Why I hate the stock market. Unprofitable Tesla is now worth more than profitable Ford which sells 28 x as many cars

Here's the latest TSLA valuation from NYU's Aswath Damodaran.

http://aswathdamodaran.blogspot.com/

Upside-it increases production by a factor of 30 in the next year or two, and increases its margins to a point where they are apple like, rather than ford like. It then justifies its price.

Downside-In increasing its production, it realizes supply chain, labor, or quality problems that thwart its attempt to move from the few thousand cars a month to the tens of thousands of cars a month. If it produces even 5% lemons-all those high hopes and customer goodwill evaporates. If it can only ramp production up to half what its promising, same thing. Building a car is easy. Building 100,000 of them a month is not, particularly if you've never done it. All ford or gm has to do is design an electric T-bird or Camaro--they already know how to build 100,000 of them a month. Musk has a cool car. He has not yet proven he can build very many of them.

Charging stations are tougher than you think. The current load for a fleet is huge. A park and ride today can install 2 or 4 chargers and hook them into the lighting circuit- and voila, they are LEED certified. If instead, the parking lot has 500 spaces, all filled with electric cars awaiting a charge-that's a lot of juice. The grid is not setup for that. Charging in one's own garage impacts the grid, but is doable. Charging hundreds of cars in parking lots will have to transform the grid. The energy demand for an office building is dwarved by the energy demand to charge all of the office worker's cars. Technology that works when less than 1% of the fleet is electric is going to blow up when the fleet hits 30 or 40 percent.

rojo wrote:

I can't win. I want to get in on the bitcoin bubble and people call me an idiot. I ask a question about Tesla being a bubble and people call me an idiot.

No you are just an idiot who shows a fundamental misunderstanding about how the stock market works.

"The micro-satellite I10 Kg) industry which does not need the outrageously expensive liquid fuel 1st stage is killing traditional satellites (1000 Kg)."

Thank you for pointing that out. I was unaware of such a trend. Since my rockets can't take a bunch of microsatellites up in one launch, and since I'm not planning to launch a constellation of satellites, and since OneWeb, for which we provide launch vehicles, will probably also cancel their constellation program, I'll shut down operations today. And I'll also forget all about that colonizing Mars thing. Thanks again for the heads up!

Ol' Musky wrote:

"The micro-satellite I10 Kg) industry which does not need the outrageously expensive liquid fuel 1st stage is killing traditional satellites (1000 Kg)."

Thank you for pointing that out. I was unaware of such a trend. Since my rockets can't take a bunch of microsatellites up in one launch, and since I'm not planning to launch a constellation of satellites, and since OneWeb, for which we provide launch vehicles, will probably also cancel their constellation program, I'll shut down operations today. And I'll also forget all about that colonizing Mars thing. Thanks again for the heads up!

I'm not sure if guys who live in their mom's basement get sarcasm, but good one.

I've had many opportunities to invest in a car company and I've passed up all those opportunities for much the same reasons Rojo cites. Tesla has blown startup and R&D money to put themselves in a spot of debt where the likes of GM and the others can easily make their own rival car and move forward with none of those debt problems. Car manufacturing is too competitive and easy to replicate.

The only way Tesla will succeed is if its charging stations prove to be far and away more available than all the competitors. Think of Tesla as the Apple ecosystem of iOS using its own chargers and the rest of the companies with their chargers are like Android sharing the same system. All those companies need to do is pay to make their generic chargers massively available, but nobody wants to foot that bill for the others. If Tesla succeeds it will be because they were willing to foot such a big bill on their chargers such that their ecosystem is self sustaining.

rojo wrote:

I can't win. I want to get in on the bitcoin bubble and people call me an idiot. I ask a question about Tesla being a bubble and people call me an idiot.

If you think Tesla is irrational, you really need to stay away from bitcoin. Tesla at present maybe overvalued, but they are diversified enough that total failure is unlikely. Tesla's biggest problems are the possibility of something causing the price of oil to drop significantly, like fining a new large reserve and/or the development of significantly more fuel efficient IC engines. The other potential problem is one of the big automakers deciding to go all-in on electric in the way Tesla has done. (Both of these things are possibilities and would 'almost' crush Tesla as an automaker.) However, Tesla is not going away because for one, they are not vapor, they have tangible products that are selling and they are making money; that have a ton a valuable patents and hard assets; they have the potential to be a market leader in batteries and solar power.

The list of automotive new venture failures is large (Deloreon, Yugo, Saturan, etc.); it takes extremely deep pockets, extreme innovative and the ability to produce, service and sell better than the other guys. So far, Tesla has not hit the mark in terms of price and performance and they only have a few more years to get there. With all of that said, if Tesla fails as an automaker, they aren't going anywhere.

rojo wrote:

Ghost of Igloi wrote:

You are the poster child for fools that actually think there is some value to a stock that doesn't even have a PE ratio. Rojo instincts are correct, TSLA is as close to a Ponzi scheme as any current stock for sale. By the way each share trade over $300 and loses $4.52 a share, while selling only 170,000 cars.

Well now i'll defend the other guy. What about AMZN? Weren't they unprofitable and without a PE ratio forever? When did AMZN become profitable?

I guess one can believe that unprofitable companies can enjoy ever higher stock prices. Market history gives a somewhat different story. Both companies have been very successful in creating the belief that profitability doesn't matter. AMZN took over ten years to regain its April 1999 high of $110.63. It is highly like that AMZN will again visit the under a hundred dollar a share level when this stock market bubble pops.

Igy

Here is one way that TSLA survives another day, by constantly diluting shareholders to raise cash.

http://files.shareholder.com/downloads/ABEA-4CW8X0/4166935479x0x936146/CF6C71DF-4893-4E92-BE61-458934A74607/TSLA_Outstanding_Convertible_Payoff_Table_FINAL.pdf

Here is TSLA's most recent annual report. Piling on debt. Make sure you read the litany of disclaimers before you buy into the hype.

http://files.shareholder.com/downloads/ABEA-4CW8X0/5198532557x0xS1564590-17-3118/1318605/filing.pdf

Every stock market bubble has its story stocks. Based on anything but fundamentals. TSLA has to be one of the leaders in the "all everything" bubble era.

rojo wrote:

I can't win. I want to get in on the bitcoin bubble and people call me an idiot. I ask a question about Tesla being a bubble and people call me an idiot.

I like what Tesla does, but their cash burn is what concerns me. As for bitcoin - I guess maybe I'm old, but how will I give bitcoin to a stripper? How does that work?

Tesla Debt Disclaimer for Annual Report:

Servicing our indebtedness requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial indebtedness. As of December 31, 2016, we had outstanding in aggregate principal amounts $205 million of the 2018 Notes, $920 million of the 2019 Notes and $1.38 billion of the 2021 Notes (collectively, the “Tesla Convertible Notes”). In addition, we have established a senior secured asset based revolving credit agreement (the “Credit Agreement”) that allows us to borrow, under certain circumstances, up to $1.2 billion. As of December 31, 2016, we had $969 million in borrowings under the credit facility pursuant to the Credit Agreement. We are also party to a warehouse credit facility with lender commitments of $600 million (the “Warehouse Facility”), of which we had borrowed $390 million as of December 31, 2016. Moreover, as of December 31, 2016, our subsidiary SolarCity Corporation, together with its subsidiaries, had total outstanding indebtedness of $3.6 billion, including under its credit facilities (the “SolarCity Credit Facilities”). Such outstanding indebtedness included $364 million drawn under a secured revolving credit facility with lender commitments of $418.5 million as of December 31, 2016 (including commitments expiring as of such date), which matures in December 2017, as well as $230 million in aggregate principal amount of 2.75% convertible senior notes due 2018, $566 million in aggregate principal amount of 1.625% convertible senior notes due 2019 and $113 million in aggregate principal amount of zero coupon convertible senior notes due 2020 (collectively, the “SolarCity Convertible Notes”). Our substantial consolidatedindebtedness may increase our vulnerability to any generally adverse economic and industry conditions, and we and our subsidiaries may, subject to the limitations in the terms of our existing and future indebtedness, incur additional debt, secure existing or future debt

or recapitalize our debt.

Pursuant to their terms, holders may convert their Tesla Convertible Notes at their option prior to the scheduled maturities of the respective Tesla Convertible Notes under certain circumstances. The 2018 Notes have been convertible at their holders’ option during each quarter commencing with the fourth quarter of 2013, except the first quarter of 2014. Upon conversion of the applicable Tesla Convertible Notes, we will be obligated to make cash payments in respect of the principal amounts thereof, and we may also have to deliver cash and/or shares of our common stock, in respect of the conversion value in excess of such principal amounts on such Tesla

Convertible Notes. For example, as of December 31, 2016, we have repaid in cash approximately $455 million in aggregate principal amount of the 2018 Notes due to early conversions. The SolarCity Convertible Notes are also currently convertible into shares of our common stock at conversion prices ranging from $300.00 to $759.36 per share. In addition, holders of the Tesla Convertible Notes and the SolarCity Convertible Notes will have the right to require us to repurchase their notes upon the occurrence of a fundamental change at a purchase price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest, if any, to, but not

including, the fundamental change purchase date.

A sober analysis of Tesla:

http://www.businessinsider.com/tesla-stock-bubble-just-got-terrifying-2017-4

"I can't win. I want to get in on the bitcoin bubble and people call me an idiot. I ask a question about Tesla being a bubble and people call me an idiot."

I can tell you why. It's because in the investing world there are idiot ideologues who simply hate Tesla for political reasons but they mask that ideological idiocy by pretending to analyze the business.

If you don't like Tesla, then short it or don't buy it. But your political ideologies about TSLA are horseshit and tell me more about YOU than YOU tell about a market.

You:

---can't read a balance sheet.

---don't know the difference between book and market value.

---can't define value with a calculation.

---couldn't define "risk premium".

It's a joke. Stop playing where you don't belong.

Now you go on and on about bubbles and other words you've heard people use. Go ahead and define "bubble" for me. Fama doesn't like the word "bubble" and even said they don't really exist. I'm no EMH acolyte (and even Fama has softened, but Fama is a genius and there's a reason he's critiqued "bubbles".

Oh, wait. You have no idea what EMH or Fama are.

You don't understand the market. Pay attention to what I keep telling you. What you think of Tesla is irrelevant. None of your ideas mean anything.

You're simply an ideologue who wants to push an agenda.

Go index. Stop trying. This is the second time I'm giving you nearly invaluable advice.

You seem angry, or did you have your coffee yet?

Gene MF Amole wrote:

Downside-In increasing its production, it realizes supply chain, labor, or quality problems that thwart its attempt to move from the few thousand cars a month to the tens of thousands of cars a month. If it produces even 5% lemons-all those high hopes and customer goodwill evaporates. If it can only ramp production up to half what its promising, same thing. Building a car is easy. Building 100,000 of them a month is not, particularly if you've never done it. All ford or gm has to do is design an electric T-bird or Camaro--they already know how to build 100,000 of them a month. Musk has a cool car. He has not yet proven he can build very many of them.

It's almost as though Henry Ford's assembly line revolutionized the industry of mass production! I do think lack of car chargers is going to be a problem, but I'm skeptical that it will really hurt Tesla sales, at least in the short term. People don't have that much foresight.

Um...no.......Chevy sold 72k Camaro's in 2016....that's 6k/month. 100k?? Also a Camaro is MUCH easier to make than a high-end Tesla and some of those Camaro's are dirt cheap in comparison to the cheapest Tesla (prior to the model 3). Tesla has the #1 selling luxury sedan out there, which was the first car they really focused hard on. (Roadster hardly counts). Making 100k/month of low-end cars Is different and a much easier task (comparatively, not saying its' easy), but Tesla doesn't plan to make that many for several years. 40k/month seems like their goal in the shorter term 2018 or 2019, up from their original plan of doing it by 2020. The model 3 is still far more advanced than most cars it'll be competing against price wise. We aren't talking about a Corolla here....

Putting a battery in a Camaro doesn't make it a tesla competitor....the competitors are way behind in many ways which is why Tesla does so well at the high-end.

Do you own a Tesla?