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Tesla as an opportunity of investment

I belive that all people that are reading this post think that Tesla is a great Car Company, the most advanced, the most innoative and the most oriented at the future.
This is the reason for which I'm evaluating tesla as an opportunity of investment and i would like to discuss with you about this.

Tesla Lover, not a bad day at all. Not at all.

Let me start by reiterating what I wrote on the 12th:

"Not sure how long this plays out but below $34.50 it becomes a buy for me. If it keeps falling, get all you can at $28 (unless the reason it's falling is catastrophic). So if it goes to $34 this week and then the earnings release next week goes badly, you can average to $31."

Well, we are just about at $34.50 now. It could go lower but $34 was the average price in December, so this is a clear support level.

This is not a bad day because TSLA is holding above $34.50 with over 3.6 million in volume just 90 minutes after market open. That is far more than the average daily volume.

A lot of sellers, but a lot of buyers right above $34.50. Who are the buyers? Long term investors and I'm pretty sure that shorts who are taking the opportunity to unwind.

My guess here is that the mixed Q4 call allowed hedge funds to kick the stock price down very hard after hours yesterday, with little money. The after hours market is easy to move. This setup the low level for today. So this forces margin buyers to sell, and induces less experienced investors to panic. Hence a lot of stock for sale.

If I am right, short interest will be lower after today. If I am wrong it will be the same or higher. If it's lower, that's a very bullish sign.

What's even better is that TSLA is holding the line above $34.50 with very high volume and in a down market environment that is now in its second day with the S&P down nearly 2%.

It is not a foolish time to buy. Next support level is $28, but that level belongs to a company with unproven manufacturing capacity. I think that the probability of retesting that level is low.

Full disclosure: I am long on the stock. But I'd like to point out that I was not recommending it at $38, as anybody reading this thread can check.

RNB - I agree the questions were very superficial. I think the analysts do not understand the big picture strategy needed to generate mass demand and supply for BEV. There are impediments that keep the BEV from hitting mass market as you mentioned:
-Supercharger networks - Very important to reduce range anxiety and can not be just a few in CA and in the Northeast. Want to generate huge demand? Saturate the highways at every 100 miles and add big LED signs to advertise. I am betting that Elon Musk got the message, thanks to Broder of NYT. Yep, he was a blessing in disguise!

- Model X - I think TSLA will have a separate assembly line for Model X. Welding, painting can use the same facilities. However, I suspect that stamping the Model X may need separate presses since it is not practical to exchange the huge dies and stamp in batches; tolerances go off with the changes and need to be adjusted. I think it is a hybrid of combo and separate assembly lines. Still, I would like to know the capex for all this and where the money is coming from? I like the Model X, except the battery is lame for this size car and the Wing Doors suck.

- Battery - Batteries improve all the time in small increments. Costs come down in small increments. Does the Model S benefit? Do the newer S and X are expected to have larger capacity battery? Charging time? Elon alluded to this, but was not clear.

Elon Musk and the management know this is the make or break year. They got to squeeze costs, control expenses and capex. The tone of the CC was on cost control. I think they will do it.

http://www.bloomberg.com/news/2013-02-20/tesla-loss-wilens-expects-to-be...

This interview with Elon Musk sums up the prospects of the company.

Bubba, I think it was a good call. I did not expect the emphasis on cost control, but this is excellent. It indicates a desire for discipline over chaotic expansion. I think Musk was on the level and described the kinds of things that happen in start-ups very well. The one about being forced to fly in tires to keep the line going at one point, or the fact that some of their supply chain did not believe their order quantities.

It's incredibly complex to do what they are doing. It's simple in principle, but there are so many thousands of details to take care of, in a coordinated way, that it amazes me that they have pulled it off to the extent that they have.

Tesla Lover,

Now is the time to remain calm - hope you read the great comments from danielc3, et al.

As you read in the link I provided recently, there are lots of reasons for the stock to drop, of which the short-covering is a major factor right now.
If you are in for the medium to long term and have cash, you may want to add to your holdings on the dips. This would somewhat mimic the "dollar cost averaging" that mutual funds, etc suggest.
I assume you are buying Tesla for valid reasons. If you think, like some, it is potentially another Apple (AAPL) - which statistically has a low probability - then only put your "play money" into it - about 10% of your total investments. The risk and the potential rewards are high.
TSLA is NOT like buying the entire DOW or NASDAQ, which you can easily do with low-cost ETF's such as DIA or QQQ. You know that long term those will eventually rise (although after the recent economic debacles, the annualized returns have been pathetic for many).
Definitely, do not invest if large losses will cause significant pain financially or emotionally (esp with the spouse !!).

Hope this helps.

Exposing the car in public generates its own demand. All TM has to do for the next year or two is try and keep up.

Bottom line: time to show profit. What ever needs to be done, do it. Elon et al sound determined to do just that.

I think that Brian H has used the right words: "Exposing the car in public generates its own demand. All TM has to do for the next year or two is try and keep up."

Since the conference call I am even more confident that Elon Musk will be successful in turning his vision into reality. He will find a way to reach the targets. The period before 2013 contained many difficult moments. But now things are improving. Up to now Tesla Motors has started to walk, and now they will learn to run, and that's when they will be unstopable.

i'm not in panic guys :) just today i did a new order for 30 pieces, i really belive in this company and i feel it can show profits this year, buy and forget it's my strategy now, always checking the news...

Yeah. But as a Model S EU Reservation Holder and a shareholder, I like the prospect of seeing Tesla's Profits in the green. But I think the strength of Tesla at this point in time is it's fantastic growth and it's technology plattform. As long as Tesla is financed properly I would rather bet everything on a strong growth in salesand in the product pipeline, but to focus on squeezing profits, by secricficing some of the growth potential.

Freemoont can output some 100.000 cars per year. I'm not intereseted in the profits in the next quarter, I'm intested on how much profit Tesla will make, when they put out 250k units a year. They managed to grow revenue by 500%, I think Tesla can grow to 250k units p.a. before 2016.

Elon is a longtherm thinker. As with the Supercharger-Network, he has a plan to grow the company to a meaningfull size and won't sacrifcies the long therm success of this compnay to short term finacial planning. I will use the drop, to buy more shares, because what I read in the finacial statements it sound even better to me, what I have expected. Go Tesla Go

This from WSJ's Market Watch

Tesla TSLA -10.00% shares skidded Thursday as investors balked at the Model S maker’s fourth-quarter earnings and outlook.

By late morning, the stock was down 10% to $34.73. The decline even triggered Nasdaq’s short-sale circuit breaker in early morning trades as short sellers pounced.

Currently, the 12- to 18-month FactSet consensus price target on the stock is $40.50, actually up from $39.89 ahead of the company’s earnings report in which Tesla reported a wider loss than expected.

Osiris: completely agree with you, in fact i said that i would like to see some profits this year, not necessarily in Q1, a short term financial plan can reduce the quality of Elon business plan, this company is for people who see far away...

TSLA has a lot of room to cut costs and that will start to show in the bottom line, since it is starting with hi cost structure. Auto components are commodity items like the glass, seats, leather, mats, carpet, etc and there are multiple suppliers. Electronic component costs like the inverter, motor control, Android tablet, etc are made of commodity components as well. Even the step down gear box from Borg Warner has competition. There are multiple reputable shops that do mass castings and forgings in the US and in Asia they do it for skinny margins. Conservatively, they could cut costs of these materials by 20-30% or more, especially with volume and lower transportation cost.

With labor dropping from 70 hours/week to 45 hours/week and still be able to maintain production to 400 cars/week. that amounts to 1-(40+5x1.5)/(40+20x1.5+10x2)=47% reduction in cost. Some costs may not drop like health insurance, etc.
http://wiki.answers.com/Q/How_much_does_labor_cost_to_build_a_new_car

Battery pack cost may amount to 30-40% of the cost of the car, but that would include the packaging that would drop in cost of manufacturing, materials, etc. Those Panasonic batteries have been around for a a couple of years, and they typical drop 7%/year.

For 2012Q4, auto revenues were $294M and cost of revenues $279M. There is certainly room to make some profit. Then time is their favor as they SC network expands, foreign sales kick in, and costs drop even further. Meanwhile, the Model S is great car per the reviews.

Osiris and Lover;
Sacrificing short-term to rush into the big GenIII game is not on. The capex to set up those lines will dwarf past expenditures. TM can earn, borrow, or go to the market to get it. Its ability to do the latter two depend on doing some of the former. Its credit "image" and investment appeal depend on proving it can do the daily, and make money.

TeslaLover,

This from BoA:

Bank of America downgraded Tesla Motors from Neutral to Underperform and maintained a $30.00 price objective.

Bank of America noted, "Due to the recent run-up in TSLA's stock price, the shares are now trading well above what we estimate as fair value. In fact, TSLA's 2/20 closing price of $38.54 implies a 2014e EV/EBITDA multiple of ~13.8X and an EV/Sales multiple of ~1.7X our forecasts, both of which appear excessive. As a result, we are lowering our rating on TSLA shares from Neutral to Underperform, while maintaining our $30 PO, based on a 2014E EV/EBITDA mult. of ~10.4X and an EV/Sales mult. of ~1.4X. We note that following a softer than expected 4Q12, we are also lowering our 2013e EPS from $0.30 to $0.10, but maintaining our 2014e of $1.80."

So expect more short-term churning.

Wow, if they turn a profit over the entirety of this year with revenues over 1.4b, they are going to look like complete buffoons. All the better...

It was a pleasant surprise to learn that Tesla Motors is now expecting its first profitable quarter to be the current one rather than one later this year. However, as noted by TeslaLover, that did not soothe a Merrill Lynch/Bank of America analyst who downgraded the stock. Many institutional money managers are virtually compelled to follow such leads. Many ordinary Merrill Lynch and Bank of America customers are similarly inclined, especially after getting calls from their broker. Hence the selling today. This may have presented a fine opportunity for those who appreciate the long term potential and were looking for a dip.

All it means is that Merrill Lynch is holding a short position, unless you believe in Chinese Walls, and unicorns.

At lot of the short positions are held by institutions. Fast Money had blurb that said huge out of the money puts were purchased. Professional money is betting that TSLA will fail. I do not think so, especially since the company has reservations that total the annual target production of 20,000+. Yes, there will be cancellations/deferments, but new orders will come from Europe and Asia, markets that have not been tapped yet.

With projected revenues to be around $1.6+B, the company has room to cut expenses, generate a profit and most important: positive cash flow. Elon Musk already said that the focus of the company will be to increase efficiency, cut labor and material costs. He has indicated that R&D and Capex will come down. Only SG&A will go up moderately as they deploy SC, service and stores. As long as Elon Musk restrains from making huge expenditures for GenIII, they should be able to achieve these goals.

Since when analysts are ML, BAC got any clue about disruptive changes? Those companies went nearly BK investing in subprime and other dumb bets. They survived only because of huge bailouts and giveaways from the Fed like near 0% interest rates. Do you believe them or Elon Musk after all his accomplishments?

Don't forget they're still "production limited". It would take all year to get to 0 unfilled orders, even if "the stores were closed today". And TM has barely begun to market, and the word-of-mouth free stuff is also barely under way. Every new owner is an enthusiastic promoter -- with tip-top credibility. And the SC network will cost about $40 million to fill in. Peanuts. I have no fear of a "sales slump". And not another car company in the world can say as much.

More free publicity that will increase awareness of Tesla's products, leading to more sales... and hence more of an "Opportunity of Investment"

http://www.csmonitor.com/Environment/Energy-Voices/2013/0222/Tesla-Motor...

Yesterday I looked at my friend's Sig Performance that was delivered in Nov-2012. The quality of the bodywork and inside is surprising good. However, I can see why the initial cars needed a lot of rework. The bodywork has complex shapes and curves for aesthetic and aerodynamic reasons. It takes a lot of fine tuning of the presses, welding and assembly robots to do get it right the 1st time and cut manufacturing costs. The inside looks good too and very precise. A little too minimalistic. Does not have the opulent Teutonic look of a Mercedes S class. I imagine Elon wanted to project a 21st look as many have mentioned.

The ride was impressive. Quite. Accelerates to 55 mph with no effort. Then in the highway, it goes from 55-80+ mph smooth. Had a keep an eye on the speed gauge to keep from going to triple digits and jail! I have done and more with Porsche 911 in a track. Talk about rough and noisy. Ferrari is just plain rough.

What is missing? 50% more KW-hr and a cheaper, lighter battery pack!

The ultimate leave behind with any great vehicle is the performance. Everything else is secondary. The question boils down to would you enjoy driving this vehicle everyday? The answer is a resounding yes.

This is why it will continue to achieve high demand. Even if customer service needs work, people will be more tolerant.

I'd be curious to compare the quality of the initial Signature models to the production versions being delivered today.

Doing "Monday morning quarterbacking", I'm not all too suprised with the 4Q2012 results. Spent more to get quality up from the beginning. Higher quality in the beginning will result in longer term improvements, efficiencies and savings. Also, liked that he talked about 25k/year rate by end of the year... and many things that were positive.

What I didn't like is that Elon pushed the "profitable in Q1" message too hard. Although this would be great, I'm afraid that this is setting higher expectations... potentially making it difficult to match up to those expectations during Q1 reporting, giving the "analysts" something to talk about if any one little issue went wrong.

I think that Q4 was a big test, and Tesla passed, in my eyes. I believe the Q1 results will be even more important. Elon and company must put all of their efforts in making the company "successful" in the eyes of business people = profitable. Prove that this can be done! Then go back into finishing up plans for Model X. Start the media hype for Model X. During this time, let the sales of Model S and review (by "media" and individuals) work on the sales/demand of the car. Spend Q3 and Q4 working on beta versions of Model X and appropriate test drives. Make fixes and start the official production by early 1Q 2014.

Keep the GenIII as a concept for now and don't keep raising the idea of it until some time next year, after Model X is in full production. Otherwise, this will limit the sales of Model S and X... keep people "waiting" for this new vehicle, while drying up business for current vehicles which is required for R&D and changes to manufacturing.

Another key factor has been seeing the energy prices in Europe. During my last trip there (1 week ago) the current price of gasoline/petrol is roughly $8 per gallon. That is going to make Tesla a huge success if they can ramp up production and spread the appropriate messaging. This is a place where you tend to see many very expesive vehicles on the roads... People have money and interest in their cars. But, from talking to people, most still treat EV as golf-carts. This mind-set will need to change. Tesla, and us a loyal followers, needs to spend some money and resources in getting a good marketing campaign. Most of these reviews and awards are a great start... but, need to go to the next level.

I'm very long TSLA! Bought during IPO and some since... never sold yet.

Hitesh +1

Another factor is burn out of Elon. He's got a serious time constraint due to SpaceX. Even though people say he's ironman, man's not superman. Dude needs to rest, get a clear mind, focus on the message to the public about the future goals of tesla. Spend the time highlighting the monumental achievements of Q4. Shape the media narrative to focus on this... The media is only responding to the defensive posturing because he puts it out there. He ought to limit his everyday responsibilities in SpaceX to do this. If that means stepping aside from CEO, then so be it. I know this is sacrilege, but the success of Tesla might be accelerated because of it, especially at this crucial juncture in its growth...

Right HiteshBhatt !! never sold, i'm long on tesla too, expectations about the revenues are great and while increasing the volume of production, the average cost will decrease allowing tesla to be profitable...

Not certain about Elon stepping down as CEO. The CEO is not the "Chief Marketing Office"... They need to have a face out in front of the screen for everyone that will take the conversation in the direction that Tesla wants... not what the media dictates. This, generally, cannot be done successfully by a CEO.

Another set of comments I had for the GenIII vehicle. If the plan is to reduce cost down to the $30s (thousand), then that tells me the following:
1. Battery pack options will probably go to the 65KWhr as the largest. Most likely have two other smaller sizes: 45 and 25(?). That 25KWhr option should drop the base price down to about $45-50k. Which means that rest of the savings needs to be found else-where.
2. Cutting back from the all aluminum body and other extremely high quality features will probably bring cost down by another $5-10k... keeping in mind that you cannot bring the quality down beyond certain point.
3. Reducing size should also help bring price down about a bit... not sure how much though. But this should also help reduce weight... therefore increase range for the smaller battery packs. Maybe see the 45KWhr pack giving 200+mile range. The 25KW pack may give 125+mile range. Thoughts?
4. Which leaves about $5k further reduction required from increased battery technology/effeciencies to bring the base GenIII price of the car down into the $30s.
5. Reduce the percentage profit per vehicle from 25% down to 20%, with the expectation that higher volume sales will make up the difference.

In short, this would be the vehicle to compare and kill the likes of Leaf and other mid-ranged EVs.

Back to the stock portion: If things plan out appropriately, they could really have a very high demand for the GenIII... Possibly put them into the 100-200k/yr vehicle sales.

In short, I see TSLA going from the current $34.xx range to $60s this year... then cross the $100 mark by end of next year. With GenIII plans, I wouldn't be surprised to see TSLA cross the $200 mark by end of 2016.

Of course this is all my unprofessional opinion, so "bet" at own risk! :)

Hitesh -- step down as CEO of SpaceX not tesla. Focus on Tesla day to day more. Focus on the public message more. Go On the talk show circuit, be funny and charming and nail the message. Can still be the big man on campus at SpaceX, but more as strategic overseer then day to day guy. Critical time at Tesla right now. While the attention is hating up, use the platform to get the good word out to a broader audience. It's not about overselling, it's about making people aware of the promise of EVs like they've never known before. Creating the desire to want Tesla to succeed in creating it's vehicle and eventually geniii regardless of having any skin in the game...

I don't see Elon Musk stepping down as CEO of SpaceX. It is more his baby than Tesla. There are plenty of people on the Earth that can do cars, but very few that can do inter-planetary travel.


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