Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[BLSmith2112]

Musk supposed to take part of this live event. Starting ~now. Dunno exactly when but the event has started.

waic.bestv.com.cn

Edit: On second thought, it might be around 8:30PM CDT, 6:30 PM PDT. Sorry!

 

[Ocelot]

They note at least here,if raining you need access to a covered spot. Can’t do that at my work, just home garage.

 

[Zaxxon]

This is a really important issue for Tesla investors. I've spent a lot of time thinking about this for both Tesla as a whole and FSD/autonomy separately.

My conclusion is that Tesla will become a near monopoly. Especially in terms of industry profit.

Some things are "self correcting" and others are not. The NBA has a salary cap, if it didn't the league would be even more dominated by rich owners in big markets. Labor unions demand higher wages from the most profitable companies in an industry, thus keeping weaker competitors alive. On the other hand, cancer or drug addiction expand until the fuel runs out.

It's easy to think that the auto industry is one of those self-correcting industries because we've always had lots of different producers. But what we have now is simply the vestiges of what has taken place over the last century. We still have many newspapers but only as a reminder of a time gone by.

Economies of scale and the network effect dictate that the first mover in a new industry has a good chance of winning it all. Why did Amazon, Apple or Google win? They got there first and sucked all the air out of the room. There is no "self-correcting" force in those industries. Not until you become so big and so powerful that the govt has to step in.

An electric, connected and autonomous vehicle is as different to today's ICE vehicle as Twitter is to Life magazine. Macy's never had a chance against Amazon, Motorola against Apple or the Yellow pages against Google.

To those who say that the race has not been won yet I say twaddle! Tesla leads in every metric that matters: Sales, distribution, advertising, management, corporate culture, balance sheet, brand, production costs, pace of innovation, hardware, software, efficiency, product satisfaction, safety and design. (That was just off the top of my head so sorry if I left out a few.) So who is going to catch Tesla? The ones that could write the code can't make the cars and the ones that could make the cars can't write the code. (No way AMZN wants to be partners with the UAW either if you think some partnership might work.) Every day we get farther ahead.

So my prediction is that yes "There can be only one."

Are your initials SMR by any chance?

 

[engle]

@engle Great post. I'm wondering the timing of the inclusion. Why are you predicting 9/28/2020 inclusion date? I heard from a few people that the inclusion normally happens about 2 weeks after ER and 10Q release. That puts the timing around middle of the August. Happy to hear your reason.

Thanks. The S&P document I hyperlinked described a quarterly rebalancing of the index. However, someone pointed out that the Committee can add new companies whenever they decide to do so and have done that quite often. Therefore, I think the "rebalancing" refers to the weighted float-adjusted market caps of each member of the S&P 500.

 

[mongo]

Thanks. The S&P document I hyperlinked described a quarterly rebalancing of the index. However, someone pointed out that the Committee can add new companies whenever they decide to do so and have done that quite often. Therefore, I think the "rebalancing" refers to the weighted float-adjusted market caps of each member of the S&P 500.

Indeed, the IWF (ratio of float to total stock) is done annually. The quarterly adjustment is the individual weight/ ranking of the constituents IWF*totalShares*sharePrice.
(Or something like that)

 

[FrankSG]

Lol, Q1 2019 was a 'one-time' logistics problem, but the market largely jumped on it.

Money is fungible. Wall St. mostly doesn't care about its source.

I think @FrankSG has blogged about past cases where the VA was used to augment profits for years after they became available, ie: Amazon

Cheers!

Yeah, I wouldn't expect the release of the VA to move the stock that much. Institutional investors should have analysts who are smart enough to have a basic understanding of VA, and know that Tesla didn't suddenly book $1-2B in extra profits. I think TSLA could get close to $1B in profits in Q4 though, even without VA.

Here's my post on the VA from earlier this year:

Tesla's $1.8B Valuation Allowance: Could it mean FY 2019 GAAP profits and immediate S&P 500 inclusion?

 

[FrankSG]

Jeez - I'm sticking to my 1500s. These high priced calls are incredibly expensive.
Jun21 1500s - $360 = $1860 breakeven - medium risk
Jun21 1800s - $287 = $2087 breakeven - high risk
Jun21 2800s - $153 = $2953 breakeven - V high risk

You should compare the pay-off of options vs holding the stock, not vs holding cash imo. That $360 to buy $1,500s would buy you more TSLA shares today at a SP of $1,400, than if the SP is $1,860 upon expiration.

At all those breakeven numbers, you'd have been better off simply holding onto the stock.

 

[FrankSG]

If we assume China production roughly equaled deliveries, then we can further estimate Fremont 3/Y production at 75,946 - 29,684 which is ~ 46,262 units for a shortened Q2.

Highly unlikely. Tesla produced ~ 22,500 vehicles in Shanghai in April + May. I highly doubt they only produced ~7k vehicles in June. I reckon production in June was likely ~16k, for total production of 38.5k in Shanghai in Q2.

There should be official production numbers reported at some point by the CPCA (China Passenger Car Association).

 

[Words of HABIT]

 

[FrankSG]

Aren't these the clowns that have a $295 PT on $TSLA?

JPMorgan upgraded Nikola to overweight from neutral
JPMorgan upgraded the hybrid truck manufacturing company and said the stock is “starting to look attractive” for long-term investors.

“The stock has fallen 40% in July month-to-date (S&P 500 up 1.5%), and could fall some more in the near term when the special purpose acquisition company shares are freely tradable (and can be sold short), but NKLA stock is now trading below our $45.00 price target and starting to look attractive for long-term investors in view of a number of potential positive catalysts in coming weeks and months. In our view NKLA is currently a story-stock, but we are on board as long as the company executes to plan, and providing the stock offers a favorable risk-reward trade-off.”

Read more about this call here.

Yeah this is nutty.

Tesla
$25B Revenue
100k Quarterly Deliveries
50k+ Employees
50%+ CAGR over the past decade
$295 PT for $60B Valuation???

Nikola
$0 Revenue
0 Lifetime Deliveries
350 Employees
Growth in marketing, PR, and sales expenditures. None of which helps them get a product to market.
$45 PT for ~$15B Valuation???

This is lunacy.

 

[FrankSG]

Just to dumb this whole concept down a little, am I right in thinking that the only reason to expect an outsized move in Tesla is because so much of Tesla's float is held by high conviction longs and insiders that only a small % of the float is available.? Or is it because it has grown so much already before being included in the S&P500

The former. And the fact that TSLA is not in the S&P 400, so institutions can't move shares from one fund to another. The market cap doesn't influence the mechanisms, it just makes the $ amounts involved larger.

At a super simple level. if there are $X Trillion of index tracking funds and the total S&P500 has a market cap of $Y Trillion, shouldn't any stock in the index be owned the same amount of X/Y% by the index tracking funds?

Correct.

To continue the thought and to use an extreme example. If the index committee decided to include a company with a market cap of $100, wouldn't the trackers still have to purchase the same X/Y% of the company?

Correct.

I just posted this in another thread, which may help further clarify things:

Agree with you on options, but if I wanted to buy TSLA for the long term, my opinion would still be buy a crapton at $1,400.

Hoping for a lower entry point with S&P 500 inclusion still in front of us, is a big gamble that may not pay off. I think there's quite a good chance that S&P 500 inclusion will revalue TSLA at $2,xxx, perhaps even as high as $3,xxx if things get really crazy.

It's just that there are about 145M shares (185M - 40M in Elon's hands) + 15M synthetic shorted shares in the hands of investors today. These investors holding 160M shares think Tesla is worth $1,400 per share as of right now.

S&P 500 inclusion might lead to the forced buying of as much as 40M, 50M, or even 60M+ shares, as well as additional short covering, Sticking with 50M total, that would mean we're going to find out at what price investors are willing to part with 50M shares. The supply of TSLA shares is about to contract from 160M to 110M (perhaps less), and we're going to find out what price those shares will have to rise to before demand for TSLA shares drops from 160M to 110M.

It could be relatively small, or a large but short-lived peak, but I would not be surprised to see a permanent revaluation of the stock to $2,xxx.

Another way to think of it is that an ice cream truck just sold 160M ice creams to 160M kids for $1,400 each. Now a school bus arrives with 50M (or more) kids who are so hot, sweaty, and hungry, that they MUST buy ice cream no matter what cost. The question now becomes at what price 50M out of those 160M kids are willing to sell their ice cream to the 50M additional kids that will buy at any cost.

Some kids will probably sell for $1,405, a bunch more for $1,450 and $1,500. But what matters is what price the 50Mth kid will sell his ice cream for. What is the ice cream worth to the kid with the 110,000,001st highest 'ice cream price target'.

 

[willow_hiller]

Odd, and seemingly innocuous story in Electrek this evening: Tesla hires guy behind Apple Pay to lead Supercharger experience. What you want to improve? - Electrek

Tesla has hired Michael Rihani, the Apple manager behind Apple Pay and Apple Cash, to lead the Supercharger User Experience and Strategy team.

Fred's take on it is that Tesla is doing it to improve the Supercharger experience... But honestly what could they improve upon? You walk up, you plug in, you drive off.

A possibility I think Fred missed... What if this is about Supercharger experience for non-Tesla vehicles?

Elon raised the possibility of allowing third parties to buy into the Supercharger network back in 2018. And who would be better placed to figure out how to let non-Tesla vehicles pay for Supercharging than the guy behind Apple Pay?

 

[vikings123]

Odd, and seemingly innocuous story in Electrek this evening: Tesla hires guy behind Apple Pay to lead Supercharger experience. What you want to improve? - Electrek

Tesla has hired Michael Rihani, the Apple manager behind Apple Pay and Apple Cash, to lead the Supercharger User Experience and Strategy team.

Fred's take on it is that Tesla is doing it to improve the Supercharger experience... But honestly what could they improve upon? You walk up, you plug in, you drive off.

A possibility I think Fred missed... What if this is about Supercharger experience for non-Tesla vehicles?

Elon raised the possibility of allowing third parties to buy into the Supercharger network back in 2018. And who would be better placed to figure out how to let non-Tesla vehicles pay for Supercharging than the guy behind Apple Pay?

Im thinking out loud here but this hire could also be related to ride hailing or robotaxi.

 

[Knightshade]

Odd, and seemingly innocuous story in Electrek this evening: Tesla hires guy behind Apple Pay to lead Supercharger experience. What you want to improve? - Electrek

Tesla has hired Michael Rihani, the Apple manager behind Apple Pay and Apple Cash, to lead the Supercharger User Experience and Strategy team.

Fred's take on it is that Tesla is doing it to improve the Supercharger experience... But honestly what could they improve upon? You walk up, you plug in, you drive off.

A possibility I think Fred missed... What if this is about Supercharger experience for non-Tesla vehicles?

Elon raised the possibility of allowing third parties to buy into the Supercharger network back in 2018. And who would be better placed to figure out how to let non-Tesla vehicles pay for Supercharging than the guy behind Apple Pay?

Pretty reasonable guess.

The other thing, as mentioned here recently, is Tesla needs to plan out and build the promised "pull through" chargers to handle Cybertrucks (and Ys) with trailers.... and also megachargers for Semi.

 

[willow_hiller]

Pretty reasonable guess.

The other thing, as mentioned here recently, is Tesla needs to plan out and build the promised "pull through" chargers to handle Cybertrucks (and Ys) with trailers.... and also megachargers for Semi.

Definitely needed, but Rihani's experience with Apple Pay wouldn't really be relevant to the physical design of the Supercharging spaces.

 

[Artful Dodger]

Highly unlikely. Tesla produced ~ 22,500 vehicles in Shanghai in April + May. I highly doubt they only produced ~7k vehicles in June.

Yeah, that's not what I'm basing my analysis upon. I said Deliveries ~= Production, so:

Apr 3,635 + May 11,095 + June 14,954​

My assumption puts GF3 June production near 15K, or almost 3.75K per week. I think this is extremely reasonable given that Tesla's publicly announced goal for GF3 production is to acheive 4K/wk by the start of Q3.

I think there's reporting issues with the Apr deliveries vs production. I think one way to resolve this is to back out the Fremont numbers from the P&D totals to estimate GF3 production, which is what I have done.

Further, this should be back-checked against running figures for total inventory since the start of GF3 production in Q1 2020. This should tease out an accurate production estimate, since the rampup rate is the ONLY figure that matters when Tesla is production constrained.

I don't care if a car was sold in Q1 vs Q2, being fully confident that it WILL be sold. What I want to know is how FAST they are making MORE!

Cheers!

 

[FrankSG]

Odd, and seemingly innocuous story in Electrek this evening: Tesla hires guy behind Apple Pay to lead Supercharger experience. What you want to improve? - Electrek

Tesla has hired Michael Rihani, the Apple manager behind Apple Pay and Apple Cash, to lead the Supercharger User Experience and Strategy team.

Fred's take on it is that Tesla is doing it to improve the Supercharger experience... But honestly what could they improve upon? You walk up, you plug in, you drive off.

A possibility I think Fred missed... What if this is about Supercharger experience for non-Tesla vehicles?

Elon raised the possibility of allowing third parties to buy into the Supercharger network back in 2018. And who would be better placed to figure out how to let non-Tesla vehicles pay for Supercharging than the guy behind Apple Pay?

More likely to be related to restaurants/cafes attached to the Superchargers. Didn't Elon talk about this at some point on Twitter?

 

[FrankSG]

Yeah, that's not what I'm basing my analysis upon. I said Deliveries ~= Production, so:

Apr 3,635 + May 11,095 + June 14,954​

My assumption puts GF3 June production near 15K, or almost 3.75K per week. I think this is extremely reasonable given that Tesla's publicly announced goal for GF3 production is to acheive 4K/wk by the start of Q3.

I think there's reporting issues with the Apr deliveries vs production. I think one way to resolve this is to back out the Fremont numbers from the P&D totals to estimate GF3 production, which is what I have done.

Further, this should be back-checked against running figures for total inventory since the start of GF3 production in Q1 2020. This should tease out an accurate production estimate, since the rampup rate is the ONLY figure that matters when Tesla is production constrained.

I don't care if a car was sold in Q1 vs Q2, being fully confident that it WILL be sold. What I want to know is how FAST they are making MORE!

Cheers!

It'd be quite strange if April production was only ~3.5k, because March was far higher. Even February was higher than that if I'm not mistaken.

Official numbers for April production came out at over 11k. I guess it's not impossible for that number to be incorrect, but unlikely imo. I think it's more likely inventories in China increased a fair bit, and maybe even some cars were shipped to APAC pre-price cut in China?

 

[mongo]

Odd, and seemingly innocuous story in Electrek this evening: Tesla hires guy behind Apple Pay to lead Supercharger experience. What you want to improve? - Electrek

Tesla has hired Michael Rihani, the Apple manager behind Apple Pay and Apple Cash, to lead the Supercharger User Experience and Strategy team.

Fred's take on it is that Tesla is doing it to improve the Supercharger experience... But honestly what could they improve upon? You walk up, you plug in, you drive off.

A possibility I think Fred missed... What if this is about Supercharger experience for non-Tesla vehicles?

Elon raised the possibility of allowing third parties to buy into the Supercharger network back in 2018. And who would be better placed to figure out how to let non-Tesla vehicles pay for Supercharging than the guy behind Apple Pay?

May be linked to the external push for CCS support.
Tesla says it is being discriminated out of cheaper electricity rates for Superchargers in New York - Electrek

Will Tesla open up its Supercharger network in Europe?

 

[Artful Dodger]

It'd be quite strange if April production was only ~3.5k, because March was far higher. Even February was higher than that if I'm not mistaken.

Official numbers for April production came out at over 11k. I guess it's not impossible for that number to be incorrect, but unlikely imo. I think it's more likely inventories in China increased a fair bit, and maybe even some cars were shipped to APAC pre-price cut in China?

Yeah, too many unknowns and not enough equations to solve this system of equations

That's why I suggest we revisit this topic after the Q2 Financial results letter (or the 10-K) comes out and we can estimate the remaining worldwide inventory at the end of Q2. Then we can back out Fremont, estimate Europe from shipping, and make a reasonable estimate for GF3 production.

Compare that estimate to the two main sources of data coming out of China then to see which is a better predictor of GF3 production. Would be very useful going forward to have an edge...

Cheers!