The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: joenorm on January 10, 2021, 08:13:44 AM
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Unfortunately I don't have a single share of Tesla, but like everyone else in my position, of course I wish I did.
What I would like to understand better is why Tesla skyrocketed now? What was significant about 2020 for them as a business?
Or is it simply investor hysteria that got them where they are. I have read all the threads arguing for or against them as a company in general but that almost seems besides the point now.
It's as if a snowball gets rolling and pretty soon you're the richest guy in the world without explanation.
I am asking because like many I am fascinated by this. And like most, have NO IDEA how it can happen. Normal people are retiring on their earnings over a few years. That's pretty wild.
I admit I have only the most basic understanding of stocks, business, etc. but I can understand a company like Amazon gaining wealth. They sell literally every piece of junk to the entire world. I can see how that could add up. But Tesla sells luxury fringe market cars and plays with rockets. I don't get it.
Please help me understand.
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You dont have any S&P500 Index funds or Total market index funds?
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The share price of Tesla will eventually reflect the underlying business. At the moment we are in a speculative bubble and the stock price has become totally disconnected. The narrative will change and people will realize facts - such as Tesla has never and will never make a profit selling cars. Their share in Europe is collapsing (see picture) VW handily sold more battery electric vehicles last year in Europe. It is a shame the S&P ctte allowed it in the index, as the collapse will be spectacular and cost a lot of unsophisticated investors 1.7% of their retirement funds.
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Its called a bubble, we had one in tech in the late 1990s.
At this point I really doubt Tesla will drop to zero because there are many many people who will not sell for a big loss and also they did manage quite a bit of capital raise for the company. I do think that some day some person is going to sit down and realize that the moat around EV is not quite as massive as current investors think. Right now Tesla is at a valuation that assumes all other car manufacturers go bankrupt.
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You dont have any S&P500 Index funds or Total market index funds?
Noted. Yes, I do.
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Its called a bubble, we had one in tech in the late 1990s.
At this point I really doubt Tesla will drop to zero because there are many many people who will not sell for a big loss and also they did manage quite a bit of capital raise for the company. I do think that some day some person is going to sit down and realize that the moat around EV is not quite as massive as current investors think. Right now Tesla is at a valuation that assumes all other car manufacturers go bankrupt.
Yes they can raise cash on the way down, but it can easily decrease 95% from here. Their business model is broken, they are a cash incinerating, small volume car manufacturer with bad quality issues.
They have no moat. If you ask many people there are so many misperceptions about the company typical of a bubble. Like the batteries - they don’t even make their own- they have no battery technology - they buy them from Panasonic and CATL - who will happily sell them to any other manufacturer. They only barrier to entry they have is they they are the only company willing to lose money Making electric cars. The moment it becomes profitable through subsidy then the OEM companies jump in and crush their market share - this is why Tesla’s market share has collapsed from 33% to 10% this year.
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I admit I have only the most basic understanding of stocks, business, etc. but I can understand a company like Amazon gaining wealth. They sell literally every piece of junk to the entire world. I can see how that could add up. But Tesla sells luxury fringe market cars and plays with rockets. I don't get it.
Please help me understand.
Well one thing to keep in mind is that Telsa has never built or launched a rocket. That's SpaceX an entirely separate company that is also affiliated with Elon Musk.
Tesla's stock price is so high because:
1) When a stock goes up fast enough for a while it becomes self sustaining as people who see it going up start buying it in the hopes it'll continue to go up and that buying drives up the price, making it self sustaining ... up to a point. This is a bubble.
2) In the last two years it has become quite clear that A) electric cars are going to be widely adopted (California has implemented a complete ban on the sale of ICE cars in 2035, as have entire countries elsewhere in the world) B) Tesla can not only build electric cars, but actually turn a profit doing so. They've made (some) profit for five quarters running now, and seven of the last nine, after being a perpetual money loser for years before that.
Like some other posters I suspect the "moat" protecting Tesla from having to trim profit margins to remain competitive isn't all that secure. But two years ago there there was a non-trivial risk Tesla might go bankrupt and disappear. Now the argument is whether they will hit crazy high grown targets or remain a small/midsized car company that made modest per car profits.
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2) In the last two years it has become quite clear that A) electric cars are going to be widely adopted (California has implemented a complete ban on the sale of ICE cars in 2035, as have entire countries elsewhere in the world) B) Tesla can not only build electric cars, but actually turn a profit doing so. They've made (some) profit for five quarters running now, and seven of the last nine, after being a perpetual money loser for years before that.
Like some other posters I suspect the "moat" protecting Tesla from having to trim profit margins to remain competitive isn't all that secure. But two years ago there there was a non-trivial risk Tesla might go bankrupt and disappear. Now the argument is whether they will hit crazy high grown targets or remain a small/midsized car company that made modest per car profits.
The EU has a ban on ICE only cars by 2030.
As you stated, though, the moat isn't that high. Renault sells the most EV cars in Europe and VW will probably sell more next year. When reality hits, Tesla will drop like an anvil and eventually be bought by a competitor.
Re: "Normal people are retiring on their earnings over a few years." We won't see many of these people retire permanently because they didn't sell and diversify in time.
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As you stated, though, the moat isn't that high. Renault sells the most EV cars in Europe and VW will probably sell more next year. When reality hits, Tesla will drop like an anvil and eventually be bought by a competitor.
You may well be right.
Yet, Tesla doesn't seem to be having any trouble selling every car it can manufacture so far. Until that stops being the case I'd be very reluctant to put money on what Telsa's ultimate share of the post-electrification auto market will end up being. Although I'd also be very reluctant to invest in the company personally, rather than via the index funds where I probably already own a small amount of it.
If my early stock picking days taught me anything, it was that I'm both bad at picking winners AND bad at picking losers. So now I buy index funds and sit back to enjoy the show.
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How on earth did we need a 4th thread about tesla valuation??
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Something like 75% of Tesla's market value is just speculation/FOMO. Something like 10-15% is betting on future domination of big new (EVs, batteries, self driving, etc) industries that might or might not happen.
The remainder (5-10%) is vaguely in the ballpark of what the company would be worth if it wasn't Tesla and (if I was a stock picker) what I'd be willing to pay for it.
-W
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Something like 75% of Tesla's market value is just speculation/FOMO. Something like 10-15% is betting on future domination of big new (EVs, batteries, self driving, etc) industries that might or might not happen.
The remainder (5-10%) is vaguely in the ballpark of what the company would be worth if it wasn't Tesla and (if I was a stock picker) what I'd be willing to pay for it.
-W
That breakdown sounds about right to me. FWIW, 10% of Tesla's current market cap would make it worth about as much as Ford. Tesla makes a lot fewer cars at the moment, but it does have a compelling growth story while Ford does not and doesn't have a legacy pension problem, while Ford does.
So 5-10% of Telsa's current value seems reasonable for a high growth but still comparatively small automaker.
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I sold most of my Tesla recently...probably too soon
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I sold most of my Tesla recently...probably too soon
It maybe tough watching it go up a bit- in a years time
When it is trading for 5% of its current value - you can annoy people with your smart move forever.
Incidentally Isaac Newton who bought into the South sea company sold his shares for a massive profit as the South Sea bubble formed. He couldn’t stand all his friends getting rich etc and bought back in at the top of the bubble, and it wiped out his fortune - hence his quote about calculating the motion of the heavens but not the madness of men.
Sell the thing and never look at it again. The price has no basis in reality. They pop, they always do. You’ll never pick the top, but you can be smug forever knowing you made a profit.
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1) Because a lot of people got stimulus checks they didn’t need.
2) Because the strategy of buying a hot stock and setting a stop-loss has worked for so many years, so it’ll probably work again.
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California has implemented a complete ban on the sale of ICE cars in 2035, as have entire countries elsewhere in the world) B) Tesla can not only build electric cars, but actually turn a profit doing so.
California also mandated a fully renewable electric grid for the state by 2045 and will need massive electric storage in order to make that work. As batteries continue to come down in cost, they will be an increasingly viable method of smoothing out the highs and lows of power output from renewable energy over the course of a day, week, and through entire seasons. The rest of the world may be headed down the same path if the Paris Agreement is any kind of leading indicator of where we're headed. Tesla's making more large scale batteries than anyone and the whole point of purchasing Solar City was to bail out Musk's brother, yes, but also to a limited degree to push the angle that they wanted to be a power and energy company too, not just an automaker.
Basically the current valuation requires that absolutely all the stars align just right in order for it to make sense, but apparently enough people believe that's exactly what will happen for the company to be valued the way it is. Musk recently said he wanted the company to be producing 20 million cars a year in another decade. That sounds comical when the 3 largest automakers on Earth each only make about 10 million cars a year but again, for him to state that's a goal is part of where the valuation comes from. He doesn't want to just compete with GM, Toyota, and VW. He wants to eclipse them, and that's just the automaker portion of Tesla. If they're selling even more batteries for stationary power storage than are going into 20 million cars then it becomes increasingly clear what the value comes from.
Now whether or not any of that is possible from an automaker that "only" sold about 0.5 million cars last year some 8 years after the launch of their first mass produced car, the Model S (the Roadster was still effectively hand made, thus doesn't count as mass produced) would be a seemingly impossible growth curve. Musk seems to specialize in the impossible though, so I guess time will tell. The fact that they're already doing it at a profit while it's unclear if any other traditional automaker's EVs are profitable is also huge.
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Tesla experts like the ones on this thread have been telling me to sell my shares since 2013. If I’d listened to them I would have missed out on 2 million in (paper) gains. (I know, I know, it's going to zero soon). The stock, the business and the founder are all lightning rods for various reasons. Lot of irrational hate out there. Then there’s also the multiple trillion dollar industries being disrupted and doing what they can to trash Tesla. Tesla traded nearly sideways for six years (2013-2019). During that time Tesla was nearly doubling production each year, rolling out more superchargers, innovating, building their FSD database from a fleet of vehicles, rolling out new models, lower the price of the vehicles, etc. During that 6 year stretch Tesla was the most shorted US equity and the stock was suppressed and heavily manipulated. So, in my mind, a large portion of the recent run was the Stockmarket realizing and catching up with all the progress and growth in the company the past six years (back payment). The other part of the recent take off is the S&P inclusion. This caused a lot of forced buying by both the S&P index funds and those funds benchmarked to the S&P (24% of the available float). When you have forced buying and few willing sellers among the institutions and retail investors holding the stock the price goes up. You can call that a bubble, but since these funds will need to buy and hold to be properly weighted to the S&P not sure you can call it a bubble. I'm sure the experts on here will disagree.
Keep in mind also that the auto “bigs" are still selling their compliance EVs at a loss or break even at best. To sell their EVs profitably, they’ll need to scale production, but to do that they need batteries. Batteries that don’t currently exist. Tesla is production constrained. And the production limiting factor is not so much how many cars they can build, but how many batteries they can produce in partnership with Panasonic and in house. It's very naive to think GM or Ford will simply flip a lever and switch from producing ICE vehicles to EVs. Its especially naive to think dealerships will want to sell these new EVs and put their profitable ICE maintenance and service departments out of business. The dealers don’t want to sell cars that don’t need oil changes, transmission fluid, spark plugs, mufflers, catalytic converters, radiator flushes, replacement belts, etc. GM and Ford stockholders want their dividends. They don’t want to hear how GM and Ford are going to have unprofitable quarters while they sink billions into developing new, ground up EVs, converting lines, lining up new suppliers, building charging networks, retraining employees, and most importantly, sink billions into building their own battery factories to compete with Tesla. Why would GM and Ford investors tolerate that? If they wanted to invest in an EV company, why would they suffer through the transition with GM and Ford when they could just buy stock in a pure play, industry leader, like Tesla right now. Maybe that’s why Tesla is on a tear. Smart money moving from oil and gas, utilities, and traditional auto to Tesla? Nah, couldn’t be...
Without spending a single dime on advertising or marketing, Tesla sells every car they make before it rolls off the line. They don’t have dealer middlemen. They occasionally offer free supercharging for a year or similar incentives but do not resort to rebates and other kimmicks to sell cars. The day Tesla has to advertise to sell a car is the day I’ll consider unloading some shares.
The energy business will be as big or bigger than the car business. The demand is there for Tesla storage products as well, but again Tesla is battery cell constrained and is currently prioritizing vehicles for the cells, though the storage business is ramping. Tesla is no more just a car manufacturer than Amazon just sells books.
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There are quite a few probable factual errors in the thesis in your post.
Your argument seems To rest on the stock price has gone up so much and I’ve made so much money I must be right. I’ve been around long enough to have seen this before with AOL, CISCO, ENRON and VALEANT. Unfortunately it means you likely won’t sell your stock before it returns to the intrinsic value of the business. Early bulls are usually hurt the worst due to this social proof, and often buy more in the way down.
Tesla is not production constrained. Their own 10k and earnings state they have current capacity of 813k cars yet they only sold 499kblast year after 7 price cuts in China, their market share dropped to 10% and in EU their share dropped to 10% also.
pems are not producing compliance cars the id3 which is outselling Tesla in Europe is a nicer quality car - made properly with the Quality defects associated with Tesla.
Tesla has no battery technology - they buy the from Panasonic- so it’s hard to see how they have any business in power walls long term.
Tesla remains a money losing car operation, burning cash, with limited R and D.
Also the no advertising is also not true. Tesla’s own latest 10k shows they spent 68Million on “marketing and advertising”
Anyhow good luck with your investment, and preserving your wealth.
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The energy business will be as big or bigger than the car business. The demand is there for Tesla storage products as well, but again Tesla is battery cell constrained and is currently prioritizing vehicles for the cells, though the storage business is ramping. Tesla is no more just a car manufacturer than Amazon just sells books.
Do you know if Tesla is planning on using battery power for air flights? The potential is enormous. I don't know if they're working on it.
Tesla is much more than a car company, as the valuation shows.
I have zero shares. Over the past 7 years I've looked at the company intermittently and always given it a pass. I recently reviewed my reasons for not investing at those times and I still think they were valid at the time. The stock still soared. I have no regrets--it's a rollercoaster I don't want to be on.
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@ColoradoTribe, keep in mind that some of us (ie, me) think Tesla is an awesome company and are rooting for them to disrupt/dominate multiple markets - while still thinking they are hilariously overvalued.
I also think it's funny that there are so many people with apparently irrational hatred of Tesla, and it's fun schadenfreude to see the stock price skyrocket. That doesn't mean I think the value is justified, though. For every Tesla hater there's a Tesla diehard who thinks the company should be worth $100 trillion or something silly, or can't actually come up with what the value should be at all and isn't even interested in evaluating the company using something silly like actual numbers. These folks essentially believe that Tesla's value will keep rising rapidly, forever.
Neither position is rational. Refusing to buy stock in the company or saying that it's overvalued is not the same as being against EVs or hating Elon Musk, or hoping that Tesla fails. It's just math, and the simple recognition that Tesla will need essentially *everything* to go *perfectly* (along with all competitors failing pretty much completely) for the next decade to justify the current value.
-W
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The energy business will be as big or bigger than the car business. The demand is there for Tesla storage products as well, but again Tesla is battery cell constrained and is currently prioritizing vehicles for the cells, though the storage business is ramping. Tesla is no more just a car manufacturer than Amazon just sells books.
Do you know if Tesla is planning on using battery power for air flights? The potential is enormous. I don't know if they're working on it.
Tesla is much more than a car company, as the valuation shows.
I have zero shares. Over the past 7 years I've looked at the company intermittently and always given it a pass. I recently reviewed my reasons for not investing at those times and I still think they were valid at the time. The stock still soared. I have no regrets--it's a rollercoaster I don't want to be on.
My recollection is Elon has stated he thinks electric powered flight will be possible in the not to distant future. Key is the energy density of the batteries and getting to a workable weight to energy ratio. Not an expert on this matter, but it sounded more a matter of when and not if.
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@ColoradoTribe, keep in mind that some of us (ie, me) think Tesla is an awesome company and are rooting for them to disrupt/dominate multiple markets - while still thinking they are hilariously overvalued.
I also think it's funny that there are so many people with apparently irrational hatred of Tesla, and it's fun schadenfreude to see the stock price skyrocket. That doesn't mean I think the value is justified, though. For every Tesla hater there's a Tesla diehard who thinks the company should be worth $100 trillion or something silly, or can't actually come up with what the value should be at all and isn't even interested in evaluating the company using something silly like actual numbers. These folks essentially believe that Tesla's value will keep rising rapidly, forever.
Neither position is rational. Refusing to buy stock in the company or saying that it's overvalued is not the same as being against EVs or hating Elon Musk, or hoping that Tesla fails. It's just math, and the simple recognition that Tesla will need essentially *everything* to go *perfectly* (along with all competitors failing pretty much completely) for the next decade to justify the current value.
-W
Obviously not everyone or even most, who like yourself simply chose not to invest in Tesla, are “haters”. You seem quite reasonable in fact.The folks I count as haters, as evidenced on this board, are those we have no stated financial interest in the company but will dedicate lots of time and effort on an internet railing against Elon, Tesla, naive investors, valuation, and any and every other perceived, real or made up issue with the company and its mission. Don’t know about you, but I don’t spend much time worrying myself with companies in which I have no stake. If the “haters” are so dead certain they are right and Tesla is just a giant bubble then they should stop posting about it and open up a large short position.
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Energy density of aviation fuel is on the order of 100 times higher than existing Li-Ion batteries. So there's a long way to go, incremental improvements of current won't cut it or even come close.
That said there are a few electric planes out there (that can carry a human, I assume we're not talking about little camera drones) with VERY limited range. But you are not going to be flying around the world on an electric plane anytime soon.
BBC did a good article on the subject:
https://www.bbc.com/future/article/20200617-the-largest-electric-plane-ever-to-fly
-W
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Ok, ColoradoTribe, I have a question for you. You and I both like Tesla, but we disagree on what the stock should be worth. I think it should be worth in the ballpark of 1/10 to 1/5 of it's current price (ie, worth 100-200% the value of Ford) depending on your level of optimism.
Clearly you are continuing to hold your stock (or perhaps are continuing to buy?) so you feel the value is higher. If you had to assign Tesla a value, what would it be?
-W
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Energy density of aviation fuel is on the order of 100 times higher than existing Li-Ion batteries. So there's a long way to go, incremental improvements of current won't cut it or even come close.
That said there are a few electric planes out there (that can carry a human, I assume we're not talking about little camera drones) with VERY limited range. But you are not going to be flying around the world on an electric plane anytime soon.
BBC did a good article on the subject:
https://www.bbc.com/future/article/20200617-the-largest-electric-plane-ever-to-fly
-W
Liquid fuels (and their weight) are also consumed in use, while batteries are not. An empty battery weighs just as much as a fully charged one. So if a current plane is thousands of pounds lighter at the end of a trip than it is at the start, it can become more efficient the longer it travels but a battery powered aircraft wouldn't have that advantage.
Planes are also designed to be far lighter when they land than when they take off (could be as much as 200k lbs). That's a major difference in the forces the airframe sees when it hits the ground, so the airframes may need to be heavier as well to acommodate the heavy batteries, or maintenance costs/replacement frequency will be higher.
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There are quite a few probable factual errors in the thesis in your post.
Your argument seems To rest on the stock price has gone up so much and I’ve made so much money I must be right. I’ve been around long enough to have seen this before with AOL, CISCO, ENRON and VALEANT. Unfortunately it means you likely won’t sell your stock before it returns to the intrinsic value of the business. Early bulls are usually hurt the worst due to this social proof, and often buy more in the way down.
Tesla is not production constrained. Their own 10k and earnings state they have current capacity of 813k cars yet they only sold 499kblast year after 7 price cuts in China, their market share dropped to 10% and in EU their share dropped to 10% also.
pems are not producing compliance cars the id3 which is outselling Tesla in Europe is a nicer quality car - made properly with the Quality defects associated with Tesla.
Tesla has no battery technology - they buy the from Panasonic- so it’s hard to see how they have any business in power walls long term.
Tesla remains a money losing car operation, burning cash, with limited R and D.
Also the no advertising is also not true. Tesla’s own latest 10k shows they spent 68Million on “marketing and advertising”
Anyhow good luck with your investment, and preserving your wealth.
Yikes, talk about factual errors.
You do realize Tesla built out their China factory in 2020 and ramped production of Model Y throughout the year. So, while they exited the year at a production RATE ofaround 800k, they did not produce nor have the ability to produce 800k vehicles in 2020.
Bears love to point to one country or region to falsely claim Tesla sales are dropping. Tesla sells every car they make, for a healthy margin, before it rolls off the line. Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows. The only metrics that matter in this rapid growth and expansion phase is global market share and total sales. Tesla has nearly doubled production and sales YOY for the past six years. And for during each of those past six years, someone like yourself has informed me that Tesla is demand constrained and that demand is collapsing. Who’s been right so far?
The majority of Tesla’s battery cells are manufactured by Panasonic, but Panasonic is partnered to Tesla and the batteries are built at Tesla’s gigafactory. I don’t see this as an issue and I’m not worried that Panasonic will want to partner with anyone else but the leader in EV and energy storage.
In fact, Tesla does have their own proprietary battery technology, which is why Tesla’s battery cells have the highest energy density per cost and their vehicles have industry leading range and the lowest degradation rates. Tesla does manufacturer their own battery cells, the new 4680 cells. There’s a line rolling them off in California. These new cells will be manufactured in mass at the Nevada gigafactory in coming years (~2). The battery tech announced at battery day in 2020 will improve the efficiency of these cells over current cells by up to 56%. Nothing to see here.
Anyway, I appreciate the warning and will hold you blameless when my position goes to zero.
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Energy density of aviation fuel is on the order of 100 times higher than existing Li-Ion batteries. So there's a long way to go, incremental improvements of current won't cut it or even come close.
That said there are a few electric planes out there (that can carry a human, I assume we're not talking about little camera drones) with VERY limited range. But you are not going to be flying around the world on an electric plane anytime soon.
BBC did a good article on the subject:
https://www.bbc.com/future/article/20200617-the-largest-electric-plane-ever-to-fly
-W
As mentioned, not an expert on this matter, as I don’t believe Tesla will be pursuing this as part of their business model anytime soon. Elon said electric flight, agree he’s likely not talking commercial flight, but personal, small craft as a relatively near term possibility as energy density improves.
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So how much do you think the company should be worth? Throw a number out there!
-W
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I sold most of my Tesla recently...probably too soon
Michael Burry, who predicted and profited off the 2008 Financial Crisis, has been getting louder about shorting Tesla. That's not a bad time to exit, in my opinion. Had I bought Tesla, Burry shorting it would definitely have made me rethink it.
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As to other posts ...
The world's best expert on Tesla, it's CEO, has said the stock was overvalued last year on twitter. You can like (or run) the company, and still think the stock price is a problem. Look at their price/earnings (1600), price/book (48), or price/sales (29):
https://finance.yahoo.com/quote/TSLA/
The factory in China, and production scaling up at the same pace are both great ... but they don't explain an 8x increase in price. Tesla currently IS the top 10: it is worth more than the other top 9 carmakers combined.
https://www.cnbc.com/2020/12/14/tesla-valuation-more-than-nine-largest-carmakers-combined-why.html
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I sold most of my Tesla recently...probably too soon
Michael Burry, who predicted and profited off the 2008 Financial Crisis, has been getting louder about shorting Tesla. That's not a bad time to exit, in my opinion. Had I bought Tesla, Burry shorting it would definitely have made me rethink it.
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As to other posts ...
The world's best expert on Tesla, it's CEO, has said the stock was overvalued last year on twitter. You can like (or run) the company, and still think the stock price is a problem. Look at their price/earnings (1600), price/book (48), or price/sales (29):
https://finance.yahoo.com/quote/TSLA/
The factory in China, and production scaling up at the same pace are both great ... but they don't explain an 8x increase in price. Tesla currently IS the top 10: it is worth more than the other top 9 carmakers combined.
https://www.cnbc.com/2020/12/14/tesla-valuation-more-than-nine-largest-carmakers-combined-why.html
Ford at one point was probably worth as much as the 9 biggest livery stables combined despite cars only capturing 2% of the transportation market. Imagine the fools that bought into Henry Ford’s lunacy. Nothing will replace good, old-fashioned reliable horses for transportation!
Michael Burry initiated his short on Tesla weeks ago and is losing his shirt if he still holds it. Shorts have lost billions over the years, including the likes of Jim Chanos, but I’m sure the next expert to short Tesla will have it right.
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Ok, ColoradoTribe, I have a question for you. You and I both like Tesla, but we disagree on what the stock should be worth. I think it should be worth in the ballpark of 1/10 to 1/5 of it's current price (ie, worth 100-200% the value of Ford) depending on your level of optimism.
Clearly you are continuing to hold your stock (or perhaps are continuing to buy?) so you feel the value is higher. If you had to assign Tesla a value, what would it be?
-W
In most investors’ opinion you value a growth company and stock based on what you think it will be worth in 5 years. That’s why they call it investing and not purchasing. You purchase something based on a fair value today. It’s great to use PE ratio for a mature companies like Coca-Cola that pay a dividend, but why would anyone expect to pay current value for a company that’s nearly doubling each year?
Despite the competition that has been “coming any minute” for the past decade, I see no real competition to Tesla in the next five years. If anything, Tesla’s pace of innovation and infrastructure buildout is accelerating and widening their advantage. I don’t invest in Tesla based on FSD or robo taxies, though Tesla is already realizing FSD revenue. If level 5 autonomous is achieved then the sky is the limit, but conservatively, I expect Tesla to be worth in the neighborhood of $1,200 - $2,000 in five years. The middle case would represent a 20%/year return from the current stock price. Fairly conservative for a company that is increasing production by roughly 40% a year and has two factories coming on line in 2021.
And yes, I modestly bought the dip this morning.
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Ok, so at ~$1.5-2 trillion as you've predicted in 5 years, Tesla would be (barring antitrust problems) pretty much the entire world's auto industry, at least in terms of market cap.
If that's the end point you imagine, I guess I could see paying current prices for Tesla stock. But it's hard to wrap my brain around:
-ALL the existing automakers failing to compete *at all*. Seems extremely unlikely to me, but who knows.
-No new competitors starting up. Starting to build cars is hard, this is plausible but far from certain.
-Tesla ramping up to the point they can build ~100x their existing production. This could maybe be doable, though ramping up from very low levels is much easier than from where they're at now.
-World government all simultaneously abandoning their existing antitrust laws AND no longer protecting their domestic manufacturers through subsidies, tariffs, etc.
The world builds about 70 million cars a year. At a market cap of $2 trillion, if you want to have the company get to a normal mature P/E of, say, 20, you'd need to be making a profit of $100 billion a year, which seems pretty reasonably doable... if Tesla is the entire world's auto industry.
If it's "only" 1/10 of the world's auto industry (still a HUGE stretch in a 5 year timeframe) the numbers don't work at all.
Tthe car vs. horse thing is a bit of a stretch. Tesla is making really good (no argument) cars. But they're not making something that replaces cars and renders them obsolete to the point of uselessness. I could go buy a Tesla today, but it wouldn't let me do anything that my existing 2006 beater Kia doesn't do, though I'm sure I'd like it a lot better. It's not a teleporter or a magic carpet, it's just a car.
-W
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Ok, so at ~$1.5-2 trillion as you've predicted in 5 years, Tesla would be (barring antitrust problems) pretty much the entire world's auto industry, at least in terms of market cap.
If that's the end point you imagine, I guess I could see paying current prices for Tesla stock. But it's hard to wrap my brain around:
-ALL the existing automakers failing to compete *at all*. Seems extremely unlikely to me, but who knows.
-No new competitors starting up. Starting to build cars is hard, this is plausible but far from certain.
-Tesla ramping up to the point they can build ~100x their existing production. This could maybe be doable, though ramping up from very low levels is much easier than from where they're at now.
-World government all simultaneously abandoning their existing antitrust laws AND no longer protecting their domestic manufacturers through subsidies, tariffs, etc.
I think the car vs. horse thing is a bit of a stretch. Tesla is making really good (no argument) cars. But they're not making something that replaces cars and renders them obsolete to the point of uselessness. I could go buy a Tesla today, but it wouldn't let me do anything that my existing 2006 beater Kia doesn't do, though I'm sure I'd like it a lot better. It's not a teleporter or a magic carpet, it's just a car.
-W
You left out at least 30% of office workers shifting to a WFH setup permanently, reducing wear and tear and demand for cars forever. A friend's employer just announced a program to let employees buy their office chairs from the building. Comcast is his Tesla, lol!
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-No new competitors starting up. Starting to build cars is hard, this is plausible but far from certain.
NIO is a good example. It's not only a Chinese homegrown challenger to Tesla but their latest sedan has a range of 625 miles.
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Bears love to point to one country or region to falsely claim Tesla sales are dropping. Tesla sells every car they make, for a healthy margin, before it rolls off the line. Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows.
[/quote]
This seems to point out that Europe has produced cars that Tesla is unable to compete with. So not only has competition arrived but they are dominating. I have yet to hear an argument for Tesla that makes sense of these valuations. Anything they do can be replicated by the legacy makers, especially including selling at cost or below cost as they can subsidize sales themselves by the margins on their current car and truck lines. Only thing different with Tesla is they are subsidized by FCA, which is likely to taper off soon.
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My recollection is Elon has stated he thinks electric powered flight will be possible in the not to distant future. Key is the energy density of the batteries and getting to a workable weight to energy ratio. Not an expert on this matter, but it sounded more a matter of when and not if.
It's just an economic and regulatory question. Jet fuel has sulfur in it. If the government puts a 500% tax on Jet fuel then suddenly electric aviation makes a lot more sense, even if it costs 3x as much because Jet-A powered aviation could increase in cost by even more than 3x in that scenario. Or suppose we're up against a hard limit on fossil fuels and jet aircraft are entirely banned by the year 2050. At that point, again, even if a flight costs 10x as much, it will simply be rare, but if a 10x more expensive electric flight is the only possible way to get from L.A. to London in under 36 hours, then so be it, even if it requires 8 stops, for example. Supply and demand. If the government eliminates the supply of oil, then alternatives present themselves.
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Ok, so at ~$1.5-2 trillion as you've predicted in 5 years, Tesla would be (barring antitrust problems) pretty much the entire world's auto industry, at least in terms of market cap.
If that's the end point you imagine, I guess I could see paying current prices for Tesla stock. But it's hard to wrap my brain around:
-ALL the existing automakers failing to compete *at all*. Seems extremely unlikely to me, but who knows.
-No new competitors starting up. Starting to build cars is hard, this is plausible but far from certain.
-Tesla ramping up to the point they can build ~100x their existing production. This could maybe be doable, though ramping up from very low levels is much easier than from where they're at now.
-World government all simultaneously abandoning their existing antitrust laws AND no longer protecting their domestic manufacturers through subsidies, tariffs, etc.
The world builds about 70 million cars a year. At a market cap of $2 trillion, if you want to have the company get to a normal mature P/E of, say, 20, you'd need to be making a profit of $100 billion a year, which seems pretty reasonably doable... if Tesla is the entire world's auto industry.
If it's "only" 1/10 of the world's auto industry (still a HUGE stretch in a 5 year timeframe) the numbers don't work at all.
Tthe car vs. horse thing is a bit of a stretch. Tesla is making really good (no argument) cars. But they're not making something that replaces cars and renders them obsolete to the point of uselessness. I could go buy a Tesla today, but it wouldn't let me do anything that my existing 2006 beater Kia doesn't do, though I'm sure I'd like it a lot better. It's not a teleporter or a magic carpet, it's just a car.
-W
So, you assign no value to Tesla energy storage products, no revenue to FSD, no revenue for solar panels or roofs, no service revenue, no software or infotainment revenue, no supercharger network revenue, no Tesla insurance revenue, no revenue from Tesla semi, no ZEV credit revenue, etc.? You’re not seeing the full picture if all you see is traditional car manufacturer metrics. Tesla is going to build massive battery plants in the coming years and Elon has stated the energy storage business will be as big or bigger than the auto side. That's before solar roof and everything else in the pipeline. Tesla could be a major supplier of battery cells or pack to other manufacturers. Again, treating Tesla like a simple car company is analogous to saying Amazon only sells books a few years back.
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Bears love to point to one country or region to falsely claim Tesla sales are dropping. Tesla sells every car they make, for a healthy margin, before it rolls off the line. Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows.
This seems to point out that Europe has produced cars that Tesla is unable to compete with. So not only has competition arrived but they are dominating. I have yet to hear an argument for Tesla that makes sense of these valuations. Anything they do can be replicated by the legacy makers, especially including selling at cost or below cost as they can subsidize sales themselves by the margins on their current car and truck lines. Only thing different with Tesla is they are subsidized by FCA, which is likely to taper off soon.
[/quote]
If you say so it must be true.
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Ok, so at ~$1.5-2 trillion as you've predicted in 5 years, Tesla would be (barring antitrust problems) pretty much the entire world's auto industry, at least in terms of market cap.
If that's the end point you imagine, I guess I could see paying current prices for Tesla stock. But it's hard to wrap my brain around:
-ALL the existing automakers failing to compete *at all*. Seems extremely unlikely to me, but who knows.
-No new competitors starting up. Starting to build cars is hard, this is plausible but far from certain.
-Tesla ramping up to the point they can build ~100x their existing production. This could maybe be doable, though ramping up from very low levels is much easier than from where they're at now.
-World government all simultaneously abandoning their existing antitrust laws AND no longer protecting their domestic manufacturers through subsidies, tariffs, etc.
The world builds about 70 million cars a year. At a market cap of $2 trillion, if you want to have the company get to a normal mature P/E of, say, 20, you'd need to be making a profit of $100 billion a year, which seems pretty reasonably doable... if Tesla is the entire world's auto industry.
If it's "only" 1/10 of the world's auto industry (still a HUGE stretch in a 5 year timeframe) the numbers don't work at all.
Tthe car vs. horse thing is a bit of a stretch. Tesla is making really good (no argument) cars. But they're not making something that replaces cars and renders them obsolete to the point of uselessness. I could go buy a Tesla today, but it wouldn't let me do anything that my existing 2006 beater Kia doesn't do, though I'm sure I'd like it a lot better. It's not a teleporter or a magic carpet, it's just a car.
-W
Exactly, film cameras and digital cameras both take fine pictures, which is why we still have film cameras and digital cameras. Nonsense, as the cost of batteries continue to drop rapidly no sensible person is going to buy an ICE over an EV once the general public becomes aware of the cost of ownership between the two and the lifespan of the EV (500k) compared to an ICE (200k).
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I’ve devoted enough time to this topic on this forum. We’ll see who’s “right” in a few years. I’ll sleep well at night in the meantime.
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Bears love to point to one country or region to falsely claim Tesla sales are dropping. Tesla sells every car they make, for a healthy margin, before it rolls off the line. Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows.
This seems to point out that Europe has produced cars that Tesla is unable to compete with. So not only has competition arrived but they are dominating. I have yet to hear an argument for Tesla that makes sense of these valuations. Anything they do can be replicated by the legacy makers, especially including selling at cost or below cost as they can subsidize sales themselves by the margins on their current car and truck lines. Only thing different with Tesla is they are subsidized by FCA, which is likely to taper off soon.
If you say so it must be true.
[/quote]
Typical. Can't even see the inconsistencies in their own logic. No competition for Tesla, except where Tesla chooses not to compete.
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So, you assign no value to Tesla energy storage products, no revenue to FSD, no revenue for solar panels or roofs, no service revenue, no software or infotainment revenue, no supercharger network revenue, no Tesla insurance revenue, no revenue from Tesla semi, no ZEV credit revenue, etc.? You’re not seeing the full picture if all you see is traditional car manufacturer metrics. Tesla is going to build massive battery plants in the coming years and Elon has stated the energy storage business will be as big or bigger than the auto side. That's before solar roof and everything else in the pipeline. Tesla could be a major supplier of battery cells or pack to other manufacturers. Again, treating Tesla like a simple car company is analogous to saying Amazon only sells books a few years back.
Now you're saying Tesla is going to be the whole car market plus Disney plus power storage plus other things.
I guess that's all *possible*. But again, even if you give those things considerable value and assume they'll happen in the near term (ie 5 years) on some significant scale, the price is still insane. Tesla would indeed need an Amazon-like trajectory (even over a 10-15 year timespan) to get to a point where the value was justified. And the regulatory climate is getting more and more hostile to huge tech conglomerates. I'd honestly not buy Tesla at it's current price even if I believed all the most optimistic projections - because I think antitrust problems will preclude that.
You can really believe in a company and think they're doing great things... and still think the price is much, much too high. I own (through index funds) some Tesla and I'm too lazy to go hedging/shorting/etc. But if I had most of my NW tied up in Tesla stock... I'd be diversifying as fast as possible.
-W
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Bears love to point to one country or region to falsely claim Tesla sales are dropping. Tesla sells every car they make, for a healthy margin, before it rolls off the line. Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows.
This seems to point out that Europe has produced cars that Tesla is unable to compete with. So not only has competition arrived but they are dominating. I have yet to hear an argument for Tesla that makes sense of these valuations. Anything they do can be replicated by the legacy makers, especially including selling at cost or below cost as they can subsidize sales themselves by the margins on their current car and truck lines. Only thing different with Tesla is they are subsidized by FCA, which is likely to taper off soon.
If you say so it must be true.
Typical. Can't even see the inconsistencies in their own logic. No competition for Tesla, except where Tesla chooses not to compete.
[/quote]
Tesla is focusing on high margin vehicles, which are higher priced vehicles. Just like Ford focuses on F-150s in North America. They have a limited number of cells. It makes business sense to start with the high margin vehicles and work your way down as cell supply increases. Elon announced this plan over a decade ago when he started with the Roadster. Plans for a 22k vehicle to be made in Shanghai were just announced. In the meantime, other manufacturers can service this segment. In the end, Tesla’s goal is to advance the transition, not own 100% of the market. I’m not going to keep responding to you if you insist on repeating the same disproven assertions.
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So, you assign no value to Tesla energy storage products, no revenue to FSD, no revenue for solar panels or roofs, no service revenue, no software or infotainment revenue, no supercharger network revenue, no Tesla insurance revenue, no revenue from Tesla semi, no ZEV credit revenue, etc.? You’re not seeing the full picture if all you see is traditional car manufacturer metrics. Tesla is going to build massive battery plants in the coming years and Elon has stated the energy storage business will be as big or bigger than the auto side. That's before solar roof and everything else in the pipeline. Tesla could be a major supplier of battery cells or pack to other manufacturers. Again, treating Tesla like a simple car company is analogous to saying Amazon only sells books a few years back.
Now you're saying Tesla is going to be the whole car market plus Disney plus power storage plus other things.
I guess that's all *possible*. But again, even if you give those things considerable value and assume they'll happen in the near term (ie 5 years) on some significant scale, the price is still insane. Tesla would indeed need an Amazon-like trajectory (even over a 10-15 year timespan) to get to a point where the value was justified. And the regulatory climate is getting more and more hostile to huge tech conglomerates. I'd honestly not buy Tesla at it's current price even if I believed all the most optimistic projections - because I think antitrust problems will preclude that.
You can really believe in a company and think they're doing great things... and still think the price is much, much too high. I own (through index funds) some Tesla and I'm too lazy to go hedging/shorting/etc. But if I had most of my NW tied up in Tesla stock... I'd be diversifying as fast as possible.
-W
That’s not what I’m saying. You said my valuation would require Tesla to own the entire auto market in 5 years while assigning no value to any other products or services. I responded that Tesla doesn’t need 100% of the auto market (assuming your numbers are even correct) if you given them credit for revenue they are already making in these segments and that will rapidly grow over the next five years to match or exceed auto revenue.
Again, everyone’s grave concern for my Tesla position appreciated and noted. Each of you will be held blameless when it goes to zero.
BTW, I am diversified. Nearly half my network is in real estate and I own plenty of VTI. I rarely buy individual stocks, but I also didn’t make the mistake of selling a winner early based on internet naysayers.
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Yeah, if you're a 7-8 figure type NW person, you can just invest for the sake of liking the company/thumbing your nose at people.
So you'll be fine.
You're welcome to go look up the numbers. Again, if Tesla started producing (5 years from now) revenue that got them to a boring/pedestrian 20 P/E at a market cap of $2 trillion, they'd need $100 billion in profits a year to do it. They make on the order of 1/300th of that in profits right now, so it will require BOTH massive scaling up and massive improvements in efficiency/profitability of existing and nascent businesses, while simultaneously avoiding regulatory problems.
-W
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The energy business will be as big or bigger than the car business. The demand is there for Tesla storage products as well, but again Tesla is battery cell constrained and is currently prioritizing vehicles for the cells, though the storage business is ramping. Tesla is no more just a car manufacturer than Amazon just sells books.
Do you know if Tesla is planning on using battery power for air flights? The potential is enormous. I don't know if they're working on it.
Electric airplanes are in the works, but not by Tesla.
https://www.flightglobal.com/aerospace/harbour-air-to-resume-electric-powered-beaver-flights-as-certification-work-begins/136071.article
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Despite the competition that has been “coming any minute” for the past decade, I see no real competition to Tesla in the next five years. If anything, Tesla’s pace of innovation and infrastructure buildout is accelerating and widening their advantage.
[/quote]
Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows.
These don't seem inconsistent to you?
Why is it when legacy companies are not in a particular segment it is because they are incapable or short sighted, but when Tesla does it then it's a choice? Overall Tesla sales dropping in Europe as competition comes online, what is to stop this from happening in other markets?
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Yeah, if you're a 7-8 figure type NW person, you can just invest for the sake of liking the company/thumbing your nose at people.
So you'll be fine.
You're welcome to go look up the numbers. Again, if Tesla started producing (5 years from now) revenue that got them to a boring/pedestrian 20 P/E at a market cap of $2 trillion, they'd need $100 billion in profits a year to do it. They make on the order of 1/300th of that in profits right now, so it will require BOTH massive scaling up and massive improvements in efficiency/profitability of existing and nascent businesses, while simultaneously avoiding regulatory problems.
-W
I’m not thumbing my nose at anyone. And my net worth was negative 21 years ago. Our NW was hard won and I don’t throw money at whims or emotions. Spare me the patronizing condescension.
Tesla’s profit is slim right now (relative to revenue) because Tesla is plugging billions back into the company to expand (see 1 new gigafactory per year). Free cash flow is much higher. This is expected for a growth company and something else bears consistently ignore. If Tesla decides to stop growing at any point in the future, profit from the underlying day-to-day business will make it look like the bottom-line profits suddenly skyrocketed.
I think I know what you want, so we can both move on. So here you go. You are a savvy, disciplined, fundamentals-driven investor that would never miss an opportunity like Tesla. The only reason you missed it is because its an over-valued bubble. I’m just some ignorant noob, who got really lucky and have no idea what I’m doing and don’t even understand what I’m investing in. So, you didn’t miss anything and I’m just a reckless gambler. We cool?
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Despite the competition that has been “coming any minute” for the past decade, I see no real competition to Tesla in the next five years. If anything, Tesla’s pace of innovation and infrastructure buildout is accelerating and widening their advantage.
Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows.
These don't seem inconsistent to you?
Why is it when legacy companies are not in a particular segment it is because they are incapable or short sighted, but when Tesla does it then it's a choice? Overall Tesla sales dropping in Europe as competition comes online, what is to stop this from happening in other markets?
[/quote]
Ford was in the sedan market and abandoned it. Tesla is a new company that is rapidly growing and will be in the economy segment in a few years. Apples and oranges. Ford is closing factories, offers routine sales and rebates, advertises heavily, has vehicles sit on lots for months waiting for a buyer, and has declining sales (worldwide). The opposite is true for Tesla in every case.
What so hard to understand. I don’t care if Tesla sells 10 fewer vehicles in Norway in Q2 than they did last year. The company is growing 40%+ a year!!! You literally can’t see the forest for the trees!!
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Tesla’s profit is slim right now (relative to revenue) because Tesla is plugging billions back into the company to expand (see 1 new gigafactory per year).
We've gone over this. Capex, in the year it's spent, does not affect profit.
Revenue - COGS = gross profit
gross profit - operations/admin* - depreciation = EBIT/operating profit
EPS is from net income, which is operating profit after debt interest and taxes are subtracted.
Capex is not an expenditure on income or balance sheets. Capex is depreciated.
(R&D salaries would be in operation expenses.)
tl;dr: The building of a gigafactory is NOT reflected in the operating profit margins except through depreciation.
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Tesla's gross profit was $6B. Gross profit is only after COGS and before operation expenses (ie., salaries and other bills).
Its EBIT was $1.8B and its EBITDA was $4.2B= $2.4B in depreciation and amortization
$6B - X - $2.4B = $1.8B means X = $1.8B in operation expenses, which includes salaries, utility bills, maintenance, etc.
Net income was $500M, which is EBIT - interest and taxes.
https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-income
There's no way to make profits skyrocket unless it it increases revenue. Merely stopping capex will not increase the D&A but it'll still weigh on the operating profit.
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Thank you bacchi, saved me the trouble of posting that.
Tesla requires new models and new markets for their growth. Sales peak in every market as a new model is introduced then tapers off. This while sales of new models cut into sales of older models. Sales in USA peaked in 18, Europe in 19, and likely China in 20 or 21. When (if) a new cheaper model is introduced it will likely follow the same pattern.
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Ford was in the sedan market and abandoned it. Tesla is a new company that is rapidly growing and will be in the economy segment in a few years. Apples and oranges. Ford is closing factories, offers routine sales and rebates, advertises heavily, has vehicles sit on lots for months waiting for a buyer, and has declining sales (worldwide). The opposite is true for Tesla in every case.
What so hard to understand. I don’t care if Tesla sells 10 fewer vehicles in Norway in Q2 than they did last year. The company is growing 40%+ a year!!! You literally can’t see the forest for the trees!!
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Using Ford as an example.
Tesla has in the sports car market and abandoned it. Ford EV is rapidly growing. Tesla has plans to close Fremont, has been cutting prices rapidly, Tesla advertises (marketing budget in their 10k) too little, dealers buy cars from Ford (cars on lots no longer owned by Ford), and has declining sales everywhere but Asia.
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Tesla requires new models and new markets for their growth. Sales peak in every market as a new model is introduced then tapers off. This while sales of new models cut into sales of older models. Sales in USA peaked in 18, Europe in 19, and likely China in 20 or 21. When (if) a new cheaper model is introduced it will likely follow the same pattern.
Hi 3toesloth, could you link to the data where you're seeing US sales peaking in 18? I'm getting 183k cars sold in the USA in '18, 192k in '19 and 193k in '20 but this is obviously not my area of expertise.
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Hi 3toesloth, could you link to the data where you're seeing US sales peaking in 18? I'm getting 183k cars sold in the USA in '18, 192k in '19 and 193k in '20 but this is obviously not my area of expertise.
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Inside EV and others has some good data and graphs. Those seem pretty accurate tho. Tesla doesn't follow GAAP when it comes to overseas sales so it takes a lot of detective work to sus out those numbers mostly using registration data, North America can be pulled form 10k reports.
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Tesla requires new models and new markets for their growth. Sales peak in every market as a new model is introduced then tapers off. This while sales of new models cut into sales of older models. Sales in USA peaked in 18, Europe in 19, and likely China in 20 or 21. When (if) a new cheaper model is introduced it will likely follow the same pattern.
Hi 3toesloth, could you link to the data where you're seeing US sales peaking in 18? I'm getting 183k cars sold in the USA in '18, 192k in '19 and 193k in '20 but this is obviously not my area of expertise.
Sorry, meant model 3 for all of those peak years. Tesla reporting has since stopped differentiating between s/x and 3/Y.
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I think I know what you want, so we can both move on. So here you go. You are a savvy, disciplined, fundamentals-driven investor that would never miss an opportunity like Tesla. The only reason you missed it is because its an over-valued bubble. I’m just some ignorant noob, who got really lucky and have no idea what I’m doing and don’t even understand what I’m investing in. So, you didn’t miss anything and I’m just a reckless gambler. We cool?
I'm not sure why you're so angry here. I'm just pointing out that for the company (by normal standards) to be worth the price it's valued at, some CRAZY stuff has to happen. Lots of simultaneous crazy things, really.
Now, I'm not rooting against that. I think if Tesla dominated cars that would probably be good for humanity. I hope Elon parachutes a gold asteroid down from the Kuiper belt to kill off the goldbug idiocy forever. I hope Tesla makes large scale energy storage practical so we can use way more renewables. I hope they make self driving cars practical and widespread and I can take a supersonic tunnel vehicle to get between places at minimal cost to the environment as compared to flying.
All of that sounds ****ing great! I have loved Tesla (both the inventor and the company) forever. I built a couple of Tesla coils for fun in high school. I don't own any individual stocks, but if I did, Tesla would be (if the price was vaguely reasonable) my first one.
It's even, no joke, my daughter's middle name!
If all of those things happen, the current market cap seems about right. If only some or none of them do (and none are a sure bet), or if they do but antitrust regulators start sniffing around, it's overvalued by like 1000%.
-W
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It maybe tough watching it go up a bit- in a years time
When it is trading for 5% of its current value - you can annoy people with your smart move forever.
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Ah I’m not so worried, fundamentals just don’t stack for current price and I hate getting caught. Tesla was only ever a flutter outside of index funds...I’ll buy back in after it becomes sane
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Despite the competition that has been “coming any minute” for the past decade, I see no real competition to Tesla in the next five years. If anything, Tesla’s pace of innovation and infrastructure buildout is accelerating and widening their advantage.
Europe has the highest EV adoption and Tesla currently doesn’t offer an economy EV, so not shocking that Tesla’s share of that market decreased as the size of the European pie rapidly grows.
These don't seem inconsistent to you?
Why is it when legacy companies are not in a particular segment it is because they are incapable or short sighted, but when Tesla does it then it's a choice? Overall Tesla sales dropping in Europe as competition comes online, what is to stop this from happening in other markets?
Ford was in the sedan market and abandoned it. Tesla is a new company that is rapidly growing and will be in the economy segment in a few years. Apples and oranges. Ford is closing factories, offers routine sales and rebates, advertises heavily, has vehicles sit on lots for months waiting for a buyer, and has declining sales (worldwide). The opposite is true for Tesla in every case.
What so hard to understand. I don’t care if Tesla sells 10 fewer vehicles in Norway in Q2 than they did last year. The company is growing 40%+ a year!!! You literally can’t see the forest for the trees!!
[/quote]
Sales in Europe actually declined last year, and they are starting to significantly lose market share in China despite having to cut price multiple times to 'move the metal' in the face of collapsing demand. USA will be a bloodbath for TESLA in 2021
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Tesla’s profit is slim right now (relative to revenue) because Tesla is plugging billions back into the company to expand (see 1 new gigafactory per year).
We've gone over this. Capex, in the year it's spent, does not affect profit.
Revenue - COGS = gross profit
gross profit - operations/admin* - depreciation = EBIT/operating profit
Exactly thx - I find the level of financial naivety in Tesla longs extremely frightening. Unfortunately it is so big now that when the bubble inevitably collapses, it will bring the whole market down with it.
EPS is from net income, which is operating profit after debt interest and taxes are subtracted.
Capex is not an expenditure on income or balance sheets. Capex is depreciated.
(R&D salaries would be in operation expenses.)
tl;dr: The building of a gigafactory is NOT reflected in the operating profit margins except through depreciation.
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Tesla's gross profit was $6B. Gross profit is only after COGS and before operation expenses (ie., salaries and other bills).
Its EBIT was $1.8B and its EBITDA was $4.2B= $2.4B in depreciation and amortization
$6B - X - $2.4B = $1.8B means X = $1.8B in operation expenses, which includes salaries, utility bills, maintenance, etc.
Net income was $500M, which is EBIT - interest and taxes.
https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-income
There's no way to make profits skyrocket unless it it increases revenue. Merely stopping capex will not increase the D&A but it'll still weigh on the operating profit.
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Tesla's profits are going to be greater than global GDP doncha know...
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I'm not really into arguing about Tesla at this point. This is more of a defense because everyone is seeming to hop onto ColoradoTribe about Capex like they put a death nail in what he said so this is more geared towards that.
Growth for a factory isn't all Capex and there is a huge portion that is reflected on the income statement. Tesla had to operate the Shanghai factory with low volumes all through 2020 as it ramped. You can partly see in the income statement in Q3 2020 vs Q3 2019 in the growth in op ex of $300m. We can't see the actual growth in auto line workers because those are rolled into cost of auto sales. In addition to ramping the energy business requires more staff in sales and installation AND a lot of expense went into both factories as they were shut down for weeks during 2020...not to mention training and staff being hired in Germany. It's true that most of the capex will be booked as property and deferred tax assets/liabilities on the balance sheet, but come on, a lot of expense goes into growth that's not capex.
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I'm not really into arguing about Tesla at this point. This is more of a defense because everyone is seeming to hop onto ColoradoTribe about Capex like they put a death nail in what he said so this is more geared towards that.
Growth for a factory isn't all Capex and there is a huge portion that is reflected on the income statement. Tesla had to operate the Shanghai factory with low volumes all through 2020 as it ramped. You can partly see in the income statement in Q3 2020 vs Q3 2019 in the growth in op ex of $300m. We can't see the actual growth in auto line workers because those are rolled into cost of auto sales. In addition to ramping the energy business requires more staff in sales and installation AND a lot of expense went into both factories as they were shut down for weeks during 2020...not to mention training and staff being hired in Germany. It's true that most of the capex will be booked as property and deferred tax assets/liabilities on the balance sheet, but come on, a lot of expense goes into growth that's not capex.
I'm not sure where the disagreement is here.
If they're using GAAP, capex is not reflected on income.
-$2B cash for a factory +$2B factory = $0 change in assets
Yes, of course op ex goes up (and net income goes down) when building a factory. There are more salaries, there are more utility bills, and there are more property taxes. What there isn't is a dramatic $2B hit on profits for the year.
It's unclear how that helps the argument for Tesla. ALL of the legacy carmakers have op ex related to their factories. Many have higher op ex because of older factories and unions.
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I'm not really into arguing about Tesla at this point. This is more of a defense because everyone is seeming to hop onto ColoradoTribe about Capex like they put a death nail in what he said so this is more geared towards that.
Growth for a factory isn't all Capex and there is a huge portion that is reflected on the income statement. Tesla had to operate the Shanghai factory with low volumes all through 2020 as it ramped. You can partly see in the income statement in Q3 2020 vs Q3 2019 in the growth in op ex of $300m. We can't see the actual growth in auto line workers because those are rolled into cost of auto sales. In addition to ramping the energy business requires more staff in sales and installation AND a lot of expense went into both factories as they were shut down for weeks during 2020...not to mention training and staff being hired in Germany. It's true that most of the capex will be booked as property and deferred tax assets/liabilities on the balance sheet, but come on, a lot of expense goes into growth that's not capex.
I'm not sure where the disagreement is here.
If they're using GAAP, capex is not reflected on income.
-$2B cash for a factory +$2B factory = $0 change in assets
Yes, of course op ex goes up (and net income goes down) when building a factory. There are more salaries, there are more utility bills, and there are more property taxes. What there isn't is a dramatic $2B hit on profits for the year.
It's unclear how that helps the argument for Tesla. ALL of the legacy carmakers have op ex related to their factories. Many have higher op ex because of older factories and unions.
Because ColoradoTribe said Tesla investing in Growth not Capex. There's more expense to new factories other than Capex. 300m in one quarter for Op increase does translate to more than a billion in expense to the income statement annualized and that doesn't include auto line worker increases that goes to cost of auto sales. What I'm saying is, it's not difficult to find $2 billion in expense related to growth on the income statement, especially if you do add depreciation over time. You're going into superficial accounting lessons on capex as an argument that growth isn't reflected on the income statement. That's the disagreement.
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The factory in China, and production scaling up at the same pace are both great ... but they don't explain an 8x increase in price. Tesla currently IS the top 10: it is worth more than the other top 9 carmakers combined.
https://www.cnbc.com/2020/12/14/tesla-valuation-more-than-nine-largest-carmakers-combined-why.html
Ford at one point was probably worth as much as the 9 biggest livery stables combined despite cars only capturing 2% of the transportation market. Imagine the fools that bought into Henry Ford’s lunacy. Nothing will replace good, old-fashioned reliable horses for transportation!
You're creating a false comparison between horses and cars. What speeds did horse-driven carriages go on the highways? What speed do Ford and Tesla's cars go on the highways? Ford, Tesla and Toyota all make cars.
Which underscores that the factual point I made isn't easy to refute. Tesla shouldn't be worth more than the world's top 9 automakers combined, with a tiny fraction of their sales.
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I'm not really into arguing about Tesla at this point. This is more of a defense because everyone is seeming to hop onto ColoradoTribe about Capex like they put a death nail in what he said so this is more geared towards that.
Growth for a factory isn't all Capex and there is a huge portion that is reflected on the income statement. Tesla had to operate the Shanghai factory with low volumes all through 2020 as it ramped. You can partly see in the income statement in Q3 2020 vs Q3 2019 in the growth in op ex of $300m. We can't see the actual growth in auto line workers because those are rolled into cost of auto sales. In addition to ramping the energy business requires more staff in sales and installation AND a lot of expense went into both factories as they were shut down for weeks during 2020...not to mention training and staff being hired in Germany. It's true that most of the capex will be booked as property and deferred tax assets/liabilities on the balance sheet, but come on, a lot of expense goes into growth that's not capex.
I'm not sure where the disagreement is here.
If they're using GAAP, capex is not reflected on income.
-$2B cash for a factory +$2B factory = $0 change in assets
(1) Yes, of course op ex goes up (and net income goes down) when building a factory. There are more salaries, there are more utility bills, and there are more property taxes. (2) What there isn't is a dramatic $2B hit on profits for the year.
It's unclear how that helps the argument for Tesla. ALL of the legacy carmakers have op ex related to their factories. Many have higher op ex because of older factories and unions.
Because ColoradoTribe said Tesla investing in Growth not Capex. There's more expense to new factories other than Capex. 300m in one quarter for Op increase does translate to more than a billion in expense to the income statement annualized and that doesn't include auto line worker increases that goes to cost of auto sales. What I'm saying is, it's not difficult to find $2 billion in expense related to growth on the income statement, especially if you do add depreciation over time. You're going into superficial accounting lessons on capex as an argument that growth isn't reflected on the income statement. That's the disagreement.
Yes, I agreed that op ex goes up. (1)
Yes, Tesla profit would be higher without the building out of the Shanghai factory but not $3.9B higher. (2)
Tesla's op ex for the 12 months ending Q3 2020 was only $1.8B. Shanghai costing $1B alone seems off given that Fremont, Reno, partial Shanghai, and HQ are included in the $1.8B.
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Yes, I agreed that op ex goes up. (1)
Yes, Tesla profit would be higher without the building out of the Shanghai factory but not $3.9B higher. (2)
Tesla's op ex for the 12 months ending Q3 2020 was only $1.8B. Shanghai costing $1B alone seems off given that Fremont, Reno, partial Shanghai, and HQ are included in the $1.8B.
Growth isn't only Shanghai nor just Op Ex. Freemont and Shanghai were scaling in 2020 and met their 500k guidance despite a pandemic. What I'm saying is there's a lot of engineers here and not a lot of accountants so kudos if you actually understand Tesla's financials. I'm skeptical.
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The factory in China, and production scaling up at the same pace are both great ... but they don't explain an 8x increase in price. Tesla currently IS the top 10: it is worth more than the other top 9 carmakers combined.
https://www.cnbc.com/2020/12/14/tesla-valuation-more-than-nine-largest-carmakers-combined-why.html
Ford at one point was probably worth as much as the 9 biggest livery stables combined despite cars only capturing 2% of the transportation market. Imagine the fools that bought into Henry Ford’s lunacy. Nothing will replace good, old-fashioned reliable horses for transportation!
You're creating a false comparison between horses and cars. What speeds did horse-driven carriages go on the highways? What speed do Ford and Tesla's cars go on the highways? Ford, Tesla and Toyota all make cars.
Which underscores that the factual point I made isn't easy to refute. Tesla shouldn't be worth more than the world's top 9 automakers combined, with a tiny fraction of their sales.
Is the cell phone market equally divided between Blackberrys and smartphones? Both had the same basic functions. Both could easily make calls and send emails?
No, that’s not how disruption works. Once the market identifies a superior product consumers will rapidly shift to the superior product following a predictable adoption curve. EVs are the superior product. Lower fuel and maintenance cost, longer drive train life, better for the environment, fewer moving parts, more efficient, quieter smoother ride with instant torque and rapid acceleration.
But hey, lots of people are still taking their film in to get developed and shaking their polaroids, so I could be wrong. A picture is a picture after all. A big box TV and flatscreen will both allow you to watch your favorite shows, right?
Also, horse and buggy didn’t go on the highways because highways didn’t exist. And you can’t compare horses to today’s cars. The Ford Model T of the day was crude and not vastly superior to horse and buggy, but once people recognized the advantages of the ICE vehicle (lower maintenance, better performance) they shift was sudden. A matter of 10-15 years in cities.
https://www.youtube.com/watch?v=yYFbnrBrbhs
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Is the cell phone market equally divided between Blackberrys and smartphones? Both had the same basic functions. Both could easily make calls and send emails?
No, that’s not how disruption works. Once the market identifies a superior product consumers will rapidly shift to the superior product following a predictable adoption curve. EVs are the superior product. Lower fuel and maintenance cost, longer drive train life, better for the environment, fewer moving parts, more efficient, quieter smoother ride with instant torque and rapid acceleration.
But hey, lots of people are still taking their film in to get developed and shaking their polaroids, so I could be wrong. A picture is a picture after all.
You don't think this is a bit of a red herring? Smartphones drove blackberry from the market because they couldn't adapt. But apple doesn't have the smartphone market to itself. They compete with Samsung and LG, and so on. While Apple didn't make a pre-smartphone phone, I believe Sony and LG were both making phones for many years before and made the jump to smartphones remaining large players.
Digital cameras drove Kodak from the market because he couldn't adopt. But no one digital camera company has a majority of the market. It's split between Canon and Nikon and Sony and the whole market shrinking away as the phones in cameras get better and better. And Canon and Nikon made film based cameras before making the jump to digital and remained large players afterwards. (I don't actually know if Sony made film cameras or is a new entrant in the digital era).
In 10-15 years I think there will be a LOT more electric vehicles. I don't think anyone in this thread is arguing about that, are they? The question is what share of those electric vehicles will be made by Tesla.
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Is the cell phone market equally divided between Blackberrys and smartphones? Both had the same basic functions. Both could easily make calls and send emails?
No, that’s not how disruption works. Once the market identifies a superior product consumers will rapidly shift to the superior product following a predictable adoption curve. EVs are the superior product. Lower fuel and maintenance cost, longer drive train life, better for the environment, fewer moving parts, more efficient, quieter smoother ride with instant torque and rapid acceleration.
But hey, lots of people are still taking their film in to get developed and shaking their polaroids, so I could be wrong. A picture is a picture after all.
You don't think this is a bit of a red herring? Smartphones drove blackberry from the market because they couldn't adapt. But apple doesn't have the smartphone market to itself. They compete with Samsung and LG, and so on. While Apple didn't make a pre-smartphone phone, I believe Sony and LG were both making phones for many years before and made the jump to smartphones remaining large players.
Digital cameras drove Kodak from the market because he couldn't adopt. But no one digital camera company has a majority of the market. It's split between Canon and Nikon and Sony and the whole market shrinking away as the phones in cameras get better and better. And Canon and Nikon made film based cameras before making the jump to digital and remained large players afterwards. (I don't actually know if Sony made film cameras or is a new entrant in the digital era).
In 10-15 years I think there will be a LOT more electric vehicles. I don't think anyone in this thread is arguing about that, are they? The question is what share of those electric vehicles will be made by Tesla.
And I’ve never argued that Tesla will own 100% of the market. Ive only argued that nearly 100% of the ,market will be EV and Tesla will be the biggest player in the market. The Apple of your smartphone analogy. My argument is you don’t still have Kodak cameras and Blackberrys on the market. Same will happen to ICE vehicles.
Apologies, but I updated my previous post after you quoted it. Good presentation on disruption that is central to this discussion.
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And I’ve never argued that Tesla will own 100% of the market. Ive only argued that nearly 100% of the ,market will be EV and Tesla will be the biggest player in the market. The Apple of your smartphone analogy. My argument is you don’t still have Kodak cameras and Blackberrys on the market. Same will happen to ICE vehicles.
Apologies, but I updated my previous post after you quoted it. Good presentation on disruption that is central to this discussion.
That's fair. So would it be fair to say you'd forecast Tesla with a share of the total EV market of somewhere between 13.5% and 40.5% EV after the dust settles (market shares for Apple in smartphones and Canon in DSLR cameras respectively)?
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We can do some interesting stuff with those numbers.
If we assume a best-case ~40% market share for Tesla, and the entire world goes EV, and that the car market stays the same size it is, that's something like 30 million cars a year.
If we also assume Tesla gets really, really good at making big margins on those cars - say something $5k per car which is well above average for the auto industry, then we get profits per year in the range of $150 billion.
At that level of revenue, you'd have a relatively profitable but not crazy/amazing company at the predicted $2 trillion market cap.
Now, they aren't doing any of that right now or even close, and I think political considerations would preclude any single car company getting that big, but that's the Apple-level-dominance where you could justify the price, I think.
-W
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We can do some interesting stuff with those numbers.
If we assume a best-case ~40% market share for Tesla, and the entire world goes EV, and that the car market stays the same size it is, that's something like 30 million cars a year.
If we also assume Tesla gets really, really good at making big margins on those cars - say something $5k per car which is well above average for the auto industry, then we get profits per year in the range of $150 billion.
At that level of revenue, you'd have a relatively profitable but not crazy/amazing company at the predicted $2 trillion market cap.
Now, they aren't doing any of that right now or even close, and I think political considerations would preclude any single car company getting that big, but that's the Apple-level-dominance where you could justify the price, I think.
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We’d also have to assume that all Tesla does now and will do in the future is manufacture passenger EVs. We’d have to ignore the semi trucks, insurance, energy storage products, battery cell manufacturing/sales, software, infotainment, ancillary services, ZEV credits, solar, utility service/backup, autonomous driving, and robotaxi revenue streams. Not every one of those will be a big winner, but combined it will exceed the auto sale revenue.
Also, Tesla’s margins are around 15% per vehicle. The average vehicle sells for $50k, so $7.5k per vehicle.
You also assume margins won’t improve when Tesla goes from 500k vehicles a year to 30 million and as the price of batteries continues to drop rapidly. The most expensive component of the vehicle.
So, let’s assume $10k per vehicle due to economies of scale and battery improvements for 30 million and then double it for all the other Tesla ventures, particularly solar and storage. We are conservatively looking at 600 billion in annual profit.
I think Tesla will end up at 25-30% of the EV market, so maybe knock that down to an even 500 billion profit.
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This Forbes article indicates Tesla achieved a margin of 21% on vehicles in 2019. They predict margins of 30% or better going forward as Tesla ramps and battery costs come down. Appears I was a bit conservative with my hip shot in the previous post.
https://www.forbes.com/sites/greatspeculations/2020/10/08/tesla-can-post-apple-like-margins-heres-how/?sh=7e938243353d
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P/E is often misleading:
"If, in 1972, an investor chose to make a purchase of (Walmart) shares, he could have paid over one hundred and fifty times the prevailing share price (a price to earnings ratio of over fifteen-hundred times, a ratio far in excess of what professional fund managers would consider prudent. They would be mistaken, as it turns out) and he would have still earned a ten percent return on his investment through to today"
Regarding total addressable market:
“When evaluating market size, it’s also critical to try to account for how lower costs and product improvements can expand markets by appealing to new customers, in addition to seizing market share from existing players.”
“When Amazon listed at the height of the dot.com boom in the late 1990’s, even the most bullish analysts thought that the total addressable market for Amazon was $26 billion, which equated to the total size of the book market in the US.”
“We didn't really foresee back 20 years ago that the sport shoe business could get so big.” Phil Knight
“Sizing the market for a disruptor based on an incumbent’s market size is like sizing a car industry off how many horses there were in 1910.”
http://mastersinvest.com/newblog/2020/11/15/fight-the-fade-round-2
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I have to say - I feel like you all got suckered in to having this exact same conversation again.
Has anything new been stated in this thread? I don't think so, but please point out if I missed it. :P
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If you go back a few years you can find the same thread about Apple, basically.
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If you go back a few years you can find the same thread about Apple, basically.
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There was probably this same thread about AOL on the old Yahoo! Finance boards.
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I have to say - I feel like you all got suckered in to having this exact same conversation again.
Has anything new been stated in this thread? I don't think so, but please point out if I missed it. :P
I've read some interesting things. Waltworks' math that a $2T market cap is theoretically a not impossible to support thing was very interesting. Yes, a long shot, but not impossible as some people might claim.
We’d have to ignore the semi trucks, insurance, energy storage products, battery cell manufacturing/sales, software, infotainment, ancillary services, ZEV credits, solar, utility service/backup, autonomous driving, and robotaxi revenue streams. Not every one of those will be a big winner, but combined it will exceed the auto sale revenue.
I think you can drop ZEV credits since if the whole market is electric they'll likely be worthless. What's the software and infotainment revenue you see? Is that like fees that Tesla owners pay to Tesla or something they get for licensing to other companies?
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Legacy auto makers *could* assemble EV autos, but they don't *want* to. Why should they work hard to render all their R&D and branding obsolete? Not to mention having to tell their dealer network all the lucrative maintenance work from their last profit center will slowly disappear.
Plus abandon the motor heads that are their bread and butter. Ferrari is building a hybrid now for release soon and you should hear the wailing and gnashing of teeth.
We've seen this same logic in other fields:
Big brewers *could* make craft beer, but they don't *want* to.
Blockbuster *could have* done streaming, but they didn't *want* to.
Barnes & Noble *could have* sold books online, but they didn't *want* to.
Intel *could* have built the chips that go in smartphones, but they didn't *want* to.
As mentioned upthread already, Nokia/Blackberry, & Kodak also chose to defend their legacy business model instead of embracing the future.
Until the legacy automakers *want* to build EV's, Tesla is guaranteed market share and outsized margins. Ferrari & McLaren say they won't have an EV before 2025, so that'd put them, what, 13 years behind Tesla? BMW & Mercedes are scheduled to release an EV in 2021, about 9 years behind Tesla. Porsche released their first EV a few months ago, only 8 years behind Tesla, at a higher price point than Tesla's Model S with a lower range.
Porsche's dilemma spells it out rather well. Tesla built the EV market, not Porsche. So, now Porsche in order to sell an EV car to one of their regular customers, they have to convince them that EV is better than ICE. Once that is (irreversibly) done, now the customer will shop around EV cars and discover that Tesla is a better value proposition.
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Legacy auto makers *could* assemble EV autos, but they don't *want* to. Why should they work hard to render all their R&D and branding obsolete? Not to mention having to tell their dealer network all the lucrative maintenance work from their last profit center will slowly disappear.
Plus abandon the motor heads that are their bread and butter. Ferrari is building a hybrid now for release soon and you should hear the wailing and gnashing of teeth.
We've seen this same logic in other fields:
Big brewers *could* make craft beer, but they don't *want* to.
Blockbuster *could have* done streaming, but they didn't *want* to.
Barnes & Noble *could have* sold books online, but they didn't *want* to.
Intel *could* have built the chips that go in smartphones, but they didn't *want* to.
As mentioned upthread already, Nokia/Blackberry, & Kodak also chose to defend their legacy business model instead of embracing the future.
Yes, but it is important to remember that the stories of Blackberry and Kodak are cautionary tales about the need to adapt even if it means cannibalizing legacy businesses rather than stories about the impossibility of doing so.
For every Nokia, Blackberry, and Kodak there is also a Canon, Nikon, and Samsung. Big companies with decades of expertise in doing things the old way that didn't necessarily want to do things the new way but ultimately will buckle down and do so and end up owning a substantial share of the new market and making some of the best products in it.
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Legacy auto makers *could* assemble EV autos, but they don't *want* to. Why should they work hard to render all their R&D and branding obsolete? Not to mention having to tell their dealer network all the lucrative maintenance work from their last profit center will slowly disappear.
Plus abandon the motor heads that are their bread and butter. Ferrari is building a hybrid now for release soon and you should hear the wailing and gnashing of teeth.
We've seen this same logic in other fields:
Big brewers *could* make craft beer, but they don't *want* to.
Blockbuster *could have* done streaming, but they didn't *want* to.
Barnes & Noble *could have* sold books online, but they didn't *want* to.
Intel *could* have built the chips that go in smartphones, but they didn't *want* to.
As mentioned upthread already, Nokia/Blackberry, & Kodak also chose to defend their legacy business model instead of embracing the future.
Yes, but it is important to remember that the stories of Blackberry and Kodak are cautionary tales about the need to adapt even if it means cannibalizing legacy businesses rather than stories about the impossibility of doing so.
For every Nokia, Blackberry, and Kodak there is also a Canon, Nikon, and Samsung. Big companies with decades of expertise in doing things the old way that didn't necessarily want to do things the new way but ultimately will buckle down and do so and end up owning a substantial share of the new market and making some of the best products in it.
And remember that people looking at Apple in 2000 might have concluded they were a decade behind Microsoft-based PCs and had an insurmountable barrier to entry in the cell phone market. A few years later, Facebook and Google seemed unlikely to overcome the first-mover advantages of MySpace and Yahoo.
There is a way to play the game where you let a pioneering technology leader incinerate cash and make all the mistakes establishing a market and then you come in with a slightly better product and steal the market from them. Most companies fail to pull this off because they wait too long, but it is a real strategy.
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I think lots of legacy automakers will be competitive, especially at the entry level where Tesla isn't trying to build anything yet. Lots of Asian (especially south Asian) companies know how to make small/cheap/efficient cars *really* well. Some of them have the additional advantage (ie, in India, China) of nationalistic governments that will slam the door on Tesla if they seem like a threat to the domestic industry.
I'd also worry about large-scale intellectual property theft in China. My own industry has seen that happen on a grand scale.
But as I said, the market cap that @ColoradoTribe predicts could in fact be justified just with sufficient dominance of passenger cars. It's a long shot, as are most of Tesla's other business ventures. But it's possible.
My own prediction is that Tesla ends up being something akin to Toyota - a very big powerful car company with fingers in a lot of pies, but not totally dominant at anything. That's still a HUGE success story and *maybe* enough to justify the current market cap, though the actual Toyota-level revenue is 10-20 years off.
-W
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My own prediction is that Tesla ends up being something akin to Toyota - a very big powerful car company with fingers in a lot of pies, but not totally dominant at anything. That's still a HUGE success story and *maybe* enough to justify the current market cap, though the actual Toyota-level revenue is 10-20 years off.
If this happens, and the stars align, that actually works against the theory that the stock will rise dramatically from here. Toyota doesn't have a 50x multiplier because they don't have the growth; if Tesla finally arrives at that revenue, why would their stock still have a 1600x multiplier? It wouldn't. It would be priced much like Toyota. Unless the Tesla bulls think it'll still have a 50% growth rate in 20 years?
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And remember that people looking at Apple in 2000 might have concluded they were a decade behind Microsoft-based PCs and had an insurmountable barrier to entry in the cell phone market. A few years later, Facebook and Google seemed unlikely to overcome the first-mover advantages of MySpace and Yahoo.
There is a way to play the game where you let a pioneering technology leader incinerate cash and make all the mistakes establishing a market and then you come in with a slightly better product and steal the market from them. Most companies fail to pull this off because they wait too long, but it is a real strategy.
Absolutely. Although I think Apple is a better examples than Facebook (not sure where to put google). Social networks, by definition, have network effects. So whoever won (Facebook, Myspace, Friendster) was going to control the vast majority of the market. Even personal computers merged with an operating system (Apple in 2000) have some level of network effects because the bigger your installed base the more software will be developed for your operating system and the more of your friends have apple computers the more likely you are to want one that will work well with the same software they use.
ICE cars clearly don't have network effects, there are lots of manufacturers and they trade market share back and forth without any of them getting bigger and being able to use that growth to capture even more of the total market and so on in a positive feedback loop. If my buddy buys a Subaru, it doesn't make my own Subaru better or more useful.
My guess is that EV cars don't have network effects either and there won't be a significant advantage to buying the same brand of car your friends and co-workers have. I could be wrong in that but I haven't seen people make a case for why that would be (maybe I just missed it though). In their absence, I completely agree Tesla has the potential to be the Apple of electric cars*, but I don't see how it can become the Facebook of electric cars.
*And seems to be headed in that direction at the moment.
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In their absence, I completely agree Tesla has the potential to be the Apple of electric cars*, but I don't see how it can become the Facebook of electric cars.
*And seems to be headed in that direction at the moment.
Couldn't Apple become the Apple of electric cars? They're working with Hyundai, who has some EV experience, and the iPhone would be a great selling channel.
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My own prediction is that Tesla ends up being something akin to Toyota - a very big powerful car company with fingers in a lot of pies, but not totally dominant at anything. That's still a HUGE success story and *maybe* enough to justify the current market cap, though the actual Toyota-level revenue is 10-20 years off.
If this happens, and the stars align, that actually works against the theory that the stock will rise dramatically from here. Toyota doesn't have a 50x multiplier because they don't have the growth; if Tesla finally arrives at that revenue, why would their stock still have a 1600x multiplier? It wouldn't. It would be priced much like Toyota. Unless the Tesla bulls think it'll still have a 50% growth rate in 20 years?
Absolutely. I'm saying the current market cap, if it stayed stagnant from now until Toyota-level revenue/size (though profit margins would need to be MUCH better as well), could be justified.
-W
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I have to say - I feel like you all got suckered in to having this exact same conversation again.
Has anything new been stated in this thread? I don't think so, but please point out if I missed it. :P
I've read some interesting things. Waltworks' math that a $2T market cap is theoretically a not impossible to support thing was very interesting. Yes, a long shot, but not impossible as some people might claim.
products, battery cell manufacturing/sales, software, infotainment, ancillary services, ZEV credits, solar, utility service/backup, autonomous driving, and robotaxi revenue streams. Not every one of those will be a big winner, but combined it will exceed the auto sale revenue.
I think you can drop ZEV credits since if the whole market is electric they'll likely be worthless. What's the software and infotainment revenue you see? Is that like fees that Tesla owners pay to Tesla or something they get for licensing to other companies?
I agree once we get to a mature EV market there will no longer be ZEV credits. However, I see the ZEV credit revenue increasing in the short run and taking up to 10 years to phase out fully.
As for infotainment, each Tesla is basically a computer on wheels capable fo receiving over the air software updates. Each car comes with a rather large touchscreen display. Not an expert in this business aspect, but I know its possible to stream Netflix, Hulu, etc. in a Tesla. It’s not to hard to see how Tesla could monetize this by offering subscriptions to services directly to customers or collecting revenue from the content providers to use the Tesla “platform”. Tesla already charges a $10 subscription fee for “premium connectivity”.
https://electrek.co/2020/03/02/tesla-mcu-infotainment-upgrade/We’d have to ignore the semi trucks, insurance, energy storage
As for software, Tesla again is a tech company first and not a car manufacturer. Their programming prowess rivals Apple. If Tesla wins the the race to FSD (Level 5) not only can they turn every Tesla already on the road into a robot taxi, they would be able to sell their FSD software to competitors at a huge margin. Every Tesla car comes with the hardware to use FSD. The current price to the purchaser to get the FSD software upgrade option is $10,000. It has been increasing and will continue to go up as it gets closer to fruition.
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In their absence, I completely agree Tesla has the potential to be the Apple of electric cars*, but I don't see how it can become the Facebook of electric cars.
*And seems to be headed in that direction at the moment.
Couldn't Apple become the Apple of electric cars? They're working with Hyundai, who has some EV experience, and the iPhone would be a great selling channel.
Absolutely. But it is perfectly possible for two mutually contradictory future events to both be possible in the present.
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In their absence, I completely agree Tesla has the potential to be the Apple of electric cars*, but I don't see how it can become the Facebook of electric cars.
*And seems to be headed in that direction at the moment.
Couldn't Apple become the Apple of electric cars? They're working with Hyundai, who has some EV experience, and the iPhone would be a great selling channel.
I think Apple is more likely to challenge Tesla than GM. Apple could no doubt quickly put together a compelling EV concept car. As Elon as stated numerous times though, the real challenge is not the prototype, but mass manufacturing of new ground-up EVs and battery cells in mass. How many years will it take Apple to build the battery cell factories, car manufacturing plants, and charging network to compete with Tesla at scale? They have the money to join the race, but these things take time. Five years absolute minimum from today. That’s five years to get to where Tesla is today. In the meantime Tesla is still growing 40% a year and rolling out new products.
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Michael Burry, who predicted and profited off the 2008 Financial Crisis, has been getting louder about shorting Tesla. That's not a bad time to exit, in my opinion. Had I bought Tesla, Burry shorting it would definitely have made me rethink it.
Same.
I read "The Big Short" and was pretty impressed by how Burry called the housing crisis. I'd hate to be on the other end of his short. However, shorts generally tend to be pretty secretive. Just the fact that he's talking about his short is an attempt to talk the stock price down. He's in a world of pain now (initiated short at $560 I think, IIRC).
Tesla issued stock to raise $5 billion to pay off bonds and have a cash cushion. Didn't phase the stock at all. Why doesn't Musk issue another $5 billion or so in stock to have a nice cash cushion for forever? My only guess is because he expects the stock to be worth even more in the future than it is today.
Full disclosure: I've never owned a single share of TSLA and don't plan to, either.
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A brief overview of the legacy competition:
VW:
Of the major automakers, VW seems to be taking the transition to EV's most serious. In Europe they are Tesla's primary EV competition (The real competition is ICE!).
Take a minute to check out this piece by Herbiert Diess, CEO of Volkswagon:https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess (https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess)
A key quote from this article is:
“What do we have to achieve in the next six months to catch up with Tesla in terms of technology by 2024?”
GM:
GM's premier EV is the Hummer EV. Tesla's entrance into the pickup market is the Cybertruck. A brief comparison in specs indicates that the cybertruck will be 35% less expensive for the top package, and offer 40% greater range. This indicates Tesla's significant superiority on the technology front.
GM expects to produce 1 million EVs by 2025. Tesla expects to produce 850,000 EVs this year (2021), with a production rate exceeding 1 million by the end of the year. This indicates a ~4 year lead in production capacity over GM.
Ford:
Of the American automakers, Ford seems to have been taking the transition most serious. The Ford Mach-e looks to be a reasonable competitor to the Tesla Model Y, however production rates are significantly limited due to battery constraints.
Toyota:
Getting over a hydrogen hangover. Expect a hard fall from the top for Toyota.
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I'd agree Toyota is likely going to have the most trouble with the transition and if someone is going to play the role of Blackberry/Kodak they're the most likely candidate. They have the biggest share of total car production around the world and the market leader is always more reluctant to cannibalize their existing product line by adopting new innovation.
I think comparing the prices of the cybertruck and the hummer EV1 isn't all that informative. The electric Hummer is clearly being priced to maximize profit per vehicle while GM scales up their electric vehicle manufacturing and supply chain (much more like Telsa's original Roadster). The fact that the preorders for the electric Hummer sold out in 10 minutes suggest GM probably could have set the price even higher and still sold all the vehicles they could build at the moment to that segment of the US market where the Hummer/GM brands are significant selling point.
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Obviously a good bit of interest in Tesla on this forum. For those not familiar, Rob Mauer does a daily podcast, called the Tesla Daily Podcast, on all things Tesla. He is a Tesla long and definitely a fan of the company and Elon. However, he doesn’t ignore negative events or bad press and tries his best to be neutral and objective in his coverage. If nothing else, he is a great Tesla news aggregator. Anyway, thought some of you might enjoy following along.
https://www.youtube.com/channel/UCgYkuL87rUwiBl7tqfN53Eg
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A brief overview of the legacy competition:
VW:
Of the major automakers, VW seems to be taking the transition to EV's most serious. In Europe they are Tesla's primary EV competition (The real competition is ICE!).
Take a minute to check out this piece by Herbiert Diess, CEO of Volkswagon:https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess (https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess)
A key quote from this article is:
“What do we have to achieve in the next six months to catch up with Tesla in terms of technology by 2024?”
GM:
GM's premier EV is the Hummer EV. Tesla's entrance into the pickup market is the Cybertruck. A brief comparison in specs indicates that the cybertruck will be 35% less expensive for the top package, and offer 40% greater range. This indicates Tesla's significant superiority on the technology front.
GM expects to produce 1 million EVs by 2025. Tesla expects to produce 850,000 EVs this year (2021), with a production rate exceeding 1 million by the end of the year. This indicates a ~4 year lead in production capacity over GM.
Ford:
Of the American automakers, Ford seems to have been taking the transition most serious. The Ford Mach-e looks to be a reasonable competitor to the Tesla Model Y, however production rates are significantly limited due to battery constraints.
Toyota:
Getting over a hydrogen hangover. Expect a hard fall from the top for Toyota.
I think this is a good analysis. GM's Hummer EV is expected to debut..... this fall? About the same time as the Cybertruck. Interestingly, GM has/is trying to copy Tesla's direct sale model. Just call your local dealer and try to order a Hummer EV. They'll tell you to go online and place the order. GM's dealer network is driving sales to the website, yet they will receive very little in compensation for any sale made. GM will be expanding their margins at the expense of their dealer network. It works... until it doesn't work anymore.
This is a huge area of innovation for Tesla. They do all the retail sales themselves, much like Apple, allowing them to capture much higher margins. They are fighting very entrenched interests and even had to stop selling in certain states as a result of lawsuits brought by dealership networks. Legacy automakers have a hard time copying this model, for the above reasons.
Sure, legacy automakers CAN do it, but, they don't WANT to. It's not in the company DNA. The adjustment will be painful for them and result in winners and losers. Remember in 2006 (?) when Kirk Kerkorian tried to take over GM? He said he'd scrap 4 brands and save GM. They said "No". Two years later they went bankrupt, got bailed out by the government with the caveat that they scrap the same 4 brands that Kerkorian wanted to scrap. THAT"S HOW MUCH AUTOMAKERS LIKE CHANGE.
And, it's not just like that in Detroit, but also in Germany and Japan, largely for the same reasons.
Sorry for yelling.
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The fact that the preorders for the electric Hummer sold out in 10 minutes suggest GM probably could have set the price even higher and still sold all the vehicles they could build at the moment to that segment of the US market where the Hummer/GM brands are significant selling point.
That's an old Jedi mind marketing trick! :) And, I see it worked. :)
They didn't state how many slots were available and all it took to pre-order was a $100 (?) fully refundable deposit. These details are of course lost later in the re-telling.
-
A brief overview of the legacy competition:
VW:
Of the major automakers, VW seems to be taking the transition to EV's most serious. In Europe they are Tesla's primary EV competition (The real competition is ICE!).
Take a minute to check out this piece by Herbiert Diess, CEO of Volkswagon:https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess (https://www.linkedin.com/pulse/how-we-transform-volkswagen-herbert-diess)
A key quote from this article is:
“What do we have to achieve in the next six months to catch up with Tesla in terms of technology by 2024?”
GM:
GM's premier EV is the Hummer EV. Tesla's entrance into the pickup market is the Cybertruck. A brief comparison in specs indicates that the cybertruck will be 35% less expensive for the top package, and offer 40% greater range. This indicates Tesla's significant superiority on the technology front.
GM expects to produce 1 million EVs by 2025. Tesla expects to produce 850,000 EVs this year (2021), with a production rate exceeding 1 million by the end of the year. This indicates a ~4 year lead in production capacity over GM.
Ford:
Of the American automakers, Ford seems to have been taking the transition most serious. The Ford Mach-e looks to be a reasonable competitor to the Tesla Model Y, however production rates are significantly limited due to battery constraints.
Toyota:
Getting over a hydrogen hangover. Expect a hard fall from the top for Toyota.
I think you are spot on here. I’d add that Fiat/Chrysler is also in bad shape on the EV front. They are currently paying Tesla handsomely for European emissions credits to get their ICE sales into compliance and I’ve seen no real commitment to going electric from them.
I think BMW is also likely to survive this transition and is taking its EV offerings seriously.
Of course, all the traditional auto companies will face the dilemma of convincing their existing customers to buy electric and forgo purchasing the company's current, profitable ICE offerings. But, not only convince them to go electric, but then convince them to go with their EV offering and not to go with the leader in dedicated EV technology, Tesla. Good luck threading that needle.
If I was going to invest based on the EV transition (not advice):
Buy:
Ford
BMW
VW
Neutral:
Toyota
Honda
Sell/Short:
Fiat/Chrysler
GM
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The fact that the preorders for the electric Hummer sold out in 10 minutes suggest GM probably could have set the price even higher and still sold all the vehicles they could build at the moment to that segment of the US market where the Hummer/GM brands are significant selling point.
That's an old Jedi mind marketing trick! :) And, I see it worked. :)
They didn't state how many slots were available and all it took to pre-order was a $100 (?) fully refundable deposit. These details are of course lost later in the re-telling.
It's the same dollar value ($100) under the same refundable terms as preordering a cybertruck. *shrug* Doesn't stop Telsa from trumpeting their own preorders for the cybertruck. (https://www.cnet.com/roadshow/news/tesla-cybertruck-reservation-elon-musk/) Nor individual investors using it to argue for the future of the company.
The model three preorder was also fully refundable, although a higher dollar value ($1,000) and again people were posting headlines about how many billions of dollars of preorders Telsa had received. Seems to have worked out pretty well for Telsa with the model 3, even with the refundable deposits.
Look: We can discount refundable preorders or we can not discount refundable preorders. There are good arguments to be made in either direction. But the trap I urge you to avoid falling into is using one set of criteria for evaluating the evidence about Telsa and another set of criteria for the evidence about Telsa's competitors.
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Another person here rooting for Tesla's success. By that I mean automakers are compelled to produce EVs thereby creating a highly competitive market. This would be great for the climate, not necessarily good for TSLA stock price.
It's not a foregone conclusion that EVs win out over ICEs. Cost, range, recharge time... these need to be addressed before going fully mainstream. I believe there are paths forward to address these, but vigorous competition is the best way to push the necessary innovation.
I don't expect Tesla will be allowed to have more than about 50% of total automotive market share, either by anti-trust regulators and or governments protecting their own interests. Some companies will not survive, but many will and new competitors will pop up. It will end up looking a lot like the ICE market.
The real disruption coming for the automotive industry is autonomous driving. Despite all Tesla's hype around "full self-driving" they are lagging far behind Waymo.
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The fact that the preorders for the electric Hummer sold out in 10 minutes suggest GM probably could have set the price even higher and still sold all the vehicles they could build at the moment to that segment of the US market where the Hummer/GM brands are significant selling point.
That's an old Jedi mind marketing trick! :) And, I see it worked. :)
They didn't state how many slots were available and all it took to pre-order was a $100 (?) fully refundable deposit. These details are of course lost later in the re-telling.
It's the same dollar value ($100) under the same refundable terms as preordering a cybertruck. *shrug* Doesn't stop Telsa from trumpeting their own preorders for the cybertruck. (https://www.cnet.com/roadshow/news/tesla-cybertruck-reservation-elon-musk/) Nor individual investors using it to argue for the future of the company.
The model three preorder was also fully refundable, although a higher dollar value ($1,000) and again people were posting headlines about how many billions of dollars of preorders Telsa had received. Seems to have worked out pretty well for Telsa with the model 3, even with the refundable deposits.
Look: We can discount refundable preorders or we can not discount refundable preorders. There are good arguments to be made in either direction. But the trap I urge you to avoid falling into is using one set of criteria for evaluating the evidence about Telsa and another set of criteria for the evidence about Telsa's competitors.
Oh, I agree that everyone does it, including Tesla.
My point is just that one needs to be careful about inferences, such as "Company X could have set the price higher" etc. Heck, how do we even know that it's TRUE? Presumably a reporter with "Car and Driver" had a stopwatch was there placing refundable orders just to independantly verify the time. Perhaps GM pre-ordained that the window would only be open ten minutes. They are trying to generate a buzz about the vehicle. It worked.
Ferrari creates a buzz about their supercars by ratcheting up crazy by a few notches. They interview millionaires before selling them a limited edition super car. They ask questions like "How many Ferraris do you own?" "When did you buy your first new Ferrari?" and the follow up question "Do you still have it? Why did you sell it? If you don't believe in the brand, why should you get this Ferrari?" "Plenty of people can afford this $750k car, why should we sell to YOU?" "What are you going to do with the car?" and silly questions like that. They want to be sure that everyone knows who's the boss in the relationship by making the potential buyer *beg* for the car. And, they're probably right to do so. But, at the end of the day, it's all only just effective marketing, b/c hey, here I am talking about Ferrari on a Tesla thread! :)
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Autonomy
The general public has recently been given quite breathtaking insight into the current state of Tesla's quest for creating a self driving car. In October of 2020, "FSD Beta" was released to a select group of testers/YouTubers. Since then, these testers have been releasing videos on the state of the software. During this time, over the course of 10 updates, the software has GREATLY improved. Although it is not ready for general consumption yet, it is getting close.
A couple of videos that show the current state of FSD & comment on the development approach:
https://www.youtube.com/watch?v=G2eCQ3rq1S4 (https://www.youtube.com/watch?v=G2eCQ3rq1S4) My experience with technology echos the comments offered in this video.
https://www.youtube.com/watch?v=dQG2IynmRf8 (https://www.youtube.com/watch?v=dQG2IynmRf8) An uninterrupted drive from Los Angeles to San Francisco using the FSD Beta software. (There's a regular speed, 5hr long version if you really have time to kill!)
So why does this matter?
Since 2016, Tesla has been equipping all of it's produced vehicles with the sensor suite that allows this software to run. Over 1 million vehicles on the road currently possess this sensor suite, 2-3 million will have it by the end of this year. IF successfully developed, this will allow for autonomy to be deployed to millions of cars with just a software update.
Autonomy will allow for the implementation of a RoboTaxi service. Maybe expect this in late 2023?
Projecting potential revenue from this yields some astounding figures.
2 million taxis
360 days operation/year
$100 profit/day (https://www.thestreet.com/personal-finance/education/how-much-do-uber-lyft-drivers-make-14804869 (https://www.thestreet.com/personal-finance/education/how-much-do-uber-lyft-drivers-make-14804869))
This very simplified model results in $72 Billion dollars of annual profit. Applying a PE ratio of 20 yields a market cap of $1.4 trillion for this segment of the business. Current market cap is $800 billion.
The fleet could then double the following year.
Edit: Engineers don't grammar
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Thank you bacchi, saved me the trouble of posting that.
Tesla requires new models and new markets for their growth. Sales peak in every market as a new model is introduced then tapers off. This while sales of new models cut into sales of older models. Sales in USA peaked in 18, Europe in 19, and likely China in 20 or 21. When (if) a new cheaper model is introduced it will likely follow the same pattern.
This reminded of a game called "Car Tycoon". In the game you will see this sales cycle. Good times dont last unless you refresh the models continuously and strategically.
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Oh, I agree that everyone does it, including Tesla.
My point is just that one needs to be careful about inferences, such as "Company X could have set the price higher" etc. Heck, how do we even know that it's TRUE? Presumably a reporter with "Car and Driver" had a stopwatch was there placing refundable orders just to independantly verify the time. Perhaps GM pre-ordained that the window would only be open ten minutes. They are trying to generate a buzz about the vehicle. It worked.
About the bolded bit.
When it comes to publicly traded companies we can usually be confident that anything they explicitly say is true. It may be an incomplete picture of the truth. It maybe framed in a much more positive light than others would choose to do. But making explicitly false statements, even about things as simply as "we sold out in ten minutes" vs "we only allowed pre-orders for ten minutes" opens them up the shareholder lawsuits in a way that "we thought only 20,000 people would preorder so we only made 10,000 preorders available so we'd still be able to say we had sold out of preorders" does not.
Now there are certainly exceptions to that rule (like Nikola). They were faced with the choice of certain doom if they told the truth or possible doom if they lied AND those lies were discovered. A company like GM has a lot more to lose if they choose to make an explicitly false statement (rather than engineering the situation to be able to say something that will sound really positive).
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Thank you bacchi, saved me the trouble of posting that.
Tesla requires new models and new markets for their growth. Sales peak in every market as a new model is introduced then tapers off. This while sales of new models cut into sales of older models. Sales in USA peaked in 18, Europe in 19, and likely China in 20 or 21. When (if) a new cheaper model is introduced it will likely follow the same pattern.
This reminded of a game called "Car Tycoon". In the game you will see this sales cycle. Good times dont last unless you refresh the models continuously and strategically.
As usual, 3toe is a fountain of misinformation on the topic of Tesla. Tesla sales did not peak in the US in 2018 as he/she claims.
2018 - 197,517
2019 - 195,125
2020 - 292,902
So, after basically flat US sales from 2018 - 2019, Tesla sales increased 33% from 2019 to 2020. It's also inaccurate to say sales peaked in Europe in 2019. Sales numbers for all of Europe for 2020 have not been released. Misleading articles citing fewer sales in Northern Europe through Nov, but ignoring the Dec deliveries push and a rise in sales in UK and Germany are the source of this misleading headline that 3toe is trumpeting. It’s very likely, Tesla sold more cars in Europe in 2020 than they did in 2019. It may also be true that Tesla’s share of the total EV market in Europe declined, but that is due to the rapidly increasing size of the total EV pie and Tesla’s production constraints.
Beware of any one that points to Tesla sales in one country or region for a month, quarter or even a single year as evidence of a lack of demand. Since Tesla is supply constrained, they prioritize shipments and deliveries to different countries and regions in different times of the year/quarter and can not meet all demand in every location. The renewal and expiry of various tax incentives can also effect where deliveries are made from quarter to quarter. It leaves their supply chain lumpy and uneven until they complete their factories in Berlin and Austin, which come on line in 2021. I guess Tesla is building new factories simultaneously to meet their flagging demand.
The real picture, and the only one that really matters, is told by global sales year over year and the numbers speak for themselves. Tesla is growing exponentially despite not engaging in any real advertising or marketing, having no dealerships, and only selling cars in half the world’s auto markets (no SA, India, Africa, ME, Korea, etc.). And, despite only serving the $40K and up market segment. There are numerous demand levers Tesla has yet to pull and still they sell every car they make as they make them while growing sales an average of 40% YOY.
https://www.statista.com/statistics/502208/tesla-quarterly-vehicle-deliveries/
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Oh, I agree that everyone does it, including Tesla.
My point is just that one needs to be careful about inferences, such as "Company X could have set the price higher" etc. Heck, how do we even know that it's TRUE? Presumably a reporter with "Car and Driver" had a stopwatch was there placing refundable orders just to independantly verify the time. Perhaps GM pre-ordained that the window would only be open ten minutes. They are trying to generate a buzz about the vehicle. It worked.
About the bolded bit.
When it comes to publicly traded companies we can usually be confident that anything they explicitly say is true. It may be an incomplete picture of the truth. It maybe framed in a much more positive light than others would choose to do. But making explicitly false statements, even about things as simply as "we sold out in ten minutes" vs "we only allowed pre-orders for ten minutes" opens them up the shareholder lawsuits in a way that "we thought only 20,000 people would preorder so we only made 10,000 preorders available so we'd still be able to say we had sold out of preorders" does not.
Now there are certainly exceptions to that rule (like Nikola). They were faced with the choice of certain doom if they told the truth or possible doom if they lied AND those lies were discovered. A company like GM has a lot more to lose if they choose to make an explicitly false statement (rather than engineering the situation to be able to say something that will sound really positive).
Has GM announced how many preorders for the EV Hummer they have? If not, I’m guessing the number is underwhelming.
Six months ago, there were over 650,00 Cybertruck deposits. A number that has likely grown since. Even if the conversion rate is only half that it is unprecedented demand for a vehicle that is not even in mass production yet.
If GM had anything approaching that number of deposits why wouldn’t they share it. It would be great marketing and spark FOMO reservations. With a price tag over $110k, my guess is GM secured 100s of reservation in that hour and the conversion rate will be much lower when the deposit holders are asked to follow through on the $110K vehicle.
For the record, I’ve never gotten too excited one way or another about these reservation counts. I just know I’d much rather be Tesla than GM in this situation.
https://electrek.co/2020/06/22/tesla-cybertruck-pre-orders-rose-over-650000-report/
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Thank you bacchi, saved me the trouble of posting that.
Tesla requires new models and new markets for their growth. Sales peak in every market as a new model is introduced then tapers off. This while sales of new models cut into sales of older models. Sales in USA peaked in 18, Europe in 19, and likely China in 20 or 21. When (if) a new cheaper model is introduced it will likely follow the same pattern.
This reminded of a game called "Car Tycoon". In the game you will see this sales cycle. Good times dont last unless you refresh the models continuously and strategically.
As usual, 3toe is a fountain of misinformation on the topic of Tesla. Tesla sales did not peak in the US in 2018 as he/she claims.
2018 - 197,517
2019 - 195,125
2020 - 292,902
So, after basically flat US sales from 2018 - 2019, Tesla sales increased 33% from 2019 to 2020. ...
Sounds like you're talking about total Tesla sales. While it sounded to me, 3toesloth was talking about specific model sales since they mention a peak as a new model is introduced.
If you just look at a specific model, say the 3, does that hold true?
As an aside, I don't have a dog in this fight. Interested bystander. I've driven them and wasn't impressed. The gimmicks are fun but not overwhelming for someone who's usually the only one in my car. I am looking forward to self-driving vehicles. That will be a world-changer for a lot of people.
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Oh, I agree that everyone does it, including Tesla.
My point is just that one needs to be careful about inferences, such as "Company X could have set the price higher" etc. Heck, how do we even know that it's TRUE? Presumably a reporter with "Car and Driver" had a stopwatch was there placing refundable orders just to independantly verify the time. Perhaps GM pre-ordained that the window would only be open ten minutes. They are trying to generate a buzz about the vehicle. It worked.
About the bolded bit.
When it comes to publicly traded companies we can usually be confident that anything they explicitly say is true. It may be an incomplete picture of the truth. It maybe framed in a much more positive light than others would choose to do. But making explicitly false statements, even about things as simply as "we sold out in ten minutes" vs "we only allowed pre-orders for ten minutes" opens them up the shareholder lawsuits in a way that "we thought only 20,000 people would preorder so we only made 10,000 preorders available so we'd still be able to say we had sold out of preorders" does not.
Now there are certainly exceptions to that rule (like Nikola). They were faced with the choice of certain doom if they told the truth or possible doom if they lied AND those lies were discovered. A company like GM has a lot more to lose if they choose to make an explicitly false statement (rather than engineering the situation to be able to say something that will sound really positive).
Has GM announced how many preorders for the EV Hummer they have? If not, I’m guessing the number is underwhelming.
Six months ago, there were over 650,00 Cybertruck deposits. A number that has likely grown since. Even if the conversion rate is only half that it is unprecedented demand for a vehicle that is not even in mass production yet.
If GM had anything approaching that number of deposits why wouldn’t they share it. It would be great marketing and spark FOMO reservations. With a price tag over $110k, my guess is GM secured 100s of reservation in that hour and the conversion rate will be much lower when the deposit holders are asked to follow through on the $110K vehicle.
For the record, I’ve never gotten too excited one way or another about these reservation counts. I just know I’d much rather be Tesla than GM in this situation.
https://electrek.co/2020/06/22/tesla-cybertruck-pre-orders-rose-over-650000-report/
ColoradoTride, I am trying to figure out how your post is connected to the discussion you quoted between bwall and I about whether it is reasonable to believe GM is telling the truth when they said their preorders sold out or not. I am afraid I'm not seeing the connection.
Could you explain?
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Oh, I agree that everyone does it, including Tesla.
My point is just that one needs to be careful about inferences, such as "Company X could have set the price higher" etc. Heck, how do we even know that it's TRUE? Presumably a reporter with "Car and Driver" had a stopwatch was there placing refundable orders just to independantly verify the time. Perhaps GM pre-ordained that the window would only be open ten minutes. They are trying to generate a buzz about the vehicle. It worked.
About the bolded bit.
When it comes to publicly traded companies we can usually be confident that anything they explicitly say is true. It may be an incomplete picture of the truth. It maybe framed in a much more positive light than others would choose to do. But making explicitly false statements, even about things as simply as "we sold out in ten minutes" vs "we only allowed pre-orders for ten minutes" opens them up the shareholder lawsuits in a way that "we thought only 20,000 people would preorder so we only made 10,000 preorders available so we'd still be able to say we had sold out of preorders" does not.
Now there are certainly exceptions to that rule (like Nikola). They were faced with the choice of certain doom if they told the truth or possible doom if they lied AND those lies were discovered. A company like GM has a lot more to lose if they choose to make an explicitly false statement (rather than engineering the situation to be able to say something that will sound really positive).
Has GM announced how many preorders for the EV Hummer they have? If not, I’m guessing the number is underwhelming.
Six months ago, there were over 650,00 Cybertruck deposits. A number that has likely grown since. Even if the conversion rate is only half that it is unprecedented demand for a vehicle that is not even in mass production yet.
If GM had anything approaching that number of deposits why wouldn’t they share it. It would be great marketing and spark FOMO reservations. With a price tag over $110k, my guess is GM secured 100s of reservation in that hour and the conversion rate will be much lower when the deposit holders are asked to follow through on the $110K vehicle.
For the record, I’ve never gotten too excited one way or another about these reservation counts. I just know I’d much rather be Tesla than GM in this situation.
https://electrek.co/2020/06/22/tesla-cybertruck-pre-orders-rose-over-650000-report/
ColoradoTride, I am trying to figure out how your post is connected to the discussion you quoted between bwall and I about whether it is reasonable to believe GM is telling the truth when they said their preorders sold out or not. I am afraid I'm not seeing the connection.
Could you explain?
I don’t have an opinion on wether GM is telling the “truth” on this matter. Selling out, whatever that means, is meaningless without any context as to the number of preorders. I merely speculated that if GM had an amazing number to share they wouldn’t cloak it under the veil of “sold out”. I thought I was on topic with my response, but feel free to ignore me if not.
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Michael Burry, who predicted and profited off the 2008 Financial Crisis, has been getting louder about shorting Tesla. That's not a bad time to exit, in my opinion. Had I bought Tesla, Burry shorting it would definitely have made me rethink it.
Same.
I read "The Big Short" and was pretty impressed by how Burry called the housing crisis. I'd hate to be on the other end of his short. However, shorts generally tend to be pretty secretive. Just the fact that he's talking about his short is an attempt to talk the stock price down. He's in a world of pain now (initiated short at $560 I think, IIRC).
Tesla issued stock to raise $5 billion to pay off bonds and have a cash cushion. Didn't phase the stock at all. Why doesn't Musk issue another $5 billion or so in stock to have a nice cash cushion for forever? My only guess is because he expects the stock to be worth even more in the future than it is today.
If you recall the source of when he initiated the short position, I'd be interested. I know he tweeted in December, and Tesla was around that price/share. My personal speculation is that he shorted some time between mid-Aug and mid-Nov, when TSLA was in the $400-$450/sh range. And then when the stock soared, his sarcastic tweet about the stock came partly from the pain he had experienced ... but then again, I would feel pain in that situation. But Burry, who bet against the financial system and waited years to be proved right, must have thick skin.
In my view, Tesla needs stronger competition and a huge negative event before it's stock price suffers. Tesla's model S gained the highest scores Consumer Reports ever gave a car, if I recall correctly.
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Isn’t there talk of apple coming into that market?....if so they’ll give Tesla some competition
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Isn’t there talk of apple coming into that market?....if so they’ll give Tesla some competition
Apple and Amazon (via Rivian; 100k electric delivery vans ain't nothing) are entering the market. The biggest competitor will probably be VW though.
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How on earth did we need a 4th thread about tesla valuation??
Good question. This one did certainly bring out the Tesla DOOMED crowd.
After being consistently wrong for over a decade, you would think they would get a clue. But apparently not.
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Tesla is not production constrained. Their own 10k and earnings state they have current capacity of 813k cars yet they only sold 499kblast year
You are using the wrong numbers (of course) - that's current capacity, not what it was as the start of 2020. Just about anyone who has followed Tesla at all knows they had major capacity increases this year, heavily weighted toward the end of the year.
And of course, they (like most manufacturers) had fairly lengthy COVID shutdowns during 2020.
Of course when you fail at simple rounding, one can easily disregard all of your calculations and bluster.
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My recollection is Elon has stated he thinks electric powered flight will be possible in the not to distant future. Key is the energy density of the batteries and getting to a workable weight to energy ratio. Not an expert on this matter, but it sounded more a matter of when and not if.
Electric flight is going to be from the "bottom up" - there are already electric powered planes for training new pilots (short duration is fine) - and the Orkney island air service is converting to electric - very short hops.
As technology (mostly battery technology) improves, longer and longer flights will be practical with electric airplanes.
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This seems to point out that Europe has produced cars that Tesla is unable to compete with.
Cites facts not in evidence. Shipping and selling to Europe is more costly for Tesla - they are selling every car they can make, and have ramped production rapidly over the past decade. So, sell more where you have more profit or less? The answer seems super obvious.
In 2014 when Musk first made the statement (there's a clip on YouTube) it was considered ridiculous they could think they would produce 500k cars in 2020.
Despite the pandemic, that's just what they did. Okay, a bit more - something like 509k.
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I won't link articles, but over the years Tesla has consistently been ranked as the #1 place to work for engineers (flip flopping with SpaceX for #2 sometimes...). One of the top reasons Tesla chose Austin for their next factory was it is a very trendy city - ask any top engineer if they'd rather work at Tesla in Austin or GM in Detroit, they will literally laugh at you for even having to ask.
Never discount the value of access to the best talent in the world, and never underestimate what the smartest scientists in the world can accomplish.
That is why I own the stock, and will for the long term.
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I won't link articles, but over the years Tesla has consistently been ranked as the #1 place to work for engineers (flip flopping with SpaceX for #2 sometimes...). One of the top reasons Tesla chose Austin for their next factory was it is a very trendy city - ask any top engineer if they'd rather work at Tesla in Austin or GM in Detroit, they will literally laugh at you for even having to ask.
Never discount the value of access to the best talent in the world, and never underestimate what the smartest scientists in the world can accomplish.
That is why I own the stock, and will for the long term.
As an aside, housing prices in Austin have gone from "that's a steep increase" in the spring/summer to "OMG" - there's something around 1K houses listed for sale in the area. Normally it's more like 6-8K.
I have seen multiple firsthand reports of attempted homebuyers offering $50k-$85K over asking price, no contingency clauses, no inspection and not getting the house because they were outbid.
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StreetInsider - this morning: Tesla (TSLA) PT Raised to 'Street High' $1,200 at Piper Sandler; 'Don't Sell the Stock Despite Surge'
Excerpt:
Piper Sandler analyst Alexander Potter raised the price target on Tesla (NASDAQ: TSLA) to a 'Street High' $1,200.00 (from $515.00) while maintaining an Overweight rating.
Potter said while 2020 was a breakout year for TSLA, they believe "the fireworks aren't over."
Despite a 10x return over the past 12 months, they don't think investors should be selling this stock.
"To defend our new price target of $1,200, we are publishing a 100+ page report entitled The Definitive Guide to Investing in Tesla," Potter commented. "While it is more exhaustive than anything we have published to date, even our expanded model does not capture all potential revenue streams. Indeed, with Tesla's target industries still embracing outdated business models, it may be decades before this company runs out of new opportunities to pursue.”
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Teslarati - today: Tesla Model S refresh gets fastest charging rate even without 4680 cells
https://www.teslarati.com/tesla-model-s-refresh-supercharger-v3-speed/
Excerpt:
Tesla’s page for the Model S notes reveals that the flagship sedan is capable of replenishing 200 miles of its range in 15 minutes. This effectively makes the Model S refresh about 12% faster than the Model 3, the fastest charging Tesla prior to the flagship sedan’s update. The Model X, for its part, now matches the Model 3’s Supercharging speed, with Tesla noting that the SUV could now recharge 175 miles of its range in 15 minutes.