Comments (67)

Mar 20, 2019

dl

Mar 20, 2019

A good product & vision don't make a good stock, or for that matter, a good business

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Mar 20, 2019

dlt

Mar 20, 2019

I don't know if I'd say "the best product in their space." I think the Tesla consumers have bought into the company's vision so hard that they're willing to overlook deficiencies/inconveniences because to them it's worth it to be a part of driving that vision.

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Mar 20, 2019

dlt

Mar 25, 2019
thexfactor336:

Tesla consumers have bought into the company's vision so hard that they're willing to overlook deficiencies/inconveniences because to them it's worth it to be a part of driving that vision.

So in other words they behave the same as most American car buyers throughout the history of cars.

Mar 20, 2019

I agree they have a strong vision and pretty good product. I also agree their valuation makes no sense based on their financials. In addition to thinking the valuation is unjustified, I have to wonder what happens when Audi/volvo/etc enter the electronic auto market in a more meaningful way. Does tesla have some secret sauce that will allow them to compete against the huge entrenched competitors once they enter? I'm not so convinced of that. Combined with the massive debt load, crazy CEO (visionary, but crazy), cash burn, and valuation, I personally am staying away (and probably will for the foreseeable future).

Mar 25, 2019

I dont know if this would really be qualified as a moat or a "secret sauce" that would allow them to fend off their bigger competitors, but they have a massive network of charging stations that took years to establish and is pretty extensive. I imagine these chargers are not compatible with other companies' electric cars.

Mar 25, 2019

I actually agree that the charging stations would help provide a moat, but for some reason I was thinking I remember reading that they'd keep them open to other brands. I think that might have even been what prompted Elon to say "moats are lame". If true, that would mean he is actively NOT building a competitive advantage (to promote green energy, which while admirable, isn't a good business strategy). I could be remembering incorrectly though

Mar 25, 2019
bigskymtbanking:

I dont know if this would really be qualified as a moat or a "secret sauce" that would allow them to fend off their bigger competitors, but they have a massive network of charging stations that took years to establish and is pretty extensive. I imagine these chargers are not compatible with other companies' electric cars.

They're not, but there are adapters that can hack the system.

Mar 20, 2019

Firstly I want to clarify I am not saying their share price is justified - I would not buy it at this range.

However, I do feel that by saying current financials you guys are missing the bigger picture which is expected growth. Whether you think the pv of their future cash flows is worth $270 a share is another matter. I would be interested to see the views of car industry growth/automation/ batteries etc etc by more qualified people than I.

That said when you see Lyft being valued at over 10x REVENUE i think that says an awful lot about the current state of the market.

Mar 20, 2019

I won't say lyft's price is justified either, but they have a strong competitive advantage through the network effect. TSLA doesn't have much of a competitive advantage in my opinion, so what happens when the 'big boys' enter the market? will they even have future cash flows or will volvo capture the market because they'll have 1) probably just as good cars and 2) the industry entrenchment to sell and service them.

Mar 25, 2019

If I believed Uber/Lyft had a viable business model then the 10 revenue would be fine.

The issue with lyft/Uber is a lack of pricing power. They have no margins. And I'd argue their long-term moat doesn't exists.

The moat they have today is old-school. It's the build up of drivers. When cars are autonomous no one will have to replicate that. I think 20 years from now all the major car companies have their own fleets and apps. It's not a complicated app. In any major city the network effect will be small since in a few block radius you could still have 10-20 different apps operating and each one will have enough cars to get you a ride in a couple minutes.

Consumers just use the app with the cheapest costs. Even now in a market that is a duopoly they have little pricing power.

Array
Mar 20, 2019

Even if you took current financials and baked in INSANE growth potential, you still wouldn't get to a valuation of $270, or anything near that.

I get what you and others are saying / implying, but it's STILL insane.

Mar 21, 2019

@QE_Infinity @FinancelsWacc

Absolutely agree with you boys I think valuations, especially in tech, are currently very hot inc. Lyft and Tesla I just wanted to point out to many people are discounting excuse the pun future growth and basing their justifications purely on the b/s. I do not think Tesla will grow quick enough to justify their current valuation - especially when a lot of the rhetoric coming out of Tesla implies reduced cash flows e.g closing point of sales. I think this would have a direct effect on losing potential sales along with cheaper cars etc etc.

Mar 20, 2019

I think TSLA's value is closer to zero than it is to its current price.

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Mar 20, 2019

Def going to 300s+ from here.

Funniest
Mar 25, 2019

Username checks out

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Mar 20, 2019

Horrrible scam of a company going to zero. Deutsche to take a huge loss on the abl.

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Mar 20, 2019

I suspect TSLA will drop more as Musk further deteriorates his reputation.

Mar 20, 2019

Serious concern actually.... TSLA bulls factor Musk in as a huge reason for the success-- If he's removed this business could be in huge trouble

thots and prayers

Mar 20, 2019

The upside for all auto manufacturers and ride-hailing services is autonomous vehicles with electric motors. Whoever can design a car that can safely drive itself AND can also develop critical mass of users will realize unbelievable riches. This is why Lyft is expected to have a crazy valuation. It's why in 10 years Tesla could be a trillion dollar company or bankrupt.

Tesla is doing its best to develop self-driving capability but I personally think Waymo and Tesla are going about it all wrong. There are some lesser known companies that are building an AV from the ground up and are designing their software in the toughest road conditions (namely, San Francisco). And Nvidia's newly launched advanced simulator is going to allow traditional auto manufacturers that are behind in this space to rapidly catch up.

Mar 20, 2019

dlt

Mar 20, 2019

It should near $420 EOY

Mar 20, 2019

I did a DCF and funny enough that's the stock price I came up with it

thots and prayers

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Mar 25, 2019

Mar 20, 2019

Lots of good points here and there. I guess what's to think about when it comes to valuation is do we value Tesla as purely an automobile maker or do we value it like a silicon valley tech company. Valuation might not seem that crazy if looked upon as a tech firm---totally nuts for a car maker

thots and prayers

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Mar 20, 2019

I would say more so as an automobile manufacturer... they have too much tied up in investment cost and physical assets to be considered a silicon valley tech company.

They should be valued/ discounted higher though imo as their battery production will likely be of great value. Probably many other reasons to justify a higher discount than auto manufacturers as well, but nowhere near a tech company.

Mar 20, 2019

dlt

Mar 20, 2019

this sums up things big time.
but-- what about Netflix in it's early days---weren't they burning through cash at a rate >= Tesla?

thots and prayers

Mar 21, 2019

Tesla's valuation isn't anchored to its financials. Saying that it's "not justified" by the fundamentals completely misses the point. Neither was Amazon.

It's basically a way OTM cash or nothing call option with a big payout.

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Mar 21, 2019

How about companies like SoftBank? People gush about the Vision Fund and Masa's genius. All I see is high leverage and overvalued investments.

Cash and cash equivalents: $138,311
Financial instruments and other inventory positions owned: $448,166

Mar 25, 2019

SoftBank is an obscenely leveraged cell phone company that made money investing in Ali baba. Ali baba is a clear fraud. It's profit margins are impossible. SoftBank then uses that money to invest in other Ponzi schemes such as Uber, penny stock biotech companies, and a pizza delivery company. Hundreds of thousands of people are hired being paid hundreds of thousands of dollars creating a huge ripple effect in the Bay Area. Eventually it will all come crashing down.

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Mar 26, 2019

Alibaba clearly not a ponzu scheme or fraud. You can't fake that level of revenue. Maybe margins.

But alibaba has the largest TAM in the world. The amazon position in a much larger market. Their margins could be 1/10 of the stated level and it could be a justified investment.

If amazon is worth $800 billion then alibaba is a steal at $400 billion with 4 times as many people in their market (most Chinese cultural societies reach 80% of US per capital gdp that did not fall into the communist block).

Margins don't matter for baba. If you are able to assume they've reached a scale moat in China then financial performance will be there in 10 years.

Array
Mar 28, 2019

Alibaba is not a fraud, they deal with an absurd TAM w/ dominant market share in a highly digitalized & integrated society.

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Mar 25, 2019

I am a tesla fan. When I had a really long commute I test drove and almost bought a Model S. Also, regardless of what anyone says or thinks of Tesla, they are revolutionizing Auto. I truly believe that Elon is a visionary genius. There is a LOT to like.

That being their execution is shit, their cash management is shit, their QC is shit, their employee moral is going to shit and their customer experience is going to shit. This is not the type of company I invest in, even with a good product.

My opinion is that elon needs to go and tesla needs to focus on attainable goals and cash management for 2-3 years, not taking over the world. Because of that, despite being a fan of the product, I own a few puts that are doing relatively well right now.

If anyone is really interested in Tesla, twitter is where it's at. I'm certainly not trying to promote my crappy twitter profile, but if you go through me you'll see a lot of the real back and forth. I'm @ CorpFin_Guy

twitter: @CorpFin_Guy

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Mar 25, 2019

Tesla Twitter is incredible - on both sides of the fence. It's basically an entertainment show at this point.

That being said - what does Tesla look like without Elon? Can you even have that company as a going concern without the 'taking over the world' premium?

Mar 25, 2019

My view is that Elon is the ultimate Key Man risk - stock drops if he leaves and I think he'll eventually drive it down by staying.

What I think Tesla needs is a grown up to come in and drive execution. Stop with any future visionary items for a few years and execute the S, X, 3 and (maybe) Y. Let Elon be Chief Creative Officer, work on the Semi or just step aside. They need a business to generate cash. At this rate, it appears as though every $ they get is paying for a sin of the past and not even investing in future growth and I'm not sure that they can get many more dollars.

twitter: @CorpFin_Guy

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Mar 25, 2019
accountingbyday:

I am a tesla fan. When I had a really long commute I test drove and almost bought a Model S. Also, regardless of what anyone says or thinks of Tesla, they are revolutionizing Auto. I truly believe that Elon is a visionary genius. There is a LOT to like.

That being their execution is shit, their cash management is shit, their QC is shit, their employee moral is going to shit and their customer experience is going to shit. This is not the type of company I invest in, even with a good product.

My opinion is that elon needs to go and tesla needs to focus on attainable goals and cash management for 2-3 years, not taking over the world. Because of that, despite being a fan of the product, I own a few puts that are doing relatively well right now.

If anyone is really interested in Tesla, twitter is where it's at. I'm certainly not trying to promote my crappy twitter profile, but if you go through me you'll see a lot of the real back and forth. I'm @ CorpFin_Guy

I agree Elon is a visionary and leader of the pack. But, I feel like Tesla is clearly not revolutionizing anything. Electric car still seems like a luxury for the rich and well off hobbyists.

I think the revolution is yet to come. But, Tesla will be synonymous to it when it does happen like Google is to online search, Amazon is to ecommerce, and Uber is to ride share.

I think if someone like Yang were to get in office on the message of tech revolution is coming, it could be a good catalyst for all this budding tech getting off the ground, which it needs. Not only that, but norms need to be developed around all this stuff, like AI and to combat all of the privacy concerns and data breaches.

The US is stuck behind the times and it really will take a collective effort to make these technological shifts become real. Congress and the government in general is too old and too dumb to do it as it currently stands.

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Mar 25, 2019

In theory a $35k (semi-luxury) electric car that requires no gas, is cheaper to insure and lasts nearly forever with few moving parts makes sense for a lot of consumers. However, that theory is not the reality of today.

You say Google now, but at one point that would've been Yahoo (or Ask Jeeves, or a number of others). Phones are now Apple, but may be Samsung eventually and were Blackberry. Leaders do get replaced. All the major automotives are now looking to play in EV. Porsche and Audi seem to have compelling offerings launching in 2019, with many more within a few years. Chinese are cornering the market on cheaper EVs (which will likely never come to the US). Right now EV=Tesla, but that might not always be the case.

I dont know that I agree that the US is behind the times. Yes, we're more lax on privacy, but a large majority of the new technological innovation still stems from the US. You'll likely never hear me defend the government, but I don't see it as much of an impediment to technological growth in the US.

twitter: @CorpFin_Guy

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Mar 25, 2019

Currently short and I think there is a pretty reasonable chance they have to file. Demand is falling off (esp. w/ the tax credit going away), competition is increasing, and brand equity is starting to erode. They have had numerous QC issues and clearly no clear long-term strategy planning (store closures, price fluctuations, etc.)

This VIC writeup give a pretty thorough overivew of the short thesis

Link

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Mar 25, 2019

Thanks for linking that...definitely a worthwhile read.

thots and prayers

Mar 28, 2019

I dont know about filing, but I certainly think the rick/reward is fantastic on the short side. I own a few puts, are you a pure short at this point?

Thank you for linking that VIC writeup, its really good! Are you a full VIC member? Did you write a full investment thesis to get in?

twitter: @CorpFin_Guy

Mar 28, 2019

I'm a pure short. It'd probably be a smarter play to do it via puts, but I personally don't trade options. Unfortunately not a full VIC member, someone else posted this in an investment forum and i thought i'd pass along.

Mar 25, 2019

Tesla is fun - it's such a polarizing company. It's also a clear 'key man risk' situation where the guy who got you there - may also kill you - but that's just the risk you take.

The issue here is pretty simple - It's a financially engineered company, that simply can't get it's operations rights. That financial engineering is beginning to reach it's limit - too much debt, too little cash flow, equity markets stalling out preventing equity raises (or even convertible offerings most likely) and, to boot, a lack of confidence in Elon who is now begging regulators to take a closer look.

If I strip everything away, they have a compelling proposition - beautifully designed cars, update automatically via internet, electric (good for the environment), blooming charging network, high performance - with the opportunity to extend all of this into other segments like trucking, buses, etc, etc.

The downsides are dependability is an issue, financially it's a mess, there's no coherent long term vision outside of whatever Musk decides.. and that changes, they aren't particularly great at actually building what they need to, customer service is a push at best, range issues, battery issues long term, no IP protection (i think they gave that all away, if i recall), etc, etc.

To your question - If i could get a piece of Tesla/SpaceX/whatever other crazy musk idea is next - i'd probably do it, simply as a speculative play on him possibly hitting a home run and designing our future.. the caveat being i'd want the combined entity.

I wouldn't buy TSLA equity, although if it gets super, super low I may take a flyer with the EV being 0.

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Mar 25, 2019

People with access to VIC ideas without the time lag will probably know about the great short writeup done on TSLA recently. Not to say it's gospel, but worth a read if you can get your hands on it. Astoundingly deep research.

Mar 25, 2019

@M_As_In_Mancy uploaded it on dropbox for all of us.....scroll up for the link

thots and prayers

Mar 26, 2019

Not surprised it's circulating. Probably the highest-rated idea on the site in recent memory.

Mar 27, 2019
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