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Even Jim Cramer (famous Tesla bear that he is) took issue with this “analysis”. > Setting a price target of $10 on a $200 stock "really is insane," the "Mad Mo

by zaroth 7y ago

Even Jim Cramer (famous Tesla bear that he is) took issue with this “analysis”. > Setting a price target of $10 on a $200 stock "really is insane," the "Mad Money" host said. "How about $8? How about $12? Ten basically says, 'I want to get talked about. Let's talk about me.'" > "If he had done $47 would we have talked about him? No, but 10. Ten is right in your face," Cramer said on "Squawk on the Street." "I question this piece of research." If even Cramer is willing to call bullshit on this, it makes you wonder. Is there any duty of care in these analysis? Are they merely op-ed of another name? Or if they are supposed to mean something, what kind of repercussions should follow from this kind of malfeasance? But most of all, remember the old adage, when there’s blood in the streets...

somebodythere 7y ago
> when there’s blood in the streets... This applies more to the entire market or particular industries than it does to specific stocks. There are many stocks whose charts look "bloody" because they are bad businesses. Not all of them go on to make a miraculous recovery, many simply find themselves trading on the pink sheets.
reitzensteinm 7y ago
It was a "worst case" target; the malfeasance is that it was placed too high. The equity will be wiped out if there's a restructuring. It's hard to imagine a future where TSLA is worth a low, but nonzero amount - there is a ton of debt first in line. Tesla still has a non-zero risk of failing; what kind of "repercussion" do you believe there should be for pointing this out? In my opinion, the right way to value Tesla is to figure out the NPV of Musk's autonomous network vision and multiply it by the chance of getting there. It's not necessarily a bad investment, but it would be a crazy basket to put all your eggs in to. There's a reason the 2025 bonds are currently trading at a 9% yield...
- hn_throwaway_99 7y ago
  Exactly, and your post made me realize why Cramer is totally correct. Of course the worse case scenario is $0 - I don't think anyone really doubts there is a significant, non-zero possibility of Tesla going bankrupt. But saying that wouldn't get you in the news, so this analyst pulled the $10 number out of his ass to make it more newsworthy than just "Tesla could go bankrupt."
- londons_explore 7y ago
  If Tesla had any spare cash, surely the logical thing for them to do is buy up those 9 percent yield bonds. If they are still solvent on bond payout day, they have made a tidy profit. If they are not, it doesn't matter!
  - zaroth 7y ago
    If a company can provide return on capital greater than 9%, then spending their money to get a 9% return is not actually a good investment. It’s more complicated than this because it’s expected rate of return with some variance, and deploying additional side-lined cash doesn’t always achieve the same return as the previous dollars, etc. etc. But it comes down to this; if the best thing a company has to do with its dollars is pay down debt, they are telling you that they couldn’t think of anything more reliably profitable or useful to do with the dollars than that.
    - reitzensteinm 7y ago
      Parent was talking about parking spare cash, so buying up bonds and selling them as an alternative to something like a money market account. Although for Tesla, it would be an alternative to paying down their ABL. A company that is cash flow positive and is looking for investment opportunities simply does not have bonds that yield 9%. Not in this millennium. In any case, I don't think you really hit on the reason not to do this. If you park your working capital in your own bonds, they're going to take a haircut when times get even worse, which is exactly when you'd be liquidating more of them. This could trivially turn in to an outright death spiral unless further funds can be raised from elsewhere. Probably not the bond market!
throwawaymath 7y ago
I don't think I understand Cramer's argument. Is he asserting the new worst-case valuation is disingenuous because it's a "nice" number like 10? Does that mean he wouldn't be saying anything about it if it were 11 instead? That seems like just as subjective an assessment as the one he's currently making. A seemingly "random" looking number can be just as arbitrarily chosen as a neat looking one. It wouldn't surprise me to know analysts like to slightly round up or down a valuation target to hit a neat number like 10. But that seems like human nature to me, not a lack of integrity or critical analysis. I don't think this is a very critical heuristic to use...
- Traster 7y ago
  No, I think what he's saying is that the analysts are massively low-balling the valuation in order to gain attention. He compares it to $47, which would be low, but would represent only an 80% drop. $10 means TSLA has had 95% of its value wiped out, it's just absurd.
  - throwawaymath 7y ago
    Ah, okay. That makes a little more sense to me.
boh 7y ago
Jim Cramer also suggested people should buy as much Lyft stock as they can (https://www.thestreet.com/video/get-lyft-when-ipos-jim-cramer-14884896 https://www.thestreet.com/video/get-lyft-when-ipos-jim-crame...). With his long history of bad calls, there's no reason to give any more credit than he deserves.
- joering2 7y ago
  I was about to say. I know plenty of onvestors watching him. Some with around $500MM in managment. None is takin advice from Jim, they watch him for entertainment. You can learnt AT tho.
dd36 7y ago
"However, Jonas kept his main price target for the stock at $230 and also has a bull-case forecast of $391"
- zaroth 7y ago
  That seems like strong supporting evidence that the $10 number is truly just to stir the pot to grab some headlines.
deleted 7y ago
[deleted]
Traster 7y ago
Jim Cramer is a TV personality. It's also established that he has in the past used his media presence to pump and dump stocks.[1] Whilst he may be right that what this analyst is doing is picking a number that makes a headline, this tells you nothing about whether the underlying analysis is right. Whatever motivation this analyst has, you can be certain that Cramer also has the same motivations - as do almost any serious set of investors you speak to. [1]https://www.nytimes.com/1995/02/20/business/smart-money-rethinks-conflict-rule.html https://www.nytimes.com/1995/02/20/business/smart-money-reth...
mruts 7y ago
Just because it’s really low doesn’t mean Ten is wrong. There’s plently of examples of securities that have been mispriced to such a degree (i.e Enron and MBS).
microtherion 7y ago
That analyst was not even very good at drumming up publicity. If he wanted to draw attention with a low price target, he should have picked… $4.20

by zaroth 7y ago

somebodythere 7y ago

> when there’s blood in the streets... This applies more to the entire market or particular industries than it does to specific stocks. There are many stocks whose charts look "bloody" because they are bad businesses. Not all of them go on to make a miraculous recovery, many simply find themselves trading on the pink sheets.

reitzensteinm 7y ago

It was a "worst case" target; the malfeasance is that it was placed too high. The equity will be wiped out if there's a restructuring. It's hard to imagine a future where TSLA is worth a low, but nonzero amount - there is a ton of debt first in line. Tesla still has a non-zero risk of failing; what kind of "repercussion" do you believe there should be for pointing this out? In my opinion, the right way to value Tesla is to figure out the NPV of Musk's autonomous network vision and multiply it by the chance of getting there. It's not necessarily a bad investment, but it would be a crazy basket to put all your eggs in to. There's a reason the 2025 bonds are currently trading at a 9% yield...

hn_throwaway_99 7y ago
Exactly, and your post made me realize why Cramer is totally correct. Of course the worse case scenario is $0 - I don't think anyone really doubts there is a significant, non-zero possibility of Tesla going bankrupt. But saying that wouldn't get you in the news, so this analyst pulled the $10 number out of his ass to make it more newsworthy than just "Tesla could go bankrupt."
londons_explore 7y ago
If Tesla had any spare cash, surely the logical thing for them to do is buy up those 9 percent yield bonds. If they are still solvent on bond payout day, they have made a tidy profit. If they are not, it doesn't matter!
- zaroth 7y ago
  If a company can provide return on capital greater than 9%, then spending their money to get a 9% return is not actually a good investment. It’s more complicated than this because it’s expected rate of return with some variance, and deploying additional side-lined cash doesn’t always achieve the same return as the previous dollars, etc. etc. But it comes down to this; if the best thing a company has to do with its dollars is pay down debt, they are telling you that they couldn’t think of anything more reliably profitable or useful to do with the dollars than that.
  - reitzensteinm 7y ago
    Parent was talking about parking spare cash, so buying up bonds and selling them as an alternative to something like a money market account. Although for Tesla, it would be an alternative to paying down their ABL. A company that is cash flow positive and is looking for investment opportunities simply does not have bonds that yield 9%. Not in this millennium. In any case, I don't think you really hit on the reason not to do this. If you park your working capital in your own bonds, they're going to take a haircut when times get even worse, which is exactly when you'd be liquidating more of them. This could trivially turn in to an outright death spiral unless further funds can be raised from elsewhere. Probably not the bond market!

throwawaymath 7y ago

I don't think I understand Cramer's argument. Is he asserting the new worst-case valuation is disingenuous because it's a "nice" number like 10? Does that mean he wouldn't be saying anything about it if it were 11 instead? That seems like just as subjective an assessment as the one he's currently making. A seemingly "random" looking number can be just as arbitrarily chosen as a neat looking one. It wouldn't surprise me to know analysts like to slightly round up or down a valuation target to hit a neat number like 10. But that seems like human nature to me, not a lack of integrity or critical analysis. I don't think this is a very critical heuristic to use...

Traster 7y ago
No, I think what he's saying is that the analysts are massively low-balling the valuation in order to gain attention. He compares it to $47, which would be low, but would represent only an 80% drop. $10 means TSLA has had 95% of its value wiped out, it's just absurd.
- throwawaymath 7y ago
  Ah, okay. That makes a little more sense to me.

boh 7y ago

Jim Cramer also suggested people should buy as much Lyft stock as they can (https://www.thestreet.com/video/get-lyft-when-ipos-jim-cramer-14884896 https://www.thestreet.com/video/get-lyft-when-ipos-jim-crame...). With his long history of bad calls, there's no reason to give any more credit than he deserves.

joering2 7y ago
I was about to say. I know plenty of onvestors watching him. Some with around $500MM in managment. None is takin advice from Jim, they watch him for entertainment. You can learnt AT tho.

dd36 7y ago

"However, Jonas kept his main price target for the stock at $230 and also has a bull-case forecast of $391"

zaroth 7y ago
That seems like strong supporting evidence that the $10 number is truly just to stir the pot to grab some headlines.

deleted 7y ago

[deleted]

Traster 7y ago

Jim Cramer is a TV personality. It's also established that he has in the past used his media presence to pump and dump stocks.[1] Whilst he may be right that what this analyst is doing is picking a number that makes a headline, this tells you nothing about whether the underlying analysis is right. Whatever motivation this analyst has, you can be certain that Cramer also has the same motivations - as do almost any serious set of investors you speak to. [1]https://www.nytimes.com/1995/02/20/business/smart-money-rethinks-conflict-rule.html https://www.nytimes.com/1995/02/20/business/smart-money-reth...

mruts 7y ago

Just because it’s really low doesn’t mean Ten is wrong. There’s plently of examples of securities that have been mispriced to such a degree (i.e Enron and MBS).

microtherion 7y ago

That analyst was not even very good at drumming up publicity. If he wanted to draw attention with a low price target, he should have picked… $4.20