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Tesla Won't Be Able ... (SeekingAlpha 2013-07-12)

There's a new Tesla-related article up on SeekingAlpha about GenIII, read for yourself:
http://seekingalpha.com/article/1546872-why-tesla-won-t-be-able-to-profitably-build-a-bmw-3-series-competitor

You can't say it enough: Most people have absolutely no idea what they are talking about. He begins the article by (incorrectly) assuming that they make $1k on each car. This is just not true, and will be even more untrue in the future once Tesla hits 25% gross margin, economies of scale kick in, advancement in tech, refinement of operations, etc etc etc. Tesla is not only going to build a competitor, it's going to build a leader.

Seeking Alpha is quickly becoming the go-to leader in unsupported FUD. I suspect it's related to all those shorts starting to get really nervous.

Shorter's will say just about anything to try and reverse their massive losses.

He calls himself "logical thought", he has written several articles saying it isn't possible for Tesla to do this or that. To quote the movie Princess Bride, "Inconceivable", "you keep saying that, I don't think it means what you think it means"

"Idiotic ramblings" might be more appropriate. Ok that might be a little bit harsh, he is at least trying to run numbers and think through things.....he's way off base, but at least he's trying. Obviously his math is so bad he's short TSLA....so his bank account is hurting, his pride is hurting, any "clients" (hope not) he has are hurting, maybe his "logical thought" is I'll bad mouth Tesla and Elon, and then the stock will go down and the pain will go away. It's like when you have a headache, the "logical thought" just doesn't happen!

It's J. Peterson's fault. Since he gave up and vanished from the scene, he left a gaping void for these other yahoos to try and fill. Nature hates a vacuum.

The article is off the mark, mainly on two counts. Firstly, GenIII is not a Model S! It will be a significantly smaller vehicle, demanding less kWh and less materials, and thus will be cheaper to build.
Secondly, trying to predict what battery-costs will be in 4 years is ridicoulous. The only valid prediction is that price/kWh will be significantly lower than today. Nobody knows by which order of magnitude...
Nevertheless, he may be correct in that TSLA stock is too high, based on actual accomplishment to date.

This dude probably shorted other people's money and is in great need to justify his action to keep his job. It's a ridiculous analysis because u don't make sweeping conclusions based on cost in one quarter....there are a lot of cost variables such as one time capital cost and temporary inefficiencies when new productions go in line. To truly find out the true cost, these factors must be clearly identified and be reflected as non-costs in the long-term cost calculations....unless u see the cost structure line by line u can't make sweeping conclusion about profitibility or cost as this dude did.

@Z, the price/kwh will not be orders of magnitude less in 4 years. Battery tech snails compared to computer tech. Battery cost is the #1 smack on eCars, unfortunately the price will move down slowly.

http://seekingalpha.com/author/logical-thought

As I thought he is a hedge fund manager....I guarantee u he's taking heat from his clients for shorting Tesla...........lost them bucooo money!

And who told him Tesla is competing with BMW 3-series which cost about 35K?? It just proves how ridiculous his argument is...Tesla is competing with the higher end BMW models -- the 6 and 7 series which cost about 80K and the Mercedes luxury lines which cost 100k....It's that segment of buyers Tesla right now is focused, not the 35k buyers.I believe the man is keeping to dig his grave instead of learning from his mistakes.

It is laughable reading this type of non-sense articles. It is just another sign that those who short TSLA are becoming desperate and would hope their nightmare were surreal by making up phony bad story about TM. Seems watching a zombi movie in which short zombi came up one after another.

At my company we call that website "Reeking Alpha" -- every article seems to be designed to shore up shorts (regardless of industry).

Anyone can post any garbage in SA. Financial "analysts" are bad enough but some of those people, either basher or pumper, who publish on SA are just ridiculous.

Seeking Alpha is reader-written. It has had some great articles, directly and much more competently contradicting this one. E.g.:https://www.google.com/url?q=http://seekingalpha.com/article/1463661-on-elon-musk-and-tesla-motors-the-art-of-modern-warfare-in-a-noble-cause

What the dude did is make up some gross margin# using temporary cost figures. Then he extrapolated his bogus finding to Gen3 competitiveness with other car companies...specifically BMW. According to the official 2nd quarter report, the gross margin for Tesla was 17%....but he's trying to convince us it was only 5%....this dude is just making up numbers to justify his boneheaded moves.

The comments are more interesting and entertaining than the original article. One commenter did make a good point--by the time the Gen III becomes available, the key challenge might not be where Tesla can hit their price and performance targets (I think they most likely will), but what the competitive landscape looks like--if an incumbent like BMW or VW decides to seriously chase the PEV space and give Tesla its first serious competition.

Omar

Tesla does eCars only, BMW and the rest do ICE and are starting to pick at the electro scene. I think too many irons in the fire for traditional auto manufactures will make them sluggish to catch up with Tesla. Look at Apple, they only put out a few products, but execute them very well. Same is true for Tesla. First to market with a win, plus a laser focus on battery tech. Electric cars needed Silicoln Valley to work, Tesla is that company.

He pops up on a bunch of threads with his perfectly logical and perfectly money losing thought. While ive been ignoring him, I just paid off my loaded S60 in 5 months.

SA can be good for thought. Peterson for example said "sell". I bought. Other authors I trust. Logical Thought? If he was making money, I might trust him.

The majors would find it hard to grab back market from Tesla. Sales of their EV sales would be at the expense of their own ICE models: a circular firing squad. All at significant R&D expense, to find the right bullets. They have a problem.

Duh. typo: Sales of their EVs would be ...

Brian - I was just reading the "pre-release" specs on the BMW i3 (something I've never seen them make available before the car has even been shown), and it was pretty underwhelming. At the end of the article, it leaves you feeling like it's a less-cool, less fresh, and less powerful MS, and not yet even a concept car.

Totally agree that cannabalizing their own ICE sales is definitely a major impediment for the big ICE-C (maybe ICEE for short?) companies. I'm glad I'm not in those boardrooms.

I know I'll probably get skinned alive for doing so, but I have to agree with the articles - only in terms of stock price being highly overvalued.

Tesla stock is very much in a bubble and is absolutely due for a correction. When that will happen, who knows? But it'll happen, that you can count on, however unfortunate for some.

When attempting to "Buy Low, Sell High", the #1 sign that it's time to sell is when it feels like people are clamoring over the stock. People talk about the stock on this forum almost as much as the cars. It's a highly polarizing topic in business news, the company is hot - some love it, some hate it, but there's no disputing that the name Tesla is everywhere. On top of that, the company's financials don't justify the bloated share price. Not hating, they just don't.

The signs are here right now, be careful, try not to get burned.

Of course, maybe I'm dead wrong this time, but operating this way has served me very well in the past.

I'm waiting for a nice healthy pullback before I jump in. Last time I picked up some shares, it was in the $30's... a few months ago.

Sorry to be a potential downer! Good luck everyone!

I find shorting stocks distasteful, at the least because it motivates people to perpetuate counterfactual FUD like what most of these anti-TSLA articles contain. When short activity actually starts to drive down share prices all by itself, it creates a self-fulfilling prophecy, and that is both unfair to the company being shorted as well as inconsistent with an efficient market based on full information.

Its very interesting that the author mentioned in the OP calls himself "Logical Thought". There was someone posting in the forums here that called themselves "Logical_Thinker".

Concidence?

shamrockceo,

"On top of that, the company's financials don't justify the bloated share price."

Of course they don't! But that is exactly the 'logical thinking' that has caused JP to be so consistently wrong on Tesla. It is the gaping hole in JP's uber-rationality: he is so mired in spreadsheets and SEC filings that he forgets to look away from his computer screen, out of his window into the real world.

The stock price is so high because of the expectations. The expectations set by a killer product, solid demand and near flawless execution. If you wait until the stock price is justified by the financials, you will make only minor gains. The big wins are for those willing to bet on Tesla continuing on the path they are on.

shamrockceo,

You are right but on the other hand at this price it may be cheap if we are to assume Gen III will be successful.

http://www.streetinsider.com/Analyst+Comments/How+Tesla+(TSLA)+Can+Easily+Go+Up+300%25+From+Here/8493497.html

Simply put 500,000 units in 2018 or so average sales of $50,000 and net margin of 10% would yield an EPS of $17. Now, honestly, that is $500 at a PE of 29 which a growth stock like Tesla can easily have. Since electric cars inherently have fewer parts and since Tesla has a huge lead in battery tech this can easily justify the current stock price. Even at lower sales prices and net margins Tesla can justify a pretty decent 5 year return. (A $200 stock price 5 years from now is pretty good)

Now, imagine if he ICE makers fail to come up with any decent competition and Tesla dominates the auto industry and commands high net margins compared to ICE makers. That could make Tesla the first trillion dollar company sometime next decade.

It is easy to see us getting lucky and having some kind of dip in the price within the next few years but there is no guarantee of that if Tesla follows this trajectory.

Brian H thanks for that link. It's one of the best, most comprehensive reviews I have read about Tesla. BTW, when I clicked on your link I was redirected to:

http://m.seekingalpha.com/article/1463661

I am telling u guys this guy is fool of it... this is not the first time he made this argument. At best he's making humongous boneheaded mistake; at worst he's big time lying for ill-gotten gains. It's impossible as he claims Tesla is making only 1K per MODEL S, and for Tesla to report 17% gross margin profit last quarter and 25% by the end of year. Either he or Tesla is making big time mistake or lying.....I tend to believe the former is true!


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