It’s painful. I exited at $430.00 - cuz I thought I knew better. Made $160 a share… but Cot dammit.
My two quoted posts above this really capture the naysayer cluelessness well. Amateur hour out there.
The naysayers were those armchair investor types that are too clueless to accept simple reality when it was staring them obviously in the face. The parts were all there in plain view but you had to be willing to sit on the calls and really look at the numbers and what was occurring. I was at a dinner with a bunch of the non-finance types talking about how its so overvalued, bubble blah blah basically because they saw a headline, are living in 2016 and haven’t looked at a cash flow statement. They explained to me that the firm has never been FCF positive because none of them had ever looked at a financial statement. Just amazing, this was extremely obvious to anyone doing the work.
Wish I had put some work in this one, even if just out of curiousity, too many names, too little time.
Luckily, this is far from the last opportunity out there.
GE still has legs despite a +51% one year run.
i note that the cash flow picture was improving in a meaningful way but it’s hard to say it was obvious that the company would receive a $130 billion EV and trade at over 5x EV/S. i mean, you could guess that the change in sentiment would drive a spike in valuation but it is still difficult to justify based on the necessary capex required to generate the earnings and cash flow needed to justify a $130 billion valuation for an eventually mature company.
the only way to truly justify this valuation is to say that the self-driving tech is worth maybe half the valuation but i think most people give elon too much credit when it comes to what can be done with cameras and radar. you’re basically betting that elon and his boys are right and every other self-driving expert is wrong. i know elon is wrong when i drive behind a tesla in the rain and the thing is going 30kmh on a 70kmh road on autopilot.
Not really, you’re missing the point. They had the gigafactory plans, timelines etc, we know the run rate and we know the approximate margin. FCF was demonstrated, the product was proven, its a simple algebra exercise of projecting out the run rate as these factories come online combined with the effect of reducing capex upon completion and not getting distracted by popular finance clickbait headlines. There are other major factors you’re missing. Future MRO earnings streams off of a growing installed base of units for example. Then factor in the top line growth rate. Anyhow, people will always create reasons for hesitating, but the business case was pretty obvious, I laid it out in detail a year ago and now we’re here, not really sure what more there is to debate. As far as I’m concerned this one is in the books.
but that’s the tricky thing with valuation. if $130B isn’t too much right now, why not $300B or $50B. when you’re pricing out a stock, you can’t really assume the next two years justifies the next fifty with a nice 8% ERP attached.
i won’t argue that it isn’t a tradeable stock. every stock is a tradeable stock. i simply think it’s a little less obvious than you are presenting it and the move up is potentially not fundamentally founded. from my point of view, this was a cut and dry squeeze on bearish sentiment, nothing more. you are right that this squeeze was fairly predictable given the progression over the past year.
Because they’re basically pricing off of near term growth plateau, which will happen around 2023 when both Europe and Shanghai are live. At that point growth will slow and you’ll be looking at ~$8-10B of FCF a year or high single digit FCF on EV, which is reasonable. This isn’t a mark to makeup valuation, this is a pretty reasonable business case generating major FCF going through the tail end of a major growth transition.
Hanmer, meet the head of the nail!
you need to connect with me… we could be great business partners
Aswath Damodoran evaluated Tesla last year at $186. He did buy Tesla in June when it was at $180 (buy limit order). He now sold, yesterday at $640. It’s an interesting listen, about 17 minutes.
wait so u are expecting 8b in fcf? i think for 2019 they’ll prolly clock 1b on fcf on 25b in revenues so roughly 4% conversion. that’s pretty typical for a car co. luxury cars can prolly clock a 10% conversion. they’re definitely still not out of the woods yet. the upfront payments for the self drivign tech is boosting their fcf massively. they still need massive adoption and i doubt that they can get it at their current price points. also i dont know if they’ll get recurring buyers, but based on consumer reports, people seem extremely happy. anyways they still have 13b in debt and are still losing 1b a year in net losses. tesla is definitely taking market share from the german manufactuers though. i see it where i work. where once it was only beamers and benz, tesla is now the rising favorite of the newer cars. i can easily see them being the majority in about 5 years. hopefully we can bring the the germans down, cant have them getting too strong like last time. those crazy tomatoes. elon is an american. we must support elon.
https://cleantechnica.com/2019/10/07/tesla-model-3-24-of-small-midsize-luxury-car-sales-in-usa/
---------- 2017 2018 2019 2020* 2021* 2022* 2023*
FCF -3.5B 0B 1.1B 1.5B 3.2B 4.8B 7.4B
*Consensus
The driver behind the growth is volume. Shanghai went live very end of 2019 and ramps through 2020, so in 2021 you have a full year of run rate. Europe goes live around end of 2021 and ramps through 2022 so you have full year run rate in 2023. Again, these are consensus. Top line more than doubled from 2017 to 2019 and should approximately triple based on plant capacity from 2019 to 2023. Shanghai is de-risked and China is like 80% of the global EV market. Their product is also proven and clearly a world leader, products share ~70% parts commonality. This a great company.
The gap between FCF (positive $1B and earnings -$1B) isn’t self driving tech, it’s the massive depreciation since all of their plant is basically new and production still ramping while orders are landing.
like aswath, it is a matter of valuation.
i’m not even a doomsayer. in september 2018, i said this “i wanna see sub $200s and a year go by.” within that next year, the stock fell below $200 and a year later was below the price when i said that. i personally didn’t buy any below $200 due to largely avoiding most cyclicals but was certainly some value, mostly optionality, there.
the cyclicality of the story is certainly underestimated with a $600 handle. it’s fine to say, “the supply side of production will drive revenues”, but people actually need to buy the cars and a recession within the next few years throws a wrench in that supply side story. aswath’s presentiation basically outlines particular reasons why the stock now gets a higher valuation, but all of the reasons he highlighted get upended in recession.
auto companies are cyclical. They always blow cuz of their debttttt
Debt is not bad for TSLA given their trajectory, if they get a year or two without a existential financial crisis they will be fine. A full blown recession would be a risk, but not a bankruptcy at this point. Cars are cyclical, EV’s are a structural growth story and cyclical car companies don’t quadruple sales in a six year period. People are free to sit on the sidelines and wag their tongues at this stock like they did AMZN but there’s a lot of smart people out there with an investment that just went 3X in a very short amount of time. This is a simple story, not sure why people are struggling with this, well I mean I have ideas why, but still.
sir please assist with holding ERJ for long time with negative profit. uber concerned. tanks
HODL
I’ve never looked into the stock. But when Chanos thinks there is accounting fraud, I don’t know. Latest thing I saw was they may be gaming the warranty reserve. The TSLAQ guys on Twitter are nuts though
Good video. I always like his approach