Tesla, the investment

[Nysoz]

Currently the valuation doesn’t make sense for their car side of business. If you look forward 5-10 years it possibly starts to make sense.

With 40-50% annual growth, in 5 years they’ll make 3.2M cars a year. As batteries get cheaper and they get more efficient at making the cars through various processes, gross margins will continue to improve. Now gross margins are 25% or so. They can probably get that closer to 30-35% in 5 years.

Say they sell cars for 40k with gross margins of 30% so that’s 12k profit per car. That’s $38B in profit.

If they end up matching toyota in the future with 10M sold thats $120B in profit. Lofty goals but the ev market is only going to get bigger and Tesla is the only one that’s poised to ramp up so far. P/E ratios start to look more reasonable. People focusing on current P/E ratios tend to forget the costs of building multiple factories and aggressive expansion.

On top of that, Tesla sells software upgrades for (relatively) pure profit. For now it’s ‘vaporware’ but as features get more advanced more people will buy them and it’ll cost more. Maybe around 25% of people get the fsd upgrade now.

So that’s all vehicle side, but I’m really hoping they use this extra cash to make more batteries for energy storage. Worldwide energy storage/arbitrage is going to be the big deal to me.

I still leave out the whole robotaxi thing for now.

Tim So two of the points in that article are wrong, or possibly so. You can still order the $35k car but it’s off menu. It’s essentially a software limited version of the $38k car so most everyone opts for that version.

The other one is that Tesla should still hit 500k vehicles delivered this year despite covid.

The last point about supercharging locations may be valid in certain markets, but if you look at the US/Western Europe/Eastern China maps its pretty well saturated.

[xraygoggles]

Sorry but I have to share this ridiculous image, that actually happened today. Sorry not sorry.

Nikola worth 20B for essentially a picture of a truck on a blackboard. Have no idea what GM was thinking.

[Nysoz]

GM is actually the smart one here I think. They got $2B in Nikola stock to agree to build their cgi truck that will be based off GMs ultium battery system.

Still have no idea what nikola does as a company as they just farm out everything to third party companies to actually make any product then slap their N on it.

[Tim]

“The last point about supercharging locations may be valid in certain markets, but if you look at the US/Western Europe/Eastern China maps its pretty well saturated.”
Saturated?
Just for your information, building a factory has zero impact on PE’s!
I didn’t set the price target for the vehicle. Upping the price is again, if you miss the target reset it. Same as the volumes. This is not “basic research”, it is marketing. Hype, hype, hype!
Tesla burns cash. What happened to Saudi taking Tesla private? Hype, hype. Hype. Elon is a marketing master. 10 years is an eternity. All of Tesla patents are public domain. Free to be reverse engineered.

[fatlittlepig]

Currently the valuation doesn’t make sense for their car side of business. If you look forward 5-10 years it possibly starts to make sense.

With 40-50% annual growth, in 5 years they’ll make 3.2M cars a year. As batteries get cheaper and they get more efficient at making the cars through various processes, gross margins will continue to improve. Now gross margins are 25% or so. They can probably get that closer to 30-35% in 5 years.

Say they sell cars for 40k with gross margins of 30% so that’s 12k profit per car. That’s $38B in profit.

If they end up matching toyota in the future with 10M sold thats $120B in profit. Lofty goals but the ev market is only going to get bigger and Tesla is the only one that’s poised to ramp up so far. P/E ratios start to look more reasonable. People focusing on current P/E ratios tend to forget the costs of building multiple factories and aggressive expansion.

On top of that, Tesla sells software upgrades for (relatively) pure profit. For now it’s ‘vaporware’ but as features get more advanced more people will buy them and it’ll cost more. Maybe around 25% of people get the fsd upgrade now.

So that’s all vehicle side, but I’m really hoping they use this extra cash to make more batteries for energy storage. Worldwide energy storage/arbitrage is going to be the big deal to me.

I still leave out the whole robotaxi thing for now.

Tim So two of the points in that article are wrong, or possibly so. You can still order the $35k car but it’s off menu. It’s essentially a software limited version of the $38k car so most everyone opts for that version.

The other one is that Tesla should still hit 500k vehicles delivered this year despite covid.

The last point about supercharging locations may be valid in certain markets, but if you look at the US/Western Europe/Eastern China maps its pretty well saturated.

i only got to the point where you assume 40-50% annual growth (?)

[fatlittlepig]

U know much more about the company than I do, but what I see is a company that produces expensive cars for a niche market.

[Brains428]

If it gets below $200, I might bite. I don't think it will.

[Nysoz]

They delivered 360k cars last year and was well on its way deliver 500k this year before covid (still should hit it but it’ll be close). That’s around 40% growth there. They’re still expanding the Shanghai plant for model y and still have room to expand model 3 production lines there. Berlin factory is well on its way with a roof already on. Austin factory will be the biggest out of all of them and making progress.

If the Shanghai factory serves as a blueprint, they can spit out factories every year to make cars while continuing to expand product lines.

For now it’s definitely an expensive niche vehicle but that’s where battery day comes in. If they’re able to get battery costs down to $70 kwh or so then lifetime ownership costs of an ev will be cheaper than any ice car. People need to look past the initial cost of purchasing and look at total ownership costs.

Currently if you compare ownership costs of a 3 series vs Model 3 vs camery it follows respectively. Once battery costs keep declining, the Tesla (or any other well established ev) will be cheaper than the camery.

Ive had my car for 1.5 years and 30k miles. No maintenance at all besides tire rotations. Electricity is 4 times cheaper than gas to move the vehicle. Combine that with the safest (And fun to drive) cars on the road and it’ll be a no brainer decision for most people’s driving habits soon.

[Jaqen Haghar MD]

This goes to show it was a wise move not to include Tesla in the index at this time. Not sure how they make the final decision, but having a PE ratio of >1000 at the time and now this, vindicates whoever made that call.

Perhaps someday they will have a stable stock, but right now some of these posts about Tesla read like emotional message-board fantasy, based on day dreams, and the stock trades like amateurs and day traders are in control of it.

Overall though, I wish the company great success. I’d like to see Musk in the lab and the shop, working on the flux capacitor, while a conservative adult is handling the financial side of things.

[fatlittlepig]

When I see middle class people nonchalantly say they bought a Tesla in the same way that they would say they bought a Toyota Camry then I would be less skeptical. I think it remains a niche product until it’s as cheap as Camry or Civic. U need to engage in too many mental gymnastics and assumptions to get to the point where the market cap is worth what it is.

[CordMcNally]

r/wallstreetbets has had quite a bit of Tesla activity lately.

[Tim]

https://www.bloomberg.com/news/videos/2020-09-08/tesla-has-a-busted-growth-story-says-glj-research-video

What strikes me is today’s price action including after hours is a 25% drop. All this talk of manufacturing capacity number 1 has NOT hit the bottom line. There is an assumption that Tesla can sell these cars. Over expansion is a real problem. Factories will hit the bottom line. As a company, they are missing a seasoned executive that is capable balancing capacity with realistic demand projections.
This is not investment volatility. There is a point that rubber meets the road.
It is a gamble. Was the manufacturing constraints a bad thing? Idle capacity might be in the cards.
Their projections aren’t based on demand, based on hope. Billions raised and spent. Those costs will ramp up and hit the bottom line.
25% in one day is a disaster. Volumes aren’t optional now. They need customer demand consistently. 1 qtr won’t do it.
Today’s 25% loss is on top of the previous.
Let this sink in: What If volumes don’t pick up? Capacity becomes an anchor. The “cool” factor has a short shelf life. Who do batteries get sold to?
The story is getting to be a tough sell, PE wise.
The E for earnings is losing credibility as well.

[burritos]

If you were forced(with a gun to your head) to put all your chips into either Tesla or Bitcoin, which one would it be. Also, are there more Tesla or Bitcoin acolytes. Full disclosure, my 1(now 5 shares of tesla) went from a 400 profit to a 400 loss in one week. Not fun.

[Tim]

Pull the trigger? Sometimes you have to sacrifice.
In Rome, citizens had the right to a quick death by beheading. Your killing me!

[fatlittlepig]

If you were forced(with a gun to your head) to put all your chips into either Tesla or Bitcoin, which one would it be. Also, are there more Tesla or Bitcoin acolytes. Full disclosure, my 1(now 5 shares of tesla) went from a 400 profit to a 400 loss in one week. Not fun.

Honestly at these levels I would go for the BTC, I think the floor for Tesla is much lower than its current price.