7 ms·

This article is the perfect example of why why the financial industry and looking at the bottom-line so often falls short of the entire picture. If you think th

This article is the perfect example of why why the financial industry and looking at the bottom-line so often falls short of the entire picture. If you think the value of Tesla is in its current line of vehicles you completely miss the point. The Roadster, Model S and Model X aren't Tesla's real value proposition, despite the numerous awards they've won and the incredible cars they are; those were merely the entrance fee. And yes, I realize this is exactly what people were saying when the .com bubble happened, but Tesla is turning a profit on a small scale, and the potential for it to profitably scale up is obvious. Before Tesla, very few people took electric cars seriously, for a few reasons: 1. Small range. 2. Too high cost for the car. 3. Looked cheap/corny. 4. Impossible to make long roadtrips. In short, electric cars used to be toy cars. The purpose of Tesla's fist three models wasn't to make a bunch of money, but to change both the reality and the perception of electric cars; to show that they could be a desirable and economically feasible daily driver, and they nailed it. The above points are less true with each model and other incremental advancement (supercharger network, charging station) Tesla releases. I would unashamedly invest in Tesla, not because its earnings are so stellar, but because it has begun to crack the code and reinvent the entire automobile industry.

acgourley 13y ago
I want to believe you, as I also love TESLA - but I also observe that on average "bottom line" analysis beats out your kind of analysis - e.g. when you compare market returns vs VC returns. The best VCs may out perform the best "bottom line" investor (I have no idea, but it seems possible), but unless you're sure you're world class, how can you be so confident in your analysis?
- tslathrow 13y ago
  VCs on average underperform retail investors on average On a liquidity-adjusted basis, VCs underperform by a wide margin
potatolicious 13y ago
You're still ignoring the big elephant in the room: Is Tesla worth more than Fiat, is it worth half of GM? In its current state, with its current sales, of course not. But with its potential state, its reinvention of automobiles, is it? That part is very, very hard to say. In a world where Tesla was the only real electric car player, sure, we know electric is the way forward. But their competitors aren't incompetent, and they aren't sitting still. We are seeing full-EV cars come out of every major car manufacturer, and they're improving rapidly. We also know that the high end of the electric car market is just a test environment, the real battle will be fought in the "regular car" market. Not the Roadster, not the Model S, and not the new SUV. Tesla may have beaten everyone to the punch and built incredible luxury automobiles, but can it beat the incumbents when pricing pressure is very real, and very heavy? I believe in electric cars, but I am very skeptical that Tesla will beat GM, Ford, Chrysler, Nissan, Toyota, Honda, Volkswagen, and Hyundai in the low/mid-end. I'm also skeptical that they can maintain their current lead when luxury automakers like BMW and Daimler want a slice of the pie. Tesla surely has done a lot to dispel the negative connotations of electric cars, but where they go from here is anyone's guess. There is way too much uncertainty to IMO justify such an insane valuation. Think about it this way: Apple was first to market with the iPhone, a device that dispelled many perceptions about smartphones being stupid, clunky, and only for businesspeople. It was beautiful, and it was a wild departure from anything seen up until that point - and most importantly, it was incredibly well executed. For a little while it looked like the iPhone was going to swallow the world. And then Android showed up and completely ate the low and mid-end markets. Apple isn't dead by any means, and perceptually they are still the top dog in town, but anyone who bet on Apple assuming majority market share is now, well, wrong. In Apple's case, the competitor sort of came out of nowhere - Android I don't think was a serious contender on anyone's radar initially. In Tesla's case, they are going up against very experienced, very wealthy, and very serious competitors - competitors who have in recent years demonstrated their ability to adapt to market conditions and turn themselves around. Anyone who still sees the big automakers are stodgy and unable to change should go look at what the Ford Motor Co has done recently.
- bluedevil2k 13y ago
  You've hit the nail on the head - everyone believes that electric cars will be the predominant type of car sold 20 years from now, but who's to say that Tesla will be the market leader at that point? It would be naive to think that GM, Ford, Toyota, Honda, etc. can't quickly catch up and pass a small company like Tesla. I wish I could find it, but Warren Buffet had a great quote about new technologies. He said, roughly, that even when everyone knows a new technology is the future, it's still impossible to predict what company will win, and therefore which stock to invest in. He gave many examples: airplanes, radio, television, cars, computers.
DEinspanjer 13y ago
I think that the article did a very good job of not tying the investment advice to some derisive comment about the company itself. It sounds like you believe the opposite? I own a Model S, but I do not have a position on their stock. I was interested in doing so, but when it was feasible for me, I felt the stock was already much higher than it would be able to sustain for the long term. Are you saying that you believe purchasing the stock at its current price would be a good long term position to take? I find it difficult to believe that the stock could stay at or above this value for the long term. I do believe it will climb significantly from whatever position it is at when the Model X and the G3 models come out, but I would be very surprised if it was still this high just before that happens.
aclements18 13y ago
While I am a huge fan of Tesla, and Musk, I think your reasoning is a bit unsubstantiated. While most analysts who don't have their head in the sand would agree that Tesla is an awesome company and has years of explosive growth ahead, there has to be some numerical concept that helps you distinguish a good company from a good investment. The key concern is all your points still apply if the stock price was $500, instead of $180. At that point would you still invest? Another way to think of it: If I were to give you one lump sum for half of all of your future earnings (salaries, bonuses, gifts) what would a be a reasonable price that you would sell that to me for? You could be a very capable professional with a lot of earning potential but there is still an upper limit on what I should pay if I plan to come out profitable, correct?
loceng 13y ago
To add to this, Elon is creating to demand for electric. He's too hoping, wanting, needing competitors to start directing money in this area to add more value to the ecosystem - as it lessens the cost overall, and Tesla is a supplier of electric vehicle parts as well. They're working on a $30k model, which then everyone will be able to afford it. It will be a matter of lining up balance sheets to be able to afford creating additional factories for millions of cars per year. They're moving towards this tipping point, and have been extremely successful in terms of moving everything forward. For reference, their current plant is capable of producing 500,000 vehicles per year. That equates to $15 billion annual revenue if just selling the $30k model. The cost of owning a Tesla / electric car when you get free charging at Tesla stations, or electric charging from the grid in general are dramatically less than paying for gas - and the costs will only go down. And the fact that these vehicles are good for the environment, good for you ... and they're quiet, and they'll last longer (fewer moving parts), etc.. People who don't understand the value of what's being done either haven't thought through it, or don't have the capacity to think holistically - to take the full scope into account.
- astrowilliam 13y ago
  I absolutely love Tesla, but saying 30,000 is in everyones price range is a little off. Look at Fords lowest price vehicle, around 14k. Tesla can not compete with that at this time. There are plenty of other factors that go into purchasing a vehicle than price which include being able to go to a showroom and test drive a car. I have to travel at least 5 hours to see a Tesla dealership, I love Tesla, but I won't be driving 5 hours to go to a dealership to test drive one. I just don't have the time. In order to get a normal American family in a Tesla the price has to come down to the ~20-25k range.
  - 001sky 13y ago
    I have to travel at least 5 hours to see a Tesla dealership, I love Tesla, but I won't be driving 5 hours to go to a dealership to test drive one. Nor would you be driving one home, unless it's on a flatbed.
Mikeb85 13y ago
Tesla is already valued with the expectation that profits will be much, much higher than current levels...
codex 13y ago
The LEAF has sold 70,000 copies worldwide. Based on sales volume, you could argue Nissan is the electric car leader.
Mikeb85 13y ago
2 and 4 are still true for alot of people. Using the range calculator on Tesla's website, a day ski trip would still be very difficult if not impossible. The range, especially in the cold with the heat on (and it gets much colder here than 32 degrees), just isn't enough... And the nearest city is ~250 miles away, which is really pushing the range, especially with the speed limit of 70 mph in the cold...

acgourley 13y ago

I want to believe you, as I also love TESLA - but I also observe that on average "bottom line" analysis beats out your kind of analysis - e.g. when you compare market returns vs VC returns. The best VCs may out perform the best "bottom line" investor (I have no idea, but it seems possible), but unless you're sure you're world class, how can you be so confident in your analysis?

tslathrow 13y ago
VCs on average underperform retail investors on average On a liquidity-adjusted basis, VCs underperform by a wide margin

potatolicious 13y ago

You're still ignoring the big elephant in the room: Is Tesla worth more than Fiat, is it worth half of GM? In its current state, with its current sales, of course not. But with its potential state, its reinvention of automobiles, is it? That part is very, very hard to say. In a world where Tesla was the only real electric car player, sure, we know electric is the way forward. But their competitors aren't incompetent, and they aren't sitting still. We are seeing full-EV cars come out of every major car manufacturer, and they're improving rapidly. We also know that the high end of the electric car market is just a test environment, the real battle will be fought in the "regular car" market. Not the Roadster, not the Model S, and not the new SUV. Tesla may have beaten everyone to the punch and built incredible luxury automobiles, but can it beat the incumbents when pricing pressure is very real, and very heavy? I believe in electric cars, but I am very skeptical that Tesla will beat GM, Ford, Chrysler, Nissan, Toyota, Honda, Volkswagen, and Hyundai in the low/mid-end. I'm also skeptical that they can maintain their current lead when luxury automakers like BMW and Daimler want a slice of the pie. Tesla surely has done a lot to dispel the negative connotations of electric cars, but where they go from here is anyone's guess. There is way too much uncertainty to IMO justify such an insane valuation. Think about it this way: Apple was first to market with the iPhone, a device that dispelled many perceptions about smartphones being stupid, clunky, and only for businesspeople. It was beautiful, and it was a wild departure from anything seen up until that point - and most importantly, it was incredibly well executed. For a little while it looked like the iPhone was going to swallow the world. And then Android showed up and completely ate the low and mid-end markets. Apple isn't dead by any means, and perceptually they are still the top dog in town, but anyone who bet on Apple assuming majority market share is now, well, wrong. In Apple's case, the competitor sort of came out of nowhere - Android I don't think was a serious contender on anyone's radar initially. In Tesla's case, they are going up against very experienced, very wealthy, and very serious competitors - competitors who have in recent years demonstrated their ability to adapt to market conditions and turn themselves around. Anyone who still sees the big automakers are stodgy and unable to change should go look at what the Ford Motor Co has done recently.

bluedevil2k 13y ago
You've hit the nail on the head - everyone believes that electric cars will be the predominant type of car sold 20 years from now, but who's to say that Tesla will be the market leader at that point? It would be naive to think that GM, Ford, Toyota, Honda, etc. can't quickly catch up and pass a small company like Tesla. I wish I could find it, but Warren Buffet had a great quote about new technologies. He said, roughly, that even when everyone knows a new technology is the future, it's still impossible to predict what company will win, and therefore which stock to invest in. He gave many examples: airplanes, radio, television, cars, computers.

DEinspanjer 13y ago

I think that the article did a very good job of not tying the investment advice to some derisive comment about the company itself. It sounds like you believe the opposite? I own a Model S, but I do not have a position on their stock. I was interested in doing so, but when it was feasible for me, I felt the stock was already much higher than it would be able to sustain for the long term. Are you saying that you believe purchasing the stock at its current price would be a good long term position to take? I find it difficult to believe that the stock could stay at or above this value for the long term. I do believe it will climb significantly from whatever position it is at when the Model X and the G3 models come out, but I would be very surprised if it was still this high just before that happens.

aclements18 13y ago

While I am a huge fan of Tesla, and Musk, I think your reasoning is a bit unsubstantiated. While most analysts who don't have their head in the sand would agree that Tesla is an awesome company and has years of explosive growth ahead, there has to be some numerical concept that helps you distinguish a good company from a good investment. The key concern is all your points still apply if the stock price was $500, instead of $180. At that point would you still invest? Another way to think of it: If I were to give you one lump sum for half of all of your future earnings (salaries, bonuses, gifts) what would a be a reasonable price that you would sell that to me for? You could be a very capable professional with a lot of earning potential but there is still an upper limit on what I should pay if I plan to come out profitable, correct?

loceng 13y ago

To add to this, Elon is creating to demand for electric. He's too hoping, wanting, needing competitors to start directing money in this area to add more value to the ecosystem - as it lessens the cost overall, and Tesla is a supplier of electric vehicle parts as well. They're working on a $30k model, which then everyone will be able to afford it. It will be a matter of lining up balance sheets to be able to afford creating additional factories for millions of cars per year. They're moving towards this tipping point, and have been extremely successful in terms of moving everything forward. For reference, their current plant is capable of producing 500,000 vehicles per year. That equates to $15 billion annual revenue if just selling the $30k model. The cost of owning a Tesla / electric car when you get free charging at Tesla stations, or electric charging from the grid in general are dramatically less than paying for gas - and the costs will only go down. And the fact that these vehicles are good for the environment, good for you ... and they're quiet, and they'll last longer (fewer moving parts), etc.. People who don't understand the value of what's being done either haven't thought through it, or don't have the capacity to think holistically - to take the full scope into account.

astrowilliam 13y ago
I absolutely love Tesla, but saying 30,000 is in everyones price range is a little off. Look at Fords lowest price vehicle, around 14k. Tesla can not compete with that at this time. There are plenty of other factors that go into purchasing a vehicle than price which include being able to go to a showroom and test drive a car. I have to travel at least 5 hours to see a Tesla dealership, I love Tesla, but I won't be driving 5 hours to go to a dealership to test drive one. I just don't have the time. In order to get a normal American family in a Tesla the price has to come down to the ~20-25k range.
- 001sky 13y ago
  I have to travel at least 5 hours to see a Tesla dealership, I love Tesla, but I won't be driving 5 hours to go to a dealership to test drive one. Nor would you be driving one home, unless it's on a flatbed.

Mikeb85 13y ago

Tesla is already valued with the expectation that profits will be much, much higher than current levels...

codex 13y ago

The LEAF has sold 70,000 copies worldwide. Based on sales volume, you could argue Nissan is the electric car leader.

Mikeb85 13y ago

2 and 4 are still true for alot of people. Using the range calculator on Tesla's website, a day ski trip would still be very difficult if not impossible. The range, especially in the cold with the heat on (and it gets much colder here than 32 degrees), just isn't enough... And the nearest city is ~250 miles away, which is really pushing the range, especially with the speed limit of 70 mph in the cold...