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Tesla as an opportunity of investment

Tesla as an opportunity of investment

I belive that all people that are reading this post think that Tesla is a great Car Company, the most advanced, the most innoative and the most oriented at the future.
This is the reason for which I'm evaluating tesla as an opportunity of investment and i would like to discuss with you about this.

danielccc | 2 February, 2013

I think it's a good mid term investment but the short term is not obvious.

I was strongly recommending it around $28 a few months ago, and managed to convince one person who got in at 31.

At $38, who knows? Especially with the Dow at 14,000 and the quarter results in a few days.

If there is an upside surprise, for example if they raised the build target for 2013, the stock could rise into margin call territory for shorts and you'd see a short squeeze, who knows how high (but not very long lasting).

But, if there is a downside surprise, for example higher costs, we could go back to the low 30's. I think the floor is around 30, at worse $27.50 (excepting a catastrophic event).

If there is no surprise I think the stock oscillates around $40 for a while and becomes subject to the broader market. Where does the Dow go from here?

Tesla Lover | 2 February, 2013

Nice analysis, i want to be a tesla shareholder but i want to buy the stocks at a right price. Watching the chart i noted that now is in a "red zone", is testing the resistance about 40$ and in the past that level was critical... but nobody can know how the title will perform, a good sentiment about tesla can bring the title up and render vain this reasoning.
Reading some news about tesla i noted that there are a lot of enthusiast, but at the same time a lot of doubts about the economic results and the financial assets, i'm interest and i will continue to follow the stock price waiting for the right moment to buy.

(sorry for any grammar errors, i'm italian)

Superliner | 2 February, 2013

I wish I had been on top of it when at IPO. As it is I came in @ 30 ish. and now am looking Long. But at least I have a skin in the game. Did really well on Ford stock "bought @ 4.00 per share when the economy was tanked and it performed nicely but I was late in selling it off and buying Tesla @ IPO Oh Well, in for a penny.. in for a pound

teddyg | 2 February, 2013

I think Q4 earnings in a few weeks should tell us more about where Tesla is headed. Q1 earnings however will be the real test as if Tesla can't show the possibility of profits down the road after a full quarter at full production there will be problems for the stock.
If I was a conservative investor I would wait until after Q1 earnings report sometime in mid April for a more clear indication. If profits look possible at that point I will be all in on Tesla...i have a few shares now that I bought around $29...but waiting for Q4 and Q1 reports before picking up any more.
I love this company but if they can't show a path to eventual profits after Q1 they will be in trouble.

Of course of all goes well the stock could be near $50 by April but that's okay...i see the stock well over $125 by 2015 if they continue to do well...Over $450 by 2020 if still successful...however I expect them to be bought out by one of the major auto companies fairly soon after they can show a clear path to profits.

Benz | 2 February, 2013

Nobody knows wat will happen tomorrow, now put that thought beween your ears and keep it there for a very long time (which means: don't forget it!!!).

But I can tell you my opinion/vision. At the moment people underestimate the power of the technology that has been developed by Elon Musk and the people who have joined him and work with him. The value of Tesla Motors is only going to grow, and it will just keep on growing for a very long time. The Sky is the limit.

My advise to Elon Musk: "Never sell Tesla Motors"!!!
And I surely hope that there never will be a hostile takeover of Tesla Motors.

Tesla Lover | 3 February, 2013

TADDYG:

I'm completely agree with you, i know that Tesla is near an important test, the 2013 Q1 results, but i can't wait for that moment, if there will be a profits the stocks will be grow and i will have lost the opportunity to buy at a lower price, what price level do you think is the most convenient ?

sandman | 3 February, 2013

@wait for 1Q earnings. First off you will be waiting until Mid-May, not April unless Tesla changes their accounting schedule. Right now Tesla waits almost 2 months after quarter close to report. Secondly, there are way too many smart people tracking deliveries and reservations on this forum. If you pay attention to those posts, you can estimate direction of earnings for the company. Yes, those tracking posts can be inaccurate but they have been pretty close so far and will cotinue to be until Tesla changes to a nonsequential numbering system which they cant do for VINs but could for reservation numbers. Right now, the only question is whether or not the reservations will keep up with production capacity. We will know that in a month or two, not May.

If you think tesla is a LONG stock then start dollar cost averaging instead of trying to time the market. Just my 2 lira worth.

Brian H | 3 February, 2013

Dollar cost averaging works because it operates on the assumption that you are not better at timing and guessing than the market (i.e., other investors). It substitutes rigid repetitious buying schedules for fear and enthusiasm.

teddyg | 3 February, 2013

Sandman...totally right, don't know why I said mid April..it will be mid-May for Q1 reports.
Reservation and delivery VIN's certainly help to know how Tesla is doing on the production rate but we really need the financials to know if Tesla is cash flow positive, and if they are really on course to ever make a profit.
I know Elon expects a 25% gross margin and I believe him but the numbers will tell all and the most revealing ones will be Q1, although I will be looking hard at Q4 too.

TeslaLover: It just depends on your risk tolerance...if you want to take more of a gamble and get in at a lower price sure try to scoop up some shares now on the next dip...however if you are conservative and want more clarity on Tesla's ability to be sucessful Q1 is going to tell you a lot.
Sure you may have to buy at $50 or $55 in Mid-May but if you are planning to hold the stock for the long haul this is a small price to pay...as I said I see the stock well over $125 by mid 2015 and over $450 by 2020, all going well.

On the other hand if Q4 and Q1 are very disappointing in terms of Tesla's profitabilty outlook and they need to raise more capital to continue operations the stock could suffer a big hit. Tesla is currently priced for a successful Q4 and Q1 so any major problems will hit the stock hard...as a young car company using new technology it is impossible to know what their long-term reliability will be. A major recall could be crippling for Tesla.

There are no guarantees in this world in anything, especially the stock market...you have to look at the potential risks and rewards...I am at a stage where I can afford to take a certain amount of risk on Tesla but I'm certainly not betting the farm.

After Q1 I think I may get a bit more agressive if things look good. May have to pay a bit higher price but as I said the stock goes much much higher after that if things continue to go well.

Another thing to think about...the HUGE short position in Tesla.
If things go well or there is a rumour of a major auto buyout the stock could explode as shorts run to cover.

I use the Volkswagen short squeese a few years ago as an example. Back then only 15% of VW stock was sold short...Porsche announced it was considering a buyout of VW and the stock exploded 5 times its value in ONE day! About 35%-40% of Tesla stock is currently sold short...if any major positive news comes Tesla's way the upside could be epic, perhaps even the biggest short squeese in history.
Why? Because 40% of Tesla is insider ownered (Musk has over 25% himself), another 10% is Mercedes, another 10% Toyota, another 5% Panasonic, and I would bet another 10% are Tesla owners and people who are extremely confident in the company and the future of the EV. This will leave VERY few sellers for the shorts to cover and could drive the price to monumental levels.

Of course short squeezes don't last forever and eventually the stock goes back to its fair value, however if you are paying attention fortunes could be made here.

Just another thing to think about.

Tesla Lover | 3 February, 2013

very helpful advices, i think that buy at differents times is a smart strategy, i want to but this title and hold it for a long time so i belive it is the best way on this type of operations. Personally, watching the Trading Book i see that a lot of investors want to buy at a lower price than the actual: the Bid/ask spread is about 12% ! (Source: ADVFN.com 03/02/2013)... i don't know what to expect this week, hope in a little flexion to buy, if not, is not a problem i will buy however..

Sudre_ | 3 February, 2013

How do you guys feel about the stock splitting?

Benz | 4 February, 2013

The stock price of Tesla Motors is not very likely to come down. It's much more likely that it will only go up. By the way, teddyg is right.

Tesla Lover | 4 February, 2013

you right Benz, this is not a speculative stock where every dollar make the difference, this title must be loved :) i'm going to buy this week...

Benz | 4 February, 2013

I think that you will not regret it. Be patient, you will see profit coming your way eventually.

Tesla Lover | 4 February, 2013

we will see profits only if Tesla make profits, and i think they can do it... this society has faced and overcome many obstacles, this is just one of those...

Benz | 4 February, 2013

I agree with you on that. Good luck.

Tesla Lover | 4 February, 2013

when the results of last year ?

Benz | 4 February, 2013

Q4 2012 will be announced on February 11th 2013.

Tesla Lover | 4 February, 2013

Danielcc:

The dow effect is being felt !!

Where i can read the balance of 2011 ??

danielccc | 4 February, 2013

You can find all the reports in http://ir.teslamotors.com/sec.cfm

That said, the balance for 2011 is of no relevance to Tesla today. The Model S represents a 20X scale up in production. Historical numbers have no predictive value, though if you are curious, knock yourself out.

The markets are indeed down today.

I know people say not to try to time the market, and that's true most of the time. Still, you want to at least avoid "top ticking" the stock and being the guy who paid more for it than anybody else, which is why I did not feel comfortable recommending it above $38 quite yet.

Bubba2000 | 6 February, 2013

They key to successful investing is risk control and anticipation. If we wait till all the news is out, it will be all priced in. Let me look at the what I think I know:
1. Demand - With limited deployment, the demand with bookings in excess of 20,000. Reading the forums, company announcement extrapolation, etc. With marketing in Europe, Japan, etc bookings should be sustainable. Then Model X kicks in next year. Supercharger network expands and drives more demand. Demand may exceed 20,000/year if quality is maintained with no battery issues. Long term, they need Gen III with battery breakthroughs.
2. Supply - It looks like the company can produce 400 cars/week or 20,000/year. Obviously, running the factory for long hours/week can increase production with just incremental labor costs, components. Minimal capex.
3. Profitability - With even 20,000 cars/year, the company should benefit from economies of scale. Less labor/car as volume increases and skills go up with the learning curve. The presses, jigs, the whole manufacturing process gets tuned in so that there are less deviations from tolerance - less rework that costs a lot of money in labor. The outsourced component costs should come down with volume. That would include the gearbox, castings, etc. The electronics cost, including the inverter, power control, display tablet, etc should see big fall in costs with volume and time. The simple design of the car seems to be able to benefit from economies of scale. With so much negativity, the surprise will be on the upside at least for now.

I think the company will have good cash flow from operations, but will burn cash in capex that includes the supercharger network, further automation of assembly. Design of GenIII, tooling of Model X body + GenIII, and R&D will suck a lot of cash. This is not like Coke, or even Apple that outsources everything, generates huge free cash flow.

Basically, if the company fine tunes operations and brings costs down, they should beat expectations.

Benz | 6 February, 2013

@ Bubba2000

Well said, and I agree.

Tesla Lover | 6 February, 2013

now tesla's shares are about 39$, the historical maximum is 40$..
Do you think is going to break that level ? i don't know if buy now or wait....

Brian H | 6 February, 2013

The SuperCharger network is cheap. TM produces the chargers, which it already does at "economies of scale" (per Elon), and Solar City manages the rest. And TM is already close to the 30,000/annum rate Elon targeted; two shifts have a max rate of 800/wk, and 600 is enough to meet that goal.

Brian H | 6 February, 2013

Tesla Lover;
Dollar cost averaging. Do both. Buy now AND wait.

Brian H | 6 February, 2013

Oops! Up another $1+ today. Gettin' squeezy! ;p

Superliner | 6 February, 2013

I wonder how they are dealing with the land lease? costs for the physical "footprint" of the individual Superchargers? Case by case basis? In conjunction with one or more power providers / utility companies? Their own Solar City arm?

As far as the stock I'm all in right now and set to purchase more whenever trigger is met which I can adjust as needed/wanted. I'm in for the long haul and have switched the lions share of my portfolio to Tesla stock.

Here I go! for better or worse ..

Whity Whiteman | 6 February, 2013

if I mix it up right, the Teslas work 20 hours a day... outputting annually 25000-28000... we where nerver told, how many shifts bring what output.
I think, the actual calculation (with the actual state of the factory) is:

1 Shift 200/day
2 Shifts 400/day
20 hours- 2,5 Shifts ...a little more than 400.

I believe, that they nearly maxed out the "one-production-street".
That's just the message, I substracted from all the news and Interviews.

Tesla Lover | 7 February, 2013

My investment plane is started, i plan to buy something about 10 share/month, increasing when (if) the price fall... first order 100 pieces...

Tesla Lover | 7 February, 2013

living in italy i've got the change eur/usd on my side, so it' s less expensive...

Tesla Lover | 8 February, 2013

First order executed...

Tesla Lover | 12 February, 2013

The 40$ resistance has proved really hard to break, tesla announced the date of the 4 quarter result wednesday 20 feb. how do you feel about the year-ended result ?

danielccc | 12 February, 2013

The stock is becoming more attractive now thanks to the NYT piece and Musk's defensive stance.

Not sure how long this plays out but below $34.50 it becomes a buy for me. If it keeps falling, get all you can at $28 (unless the reason it's falling is catastrophic). So if it goes to $34 this week and then the earnings release next week goes badly, you can average to $31.

Of course, it might not drop to $34 at all, but it's a possibility given the current media cycle.

I'm concerned it's taking so long to release the log information. It might be complex and not trivial to present in a simple, clear manner that proves Tesla's case. If so, it could end up reassuring the converted but not help with the general public.

I don't think the piece has a long term impact though. The car will speak for itself and it will be in the hands of over 10,000 people within a few months.

jk2014 | 12 February, 2013

Elon needs to take this as an opportunity to sell the car to the general public. He has garnered a lot of attention with this stand off. It would absolutely be the best time to talk about how recent owners ms have handled in the cold, how the range is fantastic when used in the most effective manner, how much you saved on gas charging at home in off peak hours, how the maintenance is minimal, how when you take your car in for maintenance they know exactlly what to fix because they have detailed logs with no way of cheating you llike many ice mechanics, car has only three moving parts as opposed to hundreds, how it's the only car on the market that improves over time, etc... I could go on for a long time and so should Elon with all the attention he's stirring up.

This is the time to take the offensive and sell the sh*t out of it!

cprenzl | 12 February, 2013

Thinking about selling my solar city and buying more tesla with the dip? Any thoughts?

Tesla Lover | 13 February, 2013

cprenzl: this week probably the shares price will drop down for a couple of dollars. next week the 2012 balance will be published so i think it's better buy at different's times, last day i bought 50 stocks, maybe tomorrow i will buy other's. the next month other's and accumulate... the sentiment about tesla is really good, they have got a strong industrial plan. I think that the next year the share's price can be around 50$ or more...

Bubba2000 | 13 February, 2013

In the short term what will count is the demand. Tesla could ramp up production from current estimated 20k/year to theoretically double that with 2 shifts/day and still do the maintenance functions. Other constraints may develop like in the supply chain, trained labor, etc.

What is the main hold-up? Range anxiety. What can reduce that over the short term? Superchargers 100 miles apart on the major highways, especially. 240V/50 amp/100 amp charging location at hotels, public places like MacD, etc. Cold climate performance, charging performance when plugged, etc is a concern. A lot of that can be resolved with software upgrades that can keep the battery pack warm after charging is finished, but the car is still plugged.

Looking at the VIN numbers, it looks like the company delivery is slightly ahead. It remains to be seen if this demand is sustainable with the current design and battery tech. After making all kinds of investing mistakes, the lesson I learnt is that even with good research, I will make frequent mistakes. Have to manage risk with your capital and this is a risky stock at this stage. I would consider putting an amount that one can loose if the stock looses $10/s. If the stock does well, the investor can double the position as the risk goes down.

This is no easy stock. Personally, I think the company has to make money on the Model S to pay for overhead and R&D of $400M/year. 20k cars/year at ASP=80k and margin of 25%, barely break even. No enough to recover the sunk costs of Model S, let alone pay for Gen III R&D, plant, etc. The only way out is for Tesla to stimulate demand for the Model S, X with superchargers, plus other charging stations. Get combined demand to 50,000 autos/year. I would prefer a higher number. Achieve economies of scale and cut costs.

It is a tough execution. So far Elon Musk has delivered and may deliver beyond expectations, but the risks are still huge. Got to adjust the investment for this risk. No need for a Stalingrad. There are lot of opportunities in investing. No need to risk the farm here.

jk2014 | 14 February, 2013

Bubba2000 --

Nice assessment. The only thing I am curious about is how you see 400m being what future r&d will be? CFO stated in Q3 conf. call r&d would be lumpy. What I take from that is it will expand and retract according to financial conditions. Also, Elon has stated the MS platform will be exploited for multiple variants so costs associated with r&d in that respect has already happened. I also heard Elon state he would like to Give the MS and MX a chance to make money for a year or so. This means to me they might cut costs (maybe specifically future vehicle r&d) and encourage margins that will sustain profitability. Elon's goal is actually 30% margins so I feel they will make aggressive near terms decisions to get to that. For some reason, a few posters believe costs are almost fixed and don't see how a profit can be made. Just have to look at the sec reports and see there are many places where it's reasonably possible. I think the whole reservation payments situation throws a lot of people off.

I also think a lot of records and other "firsts" will happen this year. No one has ever sold 20k Evs in a single year, maybe even more sales in one year than all ev sales combined in history. Could also be the highest selling premium sedan of the year (over BMW and Mercedes). Could also be the largest revenue increase year over year in auto history. Could also be the sharpest reversal of short position in Nasdaq history. The list could go on... More and more momentum will happen as the year concludes, orders will continue to come in creating a strong demand through 2014 right when the X comes out to keep interest at a high level. Have to also account for spacex and solarcity success as helping tesla sales by association. Because of this, I wouldn't be surprised if they do another public offering to accelerate geniii because of the preset demand for it. Anticipation is already starting to mount, so I'm sure the market would welcome a way to get there sooner and see the stock soar. I also think they won't care if profitability happens so as long as demand stays high and production rolls out cars to meet it.

Brian H | 14 February, 2013

@jk;
+1
Nice analysis, yourself! I think the TM designers are multi-tasking, blending extrapolations of their existing tech with new stuff in the pipeline. And given the quality of what's done so far, that is very enticing.

Bubba2000 | 14 February, 2013

jk2014,
I got the $400M estimate for Selling and General Administrative + R&D cost by extrapolating the 3Q2012 statements. The company will have to continue to invest heavily in R&D to improve/test different battery chemistries, electronics like the motor, inverter, tablet, electronics as well as optimize current and future designs.

As volume goes up and with time the cost of outsourced components like Al sheets, castings, gearbox, drive train, tablet, electronics come down. Even the battery that is bought from Panasonic will come down not only because of volume, but also with time. Moore's Law applies to electronics. Internally the cost of labor does not increase as fast as production, especially in stamping, bodybuilding, painting which is done with robotics. Final assembly cost is tied to labor, but even here there is room for productivity increase.

Costs will not as fast as in microprocessors. However, it may fall similarly to appliances that are electromechanical. With enough volume, they could achieve 30% gross margins. They do need supercharger networks.

The biggie is always the technology disruptive changes. Double the battery capacity at half the cost. No easy task. I would happy if the battery capacity increased by 40% in 5 years and the with of the Model S dropped by a 1,000 lbs with the use of stronger Al alloys and efficient structural design.

With short interest huge, the very sophisticated big money is betting the company will fail. I am long because Model S is simply impressive. A friend of mine bought a Sig and now he hardly drives his Mercedes S.

I am going to plot the reported Vin numbers versus date in a log chart and see what it looks like. Wondering if production went up significantly and if it accelerating.

jk2014 | 14 February, 2013

BrianH -- thanks for the comment. It will be interesting to see where the next variants will land. You'll probably be the one to check with soon on that I bet.

Bubba2000 -- more great detailed analysis. Can't forget about increases in ZEV credits, drivetrain sales to Daimler and Toyota,European sales, maybe even a strong leasing program over the summer... Looking forward to your future vin/prod numbers.

Benz | 15 February, 2013

"Looking forward to your future vin/prod numbers."

+1

roseland67 | 15 February, 2013

Bubba2000,

I recently attended our local AEE chapter meeting in Chicago.
A PHD from Argon labs presented the JCESR program,
(Energy Research Storage think tank).
Their charter is to develop battery technology
For appliances and transportation as follows:
5x energy density
5 years
1/5 current cost.

His trend graph of lithium ion battery energy density
Showed 1ma/h 13 years ago and
4 ma/h today.

Battery chemistry chemistry seems to be improving
At very good rate.
simple anode/cathode material changes seem to provide
Remarkable avenues for performance improvement.

It may soon be possible to drive an entire day at
Rated speeds and not empty your battery.
Exciting times

Benz | 15 February, 2013

I will believe it when I have tested it myself. This just sounds too good to be true to me.

Tesla Lover | 15 February, 2013

-3% now around 37 $, what sensation about the next week ??

Bubba2000 | 15 February, 2013

I looked at the kind of jobs Tesla advertised in their website in the last 1 year. Many of the production/manufacturing jobs (CNC, painting, etc) specified swing shift and some night shift. It is likely they are running extended day shift and moving to night shift. The big question is if Tesla need the extra shifts just to produce 400 cars/week OR did they need the shifts increase production beyond 400 cars/week?

I looked at the reservation postings and deliveries, but could not get conclusive info about production. Will look at this again.

There is a lot of nervous money around both on the short side and long side. The volatility shows.

jk2014 | 15 February, 2013

Range is the issue resurfacing right now, which Tesla anticipated from day one 10 years ago. If Tesla can publish actual range numbers under all weather conditions from current customers it will compel those sitting on the buy/sell bubble to commit one way or the other decisively. I think tesla is in a good position if they can frame all negative attention on this issue. I think the real achilles heal right now is customer service and maybe newly emerging quality control issues. Should continue to keep these problems out of the spot light until they have the time to their act together as they scale.

Brian H | 15 February, 2013

Bubba;
Who said they're stuck at 400/wk? They took the 1st week off, and in 6 weeks have racked up about 4500 VINS. That's pretty close to 700/wk.

Brian H | 15 February, 2013

Oops, more like 3500 VINS, so just under 600/wk average. Though the current rate is likely 800.

Benz | 15 February, 2013

Wow, they are producing 800 Tesla Model S EV's per week.

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