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Musk endeavours

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odysseus2000
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Re: Musk endeavours

#322457

Postby odysseus2000 » June 29th, 2020, 8:59 am

Electric trucks coming to the US postal service?:

https://www.vox.com/energy-and-environm ... rvice-mail

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odysseus2000
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Re: Musk endeavours

#322470

Postby odysseus2000 » June 29th, 2020, 9:31 am

Jay Leno review of the Model Y, very interesting to get his take on this vehicle:

https://twitter.com/elonmusk/status/127 ... 77088?s=20

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dealtn
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Re: Musk endeavours

#322479

Postby dealtn » June 29th, 2020, 9:56 am

odysseus2000 wrote:
dealtn
My concern is that as that "gap" is exploited as more and more batteries with the capability to buy/sell this arbitrage come along, that price gap will narrow. More "batteries" will be buying when energy is cheap, and similarly those same more "batteries" will be selling when energy is expensive.

So my question is what is your valuation model of Tesla using as this "gap" and does it account for that "gap" narrowing, or becoming smoother, and over what time frame. With TSLA valued at $180bn or so, I would need to be robustly confident on issues such as that before I would be long. Similarly were it valued at say $10bn I would want to a lot of confidence in going short (and I certainly wouldn't be ignoring the non-auto parts of the company even if I had little faith in their auto products).

I hear a lot about "secular growth", and also so much about how wonderful their products are, but not a lot of that matters without the context of valuation. Buying or selling shares in a company based on how good (or not) their products are isn't enough, price matters enormously too.


In terms of secular growth, I use the term to describe developments in an area that previously did not exist. So, for example, the growth that came when cars replaced horses.

The point that in the by and by there will be competition, is very similar to how Henry Ford revolutionised car production and later his methods became standard industry practice, but the time between his development of the auto industry and when competition caught up was long enough for him and his shareholders to become wealthy. I believe we are in a very similar situation with Tesla, although in this case it is better as not only does legacy auto have to compete in BEV, they also have to deal with the decline of their existing ICE manufacturing.

In regard to valuation, one can't value secular growth like one would value an existing business. Any analysis of any business that is rapidly growing into a new area will always be characterised by high price to low earnings. At this stage in a companies life, managements are focused on domination of their market, not on dividends and the other parameters of established business. A more sensible measure is that of measuring the price to earnings to growth rate, or PEG or its inverse as was popularised by Jim Slater in his writings.

In practice it is as much about what investors will pay for the potential of a stock as it is about anything else, often coupled with how much bears are prepared to short what they see as an over priced stock and then the contest between these two groups.

Regards,


Like I said I have heard a lot about secular growth.

But I asked you a question. You originally said you were happy to engage with those that present an alternative case. So how do you arrive at a valuation, presumably North of $180bn? But specifically, as this conversation, and your video, relates to the price gap between energy prices when supply/demand is extreme such that those with storage capability can exploit it, what do you think will happen to that "gap" as storage capability increases?

Do you believe the price gap will stay (and defy conventional supply/demand economics), or narrow, and if the latter by how much, and is this in your valuation?

I'm once more coming to the conclusion that whilst you are happy to post, and invite discussion, you aren't actually that interested in the "discussion" bit.

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Re: Musk endeavours

#322494

Postby odysseus2000 » June 29th, 2020, 11:00 am

dealtn
But I asked you a question. You originally said you were happy to engage with those that present an alternative case. So how do you arrive at a valuation, presumably North of $180bn? But specifically, as this conversation, and your video, relates to the price gap between energy prices when supply/demand is extreme such that those with storage capability can exploit it, what do you think will happen to that "gap" as storage capability increases?

Do you believe the price gap will stay (and defy conventional supply/demand economics), or narrow, and if the latter by how much, and is this in your valuation?


At some point all of this will reach some equilibrium, but by then lots of profits will have likely been made by the first movers and I will have left the sector and be invested/trading something else as by then it will be a utility. This will take years to happen.

The current valuation has nothing to do with the eventual utility like status but instead is reflective of the growth that will come if Tesla execute well. Of course they may not and the current price will then have been too high, but no one knows what will happen. All of these types of investment are based on imagining what may happen if ones investment thesis become reality sometimes supported by arguments based on PEG's, sometimes even the PEG's look wild, but currently Tesla PEGS are somewhat reasonable for this type of quantification. DSPP has done some estimates on this board or one can do a PEG analysis.

The history of Tesla, and almost all secular growth business, is a consensus in the media arguing that the valuation for Tesla is way too high and by large fund managers shorting the stock in a belief that valuation is a useful investment parameter and that the Tesla share price must fall to bring it to what they believe are more acceptable valuations. This approach always fails with successful secular growth business and always wins with business that are valued as secular growth but which are not.

If your question is do I think the p/e valuation is to high, my answer is that I don't consider p/e for this type of business and consequently I don't care what the p/e valuation is.

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Re: Musk endeavours

#322495

Postby tjh290633 » June 29th, 2020, 11:00 am

odysseus2000 wrote:Electric trucks coming to the US postal service?:

Catching up with Milk & More?

dealtn
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Re: Musk endeavours

#322503

Postby dealtn » June 29th, 2020, 11:14 am

odysseus2000 wrote:If your question is do I think the p/e valuation is to high, my answer is that I don't consider p/e for this type of business and consequently I don't care what the p/e valuation is.



No it isn't.

But your not answering the question I asked (and you invited) you have confirmed something else.

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Re: Musk endeavours

#322557

Postby dspp » June 29th, 2020, 2:49 pm

dealtn wrote:So how do you arrive at a valuation, presumably North of $180bn?


dealtn,

I'll have a fact-based conversation with you, making the assumption you are prepared to similarly engage constructively.

There are some useful valuations out there we can inspect. One of the more thorough ones is ARK's, because it takes the time to build a series of scenarios and then probabilistically aggregate them. Their latest one https://ark-invest.com/analyst-research ... ce-target/ has a 2024 expectation value of $7,000/share, with a bull case (P<25%) of >$15,000, a bear case (P<25%) of $1,500, and a median of $2,700. Now personally I think that some aspects of some cases are overenthusiastically assessed in the ARK cases, so personally I would dial down the values and dial down the probabilities, but equally I acknowledge that many of the cases do have a non-zero possibility of coming to pass. I also think the 2024 timescale is a reasonable one to be investing into Tesla on, i.e. beyond the 1-2 year clutter, but not out in the 10-20 year distant future.

I do not have time to build a little Monte Carlo simulator, but if I did it would likely look much like ARK's (actually their public one is deterministic, but I have also seen what look like MC ones from them). You can download ARK's at GitHub and play with it yourself.

Nevertheless at the moment my more simplistic PEG calculator is coming up with numbers of greater than unity, right now I estimate 1.09. That is on the basis of 500,000 vehicles per year, 18%GM, and $1000/share, and 57% growth rate. That suggests a slight overvaluation right now in 2020. Stick in $950/share and PEG is 1.03. That in turn suggests to me that most people who are valuing TSLA are in some way or another using a PEG valuation model, whether they realise it or not. Given that the input data to that model are purely based on the existing revenue streams that are material in the accounts that means that 95% of this valuation is arising only from the auto-business. That means one gets a free carry on the remainder of the scenarios that have the potential to liberate additional value (and remember "storage, autonomy" are merely the two top-level descriptors of several business opportunities). Within the auto-business one naturally looks for limits to growth, and at present a 500,000 vehicles/year manufacturer has a long way to go whilst still staying within a market of 80-100m vehicles/year. That is good because on a PE basis these financials would lead to fair value on a 10x multiplier at $162/share, i.e. TSLA needs to grow by 6x to grow into the valuation implicit in its share price. That in turn means the market is really valuing TSLA as a 3m vehicles/year manufacturer of high-margin vehicles, something that it might be in about early 2025. That in turn means the market is now (2020) taking for a given the central proposition within the ARK scenarios, i.e. that TSLA has as a base a high probability of becoming a substantial global auto mfg co.

I can see so many other value streams that TSLA is working on enabling (storage, autonomy), and so few constraints, and so few genuinely competing competitors that I am now much more relaxed about continuing to hold TSLA at the $1000/share price than I was when I entered at $250 or so. That is not to say that I am rushing out to buy any more (I do have to bear in mind overall portfolio risk), but if I had a portfolio with no TSLA shares in it, then I would probably be minded to have a wee nibble. I am of course also very cognisant that 2020 is likely to be a bumpy year for any business, so I expect plenty of short term events that could of course be adverse. I am conscious that TSLA is my riskiest share, at least now that HUR is no longer in my portfolio, so it is not one for anyone who cannot stand the risk.

From a trading perspective, if I think I am in a share which is being valued in a PEG way, then I guess I need to be sensitive to that. Which is a topic I am very open to the traders amongst us opining on, but please not in a handwavy manner.

regards, dspp

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Re: Musk endeavours

#322569

Postby dealtn » June 29th, 2020, 3:32 pm

dspp wrote:
dealtn wrote:So how do you arrive at a valuation, presumably North of $180bn?


dealtn,

I'll have a fact-based conversation with you, making the assumption you are prepared to similarly engage constructively.



I don't have time to do a proper "dig" right now but have skim read the ARK link you provided, so thank you.

I agree with most that would postulate that Covid, and the major disruption to the (global) economy, has made everything much harder for all companies, and it is especially hard to see who will suffer more than others.

I get the arguments about scale, reducing costs, etc. and note the investment scale required by Tesla is dependent on it continue to issue equity/debt. That can be a great path, if successes continue, but perilous should things turn out less so. In fact the single best decision I think the company made was its recent equity placing.

What would concern me though is the product. I'm not a fan generally of companies that have mega fans of their products, but they can certainly be successful investments, such as Apple. But that relies on the products being good/superior. That might be the Tesla product of the future, but there are plenty of reliability/fault issues with the product from a consumer perspective currently. With a (demanding) valuation, and reliance on growth, I think they really need to address this regardless of how powerful the "secular" change is from ICE to BEV.

I know very little about the tech, but plenty are postulating that Tesla have a moat in battery, or at least a superior product/methodology, and if true that will stand them in good stead. But if the product is a car, and not a battery, that won't be enough to generate growth in market share, volume to justify the valuations we are seeing as things stand.

Analysis from the supply side is great, and useful, but to back it up requires modelling on the demand side too. The product, and its acceptance by consumers, needs to make significant step-ups in demand for the scaling required, and the valuations that rely on it, to hold.

Useful. I will dig further later as time allows. It is certainly a massive stock, but like many others on demanding valuations, it is essentially in the "story stock" category for me. As such few succeed in justifying their valuations (even if they succeed as businesses long term), and many crash and collapse.

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Re: Musk endeavours

#322596

Postby dspp » June 29th, 2020, 4:44 pm

GM Bolt - 3yr review - very grim reading for trad auto mfg biz model > BEV survival probability

https://electrek.co/2020/06/25/chevy-bo ... ospective/

The comments are almost as interesting as the article

- dspp

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Re: Musk endeavours

#322600

Postby dspp » June 29th, 2020, 4:49 pm

dealtn wrote:
I ...... note the investment scale required by Tesla is dependent on it continue to issue equity/debt.


Please check your numbers.

My numbers show that whilst TSLA may opportunistically issue equity, it is now an elective decision. My numbers indicate that TSLA can continue to expand at this %growth rate and that it is now fully internally self-financing if it chooses to do so. If you think otherwise please show your numbers.

(I fully agree this was not previously the case, but it is now)

I have made this point previously. It is an element of TSLA being beyond the "just a story stock" stage. I'm not trying to convince you to buy it, but what interests me is if you say something that causes me to check my own 'facts' on TSLA and for me to then reassess something.

regards, dspp

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Re: Musk endeavours

#322614

Postby dealtn » June 29th, 2020, 5:58 pm

dspp wrote:
dealtn wrote:
I ...... note the investment scale required by Tesla is dependent on it continue to issue equity/debt.


Please check your numbers.

My numbers show that whilst TSLA may opportunistically issue equity, it is now an elective decision. My numbers indicate that TSLA can continue to expand at this %growth rate and that it is now fully internally self-financing if it chooses to do so. If you think otherwise please show your numbers.

(I fully agree this was not previously the case, but it is now)

I have made this point previously. It is an element of TSLA being beyond the "just a story stock" stage. I'm not trying to convince you to buy it, but what interests me is if you say something that causes me to check my own 'facts' on TSLA and for me to then reassess something.

regards, dspp


I note...in the link you provided to ARK they say..."In all cases, except those in which it either is denied access to the capital markets or is bankrupt, we assume that Tesla issues $10 billion in equity capital to scale production at an accelerated rate and capitalize on its competitive advantages. We also anticipate that Tesla will issue incremental debt—tens of billions of dollars in some cases— to scale production and that the issuance will be governed by its profitability and collateralized by its fixed assets." This is in the section headed "The Valuation".

I hope that is clearer.

I agree that Tesla is beyond the story stock in the sense they have product(s) available and selling. My meaning of "story stock" is that in addition to having the ability to scale up and supply product(s), they also need to have demand for that product(s), and on that scale, to justify the valuation.

I haven't researched enough to come to a conclusion one way or the other (despite the assumption by others I am by default a "Bear"), but make the point as always that will depend not just on whether I think the company is viable, but the price of the share in the market.

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Re: Musk endeavours

#322628

Postby odysseus2000 » June 29th, 2020, 7:22 pm

dspp wrote:GM Bolt - 3yr review - very grim reading for trad auto mfg biz model > BEV survival probability

https://electrek.co/2020/06/25/chevy-bo ... ospective/

The comments are almost as interesting as the article

- dspp


Fascinating article!

It is as though GM want to deliberately lose this market. The internal dynamics of working on BEV at GM can't be conducive to them retaining their engineering talent. This sort of reads like who ever did the Bolt, left GM and no one of similar talent could be got to replace him or her. It reads as a great advertisement to recruit good engineers at Tesla.

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Re: Musk endeavours

#322645

Postby dspp » June 29th, 2020, 8:57 pm

dealtn wrote:
dspp wrote:
dealtn wrote:
I ...... note the investment scale required by Tesla is dependent on it continue to issue equity/debt.


Please check your numbers.

My numbers show that whilst TSLA may opportunistically issue equity, it is now an elective decision. My numbers indicate that TSLA can continue to expand at this %growth rate and that it is now fully internally self-financing if it chooses to do so. If you think otherwise please show your numbers.

(I fully agree this was not previously the case, but it is now)

I have made this point previously. It is an element of TSLA being beyond the "just a story stock" stage. I'm not trying to convince you to buy it, but what interests me is if you say something that causes me to check my own 'facts' on TSLA and for me to then reassess something.

regards, dspp


I note...in the link you provided to ARK they say..."In all cases, except those in which it either is denied access to the capital markets or is bankrupt, we assume that Tesla issues $10 billion in equity capital to scale production at an accelerated rate and capitalize on its competitive advantages. We also anticipate that Tesla will issue incremental debt—tens of billions of dollars in some cases— to scale production and that the issuance will be governed by its profitability and collateralized by its fixed assets." This is in the section headed "The Valuation".

I hope that is clearer.


Yes, in this respect I think I might be more optimistic than ARK.

My numbers are $2.8bn capital investment required in 2020 vs my projected net profit in 2020 of $1.8bn (and cum negative to date), which is one reason they did the capital raise earlier this year (the other two reasons being working capital buffers, and opportunism). After this year it seems that even a pretty high growth scenario yields sufficient profits for the required investment. I've not seen many people do the numbers on this, which is why I did them for myself.

Image

regards, dspp

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Re: Musk endeavours

#322690

Postby dspp » June 30th, 2020, 7:13 am

Not sure if this Starlink / SpaceX link has been up before

https://caseyhandmer.wordpress.com/2019 ... -big-deal/

- dspp

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Re: Musk endeavours

#322696

Postby odysseus2000 » June 30th, 2020, 8:34 am

Interesting video with some speculation on Quarter end numbers, comments on various business metrics etc:

https://youtu.be/63hd7tBmykk

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Re: Musk endeavours

#322707

Postby odysseus2000 » June 30th, 2020, 9:50 am

dspp wrote:Not sure if this Starlink / SpaceX link has been up before

https://caseyhandmer.wordpress.com/2019 ... -big-deal/

- dspp


Super interesting article.

The business case for Starlink is amazing.

Kind of wonder if some countries, perhaps North Korea, China, will demand that it does not transmit to them and will be busy making anti-satellite weapons to be sure the have bargaining power.

As the author hints on top of all the revenue from selling bandwidth is the potential for a SpaceX competitor to Facebook and Google.

Everything suggests that the wealth needed to create a martian colony will be quickly earned and at the same time existing internet suppliers will struggle to compete.

Super disruptive technology.

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Re: Musk endeavours

#322794

Postby odysseus2000 » June 30th, 2020, 3:11 pm

Oppenheimer keeps Tesla at out perform, sees Germany as a bright spot:

https://seekingalpha.com/news/3587359-g ... ent=link-3

For anyone interested I am liking the news flow and the price action in Tesla stock and have been adding, but if deliveries are well down even with the c19 excuse, the price could come off fast.

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Re: Musk endeavours

#322868

Postby odysseus2000 » June 30th, 2020, 11:47 pm

Wow! What an amazing day for Tesla equity: +$70.46 (6.98 %) to a new closing high of $1079.81

Folk are, at least for the moment, looking beyond the c19 pandemic and liking the powerful macro tide that is sweeping away ICE and replacing it with BEV.

This is remarkable given that the Tesla US California plant was shut by the pandemic for a good part of the quarter and a relentless series of critical reviews by various auto commentators, but these negatives were set against the political will to clean the air and move to sustainable energy and transportation and the latter won.

The stock ipo'ed 10 years ago at $17 and has grown by over 5600%, an average of 45% per year:

https://www.barrons.com/articles/tesla- ... 1593437846

History classes in years to come will teach about the transition from ICE to BEV just as we were all taught about the transition from horse power to steam power.

In 1712, Newcomen invented the first steam engine and slowly the UK mechanised, although not all people like it and in 1813, 14 Luddites were hanged in Manchester. In 1825 the first railway carrying passengers behind a steam engine opened, 113 years after Newcomen's invention.

https://www.historic-uk.com/HistoryUK/H ... evolution/

Some argue that the transition to BEV was much faster, but the exponential growth we are seeing now is after a very long tail.

The first crude electric vehicle was created in 1828, but more practical electric cars did not exist until the 1870's. By 1899 electric cars such as those made by Baker were very popular and in the period 1900 to 1912, 1/3 of all cars were electric:

https://www.energy.gov/timeline/timelin ... ectric-car

The first Tesla was launched in 2006.

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Re: Musk endeavours

#322881

Postby odysseus2000 » July 1st, 2020, 6:55 am

Cathay Wood on the new competition to Tesla & various Aspects of their investment approach:

https://youtu.be/5tdr89cf4dQ

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Re: Musk endeavours

#323202

Postby odysseus2000 » July 2nd, 2020, 10:03 am

Musk congratulates employees:

https://www.cnbc.com/2020/07/01/elon-mu ... ter%7Cmain

This is being taken as an indication that Tesla beat expectations for deliveries. The number is predicted to print after the close tonight.

Regards,


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