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With each car they get a lifetime of service revenue, mostly without competition. They expand their network effect, their supercharger footprint, and their tech

With each car they get a lifetime of service revenue, mostly without competition. They expand their network effect, their supercharger footprint, and their technology lead as they maintain momentum. Cybertruck is poised to be a giant success, reaching into new markets outside of traditional EV buyers and into rural and suburban light trucks, the highest margin section of auto sales. Finally, its prominence attracts unsophisticated, long position investors. Perhaps it’s still overvalued beyond all of those factors. If you feel strongly about that, why not take out a short position?

sombremesa 7y ago
> Perhaps it’s still overvalued beyond all of those factors. If you feel strongly about that, why not take out a short position? The issue with that is that GP is arguing that this stock's investors continue to behave irrationally. There is no reason to believe they are going to suddenly behave rationally. Thus, a short position is inadvisable. If you are a value investor, the right thing to do is to just not invest in it.
- rjkennedy98 7y ago
  > why not take out a short position? To quote John Maynard Keynes, “The market can stay irrational longer than you can stay solvent"
  - mlyle 7y ago
    Yup. And the cost of time on Tesla options right now is insane. $590 puts for April cost ~$66.
    - n00b590 7y ago
      That's not the cost of time you're seeing; it's the implied volatility.
      - mlyle 7y ago
        Sorry for the delayed response--- didn't see your comment. An option's value is its intrinsic value, plus its time value. The time value of an option is mostly sigma, yes. https://en.wikipedia.org/wiki/Option_time_value#Time_value https://en.wikipedia.org/wiki/Option_time_value#Time_value
- medbrane 7y ago
  So you are saying that the opposite (a long position) is advisable? But that would make the current investors behavior a rational one, right?
  - sombremesa 7y ago
    > If you are a value investor, the right thing to do is to just not invest in it. I'm not sure how you got your conclusion out of what I said.
- Voloskaya 7y ago
  > The issue with that is that GP is arguing that this stock's investors continue to behave irrationally. Can we stop pretending that any part of the market behaves rationnally? Investors buy a stock because they think there will be someone else to buy it from them at a higher price later, that's it, they don't look further. Everyone was already complaining about this when $TSLA was at 50$ a share...
- whack 7y ago
  If you're investing with a 5 year time horizon, sure. If you're investing with a 20-30 year time horizon, and you're convinced that Tesla is overvalued, you should absolutely short it. Whatever "reality distortion" you are suspecting, is not going to last for 20 years. Eventually, when the promised profits and growth fail to materialize, the stock price will drop back down to its fundamentals and you will make a killing (if you're right) Every time this discussion happens, people trot out the quote about markets staying irrational longer than you staying solvent. This quote is only ever relevant if you're leveraged, or if you're at risk of someone else forcing you to exit your short position. If you're an individual investor with a 20 year time horizon, shorting a stock with less than 5% of your portfolio, you don't have to worry about either. You absolutely can stay solvent longer than the market can stay irrational. The real reason people don't go shorting TSLA nearly as much as you would think, is because Tesla's future isn't nearly close to a foregone conclusion. It's a lot more fun to make bold predictions with absolute confidence when you don't have anything to lose.
  - kgwgk 7y ago
    > If you're investing with a 20-30 year time horizon, and you're convinced that Tesla is overvalued, you should absolutely short it. Do you understand how shorting works? If you had shorted $10k of TSLA stock in May you would have lost $23k by now (it's not just a paper loss, you have to post collateral to avoid liquidation). And you also have to pay to borrow the stock you're shorting, so even if you don't face a margin call time goes against you. Edit: By the way, if you had opened in May a short position in TSLA that represented 5% of your portfolio it would be 15% of your portfolio now. That's another problem of shorts: as they move against you they get bigger and at some point you may want to worry.
    - whack 7y ago
      Do you understand how portfolio management works? You run the risk of losses with any investment you make. If the size of your short position is less than 5% of your portfolio, you still have the other 95% that you can use to cover any temporary losses.
agumonkey 7y ago
> Cybertruck have they published pre-orders numbers ? I thought it was pretty much a PR stunt without any real product line behind.
- kire2345 7y ago
  250k 100€ refundable deposits
- 51Cards 7y ago
  Last number I heard was 250K pre-orders in November. That said the pre-order buy in was crazy cheap and just gets you a spot on the waiting list. I spend a fair amount of time in automotive circles though and interest in this truck is big. I'm expecting significant sales.
- jfengel 7y ago
  It's not exactly a "stunt". The vehicles aren't expected until 2021 at the earliest, but it's not vaporware. There are over 250,000 pre-orders, but for just $100. Many of those are aspirational and won't actually turn into orders, but it demonstrates that a lot of people are interested enough to put money on the line, and many more people are interested but not willing to reserve a spot in line. Since it will take quite some time for them to produce 250,000 Cybertrucks, the pre-orders suffice to suggest that they can sell pretty much all they can produce for the first few years at least.
close04 7y ago
> a lifetime of service revenue That's a fraction of what a regular ICE car brings in. Unless you include a battery swap an EV is unlikely to be able to command the same maintenance costs over its lifetime. That's actually one of the big pro-EV arguments, isn't it? And having exclusivity on service revenue doesn't necessarily have to work in their favor if the network of garages is not extensive enough. People also want convenience and if you're locked in to a service network that can't deliver it you may only do it until the next purchase. There's only so much exclusivity you can impose until the market starts to reject you locking them in or you cross a legal boundary (think "right to repair" type discussions). I think the valuation is based on the expectation that the trend continues, Tesla will stay market leader for EVs. If that's the case and they maintain or expand their lead as the market grows than the current valuation might even be too small. If not it will probably stabilize somewhere lower, just like any other car manufacturer not at the top today.
IanDrake 7y ago
Keeping in mind, part of the gains are from shorts being squeezed.
specialp 7y ago
A lot of people have taken a short position and that is driving a lot of this gain. The shorts are getting squeezed bad and have to cover thus further driving up the price. It is a lot harder to make a long term short bet due to the potential of unlimited loss and your shares being recalled. Tesla has done better than expected with the Model 3 despite overpromising a lot and missing a lot of targets. Actually just last year Elon said he was leasing model 3's now to buy them back for a fleet of robotaxis that will start this year (LOL). But he has the hype and people's attention. It is just hard to time when that cycle will collapse.
- cobookman 7y ago
  VW had a similar short run up. https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I920081028 https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I92...
jfengel 7y ago
Though part of the point of a Tesla is that it requires less service than an ICE vehicle. It doesn't need oil changes and its brakes last basically forever. It lacks belts and gears to wear out. It only has around 20 moving parts all told. Apparently, non-Tesla EVs are having trouble selling for precisely that reason. Dealers expect to sell the cars with only modest profit, but make revenue on maintenance. EVs require less maintenance, and so the dealers don't feature them. That's yet another reason Tesla vehicles are good value, and if they can capture a major piece of the $4 trillion yearly car market[1], that makes a $100B valuation seem quite reasonable -- even without a dime of service revenue. [1] https://www.ibisworld.com/global/market-research-reports/global-car-automobile-sales-industry/ https://www.ibisworld.com/global/market-research-reports/glo...
UncleMeat 7y ago
I really don’t like the “well if you feel strongly why don’t you short” argument. I think it is insane that Tesla is worth so much. But shorting stocks is not part of the asset allocation that meets my long term goals and needs. I can certainly believe something without wanting to bet on it.
- sf_rob 7y ago
  I'd add shorting is expensive (borrowing fees or volatility premium on options) and more complex (margin/option approval etc). Plus the old adage that the market can remain irrational longer than you can remain solvent.
- jasonlingx 7y ago
  The thing is the market only cares about the opinion of those who put their money where their mouth is.
ganzuul 7y ago
You've got a lot of nerve calling buy-and-hold unsophisticated.
- reilly3000 7y ago
  I don't think buy-and-hold is unsophisticated or an incorrect approach. I hoped to mean that Tesla stock buyers may not be very analytical or make decisions based on stock fundamentals, but instead make investment decisions based on intangibles. Clearly anybody who took a position and held on is looking pretty smart right now, and a lot of market pros aren't.

sombremesa 7y ago

> Perhaps it’s still overvalued beyond all of those factors. If you feel strongly about that, why not take out a short position? The issue with that is that GP is arguing that this stock's investors continue to behave irrationally. There is no reason to believe they are going to suddenly behave rationally. Thus, a short position is inadvisable. If you are a value investor, the right thing to do is to just not invest in it.

rjkennedy98 7y ago
> why not take out a short position? To quote John Maynard Keynes, “The market can stay irrational longer than you can stay solvent"
- mlyle 7y ago
  Yup. And the cost of time on Tesla options right now is insane. $590 puts for April cost ~$66.
  - n00b590 7y ago
    That's not the cost of time you're seeing; it's the implied volatility.
    - mlyle 7y ago
      Sorry for the delayed response--- didn't see your comment. An option's value is its intrinsic value, plus its time value. The time value of an option is mostly sigma, yes. https://en.wikipedia.org/wiki/Option_time_value#Time_value https://en.wikipedia.org/wiki/Option_time_value#Time_value
medbrane 7y ago
So you are saying that the opposite (a long position) is advisable? But that would make the current investors behavior a rational one, right?
- sombremesa 7y ago
  > If you are a value investor, the right thing to do is to just not invest in it. I'm not sure how you got your conclusion out of what I said.
Voloskaya 7y ago
> The issue with that is that GP is arguing that this stock's investors continue to behave irrationally. Can we stop pretending that any part of the market behaves rationnally? Investors buy a stock because they think there will be someone else to buy it from them at a higher price later, that's it, they don't look further. Everyone was already complaining about this when $TSLA was at 50$ a share...
whack 7y ago
If you're investing with a 5 year time horizon, sure. If you're investing with a 20-30 year time horizon, and you're convinced that Tesla is overvalued, you should absolutely short it. Whatever "reality distortion" you are suspecting, is not going to last for 20 years. Eventually, when the promised profits and growth fail to materialize, the stock price will drop back down to its fundamentals and you will make a killing (if you're right) Every time this discussion happens, people trot out the quote about markets staying irrational longer than you staying solvent. This quote is only ever relevant if you're leveraged, or if you're at risk of someone else forcing you to exit your short position. If you're an individual investor with a 20 year time horizon, shorting a stock with less than 5% of your portfolio, you don't have to worry about either. You absolutely can stay solvent longer than the market can stay irrational. The real reason people don't go shorting TSLA nearly as much as you would think, is because Tesla's future isn't nearly close to a foregone conclusion. It's a lot more fun to make bold predictions with absolute confidence when you don't have anything to lose.
- kgwgk 7y ago
  > If you're investing with a 20-30 year time horizon, and you're convinced that Tesla is overvalued, you should absolutely short it. Do you understand how shorting works? If you had shorted $10k of TSLA stock in May you would have lost $23k by now (it's not just a paper loss, you have to post collateral to avoid liquidation). And you also have to pay to borrow the stock you're shorting, so even if you don't face a margin call time goes against you. Edit: By the way, if you had opened in May a short position in TSLA that represented 5% of your portfolio it would be 15% of your portfolio now. That's another problem of shorts: as they move against you they get bigger and at some point you may want to worry.
  - whack 7y ago
    Do you understand how portfolio management works? You run the risk of losses with any investment you make. If the size of your short position is less than 5% of your portfolio, you still have the other 95% that you can use to cover any temporary losses.

agumonkey 7y ago

> Cybertruck have they published pre-orders numbers ? I thought it was pretty much a PR stunt without any real product line behind.

kire2345 7y ago
250k 100€ refundable deposits
51Cards 7y ago
Last number I heard was 250K pre-orders in November. That said the pre-order buy in was crazy cheap and just gets you a spot on the waiting list. I spend a fair amount of time in automotive circles though and interest in this truck is big. I'm expecting significant sales.
jfengel 7y ago
It's not exactly a "stunt". The vehicles aren't expected until 2021 at the earliest, but it's not vaporware. There are over 250,000 pre-orders, but for just $100. Many of those are aspirational and won't actually turn into orders, but it demonstrates that a lot of people are interested enough to put money on the line, and many more people are interested but not willing to reserve a spot in line. Since it will take quite some time for them to produce 250,000 Cybertrucks, the pre-orders suffice to suggest that they can sell pretty much all they can produce for the first few years at least.

close04 7y ago

> a lifetime of service revenue That's a fraction of what a regular ICE car brings in. Unless you include a battery swap an EV is unlikely to be able to command the same maintenance costs over its lifetime. That's actually one of the big pro-EV arguments, isn't it? And having exclusivity on service revenue doesn't necessarily have to work in their favor if the network of garages is not extensive enough. People also want convenience and if you're locked in to a service network that can't deliver it you may only do it until the next purchase. There's only so much exclusivity you can impose until the market starts to reject you locking them in or you cross a legal boundary (think "right to repair" type discussions). I think the valuation is based on the expectation that the trend continues, Tesla will stay market leader for EVs. If that's the case and they maintain or expand their lead as the market grows than the current valuation might even be too small. If not it will probably stabilize somewhere lower, just like any other car manufacturer not at the top today.

IanDrake 7y ago

Keeping in mind, part of the gains are from shorts being squeezed.

specialp 7y ago

A lot of people have taken a short position and that is driving a lot of this gain. The shorts are getting squeezed bad and have to cover thus further driving up the price. It is a lot harder to make a long term short bet due to the potential of unlimited loss and your shares being recalled. Tesla has done better than expected with the Model 3 despite overpromising a lot and missing a lot of targets. Actually just last year Elon said he was leasing model 3's now to buy them back for a fleet of robotaxis that will start this year (LOL). But he has the hype and people's attention. It is just hard to time when that cycle will collapse.

cobookman 7y ago
VW had a similar short run up. https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I920081028 https://www.reuters.com/article/us-volkswagen-idUSTRE49R3I92...

jfengel 7y ago

Though part of the point of a Tesla is that it requires less service than an ICE vehicle. It doesn't need oil changes and its brakes last basically forever. It lacks belts and gears to wear out. It only has around 20 moving parts all told. Apparently, non-Tesla EVs are having trouble selling for precisely that reason. Dealers expect to sell the cars with only modest profit, but make revenue on maintenance. EVs require less maintenance, and so the dealers don't feature them. That's yet another reason Tesla vehicles are good value, and if they can capture a major piece of the $4 trillion yearly car market[1], that makes a $100B valuation seem quite reasonable -- even without a dime of service revenue. [1] https://www.ibisworld.com/global/market-research-reports/global-car-automobile-sales-industry/ https://www.ibisworld.com/global/market-research-reports/glo...

UncleMeat 7y ago

I really don’t like the “well if you feel strongly why don’t you short” argument. I think it is insane that Tesla is worth so much. But shorting stocks is not part of the asset allocation that meets my long term goals and needs. I can certainly believe something without wanting to bet on it.

sf_rob 7y ago
I'd add shorting is expensive (borrowing fees or volatility premium on options) and more complex (margin/option approval etc). Plus the old adage that the market can remain irrational longer than you can remain solvent.
jasonlingx 7y ago
The thing is the market only cares about the opinion of those who put their money where their mouth is.

ganzuul 7y ago

You've got a lot of nerve calling buy-and-hold unsophisticated.

reilly3000 7y ago
I don't think buy-and-hold is unsophisticated or an incorrect approach. I hoped to mean that Tesla stock buyers may not be very analytical or make decisions based on stock fundamentals, but instead make investment decisions based on intangibles. Clearly anybody who took a position and held on is looking pretty smart right now, and a lot of market pros aren't.