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TSLA Investor Discussions
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Norbert
TSLA will win
I think that happened several times recently, but the next day it often was up very soon. It takes very little volume to change the price after-hours.
K Hall
Member
Hello all, my first post on teslamotorsclub.com. Just a few thoughts on smorgasbord's 4Q2012 results concerns:
"I think they will have eaten into some of the money they raised in Oct. "
I assume you think this is bad because Elon represented the offering as a "just in case" thing. Still, even if used, that doesn't imply it was wasted or otherwise bad. If it's to finance more expansion to meet demand and generating more than put in, there's no problem.
"I think the quarter as whole was not cash flow positive."
Only a problem if you assume Elon's 04Dec2012 tweet of "narrowly cash flow positive last week" means everyone expects the entire quarter to be net cash flow positive. That's not what I inferred, but if everyone else did, yes this could be a disappointment.
"I think reservations spiked up, but the whole year's production was not sold out as of 12/31/12 when considering current drop-out rates."
I think the positive feedback loop:
more Model S's get out in public-->more sales generated-->more out in public-->loop
has not come anywhere near leveling off. Therefore reservations-drying-up scenarios are a very low risk.
"I think it's still costing Tesla more than they want to produce cars (look at all the due bill items and people they're bringing on board and need to train), and I think making cars for Europe and Asia this year will incur some additional costs both at the factory and with setting up Delivery/Service overseas. "
I assume you're worried about excessive, rather than "some additional" costs for Europe/Asia. I see no evidence the team aren't adjusting for the additional costs in overseas markets, as well as production costs--given Elon's stressing the priority of 25% gross margin.
"Let's also not forget the cost of setting up SuperChargers."
From Hybridcars.com interview 25Sep2012, Elon estimated $20-30 million for a charge station network of just under 100 installations. This is approx the gross margin on 1300 Model S's (1300 ~= 25M/(75k*0.25). Think of the Supercharger network cost as the gross margin from 6.7% of 2013 Model S sales (=1333/20000)
"I'm a huge Tesla bull, but let's get real, folks. The breathless optimism here is scaring me."
I would balance this off with the breathless negativity of 40.8% of the float being short as of 15Jan2013 (WallStreetJournal). Given the 15% rise since then (from 33.90 to 39.24 close 08Feb2013), there has probably been some short covering but nowhere near 100%. Further, I don't think there is much "breathless optimism." Compare the reasoned, fact based optimism I see on this forum and elsewhere, with the rampant misinformation/illogic/irrelevance-based short case. When Tesla makes it official they're making 400 cars/week, coupled with possible increased production and revenue targets, there is strong potential for big analyst target increases.
Another consideration: Many seem to consider the 39.95/shr alltime intraday high as some sort of immutable barrier. Rather, this happens to be the peak fluctuation in the largely sentiment-driven world of pre-20k/yr Model S production. Once this production is officially verified, it's very likely this "barrier" disappears, being replaced with hard numbers: 20k+/year, $1.5 billion revenue estimates and P/E/growth ratios that give much higher than $40/shr targets.
"I think they will have eaten into some of the money they raised in Oct. "
I assume you think this is bad because Elon represented the offering as a "just in case" thing. Still, even if used, that doesn't imply it was wasted or otherwise bad. If it's to finance more expansion to meet demand and generating more than put in, there's no problem.
"I think the quarter as whole was not cash flow positive."
Only a problem if you assume Elon's 04Dec2012 tweet of "narrowly cash flow positive last week" means everyone expects the entire quarter to be net cash flow positive. That's not what I inferred, but if everyone else did, yes this could be a disappointment.
"I think reservations spiked up, but the whole year's production was not sold out as of 12/31/12 when considering current drop-out rates."
I think the positive feedback loop:
more Model S's get out in public-->more sales generated-->more out in public-->loop
has not come anywhere near leveling off. Therefore reservations-drying-up scenarios are a very low risk.
"I think it's still costing Tesla more than they want to produce cars (look at all the due bill items and people they're bringing on board and need to train), and I think making cars for Europe and Asia this year will incur some additional costs both at the factory and with setting up Delivery/Service overseas. "
I assume you're worried about excessive, rather than "some additional" costs for Europe/Asia. I see no evidence the team aren't adjusting for the additional costs in overseas markets, as well as production costs--given Elon's stressing the priority of 25% gross margin.
"Let's also not forget the cost of setting up SuperChargers."
From Hybridcars.com interview 25Sep2012, Elon estimated $20-30 million for a charge station network of just under 100 installations. This is approx the gross margin on 1300 Model S's (1300 ~= 25M/(75k*0.25). Think of the Supercharger network cost as the gross margin from 6.7% of 2013 Model S sales (=1333/20000)
"I'm a huge Tesla bull, but let's get real, folks. The breathless optimism here is scaring me."
I would balance this off with the breathless negativity of 40.8% of the float being short as of 15Jan2013 (WallStreetJournal). Given the 15% rise since then (from 33.90 to 39.24 close 08Feb2013), there has probably been some short covering but nowhere near 100%. Further, I don't think there is much "breathless optimism." Compare the reasoned, fact based optimism I see on this forum and elsewhere, with the rampant misinformation/illogic/irrelevance-based short case. When Tesla makes it official they're making 400 cars/week, coupled with possible increased production and revenue targets, there is strong potential for big analyst target increases.
Another consideration: Many seem to consider the 39.95/shr alltime intraday high as some sort of immutable barrier. Rather, this happens to be the peak fluctuation in the largely sentiment-driven world of pre-20k/yr Model S production. Once this production is officially verified, it's very likely this "barrier" disappears, being replaced with hard numbers: 20k+/year, $1.5 billion revenue estimates and P/E/growth ratios that give much higher than $40/shr targets.
CyberDutchie
Active Member
I sure hope you are right Stainless 
.... I recently sold about a third of my position to lock in some serious profits and be ready in case there is a big pull back since i got burned a few months ago.
I read in an article that Tesla confirmed that they had not announced any earnings date but the article speculated it would still be soon. Sorry for not posting link.
.... I recently sold about a third of my position to lock in some serious profits and be ready in case there is a big pull back since i got burned a few months ago.I read in an article that Tesla confirmed that they had not announced any earnings date but the article speculated it would still be soon. Sorry for not posting link.
Norbert
TSLA will win
Thanks for the reference, you probably meant the article at the following link, an interesting read:
Tesla Unveils Supercharger Stations; Six Now in California - HybridCars.com
Regarding the general analysis, I very much agree with you. Targets should increase in the near future, and a lot of skepticism about Tesla will bite the dust. Just not sure if this will happen already with the upcoming earnings report, but if not, then it will remain hard to predict that point in time. So one should be ready, as I see it.
Looks like TESLA will report earnings early Monday morning, this was reported by IBD. Click on the link below, is IBD reliable guys?
http://news.investors.com/technolog...arnings-preview-model-s-sales.htm?ref=HPLNews
http://news.investors.com/technolog...arnings-preview-model-s-sales.htm?ref=HPLNews
smorgasbord
Active Member
When a company raises money "just in case" and then uses that money, you gotta wonder what happened that they have to dip into their safety fund.
If they needed the money to expand Model S production up to the promised 400/week, then that's bad because they didn't plan it right. If they're expanding to start Model X production, then there's a concern they're spreading themselves too thinly. Finally, if they're using it now, then they don't have in case something does go bad - like a major recall, Federal government shutdown panic, 500 Model S's getting destroyed in a freak storm in Fremont, CA, etc.
I think some are misinterpreting it to apply to the whole quarter. That's too optimistic.
That's not the point. The point is that some here are talking as if the whole year is, in fact, sold out, when it isn't. That's too optimistic.
I'm worried about both. Even if you believe Mushk's offhand comment about some isolated gross margin being already half of what they want, it's a hard road to double the profit margin while expanding into new markets with new facilities and new people. And, to do that in just a year?
It's being treated as a marketing expense, and it makes reaching their profit margin goals that much harder.
Scroll a bit more through this thread, where people are creating short-term models for $150 and even $200 stock prices.
The anti-EV gibberish crowd is vocal, but too poor (JP, are you reading? :biggrin
They're not the ones doing the big time shorting. There is serious money behind Tesla's shorts, and serious money is almost always from serious investors, not fringe bloggers grinding axes. There is much still that can go wrong. Also, every analyst covering the stock reads TMC. They know production for Q4 probably made the 2500 promise, but didn't exceed the 3000 top end. They know people love the cars. They know there's still some assembly line/supplier kinks to work out, and probably more new ones to come. They also know what selling in Europe and Asia will cost.
What no-one knows is what post-2013 demand will be. I agree there's a positive feedback loop, but that won't go on forever. Right now Tesla is selling well by getting a decent number of existing sports sedan car buyers to switch, and by getting a surprising number of mid-level sedan buyers to spend double what they normally do on a car. But, those pools of people are not bottomless, and Model S's appeal, like all cars, does have a limit. Tesla was smart doing Model X when they did. I'm guessing Model S sales will peak later this year, but by then Model X prototypes will be shown (maybe another Oct factory tour?), and that will help keep Tesla's overall sales rising.
But, there are real risks with Model X. For one, the price tag is going to shock many people. I predict an EPA consumption rating over 425Wh/mile due to weight and aerodynamics for Model X. And it could be as bad as a 20% efficiency hit from Model X, especially with snow tires. I think Tesla has to respond with a bigger battery pack for Model X, which pushes the ASP up even beyond Porsche Panamera territory. People may not spend $80K for an SUV that can't make it to their favorite skiing resort, and may not want to spend $120K when the Porsche is cheaper. And, I'm not even getting into the more sophisticated interior of the Porsche.
Now, that's what I call Breathless Optimism. First, I think you're putting too much stock into "officially verified" as a stock catalyst. It's clear that the analysts read TMC and know how many cars were and are being made. That's why the price has risen 30% or so. Any further up movement will come from promises the team makes during the conference call.
Second, P/E ratios for fiscal years are going to remain negative for the forseeable future. What do you think Tesla's profit will be for 2013? We all agree that Q1 and Q2 will not show a company profit, right? Q3 might break-even and Q4 may show a profit. So, overall, Tesla won't have a profitable year. That's an infinite P/E ratio. So, move out to 2014. Oh, now we've got Model X ramp-up costs, and then Gen-III development costs. If Tesla self-funds those, then there will be no company profits. If Tesla does additional capital raises, then existing stock is diluted. Either way, the metrics don't look good.
So, let's catch our breath here and realize what we're investing in. Tesla won't be company profitable for a year while Obama is in office. The price isn't set by P/E ratios or other such investing metrics that Wall St. uses for profitable companies, but by future potential.
Most importantly, this is a marathon, not a sprint.
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SebastianR
Active Member
I think that's really the most important thing to keep in mind here. I know that everyone needs to get happy according to their own plan but when I see all this "market timing" discussion going on here, I'm getting dizzy... I have to admit that I don't really believe in active trading but rather long-term investing. So as food for thought, read this little article on a cat beating investment professionals over at the Guardian:
http://www.guardian.co.uk/money/2013/jan/13/investments-stock-picking
Alright, enough seriousness for now - let's get back and speculate about Tesla numbers :smile:
So instead of a long wordy argument, I'd like to just open source my thought process. I hope we can have a respectful and data driven critique. Would love to hear folks thoughts on the below. I tried to boil down what 2013 *could* be like through a HIGHLY simplified model. Lets say we had a time machine and it is now December 2013. What could that look like?
Just some assumptions up front:
AverageSellingPrice = $80,000
UnitsSold = 22,500
Operating Expenses for 2013 (Extrapolated from 2012) = $420,000,000
Gross Margin = 25%
NumberOfOutstandingShares = 113,780,000
From here we can arrive at the following for 2013:
Revenue = $1.8 Billion
Gross Profit (Margin * Revenue)= $450,000,000
Scenario 1 (No change in market sentiment scenario): Market maintains share price of ~$40/share. For this to happen, P/E would have to be = ~150 or 50 times Ford's premium.
Scenario 2 (short scenario): Market paying 10 times Ford's premium (P/E 3). TSLA projected P/E = 30. TSLA projected share price = $8/share. - This is in a sentence is the reason even people who believe the vision of TSLA are shorting it.
Scenario 3 (Optimistic Long Scenario): Market values TSLA like a growth tech stock (P/E 300 - 600). TSLA share price at this market treatment = $80 - $150
So here is what we come down to. How do you think the market will value TSLA at the end of 2013? Roughly like Ford? Roughly like Amazon? or somewhere in the middle. Place your bets gents.
Just some assumptions up front:
AverageSellingPrice = $80,000
UnitsSold = 22,500
Operating Expenses for 2013 (Extrapolated from 2012) = $420,000,000
Gross Margin = 25%
NumberOfOutstandingShares = 113,780,000
From here we can arrive at the following for 2013:
Revenue = $1.8 Billion
Gross Profit (Margin * Revenue)= $450,000,000
Scenario 1 (No change in market sentiment scenario): Market maintains share price of ~$40/share. For this to happen, P/E would have to be = ~150 or 50 times Ford's premium.
Scenario 2 (short scenario): Market paying 10 times Ford's premium (P/E 3). TSLA projected P/E = 30. TSLA projected share price = $8/share. - This is in a sentence is the reason even people who believe the vision of TSLA are shorting it.
Scenario 3 (Optimistic Long Scenario): Market values TSLA like a growth tech stock (P/E 300 - 600). TSLA share price at this market treatment = $80 - $150
So here is what we come down to. How do you think the market will value TSLA at the end of 2013? Roughly like Ford? Roughly like Amazon? or somewhere in the middle. Place your bets gents.
I would agree with that, but we'll see whether it happened. They likely were cash flow negative for the quarter, but they would need to be negative by more than $109 million (cash on hand at end of third quarter) to have dipped into the $222 million follow on offering.
carrerascott
FUEL FTR
I think your average selling price may be a little low. A quick poll on the FB Tesla Owners Group page (a very small sample of 52) shows 1 ordered 40kWh, 9 ordered 60kWh, 15 ordered 85kWh, 18 ordered 85 kWh Performance, and 9 ordered 85kWh Performance Signature.
The single 40kWh barely counts and we can count the sigs as just Performance. So we have 9 60kWh, 15 85kWh, 26 85kWh Performance (dropped one P85 since we dropped the 40).
60kWh starts at $63k
85kWh starts at $73k
P85kWh starts at $88k
Let's assume $5k in options per car (probably low). That makes us at $68k, $78k and $93k.
If the percentages hold up then we're at 18% 60kWh, 30% 85kWh and 52% P85kWh, that comes to $83,480 per car -- I think that's conservative though.
So I guess your $80k wasn't far off, but I'd speculate that it's more like $85k+ average per car.
The single 40kWh barely counts and we can count the sigs as just Performance. So we have 9 60kWh, 15 85kWh, 26 85kWh Performance (dropped one P85 since we dropped the 40).
60kWh starts at $63k
85kWh starts at $73k
P85kWh starts at $88k
Let's assume $5k in options per car (probably low). That makes us at $68k, $78k and $93k.
If the percentages hold up then we're at 18% 60kWh, 30% 85kWh and 52% P85kWh, that comes to $83,480 per car -- I think that's conservative though.
So I guess your $80k wasn't far off, but I'd speculate that it's more like $85k+ average per car.
CapitalistOppressor
Active Member
Elon promised that Tesla would get to a 25% gross margin in 2013, but it's not clear to me at all that he meant it would apply to the entire year.
Right now I would guess that there is a 0% chance that Tesla is extracting that much margin from current production. There is just way too much evidence that they are taking a brute force, cost be damned approach to solving problems right now, and while it's necessary, that is emphatically not how you go about increasing your margins.
I'd be pleasantly surprised if they manage to reach their margin goals in Q3 or Q4. But I really, really doubt they will achieve that for the entire year.
Given Tesla's potential growth in revenue (EV technology, infrastructure, Gen III), a PE even approaching 10 times Ford who has no such growth potential would get bought up in a heartbeat. If Tesla enters gen 3 in 3-4 years they would likely be selling in the millions per year producing a stock price of $1000 per share at PE in single digits. That level of possible growth is not even in the realm of possibility for any other major auto maker.
You're confusing gross margin with earnings. There are a lot of costs that are deducted from the gross margin to get to earnings, including e.g. debt service, corporate, unallocated facilities costs, R&D, marketing, and service.
The $450 million includes all that. Its a brought projection of all operating expenses.
kenliles, I'm in this stock for the same reason in as you, I see tremendous growth opportunity. that being said, I'm sorry to say, I expect it to be a slower ride. I think roughly 2025 Tesla may be at something like a million vehicles if all goes well. hey, it would be awesome if my 2025 projection is low, but I mean this kindly, if all goes well, the numbers 3 to 4 years out will build up to 100,000+, not millons.
The 2025 potential in my mind would mean a stock price of something like $600 (in today's dollars... so I guess something more like $1000). so that's what draws my attention, the potential for such tremendous growth. at the same time, I remember when AOL and Netscape seemingly were leaders in the internet (I never analyzed them as stocks... I just remember them as market leaders to the casual observer). I'm not bringing these companies up as dot.com stocks, but real companies, with a seeming real edge on the competition. it's just real difficult to predict well into the future (and I don't discount you may have a more optimistic long term picture than I do proves to be more accurate). so I see the possible place the company may reach in 12 years as a point on the horizon... even if it never happens, I think our investment will do well, as long as we've got the vector of the company's movement right, if not the magnitude. I will say, I've never known a company with a helmsman I felt more likely to hit such a distant point on the horizon than Musk.
The 2025 potential in my mind would mean a stock price of something like $600 (in today's dollars... so I guess something more like $1000). so that's what draws my attention, the potential for such tremendous growth. at the same time, I remember when AOL and Netscape seemingly were leaders in the internet (I never analyzed them as stocks... I just remember them as market leaders to the casual observer). I'm not bringing these companies up as dot.com stocks, but real companies, with a seeming real edge on the competition. it's just real difficult to predict well into the future (and I don't discount you may have a more optimistic long term picture than I do proves to be more accurate). so I see the possible place the company may reach in 12 years as a point on the horizon... even if it never happens, I think our investment will do well, as long as we've got the vector of the company's movement right, if not the magnitude. I will say, I've never known a company with a helmsman I felt more likely to hit such a distant point on the horizon than Musk.
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