TSLA Market Action: 2018 Investor Roundtable

[beachbum77]

You have made an implicit assumption (that Tesla's profit will remain at $3/q for 4 quarters) which seems to be very debatable to me. You assume that growth from this point goes from 50-100% per year to zero, instantly, now. I say "debatable" because this is an underhanded debating tactic, and not a presentation of a rational argument. You start by saying "some of the lower analyst valuations", as if this is someone else's argument, but then slipped by saying "as high as I see Tesla going". I believe you are getting close to the precipice of materially false information here.

A 35-40 P/E ratio is pretty freaking high for a $50-60 billion tech/auto company. "As high as I see Tesla going" by the end of 3Q19. I did not say ever. And I used $12 where others were talking $8-10. I just plugged in $12 to show how we get to $420 SP everyone would like to see. For all we know the number by then could be $20.

 

[mongo]

Revenue is most relevant. It reflects market share.

Except that the ASP on a Tesla is higher than most of the competition, so revenue unlinks from market share to some extend. Look at the Q3 letter's graphs of sales volume (#5) vs sales revenue (#1).

 

[anon]

Shifting to investment in Tesla?

Sadly not - Tesla is down 2.78% after hours, presumably dragged down by the GOOG and AMZN miss.

 

[beachbum77]

Revenue is most relevant. It reflects market share. At this stage in the game it's about growth and market share. FCF is important, profit not so much. FCF and profit are the byproduct of demand, efficient production, delivery, good body design that scales well.
It's about demand and building capacity.
No analyst was expecting profit so it would not have tanked. OpEx is where everyone was shocked. They are still digesting it.

Revenue does not reflect market share. The measurement is number of units sold. When they report global total sales they talk about 95 million units. Not "x" $ in sales. The same applies to the U.S. at about 17 million estimated sales this year. No one compares revenues to determine market share.

Revenues would be gamed with Tesla since they are the only OEM that sells at retail. All the others sell wholesale to dealers. So using revenue is apples and oranges.

 

[johnnybgood888]

Earnings multiple not appropriate; try rev multiple of 2.5-4x

Exactly. For high growth companies, revenue multiples is what should be used (I consider any company that is growing revenue > 25% YOY a high growth company). For Tesla to actually have a reasonable P/E at this point in what is still a growth company, is a testament to how hungry the public are for their products. Amazon has a trailing PE of over 140. That is high even for a tech company but I don't hear anyone constantly harping on that.

We knew that the bears were at best expecting (or hoping for) maybe a slight profit of $20-30 mil, which would produce a stratospheric PE, which they could then use as their new bear thesis. When that didn't materialize, they are now scrambling to come up with new fud, like comparing a high growth PE to industry averages.

 

[tivoboy]

Most often the placements are free of charge from OEM's in exchange for screen time and are coordinated with promotional campaigns and website advertising. In some cases, directors and producers will use their own cars (and get paid for the use as a prop rental). There are also companies that rent specialty "show" cars for filming.

So that Model X could well have been the director's personal ride.

What? I paid nearly 20 million to get my SUV into a movie. Should they have paid me?

 

[SOULPEDL]

Sadly not - Tesla is down 2.78%, presumably dragged down by the GOOG and AMZN miss.

But they weren't misses. EPS were both higher than expected. It's a bigger undertow tied to election jitters I think.

 

[ThereAre4Cars]

If Tesla becomes perma-profitable then the market measurement becomes their P/E ratio. .

No it doesn't. That's investor mythology. The market is forward looking. Far forward looking as things like Amazon and Tesla and Netflix prove (even given the fact they are subject to random 30% swings based on macro sentiment). When you understand that valuation is discounted DCF you don't have these arbitrary ideas that valuation switches suddenly to P/E.

 

[MarcusMaximus]

Close but not quite. Tesla did not have to turn. They started in the BEV direction from day 1. All of the other OEM's together have over $500 billion invested in ICE factories and technologies, maybe more. They cannot scrap that overnight nor do they need to. Customers globally are not rushing to buy EVs yet. Sadly, I see a lot more new ICE cars (with temp tags) on the road each day than I do new EVs.

As we watched in Hong Kong, and Ontario, Canada, when the subsidies end so does the demand for EV's. I expect the same thing to happen here in the U.S. unless Congress makes a change to the FITC. So EVs are not able to stand on their own yet. But that day is coming and the OEM's will be there to join the collective movement or their demand will dry up.

Tesla, alone, cannot make it happen. For one they just will not have the resources or the infrastructure in time. To achieve the goal of global warming reversal (if even possible at this point) will take the global collective of automakers working together. This is not an "us vs: them" battle. Then we have the airlines, the railroads, and the ocean carriers to deal with who all burn massive amounts of fossil fuels. Geez.

That is the much, much, bigger picture...

I think we’re largely saying the same thing, just with a different emphasis. Yes, Tesla can’t do this alone. It’s just a question of who is going to be able to turn in time, who won’t, and what new boats are going to be launched pointing away from the iceberg. Anyone who doesn’t will sink, and the new players(Tesla, but also others) will take their places.

For what it’s worth(and to make this interesting), based on current trajectory, I’d predict Ford is toast and GM will be a near miss. Mercedes and Audi are near misses, BMW is a toss up, Toyota is a goner and no idea about Honda or Hyundai. But, to be clear, this is going to be immensely painful for all of the above, and I see Tesla rapidly becoming the leader and keeping hold of that in the long term.

 

[ggies07]

Amazing Q3 and yet we can't continue the upward trajectory......Instead of Brittany, it's TLSA. LEAVE TSLA ALONE.

 

[Leo9]

AMZN -9%
GOOGL down almost 5%.

 

[Zhelko Dimic]

You are missing the bigger picture.

The legacy OEM's answer to their shareholders. The legacy group are mostly all profitable. To do a major about face and go all EV would produce HUGE losses and cost many $billions. Tesla has racked up $11 billion in debt to get where they are but their shareholders expected that going in. The legacy shareholders would revolt if management tried this abruptly and all the CEO's would get canned. Then they have their global dealer networks to wrangle with.

You have to recognize their operating constraints. The fact Ford is committing $11 billion along with big changes at GM and Volvo is HUGE. Give them some credit for working towards EVs in their heavily shackled environments.

Tesla is like a 100 ft yacht surrounded by cruise ships. Tesla can be much more maneuverable since shareholders are along for the ride at this point solidly behind management.

Actually, you beautifully formulated one of my strongest reasons for investing in TSLA. Yes, legacy car makers are shackled by their shareholders/dealer network

 

[Causalien]

Thank you THANK YOU for taking me back to my unhappy place.

When I was twelve, I helped my daddy build a bomb shelter in our basement - wait wrong story.

Back in 1997, I bought 25K worth of apple at 30 CENTS (SA). I sold it in the next few years and paid for graduate school. On my trading wall I have a post-it that reads - "DON'T SELL THE NEXT APPLE EARLY".

I stopped doing that math about 20 million ago.

Same date but different post it note.

Had no money, was poor student with 2 jobs. But when I saw my roomate's 1st gen ipod, I knew it was revolutiobary. The jealousy was real too. And it feels good in my hand

My note says: "Use student loan to buy the next company that makes ipod type product."

Amazon felt like a retail play and nflx is more like a cable company, so they were never the "sell the kitchensink" type of investment like tsla.

 

[ggr]

Most often the placements are free of charge from OEM's in exchange for screen time and are coordinated with promotional campaigns and website advertising. In some cases, directors and producers will use their own cars (and get paid for the use as a prop rental). There are also companies that rent specialty "show" cars for filming.

So that Model X could well have been the director's personal ride.

It is not correct that "most often" the placements are free.
Audi Drives Hard For Film Product Placements : News : Marketing To Moviegoers : A Handbook Of Strategies Used By Major Studios And Independents
There is intense competition for who gets to put their cars into TV shows and films. In fact there are many production companies who have contracts with specific car (and other product) companies. In the case of Audi, the "Transporter" movie and TV series. Many other examples.

Maybe it was the director's personal ride, or maybe Tesla (or an owner) allowed them to use the car for free, or rent it. That doesn't change the fact that Elon is on record that he won't pay for product placement.

 

[Remus]

Actually, you beautifully formulated one of my strongest reasons for investing in TSLA. Yes, legacy car makers are shackled by their shareholders/dealer network

and mid to high level managers many of who have engine and transmission building expertise.

 

[Krugerrand]

I hearby award a badge of honor to anyone that has kept up with this thread for the last week.

A special citation if you DID NOT click on any link to Yahoo or Bloomberg or SA.

That’d be me! I feel special now.

 

[Causalien]

The current price lvl was achieved when tsla settled with SEC. TA wise, it was a price lvl caused by that emotion. However fundamentally the company is much stronger now based on the numbers alone.

A thumb up to shorts who managed to drive it down this far. You've proved your capabilities. IMO, tesla should return back to the neutral price of 330 this quarter, or at least next quarter (if shorts manages to push through their narratives again) when ppl see that this is not a one time thing.

 

[Oil4AsphaultOnly]

Hmm looking over both companies reports, it looks like Tesla had >4x the operating income of Ford.(>$400 million vs $100 million). Can’t find Ford’s overall cash flow for the quarter, though.

Here ya go: Tesla's Lemonade Stand vs. Ford’s Popsicle Stand in Q3 2018 | CleanTechnica

Complements of cleantechnica. My favorite line:
"Stated another way, if Tesla had the same revenue as Ford, Tesla would have 3× more Free Cash Flow than Ford."

 

[dandurston]

Quit blaming the OEMs and put the blame where it belongs; on the consumer. I can go to my local stores and find unsold inventory of Bolts, Volts, and a selection of Tesla products ready for immediate sale. Why is that? Because the darn consumer (at least here in the U.S.) is not motivated enough to care to buy BEVs yet in large numbers.

I was going to lease a Bolt to last me through to a Tesla. I went to the dealer for a test drive and a quote. But two things killed it: (1) The tepid DC charging rate and (2) GM's lease pricing was terrible because they had the residual value at about 20% after 3 years, so the lease wasn't much different than 3 year financing.

Both of these reasons are big ones and they are self inflicted by GM. They've done a lot of things well with the Bolt but if they don't want to sell them for a reasonable price and if they aren't going to equip it with good fast charging to go with that 238 mile range, then they aren't fielding a competitive product.

 

[dqd88]

Except that the ASP on a Tesla is higher than most of the competition, so revenue unlinks from market share to some extend. Look at the Q3 letter's graphs of sales volume (#5) vs sales revenue (#1).

Sorta, but not really if you are looking at premium segment. Unit sales alone is not so relevant, unit sales in mass-premium segment is. This is where Tesla needs to be. Simply going after the most volume would be disastrous. Most volume @ high-price point is good.