TSLA Market Action: 2018 Investor Roundtable

[Fact Checking]

But in 2006 and 2007, Toyota's P/E ratio was around 10-12. From 2013-present, they've fluctuated in the roughly 7.5-12.5 range. If we give Tesla a P/E of 12 on a forecasted $5 billion in GAAP profit, that's $60 billion in market cap or $353 per share.

While your Tesla valuation figure is moving in the right direction, even in that timeframe you are still comparing apples to oranges:

• Toyota is a commodity ICE vehicles market supplier with stiff competition and razor-thin margins.
• Tesla owns the very lucrative, high-margin franchise/monopoly of premium EVs with no credible competition in sight, and such natural monopolies tend to be countercyclical and can grow faster or maintain sales better even in recessions. (Not to mention the monopoly income and price setting power.)
  
• Tesla also has very high value intangibles which are not on the balance sheet: for example 100% margin software products that improve margins, such as AutoPilot. (If Tesla wanted to they could probably maintain $50b valuation from licensing AutoPilot and their integrated automotive software stack to other carmakers.)
• SuperCharger network value - again with the intangible network value not on the balance sheet.
• Brand value: very high level of customer satisfaction and retention rates, despite near zero mass advertising.

These are all very important factors that differentiate Toyota and Tesla.

 

[HG Wells]

.View attachment 347114

Model 3 VINs (@Model3VINs) | Twitter

Too many VIN's, Too Many VIN's.
What do you do, with too many VIN's ?

Start production on second line.

 

[strangecosmos]

Was just joking with someone about this. What did I tell everyone? This is how shorts does accounting. Anything past simple addition and multiplication is a no go.

GAAP is a standardized accounting system that all public U.S. companies are legally required to follow. It's not how shorts do accounting. It's how everyone does accounting.

If you think one particular metric like net profit is misleading in a particular case, you can look at another metric like operating cash flow or free cash flow or EBITDA.

 

[Scuttlebutt]

Ugh. down 3.2% @ $304.78. Not looking forward to watching us dip below $300 again. Oh well. Staying long, as always.

 

[shlokavica22]

Why is there fud?

If Tesla produces 7000 vehicles a week.

And we were to fill those 7000 vehicles full of gas - 15 gallons per vehicle to fill them up for the first fime.

We would need 105,000 gallons of gas every week - or roughly 11 full semi tanker loads - just to fill the cars for the first time. More than 1 tanker per day is eliminated from regional demand.

At $3 per gallon this would cost $315,000. Every week. Just to fill tanks for the first time.

Over 52 weeks of this level of production the cost to fill the cars for the first time is 16 million and would require over 600 semi truck loads of fuel.

Assuming conservatively, owners only keep these cars 3 years and only fill up each 10 days, In one year of production Tesla eliminates 108 trips to the gas station for the individual, and almost 40 million trips for a years worth of individuals.

Those 40 million times somebody isn’t putting 15 gallons of gas in their car at 3 dollars per gallon costs gas companies 1.7 billion dollars.

1.7 billion dollars worth of gas over three years eliminates the need for ~65,500 full semi trucks of gas.

Before Donald trump gave substantial cuts to oil and gas this amount was Exxon Mobiles annual profit.

And if gas is more than $3, average consumers fill up more than once per 10 days, Tesla owners stay electric longer than 3 years, or Tesla produces more than 7000 per week...well it’s all multiplicative. If gas doubles in cost then the amount removed from gas companies doubles. If Tesla then doubles production that new number doubles again.

And none of this can ever go back to the gas companies. No Tesla owner can decide to use gas in the car. It’s a permanent loss.

That’s why there is fud. It’s going to start a death spiral.

Because it isn’t just Tesla and it isn’t just a year of production.

Finding a way to stop that, will be almost impossible. Even if TSLA somehow disappears, the demand for EVs will stay. TSLA proved that it IS possible to make a profitable EV cars for the mass market.
At some point, funding all that FUD, will stop being profitable. Hopefully sooner than later

 

[mongo]

Too many VIN's, Too Many VIN's.
What do you do with too many VIN's ?

Start production on second line.

So much data, so little information...

At least the VIN will tell us when they start production in another country/ factory...

 

[gora321]

Madrid banning petrol cars from city centre - electrive.com

 

[electracity]

But will there be sufficient numbers of OEMs producing EVs to drive Toyota out of business? It needs not be purely Tesla. Nor does it require taking all of Toyota's market share, only the last few percent which generate the profit...
Also, used Teslas will be a better value than new ICE....

If everything goes well, Tesla may be passing the two million vehicle mark in 5 years... (more likely 1.5 million, but I'm an optimist and want my pickup before the Sierra dies...)

Unfortunately EVs drop gas prices. Carbon will hopefully be regulated in 5 years, but probably not for the growing middle class in lesser developed countries.

I also think that the the rise in the price the Powerwall portends the medium term future of good EVs. Tesla may have twice the demand for the 3 and Y that they can fulfill. The ability for Tesla or anyone to surge EV supply just doesn't exist.

I don't see a scenario where Tesla can be building two million EVs in 5 years. It will be a stretch to get China to a half million. The realistic max at Fremont may be 600K.

 

[shlokavica22]

Madrid banning petrol cars from city centre - electrive.com

This one is actually good and immediate measure and not just a PR nonsense.

She declared that from this November on, only electric vehicles and hybrids with a range of 40 km will be allowed to drive through the city centre freely. The area defined as centre measures 472 hectares and is enclosed by the M30.

 

[BOBTHEJOCKEY]

But they weren't misses. EPS were both higher than expected. It's a bigger undertow tied to election jitters I think.[/QUOT
If the democrats gain one or both houses the stock market will head south. There is a bill to extend the $7,500 ev tax credit working it's way through congress now. It will pass much more quickly with the Dems in power which will be hugely bullish for Tesla and will more than counteract the overall market slump.

 

[KarenRei]

This one is actually good and immediate measure and not just a PR nonsense.

She declared that from this November on, only electric vehicles and hybrids with a range of 40 km will be allowed to drive through the city centre freely. The area defined as centre measures 472 hectares and is enclosed by the M30.

Spain has been lagging on EVs. This is exactly the sort of thing they need to kickstart the switchover there.

 

[Fact Checking]

There is literally no one capable of making enough EV in 5-10 years to put Toyota put of business.

That's false, but it is not even required: if enough ICE vehicle owners chose to simply defer new car purchase, margins get further pressured and can turn negative due to fixed costs.

And ICE demand can easily fall even if there's no EV supply. See for example how ICE demand dropped by 50% in 2008-2009:

And that was a temporary drop in demand everyone knew would recover within a couple of years - while the EV related drop in demand is going to be permanent, it's never going to recover once gone. 90%+ of the customers who buy Teslas never buy an ICE car, ever again.

So if enough customers defer or chose used cars or very cheap cars until the can get a nice EV a true "death spiral" for the ICE industry might trigger.

I don't claim that this will necessarily happen, but it's a significant risk.

 

[elasalle]

Too many VIN's, Too Many VIN's.
What do you do, with too many VIN's ?

Start production on second line.

Looks like to much good news, now VIN counts are no longer Sexy

 

[Words of HABIT]

Yeah, so I think Tesla's business model is counter-cyclical for the next ~10 years, i.e. they'll grow even faster during recessions.

I also think that starting in 2019 I think they'll start hoarding cash like Apple, because there's a limit to how fast they can expand on a natural trajectory. So there is going to be a de facto rainy day fund, in practice utilized to opportunistically snatch up somewhat aging but otherwise well equipped factory buildings from cash starved, downsizing competitors in liquidity crisis.

This!

 

[gora321]

SpaceX seeks $500M loan for major one-time Starlink and BFR investments

Interesting Goldman Sachs. Let's see how will this influence on Tesla ratings.
Are we gonna see another Citron?

 

[strangecosmos]

While your Tesla valuation figure is moving in the right direction, even in that timeframe you are still comparing apples to oranges:

• Toyota is a commodity ICE vehicles market supplier with stiff competition and razor-thin margins.
• Tesla owns the very lucrative, high-margin franchise/monopoly of premium EVs with no credible competition in sight, and such natural monopolies tend to be countercyclical and can grow faster or maintain sales better in recessions. (Not to mention the monopoly income and price setting power.)
  
• Tesla also has very high value intangibles which are not on the balance sheet: for example 100% margin software products that improve margins, such as AutoPilot. (If Tesla wanted to they could probably maintain $50b valuation from licensing AutoPilot and their integrated automotive software stack to other carmakers.)

These are all very important factors that differentiate Toyota and Tesla.

What this amounts to is an argument that Tesla ought to have a higher P/E than industry peers due to growth prospects and technological competitiveness. That is a premium — Tesla's P/E ought to be higher than the industry precedent. It's not a discount to the P/E of Toyota, which doesn't seem to have changed all that much same pre-Roadster and post-Roadster.

So, it comes down to qualitative factors, rather than simply multiplying metrics by multiples. That, if anything, is my point.

I don't agree that electric car manufacturing is a natural monopoly. It seems to be as much a commodity business in the long run as gasoline car manufacturing. There may be a ~5 year lag (give or take a few years) where Tesla pulls ahead and gains an outsized share of the global auto market. Say your investment time horizon is 20 years. Let's imagine autonomy never happens. Are there strong reasons to believe Tesla will have a 50%+ share of the global EV market in 20 years? Won't batteries and electric drivetrains simply become commoditized by then?

If your investment timeframe is 5 years, I can see you have a different picture of things. But if your timeframe is 5 years, that also limits your potential to capture a piece of the longer-term growth in Tesla's value. So if your time horizon is more like 10+ years, then I think you have to consider the likelihood of the commoditization of EV technologies in the long run. In which case maybe it makes more sense to model Tesla as having a 10% or 20% global market share, rather than 50% or 60%. At a 10% or 20% market share what would Tesla be worth?

Well, look at the automakers today who have a ~10% market share, like Toyota, Volkswagen, and GM. Look at their valuations. Is there any reason why an EV company 20 years from now would have a higher valuation than them?

One possibility is capital efficiency. EVs might require half as much capital to manufacture. Then again, wouldn't that lower the barrier to entry, increase competition, and drive prices down? I'm not quite sure how to think about this.

 

[HG Wells]

DAM Fact Checking, you are going to turn me into a SHORT !

Shorting Ford.

 

[ggies07]

Problems in oil world:
GM breaks with Trump in call for national electric car mandate

How ironic.....I get to post this pic again and we can start the shaming.

 

[electracity]

That's false, but it is not even required: if enough ICE vehicle owners chose to simply defer new car purchase, margins get further pressured and can turn negative due to fixed costs.

That's not the way people work.

 

[K_Dizzle]

How ironic.....I get to post this pic again and we can start the shaming.

Is that Peter Thiel on the right?