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#21
blakegallagher said:
I found this article that mentions a new Morgan Stanley report but I can not find the actual report ... Can anyone post me a link? http://www.valuewalk.com/2013/04/ms-on-why-tesla-motors-inc-tsla-not-trading-below-20-a-share/ .... What is a misprint referring to the April 16th report?
Click to expand...

There was an April 26 research note, titled "Billionaire's Poker".

In this note they are reiterating their concern about the Tesla order book (based on delivery estimates now 1 month after ordering), and explain why this concern is not reflected in the current stock price, with four theories:

1. Income from ZEV credits (JP referred to this in his recent post on Seeking Alpha)
2. Model S prospects in China
3. Tesla is in a strong position to raise additional capital
4. Model S is just a damn good car

I particularly liked the last one, and the comment about a group of BMW engineers who did not think Tesla would be able to pull it off:

Lost in a sea of blogs, trades and tweets is one truth: The Model S is a damn good car. Each day that goes by where Tesla delivers 60 units without images of flaming Model S’s on YouTube offers incremental validation for what it has accomplished. At a recent presentation, we asked a room full of 30 BMW engineers if any of them thought Tesla would make it this far. Not one hand went up. These guys just won't go away.
Click to expand...

- - - Updated - - -

Regarding the ZEV credits and JP's negative take on it, this is discussed at length in the Nonsense-from-John-Petersen thread starting here.

Morgan Stanley has a more interesting take on it:

ZEV credit CARBitrage. Tesla made $40.5m in selling ZEV and GHG credits to other OEMs in 2012, or $13.9k per completed vehicle. The negotiated value of the credits is function of penalty avoidance ($5k), reputational protection and development cost risk management by non-complying OEMs and the supply of ZEVs from competing EVs. A similar ‘Rev per ZEV’ could add $250m to Tesla profit in 2013. Unlikely, but what if? CARB's rules and failing EV competition funnel an unusual concentration of economic benefit to Tesla.
Click to expand...
 
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#23
Cross post from the TESLIVE Speakers and Topics thread, as people here may know some analyst that should be invited to participate in a TESLIVE session on investing.

mulder1231 said:
Yes, if you could get some of the brains from the investors thread on stage (Citizen-T, Robert.Boston, luvb2b, smorgasbord, Curt Renz, etc.) as panelists with moderator Adam Jonas from Morgan Stanley, would make an awesome session.

"How to pay for your next Tesla with TSLA"
Click to expand...

TESLIVE seems to like the idea of a panel on investing strategies with an analyst as moderator.

However, Adam Jones from Morgan Stanley is not available. So here are some additional names of analysts who are regulars on the Tesla earnings calls that I suggest the organizers check into as possible moderator for a session at TESLIVE:

Himanshu Patel - JPMorgan, Senior Equity Analyst (has followed automotive sector for eight years)
Andrea James - Dougherty & Company, Vice President, Senior Research Analyst (has been on Bloomberg)
Patrick Archambault - Goldman Sachs, Vice President, US Automotive (has been bullish on TSLA)
Dan Galves - Deutsche Bank, automotive research VP (conservative $35 target)
Carter Driscoll - Capstone Investment, Wall Street analyst (slapped a sell rating on Tesla three years ago)
Ben Schuman - Pacific Crest (liked Musk fighting back NYT Broder episode)
Ravi Shanker - Morgan Stanley, Vice President and Lead Analyst for the North American automotive sector
John Licata - Blue Phoenix, Energy strategist (has been on Fox News)
Amir Rozwadowski – Barclays Capital (Tesla top pick in clean tech)
Elaine Kwei – Jefferies & Co. (has been on Bloomberg)
John Lovallo – Bank of America-Merrill Lynch (downgraded Tesla after Q4 earnings last February)
Ben Kallo – Robert W. Baird, expert green tech analyst (has been on Bloomberg w/ Cory Johnson)
Aaron Chew - was Maxim Group analyst covering Tesla, now VP of Investor Relations at SolarCity

If you have any other suggestions, or a particular preference for one of the above, please comment.
 
#24
not quite a magazine cover, but sure seem strange / horrible idea to have a panel like this. In my opinion TSLA is a very high risk stock (I'm long) and should be treated accordingly to the investing public
 
#25
30seconds said:
not quite a magazine cover, but sure seem strange / horrible idea to have a panel like this. In my opinion TSLA is a very high risk stock (I'm long) and should be treated accordingly to the investing public
Click to expand...

Well, maybe you misunderstood. The panel would not be the list of analysts listed in my post, but would consist of TMC members sharing their investor experience and opinions on TSLA.

We'd invite just one analyst as the moderator. In my opinion it would be interesting and educational, especially if they pick an analyst who is not so bullish on the stock, that could make for interesting discussions and perspectives.
 
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#27
Morgan Stanley preliminarily ups price target to $77, based on new Tesla guidance, while needing more time for a full review of all variables, now that Tesla has moved passed the viability question:

Our rating, estimates and PT are under review, pending our analysis of changes to the company’s business model, addressable market and the associated risks. Taking nothing away from the accomplishments of the Tesla team, triangulating the fundamental valuation with the share price is more challenging than for other stocks.

Preliminary changes to our earnings model: We raise our FY Model S volume forecast to 21k units from 18k previously, adopting most of the company’s full year guidance including a 4Q gross margin of 25% before ZEV credits. We have assumed $171m of ZEV revenue for the full year (incl. the $68m in 1Q). We have adopted new revenue recognition for the ‘pseudo-lease’ product, with reductions to net income, but no cash flow impact.
Click to expand...

Here's how they arrived at the preliminary $77 target:

At $77 and assuming 10x EV/EBITDA (Harley-Davidson multiple), implies >$1bn of EBITDA, the equivalent of selling 65k cars (at $80k rev/unit) at a 15% OP margin, or 140k cars (at $50k) at a 10% OP margin. Using a BMW multiple of 3x EBITDA, the current price implies 215k cars (at $80k) with a 15% OP margin or 470k cars (at $50k) at a 10% margin.
Click to expand...
 
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#28
mulder1231 said:
Morgan Stanley preliminarily ups price target to $77, based on new Tesla guidance, while needing more time for a full review of all variables, now that Tesla has moved passed the viability question:



Here's how they arrived at the preliminary $77 target:
Click to expand...


imo they're using the wrong multiple (as many will no doubt); Given the leverage points of new scales achievable and complete industry disruption spanning cars-fuel-infrastructure, the multiples on this stock will outstrip any current auto mfg for many years imo (and rightfully so).
Harley Davidson? got to be kidding me- a brand so established, they've made the same sound for 100 years
In my view, This is more evidence - they just don't get it and won't for a very long time
 
#31
ckessel said:
How does that end up working, say 7-10 years from now, when other auto makers have EVs? Do their multiples go up? Does Tesla's come down?
Click to expand...

Tesla's comes down. The same is true for tech companies. Look at IBM's multiple or Apple's multiple or Microsoft's multiple. Then look at Salesforce.com or Netflix.

The market pays for future earnings. When you have a company like Tesla where the sky is the limit for what they might become, the market will award a higher multiple. Toyota has already pretty much saturated the market, there isn't room to grow; therefore, they get a smaller multiple.
 
#32
Citizen-T said:
Tesla's comes down. The same is true for tech companies. Look at IBM's multiple or Apple's multiple or Microsoft's multiple. Then look at Salesforce.com or Netflix.

The market pays for future earnings. When you have a company like Tesla where the sky is the limit for what they might become, the market will award a higher multiple. Toyota has already pretty much saturated the market, there isn't room to grow; therefore, they get a smaller multiple.
Click to expand...

exactly- Tesla was the disruptive force that propelled their growth while others react to the disruption to regain industry position. At that time Tesla's multiple will come down substantially, while the entire industry multiple moves up slightly as market changes- but by that time Tesla will be potentially as big as the rest of them (or bigger in profit)- imo we should see multiple for TSLA in the 20-40+ range for several years (through Gen III at least)
 
#33
mulder1231 said:
Morgan Stanley preliminarily ups price target to $77, based on new Tesla guidance, while needing more time for a full review of all variables, now that Tesla has moved passed the viability question.
Click to expand...

Well, that full review didn't take long, Morgan Stanley today increased their price target to $103. Here's their reasoning:

4 key drivers of our price target to $103 from $47:
We continue to value Tesla on a 15-year DCF with a 12% WACC but update our assumptions to consider new information. (1) First time inclusion of regulatory credits of >$220m/year, adding $15 per Tesla share. (2) Exit EBITDA multiple up to 9x from 7x to reflect strong launch execution and declining going-concern risk. (3) A 40% increase in our Model S est to 30k by 2015. (4) A 70% increase in Gen 3 volume and other efficiencies.
 
#37
mulder1231 said:
Well, that full review didn't take long, Morgan Stanley today increased their price target to $103. Here's their reasoning:

4 key drivers of our price target to $103 from $47:
We continue to value Tesla on a 15-year DCF with a 12% WACC but update our assumptions to consider new information. (1) First time inclusion of regulatory credits of >$220m/year, adding $15 per Tesla share. (2) Exit EBITDA multiple up to 9x from 7x to reflect strong launch execution and declining going-concern risk. (3) A 40% increase in our Model S est to 30k by 2015. (4) A 70% increase in Gen 3 volume and other efficiencies.
Click to expand...

this is great! I'd been wondering if Tesla could expect to continue to maintain these in out years. This certainly implies they can for quite some time. That's pretty much $2/share more each than I'd modeled in my head. Starting to see how Tesla is so confident about paying DOE loan early.

The raise to 30k Model S in 2015 is amusing... conservative. To be fair these guys went out in front of the pack making a $103 price target.
 
#39
Fearless Prediction - Morgan Stanley Will Revise Guidance Upwards Again. Soon.

Maybe.

I sent an e-mail to Adam Jonas last night about some really major problems in their previous research note (which in fairness, was "under review), and asked if they wanted help fixing it, lol.

Very early this morning they released their new research. I must say it is a far superior product, and they are now clearly aware of the primary revenue streams that Tesla relies on, including what looks at first glance like a decent regulatory credit model.

However, they also tried to fix a particularly nasty systemic error that existed in their previous report (and probably earlier ones). But instead of fixing it, they doubled it. Apparently anyways. I don't see any other way to interpret their model, so I am going to e-mail Adam again and see if they have a reasonable explanation.

If I don't hear back from him, I'll the post the data on here and see if anyone can come up with a better explanation than my own :smile:
 
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