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

[NCEP]

The counter to this though which seemingly all of Wall St is either forgetting or just choosing to ignore is that it's not just a possibility, but the most likely outcome that Tesla will sell 2.5 million units at $50k ASP with 30% GM (using your numbers example).

That's because of depreciation/amortization of not just Berlin/Austin bringing the cost per per down as they increase production rates, but also the expansion out of Shanghai. Let's not forget that Shanghai for 2 straight quarters has only been running at 50-60% of production. Thus gross margins were hurt in Q2 and Q3 because the cost of Shanghai were spread across fewer vehicles. Depreciation/Amortization was a headwind to gross margins in Shanghai in Q3. That will be reversed in a pretty big way in Q4.

While it won't make a difference for Q1 and likely Q2, The Megapack factory will go through a major reduction in costs due to much higher production that will also help gross margins instead of being a drag on them.

The other thing that Wall St apparently doesn't want to talk about is the effects of IRA, There's been plenty of analysis and time for analysis to be have been done by now to at least get a ballpark about how Tesla's earnings going forward, starting with Q1, will be bolstered by the IRA. I mean even taking a pretty conservative approach ballparking the benefits to Tesla from the IRA bolsters Tesla's earnings and margins considerably.

We could even be looking at a scenario of 2023 ASP of say 46-47k and still have 30% gross margin, maybe even in the 31-33% range because of the credits that come directly back to Tesla from the IRA, not the EV credit that goes to the customer.

Really appreciate this post. As a shareholder since 2014 these past 2 months have been the only time I can remember questioning my conviction in tsla. Overwhelming FUD, elon being more elon than usual, macro environment, and a disappointing reaction to q3 results have hit me hard. I've been wavering between "if I'm feeling the effects it is definitely time to buy more" and "maybe this is getting too risky". Your reminder about the increase in margins from ramping up is the last push I needed to move some money to my brokerage.

 

[Todd Burch]

Really appreciate this post. As a shareholder since 2014 these past 2 months have been the only time I can remember questioning my conviction in tsla. Overwhelming FUD, elon being more elon than usual, macro environment, and a disappointing reaction to q3 results have hit me hard. I've been wavering between "if I'm feeling the effects it is definitely time to buy more" and "maybe this is getting too risky". Your reminder about the increase in margins from ramping up is the last push I needed to move some money to my brokerage.

And remember, you’re feeling this way because TSLA is oversold. Oversold is not the time to sell a stock. It’s that kind of psychology (which is perfectly natural) that makes hedge funds billions of dollars.

The years of FUD us old timers suffered through the last decade with Tesla has given us testiculos of steel.

Shorts didn’t realize they were making us fear-resistant.

 

[MrMoo]

The counter to this though which seemingly all of Wall St is either forgetting or just choosing to ignore is that it's not just a possibility, but the most likely outcome that Tesla will sell 2.5 million units at $50k ASP with 30% GM (using your numbers example).

That's because of depreciation/amortization of not just Berlin/Austin bringing the cost per per down as they increase production rates, but also the expansion out of Shanghai. Let's not forget that Shanghai for 2 straight quarters has only been running at 50-60% of production. Thus gross margins were hurt in Q2 and Q3 because the cost of Shanghai were spread across fewer vehicles. Depreciation/Amortization was a headwind to gross margins in Shanghai in Q3. That will be reversed in a pretty big way in Q4.

While it won't make a difference for Q1 and likely Q2, The Megapack factory will go through a major reduction in costs due to much higher production that will also help gross margins instead of being a drag on them.

The other thing that Wall St apparently doesn't want to talk about is the effects of IRA, There's been plenty of analysis and time for analysis to be have been done by now to at least get a ballpark about how Tesla's earnings going forward, starting with Q1, will be bolstered by the IRA. I mean even taking a pretty conservative approach ballparking the benefits to Tesla from the IRA bolsters Tesla's earnings and margins considerably.

We could even be looking at a scenario of 2023 ASP of say 46-47k and still have 30% gross margin, maybe even in the 31-33% range because of the credits that come directly back to Tesla from the IRA, not the EV credit that goes to the customer.

I'm not going into the ASP and GM because that's a story for another day.

However to your point of the market choosing to ignore. Yes they are choosing to Ignore. Look at NVDA's quarter and look at what they missed and compare their stock action to ours. It's actually pretty funny because back when we were at 1000 P/E people claimed TSLA was not trading on fundamentals, well guess what folks. This stock is again not trading on Fundamentals. Except to the downside. We're trading on Elonmentals.

 

[StarFoxisDown!]

Really appreciate this post. As a shareholder since 2014 these past 2 months have been the only time I can remember questioning my conviction in tsla. Overwhelming FUD, elon being more elon than usual, macro environment, and a disappointing reaction to q3 results have hit me hard. I've been wavering between "if I'm feeling the effects it is definitely time to buy more" and "maybe this is getting too risky". Your reminder about the increase in margins from ramping up is the last push I needed to move some money to my brokerage.

Just remember to be mentally prepared to see a lower valuation over the next 6 weeks.

That's not me saying you should hold off on buying. If you're buying more in cash you it doesn't matter to you. Sure you could get more shares at a lower share price, but we don't know when TSLA reaches such a cheap valuation that institutional investor start coming in with volume. But if you're thinking of using margin, make sure you can withstand a drop to at least 120.

Could be a TTM PE of 50. Could be a TTM of 45....or could be a TTM PE of 40......I don't know at this point

We're beyond all sensibility when it comes to valuation metrics at this point. The market is pricing in a complete collapse of growth and especially earnings, especially for after 2023. I believe the analyst expectations are for 20% Earnings growth.......earnings growth, not revenue growth, annually for 2024-2028. Meaning they're projecting revenue growth in the low to mid teens.

 

[Singuy]

Comparison among stocks based on FCF and stock based compensation. Poster was surprised to see how little Tesla dilutes their shareholders while generating massive FCF.

 

[Skryll]

My guess is doing the once over on a Tesla trade in before selling it again. So, yeah, tires, and filling up the blinker fluid.

Unlikely trade in, what I suspect is all sorts of dealerships buying them on auctions, fixing them up and flipping them for a quick $10k in profit. If you dont have a good product to sell, source it from auctions

 

[Discoducky]

Really appreciate this post. As a shareholder since 2014 these past 2 months have been the only time I can remember questioning my conviction in tsla. Overwhelming FUD, elon being more elon than usual, macro environment, and a disappointing reaction to q3 results have hit me hard. I've been wavering between "if I'm feeling the effects it is definitely time to buy more" and "maybe this is getting too risky". Your reminder about the increase in margins from ramping up is the last push I needed to move some money to my brokerage.

Hang in there! I've been doing this 10+ years and these last few months have been nearly, if not the hardest time being a shareholder for me.

When I started at Tesla, we were just disrupting the premium sedan industry. The target was the BMW M5. Now, it so much bigger, so much more disruption. Oil industry, car, truck and trucking industry, legacy dealerships and service industry, all the 3rd party suppliers, auto insurance, disrupting the electrical grid! The whole shootin' match! *AND* traditional marketing. Elon led companies disrupting traditional communications companies with Starlink and the list goes on...

The ven diagram of companies being disrupted by Elon led companies to top marketing spend companies is staggering and they all have deep pockets for FUD.

 

[StarFoxisDown!]

I'm not going into the ASP and GM because that's a story for another day.

However to your point of the market choosing to ignore. Yes they are choosing to Ignore. Look at NVDA's quarter and look at what they missed and compare their stock action to ours. It's actually pretty funny because back when we were at 1000 P/E people claimed TSLA was not trading on fundamentals, well guess what folks. This stock is again not trading on Fundamentals. Except to the downside. We're trading on Elonmentals.

It really is the most bizarre thing I've ever seen in my years of investing. When you combine all the different factors, we're way beyond 2019 levels of detachment from fundamentals and reality.

Not just because of the valuation being given to Tesla today but the valuation still being given to so many other companies. As you mentioned, Nvidia just posted a quarterly earnings where revenue saw revenue up a meager 3% YoY and net income down 73%......yet Nvidia has a PE of 66

Amazon just posted quarterly earnings of revenue up 15% YoY and net income down 9%. The guided to possible zero growth in Q4.....and Amazon has a PE of 87

Walmart posted earnings of revenue up 8% YoY and earnings barely up YoY and yet they have a PE of 45.

I can't find a company out there where the same dynamic is going. Where the TTM PE and/or Forward PE is less than their most current earnings growth YoY. And this is about to get even more bizarre because we know TSLA's TTM PE and Forward PE are about to compress even more in a significant way just from Q4....even if they only do something like 420k deliveries

It's like.......wtf is going on here????

 

[Ogre]

You are assuming Tesla is still at 750k. Their calculation is based on taking away Tesla sales, not ICE sales. Can you imagine their own EVs taking away ICE sales? That will cause share price implosion.


So any company claiming to be the leader at a certain time using a production rate that doesn't make sense, that's because you need to assume Tesla sales will go down because they are the competition and EV adoption stays flat.

I was trying to be generous to GM, not actually making my own prediction. Personally… I think GM is going to be in trouble and is likely to be below 1m total units, let alone 1m EVs with millions of ICE vehicles sales.

 

[nativewolf]

It really is the most bizarre thing I've ever seen in my years of investing. When you combine all the different factors, we're way beyond 2019 levels of detachment from fundamentals and reality.

Not just because of the valuation being given to Tesla today but the valuation still being given to so many other companies. As you mentioned, Nvidia just posted a quarterly earnings where revenue saw revenue up a meager 3% YoY and net income down 73%......yet Nvidia has a PE of 66

Amazon just posted quarterly earnings of revenue up 15% YoY and net income down 9%. The guided to possible zero growth in Q4.....and Amazon has a PE of 87

Walmart posted earnings of revenue up 8% YoY and earnings barely up YoY and yet they have a PE of 45.

I can't find a company out there where the same dynamic is going. Where the TTM PE and/or Forward PE is less than their most current earnings growth YoY. And this is about to get even more bizarre because we know TSLA's TTM PE and Forward PE are about to compress even more just from Q4....even if they only do something like 420k deliveries

It's like.......wtf is going on here????

Time to buy.

 

[Discoducky]

It really is the most bizarre thing I've ever seen in my years of investing. When you combine all the different factors, we're way beyond 2019 levels of detachment from fundamentals and reality.

Not just because of the valuation being given to Tesla today but the valuation still being given to so many other companies. As you mentioned, Nvidia just posted a quarterly earnings where revenue saw revenue up a meager 3% YoY and net income down 73%......yet Nvidia has a PE of 66

Amazon just posted quarterly earnings of revenue up 15% YoY and net income down 9%. The guided to possible zero growth in Q4.....and Amazon has a PE of 87

Walmart posted earnings of revenue up 8% YoY and earnings barely up YoY and yet they have a PE of 45.

I can't find a company out there where the same dynamic is going. Where the TTM PE and/or Forward PE is less than their most current earnings growth YoY. And this is about to get even more bizarre because we know TSLA's TTM PE and Forward PE are about to compress even more in a significant way just from Q4....even if they only do something like 420k deliveries

It's like.......wtf is going on here????

What's wrong with this picture?

 

[NCEP]

Just remember to be mentally prepared to see a lower valuation over the next 6 weeks.

That's not me saying you should hold off on buying. If you're buying more in cash you it doesn't matter to you. Sure you could get more shares at a lower share price, but we don't know when TSLA reaches such a cheap valuation that institutional investor start coming in with volume. But if you're thinking of using margin, make sure you can withstand a drop to at least 120.

Could be a TTM PE of 50. Could be a TTM of 45....or could be a TTM PE of 40......I don't know at this point

We're beyond all sensibility when it comes to valuation metrics at this point. The market is pricing in a complete collapse of growth and especially earnings, especially for after 2023. I believe the analyst expectations are for 20% Earnings growth.......earnings growth, not revenue growth, annually for 2024-2028. Meaning they're projecting revenue growth in the low to mid teens.

Yeah, I hear you. I don't use margin. I also never sell tsla nor will sell until 2030 at minimum.

I'm not trying to nail the bottom....where we are now is an insane discount. Heck, i've been buying since January thinking each time it was a great deal, and I still believe those lots were good buys. Most of us anticipate longer term share prices in the $800-1000 range. Short term recovery in 2023-2024 to 300-400 (not even besting ATH!) still means incredible gains at current prices.

 

[Congo Line]

What's wrong with this picture?

View attachment 875689

Sorry, maybe I'm slow but not sure what is the exact point being made here? My interpretation is that these companies have grown into their Price by growing Earnings, and at some point reach a somewhat steady state where share prices goes up in correlation with earnings growth. Is there something else to be gleaned?

 

[betstarship]

I feel like I should share something I learned this week:

It was found on Tomasz Tunguz by @ttunguz

 

[Mengy]

It really is the most bizarre thing I've ever seen in my years of investing. When you combine all the different factors, we're way beyond 2019 levels of detachment from fundamentals and reality.

Not just because of the valuation being given to Tesla today but the valuation still being given to so many other companies. As you mentioned, Nvidia just posted a quarterly earnings where revenue saw revenue up a meager 3% YoY and net income down 73%......yet Nvidia has a PE of 66

Amazon just posted quarterly earnings of revenue up 15% YoY and net income down 9%. The guided to possible zero growth in Q4.....and Amazon has a PE of 87

Walmart posted earnings of revenue up 8% YoY and earnings barely up YoY and yet they have a PE of 45.

I can't find a company out there where the same dynamic is going. Where the TTM PE and/or Forward PE is less than their most current earnings growth YoY. And this is about to get even more bizarre because we know TSLA's TTM PE and Forward PE are about to compress even more in a significant way just from Q4....even if they only do something like 420k deliveries

It's like.......wtf is going on here????

Those other companies don't have CEO's trolling on social media or selling billions in stock to buy stuff like Twitter in a crazed public circus. I know that's not a popular opinion among the vocal bulls here on TMC, but I do think its had an impact on our stock. I truly do feel our PE is lower than it should be simply due to Elon's behavior over the past year or so, which has led to investor (Wall Street) confidence in Tesla being lower than it used to be.

In one word: uncertainty. Our PE is so low due to uncertainty. In my very humble opinion.

I ain't selling my TSLA, but I do feel it's important as an investor to have an unbiased outlook on the company I'm invested in. With Tesla executing like a well oiled machine and growing like gangbusters, the PE really should be higher than it is, especially when compared to what other comparable companies have for PE's right now.

Sadly I don't think our Twitter "overhang" is going away anytime soon. I think this is going to be effecting us for quite a long time before it settles down, there will be new weekly Twitter FUD coupled with the Tesla FUD and the doubled effect will be felt on TSLA. Particularly since TWTR is no longer trading on the public market. Sure realistically Twitter should have no bearing on TSLA, but with Elon so involved with both I think the two are joined at the hip for now.

 

[juanmedina]

At least we are going into recession, how worse can it get?

 

[Webeevdrivers]

Those other companies don't have CEO's trolling on social media or selling billions in stock to buy stuff like Twitter in a crazed public circus. I know that's not a popular opinion among the vocal bulls here on TMC, but I do think its had an impact on our stock. I truly do feel our PE is lower than it should be simply due to Elon's behavior over the past year or so, which has led to investor (Wall Street) confidence in Tesla being lower than it used to be.

In one word: uncertainty. Our PE is so low due to uncertainty. In my very humble opinion.

I ain't selling my TSLA, but I do feel it's important as an investor to have an unbiased outlook on the company I'm invested in. With Tesla executing like a well oiled machine and growing like gangbusters, the PE really should be higher than it is, especially when compared to what other comparable companies have for PE's right now.

Sadly I don't think our Twitter "overhang" is going away anytime soon. I think this is going to be effecting us for quite a long time before it settles down, there will be new weekly Twitter FUD coupled with the Tesla FUD and the doubled effect will be felt on TSLA. Particularly since TWTR is no longer trading on the public market. Sure realistically Twitter should have no bearing on TSLA, but with Elon so involved with both I think the two are joined at the hip for now.

Yep. It will take years to gain the confidence of many investors back. And even if the stock partially recovers many will bail as soon as they can get out without losing their shirt. They’ll just be happy to be clear of the train wreck.

Jmho.

 

[Krugerrand]

And remember, you’re feeling this way because TSLA is oversold. Oversold is not the time to sell a stock. It’s that kind of psychology (which is perfectly natural) that makes hedge funds billions of dollars.

The years of FUD us old timers suffered through the last decade with Tesla has given us testiculos of steel.

Shorts didn’t realize they were making us fear-resistant.

*checks pants*

I can confirm the firmness level.

 

[Discoducky]

At least we are going into recession, how worse can it get?

That is funny! What I needed.

Folks, I realize it is hard to understand software, how it is made, sausage factory kind of process, but it happens, it is real, it is what powers your daily life, you wouldn't have it any other way. Imagine a life without a toaster and then compound that by a ba-gillion.

Most people don't even know how a toaster is made or the decades of tech stack we stand on to make that possible! Now, compare that to the phone you carry around everyday. Do you know how that works? No and neither do I. But I know a fair bit more than the average Joe (ok, maybe not our own @ZeApelido) about hardware, software and services engineering development and design. I pleaded with the Android team, for 2 years, to implement new constellations and antennas to allow my beloved maps Gaussian road snapping to work better, but alas, I digress...

IMHO, Elon is doing the right thing...engineering-wise, I have my own Product Management opinions, but the engineering is spot on (you think the Raptor 2 is happening by luck?). All the other sugar is cruft.

 

[Todd Burch]

Yep. It will take years to gain the confidence of many investors back. And even if the stock partially recovers many will bail as soon as they can get out without losing their shirt. They’ll just be happy to be clear of the train wreck.

Jmho.

Sounds like you are invested in ELON. Personally, I invested in TSLA.

Tesla is more than 100,000 employees. It is absolutely not a train wreck. Whatever you think of Elon, Tesla the company is in great shape.