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.
Elon is live-streaming the Model S P85D event now right over here. #DualMotor = insanely fast.
Can't wait to see what the "D" is on 10/9/14!! Anyone have a guess? And what's the 'something else'? TSLA motorcycle? Pickup? Lower cost off-grid battery storage?
Wow I LOVE this article that compares Elon to Henry Ford! And I especially love this comparison of how Model T growth exploded in the early 1900s:
1909: 10,660 vehicles.
1910: 19,050 vehicles.
1911: 34,858 vehicles.
1912: 68,773 vehicles.
1916: 501,462 vehicles.
1917: 735,020 vehicles.
1920: 941,042 vehicles.
1923: 2,011,125 vehicles (the peak year, in fact).
In ten years, Ford built 50 factories for a car that was very basic, beginning with no speedometer, poor brakes, just two forward gears and one reverse gear, no electric starter, and no fuel gauge.
This WSJ article that more closely links SolarCity to Tesla's upcoming Gigafactory does a great job of laying out in plain detail what those of us who have been bullish on Elon for a while already know: That TSLA isn't just a car company. It's a new type of energy platform. Storing energy (in the form of lower cost batteries) and using energy (in the form of cars).
This is a great quote:
"At the conference Wednesday, Mr. Musk disclosed that a portion of the gigafactory's capacity will be set aside for building "grid-scale storage."
In other words, Tesla is going to continue its tradition of manufacturing battery packs for SolarCity, only on a much grander scale."
+1 more reason that I'm betting on Elon.
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.
Sue and I took a tour of the Tesla Model S factory in Fremont, CA today. This is the old NUMMI plant. If you haven't heard the NUMMI story between GM & Toyota, and you're a car buff, there's a This American Life episode about it that's just mind blowing. The net of it is that GM tried to learn Just In Time assembly practices from Toyota, they built a factory together for Toyota to transfer this know-how to GM, and GM completely blew it. The factory shut down and was sitting idle after that fiasco.
When Elon Musk was looking for a place to build his new Model S sedan, he approached Toyota with a $50MM bid for it, which Toyota accepted. Why would Toyota sell a car production plant arguably worth $1 billion or more for $50MM? For the answer to that, you really have to understand the relationship between Musk and Toyota, which is well portrayed in this 2010 WIRED magazine article.
As a reservation holder for the Model S, I'm proud to support one of the most amazing entrepreneurs of our generation. What makes Elon even more amazing is that he's not only revolutionizing the automobile industry, but the space industry as well, with SpaceX... at the same time. Elon, my hat is off to you.
Below are a number of pictures and vidoes of the factory and the event, which was very well done.
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: