TSLA Market Action: 2018 Investor Roundtable

[bdy0627]

If we're worried that public perception over AP will be so bad that it could hurt Tesla, then why do we think hundreds of thousands of new M3 drivers will be using it?

Also why do we think that only enthusiasts can drive Tesla safely? Joshua Brown and You You were/are both enthusiasts.

I think some will certainly be wary about it and avoid using it, but I think because of the sheer numbers of model 3s that will be out there, the number of drivers using it will increase massively. We won't know until we see what happens, but it's likely that enthusiasts have been using it responsibly for the most part, with just a small number of distracted driving crashes. The latest crash into the police car as well as the rear-ending of the fire truck suggest to me that we may be now starting to see more drivers using Autopilot too casually. I do not think enthusiasts are as likely to have been involved in those types of crashes. In those circumstances, it appears the drivers completely disregarded the limitations of Autopilot, just assuming they were safe to let the car drive while they focused their attention on other things. With the model X crash, as well as YY's, the drivers understood the limitations and risks but allowed themselves to take their focus off of the road for a few seconds at the wrong time. It's maybe a subtle difference, but I believe we are going to be seeing a higher proportion of crashes like the recent ones, where the drivers wrongly assume they are safe to allow the car to drive while they do other stuff.

 

[Dynastar]

If we're worried that public perception over AP will be so bad that it could hurt Tesla, then why do we think hundreds of thousands of new M3 drivers will be using it?

Also why do we think that only enthusiasts can drive Tesla safely? Joshua Brown and You You were/are both enthusiasts.

Any small group will tend to overrate its own awesomeness. I don't think current S or X owners are any more likely to be good AP drivers then future 3 owners. You could even argue that early adapters tend to overrate their own smarts and think that the rules don't apply to them. However as sales increase we will have more AP incidents just because there are more Teslas on the road.

 

[Motor Mouth]

In terms of risk to the stock value, I do think the AP crash stories likely have some influence in the short term. In a more macro sense, however, the reality is that Tesla is simply a stand-in for autonomous driving as a whole right now. Every auto maker is devoting resources to this application, but Tesla is the one pushing the boundaries most boldly, so it's getting the negative press. Other "villains" right now aren't auto makers, but rather Uber, Google, etc. that are doing public-facing tests. Given another 6-12 months I think this turns from a Tesla story into a more philosophical story generally about the limits of autonomous driving itself. Between now and then don't be surprised if the narrative continues to be "Tesla AP is unsafe." Personally, if it can be faulted for anything, I think Tesla has under-emphasized the plain fact that AP is still developmental.

 

[Waiting4M3]

They paid extra for it, they'll use it. Maybe public perception will cause them to be more cautious but I'm not counting on it.

That seems to bolster the argument that Model 3 will see more incidents.

I think some will certainly be wary about it and avoid using it, but I think because of the sheer numbers of model 3s that will be out there, the number of drivers using it will increase massively. We won't know until we see what happens, but it's likely that enthusiasts have been using it responsibly for the most part, with just a small number of distracted driving crashes. The latest crash into the police car as well as the rear-ending of the fire truck suggest to me that we may be now starting to see more drivers using Autopilot too casually. I do not think enthusiasts are as likely to have been involved in those types of crashes. In those circumstances, it appears the drivers completely disregarded the limitations of Autopilot, just assuming they were safe to let the car drive while they focused their attention on other things. With the model X crash, as well as YY's, the drivers understood the limitations and risks but allowed themselves to take their focus off of the road for a few seconds at the wrong time. It's maybe a subtle difference, but I believe we are going to be seeing a higher proportion of crashes like the recent ones, where the drivers wrongly assume they are safe to allow the car to drive while they do other stuff.

Any small group will tend to overrate its own awesomeness. I don't think current S or X owners are any more likely to be good AP drivers then future 3 owners. You could even argue that early adapters tend to overrate their own smarts and think that the rules don't apply to them. However as sales increase we will have more AP incidents just because there are more Teslas on the road.

It seems the consensus is that more AP accidents will happen, and I'm in agreement. I don't think we know yet whether newer drivers or more experienced drivers will run into more accidents. I hope Tesla's quarterly safety reports will have some stats on this, at least internally at Tesla to help them form a better user management strategy.

I also think it's too early to predict any significant impact on long-term take rate of the EAP option because of this. If Tesla's quarterly safety report demonstrates reduced accident rate, and thousands of new drivers each week add to the pool of happy customers using AP, and SW improvements keep coming, I think the FUD won't have legs to stand for long. In the worst case even if there is some short-medium term jitters on EAP take rate, we can just put the $5k into the deferred revenue. In a few years once enough data is out there, eventually people will want AP, and will pay for it. So in long term, this FUD should not have any financial impact on Tesla.

 

[bdy0627]

Any small group will tend to overrate its own awesomeness. I don't think current S or X owners are any more likely to be good AP drivers then future 3 owners. You could even argue that early adapters tend to overrate their own smarts and think that the rules don't apply to them. However as sales increase we will have more AP incidents just because there are more Teslas on the road.

Maybe. But many current S/X owners have sought out information about their car and its features via this forum and elsewhere. I know I did when I bought my S in 2015. I did so much research on my own that I did not need to look at the manual or have a sales person give me a tour of the car and its features. The car was delivered to my house in Wisconsin and I never even met with a sale person. I think that kind of approach is becoming less common with Tesla buyers now, and I think it will be even less common in the future as the model 3 goes mainstream. Will new buyers educate themselves continually about the strengths and limitations of the car and its software? If not, they may not have the same level of awareness that we do about Autopilot's particular strengths and weaknesses. That, in turn, may lead them to use it more casually than they should.

 

[CuriousSunbird]

I think the autopilot stuff will provide a little noise around the stock price for a few months, but ultimately the stock price and the fundamentals must align, as UBS is reminding us. Either Tesla's fundamentals get improbably better or the stock price will fall. I'm still betting on the latter.

 

[Motor Mouth]

In the worst case even if there is some short-medium term jitters on EAP take rate, we can just put the $5k into the deferred revenue. In a few years once enough data is out there, eventually people will want AP, and will pay for it. So in long term, this FUD should not have any financial impact on Tesla.[/QUOTE]

I fall into this category. I didn't purchase EAP because it just felt to me like it wasn't quite "there" yet. Nothing in the recent wave of reporting has altered my opinion. It's no better or worse that I suspected and I think it's fair to say that in reality it's likely improving every day. If there was no possibility of purchasing it as a later update, I would have had a much more difficult decision. However, since I can buy it in the future if my driving patterns change and/or it gets to the point that I feel it would improve my life I will plunk down the $$ for it. I can't be the only one operating on this hedge basis. How that might affect revenue in the future is anyone's guess. It can only help or be neutral, however.

 

[CuriousSunbird]

Amazing how they spin this story into a negative headline for Tesla:

Tesla's stock extends slide after GM's self-driving unit gets $2.3 billion Softbank investment

I think the issue is that some analysts (e.g. Jonas) still base a substantial part of their Tesla valuation on Tesla Mobility and Tesla's expected first mover advantage in the car sharing autonomous network. The market now thinks that area will be more competitive.

 

[CuriousSunbird]

I see Jaguar just sent out invitations to pre-order the iPace to their US mailing lists. Still estimating delivery in the second half of the year.

They seem to have an interesting wrinkle on the reservation list. They ask you whether you are "interested in making a deposit", but don't require it or say how much.

 

[Skryll]

In general, I prefer bullish Call spread instead of pure Calls. There is one exception, if I expect imminent huge rally (like a big squeeze), then I don't do spread. I take a directional bet without caping my gains.

Just lt us know when you think it is time

I feel like I am waiting on a 24 month pregnant woman to give birth

 

[Skryll]

I see Jaguar just sent out invitations to pre-order the iPace to their US mailing lists. Still estimating delivery in the second half of the year.

They seem to have an interesting wrinkle on the reservation list. They ask you whether you are "interested in making a deposit", but don't require it or say how much.

The other thing is that they clearly state that putting in a reservation does not obligate you to buy.

 

[CuriousSunbird]

The other thing is that they clearly state that putting in a reservation does not obligate you to buy.

I don't think any reservation obligates you to buy, does it? That's the whole reason for the controversy over Tesla's conversion rate.

 

[johnnybgood888]

$2.25B divided by 19.5% plus an average control premium of 30% to 35%.

GM/SoftBank transaction was for minority stake, so need to add a control premium, before comparing to INTC/MobileEye transaction.

The M&A bankers on GM/SoftBank deal likely used INTC/MobileEye transaction as a key "comp," so I'm not surprised by similar valuation. We can argue about whether or not the transactions are comparable at all, but the reality of M&A is that the process is less about financial modeling, and more about bringing big egos to sign the dotted line. Speaking from experience

So, is it safe to say then that of Tesla's intrinsic value, at least $15 Billion should be attributed to the autonomous driving program? Then let's say another $5 Billion (total WAG) is attributed to the Energy business.

So, on a market cap of about $50 Billion now, only about $30 Billion is attributed to the core car business. Which is actually more accurate when we are comparing market caps between the various car makers and saying that Tesla is worth more than so and so. And a lot easier to explain why Tesla is valued more than certain makers, when it isn't really, if we are just comparing the core car business.

 

[bdy0627]

Just lt us know when you think it is time

I feel like I am waiting on a 24 month pregnant woman to give birth

Love the analogy! The head keeps popping into view but then the damn thing disappears again and again. Time for a C section please.

 

[CuriousSunbird]

Apologies in advance for my ignorance, but I saw in the press a comment that Autopilot 8.0 on the X relies largely on radar, while 7.0 relies on vision/cameras. Is that correct? I had always understood that Tesla based on cameras.

 

[ValueAnalyst]

So, is it safe to say then that of Tesla's intrinsic value, at least $15 Billion should be attributed to the autonomous driving program? Then let's say another $5 Billion (total WAG) is attributed to the Energy business.

So, on a market cap of about $50 Billion now, only about $30 Billion is attributed to the core car business. Which is actually more accurate when we are comparing market caps between the various car makers and saying that Tesla is worth more than so and so. And a lot more easier to explain why Tesla is valued more than certain makers, when it isn't really, if we are just comparing the core car business.

Corporate valuations are more complex than that, but I tell my readers to focus more on the longer term competitive landscape, which requires a lot less assumptions, than a complex financial model, which I also have for my personal use. You really don't need to spend much time/analysis to conclude that Tesla is the indisputable leader of a fully autonomous, all-electric feature. Full autonomy is worthless without electric vehicles, and Tesla is the only company with mass-scale, high-quality battery manufacturing capacity for at least the next eight years, and the most aggressive plans to grow that capacity in the coming years. That's really all you need.

 

[CuriousSunbird]

So, is it safe to say then that of Tesla's intrinsic value, at least $15 Billion should be attributed to the autonomous driving program? Then let's say another $5 Billion (total WAG) is attributed to the Energy business.

So, on a market cap of about $50 Billion now, only about $30 Billion is attributed to the core car business. Which is actually more accurate when we are comparing market caps between the various car makers and saying that Tesla is worth more than so and so. And a lot more easier to explain why Tesla is valued more than certain makers, when it isn't really, if we are just comparing the core car business.

Last time I saw a number from Morgan Stanley, they attributed $196 per share to Tesla Mobility.

 

[Waiting4M3]

So, is it safe to say then that of Tesla's intrinsic value, at least $15 Billion should be attributed to the autonomous driving program? Then let's say another $5 Billion (total WAG) is attributed to the Energy business.

So, on a market cap of about $50 Billion now, only about $30 Billion is attributed to the core car business. Which is actually more accurate when we are comparing market caps between the various car makers and saying that Tesla is worth more than so and so. And a lot more easier to explain why Tesla is valued more than certain makers, when it isn't really, if we are just comparing the core car business.

Where do you see Tesla's charging infrastructure's worth fit? In the $30b auto side? or the $5b energy side?

 

[johnnybgood888]

Where do you see Tesla's charging infrastructure's worth fit? In the $30b auto side? or the $5b energy side?

That is a great question, because Tesla is trying to be completely vertically integrated, it is tough to know which buckets to attribute which technology or infrastructure. I think that is one of the reason why it is difficult for traditional or value investors to see what we see.

As ValueAnalyst said, most of us in this forum does not need to do complex calculations or analysis to know that TSLA is worth or will be worth more than what it is currently. But I still do think that it is a helpful exercise to do some simple back of the envelope calculations to estimates the intrinsic value even if it is not used to counter FUD, it can still be good for our own peace of mind.

That being said, until the charging infrastructure becomes a profit center for TSLA, I would put it into the $30 Billion car side of the business. At this point, it is a value-add to the car business and not generating any revenue in its own right.

 

[johnnybgood888]

Last time I saw a number from Morgan Stanley, they attributed $196 per share to Tesla Mobility.

I think that is quite generous of them to value it that high at this point in time. I don't think Tesla Mobility will make any major impact for at least another 5 years. Until L5 autonomy is widespread, there is no competitive edge currently for Tesla vs the incumbents.