Guest roark33 Posted July 13, 2016 Share Posted July 13, 2016 This is an honest reflection on your position and approach to Tesla. Link to comment Share on other sites More sharing options...
Jurgis Posted July 13, 2016 Share Posted July 13, 2016 I'm personally surprised by the timing of this deal announcement. Why not wait until the Model 3 is over and done with? I did not follow SCTY much, but wasn't it going down without Tesla? Isn't Musk pretty much trying to save the company? Not that I like the deal. Link to comment Share on other sites More sharing options...
Aberhound Posted July 13, 2016 Share Posted July 13, 2016 I don't get why people don't like the concept of the deal. I am not commenting on the price as I have not looked at it. I like the deal because the car becomes the emergency power backup and allows increased arbitrage of electricity prices due to time of day pricing. Let the power go out just once due to the solar changes increasing the atmospheres vs. Earth voltage differential the see what people think. I like executives that act before the crowd. To understand how electricity works in regards to the earth and sky read Tesla's own words with a little commentary by a brilliant Dutch gentleman who gathered the quotes together and provides some helpful commentary. I particularly like the part where Tesla explains how seeing lightning triggering a rain storm would allow him to magnify electricity by using a spark gap to pull in gaseous electrical prana from the air into the incompressible fluid of the current flow. https://drive.google.com/file/d/0B70OHRF13ajnc245VDZuMkRhRlU/view Link to comment Share on other sites More sharing options...
glorysk87 Posted July 13, 2016 Share Posted July 13, 2016 I don't get why people don't like the concept of the deal. I am not commenting on the price as I have not looked at it. I like the deal because the car becomes the emergency power backup and allows increased arbitrage of electricity prices due to time of day pricing. Let the power go out just once due to the solar changes increasing the atmospheres vs. Earth voltage differential the see what people think. I like executives that act before the crowd. To understand how electricity works in regards to the earth and sky read Tesla's own words with a little commentary by a brilliant Dutch gentleman who gathered the quotes together and provides some helpful commentary. I particularly like the part where Tesla explains how seeing lightning triggering a rain storm would allow him to magnify electricity by using a spark gap to pull in gaseous electrical prana from the air into the incompressible fluid of the current flow. https://drive.google.com/file/d/0B70OHRF13ajnc245VDZuMkRhRlU/view I mostly agree with you. It seems the gut reaction was to cry foul but I haven't seen much in terms of critical thought as to the actual merits (or deficiencies) of the deal. I personally think that a combined TSLA/SCTY has massive potential and the synergies seem numerous. But no one else seems to agree. Link to comment Share on other sites More sharing options...
Liberty Posted July 21, 2016 Share Posted July 21, 2016 https://www.tesla.com/en_CA/blog/master-plan-part-deux Link to comment Share on other sites More sharing options...
glorysk87 Posted July 21, 2016 Share Posted July 21, 2016 https://www.tesla.com/en_CA/blog/master-plan-part-deux People all over twitter are absolutely hating on it, but I really do think that overwhelming ambition targeting nearly unattainable objectives has been the sole factor that has gotten Tesla to where it is today. They need people to believe in the "blue sky" scenario in order to keep giving Tesla the funding it needs to actual make these moonshots a reality. Link to comment Share on other sites More sharing options...
adesigar Posted July 21, 2016 Share Posted July 21, 2016 https://www.tesla.com/en_CA/blog/master-plan-part-deux Forget steps 2 and 4. If he can even do just step 1 or step 3 that would be awesome. Link to comment Share on other sites More sharing options...
Jurgis Posted July 21, 2016 Share Posted July 21, 2016 https://www.tesla.com/en_CA/blog/master-plan-part-deux Forget steps 2 and 4. If he can even do just step 1 or step 3 that would be awesome. Agreed. 2 and 4 are meh and possibly distractions. I still think 1 and 3 should be two different companies and I still don't like TSLA buying SolarCity, but OK power to him. If he succeeds, it will be huge. Link to comment Share on other sites More sharing options...
Voodooking Posted July 21, 2016 Share Posted July 21, 2016 The way I see it, I'm not trading stocks to make a profit, I won't buy and sell to gain a bit of cash on rumour and speculation. I am primarily and deeply to my core a value investor. However, I cannot even begin to accurately value Tesla as a company. I'm just nowhere near good enough... What I do know though, is that Elon Musk is a GENIUS. He is one of a few of our generation that have incredible brainpower to change the world we live in for the better. I rank him alongside Steve Jobs, Bill Gates, Warren Buffett etc. In the words of Charlie Munger: "Elon Musk is a Genius; and I do not use that term lightly". I have a substantial amount of my portfolio in Tesla stock because I truly believe that Musk is going to change transport, infrastructure, power consumption and generation as we know it, on a huge scale, all across the world. I respect that mind so much that I want to be a part of whatever he creates, even if it is overvalued. I still want to own that Tesla stock in 30 years, when I am my father's age. I don't ever want to sell. To me, buying Tesla is an insurance policy for the future. I don't want to be one of these people standing on the sidelines wishing they'd invested in Apple, Microsoft, Berkshire Hathaway, etc. Link to comment Share on other sites More sharing options...
Gamecock-YT Posted July 21, 2016 Share Posted July 21, 2016 The way I see it, I'm not trading stocks to make a profit, I won't buy and sell to gain a bit of cash on rumour and speculation. I am primarily and deeply to my core a value investor. However, I cannot even begin to accurately value Tesla as a company. I'm just nowhere near good enough... What I do know though, is that Elon Musk is a GENIUS. He is one of a few of our generation that have incredible brainpower to change the world we live in for the better. I rank him alongside Steve Jobs, Bill Gates, Warren Buffett etc. In the words of Charlie Munger: "Elon Musk is a Genius; and I do not use that term lightly". I have a substantial amount of my portfolio in Tesla stock because I truly believe that Musk is going to change transport, infrastructure, power consumption and generation as we know it, on a huge scale, all across the world. I respect that mind so much that I want to be a part of whatever he creates, even if it is overvalued. I still want to own that Tesla stock in 30 years, when I am my father's age. I don't ever want to sell. To me, buying Tesla is an insurance policy for the future. I don't want to be one of these people standing on the sidelines wishing they'd invested in Apple, Microsoft, Berkshire Hathaway, etc. Haven't read this much cheerleading since the Elizabeth Holmes thread Link to comment Share on other sites More sharing options...
Travis Wiedower Posted July 21, 2016 Share Posted July 21, 2016 Voodooking, If everything you say is true, another factor to consider is that Tesla probably has the highest key man risk of any public company in the world. Something to keep in mind with respect to position sizing. Also, geniuses are not infallible. Link to comment Share on other sites More sharing options...
Voodooking Posted July 21, 2016 Share Posted July 21, 2016 Thanks Travis By substantial, I mean about 15% of my portfolio currently. I'm comfortable with that. As my portfolio grows, this percentage will inevitably be diluted. I understand there is a risk of Tesla not turning profitable, or being overtaken by Mercedes or VW, but I am happy with that also. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted August 3, 2016 Share Posted August 3, 2016 3 Months Ago “Total non-GAAP operating expenses in Q2 should increase slightly from Q1 as we grow our customer support infrastructure while maintaining our focus on expense management. Then, as we accelerate Model 3 development work in the back half of 2016, operating expense growth should increase, so that full year 2016 total non-GAAP operating expenses should increase by about 20- 25%.” Today “Total non-GAAP operating expenses should increase sequentially in Q3 and Q4, and we now expect full year 2016 total non-GAAP operating expenses to increase by about 30%. The increases come from engineering, design, and testing expenses related to Model 3 supplier contracts, and higher sales and service costs associated with expanding our geographic presence.” Link to comment Share on other sites More sharing options...
JBird Posted August 5, 2016 Share Posted August 5, 2016 In 2010 Tesla was producing 600 cars a year. On an annualized basis, it is currently producing 100,000. In 2018 it will produce 500,000. Elon mentioned in the earnings call, this growth rate is unprecedented in the modern era. Link to comment Share on other sites More sharing options...
doughishere Posted August 5, 2016 Share Posted August 5, 2016 I'll be honest I havent looked at tesla.......does anyone know how Musk funds SpaceX? It cant be via Tesla they are separate right? Link to comment Share on other sites More sharing options...
JBird Posted August 6, 2016 Share Posted August 6, 2016 I'll be honest I havent looked at tesla.......does anyone know how Musk funds SpaceX? It cant be via Tesla they are separate right? They're separate, yes. SpaceX generates revenue from commercial and government missions. The current flight manifest of 70 missions represents $10 billion in contract revenue. They also tap the private market for equity issuance. Last year they sold new shares to Google and Fidelity for proceeds of $1 billion at a $10 billion valuation. Side note, SpaceX also owns about $250 million worth of SolarCity bonds. Link to comment Share on other sites More sharing options...
Spekulatius Posted August 6, 2016 Share Posted August 6, 2016 TSLA numbers were really crappy last quarter - there does not seem anything to stop the losses from accelerating. Moreover, we will see a lot of competition from luxury car makers (BMW, Daimler etc) in the electric car space within 2 years. I guess nobody looks at the numbers, as long as the belief in Elon Musk is strong.... Link to comment Share on other sites More sharing options...
SlowAppreciation Posted August 6, 2016 Share Posted August 6, 2016 TSLA numbers were really crappy last quarter - there does not seem anything to stop the losses from accelerating. Moreover, we will see a lot of competition from luxury car makers (BMW, Daimler etc) in the electric car space within 2 years. I guess nobody looks at the numbers, as long as the belief in Elon Musk is strong.... The valuation is just so high and the red flags too numerous to justify an investment. I recently wrote up a short thesis on my blog about Tesla, as the poor corporate governance, dubious acquisitions, and complex capital structure are extremely concerning. Not to mention the well funded startups, giant tech companies, and every auto maker are gunning for the market. I fear most investors are conflating product success with investing success, and they're just not correlated. Link to comment Share on other sites More sharing options...
JBird Posted August 7, 2016 Share Posted August 7, 2016 TSLA numbers were really crappy last quarter - there does not seem anything to stop the losses from accelerating. I guess nobody looks at the numbers, as long as the belief in Elon Musk is strong.... Here's an event that may stop the losses from accelerating, and some numbers to go with it: 400,000 Model 3's sold in 2018 at a 15% average gross margin for a pre-tax profit of $2.1 billion. 100,000 Models S and X sold in 2018 at a 25% average gross margin for a pre-tax profit of $1.8 billion. Total pre-tax profit in the area of $4 billion, or $2.6 billion after tax. Those margins are conservative. If Elon's gross margin projections are realized, the pre-tax profit is roughly $5.5 billion, or $3.5 billion after tax. And I'm not talking about the distant future here. This starts in 18 months. Moreover, we will see a lot of competition from luxury car makers (BMW, Daimler etc) in the electric car space within 2 years. Even if this is true, it's irrelevant for two reasons: 1) The market for electric vehicles is not limited to Tesla's market share. The EV market can consume fossil-fuel car market share at an exponential growth rate for the foreseeable future. 2) No EV competitor has the ability to produce EV cars at Tesla's 2018 rate given the current global capacity for lithium ion battery production. I don’t know what you define as "a lot of competition", but if you want to make 500,000 EV's in a year, you're going to need 160% of the 2014 world's lithium-ion battery production. You need a huge battery factory, one capable of producing 50 GWh / year. That’s a showstopper for everyone but Tesla right now. No other company is even talking about such a factory. Link to comment Share on other sites More sharing options...
JBird Posted August 7, 2016 Share Posted August 7, 2016 I’m going to explain why a) batteries have been expensive in the past and b) why Tesla battery costs will plummet and illustrate the subsequent economic effect on the company. According to Bloomberg, Li-ion batteries industry-wide in 2015 cost around $400 / kWh. It’s easy to see why: If battery components are made in different countries and then flown to another country to be assembled, and then shipped halfway around the world to be delivered, the cost must necessarily be high to compensate for shipping and all other inefficiencies. The Gigafactory will centralize battery production. Raw materials will come in and finished batteries will come out. The economies of scale enabled with this 6 million square-foot plant are predicted by Tesla to bring battery costs down to $100 kWH by 2020. If we assume Tesla is currently producing batteries for roughly $175 kWh, then on a hypothetical 50 kWh Model 3, the total battery cost is about $8,750. If the $100 kWh figure is reached, a 50 kWh battery pack now costs $5,000. On 500,000 vehicles that’s $1.8 billion a year. That margin increase could be used to a) Drop the price tag of Model 3 to $32k, opening up the vehicle to an even broader market, b) be reinvested in a capex project like Gigafactory 2 or c) strengthen the balance sheet. Either way the Tesla economic moat widens. The valuation is just so high and the red flags too numerous to justify an investment. I recently wrote up a short thesis on my blog about Tesla, as the poor corporate governance, dubious acquisitions, and complex capital structure are extremely concerning. Not to mention the well funded startups, giant tech companies, and every auto maker are gunning for the market. Go ahead and short it but if you stand on the tracks long enough you're going to get hit by an electric freight train. I do agree with you on the SolarCity acquisition though. I think it's a bad idea for a few reasons. 1) Tesla capex is so heavy right now it's too risky taking on SCTY's debt burden should SCTY stay cash flow negative. 2) Elon already runs two companies and it's incomprehensible to me that he can have time for a third. 3) There's no reason Tesla couldn't offer the all-in-one energy solution it's proposing while remaining separate. 4) Price. Link to comment Share on other sites More sharing options...
Spekulatius Posted August 7, 2016 Share Posted August 7, 2016 Gross margin <> pretax profit. While their gross profit indeed may be in the neighborhood of 20%, their SG&A consumed almost 30% of their revenues and was growing much faster than R&D expense (~18% of revenues). Just for reference, GM's SG&A expensive is roughly 6% of revenues, so TSLA needs to grow the company more than 5x to get into a competitive cost structure. Solarcity is going to be a burden for TSLA, balance sheet and management wise. I think the transaction was constructed to save Elon Musk face and spare him the visibility of a failure. Now they can just let Solarcity fail within the bellows of TSLA without drawing too much attention, It remains to be seen, how much the Gigafactory can reduce the battery cost. TSLA has shown that they can build some nice battery powered cars. However, unless they show that they are really good at manufacturing them at a competitive cost, I have a hard time seeing how this can work out, unless loosing money on each unit and making it up in volume is considered a viable business model. Link to comment Share on other sites More sharing options...
JBird Posted August 7, 2016 Share Posted August 7, 2016 Gross margin <> pretax profit. I have no idea what I was thinking there, so thanks for correcting me. While their gross profit indeed may be in the neighborhood of 20%, their SG&A consumed almost 30% of their revenues and was growing much faster than R&D expense (~18% of revenues). Just for reference, GM's SG&A expensive is roughly 6% of revenues, so TSLA needs to grow the company more than 5x to get into a competitive cost structure. If revenue grows to $21 billion in 2018 with gross profit $4 billion, throw a big number on SG&A like $2 billion and you still have $2 billion left over. Subtract say $800 million for R&D (Full autonomy here we come), another $200 million for interest expense, and pre-tax profit is still $1 billion. That happens without the reductions in battery production costs. Edit: I've never owned shares of TSLA Link to comment Share on other sites More sharing options...
Jurgis Posted August 7, 2016 Share Posted August 7, 2016 Although I'm very much pro-Elon, I think this kind of growth is very hard to achieve in hardware (batteries, cars) industries. Unlike software, the buildouts and getting things to efficient production usually takes much longer than expected. Apple mostly sidestepped this issue by outsourcing manufacturing (IIRC they had some of similar issues when they manufactured their own computers). Elon will have to confront it head first. We'll see how it works out. Sure Tesla and Elon have some experience by now. But Gigafactory and scaling cars to 500K a year is not just a step of repeating what they know. Disclosure: I have token amount of TSLA shares for fun and Elon support. It's not an investment. Link to comment Share on other sites More sharing options...
NBL0303 Posted August 8, 2016 Share Posted August 8, 2016 Disclosure: I have token amount of TSLA shares for fun and Elon support. It's not an investment. I really respect this thought. I feel similarly as far as very much hoping Tesla succeeds, regardless of how I feel about it as an investment. But to your point of buying a few shares for support for the company rather than an investment and self-identifying it as such. One thing I've observed over a long-time as investor is that the human mind's aversion for cognitive dissonance often causes investors to talk themselves into a company as a good investment because they like the company's products or just generally like the company. And when people then buy shares in a company even if they start off doing it for non-financial reasons, their mind over time convinces them that the shares are actually for investment. People can buy shares for any reason they would like, obviously, including general support for the company, I think it is important for an investor's thought process and consequent long-term results though to clearly identify the non-financial reasons for purchasing shares when that is the case. So thank you for providing this excellent and well-stated reminder of this line of thought. Link to comment Share on other sites More sharing options...
boilermaker75 Posted August 16, 2016 Share Posted August 16, 2016 I am always talking about the wonders of SpaceX, TSLA, and how my next car is going to be a model 3. Turns out I am on the order list for a model 3. As an anniversary gift, no 39, my wife put down $1,000 on a model 3. Link to comment Share on other sites More sharing options...
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