Yeah, that is what patents are for! They used to be anyway. But hardware patents still are for the most part. The quick and dirty answer is that the IP that TM has in the drivetrain cannot easily be reproduced to a quality, packaging and performance standard by even the current automobile giants. From an Engineering, Design, Manufacturing, Supply Chain point of view I'm guessing TM has a lead of at least 5 to 9 years from the set of exec/board meetings, at said current automobile giants, required to spend billions on a simple goal of "Design/build/sell/support a better (in the eyes of a consumer) car (product) and purchase experience than the Model S".
NOTE: I think those meetings are most likely either happening now or will shortly.
The Chronicles of Belle - 60kWh TeslaTrip
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Mr. Donut, your weekend reading (and anyone on here who hasn't yet) is the Innovator's Dilemma, by Clayton M. Christensen. It should become obvious that cars based on internal combustion engines are sustaining technologies and cars based on electric motors are disruptive technologies. Also note that existing car manufacturers are locked into selling to dealerships, not end consumers, and thus have to deliver products those dealers want. Tesla has smartly fought to break this model.
Model S P85D Delivered 12/22/14. Red
Model S P85 1/17/13, sold 12/23/14. Black
Model X #3801
It's very rare for a company to be growing as fast as TSLA with revenue in the billions (ie., $1b to $10b in revenue in 3 years) in a huge addressable market (ie., $1.5 trillion auto industry). This is the reason for the seemingly valuation and the reason why it could go a lot higher as well (especially as we get closer to Gen III which will eventually take TSLA from $10b to $100b+ in annual revenue).
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On the flip side, if TSLA can't sell 30-35k cars next year (and 50-55k cars in 2015), then the stock will get hit very, very hard.
So when I hear people say that the current stock price is betting TSLA will execute perfectly, I think that's not accurate. The current stock price factors in a healthy demand of Model S cars (along with TSLA's ability to meet that demand) of maybe 35k cars in 2014 and 50-55k cars or so in 2015. So, if you think if demand is going to be significantly higher than that (and TSLA can meet that demand with production), then you really ought to be a long-term buyer of the stock at these levels.
The other factor apart from Model S demand is the pending Gen III vehicle. Again it's all about demand and TSLA's eventual ability to meet that demand. If demand is off-the-charts (which I expect), then this will drive the stock price up A LOT. And since the markets are usually forward-looking, people are/will be pricing in Gen III into the current stock price and rightfully so. If you think Gen III demand will be significantly higher than what most people think, then again you should be a long-term buyer of the stock at these levels.
Well one recent SA article tried to do a calculation of future earnings with rough estimates and provided an excel spreadsheet. I've modified it to what I think is realistic for Tesla to achieve (23k MS this year, 43k next, 67k then etc with dropping yearly increase rates of 40%), Model X of 13k in 2015, 26k in 2016, 44k in 2017 etc and Model E 20k in 2017 growing at 100% initially with 10% per year growth downturn. The sheet accounts for a steady supercharger rollout in the whole world and I've set it up far more optimistically (i.e. more expensive) than the guy in the article did. We reach the ~200k cars sold some time in 2018 by which time Tesla will have figured out the battery supply. Using compression of P/E going from 45 in 2013 (high growth company) to 15 in 2020 (still growing, but reduced close to other major car makers.
I'd consider this a pessimistic/realistic scenario with erring on the side of caution for X and E and the result is that I see the following stock prices:
2013 -> $184.6 (hehe, nice coincidence, no tweaking to get it, promise)
2014 -> $282
2015 -> $383
2016 -> $432
2017 -> $509
2018 -> $522
2019 -> $501
2020 -> $482
Remember I used a pretty aggressive P/E compression and a relatively reduced growth and initial rates for the X and E with extended supercharger requirements that adds a lot of cost. The estimates do not include R&D costs or other unknowns, but purely based on sales of the cars. I assumed the S and X have 25% profit margin and the E would have 15% with average sale prices of S at $90k, X at $80k and E at $40k.
And most of all I assumed that the SA author didn't **** up his excel sheet
This is by no means a comprehensive analysis yielding concrete stock price predictions, but just a quick sanity check and it does say that while the price may indeed expect a decent execution by Tesla it's by no means expecting a perfect execution. Using idealistic numbers I saw in 2020 the stock price around $900, but that assumed a far faster ramp up of X and E (not unlikely though). So the $180 stock price is by no means extremely high, it seems far more likely to be about on-par with reality.
S85D | Ocean Blue | Grey 21" turbines | Black interior (next gen seats, alcantara) | Air | Premium package | Autopilot | VIN: 83569
P85 | Black w/Piano black Leather and CF interior | Air | Tech | Parking Sensors | Lighting | Security | Cold weather | 21" | VIN: 17798 (now for rent at teslarent.eu)
My gut feeling is we'll hit $200 by mid-November after Q3 ER and $220 before end of year, based on the last two month's momentum. The short interest has increased about 10% during the month of August, though we will see if that has changed when NASDAQ releases short-interest numbers this coming Tuesday 24th.
And disclaimer, I am not holding a short position. I imagine a real short would be more sophisticated than to just post an opinion on a forum with no backing evidence. I probably should have worded my initial post more carefully.
EDIT: Also, I think the rumors of war in the Middle East, and the expectation of possibly higher gas prices, also help TSLA. That's been disrupting the markets a fair bit lately, and I think it has an impact.
Last edited by makinthdonuts; 2013-09-21 at 04:04 PM.
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