6 ms·

Tesla's stock price at present reflects and is driven primarily by the exuberant optimism of its shareholders, not by mundane financial details like how many mi

by cs702 13y ago

Tesla's stock price at present reflects and is driven primarily by the exuberant optimism of its shareholders, not by mundane financial details like how many millions the company lost or how many cars were sold last quarter. Consider that despite today's drop, the stock price has gone up 4.6x this year (from $33.87 at year-end 2012 to around $155 right now), but over the same period the company's quarterly revenues have increased only 1.4x (from $306 million in Q4 2012 to $431 million in Q3 2013).[1] The future of a young, highly innovative company like Tesla is so uncertain that shareholders have little choice but to rely primarily on speculation and emotion rather than on analysis of (limited) facts to estimate the present value of the business. -- PS. I'm a HUGE fan of the company and Elon Musk, and want them to succeed beyond their wildest dreams. -- [1] Quarterly financial results are posted on http://ir.teslamotors.com/events.cfm http://ir.teslamotors.com/events.cfm -- Edits: added third paragraph; grammar.

rdl 13y ago
The scary thing for me with Tesla stock is primarily the risks in going to large scale mass market cars, as well as the risk of another car company, or another startup, emerging to win the mass market EV space.
- derekp7 13y ago
  If another company came up with a dual-powered version of the Tesla, then I would definitely buy that. The current round of plugin hybrids don't offer enough battery-only range for me. I'd like to see about 100 mile battery only (in case I forget to plug it in), plus a small engine and 10-gallon tank. I wouldn't think the gas engine would have to be that large, especially if it were designed to use the battery as a buffer (i.e., it would only need to have enough HP to maintain highway speed, and acceleration could be handled by the battery). Which brings up a question -- how much horse power is needed just to keep a car cruising, without accounting for acceleration? Edit: just looked up on Wikipedia, the Model S gets 100 miles per 35kWh. So that works out to (assuming 65 mph) about 23 kilowatts average continuous output, or 30 HP. Considering that many car engines are 300 HP, I don't see a 30 HP engine being that extreme.
  - rdl 13y ago
    Depends a lot on speed, the shape of the car, and other factors, but on the order of 10-30 HP for something like the Model S at 70mph I think. I still really want a hybrid truck, running diesel, with the ability to seat 2 people, secure cargo space (like a custom bed with lockboxes), 4wd, and the ability to run the engine for a week or two in place as a generator (e.g. at a remote comms site). Run the engine during the day to keep the batteries charged, operate at night off battery.
    - jsight 13y ago
      VIA Motors is the closest thing to this that I know of: http://www.viamotors.com/ http://www.viamotors.com/
      - rdl 13y ago
        Sadly gasoline/petrol vs. diesel. I really want diesel so I can store/transport reasonable amounts of fuel; I avoid messing with gas. I wonder how it would deal with towing. That I6 would be inadequate for peak towing, so it would depend how often a truck going up grades, offroad, etc. and towing would need battery augmentation.
  - AnthonyMouse 13y ago
    The problem is that it's not just the engine. If you want an engine then you need a fuel tank, emissions controls, either a transmission or a separate electric generator attached to the engine, etc. All of that stuff adds weight and cost, or reduces the space, weight and cost budget you have for batteries and electric motors. By the time you've paid for it you might as well forget about the 30HP engine and put in a 100HP engine, at which point you have a Prius.
  - rodgerd 13y ago
    If what you want is a fast luxury hybrid, there are already high-end Lexuses (Lexii?), but I suspect you'd not like the range as much. Porche are also pushing hybrids, but again for performance, they're using the petrol. The WEC is pushing supercapacitors into the hybrid drivetrains as a superior method of scavenging (but not storing) energy.
- SwellJoe 13y ago
  I think the danger is in the big automakers getting EV right, before Tesla reaches the middle and low end of the market. Nissan has the Leaf, which is by most accounts, a great little car. The Chevy Volt is the best-selling in my neck of the woods, it seems. Tesla makes better electric cars...as far as the reviews indicate. But, they're also much more expensive. But, here's the reason I just placed a limit order for tomorrow morning (I'd check into TSLA a couple of times this year and thought, "Nope, still trading too high."): Tesla is currently selling as many cars in a year as Chevy sells in three days. So, the stories I can envision in my head for how this will play out are one of the two: 1. Tesla will fail to scale up. They will not be able to continue executing on their business plan effective. Growth will halt. The big auto makers will gradually move into the EV market. They will use their leverage as larger players with more money to throw around to beat Tesla on the battery front and on manufacturing costs. Tesla will remain a bit player, and be bought up for patents in a few years. The stock will not do well, long term, in this scenario. 2. Tesla will continue to execute well, if not flawlessly as they have done up to now (let's be honest, Tesla has an amazing record of doing the right thing at the right time). They will continue to grow at a very rapid clip. They will enter new markets. They will sell more cars than they can manufacture (and maybe more electric cars than anyone else can manufacture also, due to the current limited battery availability). They will continue to execute well on battery acquisition and development. They will continue to execute well on solving the cross-country EV trip problem...before any other manufacturer. And, they will become a major automaker. The market is huge. They're less than 100th the size of Chevrolet or Ford. That's a lot of room for growth, even with their share price being hundreds of times earnings (yes, it really is a very expensive stock, in that regard). So, my primary question is: Will they execute really well. History says they will. And, my next question is: Will I get other chances to buy at a discount over what it's trading at now? I don't know. I've regretted not buying stocks in the past due to it looking really expensive. I put off buying GOOG for a long time. Watched it from IPO on up to $750+. Then it went on sale for $340, and I backed up the truck as well as my stock portfolio would allow (so, I'm currently approaching a triple bagger on GOOG). TSLA is no GOOG. Probably never will be. But, it's potentially a much larger company than it is today. I'm willing to bet a few bucks that it will be. But, it is definitely gambling and not value investing.
  - 13y ago
- bsdetector 13y ago
  Toyota is supposedly coming out in 2015 with production cars with fuel cells costing a bit more than what a Tesla battery does, but the more they produce the less costly they are. In contrast, the more batteries Tesla produces the more the cost of lithium increases. It seems like an incredible proposition that Tesla will expand fast enough to shut out fuel cells before they get established.
  - r00fus 13y ago
    Toyota (and others) have been touting fuel cells for well over a decade. I'm not holding my breath - fuel cells are as sustainable and non-oil as flex-fuel (read: vaporware). Musk makes some very unrefutable points here deriding fuel cells, and Ive had that opinion long before people were listening to Musk: http://cleantechnica.com/2013/10/25/elon-musk-munchen-fuel-cell-bullshit/ http://cleantechnica.com/2013/10/25/elon-musk-munchen-fuel-c...
    - bsdetector 13y ago
      > Toyota (and others) have been touting fuel cells for well over a decade. The cost of fuel cells has decreased to 5% of what it was then, and at least three manufacturers are coming out with limited production fuel cells cars. Just because it took 50 years to get ready doesn't mean it isn't ready. Musk's point is basically that the energy density of fuel cells is worse than batteries. That's true, but they can be refueled instead of mechanically swapped. He says the current total cost of the system is higher than batteries. That's true, but Toyota is halving the cost every 5 years as they ramp up production, where battery cost is falling maybe 10% in that time.
  - Tuna-Fish 13y ago
    > In contrast, the more batteries Tesla produces the more the cost of lithium increases. This is true, but misleading. The cost of lithium is a vanishingly small component of the price of the battery, a typical quote is between 1% and 0.1% of the production cost. Lithium is one of the most common elements in the earth's crust, and is plentiful enough in seawater that it cannot run out -- before it's cost is high enough to have any real effect in battery prices, it will be well worth extracting it from the seas. (In which there is enough supply for millions of years.) The rapid increase in demand caused by proliferation of lithium-ion batteries has spiked the price over the past decade, but that is simply because mining operations take years to spin up, so large changes in demand always lead to large-scale price action. This has not yet had anything but a negligible effect on battery prices, and it will not have one in the future. I do not understand the current meme of trying to paint all economic issues as resource-limited. That's just not how the world works.
hackula1 13y ago
I hate to be the "revenues-dont-matter" guy, but stock prices could be based on the fact that they demonstrated that they are 4.6x more likely to succeed based on their performance this year. If stocks only followed revenues, trading would be pretty meaningless. A company like Tesla has a tipping point in value based on the viability of their model. I am in no way claiming that I think they will succeed, but this year has probably shown that they are more likely to hit a tipping point than last year. This matters a lot in highly speculative investments like Tesla.
- foobarqux 13y ago
  The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".
  - toomuchtodo 13y ago
    > not whether the thing underlying the security is going to be "successful". But that's exactly what determines how much you should pay. Fundamentals are "How much will this be worth in the future".
    - foobarqux 13y ago
      Your decision to invest shouldn't be equivalent to whether the company is going to be successful but whether you will get more money than what you put in (accounting for risk, alternative investments, etc). Failing businesses are sometimes good value.
  - SwellJoe 13y ago
    "The thing underlying the security" is a dynamic thing, it grows or shrinks based on the market for their products, the execution of its executives, and the quality of its products. If it is not going to be making significantly more money next year than this year, you'd want to build that into your decision to buy the stock. Fundamental value can be defined in a lot of ways, but growth is not reliably quantifiable. Which is why there is fluctuation in stock prices. If I believe Tesla will continue to grow at 50-100% per year, then it may be valued reasonably right now. It may even be a bargain. If, on the other hand, I believe it is a static business now and has reached saturation of its product line in the market as it exists, I'd be a fool to pay this high a price. There are so many variables...if you're value investing rather than growth investing, TSLA is not your stock, and won't be for another decade or two. I tend to buy into growth companies, so this looks like a chance to buy into a company I missed earlier at a slightly lower price (I don't suggest trying to time the market, but sometimes the market puts something on sale that you wanted to buy anyway). It was just such a sale (only on a much larger scale) many years ago, that led to me holding a few shares of GOOG. I bought as many shares as I could afford with what was in my trading account, and I may buy as many shares of TSLA as I can afford now (after a bit of research, of course).
tvladeck 13y ago
If your first sentence were true, then the stock shouldn't have been affected much by today's news. Instead, it fell significantly. The price of the stock has to do with how much money it might make in the future, and where they are on their growth trajectory. The news today signifies that the trajectory might be lower overall, or they might be further behind than investors thought.
- Arzh 13y ago
  The stock is up $1.61 on the day, the stock did not tumble, what tumbled was wall street's interest.
  - dxhdr 13y ago
    What we're talking about is the after-hours trading price of the stock. It will open tomorrow at the new, reduced price.
  - tanzam75 13y ago
    > The stock is up $1.61 on the day, the stock did not tumble, what tumbled was wall street's interest. Up $1.61 at the closing bell, then down $22 after-hours, equals down $20. Quite a substantial move for a $176 stock -- at least, it was a $176 stock at 4 o'clock on November 5.
- ChuckMcM 13y ago
  [I don't currently own any stock or options in TSLA] Sort of and sorta not. There is a tremendous amount of speculation in Tesla stock. That came about from a number of people making very large bets against and for the company (option trading is quite active for such a 'young' company). The stock is "priced for perfection" which is to say it is priced at a value that only makes sense if Tesla meets every objective, has no missteps, and doesn't run into any technical or legal issues. Consequently there are lots of people who have various hedges in place to sell stock if it goes down, or buy covering options, etc. Thus any news tends to be magnified on this stock. Had it not been priced so tightly the effect would have been more inline with other companies when they announce results. (a 3 - 5% change on "news")
cylinder 13y ago
I hope it continues to decline so I can get in. I have been shocked by how prevalent the Model S already is on American roads. And when I look at the drivers, they are by no means the stereotypical "early adopter" of tech. This signals to me that electric is not at all a barrier to the average vehicle consumer. Tesla has a focus on quality and details that other carmakers can't achieve. As soon as they are able to finance their expansion into other classes of vehicles, they will overtake the incumbents rather easily. There will be many bumps in the road as they expand, but if you are on a 20-year timeline they don't matter.

by cs702 13y ago

rdl 13y ago

The scary thing for me with Tesla stock is primarily the risks in going to large scale mass market cars, as well as the risk of another car company, or another startup, emerging to win the mass market EV space.

derekp7 13y ago
If another company came up with a dual-powered version of the Tesla, then I would definitely buy that. The current round of plugin hybrids don't offer enough battery-only range for me. I'd like to see about 100 mile battery only (in case I forget to plug it in), plus a small engine and 10-gallon tank. I wouldn't think the gas engine would have to be that large, especially if it were designed to use the battery as a buffer (i.e., it would only need to have enough HP to maintain highway speed, and acceleration could be handled by the battery). Which brings up a question -- how much horse power is needed just to keep a car cruising, without accounting for acceleration? Edit: just looked up on Wikipedia, the Model S gets 100 miles per 35kWh. So that works out to (assuming 65 mph) about 23 kilowatts average continuous output, or 30 HP. Considering that many car engines are 300 HP, I don't see a 30 HP engine being that extreme.
- rdl 13y ago
  Depends a lot on speed, the shape of the car, and other factors, but on the order of 10-30 HP for something like the Model S at 70mph I think. I still really want a hybrid truck, running diesel, with the ability to seat 2 people, secure cargo space (like a custom bed with lockboxes), 4wd, and the ability to run the engine for a week or two in place as a generator (e.g. at a remote comms site). Run the engine during the day to keep the batteries charged, operate at night off battery.
  - jsight 13y ago
    VIA Motors is the closest thing to this that I know of: http://www.viamotors.com/ http://www.viamotors.com/
    - rdl 13y ago
      Sadly gasoline/petrol vs. diesel. I really want diesel so I can store/transport reasonable amounts of fuel; I avoid messing with gas. I wonder how it would deal with towing. That I6 would be inadequate for peak towing, so it would depend how often a truck going up grades, offroad, etc. and towing would need battery augmentation.
- AnthonyMouse 13y ago
  The problem is that it's not just the engine. If you want an engine then you need a fuel tank, emissions controls, either a transmission or a separate electric generator attached to the engine, etc. All of that stuff adds weight and cost, or reduces the space, weight and cost budget you have for batteries and electric motors. By the time you've paid for it you might as well forget about the 30HP engine and put in a 100HP engine, at which point you have a Prius.
- rodgerd 13y ago
  If what you want is a fast luxury hybrid, there are already high-end Lexuses (Lexii?), but I suspect you'd not like the range as much. Porche are also pushing hybrids, but again for performance, they're using the petrol. The WEC is pushing supercapacitors into the hybrid drivetrains as a superior method of scavenging (but not storing) energy.
SwellJoe 13y ago
I think the danger is in the big automakers getting EV right, before Tesla reaches the middle and low end of the market. Nissan has the Leaf, which is by most accounts, a great little car. The Chevy Volt is the best-selling in my neck of the woods, it seems. Tesla makes better electric cars...as far as the reviews indicate. But, they're also much more expensive. But, here's the reason I just placed a limit order for tomorrow morning (I'd check into TSLA a couple of times this year and thought, "Nope, still trading too high."): Tesla is currently selling as many cars in a year as Chevy sells in three days. So, the stories I can envision in my head for how this will play out are one of the two: 1. Tesla will fail to scale up. They will not be able to continue executing on their business plan effective. Growth will halt. The big auto makers will gradually move into the EV market. They will use their leverage as larger players with more money to throw around to beat Tesla on the battery front and on manufacturing costs. Tesla will remain a bit player, and be bought up for patents in a few years. The stock will not do well, long term, in this scenario. 2. Tesla will continue to execute well, if not flawlessly as they have done up to now (let's be honest, Tesla has an amazing record of doing the right thing at the right time). They will continue to grow at a very rapid clip. They will enter new markets. They will sell more cars than they can manufacture (and maybe more electric cars than anyone else can manufacture also, due to the current limited battery availability). They will continue to execute well on battery acquisition and development. They will continue to execute well on solving the cross-country EV trip problem...before any other manufacturer. And, they will become a major automaker. The market is huge. They're less than 100th the size of Chevrolet or Ford. That's a lot of room for growth, even with their share price being hundreds of times earnings (yes, it really is a very expensive stock, in that regard). So, my primary question is: Will they execute really well. History says they will. And, my next question is: Will I get other chances to buy at a discount over what it's trading at now? I don't know. I've regretted not buying stocks in the past due to it looking really expensive. I put off buying GOOG for a long time. Watched it from IPO on up to $750+. Then it went on sale for $340, and I backed up the truck as well as my stock portfolio would allow (so, I'm currently approaching a triple bagger on GOOG). TSLA is no GOOG. Probably never will be. But, it's potentially a much larger company than it is today. I'm willing to bet a few bucks that it will be. But, it is definitely gambling and not value investing.
- 13y ago
bsdetector 13y ago
Toyota is supposedly coming out in 2015 with production cars with fuel cells costing a bit more than what a Tesla battery does, but the more they produce the less costly they are. In contrast, the more batteries Tesla produces the more the cost of lithium increases. It seems like an incredible proposition that Tesla will expand fast enough to shut out fuel cells before they get established.
- r00fus 13y ago
  Toyota (and others) have been touting fuel cells for well over a decade. I'm not holding my breath - fuel cells are as sustainable and non-oil as flex-fuel (read: vaporware). Musk makes some very unrefutable points here deriding fuel cells, and Ive had that opinion long before people were listening to Musk: http://cleantechnica.com/2013/10/25/elon-musk-munchen-fuel-cell-bullshit/ http://cleantechnica.com/2013/10/25/elon-musk-munchen-fuel-c...
  - bsdetector 13y ago
    > Toyota (and others) have been touting fuel cells for well over a decade. The cost of fuel cells has decreased to 5% of what it was then, and at least three manufacturers are coming out with limited production fuel cells cars. Just because it took 50 years to get ready doesn't mean it isn't ready. Musk's point is basically that the energy density of fuel cells is worse than batteries. That's true, but they can be refueled instead of mechanically swapped. He says the current total cost of the system is higher than batteries. That's true, but Toyota is halving the cost every 5 years as they ramp up production, where battery cost is falling maybe 10% in that time.
- Tuna-Fish 13y ago
  > In contrast, the more batteries Tesla produces the more the cost of lithium increases. This is true, but misleading. The cost of lithium is a vanishingly small component of the price of the battery, a typical quote is between 1% and 0.1% of the production cost. Lithium is one of the most common elements in the earth's crust, and is plentiful enough in seawater that it cannot run out -- before it's cost is high enough to have any real effect in battery prices, it will be well worth extracting it from the seas. (In which there is enough supply for millions of years.) The rapid increase in demand caused by proliferation of lithium-ion batteries has spiked the price over the past decade, but that is simply because mining operations take years to spin up, so large changes in demand always lead to large-scale price action. This has not yet had anything but a negligible effect on battery prices, and it will not have one in the future. I do not understand the current meme of trying to paint all economic issues as resource-limited. That's just not how the world works.

hackula1 13y ago

I hate to be the "revenues-dont-matter" guy, but stock prices could be based on the fact that they demonstrated that they are 4.6x more likely to succeed based on their performance this year. If stocks only followed revenues, trading would be pretty meaningless. A company like Tesla has a tipping point in value based on the viability of their model. I am in no way claiming that I think they will succeed, but this year has probably shown that they are more likely to hit a tipping point than last year. This matters a lot in highly speculative investments like Tesla.

foobarqux 13y ago
The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".
- toomuchtodo 13y ago
  > not whether the thing underlying the security is going to be "successful". But that's exactly what determines how much you should pay. Fundamentals are "How much will this be worth in the future".
  - foobarqux 13y ago
    Your decision to invest shouldn't be equivalent to whether the company is going to be successful but whether you will get more money than what you put in (accounting for risk, alternative investments, etc). Failing businesses are sometimes good value.
- SwellJoe 13y ago
  "The thing underlying the security" is a dynamic thing, it grows or shrinks based on the market for their products, the execution of its executives, and the quality of its products. If it is not going to be making significantly more money next year than this year, you'd want to build that into your decision to buy the stock. Fundamental value can be defined in a lot of ways, but growth is not reliably quantifiable. Which is why there is fluctuation in stock prices. If I believe Tesla will continue to grow at 50-100% per year, then it may be valued reasonably right now. It may even be a bargain. If, on the other hand, I believe it is a static business now and has reached saturation of its product line in the market as it exists, I'd be a fool to pay this high a price. There are so many variables...if you're value investing rather than growth investing, TSLA is not your stock, and won't be for another decade or two. I tend to buy into growth companies, so this looks like a chance to buy into a company I missed earlier at a slightly lower price (I don't suggest trying to time the market, but sometimes the market puts something on sale that you wanted to buy anyway). It was just such a sale (only on a much larger scale) many years ago, that led to me holding a few shares of GOOG. I bought as many shares as I could afford with what was in my trading account, and I may buy as many shares of TSLA as I can afford now (after a bit of research, of course).

tvladeck 13y ago

If your first sentence were true, then the stock shouldn't have been affected much by today's news. Instead, it fell significantly. The price of the stock has to do with how much money it might make in the future, and where they are on their growth trajectory. The news today signifies that the trajectory might be lower overall, or they might be further behind than investors thought.

Arzh 13y ago
The stock is up $1.61 on the day, the stock did not tumble, what tumbled was wall street's interest.
- dxhdr 13y ago
  What we're talking about is the after-hours trading price of the stock. It will open tomorrow at the new, reduced price.
- tanzam75 13y ago
  > The stock is up $1.61 on the day, the stock did not tumble, what tumbled was wall street's interest. Up $1.61 at the closing bell, then down $22 after-hours, equals down $20. Quite a substantial move for a $176 stock -- at least, it was a $176 stock at 4 o'clock on November 5.
ChuckMcM 13y ago
[I don't currently own any stock or options in TSLA] Sort of and sorta not. There is a tremendous amount of speculation in Tesla stock. That came about from a number of people making very large bets against and for the company (option trading is quite active for such a 'young' company). The stock is "priced for perfection" which is to say it is priced at a value that only makes sense if Tesla meets every objective, has no missteps, and doesn't run into any technical or legal issues. Consequently there are lots of people who have various hedges in place to sell stock if it goes down, or buy covering options, etc. Thus any news tends to be magnified on this stock. Had it not been priced so tightly the effect would have been more inline with other companies when they announce results. (a 3 - 5% change on "news")

cylinder 13y ago

I hope it continues to decline so I can get in. I have been shocked by how prevalent the Model S already is on American roads. And when I look at the drivers, they are by no means the stereotypical "early adopter" of tech. This signals to me that electric is not at all a barrier to the average vehicle consumer. Tesla has a focus on quality and details that other carmakers can't achieve. As soon as they are able to finance their expansion into other classes of vehicles, they will overtake the incumbents rather easily. There will be many bumps in the road as they expand, but if you are on a 20-year timeline they don't matter.