Tesla

[Rocinante2]

(1) Revenue:
Tesla has trailing PS ratio of 27.76. If ~50% topline growth holds, then by the same time next year, PS ratio = 18.5; by Feb 2023, PS ratio = 12.4; by 2024, revenues would exceed US$100bil. This is plausible since traditional auto companies have revenues around US$100+ (e.g. GM) to 200+ (e.g. Toyota) bil.

(2) Margins:
Investors need to ask themselves, what is the final profit margin? Will it be similar to ICE cars, or will they be significantly different? Margins of Tesla might be significantly more than traditional auto-companies due to brand recognition, direct-to-consumer sales, minimal marketing expense, vertical integration, continuous decline of battery cost, less complexity in manufacturing, drive-assistance software (which Tesla already sells as an add-on) etc. This is before other adjacent market potential is considered (solar roof, Powerwalls, recurring cash flow of Tesla's supercharger network, utility scale battery storage, tax credits etc.)

If revenue growth trajectory and final profit margin assumptions hold, then current valuation is likely justified. 

Peace.

(vested, but not adding more at current levels)

same here, vested but no balls to add more.

[Corgitator]

(1) Revenue:
Tesla has trailing PS ratio of 27.76. If ~50% topline growth holds, then by the same time next year, PS ratio = 18.5; by Feb 2023, PS ratio = 12.4; by 2024, revenues would exceed US$100bil. This is plausible since traditional auto companies have revenues around US$100+ (e.g. GM) to 200+ (e.g. Toyota) bil.

(2) Margins:
Investors need to ask themselves, what is the final profit margin? Will it be similar to ICE cars, or will they be significantly different? Margins of Tesla might be significantly more than traditional auto-companies due to brand recognition, direct-to-consumer sales, minimal marketing expense, vertical integration, continuous decline of battery cost, less complexity in manufacturing, drive-assistance software (which Tesla already sells as an add-on) etc. This is before other adjacent market potential is considered (solar roof, Powerwalls, recurring cash flow of Tesla's supercharger network, utility scale battery storage, tax credits etc.)

If revenue growth trajectory and final profit margin assumptions hold, then current valuation is likely justified. 

Peace.

(vested, but not adding more at current levels)

Over a 65-year period in US between 1940-2015, of the 5197 annual observations of companies that made more than $25B in sales (Tesla made $31B), only 14 observations went on to grow revenue at more than 45% per annum over the next 3 years. That's about 0.27%, and goes to show 1) how effective capitalism/competition has been in terms of preventing companies from growing unhinged, and 2) the base effect.

So the assumption of revenue growing at 50% per annum till 2024 is very aggressive. Of course, one can argue that Tesla is a one-of-its-kind company that will be among that 0.27% group. But I think it's useful to always keep that statistic in the back of mind when assessing probabilities. After all, investing is a lot about making good probabilistic bets.

[Wildreamz]

@Corgitator: Thanks. Yes, it is statistically unlikely event (I'm surprised the number isn't lower). So investing now at current valuation will be undoubtedly high-risk.

That said, statistics is only 1 component of decision making. Need to look at other factors (e.g. first principle thinking, market trends, competitive landscape analysis etc.), as well as evaluate potential downside, combine with proper position sizing.

Interesting to note that M2 money supply has risen considerably, while cost of living of essentials has dropped considerably. Combining these factors, spending power (especially of the wealthiest) and asset prices has inflated significantly (including luxury consumer items).

If add inflation to the mix, the probability of 50% growth in 2021 and beyond, for companies $25bil revenues and larger should be considerably higher than the last 7 decade.

[BlueKelah]

@Corgitator: Thanks. Yes, it is statistically unlikely event (I'm surprised the number isn't lower). So investing now at current valuation will be undoubtedly high-risk.

That said, statistics is only 1 component of decision making. Need to look at other factors (e.g. first principle thinking, market trends, competitive landscape analysis etc.), as well as evaluate potential downside, combine with proper position sizing.

Interesting to note that M2 money supply has risen considerably, while cost of living of essentials has dropped considerably. Combining these factors, spending power (especially of the wealthiest) and asset prices has inflated significantly (including luxury consumer items).

If add inflation to the mix, the probability of 50% growth in 2021 and beyond, for companies $25bil revenues and larger should be considerably higher than the last 7 decade.

It will just end up for USA like Japan and Europe. They may avoid a big crash due to money printing and keep assets artificially inflated, but very likely to end up with negative rates and just lots of monetary easing to keep economy afloat. Even before covid, USA stocks took a hit when FED tried to raise rates couple years back. 

Most importantly Demographics for USA shows moderating population growth, as shown in Japan and Europe, low birth rates is not good for economy either. 

There are still many developing markets where tesla will need to compete and penetrate to keep their growth up. However developing govs are more interested in just making money rather than subsidizing or aiming for green energy, they dont care about environment or global warming, what ever cheapest energy they will just use. So it may take a long time before growth in these markets can pick up.

Also solar side I havent look at Tesla solar business, previously Musk absorb his cousins badly loss making company into tesla to keep it afloat, i do wonder what is the cashflow like from there?

[Wildreamz]

@BlueKelah

Not bad: https://techcrunch.com/2021/01/27/teslas...-take-off/

Tesla Solar competes directly with Sunrun, can look at Sunrun financials as a proxy: https://www.fool.com/investing/2021/01/0...4-in-2020/

[BlueKelah]

@BlueKelah

Not bad: https://techcrunch.com/2021/01/27/teslas...-take-off/

Tesla Solar competes directly with Sunrun, can look at Sunrun financials as a proxy: https://www.fool.com/investing/2021/01/0...4-in-2020/

As i suspected its still a shitty business, revenue may be increasing but no mention of profits on Tesla side. and the Sunrun also not making money, just near breakeven. Its all a speculative frenzy. ANd also depends on government green subsidies.

Just like EVs limited in range due to batteries, Home Solar panels are limited in function as well especially in northern areas. Can u imagine running roof solar with HAIL, SNOW and limited daylight for half the year?

lets hope real rates dont rise anytime soon or these companies will blow apart pretty quick.

[EnSabahNur]

https://markets.businessinsider.com/curr...1030102452

Do you mean like this?

Inflation rises, bond yields rise, leading to increase borrowing costs?

[Wildreamz]

https://markets.businessinsider.com/curr...1030102452

Do you mean like this?

Inflation rises, bond yields rise, leading to increase borrowing costs?

Interesting prediction. Unlikely to me.

[cyclone]

This analyst says Tesla’s stock is worth $150 — which would be a 78% discount
* Craig Irwin, senior research analyst at Roth Capital, has a price target of $150 for Tesla — that’s way below the stock’s Monday close of nearly $700.
* Irwin said Tesla is a “minor player” in the U.S. and European automotive markets, but its valuation of around $660 billion is close to the total size of those markets.

Yen Nee Lee
PUBLISHED TUE, APR 6 20213:32 AM EDT
UPDATED TUE, APR 6 20214:23 AM EDT

Tesla’s stock is overvalued and worth only $150, according to Craig Irwin, senior research analyst at Roth Capital, who said the electric carmaker must do more to justify its share price of nearly $700.

Shares of Tesla closed at $691.05 overnight as investors cheered the electric carmaker’s forecast-beating deliveries.

But the possibility of Tesla beating estimates is “clearly already in valuation,” Irwin told CNBC’s “Squawk Box Asia” on Tuesday. The company’s valuation of around $660 billion is close to the total size of the U.S. and European automotive markets, even though it’s only a “minor player” overall, said the analyst.

“So for me, I see this as a market dislocation, I see this as something avoiding analysis of the fundamentals and I think there’s room for many successful companies in the market. People are just assuming that Tesla has no competition when they put this kind of lofty valuation on the company,” Irwin said.

Still, Irwin said he’s bullish on the outlook for the sales of electric vehicles, in which Tesla is a market leader.



Tesla on Friday reported that it delivered 184,800 vehicles and produced 180,338 cars in the first quarter of 2021. Analysts were expecting the company to deliver around 168,000 vehicles during this period, according to estimates compiled by FactSet as of April 1.

More details in https://www.cnbc.com/2021/04/06/tesla-tl...alyst.html

[Wildreamz]

https://www.cnbc.com/2021/04/26/tesla-ts...2021-.html

Tesla posts record net income of $438 million, revenue surges by 74%

*Tesla reported record net income of $438 million during the quarter, as well as earnings of 93 cents per share on $10.39 billion in revenue.

*In its earnings release, the company said it has weathered chip shortages that have plagued the auto industry in part by “pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers.”

*On an earnings call, CEO Elon Musk said the delayed new version of the company’s Model S sedan will be delivered starting in May 2021, and Model X deliveries will begin in the third quarter of the year.

..

Net profit reached a quarterly record of $438 million on a GAAP basis, and the company recorded $518 million in revenue from sales of regulatory credits during the period. It also recorded a $101 million positive impact from sales of bitcoin during the quarter.

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I don't usually post all Tesla's earnings report. But this time it's notable, due to sales of Bitcoin; showing, that they are not just a digital asset "HODLer".

Another interesting observation, is that, despite "competition" in the EV space is supposedly at "all-time-high", so is regulatory credit sales. Suggesting that competitors are not pivoting fast enough, compared to tightening regulatory environment.

(vested)