. These are not really substitutes for each other. I am very glad to have both and appreciate the differences. I use my X in was that our Y is simply not adequate. So I'm saying it's all good. Consumers need a lot of model choice. As Tesla approaches making some 10M cars a year, customer will demand a broad portfolio of products to choose from. At this scale, producing some 1 million units of Model S/X, Roadster 2, and maybe some other high end products is not unthinkable. Robotaxi does not change this in my thinking. Model Y or something close to it will become the dominant model for robotaxi. When this happens, buyers of higher end private vehicles will probably not want to buy anything that looks like a robotaxi. What would be the point? There will be ten million or so robotaxis on the road, and if you bother to own your own car you'll want something special and distinctive, something that fits your family just right or expresses your version of fun and lifestyle. So I'm all in favor of mass prodroducing the Model Y, Model 3 and robotaxis. But I do think that other products like the Models S/X should be fresh, fun and exciting and well on point with the mission. I do believe there is an unsatisfied market for a $60k Model S and Model X, and if Telsa has a path to produce it at $45k, then we could see demand in the range of 500k to 1M units, all while Models Y/3 starting at $30k push out to 4M or even 8M units per year. Affordability is all relative. A Model S will never be as affordable as a Model 3, but within the Model S line we could still have a range from $60k to $120k, making some much more affordable than others. So really I am point to a gap that I believe will be closed over the next 8 years, either by Tesla or by competitors.

I understand that this is not in the cards for immediate action. So please spare me lectures about how Tesla has other priorities right now. I totally get that. And if anyone thinks I don't get that, they simply misunderstand me. I am talking about a pathway to 10M cars. Unless Tesla has something up their sleeve for something better, I do believe that Models S and X are a material part of that future, more than 10% of automotive revenue. Absolutely Tesla must massively scale up the Model Y and Model 3. Cybertruck will be a massive cult hit and can't be put into production fast enough. And actually the product that I am most eager about is the Semi. It's absolutely essential for addressing climate change. So all this takes alot of Gigafactory capacity and massive battery supply. I totally get that. But Tesla also needs a platform about the size of Models S and X that can support various van configurations. If Tesla could invent a flexible common platform for vans along with the S and X, that would be awesome. I am not saying that I know that Tesla can or will do this. I'm just saying it would be a worthy challenge for Musk and his engineers to move in this direction. I think that Musk is thinking more about flexible architecture these days. It's really important if you want to master the economies of scale while being able to deliver niche products at fewer than 300k units per year. A flexible platform for van, S and X could deliver more than 1M units per year. Again, don't anyone give me grief for this suggestion. I'm not saying that Tesla is capable of doing this or will ever make it a priority. I am just saying that flexible architecture is a worthy challenge that masters the economics of smaller volume products. Along the path to a 10M unit portfolio, I do hope that Tesla finds a way to master the economics of lower volume products. If not flexible architure, maybe advanced robotics, i.e., Optimus.
 
Also worth noting that lifting heavy objects up out of a bed (a few feet away from your center of mass) and then up and over your head/shoulders is recipe for injury.

Plus, the CT has a bed. If people have this imaginary need to do this, keep those items at the rear. The other EV trucks are nearly worthless for towing, may as well stick with my 3 for this purpose. The range is what makes the CT the superior all around truck.
The other point-with conventional pickups, people install tool boxes to have secure, lockable, protected storage. Not an issue with Cybertruck where your property in the bed is secured with a powered "tonneu cover". That feature alone makes CT appealing to me, as well as the short, low nose/cab forward design. For a given bed size, the truck is shorter, making it less of a PITA to park, and visibility is better without that long, high hood, meaning safer in urban traffic, where you can actually see shorter pedestrians, and far better off-road, where you can see over a rise.
 
Tesla credit rating talk is pointless. First, Tesla isn’t issuing debt, so it doesn’t affect the company. Second, even if it did, actual market rates are based on real world perceptions of Tesla, not a rating agency’s opinion. So a rating change might make a headline that slightly affects the stock price for half a day, but that’s about it.

So you missed the news that non-Index Funds are dramatically underweight TSLA? Because guess what's holding them back. Among other FUD, it's the "Investment Grade" credit rating requirement in their own bylaws that keeps Fund Managers from buying TSLA. So...

 
I recommend starting here:
After that I recommend this:
Value Investing: from Graham to Buffett and Beyond and Competition Demystified: A Radically Simplified Approach to Business Strategy

These books are blatantly about Value Investing. The basic problem is how to define 'value'.
@The Accountant uses a traditional (in value investing terms) assessment of earnings quality with, in Tesla's case, not emphasizing debt coverage because Tesla has negligible debt. I'm sure he'll speak up if I seem to represent him.

disclosure: I am a graduate of Columbia Business School, where value investing has been a constant message since Graham and later, Dodd. That includes considerable attention to derivative and option pricing, although Value Investing and Speculation are opposite poles, with Momentum following closely on speculation. From an institutional investor perspective value forecasts mostly cede to rating agencies and advisory services; notable exceptions are strict adherents of value investing such as Ron Baron (who actually never had academic background in the investment philosophy he follows.

All this may seem irrelevant to the forecasting methodology one chooses. As several people point out the discount rate is one crucial point (In Value Investing the discount rate is meant to be the 'blended incremental cost of capital' but most Wall Street 'analysis' uses arbitrary numbers.)

One major problem with forecasting methodology is to accurately cost equity, and that is very hard to do without a regular track record of primary offers. In Tesla's case new issuances would be silly because of the cash generating nature fo the business. However, it's equally obvious that the Tesla cost of equity would be very, very low. We also do not know what Tesla cost of debt would be since the only debt they have offered recently has been lease and loan securitizations. An added complication is that Tesla has unusual pricing power so can anticipate regulatory pressure. Hence setting the proper discount rate for tesla is not easier, either.

The largest problem in forecasting Tesla is that there is no precedent. Many of us try with the 1910's Ford, Amazon, Google, Apple etc. We almost never think of Xerox, Kodak, Kaiser etc. We are just beginning to try to consider Tesla Energy, Supercharger network, used car sales as potentially material factors.

Hence long forecasts are important, but fraught more in Tesla's case than in many. Even the competitive outlook is largely imagined but not yet really in evidence. That is only exacerbated when we consider key executive risk (Elon is not the only one), regulatory impediments and the overwhelming climate risks.

Nobody has published much about how to value a company with a ~50% growth rate, several months of backlog and lack of presence of any kind in half the world. That is probably why we obsess on the things we can know, and why we want good critical thinking rather than FUD.

As for blended capital cost, at present and for some time, Tesla manages to have positive cash flow even while growing at >50% per year and starting new technologies, new factories at the same time. That is unheard of; I know of no such case ever, anywhere. Thus the cost of financing for Tesla is now negative since they are realizing sales before they must pay suppliers. That, in turn, keeps their supplier costs very low.

So, to be accurate in these circumstances the discount rate for Tesla would likely be roughly equal to the inflation rate in major supplier countries and major sales countries. Not precise but close, Tesla has roughly equal exposure in US dollar (9.1%), China (3.0%) and Eurozone (8.6%). Blending those would yield average inflation of 6.9%, so as good a discount rate as we might have.

FWIW, nobody so far is using such a low discount rate. Why? Because they all seem to think Tesla is somehow higher risk than may be others. Personally I think the positives for Tesla outweigh all the questions so I'd discount at 6.9%.
So the higher the discount rate the shorter the term value chain will be. By choosing the one I do, forward values really go at Plaid speed, which as we know from Spaceballs, is very high risk.

That is our dilemma. The facts seem too optimistic. It seems wildly implausible. Yet such things have happened, but most of them were a century ago or more. Thus our realistic analogues are probably Amazon and Apple. If this approach to Tesla is wrong, we'll have much more serious problems than correct valuation of securities.

Obviously all this is my opinion, driven by decades of experience and study. A huge caveat is that I would never, ever vote for anybody within a decade of my age. That may apply to my investment approach too, although I don't think so. Old and opinionated, I am.

Good post but I disagree with one thing. AIUI financial projections do not take into account inflation, instead they assume that revenue, income and other company figures will be inflated at the same rate as general inflation. Using "real" dollars like this removes a source of uncertainty and complication from the projections.

The discount rate is then the real rate of return from the best "safe" alternative investment (say stock market average returns of 7%) - the average historic inflation rate (2%) + a risk factor. The risk factor accounts for variance between the projection and real performance. If performance is modelled as a PDF of bear/nominal/bull cases then this risk factor can be reduced, but not eliminated.

I agree that 50% growth is unprecedented, Most analysts get round that by assuming that Tesla will revert to the mean before long and have growth at no more than 15%.

Few (even bulls on TMC) consider that 50% growth could continue for a long time. A bull case would be that automotive growth would last 6 more years, energy another 16 months (to double the size again), then robotaxi another 5 years (to a total of 8x automotive+energy combined), then AI+Optimus another 4 or 5 years. That is a total of 17 years of 50% growth, at which point automotive would be 1.4% of profits, after that Tesla would be a large part of global GDP and would struggle to grow quicker than that. Now the chance of this happening is tiny, there are lots of potential problems, but there seems to be a significant chance that 10 years of 50% growth is possible,
 
I’m not sure where this $80000 Model X would fit. I just priced a Y performance with some options and it was $86000. That’s a lot more than I paid for my Raven S. If there’s a hole, it’s around $100000.
Some families need the 7-seats that fit more comfortably in a Model X than a Performance Model Y.

It's perfectly fine for a Performance Y or 3 to be priced well above a Standard X or S. Performance vs Standard is orthogonal to the basic size or shape of the vehicle. Indeed, before Tesla, high performance used to mean a smaller sports car. It's actually weird that the Model X can achieve truly high performance while being a really big SUV.
 
Today Craig Johnson of Piper Sandler shows TSLA(+), meaning in his technical analysis it’s a positive. That’s the same notation I found in his 1/28/13 newsletter, which inspired me to start purchasing TSLA shares.
From a purely TA perspective, the last time Tesla looked this strong was June 21 (prior to that Dec 19). There has been lots of accumulation, a breakout of a trend, strong showings of support, and lots of headroom to run if momentum builds up. The headroom is a big thing right now. There are some significant resistance levels in between, but a TA case can be made that a move to 1075/1080 is coming up and if that breaks the move to ATH is within reach. Now I think a failing in TA is that it doesn't take into consideration news where the macro economy is pretty questionable, but ignoring that, the TA looks very positive.
 
So you missed the news that non-Index Funds are dramatically underweight TSLA? Because guess what's holding them back. Among other FUD, it's the "Investment Grade" credit rating requirement in their own bylaws that keeps Fund Managers from buying TSLA. So...

Or it could be that they don't know how to value Tesla and use the credit rating issue as an excuse
to avoid the stock. If there is a will there is a way.
Moreover, nobody seems to get fired yet for avoiding tesla, including the JP Morgan analyst.
 
That is a total of 17 years of 50% growth, at which point automotive would be 1.4% of profits, after that Tesla would be a large part of global GDP and would struggle to grow quicker than that.

Yeah, it's no problemo. Tesla will be off-planet by then (2040). Bots on the Moon, bots on Mars. Then we'll see C-beams glitter in the dark near the Tannhäuser Gate. ;)

Elon's ambition is not limited to Earth, nor even the Solar System. It's limited by physics. Full stop.

Cheers to the Longs!