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

[Hiline]

Amusingly Tesla now has enough cash that it could buy Rivian and Lucid and do a $5bn stock buyback AND still have$4billion in spare cash.
Maybe next year they will be able to buy GM? (not that I think they should buy any of these!)

This is honestly the only thing I care about for this earnings report. A few cents of earnings per share doesn't matter in the long run. The cash reserve is what allows Tesla to make strategic investments when the opportunity presents itself, and Tesla is still building up this war chest. An enormous investment is going to be needed to quickly scale the next-generation platform, for example. In 3 years when Tesla sells 5 million cars a year, people will realize how big of an investment opportunity they will have missed for not buying the stock in 2024.

 

[MC3OZ]

I'm saying always be cautious with Chinese made products without foreign branding oversight and quality control. The Japanese naturally are overly obsessed with perfection. Only place you can find 900 dollar square watermelons and thousand dollar cantaloupes. When was the last time you have seen people trained for a decade how to perfect making sushi rice? Only in Japan.

The BYD cars with battery problems are plug-in hybrids, sold mainly in China..

They are an earlier generation of products and I think BYD has been mainly focusing R&D on EVs and the Blade battery.

No indications of serious fire problems with BYD EVs...

BYD and the Chinese government are trying to lift standards, sometimes unintentional mistakes are made, and sometimes it takes a while to correct them. This is completely different to "diesel-gate" and "defeat-devices". Anyone can make a mistake, but some cheat and deliberately mislead.

if we limit the conversation only to EVs and batteries, my impression is that the Chinese are currently making better products than the Japanese, With the right leadership the Japanese could do a lot better, the raw brain power, hard work and attention to detail is there, but it needs to be steered in the right direction.

 

[Ellec]

It’s been obvious to me that demand has reached its limit for a while. Tesla has the capacity to produce more vehicles but doesn’t because we will end up with to much inventory.
If interest rates go down, Tesla does targeted advertising, Elon stops antagonising people etc demand will increase.
However it will have a limit because simply worldwide theirs a limit as to how many people can afford $40,000+ vehicles.

The next major jump is going to occur with the $25-$30,000 (I hope) vehicle.
As is normal for Tesla I expect delays especially as they are talking about a revolutionary process.

I hope by 2026 the numbers produced give us a big jump and within a year or two after that the number of the cheaper vehicles sold alone is more than the total production this year.

I disagree, more and more people are still switching from ICE to BEV's and will continue each year so demand will only increase. Demand will stop increasing when every car sold is a BEV.

 

[thx1139]

They are also paying the higher percentage on their mortgage. They have no choice but to pay the mortgage. They don't have to buy a new car.

Not all mortgages just adjust. Maybe I am wrong, but most people have fixed rate mortgages. So they dont just go up when interest rates go up. Only new and refinance and who would refinance to a larger rate?

 

[Musskiah]

Nope- that's not what a valuation allowance is

Oh, right, duh. For past loss years

 

[Krugerrand]

Up 5. Can we have just a l'il buyback now?

Absolutely not. But I’d be curious to know how many billions is enough billions? I don’t expect to get an answer until the point at which they stop growing the billions. What does Elon and the board have in mind? There’s got to be a magic number or range where they feel comfortable enough to ride out any kind of disaster and remain a viable business. Maybe there isn’t a number because the future plans and the imagination are limitless for the company.

 

[GhostSkater]

I just hope that I don't end up having to sell a significant portion of my positions in the near future and that I find a high paying job in the near term

The path Tesla is is more than clear, for some at least

LFG!!!

 

[heltok]

Yep, the 50% target is dead. History might say the record low interest rates for an excess period of time was crazy.

My guess is that we will see at least 1 year of >50% before 2030. Maybe 2 or more also. $25k vehicle will ramp like crazy in multiple factories. If they manage to catch up to 20M in 2030, who cares. Bears will be like "See Tesla only did 9.9M vehicles in 2030, showing that Elon always lies" and ignore the fact that 9.9M is a really good number and they were expecting Tesla to be bankrupt many times over.

 

[AMN]

$333M in interest income on its cash position. That's $1.3B+ annualized... LOL

 

[unk45]

Google "BYD to replace pouch cells due to fire risk" which leads directly to this week-old article:

Exclusive: BYD to stop making pouch batteries for its hybrid EVs on leakage concerns | reuters.com › business › autos-transportation​

Excerpt from the roto-REUTERS article:

I freely admit I have considered only BEVs. Since nearly all pouch users have faced significant problems, that one probably was inevitable. Still, they should have known better.

Frankly I admit I think of their prismatics, Blade as a quite substantial advance.

Anyway, just thinking about Tesla Free Cash Flow makes me more convinced that I already was that they have no peer in operating quality. None of the Chinese competitors ahem anything even approaching TSLA financial and logistical talents. Strongly none have yet successfully copied the direct sales model although several Geely companies are trying to approach that, notably Polestar and, in some countries Volvo.

 

[TespaceX]

They are also paying the higher percentage on their mortgage. They have no choice but to pay the mortgage. They don't have to buy a new car.

You make it sound like every car buyer just bought a new home and a new car within the last 6 months when interest started going up. C'mon.

 

[hobbes]

Another nice item from Q4 letter after some uncertainty on how production has been going lately in Giga Berlin (hat tip to Rob Maurer):

 

[SmokyPeat]

Oof. Sounds like another year or two of stagnation for the stock.

 

[Zaddy Daddy]

Is Tesla Ending The Growth Narrative?

Of course this is written before the earnings call which might give more clarity, but I'm struggling to have a strong postive or negative bias on the earnings report.

There are distinct positives, including:

1) Automotive COGs dropping nicely. Margins should be near bottom, though the usually weakest Q1 might be the actual bottom.

2) Operating margin up is big as this ultimately feeds into earnings. Legitimate chance this is the bottom.

3) Cash flow and cash-reserves trending nicely. Tesla is financially secure, unlike other OEMs who can't throw their hat into the EV ring any further without getting their financials rekt.

But there are also negatives, including:

1) Explicit stating growth is slowing and more glaringly removing the 50% CAGR target from forward looking statements. Financial institutions are obviously using growth in their DCF models. Sure if 2024 is only 10% unit growth, that could be discarded, but by removing this statement, Tesla is opening up institutions to remodel their DCF valuations lower simply because of lower assumed average growth moving forward.

2) Absolutely no mention of 4680. I mean this is the biggest limit on volume growth and cost reductions in the next few years, and there's literally 0 mentions of it?!

3) If it wasn't before I hope it's obvious to you now. Tesla is demand constrained. Growth is quite likely limited because any further volume expansion would require signficant further price cuts that would eat into cash flow. The price elasticity sucks. This is evident by looking at the growth over last 4 quarters - the volume growth is minimal while ASPs have gone down signficantly.


So it's hard to determine what the sentiment will be for this earlier part of the year. There's a mix of good and bad.

There is an endless list of reasons for people’s current upset with the SP, but nowhere near the top, let alone on this planet, is the reason because the SP didn’t appreciate in a calm, collected, calculated, and measured manner.

No, my point was that people oversimplisticly think it unfair that the share price is lower than it was 2 years ago, even though arguably the company is in better shape.

 

[Mengy]

Oof. Sounds like another year or two of stagnation for the stock.

Sort of. I'd say a bit over one year of trading in a channel between here and $300. Once the Fed starts lowering interest rates and the Gen 3 is in production I think we'll climb over the ATH of $415, but not before. In my humble opinion at least.

 

[mongo]

2) Absolutely no mention of 4680. I mean this is the biggest limit on volume growth and cost reductions in the next few years, and there's literally 0 mentions of it?!

"We expect the ramp of Cybertruck to be longer than other models given its manufacturing complexity."

 

[M|S|M MYP]

I was a little hopeful until i saw this:

 

[AndrewZ]

Sort of. I'd say a bit over one year of trading in a channel between here and $300. Once the Fed starts lowering interest rates and the Gen 3 is in production I think we'll climb over the ATH of $415, but not before. In my humble opinion at least.

Historically the arrival of rate cuts is where the market dump begins, the overall market just hit an ATH — how that parses out for Tesla as an individual company though, not too sure about that.

But overall the economy is doing quite well, hence the stock market doing so well. Rates likely won’t be cut until the economy actually starts suffering.

 

[The Accountant]

Do you know if the 1x tax deffered revenue affects FCF? As in was this a real FCF+ or accounting?

No it doesn't. It's a non-cash item.

 

[MD70]

I disagree, more and more people are still switching from ICE to BEV's and will continue each year so demand will only increase. Demand will stop increasing when every car sold is a BEV.

Demand has reached its limit now as Tesla has the ability to increase production right now but hasn’t.