Tesla

Hello Folks, More on Tesla being not such a great bull pick: [url=http://www.businessinsider.com/aswath-damodaran-tesla-fair-value-2013-9]http://www.businessinsider.com/aswath-d ... lue-2013-9[/url] [url=http://aswathdamodaran.blogspot.com/2013/09/valuation-of-week-1-tesla-test.html]http://aswathdamodaran.blogspot.com/201 ... -test.html[/url] For some odd reason, I can't attach his extensive spreadsheet evaluation here, but, he does offer it in his "The bottom line" section of his blog. Regards, Marc

Comments

  • I agree. Although there's a great article from the FT regarding TSLA. "To be rational about Tesla is to miss the point" - http://www.ft.com/cms/s/2/bb6abd4a-4b4f-11e5-b558-8a9722977189.html#axzz3vF8BsX3O
  • I'm complete bear on Tesla, but I would like to hear a rational reason to buy Tesla. I understand there is a lot of short positions, but I want not have confirmation bias.
  • *Full disclosure I am an investor in Tesla with a small position for the last few years.

    I think that the article snow_crashing posted makes a good case for Tesla as a speculative investment. My view on Tesla for what it is worth is more of a publicly traded venture capital deal. Once a company goes public it has become commonplace for investors to view a company based on on a "what has it done for me lately (or quarterly)" mentality. Tesla, on the other hand, is a company that has a long-term vision that is second to none in the world today, understandably with the cash burn to match. With that said, it is common to hear that Tesla over promises and under delivers which in common practice is a bad thing to do. In Tesla's case, the magnitude of the promises are usually such that if they under deliver they still tend to deliver something that is substantial.

    Tesla is interesting for the following 4 reasons:

    1. The Driverless Future
    With all the talk in the world of driverless cars and the driverless future (trucks, busses, taxies) I always find it amazing how little value people tend to give to the Tesla AutoPilot program. This is a program that has arguably been the best in breed since its inception. The argument to that idea is "not everyone can afford a tesla to take advantage of this" and this is true, but what this program has afforded Tesla is a headstart in the data collection of autonomous vehicles and the production of a world class system. Tesla has logged over 1.3 Billion miles or driving data (https://www.bloomberg.com/news/articles/2016-12-20/the-tesla-advantage-1-3-billion-miles-of-data) that can be used to improve its systems and possibly be sold to other companies for use with their potential self-driving projects. With the rise of big data, a cache of self-driving information that is ahead of the pack will be increasingly valuable to the entire automobile industry.

    Additionally, Tesla has stated their aims to have autonomous buses and trucks which I am even skeptical on their timeline or vision with such little information but its expansionary options and vision like this that serve to justify its valuation.

    2. Energy
    You will notice that Tesla has removed the "Motors" from its company name and is now just Tesla since its acquisition of Solar City. Tesla is fully invested in the green energy revolution which will only grow in coming years as increasing talk of climate change spurs action from nations around the world. Granted the US looks to be slower adopters of green technology than one would like but I believe the opportunity lies in the developing world. The cost of solar in the developed world has come down dramatically and many countries such as India, China & Saudi Arabia are investing in Solar and other forms of renewable resources. As these countries build their economies they will find it less cost prohibitive to build an energy infrastructure that is conducive to renewable energy. I don't think Tesla will be the seller of all the world solar panels by any stretch of the imagination but I do Believe that Tesla will be a key supplier of storage solutions for renewable energy.

    Also, Musk has come out with innovative products such as the solar shingle that may prove to be potential revenue streams in the future.

    3. Space
    This is more of a long shot idea but ultimately you can not overlook the fact that Musk is also the CEO of SpaceX which currently has multiple contracts for delivery of NASA equipment and satellites for companies the likes of Facebook.
    (Note the SpaceX rocket actually exploded destroying the facebook satellite, but unfortunately, that happens in the aerospace industry) Space does not look like it will be a cash cow as of yet but In the future, it has the potential for revenue generation that is unclear currently. Musk is not the only one in the space business now but he has made a strong effort and has an innovative vision for the future of space travel.

    4. Musk himself
    It is probably ill advised to bet the ranch on one man and by no means would I advocate that but Musk is an incredible individual and the management is definitely one criterion to which a company should be measured. Musk is viewed on the same level as visionaries and great chief executive officers like Jobs, Bezos & Gates. Musk has an incredible drive and has started, and successfully run multiple companies in a diverse number of industries.

    In conclusion, if you are looking to value Tesla on any traditional metrics I would say don't bother. If you are looking for a value stock, don't buy Tesla. If you are looking for a safe investment, don't buy Tesla. If on the other hand, you are looking for a company to take a speculative position in based on potential then Tesla, in my opinion, is one to consider. As I stated before Tesla is not a company to invest half your net worth into but if you consider it like a venture capitalist might you would make a small investment with the potential to pay off many-fold in the future (as long as you can afford to lose that capital too). Tesla is bet on innovative convexity, one that has a linear potential for loss and exponential opportunity for growth and innovation.

    I apologize for the essay! I would be interested to hear your comments.

    Best,

    Matt
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