Are we worried yet about Tesla Stock?

[anticitizen13.7]

I'm not worried. I will hold on to my shares until Model 3 and Tesla Energy production is in full swing, or the company sinks. I am fully prepared to see my entire investment in TSLA crater.

When I first bought shares in TSLA years ago, Model S wasn't even in production. I made my investment knowing that TSLA had a chance of going to 0 (zero), and also knowing that the money I spent was NOT part of my retirement plan or money I would need for upcoming or emergency expenses. It was purely a gamble on what I saw as potentially revolutionary automotive technology.

Sure, it could all go to hell, but I would have bigger regrets if I never participated or took a chance.

Time after time people would talk him down, encourage, reassure that the stock would go up. After a while, they were telling him to stop posting, stop looking, just plain, "Quit it!" Hold on to what you have but quit watching. Some people can't watch. It's just not their personality type.

I have tried over the past few years (perhaps in vain) to educate people here at TMC about stock market psychology and why peoples' impulses usually do not serve their long-term interests. I would guess that the majority of humans do not have the temperament to resist the "Buy High, sell low" trap, and therefore become prey for algobots and professional traders.

I would further state, and perhaps controversially so, that most people have no business buying shares in TSLA, based on what I've been seeing over the past month. When people are risking cash positions that they need for other things by buying TSLA, or stuffing their retirement portfolios with TSLA, it is a recipe for disaster. I've seen stuff like this play out in 2000 and again in 2008. It rarely ends well.

Broad market stock index and bond index funds should be the basis for most retirement accounts because they have low management cost, less volatile than individual issues, and usually have policies designed to limit large outflows based on impulse. All of my tax-advantaged retirement accounts are in Index Funds. I re-balance them once each year to keep my bond allocation at my age. For the vast majority of people, buying individual stocks like TSLA should be with extra money that isn't needed for something else.

 

[ludicrousspeed]

There's no reason to worry, as long as your have the proper time horizon. Nobody should be trading Tesla short-term, but rather investing long-term.

Short Term
I simply cannot see how sentiment can get any worse. From articles claiming that Tesla is "the worst stock in the world" to various back-to-back downgrades without any fundamental changes, expectations have subsided dramatically. Even with these downgrades and historically negative ratings from the major banks, Tesla's current price sits above EVERYBODY'S price target. I normally don't put much, if any, weight on analyst opinions, but this can only be a good sign. Of the 15 major firms with coverage on Tesla, the lowest price target is $180 from BoA. The average PT is $276 and the median PT is $282. This suggests an AVERAGE upside of almost 70%. Again, I'm not saying to listen to analysts (who imo often manipulate stock prices) and encourage independent research.

Short interest should be reported soon as of Jan. 31 and is almost certainly going to be north of 30M shares (almost 10 full trading days worth.) Instead of covering and taking profits, shorts have been adding to their positions, which adds fuel to any fire that will result from positive surprises. If this downward price action was happening as short interest decreased, it'd be much more worrisome. Instead, we have a series of positive catalysts that are bound to play out in 2016, which include 3 material revenue streams (S, X, energy products - as opposed to just one that the market is accustomed to), M3 reveal and reservation intake, opening of the GF, and (most likely) multiple positive cash flow quarters.


Long Term
I can go on forever about how Tesla will be successful long term, but a nice summary can be found on Are we worried yet about Tesla Stock? - Page 4 of this thread, where I showed how Tesla can get to over $27B in revenues by 2020, even if they only sell 300K vehicles. Just based on significantly higher margins and astronomically higher growth than their competitors, I strongly feel that Tesla will demand a P/S ratio of at least 3x sales throughout this time period. This suggests that the market cap will appreciate more than 270% over this relatively short time frame. Despite the negative sentiment recently, nothing has really changed from their ultimate long-term plan. If you are truly long on the stock, now is the perfect buying opportunity, right when others are "worried."

 

[juliusa]

Not worried. And agree TSLA is not Tesla.

Tesla sold a bunch of TSLA in an offering last year, right - at about $240 a share? Smart. Elon bought at least $20M of that offering...

 

[Fallenone]

The thing worries me most is the lower the price of the stock TSLA, the harder for Tesla the company to raise additional cash to accelerate mass production of Model 3. Clearly, there's huge amount of CapEx ahead for Model 3 and with what Tesla can invest from its own operations, I just don't see it possible for them to go 500k a year in 2020 without a major equity/debt raise.

 

[sundaymorning]

The thing worries me most is the lower the price of the stock TSLA, the harder for Tesla the company to raise additional cash to accelerate mass production of Model 3. Clearly, there's huge amount of CapEx ahead for Model 3 and with what Tesla can invest from its own operations, I just don't see it possible for them to go 500k a year in 2020 without a major equity/debt raise.

Tesla doesn't need to raise capital immediately. They can do it in increments as X ramps up and buyers flock back to the stock. Don't forget about stationary storage, once that heats up, more buyers will line up. We're not looking to produce 500k off the bat. They can raise in increments. As far as additional funding goes, that is what S and now X is for.

 

[Fallenone]

I agree they don't need to raise 5 billion for one offering, but still, lower the price of stock, harder the raise will be, incremental or not. And the harder the raise, the lower the expectation, which feeds back to lower the price of stock.

Tesla doesn't need to raise capital immediately. They can do it in increments as X ramps up and buyers flock back to the stock. Don't forget about stationary storage, once that heats up, more buyers will line up. We're not looking to produce 500k off the bat. They can raise in increments. As far as additional funding goes, that is what S and now X is for.

 

[sundaymorning]

Naturally they don't want the stock to low for a raise, so let's wait until a bounce and TSLA can think about it. As of right now they are within striking distance of fcf, so what's the problem? The gigafactory is all but paid for.. S demand is still high and X is going to get fixed.

I agree they don't need to raise 5 billion for one offering, but still, lower the price of stock, harder the raise will be, incremental or not. And the harder the raise, the lower the expectation, which feeds back to lower the price of stock.

 

[lango]

I don't think Model 3 is at the stage yet were they need to spend loads on Capex. Maybe at the end of 2016, so they still have some quarters were they don't need to raise equity and can still keep their pace.

Few engineering, design and planning problems are accelerated by throwing money at them. Let' not forget that they can produce 1000 X per week and sell them for $140k very soon if all goes well.

 

[Fallenone]

gigafactory phase 1, which is 14% of the gigafactory that was designed to support 500k deliveries in 2020, is all but paid for. There's still quite a lot of capex need for it in the coming years. Sure it can be spread out but sooner or later, Tesla needs to pay for it.

Naturally they don't want the stock to low for a raise, so let's wait until a bounce and TSLA can think about it. As of right now they are within striking distance of fcf, so what's the problem? The gigafactory is all but paid for.. S demand is still high and X is going to get fixed.

 

[chargeshare]

I am not yet concerned.

 

[sundaymorning]

Conservatively speaking if Tesla sells 75k S and X combined without delivering a single Powerwall/pack at ASP of $100k that is about $7.5 billion in revenues for 2016 alone. I'm sure the stock will reflect this in the future and they'll find backers with a heavy model 3 line and 40% growth yoy. To answer this thread's question, not a bit worried

gigafactory phase 1, which is 14% of the gigafactory that was designed to support 500k deliveries in 2020, is all but paid for. There's still quite a lot of capex need for it in the coming years. Sure it can be spread out but sooner or later, Tesla needs to pay for it.

 

[TaoJones]

The earnings calls this year (and subsequent spin) should be interesting.

Jerome leaving was and remains a Very Bad Thing for owners, and as an investor, it's a concern, certainly, right up there with the communications failures and variable service experiences.

On the flip side, would you rather drive anything else? Not that that fixes the fundamentals, but still, it does correlate to strong demand. Viewing Tesla as a global battery company with all kinds of levers yet to pull does help soften the short term pain a tad, too.

Long term (5+ year view) looks strong for Tesla and Panasonic. Short term is going to be painful, but it's not all Tesla's fault by any stretch. Woke up this morning to CNBC predictions of a "Global Economic Death Spiral". Lovely.

Besides, if things really go south, it just means we'll own more AAPL or GOOG after the conversion .

 

[Chickenlittle]

The earnings calls this year (and subsequent spin) should be interesting.

Jerome leaving was and remains a Very Bad Thing for owners, and as an investor, it's a concern, certainly, right up there with the communications failures and variable service experiences.

On the flip side, would you rather drive anything else? Not that that fixes the fundamentals, but still, it does correlate to strong demand. Viewing Tesla as a global battery company with all kinds of levers yet to pull does help soften the short term pain a tad, too.

Long term (5+ year view) looks strong for Tesla and Panasonic. Short term is going to be painful, but it's not all Tesla's fault by any stretch. Woke up this morning to CNBC predictions of a "Global Economic Death Spiral". Lovely.

Besides, if things really go south, it just means we'll own more AAPL or GOOG after the conversion .

Best excuse for stock dropping....Jerome leaving. Very funny. Should put smiley face in

 

[Jamriman]

I can't believe people sell when a stock drops. Time to buy not sell. Forget about it. That's my philosophy & I never lost, always gain long term.

 

[Fallenone]

We all know revenue is growing and that's great. But the bears do have one point right, the operating margins for Tesla is not high, actually negative for the most time so far. In a bull market, that's fine. In a bear market, it's hard to persuade others lend you money/buy your stock. I'm confident they will cut down cost and increase revenue at the same time this year. But not confident that alone could cover all the capex till 2020.

Conservatively speaking if Tesla sells 75k S and X combined without delivering a single Powerwall/pack at ASP of $100k that is about $7.5 billion in revenues for 2016 alone. I'm sure the stock will reflect this in the future and they'll find backers with a heavy model 3 line and 40% growth yoy. To answer this thread's question, not a bit worried

 

[sundaymorning]

Of course Tesla is operating at a negative, their growth trajectory is too high. If they stopped growing and only produce S and X they will be profitable. But I would rather them spend every dime and borrow as much as they can to grow even faster. I think it's a given that Tesla needs to raise more capital, but now is perhaps not the right now. Prove to the bankers X can ramp and nicely and lenders will be a dime a dozen. 40% growth year over year with M3 coming at 35k plus is no joke. And your right, the market can spin more negative headlines, but just how many people will listen to that BS when prices are this insatiable is to be debated. Let me ask you this, if Elon guides for 72-75k and tells you X is ramping up nicely by mid February would that convince you? What if he mentions that Powerwall and Powerpack will be delivered 1st Q along with M3 reveal being on time? I can't see the market reacting badly to that... but I've been wrong before.

We all know revenue is growing and that's great. But the bears do have one point right, the operating margins for Tesla is not high, actually negative for the most time so far. In a bull market, that's fine. In a bear market, it's hard to persuade others lend you money/buy your stock. I'm confident they will cut down cost and increase revenue at the same time this year. But not confident that alone could cover all the capex till 2020.

 

[eye.surgeon]

Broad market stock index and bond index funds should be the basis for most retirement accounts because they have low management cost, less volatile than individual issues, and usually have policies designed to limit large outflows based on impulse. All of my tax-advantaged retirement accounts are in Index Funds. I re-balance them once each year to keep my bond allocation at my age. For the vast majority of people, buying individual stocks like TSLA should be with extra money that isn't needed for something else.

Exactly this, fellow boglehead.

 

[Fallenone]

I totally agree a raise of capital now is not the best time. Too much dilution at this price. Best wait till summer after some good and solid news on X ramp, battery, gigafactory, model 3, potential FCF positive, oversea partners.

As we are discussing in the other thread, I do think a guidance of 75k for 2016 is bad. For your other points, I agree.

Of course Tesla is operating at a negative, their growth trajectory is too high. If they stopped growing and only produce S and X they will be profitable. But I would rather them spend every dime and borrow as much as they can to grow even faster. I think it's a given that Tesla needs to raise more capital, but now is perhaps not the right now. Prove to the bankers X can ramp and nicely and lenders will be a dime a dozen. 40% growth year over year with M3 coming at 35k plus is no joke. And your right, the market can spin more negative headlines, but just how many people will listen to that BS when prices are this insatiable is to be debated. Let me ask you this, if Elon guides for 72-75k and tells you X is ramping up nicely by mid February would that convince you? What if he mentions that Powerwall and Powerpack will be delivered 1st Q along with M3 reveal being on time? I can't see the market reacting badly to that... but I've been wrong before.

 

[Cobbler]

8 years ago, AAPL shares were crashing. A lot of investors were overreacting and even began to wonder if this could mean a neverending down-story for the AAPL stock. Even Steve Jobs had to re-assure his own personell that Apple had a lot of exciting products yet to release and there was not really something to worry about. He advised everyone to buy more stock!


This whole situation with the TSLA stock reminded me of that. Just relax, hold on tight and enjoy the bumpy ride

 

[bonaire]

Every time a stock goes down, one must pull out the AAPL story. I tell my son when he fails a test in school that "look at Jimmy in Aisle #2 - he got an A and so will you".