Tesla is off the rails

[OldShooter]

By that logic, everything we already know is already baked into the share price of every public company. ... Since everything we know about a company is already baked into the share price, it doesn't matter which companies you invest in.

That's a fairly common criticism of the EMH. If prices are truly efficient then there is no reason to trade. The first flaw is that no one really knows what the "right" price is. The right price is sometimes said to be the NPV of all future cash flows. But right after a willing buyer and a willing seller establish a price, someone will come along who has a different forecast of the future cash flows. So the price really never stabiliizes. The other factor, which Fama seems reluctant to acknowledge, is the psychological factor. This is the factor that moves prices up and down on trivial news and recent events. It is also the factor that leads to manias where the price of a stock loses any financial anchor and rises due to true believers and greater-fool trading strategies.

...
Guess what, for every $10,000 I had invested back then would now be worth $1,230,000.00! That's $1.2 million for anyone challenged by all those zeros. I wanted to invest about $30K but was waiting for it to hit a "more reasonable" $20/share, LOL! I missed out on over $3.6 million in profits for my want of a "more reasonable" price.

Zzzz ... Nothing is easier than picking winners in the rear view mirror. As Will Rogers advised, "If it don't go up, don't buy it."

I have a bit over half of my retirement currently invested in Tesla. I'm 57 years old, retired, and not worried one bit. All investment carries some risk. It takes money to make money.

Now I see why you get so excited when anyone mentions an imperfection in your baby. William Bernstein has this comment on that kind of strategy: “Do you think that by choosing a portfolio of only a few stocks that you hope will score big, you are maximizing your chances of becoming wealthy? Indeed you are, but you are also maximizing the chances of a retirement of cat food cuisine.” But you know more than he does.

... that financial analysts use volatility as a proxy for risk. ...

We agree on this one. The genesis was Harry Markowitz's PhD thesis in 1952: Portfolio Selection. Harry Markowitz. The Journal of Finance, Vol. 7, No. 1. (Mar., 1952) I guess the idea has value for someone; after all he got the Nobel. But I don't see that it is a very good idea for small investors beyond the need for a good defense against SORR. Risk is Enron, JDS Uniphase, GE, Sears Holdings, Wirecard, and thousands of others where the business ended up not being what the market thought it was or would become. IOW the discounted cash flow forecast was way off the mark. Measuring volatility is of no use in identifying those.

Coincidentally, last week I had a guy ask me what I thought about the Ray Dalio "All Weather" portfolio, said to minimize volatility. It certainly does that; over the last 10 years a total US market fund had an SD of 14.28 vs his 5.8. But the cost of that stability was huge! 12.37% CAGR for the US market vs 8.47% for Dalio. Is low volatility worth paying that much for? I guess some people think so.

 

[RetiredAtThirty-eight]

The author certainly cherry picked his data. No mention of the cancelation of the short range Y, or the move under 50k allowing state tax incentives?
I'm not buying at this point, I'm up almost 100% in a few weeks and am expecting a small pullback

Pullbacks always happen after the market shows they finally understand a stock and then the value over-shoots. The problem is the market will make it's own determination of value and no one knows where that will be. So the "pullback" could happen this afternoon or it might not happen until it's climbed near $2000 or even over $2000.

One thing is obvious, the people who claimed the stock was wildly "over-valued" last year when it was trading at only $400 were just plain wrong.

This isn't my first rodeo and that the naysayers have been as wrong as wrong could be is clear as day whether they admit it or not.

 

[RetiredAtThirty-eight]

Risk is Enron, JDS Uniphase, GE, Sears Holdings, Wirecard, and thousands of others where the business ended up not being what the market thought it was or would become. IOW the discounted cash flow forecast was way off the mark. Measuring volatility is of no use in identifying those.

I think what you are missing here is that I'm not advocating investing in just any company that the market thinks will be high growth. I make my picks from the entire universe of stocks traded on the major US exchanges and I was not tempted to own ANY of those.

Here's the key: I make my investment returns from the disparity between market perception and the reality on the ground. The bigger the disparity, the more I invest and the bigger my returns. I don't invest in anything until I find such a disparity. I've been following Tesla closely for 10 years but I didn't make a single investment until last year when I saw a widening gap or disparity between perception and reality.

The market is currently in a phase of price discovery with Tesla and no one knows exactly where it will end up. But I only want to own companies that can innovate and grow at the top of their class. Tesla has proven they are that. Now it's just a matter of waiting for the dust to settle, see where the market values them and how they perform going forward. If the market values Tesla so high that I feel the downside risk outweighs the gains I expect from superior growth and innovation then I will sell. But I always err on the side of holding if my research shows the company has superior execution and opportunity. Because they are extremely rare and I don't want to get stopped out of those kind of multi-year returns. My current best estimate of the present discounted value of Tesla looking only 5 years out is around $2500-$3000. That is what I think it should be worth today but those numbers are extremely conservative. That doesn't mean the market will value it at that when the dust settles because major re-valuations (as we are in right now) often take multiple revaluation attempts to arrive at a more stable valuation. And, of course, that valuation is subject to re-evaluation should the performance of the company change. I'm simply not that focused on what the market values it at, I continually look towards my projections of cash flows, margins and execution.

So far the Tesla naysayers have been wrong as wrong can be and my research indicates strongly that will likely continue as far as the eye can see. I'm less interested in the day-to-day stock price movements except to say that I still think it's undervalued presently, even when properly discounted for time and risk of execution (including acts of God, etc).

This isn't my first rodeo and I take these things very seriously and I'm good at what I do. My wealth has only increased since I retired at 38 and stopped living like a college student.

 

[travelover]

......This isn't my first rodeo and I take these things very seriously and I'm good at what I do. ......

And yet you have remained so humble.

 

[RetiredAtThirty-eight]

And yet you have remained so humble.

Humble is relative. I prefer to stick to the facts.

 

[Fermion]

Everyone thinks they are an investing genius until they get seadrilled

 

[RetiredAtThirty-eight]

Everyone thinks they are an investing genius until they get seadrilled

I agree, there are a lot of "Johnny come lately" newbie investors who have never been through a bear market and believe they are God's gift to investing.

I still remember "Black Monday" in 1987 when I was a young investor, it made quite an impression on me. Major indexes lost something like a quarter of their value in one day. Then there was the tech bubble of the late 1990's that didn't end well for many. And it hasn't been smooth sailing since then, of course.

I look to seasoned investors with multi-decade track records of superior returns. Oh, wait, I suppose my 30+ year record qualifies me.

IMO, TSLA is the most misunderstood and mischaracterized investment of the modern era, at least of companies that have market caps over $10 billion. The opportunities that are in front of them are enormous and the execution has been amazing even as professional analysts have been throwing shade their way. That is finally changing with mainstream brokerage analysts finally recognizing TSLA's amazing achievements and opportunities. How they didn't see it sooner is beyond comprehension. Because that's what these guys are supposed to be paid to do. But I learned long ago not to trust brokerage analysts, relying instead on my own research for Tesla as I do with all my investments over the years.

I first alerted this board to TSLA back in March when it was trading at $500 and it is roughly triple that now.

 

[Aerides]

Mod Note:

Dial it back a notch please folks - the attitude here is off-putting and un-inviting to many members who are otherwise interested in this subject.


Be Courteous and Appropriate! We aim to ensure that the forum is an enjoyable place that you want to visit time and time again. Our underlying philosophy is that the strength of the member relationships we build here is what sets us apart from the other boards. Treating each other with respect and kindness, and thinking before you speak will go a long way towards making this an enjoyable place.

 

[RetiredAtThirty-eight]

There are murmurs that Tesla is quietly building the pilot production line for their electric semi. A "pilot production line" is tuned for production quality and efficiency until it is ready to be replicated on other continents. This will be another huge growth segment for Tesla in the coming years because trucking is an industry ripe for disruption.

 

[OldShooter]

Everyone thinks they are an investing genius until they get seadrilled

Have you read Nassim Taleb's "Fooled by Randomness?" You would probably enjoy it. One of his main themes is people who have gotten lucky and, from that, concluded that they are geniuses.

 

[RetiredAtThirty-eight]

Have you read Nassim Taleb's "Fooled by Randomness?" You would probably enjoy it. One of his main themes is people who have gotten lucky and, from that, concluded that they are geniuses.

Are you discussing Tesla here or something else?

 

[aja8888]

There are murmurs that Tesla is quietly building the pilot production line for their electric semi. A "pilot production line" is tuned for production quality and efficiency until it is ready to be replicated on other continents. This will be another huge growth segment for Tesla in the coming years because trucking is an industry ripe for disruption.

This thread is about Tesla stock, not rumors that the membership here are not interested in. Please stay on the thread subject.

 

[aja8888]

I suspect this thread is about to be closed.

 

[MichaelB]

I suspect this thread is about to be closed.

Not many members are participating of late, they’ve been shouted out, so it might not even be missed.

 

[RetiredAtThirty-eight]

This thread is about Tesla stock, not rumors that the membership here are not interested in. Please stay on the thread subject.

I'm sorry but Tesla stock is ownership in the company. Anyone investing in the stock owns a portion of the company (and their profit) and is certainly interested in fundamental developments that affect their investment.

Progress of the Tesla Semi is not a rumor, it is supported by recent statements right from the CEO of the company (amongst other things). Half of my retirement is currently in TSLA, of course I would find this interesting. Please don't close the this thread!

 

[RetiredAtThirty-eight]

Not many members are participating of late, they’ve been shouted out, so it might not even be missed.

I haven't seen any shouting. I have seen people who may not like Tesla doing well show some skepticism. Shouldn't people be allowed to show skepticism?

 

[MRG]

Not many members are participating of late, they’ve been shouted out, so it might not even be missed.

It's interesting to me how polarizing this equity is.

 

[Texas Proud]

Who buys "economy cars" these days? The closest you get to that in the mass market would be a Toyota Prius (which electric cars are very competitive with). A smart car buyer considers the total cost of ownership.

But here's the deal. People are not buying popular EV's like the Model 3 and the Model Y because they are cheap (they start at $39K) but because they are such nice cars. Gas cars just don't compare favorably. And every year the batteries (which are the most expensive part of any EV) drop in price by about 7-10% every year. Batteries costs are no where near the bottom of the price curve yet and the chemistries just keep improving.

The bottom line - it's not long before gas cars can't even pretend to compete in an open marketplace. Because people are not stupid, they want the best value for their hard-earned money.

Your last stmt makes no sense.... if it did nobody would buy any of the Chrysler, Jeep or Land Rover vehicles as they are some of the worse cars for reliability...



Nope, consumers are not smart....

 

[Texas Proud]

One of the things that I see here is the argument of how good Tesla is with the EV market... I think that most of the people saying the price is too high agree that it is the leader in that market and will likely do so for some time..


The issue that I have is pure and simple discounted cash flow... I do not see Tesla's cash flow (I think it is negative at this time, but that is a guess) increasing fast enough to justify the price. There is a limit to how much profit per car they can make, there is a limit to how much profit they can make on a solar roof... same with storage...


They will NOT be the only company doing this...


NOW, to give fuel to the other side... Bob Lutz said this morning that Tesla is now a mindset... that people are going to want a Tesla even though other cars might be better... he did not use this analogy, but I would say it might be like Apple... where people are willing to pay a huge premium for a product that others make that are similar in quality and function...


ME, I will just own Tesla in whatever MF that buys it because it is supposed to...

 

[Fermion]

I started the thread, I don't really care what direction it takes as long as everyone is nice.

As far as money, I would never have half my retirement tied up in one company. And this is coming from a guy who invests in biotech, one of the sectors with the highest risk. I am also up 1200% on my trading account in 2 years and not from just one stock pick, but I am still humble enough to admit I am quite lucky and probably will get seadrilled myself one day.

As far as Tesla? I love the idea and I am glad battery life is getting so much attention. We converted a sailboat to all electric and I could really use some 200kWh battteries. Elon is quite a visionary. He makes quite bold statements and then follows them up with action. If he makes a mistake, he learns from it and keeps going...a modern Edison. I would invest in SpaceX directly if allowed, but Tesla is a bit too FOTM, even Elon said so a few months back.

 

[aja8888]

Bob Lutz said this morning that Tesla is now a mindset... that people are going to want a Tesla even though other cars might be better... he did not use this analogy, but I would say it might be like Apple... where people are willing to pay a huge premium for a product that others make that are similar in quality and function...


ME, I will just own Tesla in whatever MF that buys it because it is supposed to...

Tesla is not like Apple. Apple had Steve Jobs and made money, lots of it. Apple has a host of great quality products, while Tesla (cars) are being shown to be less quality than most other brands. What's really going to hurt Tesla owners is when the cars are in need of repair and fix time is very lengthy (like it's starting to happen now). There is no dealer/repair shop network and that will become a negative.

I'd buy an EV tomorrow if the price was right and range was sufficient. Those specifications need to happen concurrently. I'm not shelling out $75K for a car that will go 300 miles. I can buy a new Camry (about the same size as a Model 3) for the mid $20K range. If you get the hybrid Camry, you can get near 50 MPG at a cost of about $30K out the door. Range is probably 700 miles.

Until the EV market is willing to support the average guy, they will only sell these cars to the top 10% of the wage earners.

 

[NW-Bound]

I started the thread, I don't really care what direction it takes as long as everyone is nice.

As far as money, I would never have half my retirement tied up in one company. And this is coming from a guy who invests in biotech, one of the sectors with the highest risk. I am also up 1200% on my trading account in 2 years and not from just one stock pick, but I am still humble enough to admit I am quite lucky and probably will get seadrilled myself one day.

As far as Tesla? I love the idea and I am glad battery life is getting so much attention. We converted a sailboat to all electric and I could really use some 200kWh battteries...

Eh, 200kWh battery? I am not too interested in cars, no matter what engine, but mention batteries and you wake me up.

Lemme see. My 22kWh DIY home solar battery weighs around 500 lbs, and is about 4 cubic feet. That's using LiFePO4 cells, and I am building another DIY battery using Panasonic cells of the type similar to what they make for the Tesla S. It is not be as safe and long-lasting as LiFePO4 chemistry, but will be 2/3 the weight and volume.

How are you going to charge your sailboat 5000-lb 200-kWh battery? You will need to run a portable 2kW Honda generator for 100 hours. Better use a large 20kW diesel generator for 10 hours. It will take 16 gallons of diesel fuel per charge.

If you have 1000 sq.ft. of deck to tile it with solar panels, you can generate 100kWh/day, and charge that battery with 2 days of sunlight.

Oops, we are getting away from Tesla. To get back, I will mention that I read that Panasonic will not be making batteries for Tesla China production line. CATL, a Chinese battery maker will do that. It was also mentioned that Tesla was looking to use LiFePO4 chemistry. It is less expensive, but will not give the same range as lithium-nickel-cobalt cells. It also weighs more, so the "stupendous acceleration" mode or whatever it is called will be less impressive.

 

[Fermion]

How are you going to charge your sailboat 5000-lb 200-kWh battery? You will need to run a portable 2kW Honda generator for 100 hours. Better use a large 20kW diesel generator for 10 hours. It will take 16 gallons of diesel fuel per charge.

Our sailboat (and most sailboats sadly) spend 95% of their time in a marina with 30 amp shore power. You can get 50 amp shore power at some places. After a weekend of sailing, you would just pull back to the marina and plug in, and the next time you took the boat out in a few days/weeks it would be at full charge.

200kWh would get you about 300nm at 5kts, more than enough for a weekend trip even with no wind.

I base my future hopes on the Cybertruck 3 motor version coming with a 250kWh battery. I do not think that the truck would have a 6,000 pound battery, do you? I was thinking more of 2000 pounds or so, which is about what the old diesel plus fuel tank plus 6 house batteries weighed.

 

[Animorph]

Wikipedia says the 100 kWh battery pack for the Model S weighs 625 kg. Hopefully a little less in the future.

 

[RetiredAtThirty-eight]

One of the things that I see here is the argument of how good Tesla is with the EV market...

This is a common misconception of the anti-Tesla folks...that since Tesla's are EV's, they must be competing against other EV's. But the reality on the ground is Tesla's largest competition (by far) comes from gasoline powered cars. Over 95% of all Tesla buyers are replacing a car with an internal combustion engine. Tesla doesn't have any serious competition in the EV space. None of their EV competitors can match Tesla's value for the money and they don't produce in high enough volumes to threaten Tesla anyway. The untapped market is absolutely huge and people are learning how superior electric propulsion is to gasoline faster than Tesla can build new factories to supply the new demand.

The issue that I have is pure and simple discounted cash flow... I do not see Tesla's cash flow (I think it is negative at this time, but that is a guess) increasing fast enough to justify the price.

Where did you get your numbers from? According to Tesla's annual financials (which are independently audited) Tesla has been cash flow positive since 1998 (quite strongly cash flow positive while building up a positive cash balance of over $7 billion) and they have been GAAP profitable for the last three quarters in a row (and expected to announce their fourth profitable quarter in a row on July 22 which will likely result in S&P announcing their inclusion in the S&P 500 shortly thereafter).

Tesla short-sellers (many identifying under the hashtag of "$TSLAQ") have been putting out false information on Tesla cash flow and profitability so I suspect you may be listening to the wrong people to form an accurate picture.

There is a limit to how much profit per car they can make, there is a limit to how much profit they can make on a solar roof... same with storage...

There is always a limit to profit margins so that is a true statement. But the actual profit margins Tesla has already achieved are impressive compared to many automakers and margins continue to increase as volumes continue to ramp and they can leverage their existing investments over more cars. The most serious analysts recognize Tesla has the potential for higher margins than the rest of the industry due to their huge lead in automotive software and their ability to leverage that into higher margins.

They will NOT be the only company doing this...

This sounds like a variation on the theme that we have been hearing for years...Namely that the competition is coming. But the competition keeps coming and it's not impressive, at least not compared to Tesla.

NOW, to give fuel to the other side... Bob Lutz said this morning that Tesla is now a mindset... that people are going to want a Tesla even though other cars might be better... he did not use this analogy, but I would say it might be like Apple... where people are willing to pay a huge premium for a product that others make that are similar in quality and function...

When Bob Lutz left GM, he started a new auto company with another partner, later two partners. It's basically a failed company - It couldn't compete against Tesla's Model S. Maybe you heard of them - Fisker Automotive. They have lost billions and went into hibernation mode. So he has reason to talk Tesla down. He failed to make GM a leader in the race to EV's and his own startup has basically gone nowhere. It's embarrassing!

ME, I will just own Tesla in whatever MF that buys it because it is supposed to...

I own TSLA indirectly through ARKQ (an ETF focused on disruptive AI technologies) but the cleanest exposure comes through directly purchasing the shares (and that is where I expect the highest returns over the next 5 years). The market is still wide open (remember, Tesla primarily competes with ICE cars which make up almost 98% of the existing market). The growth potential is staggering!