They had a leaked email posted last week that they were pushing for 100K. So 97k is less than was priced into the stock. Not sure why institutional investors don't like the stock and it's so heavily shorted and twitchy.
Tesla could use a COO to manage operational expectations and let Elon focus more on engineering in the future. It'll keep his twitter/email free from setting market expectations.
Institutional investors don’t like the stock because it’s a 16 year old company that’s never made a profit a year in existence. It’s pretty easy to see how that could make any money manager run scared
Let's also note that it's down 30% from peak this year. And that the price is heavily based on hypothesized future performance. And that Musk took a hype-driven strategy that, while getting him low-cost capital and a lot of free marketing, also has downsides. In particular, it creates a population of skeptics, and increases volatility when negative events cause former believers to become skeptics.
Tesla's hypothesized future performance has continuously been pushed out longer and longer. The consensus 2020 EPS was $18 in 2013, and by today it is a negative number. You can't push out future performance for eternity.
Hi! Replies generally go better if you assume people know the basics and then interpret what they said in light of that. Assuming for the moment I did know that, what do you think I might have meant?
Why would I assume you knew that? Not everyone is well versed in stocks so I was replying in case you thought tesla was unique in being priced based on speculated future earnings. I admit I said it in a pretty condescending way though.
The operational problems can't be understated either. Customer service experiences that are all over the map (Ranging from they came out to my driveway and fixed my car to its been in the shop for 3 months with no end in sight), production issues, QC issues, engineering issues... for every way they tend to "surprise and delight" they also tend to find ways to horrify by not nailing the basics.
And you only get to play the startup card so long. Tesla is indeed a 16 year old company whose production struggles look even more troubling considering their growth isn't what anyone would really consider hockey stick, and their competitors have none of their scaling issues.
Add in a leader that has shown some stability issues, and its tough to make a case for it.
Personally, I root hard for Tesla the company, want to see them succeed, and after recently buying a house with a parking spot, may buy a Tesla as my next car, but I am not buying shares anytime soon.
If you take a look at their quarterly production numbers, things don't look so rosy- they jumped from ~25000/quarter in Q4 2017 to 80k/quarter in 2018, but have not really moved the needle that much since then- this past quarter was 96k (96,155 if you want to get pedantic). Its fine growth for sure, but certainly not in a hockey stick matter- it makes me wonder where the disconnect is- how and when are they booking the revenue, and can this be expected to continue to jump if production isn't growing accordingly.
All the while, they are still losing money. This is not just about cash flow, this is about actual earnings. You have to look into where the disconnect there is as well to make a bull case.
I agree that the growth is likely to slow down somewhat in 2019. On a years view they produced about 253.000 cars in 2018 and will likely land at 360.000 in 2019. Nevertheless it is still 30% Growth YoY.
I would argue that slow down is mainly due to the nature of the production ramp, which goes exponential in the beginning but is now starting to flatten out. As it flattens though margins should continue to get better. If they get additional factories like the one in China it should reinvigorate the growth rate.
For me the bull story goes something like: they sunk a lot of money building out their very first mass producing production line, making a lot of mistakes on the way. Although they have some quality and service and margin issues people still keep buying their cars, which is the most important. Fixing the margin and other secondary issues is just a matter of time and continuous optimization.
So the most important of Musks hypotheses that people like buying electric cars if they are better in every important category is pretty much proven by now.
The second, that they are able to produce them at a profit is still to be proven, but economies of scale play a big role in that and they are first beginning to really leverage those.
It isn't just about cash flow, but both cash flow and earnings matter. Their cashflow has improved to the best state that it has been in since the company was founded.
Their other issues are a combination of scale and fundamental business issues with selling cars. Other manufacturers have profitable dealer networks selling their cars. Tesla has a money losing sales and service network. Some of this is due to their relatively small scale, but some of the problems are deeper than that, unfortunately.
Edit:
Wow, so much hate for a one-line comment. I have five replies and three downvotes as of now.
I stand by my comment. I think Tesla is building long-term value (brand recognition, a reputation for innovation in an stodgy industry, technical know-how in multiple industries) that will allow them to be profitable. I know well how Amazon got here, but I don't care about the technicalities. It is the behemoth that it is because of the compounded value added over 14+ years. I see Tesla equally driven and able to take advantage of the things it puts in place now.
Amazon has been cash flow positive since 2003. Amazon has a unique negative cash flow cycle where they collected revenue significantly prior to paying their accounts payable. As long as they are constantly growing, it is basically like running a business on a credit card.
Tesla is in a completely different situation. Cars require massive upfront investment before their revenue is realized, and given the results just posted, Tesla will most likely post a quarter with declining revenue.
People should stop comparing things to Amazon. Amazon was successful because it was unique.
Amazon made a profit in 2003 and literally every year after that.
Amazon can be forgiven for losing $1.6 Billion in the 2001 recession, but their pathway to profitability was rather short all else considered.
Amazon has famously low margins, but those low margins commanded a mighty profit for decades. They are not the company you want to compare against Tesla. Tesla's strategy is supposed to be luxury vehicles at high margins and relatively (relative to Ford / Toyota / its other competitors) low production.
In contrast: Amazon is low margins while out-producing its competition. A very, very bad comparison.
Amazon was profitable for nearly all years after 2003.
2003: $35 Million profit
2004: $588 Million profit
2005: $359 Million
2006: $190 Million
2007: $476 Million
2008: $645 Million
2009: $902 Million
2010: $1,152 Million
2011: $631 Million
2012: $(39) Million <--- First loss
2013: $274 Million
2014: $(241) Million <--- 2nd loss
2015: $596 Million
2016: $2,371 Million
2017: $3,033 Million
2018: $10,073 Million
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Aside from 2012 and 2014, Amazon was both profitable AND cash flow positive. Amazon was Cash flow positive all 15 years in this time period as well. But I'm talking net profit / net loss here.
IMO: there's no valid comparison to Tesla here. Amazon is not the company you want to compare against Tesla's performance.
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Anyway, yes, Jeff Bezos sacrificing one year or two years of profits (over 15 years) for greater long-term growth could make sense. That doesn't actually mean its healthy for Tesla to consistently lose money for 10 years straight.
I guess my major point is that Amazon didn’t need to consistently find new capital in order to keep the business afloat. Musk does. That’s partyly the distinction between cash flow and profit
Not every loss making company is an Amazon in the making :)
Tesla is likely coming to the end of the period where they have a relatively unique portfolio of products. We're starting to see the traditional car makers come up with competitive vehicles.
Whilst Tesla may ride this out fine, it's likely to have an impact on things like margins, going forward.
not sure I've seen a good analogue for the Model S (yet)
closest competitor for the Model X at the moment appears to be the Jaguar I-Pace.
For the model three there's things like the Hyundai Kona and Renault Zoe which are becoming competitive.
I don't think it's there yet, but if I was an investor looking at a 2-3 year timeline, you've got to expect increased competition as there's various models coming along from various companies. Not all of them will be successful, but it's a fair likeliness that some will be.
Comparing pre-IPO Tesla to post-IPO Amazon is going to skew some things. I think it's better to compare post-IPO Amazon (1997) to post-IPO Tesla (2010).
For the first ~10 years of existence they were barely a company. That Tesla has almost nothing in common with today's Tesla, not even Elon Musk. Not sure time since incorporation is the best metric.
So 2008 didn't happen I guess. I guess nobody in their right mind would buy and sell loans which aren't guaranteed. And I guess usable mass market EV's existed before 2018 and I guess Tesla is just running a scam .
What does 2008 have to do with anything? A company that hasn’t made a profit for 16 straight years, especially valued at billions of dollars, should be considered a extremely risky investment
Name any investment bank which started after 2008 and has some decent amount of market cap. My point is suggesting investment banks can make rational decisions is not based on facts. They make decisions which make most money or save existing investments. Aside from the level of toxic hatred on the stock what can you fault about the products they are selling nothing. Can you find another company anywhere delivering value/$ as Tesla I'm not sure.
It's because Tesla is still a pretty risky investment. It still remains to be seen what sort of "moat" they really have in the EV space. Most other major manufacturers are preparing to launch EVs over the next 3 years. It may turn out that Tesla really is a few steps ahead technologically or all of the guys that have been building cars for the last 80 years may eat their lunch.
But I do agree that they could definitely use a COO. Musk seems like a bright guy but I'm just not sure how suited he is to handle operations at scale.
It could also be to some degree there are very weird decisions that have been made at Tesla.
Lets just look at Kimbal who has been on the board since the beginning, with a multi-million dollar compensation package even though he has zero relevant experience in the industry and is a huge outlier compared to the rest of the industry. Sure they are making strides in electric cars but as a business its very out of the norm.
Plus, keep in mind that, if TSLA isn't massively more profitable on a per-car basis than other car companies or doesn't essentially take over the automotive market, any upside is already priced in.
There isn't a car company around right now that doesn't have an electric model coming out in the next couple of years. And so Tesla has nowhere to go but down.
Not sure I understand your logic. EV vehicles account for just over 2% of US vehicles sales in 2018. Globally it'd be more but still minuscule compared to ICE ones. The competition is getting fierce, but they compete for a bigger and bigger cake. If anything there are nowhere to go but up.
Tesla is the leader, not a follower in the segment. They have advantage of manufacturing, charging network, battery, software, and last but definitely not least their brand. If anything some laggards will lose out, for example Chrysler or Mazda.
Tesla booked about 110,000 orders this past quarter. That's a very healthy demand. [0]
I'm not trying to say Tesla has no risks at all, but you have to _really squint_ to not seem them as the clear market leader currently. The Model 3 simply has no competitors today - and to invoke the Taycan is about as disingenuous as it can get.
Where’s the charging network? Why do you not mention 100-150 miles less range when comparing the Taycan to the S and X?
“The maximum range for the Taycan is listed as just 450 km (279 miles) on the WLTP test cycle. The Audi is rated at 255 miles on WLTP and 204 on the U.S, EPA cycle. When the Taycan gets its EPA certification, it will likely have a range of around 220 miles.” - Forbes
The street was expecting much higher than 100k. Down 4& after hour.
Currently Tesla's valuation is higher than both BMW and Mercedes. No doubt, they're enjoying rich multiple due to other forward-looking business units, but they're not generating any money. Their car business is what's keeping the light on.
On long term, Tesla's car business is uncertain. The first-mover advantage is eroding quickly as legacy mfrs are stepping up.
It's an extremely competitive business. And with $45k model flooding the market, the novelty factor of the brand is going to wear off very quickly.
Look at the new Porsche Taycan. To me, that's the new Model S.
Can a Tesla compete on brand, design, interior fit, build quality, support, charging speed, repeatability, handing ? AFAIK it loses in all of these categories.
I thought Tesla superchargers have faster charging speed? They have 150kW charging, is Porsche doing something better?
OP said Taycan is the new Model S, I think that your comment vs. mine highlights that this isn't true -- Taycan customers are not the same as Tesla customers. Tesla customers get a good bang for their buck -- speed, range, charging network at a cheap price. Porsche customers get brand, design, & build quality.
Someone who values what Porsche has to offer probably was never interested in a Tesla.
Meanwhile a Model 3 Performance -- the same speed as the Taycan -- costs $90,000 less.
Young people have been, and will continue to be buying 10-year old junkers, not brand-new Teslas. Outside of the tech bubble, money doesn't grow on trees.
I much rather have the interior of a Tesla. I car much more about the cool features then complaining about a slight overlap of two plastic panals that are under the seat, or whatever car german fetishits obsess about.
> charging speed
They have a small advantage on a tiny number of actual charging stations but the majority of the time your gone charge much slower.
Tesla could use a COO to manage operational expectations and let Elon focus more on engineering in the future. It'll keep his twitter/email free from setting market expectations.