Tesla stock is down almost 10% today, after its 2012 earnings report became public. Tesla missed its projections and investors hammered the stock in response. So what did I just do? I just bought a lot of TSLA. Why did I do it? Because I'm betting on Elon.
There's a SeekingAlpha analyst report that's very bearish on Tesla stock. The author writes:
"Tesla's current market value is 250 times higher than it would be if it were being valued as a car manufacturer rather than an idea whose time is about to come. If Tesla were valued as a car manufacturer at Ford's valuation ratio, it would have to produce about 440,000 cars each year. That's over 20 times its current production goal. Are there that many luxury car buyers out there who are willing to live with the limitations of an electric car? It seems doubtful to me."
Here's the problem with the author's perspective: He doesn't understand Elon's master plan, nor does he appreciate Elon's "relentlessly resourceful" ability to execute on that plan.
If you just consider TSLA stock based on what the company has achieved to date, I'd agree that the stock's price is still inflated beyond what its current-day business metrics would justify. As the analyst points out:
"If Tesla were valued as a car manufacturer at Ford's valuation ratio, it would have to produce about 440,000 cars each year. That's over 20 times its current production goal. Are there that many luxury car buyers out there who are willing to live with the limitations of an electric car? It seems doubtful to me."
But here are a few counter points to consider:
But my last point is that I'm specifically betting on Elon Musk, the CEO of Tesla. He has single handedly pushed Tesla through tremendous obstacles to get it to where it is today. Above all else, I believe in Elon. I don't care if Tesla stock drops even more; I'll just keep buying it because it'll be on sale. If there's anyone that can create a new mass market car company -- which nobody has been able to do since the 1920's -- it'l be Elon.
I don't buy stocks anymore because I don't really know enough about how to value them, but I do think that Tesla is going to be massively successful. Their price/performance/charging station rollout/range/etc. is already pretty great, and will only get better.
There's no question that TSLA's current value has some of what I wrote above already priced into it. But my personal belief is that most analysts are looking quarter to quarter, or maybe to the 6 or 12 month horizon. TSLA is a long-term play; no question about it. In fact, I fully expect it to drop more before it goes up. But I'm also convinced that TSLA is one of those special companies that's not only creating an industry, but going to be able to be one of the massive winners in that industry. Think MSFT-style back in the 80's.
Well, if you're pointing out that stock prices are vulnerable to short term thinking and short sighted market forces - this is both a huge problem for the market as a whole and a huge opportunity for long term investors who can see and understand a vision beyond the next quarter. It's a huge problem because it causes companies to pursue quarter by quarter strategies which are tremendously sub-optimal. But the companies that can act beyond that have a tremendous advantage. But note that those companies always have visionary leadership behind them - Amazon, Apple, et. al. And here, you're basically saying Elon provides that for Tesla. Darn tootin'. Just listening to him talk about why he's founded the companies he's founded, like Space X, he basically said I'm rich and smart, now where can I put my money, time and talent where they can have the greatest impact on the future of the human race? That's a pretty wonderful way to decide on your second act.
My favorite Jeff Bezos quote: "We're willing to be misunderstood for a long time." So he can make moves that others would be afraid of because he knows they're long term plays that will pan out eventually. Tesla is like that.
Incredible that TSLA is at $270 today -- although I'm not surprised. As I've written below, I really believe this is a $1k/share stock over the medium-term.
The news that's pushed TSLA up 2.5% today is that China is considering a gas tax to encourage adoption of electric vehicles. As SeekingAlpha reports:
With the smog issues in China a national health issue, I'm very convinced that China is going to have to do something extreme, and fast. And not just China, but India, too. These are both huge potential markets for Tesla (India further down the road than China.) It's just the perfect storm for TSLA to keep the pedal to the metal, and not just for cars, but for clean energy storage via its Gigafactory battery project, which is gunning to get storage down to $100 per kWh, a tipping point for energy storage.
I'm still betting on Elon more than ever, 2 years later!
A year an a half ago I mentioned here that I was betting on Elon by buying the car. The honeymoon is still not over. The car has been and is amazing.
There is one Tesla innovation that I don't think people talk about enough - their service. We got a warning indication that the car needed service and it was time for the 12k checkup service. Tesla drove to my office and gave me the key to a loaner car (white Model S). Later that evening they dropped my car off at home an retrieved the loaner. They did all kinds of things I wouldn't have expected like new wiper blades, new battery in the key fob, replaced the charge door that I cracked last year, etc., etc. It came back completely detailed and basically like the day I bought it.
Tesla's service is as good as it gets from my experience. They are taking care of their customers and appear to have a great corporate culture. Its smart to bet on these people. They are winners.
Wow, what a great blog post comparing the cost of Model S ownership to that of a Honda Odyssey. Specifically:
"The Model S carries about $25-30K more in depreciation vs. an Ody ($55K vs. $25-30K). But you save $20-25K on gas and $5-10K on maintenance. In today's dollars, the Model S is less expensive than nearly any other luxury car, and more affordable than even the Ody."
Wow, what a different outcome for Tesla vs. Better Place (the Israeli electric car startup that raised almost a billion dollars):
"Everything we needed to go right went wrong," says one former employee. "Every cost on our spreadsheet wound up being double, every time factor took twice as long." There was profligacy, marketing problems, hiring problems, problems with every conceivable part of the business. There was questionable oversight by the company's board of directors. There was bad luck. And there was hubris.
"There was nothing normal about Better Place," says Pross. "It was spectacular. Shai always said, 'If we go down, we'll make a lot of noise.'"
I read this with my jaw agape at almost every sentence. At every turn of the article, I could vividly remember reading about their "potential" when those time frames happened int he past and the picture behind the scenes (as reported here) was apparently a stark opposite of the media-darling status they were projecting to the world.So much hype. Such a truly EPIC #FAIL.
Wow lots of detail on TSLA's new GigaFactor just unveiled, allowing it to produce 500,000 (!!!) vehicles per year by 2020 (up from 35,000 projected this year). View the full PDF here.
TSLA is up over 3% after hours due to this announcement.
I have yet to buy Tesla stock because I decided to sink a $100k into the car instead. Until now, I've secretly felt that the P/E ratio and market cap put the stock price into the WTF range. I think the battery factory is a game changer and am now wishing I had bet bigger on Elon sooner.
Tom, that's an interesting perspective. I'm on the other side of the fence -- I don't want to sell my TSLA stock to buy a Model S because I don't want to miss out on what the stock might want to do next!
LOL. Grass is always greener, eh? At least you're looking at the grass through the windshield of a sweet, sweet ride :)
Well... If I would have put the 100k into stock last year when I bought the car, I could have kept my original investment, bought at least two cars and paid the capital gains. Your grass does look greener at the moment :-) That said, I have no regrets, but it may be time for me to bet on Elon some more. Might be time to double down.
Tom, as I've said from early on, I really believe that TSLA is a $1k/share stock -- heck maybe a lot more over time.
I was a founder of a startup where one of the investors is good friends with Elon Musk. And I heard stories starting many years ago about how incredible Elon is as an entrepreneur. I started tracking him back then. And I have to say that I believe that people (especially investors on the Street) are greatly underestimating him. His motivations are different than an average CEO's. He's said his money was the first into TSLA and it'll be the last money out, and he means it. Industry watchers that are used to tracking CEOs who just focus on the next quarter haven't yet groked that Elon is working on an entirely different level. Think Jeff Bezos' long-term view. That kind of thing. He is executing on the early steps of a massive vision.
So yeah, I'd say it's still absolutely time to bet on Elon. Buying TSLA now is like buying shares of MSFT back in the early 80s.
TSLA flirted with the $200/share mark yesterday. I believe this stock is very capable of being a $1,000/share stock (to be clear, it's likely it would split so it may never actually trade at $1k/share, but you get what I mean).
This is a good analysis of ots near-term potential: http://m.seekingalpha.com/article/2013751 but does not take into account the GIga factory that Teala is likely building in New Mexico, nor the huge China market that will likely explode for Tesla, nor the more affordable Gen III car that Tesla has always said is coming.
Tesla has executed perfectly to date. All they have to do is not mess it up. I'm still betting on Elon.
Yeah honestly was definitely not expecting such a rapid rise back to the top myself. Even though Germany cleared that whole auto investigation fiasco isn't it still technically open in the NHSTA books? It is highly unlikely they will find anything but the fact they haven't resolved this yet makes my conspiracy mind wonder sometimes if they're trying to find some loophole to satisfy the people who jingle the pursestrings /conspiracy. It says a lot when a country (Germany) who's pride is their high end automobiles would quickly give an all clear to their biggest competitor.
As for the short term plays I'm torn whether to sell the stake I bought at 173 on a pre earnings rise of say it shooting to 210-215 then buyback later with parlayed profit. The article you pointed out depicted short interest as high again but given the roasting short's have gotten with this 120 - 200 turnaround they are probably playing a lot more conservative and giving up their positions fast. The stock market seems to be built on purely sentiment as well so I agree with the article (and last quarter's results) in which a good statement which isn't blockbuster might send this tumbling back down to 170-180 or so.
Conversely blockbuster quarter with even more production surprises unannounced which will squeeze into massive $$$ territory. In the long term I really don't want to give up a position at 170 unless the economy starts catching up with the stock market and people start pulling back. I already sold the 5k I bought at 180 - 185 for a slight profit (100$ or so) as I always regretted buying at such a high position with money I wasn't planning on holding in limbo for such a long time.
Indeed. I want some ModelX eye candy!
The way the snow is going here in Chicago, we *need* the model X without delay. That said, it sure is nice to be able to use my iPhone to warm up the Tesla before heading out into our -18 degree Chicago weather. Oh, and the engine always starts too :-)
Hey Tom, so I've been super curious to know how the Model S handles in cold weather and in the snow. Interestingly Tesla seems to really be pushing the Model S' performance in cold weather (like in the marketing promo screenshot below). My assumption was that a battery operated car would have a greatly reduced range in cold weather -- that might be exactly why they're trying to dispel that perspective. But what's your real-world experience been? Is the Model S "perfect for winter" as they state?
Executive summary - its fine. The Model S is a heavy car. In slippery conditions it accelerates much better than I would have expected from a heavy rear wheel car. I agree that all wheel drive isn't a necessity unless you need to drive in more than 8 inches of snow.. You have to be careful to leave ample stopping distance though. Its *much* better than a Jaguar XJ6 which I would guess is a comparable weight class rear wheel drive car, but its no Audi Quattro.
When the pack is cold, it goes into a heating mode indicated on the dash. During this period the regenerative braking is off at first and then gradually increases until the pack is warm.This does take some getting used to. During this period acceleration is also reduced, but not in my view in any noticeable way. We typically have a 20 minute drive to work on side roads, so it's just getting warmed up only to get parked again. As such, and I haven't made careful measurements, we seem to be getting a 25% reduction in range. Its not been an issue at all so I've not bothered to measure it carefully.
Two important things to remember - its been below 0 degrees here *a lot*. My wife primarily drives the Tesla, and I drive a Mercury Mariner Hybrid. The Mariner Hybrid gives me roughly 30mpg with my normal driving habits, but this winter I'm getting about 21mpg. For our driving habits, I'd say the performance in terms of range and handling is comparable to a regular car. I'd say the marking folks are gilding the lily a bit, but its certainly no worse than a regular car. My opinion might be a bit skewed because I can't help but compare it to the AWD small SUV I'm used to driving.
That said, using the app to warm up the car is really really nice. I must need to update my app though because I don't see that there is a way to use the app to start the battery warming process. This would be nice especially because this would generally occur when the car is plugged in. Another idea (if anybody at Tesla is listening) would be to use the regenerative braking power that cannot be used on cold batteries to warm up the pack faster.
Oh, and a 3 second 0 to 60 AWD Tesla would be nice regardless of the season :-)
Jan 16, 2014 - Squeezing the Juice?
Tesla stock is up a marvelous 20% approx from it's 140$ price to 172$ given a violent rally (another short squeeze?) spurred by Tesla's Detroit Auto Show announcement of making many more cars than projected. All of this happened in 2 trading days - squeeeezing the juice!!!
Only question for me - how long will this rally last before people start pulling out? Are there people like me who bought in at 180-185 hankering to pull out overbought speculation once it reaches close? If so I did a craps like calculation of ~400$ loss if I sold now to insure 10,000$. Sentiment seems good though and if last Q's run-up was any indication this thing may easily hit 180 before the steam runs out. Maybe I'll think of dumping my overbought a bit below 180 time to recalc. A sell at around 177 would be a totally neutral move if I sold my set at that mark. Selling above 177 would net me a tiny profit.
Long term prospects are still good despite the lingering NHTSA recall everyone's forgotten about that's unresolved. Maybe I'm just being a wuss again and I should wait till it hits 210 or 2,100 in a decade ;).
If it helps, we still *love* the Model S we got in April. Long term customer satisfaction makes "Betting on Elon" a good idea.
Huge vote of confidence right there - thanks!
It's funny as user sentiment about a product doesn't necessarily reflect onto the stock price for a certain company (possibly most) but with so many instances of people who own the cars still head over heels about it maybe this one's a rulebreaker ;) Case in point the financial people keep talking about the reliability of Ford stock and it coming back or whatnot but from my experience all their cars suck and it's been that way for 25 years running. Somehow the stock hasn't tanked to 0 despite all that. Tesla is a bit easier in this case to analyze I guess as it only gets it's income from a small selection of cars vs multinationals and the like where one top selling product line can be diluted by crap from the other 95% of their holdings.
I decided to sell the most liable of my holdings for a 100$ loss earlier recovering 1400$ in capital to speculate with. Will probably leave the other 8,600$ alone and sell depending on user sentiment vs. time and likelihood for price to go down again.
This weekend, Telsa held an exclusive Model X preview for reservation holders. As the CEO of a mobile startup, I have mad respect for Elon Musk, the founder of Tesla. Here's a guy who, after starting and selling PayPal, started not one, but two companies with prescient timing: Tesla and SpaceX. As gas heads towards $5/gallon (with the imminent threat of shooting up higher) and the US retires its Space Shuttle program, Elon's two startups are positioned perfectly. For more background on Tesla, take a look at the blog post I wrote after touring the Tesla Factory.
Critics are raving over the Model X. As someone who's passionate about cars & motorcycles and hopeful for the future of electric vehicles that perform as well or better than their fossil fuel burning brethern, I was originally a reservation holder for the Model S. When I saw the Model X, I immediately swapped my reservation out. Now I'm #486 on the list for a Model X. You can get a reservation of your own here -- it's a $5k refundable deposit. Your only risk, really, is that Tesla doesn't stay viable as a company, but as someone in the tech industry, I really believe in Elon, his vision, and his ability to execute. I'm willing to take that risk.
Getaround is a car sharing service like Zipcar, except that it uses people's private vehicles instead of a fleet. It's a bit like AirBnB for cars. Getaround is part of the "collaborative consumption" movement, which believes that if we could share things we don't use most of the time it would be better for us in a lot of ways. Sharing cars means less cars on the road, which means less pollution, and generally less "stuff."
I'd never used Getaround and a few weeks ago I was trying to figure out why. I pinged Jessica, one of the founders, and told her that what I'd realized was that I didn't want to have to go to someone's house and "borrow" their car. The thought of actually interacting with the owner of a car was awkward enough that it had kept me from trying the service.
Jessica told me about a new type of rental they now have called "Instant," where I can use the Getaround mobile app to rent a car instantly and unlock it with my phone, meaning I wouldn't have to meet the owner or wait for approval. (This dovetails really well into my recent blogs about the power of mobile and apps to transform businesses, and how Fortune 1000 CEOs are going to get fired for missing it.) Getaround Instant was exactly what I was looking for, so my brother-in-law Dal and I decided to give it a try.
I had a few hiccups that Getaround is still working through (for example, Getaround verifies a driver's driving history with the DMV in real-time, and since my last name has a hyphen in it, but the DMV doesn't account for hyphens, my rental request initially broke Getaround's booking system. But both Jessica and Matt were very proactive at resolving these speed bumps). Overall the process was incredibly smooth: