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Can anyone long the stock who is bullish about the future growth of production, cars, batteries etc write down some quick napkin math on future expectations tha

by hodder 10y ago

Can anyone long the stock who is bullish about the future growth of production, cars, batteries etc write down some quick napkin math on future expectations that would justify your investment at this valuation? I have yet to hear a bull case with any actual math behind it, but am willing to hear you out. Something like: cars sold by yr, Margins. battery wall, solar sold by year. Margins. multiples assumed on revenue and earnings by yr, and at mature phase. dilution of equity assumed to scale production. Can someone address those things without hand waiving them away for me? Again, I'm not long or short the stock, but havent heard a coherent argument with math for going long.

8ytecoder 10y ago
If everything in investment is about Math (and Math only) we'll have a perfect market. I'm long on Tesla and I totally believe the current valuation is out of proportion. However, I know Tesla can do a lot more and better than they do currently. I do think they have a lot of potential and can overtake other car makers. I won't buy more shares but I'll hold on to them for the foreseeable future.
- paulpauper 10y ago
  without some uncertainty, there is no market
paulpauper 10y ago
The thing is, Wall St. already factored all that stuff into their valuation and determined that the 'fair price' is $290/share (as of today). Tesla's car business is quite profitable and has huge growth...that's what matters http://greyenlightenment.com/another-correct-prediction-tesla http://greyenlightenment.com/another-correct-prediction-tesl... In the late 90' during the tech bubble, companies that had negative cash flow operation were bid to the stratosphere. Tesla and Amazon however have positive cashflow for operations and huge growth. People said the same thing about Facebook in 2012-2013 and Google in 2004-2005: how will they (Google and Facebook) justify their valuations? Well, they did. Wall St. sometimes get it terribly wrong (Infospace in 2000) and other time very right. Sometimes it doesn't make sense...but there is a method to the market's madness.
- jm__87 10y ago
  lol @ "but there is a method to the market's madness." It is just supply and demand. More buyers than sellers => price goes up. More sellers than buyers => price goes down. Not all buyers need to be smart and informed. I think Elon Musk will do great things with Tesla but I would never buy that stock... it is purely a gamble.
erikpukinskis 10y ago
Thinking about product category sales is the wrong way to do it, because Tesla is trying to restructure existing product categories. Not car purchasing, but mobility services. Not solar panels but sustainable electricity generation and storage. U.S. residential electricity use is 1.4 trillion kilowatt hours (kWh) per year. [1] At $0.10 each that $140 billion dollars. Americans travelled about 3 trillion car miles in cars per year. [2] At $0.50 per mile (what the IRS lets you claim for mobility) that's $1.5 trillion dollars. That's just the U.S. These markets are enormous. There are all kinds of ways for them to carve out $7 billion a year in net income to justify their market cap. [1] https://www.eia.gov/tools/faqs/faq.php?id=96&t=3 https://www.eia.gov/tools/faqs/faq.php?id=96&t=3 [2] https://www.advisorperspectives.com/dshort/updates/2017/03/17/vehicle-miles-traveled-another-look-at-our-evolving-behavior https://www.advisorperspectives.com/dshort/updates/2017/03/1...
hodder 10y ago
It appears that no one has even presented napkin math to justify the price. Total addressable market is interesting, but doesn't even qualify as napkin math without even a rough idea of margins, capital needed, rough growth rates. I am basically seeing an argument that Tesla is smart and will figure out ways to make money to justify a 50B mcap. That may be true, but I was hoping for more. I will likely buy puts on this once the squeeze subsides. All arguments so far I would basically describe as hand-waving which gives me more confidence that the market is too optimistic. All that said, if you have been long this, congratulations.
tokipin 10y ago
The assumption is that Tesla is going to knock the market out of its steady state. You aren't going to predict any of those numbers because the space of possibilities is wildly broad for a roiling market. You may as well try to predict the weather a year from now. People instinctively know not to waste time on that. Put differently, the long argument is a qualitative one, not a quantitative one. This doesn't make it any less intelligent, just harder for people to put into words. See an earlier comment I made[1] about the kind of thing that's meaningful but which is difficult to attach a number to. And conversely, if you can predict something with numbers, that's a sign that it's stable and less risky, but then the price/ROI will reflect that safety. [1] https://news.ycombinator.com/item?id=13711871 https://news.ycombinator.com/item?id=13711871

by hodder 10y ago

8ytecoder 10y ago

If everything in investment is about Math (and Math only) we'll have a perfect market. I'm long on Tesla and I totally believe the current valuation is out of proportion. However, I know Tesla can do a lot more and better than they do currently. I do think they have a lot of potential and can overtake other car makers. I won't buy more shares but I'll hold on to them for the foreseeable future.

paulpauper 10y ago
without some uncertainty, there is no market

paulpauper 10y ago

The thing is, Wall St. already factored all that stuff into their valuation and determined that the 'fair price' is $290/share (as of today). Tesla's car business is quite profitable and has huge growth...that's what matters http://greyenlightenment.com/another-correct-prediction-tesla http://greyenlightenment.com/another-correct-prediction-tesl... In the late 90' during the tech bubble, companies that had negative cash flow operation were bid to the stratosphere. Tesla and Amazon however have positive cashflow for operations and huge growth. People said the same thing about Facebook in 2012-2013 and Google in 2004-2005: how will they (Google and Facebook) justify their valuations? Well, they did. Wall St. sometimes get it terribly wrong (Infospace in 2000) and other time very right. Sometimes it doesn't make sense...but there is a method to the market's madness.

jm__87 10y ago
lol @ "but there is a method to the market's madness." It is just supply and demand. More buyers than sellers => price goes up. More sellers than buyers => price goes down. Not all buyers need to be smart and informed. I think Elon Musk will do great things with Tesla but I would never buy that stock... it is purely a gamble.

erikpukinskis 10y ago

Thinking about product category sales is the wrong way to do it, because Tesla is trying to restructure existing product categories. Not car purchasing, but mobility services. Not solar panels but sustainable electricity generation and storage. U.S. residential electricity use is 1.4 trillion kilowatt hours (kWh) per year. [1] At $0.10 each that $140 billion dollars. Americans travelled about 3 trillion car miles in cars per year. [2] At $0.50 per mile (what the IRS lets you claim for mobility) that's $1.5 trillion dollars. That's just the U.S. These markets are enormous. There are all kinds of ways for them to carve out $7 billion a year in net income to justify their market cap. [1] https://www.eia.gov/tools/faqs/faq.php?id=96&t=3 https://www.eia.gov/tools/faqs/faq.php?id=96&t=3 [2] https://www.advisorperspectives.com/dshort/updates/2017/03/17/vehicle-miles-traveled-another-look-at-our-evolving-behavior https://www.advisorperspectives.com/dshort/updates/2017/03/1...

hodder 10y ago

It appears that no one has even presented napkin math to justify the price. Total addressable market is interesting, but doesn't even qualify as napkin math without even a rough idea of margins, capital needed, rough growth rates. I am basically seeing an argument that Tesla is smart and will figure out ways to make money to justify a 50B mcap. That may be true, but I was hoping for more. I will likely buy puts on this once the squeeze subsides. All arguments so far I would basically describe as hand-waving which gives me more confidence that the market is too optimistic. All that said, if you have been long this, congratulations.

tokipin 10y ago

The assumption is that Tesla is going to knock the market out of its steady state. You aren't going to predict any of those numbers because the space of possibilities is wildly broad for a roiling market. You may as well try to predict the weather a year from now. People instinctively know not to waste time on that. Put differently, the long argument is a qualitative one, not a quantitative one. This doesn't make it any less intelligent, just harder for people to put into words. See an earlier comment I made[1] about the kind of thing that's meaningful but which is difficult to attach a number to. And conversely, if you can predict something with numbers, that's a sign that it's stable and less risky, but then the price/ROI will reflect that safety. [1] https://news.ycombinator.com/item?id=13711871 https://news.ycombinator.com/item?id=13711871