Tesla a cult?

i would say there is a cult of tesla believers, but not all. no idea what percentage.

i don't think it should be seen as a pejorative, as some might take it. tesla is just another company with good and bad attributes.

 

Back in January I referred to a Fortune magazine article about Tesla stock that was largely based on two ways of analyzing the future value of a company: "expectations investing" analytics developed by David Trainer and "economic value added" developed by Institutional Shareholder Services. Each provides a non-emotional way of looking at a stock's long term prospects. After all, you should be valuing a stock based on your expectations of its success, or failure. Both methods attempt to measure how successful a company would have to be to justify XYZ share price.

The thrust of the article was that for a stock to be worth that much you have to believe that the market will continue expand, other car makers will fail, Tesla will retain and even wildly grow its share of the total car market in a way that not even an Apple has done in its niche and Tesla will be able to develop profits per car beyond what any other car maker has ever done (including Tesla today) and well beyond their then current and spectacular profit margins.

I determined then that there was too much Tulip Mania or Gamestock in it at the then ~$400 (adjusted) price for me.

If you got in early and sold some at the peak, good for you. I don't begrudge your success (or Teslas). But even at its current value, you have to make some pretty aggressive assumptions about sales numbers, geopolitical risk, growth in profit as a percentage of sales, etc.

So yes Tesla gets free publicity. I applaud that. And follow much of it. But the basis for investing is future profits, not fanboy postings.

Today you are paying $103 for every $1 of earnings (that old P/E thing). If you are buying you are saying expect even more.

 

Tesla has a trailing PE of about 107 and a fwd PE of about 76. (Yahoo finance)
They are growing units sales >50% per year and plan to do that for many more years.
They have the capacity in place for a few more years growth just at the two new plants they are ramping up. (Germany & Texas)
50% growth is 2.25x every 2 years which can easily bring the PE down to the range that large slow growth companies usually have within a few years if the stock doesn't continue to go up.
The Tesla semi, grid batteries and the like are just additive to cars as these businesses become significant.

Mike

 

does the stock market work like that? i thought it was more of a bet on the future of the companies.

maybe i've read too many articles about bed, bath and beyond

 

It doesn't directly work like that. But I was just pointing out that Tesla can easily grow into the current price and valuation based on their conservative expected growth rate. I'm thinking they will announce a new giga factory in the next 6 months or so to continue the growth in 2025 and beyond. (This is beyond the expected ramp ups in Germany and Texas and the expansion expected at both locations and China)

Mike

 

Tesla fans often exhibit the hallmarks of a cult. For instance, they try real hard to convince others that theirs is the only true way. They accept the words of their leader without inspection. They find value where there is none.

And then they make senseless statements like "I figured Tesla EVs and Tesla the company (i.e., the stock TSLA) are an applied IQ test.". I How in the world would a pair of nouns be a test?

Bless his heart.

 

that's true of most single brand owners

 

OK $4B for another factory that comes on line in 2+ years. Do we assume that China's attitude towards the US and Tesla specifically remains status quo? Those critical raw materials from China are still available? That new mines actually open? That private ownership of a business in China remains when ownership of others are being broken up? That other car makes don't come out with cars that collectively undercut Tesla's volume cars? Have we heard of the number of order cancellations due to the price hikes? At what point to we run out of people who can shrug off those price hikes?

Just thinking of the risk section in the prospectus.

 

you can always buy toyota. pretty stagnant, but a 2.85% return

 

Do you ask these questions of the items in the risk section of Toyota’s prospectus?
Tesla has been waiting, prompting, hoping other manufacturers would come out with competing cars for over 10 years. So far, the market has grown faster than the competition.

The order cancelations have been less than the new orders as the wait times have not shortened, even with production growing.

It is fine, even good, to ask questions. But the prospectus is a place to put all risks, even if the odds are minor. If you take every risk and assume it will happen, you should stop investing and stop reading the prospectus for any company.

 

You left out a couple of items...like an earthquake in CA that shuts the Fremont plant down.
Or Germany shuts off the factory power so people can heat their homes after Russia cuts off the gas.

Lots of things could happen. Nothing is certain, that's why the price isn't even higher now.

I was putting forward a reasonably achievable way that Tesla grows into the current stock price/valuation in a reasonable time frame. None of the legacy car makers are growing sales of any kind at a rate that would reward them with a PE like Tesla's.
You don't get large stock market gains without taking some risks...you also don't have big drops with conservative investments.

Mike

 

Saw this image today while doing research on generators.

 

Thank you (most likely) PhotoShop!
Since you can't charge a Tesla while it is driving.

 

It could apply to me also I drive a PHEV and need to plug in every so often.

 

i think i saw that pic on exxons website

 

That picture - so funny I love it! It could be a propane or nat gas genset - but no, they had to photoshop in coal Rolling black smoke in order to drive home the phony point.
Perfect!
As for their being a cult? there almost has to be - just to offset the cult of nay-sayers.
Think how offensive most gear heads find Tesla - since gas burners can't even come close to their quickest world record ¼ mile time.
2nd quickest? You'd have to spend over a million for a low production Bugatti type.
https://www.tesmanian.com/blogs/tesmanian-blog/tesla-model-s-plaid-sets-a-1-4-mile-record-of-8-83-seconds-confirming-its-title-as-the-worlds-fastest-production-car#:~:text=News-,Tesla%20Model%20S%20Plaid%20Sets%201%2F4%20Mile%20Record%20of,as%20World's%20Fastest%20Production%20Car&text=Tesla%20Model%20S%20Plaid%20sets%20a%20new%201%2F4%2Dmile,previous%20record%20of%208.943%20seconds.

.