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Why invest in Tesla (KarenRei)

Discussion in 'TSLA Investor Discussions' started by FS_FRA, Nov 6, 2018.

  1. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    Or is it that GM doesn't make enough Bolts to get good pricing from LG? Some have posited that LG is getting most of the profit margin...
     
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  2. Brando

    Brando Active Member

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    As Elon has admitted/said (so did Sandy Munro) parts need to be DESIGNED for robot assembly. That is the big potential.


    example: latest patents for car cabling by Tesla
     
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  3. Brando

    Brando Active Member

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    Most may already know/see this.

    I suspect the biggest advances in manufacturing is in the design of the components. why?
    - total vertical integration of the factory, example Henry Ford
    ---raw materials came in and product (cars, then trucks, WWII tanks & planes) search: Ford River Rouge Complex
    ---- made glass, steel etc. (note: wood creates for engines were designed to form truck bed for Model T truck

    -Modern trend [GM/Wall St./banker] consolidation and then outsourcing.
    ---now parts are NOT designed at the factory; supply chains; and factories do assembly work
    ---note: Tesla makes their own seats and might get more margin [make vs build typical decision/calculation]
    ---other examples are of course motors and batteries and aluminum parts forging in Lathrop

    Tesla example of parts design:
    - reduction in cabling and cable patents so robots can assemble
    - superbottle - all cooling systems use: motor; battery; passenger compartment
    --- less bottles,pumps, hoses and therefore quicker assembly
    - centralized electronic vs each parts maker in supply chain doing their own electronics
    (is Tesla making its own Model 3 brake rotors? brake calipers? anyone know?? air suspension?)

    I hope this crude/quick note gives you the basic ideas. I have no basic Tesla experience, and I don't care to try and speculate in more detail as I only think I know what I think I have read.

    suggested research: Ford River Rouge Complex; Edward Demings (also Deming Prize Japan) who taught Toyota
     
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  4. adiggs

    adiggs Active Member

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    (copied from Investor's Roundtable)

    My reason for investing in Tesla is increasingly simplifying down to good old fashioned EPS.

    With ~170M shares in circulation, every $170M in earnings is $1 EPS. Or every $500M in earnings is about $3 EPS.

    If third quarter EPS of $3 (I round from $2.90) carries forward for 3 more quarters, then we own today a company that is producing $12/year in EPS. The closest comparison of size and growth rate I know of is Amazon, who gets better than a 100PE on much lower growth.

    So my valuation today is $1200 (ok - in ~6 months). I only need for Q4/1/2 to average out to being as good as Q3 to get to $12 EPS. I think that's misleadingly conservative, and $15-$25 EPS is more likely - now I'm at a $1500-$2500 share price in ~6 months. If you were confident the shares were going to trade at $1200 in ~6 months, how much would / should you be willing to pay for them today? I'm thinking $600 is cheap, today.

    If we assign a slowly growing, profitable big company PE to Tesla of maybe 30 PE, that gets me to today's share price (not quite) of $360. I think this is a ridiculous undervaluation, but maybe the market will only value Tesla at 60 PE ($720 share price).

    The company has so little stock in circulation, every $500M in earnings is $3 EPS. This is a company that when it finally swung to positive earnings, it went from negative the previous quarter all the way to $3 in it's "first" (recent) profitable quarter.

    The operating leverage is huge and not correctly valued yet - the recent (say last 3 years) trading history is being overvalued and the operating leverage / profitability is undervalued. (MHO). I'm really looking forward to the Q4 earnings report.
     
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  5. mikevbf

    mikevbf Active Member

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    As Elon said recently in an interview (paraphrased), "What other company has as exciting a road map?" The memory of this phrase came up after watching yesterdays "Now You Know - In Depth" blog where Zack and Jesse forecast where Tesla will be in 5 years. Spoiler alert: TSLA's evaluation is more than 10x what it is today.
     
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  6. adesai

    adesai Member

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    #66 adesai, Jan 16, 2019
    Last edited: Jan 16, 2019
    My investment hypothesis is rooted down to one thought:

    If climate change is real (which I believe it is based on my research and reading), then it is the single most important problem human civilization faces. If we fix climate change, then we survive and, hopefully, thrive.

    So, I put as much money as possible into the company (and/or areas) that have shown the ability to execute on fixing that problem and it's related areas. Generally, looking at major problems brings an equal amount of innovation to bring up new ways of doings things...which is very lucrative (from what I've learned). So, yeah. The ability to make money off of this problem is there. All companies are intentionally built to solve unmet needs in the market if the government cannot and/or will not to satisfy the population/society. Tesla's my choice as was Solar City for climate change.

    I put in ~50% of my life savings into Tesla (at $29.50) back in 2012 before they showed the earnings report after Model S got into production. Happy with the returns, but very happy my money is still in it for the long haul until that problem is fixed or until I'm satisfied with the outcome of this problem solving exercise.
     
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  7. Dreadnought

    Dreadnought Member

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    #67 Dreadnought, Mar 6, 2019
    Last edited: Mar 6, 2019
    Last year, FSD had a low proba-closer-inspection-of-teslas-autopilot-safety-statistics-533eebe0869d)soon. Even more so after Tesla pulled it off the menu. Since then, some pieces of new information made me re-evaluate the topic. Individually, they have little relevance but for the first time, I see a path to autonomous driving with a fair chance of realization within a decade.

    HW3
    The upgrade of processing power by a factor of 10 enables implementation of more complex models with improved recognition quality at higher frame rates. More importantly, new features can be added without the need to first optimize performance of the existing SW to free up capacity. Recent announcements of upcoming features seem to depend more on rollout of the new HW than remaining SW implementation efforts.

    AP + FSD
    After moving some existing features into the FSD package, there is for the first time an actual proposition in this purchase. Until then, it was just the promise of future miracles to come and I suspect most orders were intended as a zero-interest loan to fund development. If Tesla can deliver according to the roadmap, the FSD package will actually be worth its money by the end of the year. Take rates will consequently improve and free upgrades for existing EAP owners after recent price cuts will add to the fleet of FSD - enabled cars.
    Granted, Elon's interpretation will remain to be an assistance system for a while. It won't give me the ride home after a beer too many and it won't drop off the kids at school. Would I appreciate a car that is 99% of my commute hands - off while not meeting the mind - off requirements to meet L4 autonomy requirements? Definitely! Will it be worth an incremental 5k? Time will tell but I am confident that Tesla will get the pricing right in order to have take rates close to those of EAP.

    Regulatory Approval
    The SAE definitions of autonomy levels are a good definition of the requirements to the system but (to the extent of my knowledge) they don't specify how to prove that a system complies. Frankly, I have conveniently avoided the question as this all seemed to be pretty far out. By chance, I came across an article that discusses Tesla's EAP safety statistics. (A Closer Inspection of Tesla’s Autopilot Safety Statistics).
    My main takeaway was that it takes billions of miles to gather statistically relevant numbers to even tell whether the system is better than the human driver and even more to prove that the system is 10 times or 100 times less likely to cause an accident.
    Not completely unlike the real - world test a human needs to pass for getting a driving license, an automated system will need to prove it statistically. This, however, means that only a significant large fleet can acquire the needed miles traveled. And in consequence, the Waymo fleet will likely not scale to reach a critical threshold.

    Bottom line: Until recently, I gave a zero chance to L5 automated driving in the next 5 years and only slightly higher within a decade. Now for the first time, I can see how this could become feasible but only for OEMs with a critical mass of cars that constantly deliver evidence of correct behavior of the cars and Tesla is uniquely positioned if they manage to get away without expensive Lidar.

    Edit: Completed the accidentally submitted post.
     
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