Author Topic: Tesla seems overvalued  (Read 6566 times)

AlexK

  • Bristles
  • ***
  • Posts: 330
  • Age: 46
  • Location: Sparks, NV
Tesla seems overvalued
« on: April 11, 2017, 08:09:30 AM »
I am not a market timer and only half serious, this is just talk right now.

Tesla today is worth more than General Motors by market cap. GM sells 100 cars for every one Tesla. Something isn't right. Would shorting Tesla stock be a good move? It seems like Tesla is just a Model X fire away from a spectacular drop. The problem is predicting when that would happen. When you hold a stock you can wait forever for it to rise but shorting is different (at least I think so, never done it). On the other hand betting against Elon Musk seems stupid and I personally want electric vehicles and soon. 

I own three properties within 15 miles of the new Tesla Gigafactory, which were all boosted at least 20% in value because of the hype around Tesla bringing 6000 new jobs into the Reno economy. So in this way my NW is already correlated to this company's success.

Thoughts?


TheAnonOne

  • Handlebar Stache
  • *****
  • Posts: 1578
Re: Tesla seems overvalued
« Reply #1 on: April 11, 2017, 08:14:29 AM »
On this forum owning individual stocks at all is kind of rare, and shorting said stocks is double rare.

I see no reason why shorting isn't  always 100% market timing.

Sent from my SM-G935T using Tapatalk


AlexK

  • Bristles
  • ***
  • Posts: 330
  • Age: 46
  • Location: Sparks, NV
Re: Tesla seems overvalued
« Reply #2 on: April 11, 2017, 08:23:24 AM »
I just learned you can lose an unlimited amount when shorting a stock, but the upside is capped. Also the time frames are short, like a few weeks.

Car Jack

  • Handlebar Stache
  • *****
  • Posts: 1527
Re: Tesla seems overvalued
« Reply #3 on: April 11, 2017, 09:06:29 AM »
I'm equally skeptical that Tesla will make it in the long run unless, perhaps they stop being a car company and become just a battery company.  The biggest draw right now is release of the Model 3 which is supposed to open the flood gates of profit.  Problem is....Tesla has yet to figure out how to make money selling cars.  The Model 3 brings volume but if you're shipping $100 bills with every car, that doesn't make you profitable.  If we were in $4 gas days, maybe there would be more of a chance, but around my house, it's closer to $2.  I have no problem driving my 15 mpg Wrangler around at that rate (plus our local electricity cost is way above national average at about 20 cents a kWHr).

YttriumNitrate

  • Pencil Stache
  • ****
  • Posts: 870
  • Location: Northwest Indiana
Re: Tesla seems overvalued
« Reply #4 on: April 11, 2017, 12:30:49 PM »
I believe that old adage goes that "the market can stay irrational longer than you can stay solvent."

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2304
  • Location: EastCoast
Re: Tesla seems overvalued
« Reply #5 on: April 11, 2017, 12:37:22 PM »
People have been saying the whole market is overvalued, and Tesla 100 times so, since at least 2012. I can only guess how those short positions worked out..

jjandjab

  • Stubble
  • **
  • Posts: 137
Re: Tesla seems overvalued
« Reply #6 on: April 11, 2017, 12:46:03 PM »
I remember hearing the same thing about Amazon when I was starting to invest - it's just an online book store...

So often these companies are also creating value (or trying to) in other ways - adaptable technologies or ideas that can be transformed into something else of value. GM does not appear to be creating anything new (could be wrong, I'm no insider) whereas Tesla has created something no one thought feasible 10 years ago - 300-400 mile range battery powered car that goes 0-60 in 2.5 seconds.

Now I personally believe in using about 5% of my portfolio to play around and invest in things I like, although haven't shorted anything before - so if you can handle a complete loss, then go for it.

But sounds like you have way more to gain from Tesla success, so I'd be rooting for that.

PaulMaxime

  • Stubble
  • **
  • Posts: 241
  • Age: 56
  • Location: San Francisco, CA
  • Absolute power doesn't corrupt, it reveals.
Re: Tesla seems overvalued
« Reply #7 on: April 11, 2017, 01:03:51 PM »
Yeah, Tesla is definitely overvalued if you are looking at it as a mature business.

But the market is forward looking. Clearly they are expecting lots of growth. Model 3, Battery technology, Solar roof tiles. If it all pans out the company could be worth much more.

It's somewhat of a gamble at the moment. If you believe that the market is efficient (I don't really but it's at least somewhat efficient) then the current value is the correct one.

I have shorted stocks before and never ever short on valuation alone. There needs to be some other catalyst that is going to drive the stock down that you believe that is being overlooked. Blackberry was a good example of a good short back when the iPhone was released. But you would have had to understand what a revolution the iPhone was at the time and how BBRY wasn't likely to be able to respond. But everything looks obvious in hindsight.





691175002

  • 5 O'Clock Shadow
  • *
  • Posts: 69
Re: Tesla seems overvalued
« Reply #8 on: April 11, 2017, 01:12:19 PM »
Kind of, but not really.  Shorting has a lot of non-obvious constraints that make it more dangerous than buying a stock.

For one, you have to actually borrow the stock so you are probably paying 2-5%/yr in shorting costs to keep the position open.  You are then fighting the market which on average tends to go up ~8%/yr, so on average your chosen short must be down at least 10%/yr relative to the market to even break even.

There is a more serious problem as well: an unsuccessful short becomes a larger part of your portfolio.  If you consider long positions, a loser becomes a smaller part of your portfolio and the damage is limited to the initial investment.  This is not true for shorts.

If you allocate 5% of your portfolio into shorting a stock and it doubles you now have a 10% short position.  You can maintain the 10% short position but you are exposed to a nonsensical amount of risk.  Scaling the position back to 5% requires locking in a massive loss - even if the company eventually goes bankrupt you will still lose money on the overall trade.

Your absolute maximum upside is only your initial investment, and it can take a company many years to die.  Management can keep a zombie going with spin-offs, refinancings, restructurings, asset sales, "strategic alternatives"...

Timing is very important when shorting since the outcomes are path-dependent.  "The market can remain irrational longer than you can remain solvent."

jjandjab

  • Stubble
  • **
  • Posts: 137
Re: Tesla seems overvalued
« Reply #9 on: April 11, 2017, 01:22:15 PM »

If you allocate 5% of your portfolio into shorting a stock and it doubles you now have a 10% short position.  You can maintain the 10% short position but you are exposed to a nonsensical amount of risk.  Scaling the position back to 5% requires locking in a massive loss - even if the company eventually goes bankrupt you will still lose money on the overall trade.

Your absolute maximum upside is only your initial investment, and it can take a company many years to die.  Management can keep a zombie going with spin-offs, refinancings, restructurings, asset sales, "strategic alternatives"...

Excellent points - you can tell I haven't shorted with my 5% - I hadn't continued the thought that yes you could lose far more than your initial investment.

frugal_c

  • Bristles
  • ***
  • Posts: 256
Re: Tesla seems overvalued
« Reply #10 on: April 11, 2017, 07:12:18 PM »
I don't recommend what you are trying to do.  However, if you really want to do this I would research buying puts instead of shorting.  There are issues with puts for sure but at least you have limited downside.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 2219
Re: Tesla seems overvalued
« Reply #11 on: April 11, 2017, 07:47:52 PM »
Even if you're right, there are more people going with the momentum than selling Tesla.  If you're correct and get the timing wrong, the stock will still move upwards until you get a margin call... "Send us more money, or we're selling your position at a loss."  And then, when you don't have more money, the brokerage sells your position and makes you take a loss.  The brokerage is also on the hook for your short sale, so they have the right to dissolve it when you lack the funds to keep going.

And as you said, you have to get the timing down to a matter of weeks, rather than a vague idea that it is overvalued at some future point.

The S&P 500 index holds less than 0.2% in Tesla stock, so that's the right amount for me.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1881
Re: Tesla seems overvalued
« Reply #12 on: April 12, 2017, 08:37:28 AM »
Selling one car vs. 100 cars tells us little about the profitability of those sales. With so many fewer parts, the cost to produce a Tesla will eventually become lower than the cost of producing an internal combustion drivetrain with thousands of machined metal pieces.

Sales volume also tells us nothing about the risks to the company, such as leverage, imploding pensions, pissed unions, product line dependency on low fuel prices, dependency on a dealer structure that creates deadweight losses, etc.

Finally, Tesla will likely end up earning income without even being required to make products. The big mainstream companies will end up paying royalties to Tesla for their growing portfolio of intellectual property, and there may be no competitive alternative to doing so. GM's halfhearted attempts to make electric cars, from the EV-1 to the Bolt, were attempts to obtain at least some IP, not make a profit.

bfiguero

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: Tesla seems overvalued
« Reply #13 on: April 12, 2017, 11:35:11 AM »
ChpBstrd,you make two really good points. The cost of batteries in particular will go down once the GigaFactory is at full capacity and it only first went online in January. Furthermore the software being crammed into the cars alone is a big a deal on the IP side of things.

Tesla themselves say they're an energy company, not a car company. A lot of the rest of the value is in the solar panel and power pack production too. Regular car companies don't do any of that stuff.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2304
  • Location: EastCoast
Re: Tesla seems overvalued
« Reply #14 on: April 12, 2017, 02:23:41 PM »
The S&P 500 index holds less than 0.2% in Tesla stock, so that's the right amount for me.

This seemed unlikely so I had to check; Tesla is not in the S&P 500. So an S&P500 index holds 0% Tesla. (Though I guess you're technically correct, since you said "less than 0.2%"..)

Kaspian

  • Handlebar Stache
  • *****
  • Posts: 1536
  • Location: Canada
    • My Necronomicon of Badassity
Re: Tesla seems overvalued
« Reply #15 on: April 13, 2017, 10:34:47 AM »
You know a company's overvalued when the CEO gets cocky with their own shareholders and tells them to buy something else instead.

 http://www.reuters.com/article/us-tesla-board-idUSKBN17E23Z
Quote
A group of Tesla Inc (TSLA.O) investors has urged the luxury electric car maker to add two new independent directors to its board, without ties to Chief Executive Elon Musk, to "provide a critical check on possible dysfunctional group dynamics."

A defiant Musk took to Twitter on Wednesday afternoon to suggest the investors buy stock in Ford Motor Co (F.N) instead

There's probably a classier way to handle investor relations?

PaulMaxime

  • Stubble
  • **
  • Posts: 241
  • Age: 56
  • Location: San Francisco, CA
  • Absolute power doesn't corrupt, it reveals.
Re: Tesla seems overvalued
« Reply #16 on: April 13, 2017, 06:04:31 PM »
Rather than short a stock you can limit potential losses by buying put options.  Put options are contracts that give you the right to sell a stock at a specific price.  You make money if the stock drops below that price.

The current Jan 2018 300 puts are selling for 41.50 which means that the stock needs to drop below 258.50 for you to break even at expiration. You can buy out of the money puts much cheaper but the risk of ending up with nothing is much higher.

You can limit the cost of those puts by selling puts at a lower strike price.

You generally want to use the longest term options you can get for this type of spread since it gives the most time for your thesis to play out.

If you believe that TSLA will be lower in the next couple years you couid

BTO Jan 19, 2018 300 Puts for 41.50 and
STO Jan 19, 2018 280 Puts for 31.20

Net cost: 10.30 ($1030)

If TSLA is below 280 in Jan 2018 you make $20 ($2000) for 94% return in a year. If it's above 300 you lose all your investment, but you know how much you are risking up front as opposed to shorting. There's a similar trade for the 2019 options. Longer term, more chance for you to be right but longer to wait.

I think it's going to be higher, personally, but if you want to put your short money where your mouth is this is a viable option.
« Last Edit: April 13, 2017, 06:07:26 PM by PaulMaxime »

sol

  • Walrus Stache
  • *******
  • Posts: 8488
  • Age: 43
  • Location: Pacific Northwest
Re: Tesla seems overvalued
« Reply #17 on: April 13, 2017, 11:11:13 PM »
I agree that Tesla is over-valued.  Also Netflix, Amazon, Google, Facebook, and virtually every other technology company on the market. 

Even if I'm right, is that actionable information?  Would you willingly avoid buying these companies as part of a (presumably cap-weighted) indexing strategy?  Of course not.  You need to own them, regardless of the price, because they are where the value is in today's economy.  The price may go up, or it may go down, and you're going to ride it both directions without selling, no matter what happens. 

farfromfire

  • Stubble
  • **
  • Posts: 230
Re: Tesla seems overvalued
« Reply #18 on: April 14, 2017, 02:23:00 AM »
Personally, I dislike holding so much of Ford and GM in an S&P500 index fund without any exposure to Tesla. But personal feelings do not an investment strategy make.

2Cent

  • Pencil Stache
  • ****
  • Posts: 652
Re: Tesla seems overvalued
« Reply #19 on: April 14, 2017, 02:59:12 AM »
In the technology platform market it's mostly winner takes all. That is why many tech companies seem overvalued. What people underestimate is the in car software. Tesla is leagues ahead of the rest there, and could dominate the in-car platform like Apple used to dominate smart phones. Once those cars fully drive themselves, drivers are going to want to do something else with their time.

Johnny Aloha

  • Bristles
  • ***
  • Posts: 315

yachi

  • Bristles
  • ***
  • Posts: 267
Re: Tesla seems overvalued
« Reply #21 on: April 14, 2017, 06:47:10 AM »
In the technology platform market it's mostly winner takes all. That is why many tech companies seem overvalued. What people underestimate is the in car software. Tesla is leagues ahead of the rest there, and could dominate the in-car platform like Apple used to dominate smart phones. Once those cars fully drive themselves, drivers are going to want to do something else with their time.

I've thought about the similarities to Apple too.  The Iphone has a very large share of the US smartphone Market (about 40%).  I could see Tesla creating a market for their cheaper Model 3 that doesn't currently exist, especially if it's the first self driving car around.  I'm thinking elderly who don't drive, commuters who want to use their commute time for other things, etc.

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Tesla seems overvalued
« Reply #22 on: April 14, 2017, 08:32:34 AM »
If we were in $4 gas days, maybe there would be more of a chance, but around my house, it's closer to $2.  I have no problem driving my 15 mpg Wrangler around at that rate (plus our local electricity cost is way above national average at about 20 cents a kWHr).

There are (relatively) lots of electric cars in Vancouver BC, where we pay $C 1.40/Liter.
« Last Edit: April 14, 2017, 08:38:38 AM by Heckler »

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Tesla seems overvalued
« Reply #23 on: April 14, 2017, 08:35:08 AM »
Thats $U 3.98/Gallon - our typical cost for gas on a bad day. 

Today its $C 1.34/L.
« Last Edit: April 14, 2017, 08:38:13 AM by Heckler »

JetBlast

  • Bristles
  • ***
  • Posts: 365
Re: Tesla seems overvalued
« Reply #24 on: April 14, 2017, 10:52:33 AM »
I agree with others that puts are the only way I'd ever bet against a stock. Shorting is a quick way to destroy your portfolio if you aren't careful.

As a trade I'd look at a put spread like PaulMaxime outlined.


Buckthundaz

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: Tesla seems overvalued
« Reply #25 on: April 14, 2017, 12:23:40 PM »
I am not a market timer and only half serious, this is just talk right now.

Tesla today is worth more than General Motors by market cap. GM sells 100 cars for every one Tesla. Something isn't right. Would shorting Tesla stock be a good move? It seems like Tesla is just a Model X fire away from a spectacular drop. The problem is predicting when that would happen. When you hold a stock you can wait forever for it to rise but shorting is different (at least I think so, never done it). On the other hand betting against Elon Musk seems stupid and I personally want electric vehicles and soon. 

I own three properties within 15 miles of the new Tesla Gigafactory, which were all boosted at least 20% in value because of the hype around Tesla bringing 6000 new jobs into the Reno economy. So in this way my NW is already correlated to this company's success.

Thoughts?

Tesla is forward looking.  It is an energy company, not a car company. 

Remember Ford said, “If I had asked people what they wanted, they would have said faster horses.”  How were combustion engine cars valued before they were ubiquitous?  How were PCs valued before they came ubiquitous? How about iPhones?

Those examples are clearly subject to survivorship bias.  And many visionary products/companies fail without proper timing + distribution.  Depending on your entry on the stock, your ISP and your view about where the world is and where it's going -- that determines if it's a good buy.

Most people (myself included) are short sighted*.  It is overvalued at the moment, but undervalued in the long run -- unless Elon has an untimely death.

*Side note -- there's a foundatio: http://longnow.org/about/ that is headed by the likes of Stewart Brand, Kevin Kelly, et al. and their mission is to target our time horizon long out.

PaulMaxime

  • Stubble
  • **
  • Posts: 241
  • Age: 56
  • Location: San Francisco, CA
  • Absolute power doesn't corrupt, it reveals.
Re: Tesla seems overvalued
« Reply #26 on: April 14, 2017, 02:10:46 PM »
An interesting thing about game changing growth companies is that very often lots of people come out and say it's "overvalued." This is based on our understanding of how the world is now. But if these companies truly change the world in the way they intend, they are indeed undervalued.

The fact that lots of people think they are overvalued means that in reality the stock is cheap compared to what it should be since all those people are not investing. It's one of the truly interesting places to find inefficiency in the stock market. Look for fast growing companies that many people say are overvalued and you might have a good investment. In many cases they will probably be right but when they are wrong you get Amazon or Apple or Netflix or Priceline or maybe even Tesla.

Amazon is a great example of this. For years and years they were "overvalued" but if you had bought their stock pretty much at any time you would have totally blown away the market's return.

OneCoolCat

  • Bristles
  • ***
  • Posts: 439
  • Age: 33
  • Location: SoFla
Re: Tesla seems overvalued
« Reply #27 on: April 14, 2017, 02:27:45 PM »
I love Telsa, I love the vision behind the company and want it to succeed.  That said, there are very real concerns with this company that are not overstated and not unsubstantiated. 

Telsa has a capital problem.  It carry's a burdensome amount of debt and, like clockwork, sells a large amount of shares annually to stay afloat.  This causes shareholder dillution.  This in of itself is not a huge concern, lots of young up-and-coming companies do this, but pair with Tesla's acquisition of SolarCity there are red flags.  Solar City's last 10-k reported that they were utilizing Special Purpose Entities ("SPE's") in their liability section.  They were pushing liabilities into these vehicles because it makes the company look healthier.  I'm not sure what this means for Tesla, other than that these SPE's are going to be on their 2017 10-k, but some economist point out that Enron was notable for similar action which ultimately led to its downfall.  Finally, the company is not yet profitable and is expected to continue reporting losses in 2017.

People often draw analogies to Amazon.  I can't say whether Amazon had similar problems with dillution and SPE's but we all know Amazon was a resounding success.  I hope Tesla, well any clean energy company, will do the same.  That said, I'm not buying any Tesla.
« Last Edit: April 14, 2017, 02:31:27 PM by OneCoolCat »

TomTX

  • Magnum Stache
  • ******
  • Posts: 3975
  • Location: Texas
Re: Tesla seems overvalued
« Reply #28 on: April 15, 2017, 01:28:00 PM »
You know a company's overvalued when the CEO gets cocky with their own shareholders and tells them to buy something else instead.

 http://www.reuters.com/article/us-tesla-board-idUSKBN17E23Z
Quote
A group of Tesla Inc (TSLA.O) investors has urged the luxury electric car maker to add two new independent directors to its board, without ties to Chief Executive Elon Musk, to "provide a critical check on possible dysfunctional group dynamics."

A defiant Musk took to Twitter on Wednesday afternoon to suggest the investors buy stock in Ford Motor Co (F.N) instead

There's probably a classier way to handle investor relations?

He's not just the CEO - he is the single largest individual investor (by far) and without his repeated money injections early on, Tesla would not exist.

I can certainly see why he would resent the proposal.

TomTX

  • Magnum Stache
  • ******
  • Posts: 3975
  • Location: Texas
Re: Tesla seems overvalued
« Reply #29 on: April 15, 2017, 01:30:51 PM »
I love Telsa, I love the vision behind the company and want it to succeed.  That said, there are very real concerns with this company that are not overstated and not unsubstantiated. 

Telsa has a capital problem.  It carry's a burdensome amount of debt and, like clockwork, sells a large amount of shares annually to stay afloat.  This causes shareholder dillution.  This in of itself is not a huge concern, lots of young up-and-coming companies do this, but pair with Tesla's acquisition of SolarCity there are red flags.  Solar City's last 10-k reported that they were utilizing Special Purpose Entities ("SPE's") in their liability section.  They were pushing liabilities into these vehicles because it makes the company look healthier.  I'm not sure what this means for Tesla, other than that these SPE's are going to be on their 2017 10-k, but some economist point out that Enron was notable for similar action which ultimately led to its downfall.  Finally, the company is not yet profitable and is expected to continue reporting losses in 2017.

People often draw analogies to Amazon.  I can't say whether Amazon had similar problems with dillution and SPE's but we all know Amazon was a resounding success.  I hope Tesla, well any clean energy company, will do the same.  That said, I'm not buying any Tesla.

Let them finish ramping Model 3 and the Gigafactory - then we can talk about turning profitable.

TomTX

  • Magnum Stache
  • ******
  • Posts: 3975
  • Location: Texas
Re: Tesla seems overvalued
« Reply #30 on: April 15, 2017, 01:31:19 PM »
I love Telsa, I love the vision behind the company and want it to succeed.  That said, there are very real concerns with this company that are not overstated and not unsubstantiated. 

Telsa has a capital problem.  It carry's a burdensome amount of debt and, like clockwork, sells a large amount of shares annually to stay afloat.  This causes shareholder dillution.  This in of itself is not a huge concern, lots of young up-and-coming companies do this, but pair with Tesla's acquisition of SolarCity there are red flags.  Solar City's last 10-k reported that they were utilizing Special Purpose Entities ("SPE's") in their liability section.  They were pushing liabilities into these vehicles because it makes the company look healthier.  I'm not sure what this means for Tesla, other than that these SPE's are going to be on their 2017 10-k, but some economist point out that Enron was notable for similar action which ultimately led to its downfall.  Finally, the company is not yet profitable and is expected to continue reporting losses in 2017.

People often draw analogies to Amazon.  I can't say whether Amazon had similar problems with dillution and SPE's but we all know Amazon was a resounding success.  I hope Tesla, well any clean energy company, will do the same.  That said, I'm not buying any Tesla.

Let them finish ramping Model 3 and the Gigafactory - then we can talk about turning an annual profit. Side note: They did have a quarterly profit last year.

beltim

  • Magnum Stache
  • ******
  • Posts: 2884
Re: Tesla seems overvalued
« Reply #31 on: April 16, 2017, 03:18:23 AM »
I agree that Tesla is over-valued.  Also Netflix, Amazon, Google, Facebook, and virtually every other technology company on the market. 

Even if I'm right, is that actionable information?  Would you willingly avoid buying these companies as part of a (presumably cap-weighted) indexing strategy?  Of course not. You need to own them, regardless of the price, because they are where the value is in today's economy.  The price may go up, or it may go down, and you're going to ride it both directions without selling, no matter what happens.

This is how bubbles are created.  Even if the thesis is right, and every one of those companies maintains it's market position and becomes the dominant player, you can still lose money.  See Cisco, which despite being the market leader, and destroying its competitors, and being highly profitable, STILL has been a losing investment since 2000.  Long term, profits drive investments, not sales or eyeballs or tulips or the value in today's economy.  And the profits have to be acquired at an acceptable price - see Cisco, or the Nikkei average, or any of other countless bubble examples of even profitable companies.

None of this is to say that Tesla being overvalued is an actionable piece of information.  I always think of the Keynes quote: "the market can stay irrational longer than I can stay solvent."  Unlike long term investing, with a short sale you can be right about everything on your investing thesis except the timing, and wind up losing a ton of money (and way more than your original investment!).

Ocinfo

  • Bristles
  • ***
  • Posts: 313
Re: Tesla seems overvalued
« Reply #32 on: April 16, 2017, 06:28:35 AM »
I've been invested in TSLA since it first popped up to a bit below $100. Like many on here, I have around 10% for individual stocks that I play with. For me, TSLA figured out how to build a computer with wheels where as the auto manufacturers were trying to build a car with a computer. It's a subtle difference but it's one that I think made a big difference. Plus, everyone is forgetting that they will be the biggest car manufacturer on Mars once SpaceX gets that figured out...


Sent from my iPhone using Tapatalk

nick663

  • Bristles
  • ***
  • Posts: 303
  • Location: midwest
Re: Tesla seems overvalued
« Reply #33 on: April 16, 2017, 07:32:52 AM »
TSLA is priced for perfection at the moment and the valuation is stupid.  They have not shown they can execute any portion of production on the level of a typical car company and the Model 3 launch will likely suffer the same issues we have seen in the past (delays, quality issues, etc).  The real killer is going to be recalls as they're not a big deal on low volume/high margin products but they will became a huge line item when their production increases 10x.

I think the one thing that Wall Street is seriously underestimating is just how hard it is to build high quality vehicles at high volumes, profitably.

I have no experience in shorting stocks but I can say for sure I wouldn't be buying TSLA for my own portfolio.  Way too much downside with very little upside.

Tesla is forward looking.  It is an energy company, not a car company.
The energy side of the company is only ~5% of TSLA right now though (based on revenue).

Hargrove

  • Pencil Stache
  • ****
  • Posts: 732
Re: Tesla seems overvalued
« Reply #34 on: April 16, 2017, 09:34:31 AM »
Yeah, shorting Tesla is stupid. It's totally overvalued, unless you count the hype that it's going to take over the world. The stock market counts hype, and it's awfully tricky to figure out if there will be a moment Tesla finally punches itself hard enough to detract from the hype. Buying Tesla is not a game of buying a company for proper valuation, it's a pure gamble on the hype factory continuing to churn out increases until either a) you get out or b) the company does indeed take over the world or collapses.

The owner is a charismatic idealist with a following more loyal than Apple's. He treats shareholders like idiots and this increases his reputation even among other shareholders. They make few cars and at a loss, and rise in the wake of bad news release after bad news release. Ford meanwhile releases steady good news until the last 6-9 months and turns profits all the time, and their stock keeps going down.

I put some play money on Ford. They pay a stupendous dividend and their valuation is so low you have to check twice to make sure it's real in this market.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 2219
Re: Tesla seems overvalued
« Reply #35 on: April 16, 2017, 09:43:20 AM »
I agree with others that puts are the only way I'd ever bet against a stock.
Wanted to point out when a put option expires outside the money, you get $0.  Put options offer the chance for 100% loss of investment.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1881
Re: Tesla seems overvalued
« Reply #36 on: April 16, 2017, 07:16:39 PM »
Yeah, shorting Tesla is stupid. It's totally overvalued, unless you count the hype that it's going to take over the world. The stock market counts hype, and it's awfully tricky to figure out if there will be a moment Tesla finally punches itself hard enough to detract from the hype. Buying Tesla is not a game of buying a company for proper valuation, it's a pure gamble on the hype factory continuing to churn out increases until either a) you get out or b) the company does indeed take over the world or collapses.

The owner is a charismatic idealist with a following more loyal than Apple's. He treats shareholders like idiots and this increases his reputation even among other shareholders. They make few cars and at a loss, and rise in the wake of bad news release after bad news release. Ford meanwhile releases steady good news until the last 6-9 months and turns profits all the time, and their stock keeps going down.

I put some play money on Ford. They pay a stupendous dividend and their valuation is so low you have to check twice to make sure it's real in this market.

Have you read The Innovator's Dilemma by Clayton Christensen? I think it explains a lot about how investors view valuation when a technological disruption occurs.

http://www.barnesandnoble.com/p/innovators-dilemma-clayton-m-christensen/1100196911/2676356558960?st=PLA&sid=BNB_DRS_Marketplace+Shopping+Textbooks_00000000&2sid=Google_&sourceId=PLGoP20449&k_clickid=3x20449

Hargrove

  • Pencil Stache
  • ****
  • Posts: 732
Re: Tesla seems overvalued
« Reply #37 on: April 16, 2017, 07:26:33 PM »
I kind of view it as modern trading card speculation. We can't collect 1000 Mickey Mantel rookies anymore, but the fantasy lives on. Everybody wants to be in on the ground floor, but everyone doing it actually changes the ground floor.

atrex

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Tesla seems overvalued
« Reply #38 on: April 16, 2017, 09:10:44 PM »
I don't know the financial aspects, but Tesla looks overhyped to me on two counts:

1) They're essentially a small OEM that is trying to corner a large section of the small EV market as that market scales.  Elon Musk wants you to think that Tesla is a super innovative Silicon Valley startup, but they are really a manufacturer.  Small OEMs are notorious for failing or getting gobbled up by the big OEMs, and a big part of that is that solving the supply chain problems to build millions of vehicles per year is really difficult.  The big OEMs have solved the supply chain problem year in and year out and they understand it really well.  It's one of the only things they are good at.

If you think about the major OEMs out there, the top of the mountain is Toyota, and how many hybrid vehicles did they produce last year?  9 million.  The supply chain for a hybrid vehicle will include most of the elements for an EV.  Tesla produced 84k.  Toyota is out producing Tesla 100:1 in the hybrid/EV market.  Big edge.

2) Tesla has lost ground in the autonomous race.  They were doing well when they were piggybacking on Mobileye's computer vision backbone, but since the ugly break up, the word on the street is that the post-Mobileye highway driving of Teslas is poor.  If looks like they were pretty dependent on Mobileye to do the hardwork for part or all of their autonomous vehicle development.  If you don't believe that, ask yourself why Intel bought Mobileye for $15 billion.

The other thing, is that people forget that highway driving is the easy part of self driving, and that's about all that Tesla does.  Waymo on the other hand looks like the software leader, as you only need to travel to Mountain View, CA to drive side by side with their autonomous vehicles driving city streets.  City driving is the hard part of autonomous, and Tesla is not doing well in that race.  Maybe they're hiding something, but Musk tends to advertise when he's got something good, so I doubt it.


Dragonstrike

  • Stubble
  • **
  • Posts: 108
Re: Tesla seems overvalued
« Reply #39 on: April 22, 2017, 10:02:55 PM »
Ok, so here's my take on this, having owned Tesla stock and short sold it not too long ago.

I bought about $3K worth of the stock at the time, and that's all I really could use to "start" investing in a brokerage fund for play money.

I bought stock at a share of about $220 if memory serves me right. I bought only like, 10 shares.

I did my research and saw that this market was going to go up more.  Around $250 share price, I sold it. Even before the new model for the preorders went out, I knew I was short selling it for a minimum profit.  Why?  Because that was essentially my risk tolerance.  I got about 10% return for  a first purchase, and that wasn't bad.  What happens the next day?  A few articles go out on the web, Tesla becomes the hot buy, it jumps to $272.  I wasn't feeling stupid, because I knew I won what I could. 

Again, fire articles spread across media:  Tesla stock drops to $235-240.  What saves it?  Pre-orders go out, now the stock sits up in the $300's range.

Had I stayed in, I would have made more selling now.  But investors are scared about this stock, and I agree with that.

Tesla is building the market, not putting a product in a current one.  It wants to become the green energy superpower of the future, and it will be someday.  It will be the company that makes the electric car, the charging station, the solar roofs and walls and batteries and everything else after that.

And it will be competing with a lot of already well established major industries, so there will be a war of sorts for that.

What can succeed long term?  A lot, and the stock will go up and up and up.

What can make it crash and burn?  A smart self driving car killing someone?  Sure, that rumor did damage already. But what else?  Tesla's overconfidence in investors or customers.  Investors if they use Tesla not as a smart choice for stocks but to ride the wave and manipulate the buys and sells.  To even surmise that, you would need to look into who has majority shares and who or what is driving the sales.

But more so, the customer base.  Tesla wants people to drive electric, and that will fuel the need for charging stations.  Places like South Korea are well on the way to expanding that market, and if it was anything like the 90's period of semi-conductors, it will be a market Tesla has to compete with or somehow make allies with.  But, does Tesla have enough driving force for such a big change in the world environment?  That is something time will tell.

Honest opinion with so many factors at play?  If you want long term, buy buy and buy more.  I think its too late in the game to get into Tesla right now with how high the shares are, but if you got that kind of money then go for it.

Otherwise, with what you got, go short term but be smart about the season for the stock, do the long term research to aid the short term, and sell when you are comfortable.

I took what I won, and I have about $1000 now in Emerald Health Therapeutics (TBQBF), bought at $1.02.  I see the stock going up, and I'm expecting good returns over the next one to two years.




TomTX

  • Magnum Stache
  • ******
  • Posts: 3975
  • Location: Texas
Re: Tesla seems overvalued
« Reply #40 on: April 23, 2017, 08:30:52 AM »
Dragonstrike, you seem to be confusing the terms "short term capital gains" with "short selling"

"Short term gains" is not holding an investment very long and selling before you reach "long term gains" which for stocks are taxed at a lower rate. Not a Big Deal.

"Short selling" or "shorting" is when you sell shares you don't own with the plan of buying them back later when the price drops. Huge deal. Potentially unlimited liability. Potentially Big Deal

sol

  • Walrus Stache
  • *******
  • Posts: 8488
  • Age: 43
  • Location: Pacific Northwest
Re: Tesla seems overvalued
« Reply #41 on: April 23, 2017, 09:18:43 AM »
I did my research and saw that this market was going to go up more.  Around $250 share price, I sold it. Even before the new model for the preorders went out, I knew I was short selling it for a minimum profit.

I agree with TomTX, this isn't short selling.  Short selling is when you bet the stock will go DOWN, by borrowing shares someone else owns with an agreement to return them (with a modest profit) in the future, then selling those borrowed shares immediately in the hope that you can buy them back at a lower price before you have to return them to the owner.  In a short sale, you can potentially lose much more than your initial investment if the stock price surges.

What you're describing is just prudent profit-taking, and there's nothing wrong with that.  You bought a stock for yourself to own, it went up in price, and you sold it for a gain.  Nicely done.