Tesla, the investment

[xraygoggles]

Day traders are not the objective of a CFO. The volumes are usually insignificant. What a company wants is the big dogs taking investment positions in block trades, that moves the market price and stabilizes the value of the company. A split does bring the capital commitment down to the common person. Day trading is the enemy of a company’s ownership.

I think Tesla makes up a massive proportion of all options activity (more than 25% I think, maybe a lot more). So if the price goes down, options are cheaper, which make it more likely for everyone (institutions but also day traders) to speculate even more.

Aren't block trades usually done over the counter or via dark pools? ie they don't affect the market price as much? Not sure about that.

[Tim]

I think Tesla makes up a massive proportion of all options activity (more than 25% I think, maybe a lot more). So if the price goes down, options are cheaper, which make it more likely for everyone (institutions but also day traders) to speculate even more.

Aren't block trades usually done over the counter or via dark pools? ie they don't affect the market price as much? Not sure about that.

I know FIDO has a special desk for 10k shares or more. Available to retail as well.

From a company perspective, options are of zero value, actually detrimental. You go on a roadshow and incur a ton of expense to raise capital, equity.
Debt is better, but might have too much risk, expensive.
The only time a company uses options is if they need shares for stock options. Yeah, a little insider info there, but they plan to exercise it for commitments.

Dark pools eventually impact price, just not the execution price desired. Blocks are not that uncommon. WSJ used to publish the volumes.

https://www.wsj.com/amp/articles/regulators-probe-block-trading-at-morgan-stanley-goldman-other-wall-street-firms-11644875448

The problem is front running. Not the trade.
The level 2 order book shows if it needs to be split. The sell side is the problem. You can get screwed, Who would have thought of that?

[Panscan]

Tesla loves options bc they are the only reason the price is anywhere near where it is. It’s been gamma squeeze after gamma squeeze. As X-ray said the options are a large portion of the total options volume for the ENTIRE market. There is vast speculation in Tesla which has fueled its rise. This effect is dramatically greater than the actual thoughts on valuation/future of the company and will spontaneously combust in the same manner

[Zaphod]

Tesla options are a massive part of the market, and with retail being huge buyers, which can drive dealers to hedge by buying of the stock. Decreased stock price, increased option activity, increased likelihood of gamma squeezage. This is the market now. No shock amzn decided to split finally also, it works now that we understand it as a game.

[Tim]

Tesla options are a massive part of the market, and with retail being huge buyers, which can drive dealers to hedge by buying of the stock. Decreased stock price, increased option activity, increased likelihood of gamma squeezage. This is the market now. No shock amzn decided to split finally also, it works now that we understand it as a game.

But the company only benefits by issuing new shares. Even employee stock options go underwater. I found it interesting with Elon commenting about potentially 10% company layoffs.
"Tesla is looking to lay off 10% of its workforce and pause hiring, Reuters reported Friday. CEO Elon Musk said in an email to executives that he had a “super bad feeling about the economy,” Reuters reported. Along with plans for layoffs, Musk said the company will pause hiring worldwide."

The problem is the unvested golden handcuffs get released and product roadmaps and new construction get slashed. What was an optimistic opportunity gets trashed. In other words the top 10% and bottom 10% are no longer dedicated employees. Not a pretty picture.

[xraygoggles]

Interesting price action lately: massive headwinds due to Twitter purchase; decreasing growth prospects; continual rate hikes; self-inflicted brand/reputational damage by Elon

[Tim]

Interesting price action lately: massive headwinds due to Twitter purchase; decreasing growth prospects; continual rate hikes; self-inflicted brand/reputational damage by Elon

Rather amazing that the Twitter purchase really has no impact the headwinds of Tesla.
Rather amazing that inflicted brand/reputational damage is done by the private purchase of Twitter.
Oh well.

[Bellescamp]

self-inflicted brand/reputational damage by Elon

this is fascinating to watch

[Panscan]

I too love it when my ceo pays like 3x the value of a company , takes on a ton of debt to service and makes everyone hate him even more while not innovating at the large company while every other auto manufacturer in the world laps them.

imagine being long Tesla. Straight to 0

[Nysoz]

The market is a short term voting machine and a long term weighing machine. The recent price action is a result of taking a random headline that causes negative sentiment then large options volume that’s skewed to the put side. Same mechanism that caused TSLA to go to 400 but in reverse.

I don’t have the exact numbers in front of me but at the recent bottom TSLA was trading around 55 p/e. Same price with likely q4 numbers was like 35 p/e for the end of year. If the market is supposed to be forward looking, taking 2023 probable earnings into account was trading at 24 forward p/e.

Sure some people may not buy a Tesla now because they hate the association with Elon but how long will that last? People still buy VWs with some distant connections to nazis.

Then it’s harder to buy any other ev besides a Tesla because no one else is scaling manufacturing successfully yet especially while being profitable.

There’s going to far more companies that go bankrupt before Tesla does. Look at the cash burn and losses of Lucid and Rivian.

Lucid was supposed to be another Tesla killer. They make decent cars for sure but Lucid lost $530M while delivering 1400 cars. They have free cash flow of -$860M this quarter and cash/short term investments of $3.2B.

Rivian lost $1.723B while delivering 6584 cars. Fcf -$1.666B and have cash of $13.8B.

Tesla made $3.3-3.6B while delivering 344k cars. Fcf $3.3B and cash of $21B while building/ramping production at 2 new factories.

It’s hard to see how well Tesla the company is doing if you’re focused on all the random noise and headlines. Just pretend Elon wasn’t there and take the numbers and guidance into account. A company that’s growing revenue and earnings 50-100% yoy with industry leading margins through Covid and continues to guide positively through the potential recession and foreseeable future.

Dont get me wrong. TSLA is still “expensive” and for sure volatile and risky. Elon, memes, options market will do that. Tesla the company is still doing great.

[Panscan]

The market is a short term voting machine and a long term weighing machine. The recent price action is a result of taking a random headline that causes negative sentiment then large options volume that’s skewed to the put side. Same mechanism that caused TSLA to go to 400 but in reverse.

I don’t have the exact numbers in front of me but at the recent bottom TSLA was trading around 55 p/e. Same price with likely q4 numbers was like 35 p/e for the end of year. If the market is supposed to be forward looking, taking 2023 probable earnings into account was trading at 24 forward p/e.

Sure some people may not buy a Tesla now because they hate the association with Elon but how long will that last? People still buy VWs with some distant connections to nazis.

Then it’s harder to buy any other ev besides a Tesla because no one else is scaling manufacturing successfully yet especially while being profitable.

There’s going to far more companies that go bankrupt before Tesla does. Look at the cash burn and losses of Lucid and Rivian.

Lucid was supposed to be another Tesla killer. They make decent cars for sure but Lucid lost $530M while delivering 1400 cars. They have free cash flow of -$860M this quarter and cash/short term investments of $3.2B.

Rivian lost $1.723B while delivering 6584 cars. Fcf -$1.666B and have cash of $13.8B.

Tesla made $3.3-3.6B while delivering 344k cars. Fcf $3.3B and cash of $21B while building/ramping production at 2 new factories.

It’s hard to see how well Tesla the company is doing if you’re focused on all the random noise and headlines. Just pretend Elon wasn’t there and take the numbers and guidance into account. A company that’s growing revenue and earnings 50-100% yoy with industry leading margins through Covid and continues to guide positively through the potential recession and foreseeable future.

Dont get me wrong. TSLA is still “expensive” and for sure volatile and risky. Elon, memes, options market will do that. Tesla the company is still doing great.

growing revenue and earnings 50-100% YoY ? Never going to happen again. Ever: Teslas in free fall in used market and demand for new ones has also plummeted. You would need that kind of perpetual growth to come anywhere near these kinds of valuations and expecting it to continue is wild. There are only so many cars needed in the world and they continue to fall behind. 4680 has been a nothingburger , while everyone was calling it second coming of Christ a year ago.

Nazi Germany was 70 years ago and of course atrocious and inexcusable. Elon has overpaid by tens of billions for his own truth social essentially( that he will have to continually sell Tesla stock to service the debt) while he is actively antagonizing our government with and large corporations throughout the world.

if these recent things haven’t made you more bearish on Tesla idk what to tell you. I have no idea how anyone could look at the last few months as anything besides extremely alarming.

and if you think elon is the second coming of Christ, surely you’d want him focusing on Tesla right? Not designing radical right social media websites ?

cannot be bearish enough. Slow bleed to 0

[Tim]

The market is a short term voting machine and a long term weighing machine. The recent price action is a result of taking a random headline that causes negative sentiment then large options volume that’s skewed to the put side. Same mechanism that caused TSLA to go to 400 but in reverse.

I don’t have the exact numbers in front of me but at the recent bottom TSLA was trading around 55 p/e. Same price with likely q4 numbers was like 35 p/e for the end of year. If the market is supposed to be forward looking, taking 2023 probable earnings into account was trading at 24 forward p/e.

Sure some people may not buy a Tesla now because they hate the association with Elon but how long will that last? People still buy VWs with some distant connections to nazis.

Then it’s harder to buy any other ev besides a Tesla because no one else is scaling manufacturing successfully yet especially while being profitable.

There’s going to far more companies that go bankrupt before Tesla does. Look at the cash burn and losses of Lucid and Rivian.

Lucid was supposed to be another Tesla killer. They make decent cars for sure but Lucid lost $530M while delivering 1400 cars. They have free cash flow of -$860M this quarter and cash/short term investments of $3.2B.

Rivian lost $1.723B while delivering 6584 cars. Fcf -$1.666B and have cash of $13.8B.

Tesla made $3.3-3.6B while delivering 344k cars. Fcf $3.3B and cash of $21B while building/ramping production at 2 new factories.

It’s hard to see how well Tesla the company is doing if you’re focused on all the random noise and headlines. Just pretend Elon wasn’t there and take the numbers and guidance into account. A company that’s growing revenue and earnings 50-100% yoy with industry leading margins through Covid and continues to guide positively through the potential recession and foreseeable future.

Dont get me wrong. TSLA is still “expensive” and for sure volatile and risky. Elon, memes, options market will do that. Tesla the company is still doing great.

I do appreciate the competitive analysis. EV’s are in the infancy stage, so of course capacity is the gating limitation. That will be solved . No doubt.
Autos are a commodity business. Suppliers and batteries will be available.
The key is design that captures the public’s desire to buy the cars. Quite honestly, the “new next thing” for Tesla has worn off. The appearance is becoming stale. The key will be the designers , the next generation and “look” , not the self driving etc. People buy cars on impulse, that looks cool, I want that one.
The designers hit that, the volumes and profits will come.
Ford hit it with the Mustang.

https://www.cjponyparts.com/resources/mustang-sales-throughout-years

The Mustang was the second generation of the Falcon. Tesla’s second generation of cars will determine their volumes. Any auto manufacturers that hit the “design” jackpot will be the top dog.
The days of “oh look it’s a Tesla” are close to over from a consumer buying perspective.
Consumers buy cars on appeal.

[Kamban]

Is Tesla stock now the new Bitcoin / Crypto here in this forum?

[Nysoz]

As long as Tesla continues to grow productions and deliveries as guided, 2023 should be another 40-80% yoy gain in revenue/earnings. Potential global recession and people buying less cars is certainly a possibility. Tesla has the margins and cash to withstand anything like this way better than other companies. The multiple will definitely take a hit if this happens but should survive.

As for perpetual growth, they have enough space in/around current factories to continue their guided 50% growth through 2024-25. Shanghai has a rate of around 1M cars a year now. Austin and Berlin have much more space in comparison. They're already starting to clear more ground at Berlin in preparation to expand there (to not disturb bats/snakes hibernating or whatever it was). After 2025 they'll need more factories and address raw materials for sure.

https://electrek.co/2022/10/18/us-electric-vehicle-sales-by-maker-and-ev-model-through-q3-2022/

They might be 'falling behind' on % market share but still overwhelmingly more on an absolute basis.

Elon selling might change sentiment of the share price and impact short term movement (especially since so exacerbated by the options market), but doesn't impact the company itself. He can sell the TSLA shares to fund the rest of the twitter purchase and lose it all to pay off the debt and creditors. Once again, doesn't impact Tesla fundamentals.

Anyone that thinks Elon is the second coming of Christ is ridiculous. I personally think the whole twitter thing is dumb and he definitely overpaid. I honestly think the company would be better off without him as a vocal CEO (Tesla or Twitter) and he work as product designer or engineer like he wants to do.

But yes I'm still long term bullish on Tesla. I have shares of a company, not an individual.

Regarding competitors and being a commodity business, yes other companies can get similar batteries and design a similar car. The biggest difference is Tesla being able to do it at 5-10x the profit per unit sold. Through being lean, no prior financial commitments, no dealership model, innovations in the factory/production itself, vertical integration, or anything else.

Then I'm not sure if this has been brought up yet, but Tesla stands to get even more of the sweet government subsidy money as much as people hate it. In the IRA, battery manufacturers stand to get significant tax credits for batteries and battery packs/modules made in the US. With Tesla partnering with Panasonic in Nevada, they may split this credit, but there's rumor that Tesla struck an agreement to get all of any potential subsidy. Any of the 4680 cells they make themselves they get the full credit.

[Tim]

As long as Tesla continues to grow productions and deliveries as guided, 2023 should be another 40-80% yoy gain in revenue/earnings. Potential global recession and people buying less cars is certainly a possibility. Tesla has the margins and cash to withstand anything like this way better than other companies. The multiple will definitely take a hit if this happens but should survive.

As for perpetual growth, they have enough space in/around current factories to continue their guided 50% growth through 2024-25. Shanghai has a rate of around 1M cars a year now. Austin and Berlin have much more space in comparison. They're already starting to clear more ground at Berlin in preparation to expand there (to not disturb bats/snakes hibernating or whatever it was). After 2025 they'll need more factories and address raw materials for sure.

https://electrek.co/2022/10/18/us-electric-vehicle-sales-by-maker-and-ev-model-through-q3-2022/

They might be 'falling behind' on % market share but still overwhelmingly more on an absolute basis.

Elon selling might change sentiment of the share price and impact short term movement (especially since so exacerbated by the options market), but doesn't impact the company itself. He can sell the TSLA shares to fund the rest of the twitter purchase and lose it all to pay off the debt and creditors. Once again, doesn't impact Tesla fundamentals.

Anyone that thinks Elon is the second coming of Christ is ridiculous. I personally think the whole twitter thing is dumb and he definitely overpaid. I honestly think the company would be better off without him as a vocal CEO (Tesla or Twitter) and he work as product designer or engineer like he wants to do.

But yes I'm still long term bullish on Tesla. I have shares of a company, not an individual.

Regarding competitors and being a commodity business, yes other companies can get similar batteries and design a similar car. The biggest difference is Tesla being able to do it at 5-10x the profit per unit sold. Through being lean, no prior financial commitments, no dealership model, innovations in the factory/production itself, vertical integration, or anything else.

Then I'm not sure if this has been brought up yet, but Tesla stands to get even more of the sweet government subsidy money as much as people hate it. In the IRA, battery manufacturers stand to get significant tax credits for batteries and battery packs/modules made in the US. With Tesla partnering with Panasonic in Nevada, they may split this credit, but there's rumor that Tesla struck an agreement to get all of any potential subsidy. Any of the 4680 cells they make themselves they get the full credit.

If investing is defined as 5 or more, not one of your projections or or subsidies addresses any thing past 2025. THAT is what supports and investment rather than a trade. Tesla has been at this since 2003. Very good stock performance for quite awhile. The question is will it continue for another 5 or 10 years (financial performance).
I don't know. I have my doubts.