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

[Chenkers]

I picked up an error in the table of Elon's equity for the Twitter purchase that I included in post #371845(Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable )
I had the cost of Elon's 9.2% Twitter purchase the same as the value of those shares in the buy-out. The value at the buy-out price of $54,20 is $3.96B, whereas Elon's original purchase only cost $2.89B.

So that reduces the balance outstanding from around $4.6B to just $3.5B. I've edited my original post to include the updated table.

 

[traxila]

OK the question everyone wants answered! Time to vote!

Is Elon selling on Monday October 24th for TWTR?

The question on everyone’s mind! Vox Populi Vox Dei!

teslamotorsclub.com

 

[Xepa777]

The estimates are presented as though they're intended to be accurate predictions.

If that's not the case, then they are misleading investors by leaving out clear messaging explaining the actual goal of the estimates. If so, that's either a deliberate lie of omission or gross negligence in failing to clearly express the meaning of their words and numbers. Those are the only two possibilities.

If they are intended to be accurate predictions, then that indicates that these analysts do not know how to make accurate predictions, because all of the predictions are consistently inaccurate.


That I don't know. This took a while to compile but I was only making a restricted claim that that the vast majority of institutional analysts don't publish accurate estimates for TSLA specifically.

That being said, the piss-poor results of thousands of professional analysts shown on TipRanks whose picks perform no better than those of monkeys throwing darts at a list of S&P 500 stocks seems to suggest something about either their skill or honesty.

...what does that say about you then who is obsessed about one company (vs. analysts who are often assigned sectors, let alone companies) in an industry you're passionate about, with no corporate reputation / bureucracy / peripheral pressures to be beholden to, yet still be wildly off in your own report? And while you have the benefit of being veiled behind a curtain of psuedo anonyminity with an online username. Honestly given all those parameters, you SHOULD be more accurate than them.

I went to Wharton for my MBA and know some equity research analysts. They're smart as *sugar*, and for you to indistriminately bash all of them and assign a crude blanket statements is incredibly immature. Just Alex Potter alone, I dare you to say he's corrupt or lazy to his face (or Rob Maurer) who has had him on multiple times.

I'm not saying they're right. Our collective intelligence through great contributions from members like yourself and @The Accountant give us much better foresight than Wall Streeet. But people (including you) take it too far sometimes.

 

[Ocelot]

While I love your analysis, it's always fraught when we assign motives.

Perhaps it's the case that you just don't understand what these analyst estimates are intended to be? Perhaps accurate predictions of the future are not what the people who are paying for them are expecting?

Also, your criticism lacks context. We always complain about the constant drumbeat of such things as "Teslas burn!" when they leave out the "... at 1/10 the per capita rate of gas cars". So how about your complaints? How do these misses compare to how analysts do with other stocks? other growth stocks? AAPL?

Just seems to me that these considerations might be relevant before you get angry and make accusations. Me, in most cases I suspect you're quite right, leaning a bit more towards incompetent and too overworked to do the job right regardless.

Definitely not incompetent. Maybe overworked, but that does not lead to their errors.
It is straight up manipulation. I cannot stress that enough. If you are a pawn, your only chance of success in a game, is acknowledging you are a pawn.
It was so much easier when every analyst/group had share prices way lower than the share price. ie. you know they want to suppress the price, and wanted people to sell. When a new prediction/analyst rating comes out, and it moves the share price, it is both laughable and sad.
You got it right by saying "perhaps accurate predictions of the future are not what the people who are paying for them are expecting". they expect to make money. but even then they are the second mouth to get fed, after the 'predictors' mouth. Their goal is to make money. They do not care how, or who is manipulated to make that money.

 

[Rarity]

I went to Wharton for my MBA and know some equity research analysts. They're smart as *sugar*, and for you to indistriminately bash all of them and assign a crude blanket statements is incredibly immature. Just Alex Potter alone, I dare you to say he's corrupt or lazy to his face (or Rob Maurer) who has had him on multiple times.

To quote Brad Pitt in Moneyball: "If they are such good players, why don't they play good?"

 

[wipster]

Interesting, hope Tesla wasn't counting on these:

CATL reportedly delays North America battery plant due to new ...

The world's largest EV battery manufacturer, CATL, is reportedly

inside.com

 

[Tommy O]

...what does that say about you then who is obsessed about one company (vs. analysts who are often assigned sectors, let alone companies) in an industry you're passionate about, with no corporate reputation / bureucracy / peripheral pressures to be beholden to, yet still be wildly off in your own report? And while you have the benefit of being veiled behind a curtain of psuedo anonyminity with an online username. Honestly given all those parameters, you SHOULD be more accurate than them.

I went to Wharton for my MBA and know some equity research analysts. They're smart as *sugar*, and for you to indistriminately bash all of them and assign a crude blanket statements is incredibly immature. Just Alex Potter alone, I dare you to say he's corrupt or lazy to his face (or Rob Maurer) who has had him on multiple times.

I'm not saying they're right. Our collective intelligence through great contributions from members like yourself and @The Accountant give us much better foresight than Wall Streeet. But people (including you) take it too far sometimes.

You've been grumpy and lashing out lately. What does that say about you?

Alex Potter was specifically brought up as an exception, btw...

 

[Xepa777]

To quote Brad Pitt in Moneyball: "If they are such good players, why don't they play good?"

Yah, oversimplify a situation with a witty movie quote quip to harvest likes on an internet forum. Great job.

 

[printf42]

https://twitter.com/x/status/1583322701938053120

Why is the floor elevated off the ground? Was it pre-fabed then dropped in place same as they do the charging stalls and cabinets?

Is this the path Tesla going to take to get into pre-fab home market?

I have so many questions…

 

[Xepa777]

You've been grumpy and lashing out lately. What does that say about you?

Alex Potter was specifically brought up as an exception, btw...

I had some very positive comments about the earnings call, still as bullish as ever. No margin worries on options so just chilling with my stack of shares.

Even though I do believe Tesla will solve Robotaxi (to what extent remains to be seen), I've ALWAYS been more moderated in that viewpoint (and you can see in my post history). Just take opportunities to point out when I'm right about stuff (i.e. Elon's comments on Dojo, also que-ing up my "Tesla needs better camera equipment for robotaxi" told-ya-so comments in a few months from now). I'm pretty petty I remember historical downvotes from strangers who have no impact in my actual life lol.

Have always been annoyed by the overly-bullish short term sentiments when phrased with such certainty. The past few quarters have been a great way to point at the scoreboard (whatever happened to those big catalysts on investment grade upgrade, the mythical deferred revenue that everyone talked about weekly in 2020). Also in people re-writing what their expectations were, which is disingenuous. We're not hitting 50% delivery growth this year and that's okay, but to pretend like this place wasn't filled with people looking for 70-100% growth from 1-2 years ago is disingenuous. I get it, a forum consist of multiple people it's not monolithic, and I'm not going to take the time to search everyone's post history, but if you're being honest here there are clear attempts to re-write what previously held short-term expections would be. It's worse here than Reddit because on Reddit people can hop from one sub to another. Here is like, literally a website dedicated to Tesla bulls so the echo-chamber is significantly worse.

Part of it is me missing the community pre-2019 which was fueled by more of the "story stock" narrative rather than driving future stock price (especially near term) based on financial earnings. It's inevitable that Tesla's the largest company in the world, I think by 2030. And SpaceX by 2040. All this stuff is just noise. What's more fun is when there's actual uncertainty, like with what ABML is doing with extraction/recycling. TMC gang back then is different than today. As a VC it's just more my wheel-house to be a long-term thinker about items like competive moats, rather than nailing a free cash flow number with forex and depreciation considerations.

Admitting vulnerability is important. You can ALWAYS cherry pick positives from every comment, data, rumor, or earnings. But that leaves you incredible blindspots. And I just don't think it happens enough here (or is ignored, or reasoned away...looking at you "wait time list vs. delivery date" posts from today despite the all but unconfirmed rumors of China demand weakness. Which btw, when Tesla inevitably cuts prices to accelerate demand, guess what...that's great! The company has the ability to do that with its margins while no one else does, and Elon himself admitted to being embarrassed by prices. Now...if I was to wait until after price cuts happened and wrote that post, it would get many upvotes. But because I'm actually pointing out at anecdotal demand weakness right now...lots of dislikes. Shrugs).

Part of it is when Elon went political a lot of people (including those on this forum) turned on him and I'm like "guys he's always been libertarian this is nothing new."

I'm somewhat early retired and just advise a few public and private companies so I guess I have more freetime to post here I know which of my posts will lead to dislikes, always have lol.

50/50 feel like your original post was shade and I took it way too thoughtfully, but whatever.

 

[mb300sd]

The shade thrown at institutional analysts (with the exception of a few such as Alex Potter and Pierre Ferragu) is completely fair, because their estimation methodology completely sucks. Personally, I will explicitly bash their estimates. They have been very wrong in general and will continue to be very wrong.

Over and over again, institutional analysts have underestimated Tesla's performance, especially over the long haul but also on a quarterly level, as shown in the following table and charts.

The quarterly data uses institutional analyst consensus EPS expectations compiled by Zack's for each quarter since 2019. The average quarterly EPS prediction error was -25% of the actual EPS, with a cumulative error of $1.49 since 2019. This track record is especially egregious considering that all of these estimates were published immediately before each earnings release, after the production and delivery numbers were known, which (if we give analysts the benefit of the doubt regarding their good intentions) can only indicate that analysts have been consistently failing to understand the factors affecting Tesla's revenue and cost.

The annual forward-looking estimates for both vehicle production and earnings are far worse. I tried to find compiled data taken in December for each subsequent year, but couldn't find it. Instead, I resorted to looking up a few reports published by individual analysts.

If analysts had a 50/50 chance of guessing quarterly numbers too high or too low, the odds of guessing low on at least 12 of the last 13 quarters due to bad luck is 1/binom.dist(1,13,true) --> 585 to 1. Moreover, for the single instance in Q4 2020 when they estimated too high, it was only by 6% and that was mainly due to a $100M interest expense penalty that Tesla voluntarily paid to settle their convertible notes early. Without this unexpected one-time expense, the analyst consensus would have once again been 20% too low. If we want to count that as another miss, then that's 13 consecutive quarters of underestimation which has a 1 in 8,192 chance of happening randomly.

These results, along with the context of all the misunderstandings that apparently led analysts to their erroneous estimates, conclusively and unambiguously indicate systematic bias.

I would bet my life savings that their estimates for 2023, 2024 and beyond also are much too low just like all the previous estimates. Oh wait...I have bet my life savings on that prediction.

Quarter	Non-GAAP Earnings per Share	Estimated	Error	% Error
Q1 2019	-$0.19	-$0.08	$0.11	58%
Q2 2019	-$0.07	-$0.04	$0.04	52%
Q3 2019	$0.12	-$0.01	-$0.13	-108%
Q4 2019	$0.14	$0.11	-$0.03	-24%
Q1 2020	$0.08	-$0.01	-$0.10	-118%
Q2 2020	$0.15	-$0.04	-$0.19	-129%
Q3 2020	$0.25	$0.18	-$0.07	-29%
Q4 2020	$0.27	$0.28	$0.02	6%
Q1 2021	$0.31	$0.26	-$0.05	-15%
Q2 2021	$0.48	$0.30	-$0.18	-38%
Q3 2021	$0.62	$0.45	-$0.17	-28%
Q4 2021	$0.85	$0.67	-$0.17	-20%
Q1 2022	$1.08	$0.72	-$0.36	-33%
Q2 2022	$0.76	$0.64	-$0.12	-16%
Q3 2022	$1.05	$0.97	-$0.08	-8%
Totals / % Error Average	$5.89	$4.40	-$1.49	-25%

View attachment 866224View attachment 866225

View attachment 866239
There were 1.123 billion outstanding shares (diluted) at the time, so this translates to non-GAAP net income estimates of $10.0B and $11.8B in '22 and '23 respectively. '22 actual is already $9.3B just in the first 3 quarters and it's likely to be around $15-16B after Q4 gets added. This is tracking for a 50-60% beat despite Shanghai shutdowns and a highly unanticipated war in Europe. $11.8B for '23 is just...I have no words. Even Fremont and Shanghai by themselves will probably earn double or triple that in '23.

For another example, in May 2019 Joseph Spak from RBC Capital provided a price target equivalent to a ~$50B market cap and:

Actual non-GAAP net income results:
'19: $0.04B
'20: $2.46B
'21: $7.64B

Let's bear in mind this estimate was published before anyone had heard of COVID-19, so nobody was anticipating factory lockdowns and major supply chain chaos.

There are only two respectable ways for someone to respond to inaccurate estimation:

1. Acknowledge the problem, take responsibility and learn how to fix the model
   • (Note: this should be happening every time because all of our estimates are wrong and all we can hope for is to make our models less wrong over time)
2. Cease publication of authoritative-sounding "expert" estimates until such time that #1 has been accomplished

I can't help but notice that institutional analysts have selected neither of these options, which means that either they are incompetent at this particular task or are corrupt liars, or both.

Shhhh don't tell them. Keep giving us high probability trades on earnings day.

 

[Tommy O]

I had some very positive comments about the earnings call, still as bullish as ever. No margin worries on options so just chilling with my stack of shares.
<snip>...

50/50 feel like your original post was shade and I took it way too thoughtfully, but whatever.

You didn't take it too thoughtfully at all. That was a helpful response. I wasn't throwing shade, I just disagreed with you specifically targeting a post that actually put numbers behind it...and it seemed you missed the Alex Potter exception in the post. There are many, many posts on here that don't back up their accusations. I think @Gigapress deserves credit for making the effort to quantify the analysts results.

Thanks for taking the time, genuinely appreciate it.

 

[bkp_duke]

https://twitter.com/x/status/1583322701938053120

Why is the floor elevated off the ground? Was it pre-fabed then dropped in place same as they do the charging stalls and cabinets?

Is this the path Tesla going to take to get into pre-fab home market?

I have so many questions…

Kettleman City, CA has a very similar design, and is elevated in a similar manner. Although it is a substantially larger building with an actual Tesla-employee run cafe.

 

[bkp_duke]

If we see actual fisticuffs in this forum and thread, can we call a bottom to the stock?

Asking for a friend.

 

[Tommy O]

If we see actual fisticuffs in this forum and thread, can we call a bottom to the stock?

Asking for a friend.

Absolutely not and I will fight you for evening bringing this up.

 

[bkp_duke]

Absolutely not and I will fight you for evening bringing this up.

Bring it!

 

[Gigapress]

...what does that say about you then who is obsessed about one company (vs. analysts who are often assigned sectors, let alone companies) in an industry you're passionate about, with no corporate reputation / bureucracy / peripheral pressures to be beholden to, yet still be wildly off in your own report? And while you have the benefit of being veiled behind a curtain of psuedo anonyminity with an online username. Honestly given all those parameters, you SHOULD be more accurate than them.

Most of the pros have gotten a long string of quarters wrong by 25% on average despite the tremendous advantage of knowing delivery numbers when making those estimates, and that is enough time and data points for random unpredictable factors to average out to approximately zero. They've gotten most forward-looking annual estimates wrong by quite a bit more than 25%, in many cases by an order of magnitude more. I agree that the institutional analysts probably do have too much work to do and are beholden to corporate reputation / bureaucracy / peripheral pressures. Maybe I should modify my claim to say that the combination of the analysts themselves and their institutional environment is producing consistently wrong results. Either way, the results are consistently wrong. Also, if people are publishing different estimates than what they actually believe because of concerns about what their colleagues, boss, or the public will think, then that would negatively affect the amount of respect I have for them. Furthermore, if in fact it's nigh impossible to accurately analyze dozens of stocks simultaneously, then that begs the question of why anyone is doing that in the first place.

If my estimate of Q3 earnings of $1.28 had been exactly right, I would not have paraded that around as evidence of my model being perfect, because no matter what, there is a substantial random component to the end result and I can't claim any special ability to predict the random component. I want to apply scientific rigor and that means not misinterpreting the results of luck, whether good or bad, as being the result of knowledge or skill. As a matter of fact, in Q1 my EPS estimate was pretty close to the actual when almost everybody was underestimating, but it was due to high ZEV credits instead of price increases as I had been predicting, and so I publicly acknowledged that here in the forum and used the result to learn that trying to estimate price hike timing based on tesla.com estimated delivery dates is futile. In the long run, my investment performance will depend not on how smart people perceive me to be, but rather on whether I actually got the right answers and the millions of dollars of potential earnings on the line are much more important than the reactions I receive on an internet forum.

As for my estimate, I covered this on Wednesday in #371,419. The important parts of the model that I can estimate were in fact quite close and that was the actual goal because those elements are what will determine the long-run average accuracy of my model and that's what I care about.

The deviation can be almost entirely explained by three variables:

• ZEV credits
• Order fulfillment timing for March/April price hikes taking effect
• Foreign exchange

For the first two variables, I'm not aware of anybody who has identified a method for precisely estimating ZEV credits and order fulfillment timing without insider information, and I deliberately decided not to model for forex because of the crazy complexity involved in doing so and probable likelihood of failure without insider information even if I tried.

I went to Wharton for my MBA and know some equity research analysts. They're smart as *sugar*, and for you to indistriminately bash all of them and assign a crude blanket statements is incredibly immature. Just Alex Potter alone, I dare you to say he's corrupt or lazy to his face (or Rob Maurer) who has had him on multiple times.

I specifically listed Alex Potter as an exception. His TSLA analysis is good and he seems like a nice person from what I've seen in his extended interviews.

Analysts should be able to look at their own estimates and notice patterns in order to learn and take corrective action. If they were doing that successfully then they wouldn't be continually publishing estimates that are flagrantly incorrect in the same direction or asking clueless questions about stuff like demand when publicly available information could have easily told them the answer and led to them not wasting precious time on quarterly conference calls.

Yah, oversimplify a situation with a witty movie quote quip to harvest likes on an internet forum. Great job.

It was a relevant analogy that got the point across. Just as an athletic man with the profession "baseball player" may not be able to actually hit the ball consistently, stock analysts may be smart, may be ethical, and may be good looking or have a number of other positive personal qualities and still be bad at modeling Tesla's business. I can't play the saxophone, but importantly, I don't go on CNBS claiming to have expertise and to play smooth jazz for the audience and discuss the finer points of technique, nor do I charge other people money for provision of "professional" lessons and saxophone analysis.

It actually is a simple situation at its core. Tesla analysts ostensibly have one job, to model the performance of the company on KPIs like production, deliveries, revenue, margins and earnings. The average job performance over time is easy to objectively measure and the historical performance of analyst ratings and estimates is readily available online. The results are in, and it appears most of the pros have been performing very poorly, yet for some reason they keep getting undeserved credibility on this topic by the market at large.

 

[Cosmacelf]

I had some very positive comments about the earnings call, still as bullish as ever. No margin worries on options so just chilling with my stack of shares.

Even though I do believe Tesla will solve Robotaxi (to what extent remains to be seen), I've ALWAYS been more moderated in that viewpoint (and you can see in my post history). Just take opportunities to point out when I'm right about stuff (i.e. Elon's comments on Dojo, also que-ing up my "Tesla needs better camera equipment for robotaxi" told-ya-so comments in a few months from now). I'm pretty petty I remember historical downvotes from strangers who have no impact in my actual life lol.

Have always been annoyed by the overly-bullish short term sentiments when phrased with such certainty. The past few quarters have been a great way to point at the scoreboard (whatever happened to those big catalysts on investment grade upgrade, the mythical deferred revenue that everyone talked about weekly in 2020). Also in people re-writing what their expectations were, which is disingenuous. We're not hitting 50% delivery growth this year and that's okay, but to pretend like this place wasn't filled with people looking for 70-100% growth from 1-2 years ago is disingenuous. I get it, a forum consist of multiple people it's not monolithic, and I'm not going to take the time to search everyone's post history, but if you're being honest here there are clear attempts to re-write what previously held short-term expections would be. It's worse here than Reddit because on Reddit people can hop from one sub to another. Here is like, literally a website dedicated to Tesla bulls so the echo-chamber is significantly worse.

Part of it is me missing the community pre-2019 which was fueled by more of the "story stock" narrative rather than driving future stock price (especially near term) based on financial earnings. It's inevitable that Tesla's the largest company in the world, I think by 2030. And SpaceX by 2040. All this stuff is just noise. What's more fun is when there's actual uncertainty, like with what ABML is doing with extraction/recycling. TMC gang back then is different than today. As a VC it's just more my wheel-house to be a long-term thinker about items like competive moats, rather than nailing a free cash flow number with forex and depreciation considerations.

Admitting vulnerability is important. You can ALWAYS cherry pick positives from every comment, data, rumor, or earnings. But that leaves you incredible blindspots. And I just don't think it happens enough here (or is ignored, or reasoned away...looking at you "wait time list vs. delivery date" posts from today despite the all but unconfirmed rumors of China demand weakness. Which btw, when Tesla inevitably cuts prices to accelerate demand, guess what...that's great! The company has the ability to do that with its margins while no one else does, and Elon himself admitted to being embarrassed by prices. Now...if I was to wait until after price cuts happened and wrote that post, it would get many upvotes. But because I'm actually pointing out at anecdotal demand weakness right now...lots of dislikes. Shrugs).

Part of it is when Elon went political a lot of people (including those on this forum) turned on him and I'm like "guys he's always been libertarian this is nothing new."

I'm somewhat early retired and just advise a few public and private companies so I guess I have more freetime to post here I know which of my posts will lead to dislikes, always have lol.

50/50 feel like your original post was shade and I took it way too thoughtfully, but whatever.

FWIW, I agree with all your points, as I would imagine at lot of TMCers here also do. Just keep on truckin…

 

[Cosmacelf]

Interesting, hope Tesla wasn't counting on these:

CATL reportedly delays North America battery plant due to new ...

The world's largest EV battery manufacturer, CATL, is reportedly

inside.com

Rather interesting that a Chinese battery manufacturer is having heartburn over opening a US battery plant. I mean, I don’t blame them after what the Biden admin is doing against China right now. but CATL’s reason for the plant opening delay is odd:

”What is more, the rules would hike the costs of manufacturing batteries in the United States to a level higher than shipping them from China even if the US government offers subsidies for CATL to build the plants, reports Reuters with reference to a third person, who also asked not to be identified.”

So somehow very generous IRA subsidies wouldn’t be enough to overcome US sourcing? I don’t know if that’s believable.

 

[AudubonB]

Rather interesting that a Chinese battery manufacturer is having heartburn over opening a US battery plant. I mean, I don’t blame them after what the Biden admin is doing against China right now. but CATL’s reason for the plant opening delay is odd:

”What is more, the rules would hike the costs of manufacturing batteries in the United States to a level higher than shipping them from China even if the US government offers subsidies for CATL to build the plants, reports Reuters with reference to a third person, who also asked not to be identified.”

So somehow very generous IRA subsidies wouldn’t be enough to overcome US sourcing? I don’t know if that’s believable.

To me, it sounds even worse - that is, even sketchier reasoning. The Reuters line refers not to US sourcing costs, but that the RULES "would hike the costs". The collective understanding is that any rules emplaced since CATL's decision to build here have lowered, not hiked, the costs.