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The bigger missed point I would say is that Tesla is worth $X billion now only selling 33,000 vehicles. They can and will ramp up their factory to produce the ~

by loceng 12y ago

The bigger missed point I would say is that Tesla is worth $X billion now only selling 33,000 vehicles. They can and will ramp up their factory to produce the ~500,000 annual capacity (1 per minute) once they are able to release the ~$30k model to the masses. This is when the charging station network will really take off as well. 500k is more than 10x current annual production, and though profit per vehicle may be less than their current models, we could still assume that they're preparing to ramp up 10x their size within a very short period of time. There will likely be enough profit or credit available to build more factories then - or perhaps take on partners that they build vehicles for. Could this lead their valuation being 10x what it currently is? Even 5x at what it currently is would put Tesla at nearly double the value of the suggested $75B purchase pricetag Apple might pay. It just doesn't make sense. Also, it seems they're planning to supply houses, not just vehicles, with battery packs - so they could easily sell tens of millions of home and business packs every year within the next 5 years, at a much higher purchase price than an iPhone and with greater long-term savings.

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- johnloeber 12y ago
  Tesla sells cars internationally, not just in the US. According to a June 2014 report[0], the US then accounted for half of Tesla's sales. Also note that production capacity is not equal to projected sales. [0] http://www.forbes.com/sites/chuckjones/2014/07/31/analysis-of-tesla-sales-by-geography/ http://www.forbes.com/sites/chuckjones/2014/07/31/analysis-o...
shalmanese 12y ago
Tesla has to accomplish all of that just to meet market expectations and stay at it's current valuation. For comparison, Tesla sells 33,000 cars and is valued at $25B GM sells 10,000,000 cars and is valued at $60B. The market has already priced phenomenal growth into Tesla's valuation which is why it's one of the most short sold stock in the world.
- adventured 12y ago
  It's the same argument used on Amazon of course. Pumpers that proclaim: why just imagine how much Amazon will be worth once they start generating a meaningful profit! Back in reality, were Amazon generating $8 billion per year in net income, their market cap probably wouldn't move at all unless their forward profit growth projections were dramatic. It's maybe most common mistake I see inexperienced, or delusional, investors make - failing to understand the concept of future returns being pulled forward. There's a Chinese stock I always think of when it comes to this, China Life Insurance (LFC). Back during China's market bubble of 2006/07, the stock was pumped to the moon, projections were for perpetually high growth for decades. It was trading at something like 80 to 100 times earnings in 2007 at the peak... eight years later it hasn't moved higher than that (predictably the growth collapsed and the PE compressed).
  - shalmanese 12y ago
    Isn't that an argument that the market priced LFC exactly correctly and that exactly what they expected to happen did happen?
- GreenPlastic 12y ago
  While I agree, for the most part, that future growth is risk adjusted and priced in, I also believe that the market doesn't quite understand all the nuances. One, Tesla's margins are actually significantly than GMs. Two, they're losing money on a gaap basis because of a. how you account for residual lease values when they most likely won't have to pay any of that back and b. large capex expenditures in preparation for model x and model 3. If they weren't spending so much on capex, this would be a very cashflow positive company. Third, the average person doesn't quite understand how much better of an experience driving a Tesla is than a normal ICE vehicle (I know several people who would never buy > 50k car who own Teslas, know another 20 who would go buy a 3 immediately if it was available). Finally, projections don't really account for the stationary storage market, which is all gravy. Are there risks? Of course - you can have a giant first mover advantage, giant technological moat, and ISO chooses a different charging standard, Elon Musk gets hit by a bus, etc. I think there's enough optionality here for those willing to wait 5 years.

by loceng 12y ago

deleted 12y ago

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johnloeber 12y ago
Tesla sells cars internationally, not just in the US. According to a June 2014 report[0], the US then accounted for half of Tesla's sales. Also note that production capacity is not equal to projected sales. [0] http://www.forbes.com/sites/chuckjones/2014/07/31/analysis-of-tesla-sales-by-geography/ http://www.forbes.com/sites/chuckjones/2014/07/31/analysis-o...

shalmanese 12y ago

Tesla has to accomplish all of that just to meet market expectations and stay at it's current valuation. For comparison, Tesla sells 33,000 cars and is valued at $25B GM sells 10,000,000 cars and is valued at $60B. The market has already priced phenomenal growth into Tesla's valuation which is why it's one of the most short sold stock in the world.

adventured 12y ago
It's the same argument used on Amazon of course. Pumpers that proclaim: why just imagine how much Amazon will be worth once they start generating a meaningful profit! Back in reality, were Amazon generating $8 billion per year in net income, their market cap probably wouldn't move at all unless their forward profit growth projections were dramatic. It's maybe most common mistake I see inexperienced, or delusional, investors make - failing to understand the concept of future returns being pulled forward. There's a Chinese stock I always think of when it comes to this, China Life Insurance (LFC). Back during China's market bubble of 2006/07, the stock was pumped to the moon, projections were for perpetually high growth for decades. It was trading at something like 80 to 100 times earnings in 2007 at the peak... eight years later it hasn't moved higher than that (predictably the growth collapsed and the PE compressed).
- shalmanese 12y ago
  Isn't that an argument that the market priced LFC exactly correctly and that exactly what they expected to happen did happen?
GreenPlastic 12y ago
While I agree, for the most part, that future growth is risk adjusted and priced in, I also believe that the market doesn't quite understand all the nuances. One, Tesla's margins are actually significantly than GMs. Two, they're losing money on a gaap basis because of a. how you account for residual lease values when they most likely won't have to pay any of that back and b. large capex expenditures in preparation for model x and model 3. If they weren't spending so much on capex, this would be a very cashflow positive company. Third, the average person doesn't quite understand how much better of an experience driving a Tesla is than a normal ICE vehicle (I know several people who would never buy > 50k car who own Teslas, know another 20 who would go buy a 3 immediately if it was available). Finally, projections don't really account for the stationary storage market, which is all gravy. Are there risks? Of course - you can have a giant first mover advantage, giant technological moat, and ISO chooses a different charging standard, Elon Musk gets hit by a bus, etc. I think there's enough optionality here for those willing to wait 5 years.