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I have trouble squaring this ostensibly fantastic news with the constant dire predictions about the stock. Is it just the stock is considered by some people to

I have trouble squaring this ostensibly fantastic news with the constant dire predictions about the stock. Is it just the stock is considered by some people to be simply overpriced, or is Tesla the company in danger of going bankrupt? I'd like to get a Tesla, but I worry about the company going under and being left with a car that has no resale value or ability to be maintained.

solean 7y ago
I wouldn't worry at all about not being able to maintain it. Worst case scenario: they get acquired and VW/Apple/etc will service your car. The brand is too valuable to die at this point.
- dsfyu404ed 7y ago
  Just because the brand lives on doesn't mean the old tooling that makes the replacement parts didn't get sold to someone who will turn it into ball bearings during the liquidation and reorganization. That said, considering how good Tesla isn't at supplying parts to their own shops (let alone the aftermarket) having Dorman (or whoever, but this would be a very Dorman thing to do) acquire all the body dies at some post-bankruptcy liquidation sale and start cranking them out from a factory in China could very well wind up being better for parts availability than the current situation.
- owenmarshall 7y ago
  You have a very optimistic definition of “worst case scenario”. If Tesla is acquired I would imagine it would be for IP; I could easily see the brand going away with the billions of debt.
wlesieutre 7y ago
I have no idea about Tesla's long term prospects, but the maintenance question reminded me of this story about keeping their original Roadsters running: https://www.roadandtrack.com/new-cars/a28819221/tesla-roadster-repair-carl-medlock/ https://www.roadandtrack.com/new-cars/a28819221/tesla-roadst... >There are unique challenges that come with working on these cars. You might have to rebuild a circuit board one day, and fabricate a new hood the next day. Actually, if any body parts are damaged, you'll have to fabricate them. Tesla doesn't sell parts to anyone, so Medlock has taken to fashioning new panels out of carbon fiber himself.
jcfrei 7y ago
Tesla has a market cap in between Ford and GM. Their share price most likely reflects an expectation of even more sales in the future.
- bryanlarsen 7y ago
  Enterprise Value (shares + debt) is a much better measure of company size than just the share value alone. By that measure, Tesla is about a third of the size of Ford & GM. (50Billion vs 150Billion)
martinald 7y ago
Problem is Tesla is losing billions of dollars selling these cars currently with no real profitability in sight. Tesla also has $11bn+ of debt on its balance sheet. Elon keeps promising profitability but then misses it badly.
- beat 7y ago
  Tesla is a growth company. Being "profitable" is irrational and stupid. They should be farming every cent they make into production, borrowing every cent that will be loaned, and selling stock. Why turn a $1.00 into $1.10 this year when you can turn it into $15 in ten years? This is how startups and growth companies work. Profitability is a very narrowminded view of how to run a company. The goal isn't to turn a profit next year. The goal is to become a bigger company than Apple, to wipe out entire car companies in the process, and to change how we power the cars we drive.
  - adwn 7y ago
    > Why turn a $1.00 into $1.10 this year when you can turn it into $15 in ten years? Because there's a very good chance you go bankrupt in year 3, turning your $1.00 into $0.00 instead of $15. > Being "profitable" is irrational and stupid. [...] Profitability is a very narrowminded view of how to run a company. What a weird, weird thing to say. As if it were straight out of the Silicon Valley TV show.
    - 1123581321 7y ago
      Think of Tesla as maximizing the expected value of its entire profitability over its lifetime. Although you would like it to cease investing in new cars and maximize its profitability now, it has a good chance of making a lot more money by continuing to invest in itself. The odds are good that there will be a generation of Tesla cars which primary job is to make money for shareholders, and they will make so much more than is possible now (we can look at the existing automakers for examples of this level of earnings) that the profits exceed the present value of possible profits. It’s different than the scenarios parodied in Silicon Valley, where companies with no business model, who can’t be profitable with their product, posture in order to be acquired to the extent that their founders believe the posturing.
dragontamer 7y ago
> Is it just the stock is considered by some people to be simply overpriced, or is Tesla the company in danger of going bankrupt? Not immediate danger, but Tesla has never made a yearly profit in this entire decade. The two profitable quarters (Q3 2018 / Q4 2018) were completely wiped out by awful performance in Q1 2019. If things keep going the way they're going, I'd estimate Tesla only has maybe till 2022 or 2023. That's enough time to turn the company around, but you can only lose billions-of-dollars / year for so long before the whole shebang collapses. My 2022 estimate is based on two things: 1. December 2020 is SolarCity's last bond. Most likely, Musk will find a way to avoid paying for the bond IMO (probably rolling off SolarCity as a subsidiary or something), limiting the damage to Tesla. 2. March 2021 is the next major bond repayment, initially taken out for the Nevada Gigafactory. Musk is pretty good about raising money, but after shenanigans with Dec 2020, I'm not sure if the market will be so forgiving. Banks would rather him succeed however, so I expect a kind of "One last chance" here. 3. March 2022 is the next major bond repayment. 4. If Tesla survives past 2022, they have over a full year before 2024 and 2025 bond repayments kick in again. Tesla's next major tests are about whether or not they can pay back the 2021 / 2022 bonds. Well, not necessarily "pay back", but they should be making a profit and not just "borrowing more money to pay off older bonds". If the market realizes that Tesla is exponentially losing money here, they'll be in a bad spot. That gives all of 2020 for Tesla to turn around. The Model 3 has proven unprofitable in the USA, the only hope is Chinese sales through the $5 Billion Gigafactory 3. Not exactly a bet I want to take (if the technology is unprofitable in the USA, why would it be more profitable if you made a similar factory in China?? Musk should have focused on profitability in Nevada before expanding...
- toomuchtodo 7y ago
  Refinancing their bonds at a lower interest rate is an entirely reasonable business decision vs having to pay them off. Cash flow is king, do whatever possible to maximize it.
  - dragontamer 7y ago
    > Refinancing their bonds at a lower interest rate is an entirely reasonable business decision vs having to pay them off. Tesla's 2019 Bonds were initially 0.25%. They were rolled over into 2.00% bonds due 2024. Furthermore, Tesla paid hundreds-of-millions of dollars for this opportunity. I've seen estimates suggest that the "real" price (once the hundreds-of-millions are factored in) suggests a "real price" of ~8% on the 2024 bonds. (That is, pretending that the hundreds-of-millions Tesla paid for the opportunity to borrow money is instead "part of the bond", and suddenly the 2% bond is really closer to a traditional 8% bond). https://www.bloomberg.com/news/articles/2019-05-03/tesla-raises-2-35-billion-in-boosted-debt-stock-offerings-jv82k0mf https://www.bloomberg.com/news/articles/2019-05-03/tesla-rai... Look: I get it. They didn't make money from the Nevada Gigafactory and needed the cash severely to fund Gigafactory 3 in Shanghai. I'm just saying that when all of this debt hits them come 2022 (let alone the 2024 "recycled" debt to pay off 2019) Tesla will be in a much worse position.
navigatesol 7y ago
>I have trouble squaring this ostensibly fantastic news with the constant dire predictions about the stock. The problem isn't the "stock". It's the financials of the company that are an issue. >simply overpriced If you think they'll have half a million self-driving, appreciating robo-taxis on the road next year, it's probably cheap. I happen to think that ain't gonna happen. >is Tesla the company in danger of going bankrupt? 16 years of losses so far. But they've been able to continue to find financing for now. That (We)works until it doesn't.
- jtaillon 7y ago
  Or it turns Jeff Bezos into the richest man in the world... Anecdata can go both ways!
  - bb822 7y ago
    The inanity of the comparison knows no end... If you think Tesla and Amazon are similar businesses in any way, I have a short-term, tech-enabled, real-estate company to sell you, too.
hw 7y ago
I don't think Tesla is in real danger of going bankrupt. Investors are going to continue to throw money at their bond offerings and Tesla itself is close to becoming profitable. Much of it hinges on China where it's built a factory for domestic production, however China is going to be tough given how competitive the EV landscape is over there. I own a M3 and I do think it's really an underpriced car for what it offers. With the new v10 update I've spent a few nights watching Netflix in my garage and it's such a great experience - who needs a theater room in the house? Tesla can (and should) raise the prices of the M3 by 10% and I believe they'll still be able to sell.
- sergiosgc 7y ago
  An M3 is not a good nickname for a Model 3, as it is a name taken by an icon in the auto-world: https://en.wikipedia.org/wiki/BMW_M3 https://en.wikipedia.org/wiki/BMW_M3
  - scrumbledober 7y ago
    this is one of my pet peeves. The tesla subreddit (well, the teslamotors subreddit) is chock full of people referring to the model 3 as an M3. Another smaller but lesser example is people referring to Destiny 2 as D2 (especially when Des2ny was right there). I think the best abbreviation for the model 3 is TM3. Not to be confused with TM03, swords dance.
    - xeromal 7y ago
      I hate the M3 moniker too. It's a model 3 or TM3 like you said.
- electrograv 7y ago
  With the price difference between a Model 3 and a regular car, you could install an entire theater room system with absolutely top-of-the-line sound quality and power, a cutting-edge HDR projector (or a big OLED TV) which would absolutely put to shame anything the Model 3 can do as a theater experience. I think it’s cool that Tesla is finding new ways of getting value out of their cars, but to answer your question: Many people would prefer a proper theater or music experience. Also, while Tesla’s sound quality is among the best out there for cars, no car audio can hold a candle to the music (or theater) sound quality you can get from large high-quality speakers (far too large to fit in any car) in a well-damped room (with acoustic treatments if necessary, e.g. if you have hard floors or too many windows). You could install the best speakers in the world in a car, but it would still sound worse than in an average house due to all the acoustically reflective surfaces at many angles (e.g. glass) and oddly shaped compartment which distorts the sound in ways that cannot be perfectly corrected even with DSP.
electriclove 7y ago
Tesla is focused on growth (and not profit) at this time. So the stock has that pressure on it. Tesla is worth about the same amount as GM and GM sold almost 10 million vehicles in 2017. It isn't so simple though and a crude analogy could be made for Amazon and Walmart 20 years ago. I don't think profit will be the focus for a while as they keep investing in new tech, new factories, new product lines. All of those things will increase the potential for Tesla and its stock. Back seat quarterbacking.. but they might want to strategically focus a little bit on profit though (show profit -> get added to S&P 500 -> more stable stock price).
- dragontamer 7y ago
  You are mistaken. Growth / Capital Expenditures count as $0 on the income sheets. Pay for a $5 Billion factory, and it cost you $0 in terms of profit. -------- A $5 Billion factory will cause $5 Billion of negative CASH FLOW. But it won't actually change "net profit" at all. Tesla is losing money at the operational level: their superchargers and high-end mall space is too expensive, and their margins are too thin. -------- On the asset sheets, consider what happens when you pay for a $5 Billion factory. You lose $5 Billion in cash, but you GAIN a $5 Billion factory. So +$5Billion factory - $5 Billion cash == $0 on the bottom line.

solean 7y ago

I wouldn't worry at all about not being able to maintain it. Worst case scenario: they get acquired and VW/Apple/etc will service your car. The brand is too valuable to die at this point.

dsfyu404ed 7y ago
Just because the brand lives on doesn't mean the old tooling that makes the replacement parts didn't get sold to someone who will turn it into ball bearings during the liquidation and reorganization. That said, considering how good Tesla isn't at supplying parts to their own shops (let alone the aftermarket) having Dorman (or whoever, but this would be a very Dorman thing to do) acquire all the body dies at some post-bankruptcy liquidation sale and start cranking them out from a factory in China could very well wind up being better for parts availability than the current situation.
owenmarshall 7y ago
You have a very optimistic definition of “worst case scenario”. If Tesla is acquired I would imagine it would be for IP; I could easily see the brand going away with the billions of debt.

wlesieutre 7y ago

I have no idea about Tesla's long term prospects, but the maintenance question reminded me of this story about keeping their original Roadsters running: https://www.roadandtrack.com/new-cars/a28819221/tesla-roadster-repair-carl-medlock/ https://www.roadandtrack.com/new-cars/a28819221/tesla-roadst... >There are unique challenges that come with working on these cars. You might have to rebuild a circuit board one day, and fabricate a new hood the next day. Actually, if any body parts are damaged, you'll have to fabricate them. Tesla doesn't sell parts to anyone, so Medlock has taken to fashioning new panels out of carbon fiber himself.

jcfrei 7y ago

Tesla has a market cap in between Ford and GM. Their share price most likely reflects an expectation of even more sales in the future.

bryanlarsen 7y ago
Enterprise Value (shares + debt) is a much better measure of company size than just the share value alone. By that measure, Tesla is about a third of the size of Ford & GM. (50Billion vs 150Billion)

martinald 7y ago

Problem is Tesla is losing billions of dollars selling these cars currently with no real profitability in sight. Tesla also has $11bn+ of debt on its balance sheet. Elon keeps promising profitability but then misses it badly.

beat 7y ago
Tesla is a growth company. Being "profitable" is irrational and stupid. They should be farming every cent they make into production, borrowing every cent that will be loaned, and selling stock. Why turn a $1.00 into $1.10 this year when you can turn it into $15 in ten years? This is how startups and growth companies work. Profitability is a very narrowminded view of how to run a company. The goal isn't to turn a profit next year. The goal is to become a bigger company than Apple, to wipe out entire car companies in the process, and to change how we power the cars we drive.
- adwn 7y ago
  > Why turn a $1.00 into $1.10 this year when you can turn it into $15 in ten years? Because there's a very good chance you go bankrupt in year 3, turning your $1.00 into $0.00 instead of $15. > Being "profitable" is irrational and stupid. [...] Profitability is a very narrowminded view of how to run a company. What a weird, weird thing to say. As if it were straight out of the Silicon Valley TV show.
  - 1123581321 7y ago
    Think of Tesla as maximizing the expected value of its entire profitability over its lifetime. Although you would like it to cease investing in new cars and maximize its profitability now, it has a good chance of making a lot more money by continuing to invest in itself. The odds are good that there will be a generation of Tesla cars which primary job is to make money for shareholders, and they will make so much more than is possible now (we can look at the existing automakers for examples of this level of earnings) that the profits exceed the present value of possible profits. It’s different than the scenarios parodied in Silicon Valley, where companies with no business model, who can’t be profitable with their product, posture in order to be acquired to the extent that their founders believe the posturing.

dragontamer 7y ago

> Is it just the stock is considered by some people to be simply overpriced, or is Tesla the company in danger of going bankrupt? Not immediate danger, but Tesla has never made a yearly profit in this entire decade. The two profitable quarters (Q3 2018 / Q4 2018) were completely wiped out by awful performance in Q1 2019. If things keep going the way they're going, I'd estimate Tesla only has maybe till 2022 or 2023. That's enough time to turn the company around, but you can only lose billions-of-dollars / year for so long before the whole shebang collapses. My 2022 estimate is based on two things: 1. December 2020 is SolarCity's last bond. Most likely, Musk will find a way to avoid paying for the bond IMO (probably rolling off SolarCity as a subsidiary or something), limiting the damage to Tesla. 2. March 2021 is the next major bond repayment, initially taken out for the Nevada Gigafactory. Musk is pretty good about raising money, but after shenanigans with Dec 2020, I'm not sure if the market will be so forgiving. Banks would rather him succeed however, so I expect a kind of "One last chance" here. 3. March 2022 is the next major bond repayment. 4. If Tesla survives past 2022, they have over a full year before 2024 and 2025 bond repayments kick in again. Tesla's next major tests are about whether or not they can pay back the 2021 / 2022 bonds. Well, not necessarily "pay back", but they should be making a profit and not just "borrowing more money to pay off older bonds". If the market realizes that Tesla is exponentially losing money here, they'll be in a bad spot. That gives all of 2020 for Tesla to turn around. The Model 3 has proven unprofitable in the USA, the only hope is Chinese sales through the $5 Billion Gigafactory 3. Not exactly a bet I want to take (if the technology is unprofitable in the USA, why would it be more profitable if you made a similar factory in China?? Musk should have focused on profitability in Nevada before expanding...

toomuchtodo 7y ago
Refinancing their bonds at a lower interest rate is an entirely reasonable business decision vs having to pay them off. Cash flow is king, do whatever possible to maximize it.
- dragontamer 7y ago
  > Refinancing their bonds at a lower interest rate is an entirely reasonable business decision vs having to pay them off. Tesla's 2019 Bonds were initially 0.25%. They were rolled over into 2.00% bonds due 2024. Furthermore, Tesla paid hundreds-of-millions of dollars for this opportunity. I've seen estimates suggest that the "real" price (once the hundreds-of-millions are factored in) suggests a "real price" of ~8% on the 2024 bonds. (That is, pretending that the hundreds-of-millions Tesla paid for the opportunity to borrow money is instead "part of the bond", and suddenly the 2% bond is really closer to a traditional 8% bond). https://www.bloomberg.com/news/articles/2019-05-03/tesla-raises-2-35-billion-in-boosted-debt-stock-offerings-jv82k0mf https://www.bloomberg.com/news/articles/2019-05-03/tesla-rai... Look: I get it. They didn't make money from the Nevada Gigafactory and needed the cash severely to fund Gigafactory 3 in Shanghai. I'm just saying that when all of this debt hits them come 2022 (let alone the 2024 "recycled" debt to pay off 2019) Tesla will be in a much worse position.

navigatesol 7y ago

>I have trouble squaring this ostensibly fantastic news with the constant dire predictions about the stock. The problem isn't the "stock". It's the financials of the company that are an issue. >simply overpriced If you think they'll have half a million self-driving, appreciating robo-taxis on the road next year, it's probably cheap. I happen to think that ain't gonna happen. >is Tesla the company in danger of going bankrupt? 16 years of losses so far. But they've been able to continue to find financing for now. That (We)works until it doesn't.

jtaillon 7y ago
Or it turns Jeff Bezos into the richest man in the world... Anecdata can go both ways!
- bb822 7y ago
  The inanity of the comparison knows no end... If you think Tesla and Amazon are similar businesses in any way, I have a short-term, tech-enabled, real-estate company to sell you, too.

hw 7y ago

I don't think Tesla is in real danger of going bankrupt. Investors are going to continue to throw money at their bond offerings and Tesla itself is close to becoming profitable. Much of it hinges on China where it's built a factory for domestic production, however China is going to be tough given how competitive the EV landscape is over there. I own a M3 and I do think it's really an underpriced car for what it offers. With the new v10 update I've spent a few nights watching Netflix in my garage and it's such a great experience - who needs a theater room in the house? Tesla can (and should) raise the prices of the M3 by 10% and I believe they'll still be able to sell.

sergiosgc 7y ago
An M3 is not a good nickname for a Model 3, as it is a name taken by an icon in the auto-world: https://en.wikipedia.org/wiki/BMW_M3 https://en.wikipedia.org/wiki/BMW_M3
- scrumbledober 7y ago
  this is one of my pet peeves. The tesla subreddit (well, the teslamotors subreddit) is chock full of people referring to the model 3 as an M3. Another smaller but lesser example is people referring to Destiny 2 as D2 (especially when Des2ny was right there). I think the best abbreviation for the model 3 is TM3. Not to be confused with TM03, swords dance.
  - xeromal 7y ago
    I hate the M3 moniker too. It's a model 3 or TM3 like you said.
electrograv 7y ago
With the price difference between a Model 3 and a regular car, you could install an entire theater room system with absolutely top-of-the-line sound quality and power, a cutting-edge HDR projector (or a big OLED TV) which would absolutely put to shame anything the Model 3 can do as a theater experience. I think it’s cool that Tesla is finding new ways of getting value out of their cars, but to answer your question: Many people would prefer a proper theater or music experience. Also, while Tesla’s sound quality is among the best out there for cars, no car audio can hold a candle to the music (or theater) sound quality you can get from large high-quality speakers (far too large to fit in any car) in a well-damped room (with acoustic treatments if necessary, e.g. if you have hard floors or too many windows). You could install the best speakers in the world in a car, but it would still sound worse than in an average house due to all the acoustically reflective surfaces at many angles (e.g. glass) and oddly shaped compartment which distorts the sound in ways that cannot be perfectly corrected even with DSP.

electriclove 7y ago

Tesla is focused on growth (and not profit) at this time. So the stock has that pressure on it. Tesla is worth about the same amount as GM and GM sold almost 10 million vehicles in 2017. It isn't so simple though and a crude analogy could be made for Amazon and Walmart 20 years ago. I don't think profit will be the focus for a while as they keep investing in new tech, new factories, new product lines. All of those things will increase the potential for Tesla and its stock. Back seat quarterbacking.. but they might want to strategically focus a little bit on profit though (show profit -> get added to S&P 500 -> more stable stock price).

dragontamer 7y ago
You are mistaken. Growth / Capital Expenditures count as $0 on the income sheets. Pay for a $5 Billion factory, and it cost you $0 in terms of profit. -------- A $5 Billion factory will cause $5 Billion of negative CASH FLOW. But it won't actually change "net profit" at all. Tesla is losing money at the operational level: their superchargers and high-end mall space is too expensive, and their margins are too thin. -------- On the asset sheets, consider what happens when you pay for a $5 Billion factory. You lose $5 Billion in cash, but you GAIN a $5 Billion factory. So +$5Billion factory - $5 Billion cash == $0 on the bottom line.