Tesla lost $38M in third quarter, stock tumbles over 12 percent(arstechnica.com)
arstechnica.com
Tesla lost $38M in third quarter, stock tumbles over 12 percent
http://arstechnica.com/business/2013/11/tesla-lost-38m-in-third-quarter-stock-tumbles-over-12-percent/
98 comments
If your first sentence were true, then the stock shouldn't have been affected much by today's news. Instead, it fell significantly.
The price of the stock has to do with how much money it might make in the future, and where they are on their growth trajectory. The news today signifies that the trajectory might be lower overall, or they might be further behind than investors thought.
The price of the stock has to do with how much money it might make in the future, and where they are on their growth trajectory. The news today signifies that the trajectory might be lower overall, or they might be further behind than investors thought.
[I don't currently own any stock or options in TSLA]
Sort of and sorta not. There is a tremendous amount of speculation in Tesla stock. That came about from a number of people making very large bets against and for the company (option trading is quite active for such a 'young' company).
The stock is "priced for perfection" which is to say it is priced at a value that only makes sense if Tesla meets every objective, has no missteps, and doesn't run into any technical or legal issues. Consequently there are lots of people who have various hedges in place to sell stock if it goes down, or buy covering options, etc. Thus any news tends to be magnified on this stock.
Had it not been priced so tightly the effect would have been more inline with other companies when they announce results. (a 3 - 5% change on "news")
Sort of and sorta not. There is a tremendous amount of speculation in Tesla stock. That came about from a number of people making very large bets against and for the company (option trading is quite active for such a 'young' company).
The stock is "priced for perfection" which is to say it is priced at a value that only makes sense if Tesla meets every objective, has no missteps, and doesn't run into any technical or legal issues. Consequently there are lots of people who have various hedges in place to sell stock if it goes down, or buy covering options, etc. Thus any news tends to be magnified on this stock.
Had it not been priced so tightly the effect would have been more inline with other companies when they announce results. (a 3 - 5% change on "news")
Disclaimer: I have no idea how a stock is prised.
Is the stock prise directly related to the revenue/losses of the company? If this is true, couldn't the losses be explained by this:
>"Production in the quarter significantly exceeded deliveries in order to fill the pipeline of vehicles in transit to Europe and provide cars for service and marketing uses."
Probably by a long shot (considering so many uncertainties in my logic), but it seems to me that they simply loss money, because they needed to fill the stores in unexplored markets, which resulted in stock prise decline and not that significant one (as already pointed, the stock went up 460% just this year).
Edit: 38M is roughly equal to 470 Model S cars on average of $81k. If their production cost is 50%, this means about a 1000 cars could make up for the losses. And when you include the Supercharger network (do they make any money of that? and how much does it cost to build these stations?) and shipping of all extra production (without an order) to Europe it kind of seems reasonable.
Is the stock prise directly related to the revenue/losses of the company? If this is true, couldn't the losses be explained by this:
>"Production in the quarter significantly exceeded deliveries in order to fill the pipeline of vehicles in transit to Europe and provide cars for service and marketing uses."
Probably by a long shot (considering so many uncertainties in my logic), but it seems to me that they simply loss money, because they needed to fill the stores in unexplored markets, which resulted in stock prise decline and not that significant one (as already pointed, the stock went up 460% just this year).
Edit: 38M is roughly equal to 470 Model S cars on average of $81k. If their production cost is 50%, this means about a 1000 cars could make up for the losses. And when you include the Supercharger network (do they make any money of that? and how much does it cost to build these stations?) and shipping of all extra production (without an order) to Europe it kind of seems reasonable.
> Is the stock prise directly related to the revenue/losses of the company?
Yes. However, expectations are more important than past behaviour, especially in new businesses. People buying Tesla stock are guessing their growth/earnings trajectory, and if reality deviates from that they'll sell (simplifying here, obviously).
Yes. However, expectations are more important than past behaviour, especially in new businesses. People buying Tesla stock are guessing their growth/earnings trajectory, and if reality deviates from that they'll sell (simplifying here, obviously).
Stock is priced like anything else: what people are willing to pay. In theory a stock represents a share of a business, and so its price is a bet on the lifetime return of the stock at the time of purchase -- if you pay $100 for a stock today, you expect the "net present value" of that stock to pan out to at least the net present value of $100 invested in something really safe (e.g. in treasuries... oh wait, hmm... gold, er ah no... in C-notes under your bed).
The stock is up $1.61 on the day, the stock did not tumble, what tumbled was wall street's interest.
> The stock is up $1.61 on the day, the stock did not tumble, what tumbled was wall street's interest.
Up $1.61 at the closing bell, then down $22 after-hours, equals down $20.
Quite a substantial move for a $176 stock -- at least, it was a $176 stock at 4 o'clock on November 5.
Up $1.61 at the closing bell, then down $22 after-hours, equals down $20.
Quite a substantial move for a $176 stock -- at least, it was a $176 stock at 4 o'clock on November 5.
What we're talking about is the after-hours trading price of the stock. It will open tomorrow at the new, reduced price.
The scary thing for me with Tesla stock is primarily the risks in going to large scale mass market cars, as well as the risk of another car company, or another startup, emerging to win the mass market EV space.
I think the danger is in the big automakers getting EV right, before Tesla reaches the middle and low end of the market. Nissan has the Leaf, which is by most accounts, a great little car. The Chevy Volt is the best-selling in my neck of the woods, it seems. Tesla makes better electric cars...as far as the reviews indicate. But, they're also much more expensive.
But, here's the reason I just placed a limit order for tomorrow morning (I'd check into TSLA a couple of times this year and thought, "Nope, still trading too high."): Tesla is currently selling as many cars in a year as Chevy sells in three days. So, the stories I can envision in my head for how this will play out are one of the two:
1. Tesla will fail to scale up. They will not be able to continue executing on their business plan effective. Growth will halt. The big auto makers will gradually move into the EV market. They will use their leverage as larger players with more money to throw around to beat Tesla on the battery front and on manufacturing costs. Tesla will remain a bit player, and be bought up for patents in a few years. The stock will not do well, long term, in this scenario.
2. Tesla will continue to execute well, if not flawlessly as they have done up to now (let's be honest, Tesla has an amazing record of doing the right thing at the right time). They will continue to grow at a very rapid clip. They will enter new markets. They will sell more cars than they can manufacture (and maybe more electric cars than anyone else can manufacture also, due to the current limited battery availability). They will continue to execute well on battery acquisition and development. They will continue to execute well on solving the cross-country EV trip problem...before any other manufacturer. And, they will become a major automaker. The market is huge. They're less than 100th the size of Chevrolet or Ford. That's a lot of room for growth, even with their share price being hundreds of times earnings (yes, it really is a very expensive stock, in that regard).
So, my primary question is: Will they execute really well. History says they will.
And, my next question is: Will I get other chances to buy at a discount over what it's trading at now? I don't know. I've regretted not buying stocks in the past due to it looking really expensive. I put off buying GOOG for a long time. Watched it from IPO on up to $750+. Then it went on sale for $340, and I backed up the truck as well as my stock portfolio would allow (so, I'm currently approaching a triple bagger on GOOG). TSLA is no GOOG. Probably never will be. But, it's potentially a much larger company than it is today. I'm willing to bet a few bucks that it will be. But, it is definitely gambling and not value investing.
But, here's the reason I just placed a limit order for tomorrow morning (I'd check into TSLA a couple of times this year and thought, "Nope, still trading too high."): Tesla is currently selling as many cars in a year as Chevy sells in three days. So, the stories I can envision in my head for how this will play out are one of the two:
1. Tesla will fail to scale up. They will not be able to continue executing on their business plan effective. Growth will halt. The big auto makers will gradually move into the EV market. They will use their leverage as larger players with more money to throw around to beat Tesla on the battery front and on manufacturing costs. Tesla will remain a bit player, and be bought up for patents in a few years. The stock will not do well, long term, in this scenario.
2. Tesla will continue to execute well, if not flawlessly as they have done up to now (let's be honest, Tesla has an amazing record of doing the right thing at the right time). They will continue to grow at a very rapid clip. They will enter new markets. They will sell more cars than they can manufacture (and maybe more electric cars than anyone else can manufacture also, due to the current limited battery availability). They will continue to execute well on battery acquisition and development. They will continue to execute well on solving the cross-country EV trip problem...before any other manufacturer. And, they will become a major automaker. The market is huge. They're less than 100th the size of Chevrolet or Ford. That's a lot of room for growth, even with their share price being hundreds of times earnings (yes, it really is a very expensive stock, in that regard).
So, my primary question is: Will they execute really well. History says they will.
And, my next question is: Will I get other chances to buy at a discount over what it's trading at now? I don't know. I've regretted not buying stocks in the past due to it looking really expensive. I put off buying GOOG for a long time. Watched it from IPO on up to $750+. Then it went on sale for $340, and I backed up the truck as well as my stock portfolio would allow (so, I'm currently approaching a triple bagger on GOOG). TSLA is no GOOG. Probably never will be. But, it's potentially a much larger company than it is today. I'm willing to bet a few bucks that it will be. But, it is definitely gambling and not value investing.
They will sell more cars than they can manufacture (and maybe more electric cars than anyone else can manufacture also, due to the current limited battery availability). They will continue to execute well on battery acquisition and development.
This battery supply thing reminds me of this story: http://qr.ae/N0Uxr
This battery supply thing reminds me of this story: http://qr.ae/N0Uxr
Non-shortened (HN doesn't like those, people want to know what they are clicking):
http://www.quora.com/Business/Whats-the-shrewdest-smartest-m...
Business: What's the shrewdest, smartest maneuver you've ever seen in business?
Cool little blurb hand-soap:
There was only one problem: Nothing he was selling could be patented. The concept of liquid soap wasn't new, and simple pumps had been around since the dawn of civilization. As a result, Taylor knew several huge soap manufacturers were ready to happily steal his idea the very moment it looked like it could succeed on a large scale. Armed with superior resources and the ability to quickly R&D an imitation product, the industry giants were ready to crush tiny Minnetonka.
Taylor, however, was ready for this. Before any other company had the chance, Taylor decided to go shopping one day and bought a few plastic pumps. And by a few we mean FUCKING ALL OF THEM. There were only two companies nationwide manufacturing those little pumps, and Taylor ponied up $12 million -- more than the total net worth of his company at the time -- and ordered 100 million of them, effectively buying every single pump these two companies would be able to manufacture for the next year or two.
Business: What's the shrewdest, smartest maneuver you've ever seen in business?
Cool little blurb hand-soap:
There was only one problem: Nothing he was selling could be patented. The concept of liquid soap wasn't new, and simple pumps had been around since the dawn of civilization. As a result, Taylor knew several huge soap manufacturers were ready to happily steal his idea the very moment it looked like it could succeed on a large scale. Armed with superior resources and the ability to quickly R&D an imitation product, the industry giants were ready to crush tiny Minnetonka.
Taylor, however, was ready for this. Before any other company had the chance, Taylor decided to go shopping one day and bought a few plastic pumps. And by a few we mean FUCKING ALL OF THEM. There were only two companies nationwide manufacturing those little pumps, and Taylor ponied up $12 million -- more than the total net worth of his company at the time -- and ordered 100 million of them, effectively buying every single pump these two companies would be able to manufacture for the next year or two.
I do believe the volt makes Chevrolet a loss for every unit sold. If this is a deliberate loss leader to put Tesla out of business, then it is an issue. They're all looking for market share, but Tesla has less capital backing. OTOH it has less crummy baacklog and infrastructure, so it may be nimble eough to survive
Tesla is aiming for the M5 end of the market, Volt is more of a Prius
Considering the state of battery technology did Tesla have any choice? Even their new X will be more expensive than the S.
To get his range he needed long wheelbase large cars. To get range he needed more than a 1000lbs of batteries.
He won't get to the lower end of the market unless batteries improve and by then he will have ceded it to the established players who will and are willing to offer more than electric only solutions.
To get his range he needed long wheelbase large cars. To get range he needed more than a 1000lbs of batteries.
He won't get to the lower end of the market unless batteries improve and by then he will have ceded it to the established players who will and are willing to offer more than electric only solutions.
That's a pretty small market - BMW only makes about 4000 M5s a year and I'd be surprised if the sales of equivalent models from other manufacturers were much higher.
http://en.wikipedia.org/wiki/BMW_M5
http://en.wikipedia.org/wiki/BMW_M5
Currently. But the plan in theory is to move downmarket.
If another company came up with a dual-powered version of the Tesla, then I would definitely buy that. The current round of plugin hybrids don't offer enough battery-only range for me. I'd like to see about 100 mile battery only (in case I forget to plug it in), plus a small engine and 10-gallon tank. I wouldn't think the gas engine would have to be that large, especially if it were designed to use the battery as a buffer (i.e., it would only need to have enough HP to maintain highway speed, and acceleration could be handled by the battery).
Which brings up a question -- how much horse power is needed just to keep a car cruising, without accounting for acceleration? Edit: just looked up on Wikipedia, the Model S gets 100 miles per 35kWh. So that works out to (assuming 65 mph) about 23 kilowatts average continuous output, or 30 HP. Considering that many car engines are 300 HP, I don't see a 30 HP engine being that extreme.
Which brings up a question -- how much horse power is needed just to keep a car cruising, without accounting for acceleration? Edit: just looked up on Wikipedia, the Model S gets 100 miles per 35kWh. So that works out to (assuming 65 mph) about 23 kilowatts average continuous output, or 30 HP. Considering that many car engines are 300 HP, I don't see a 30 HP engine being that extreme.
The problem is that it's not just the engine. If you want an engine then you need a fuel tank, emissions controls, either a transmission or a separate electric generator attached to the engine, etc. All of that stuff adds weight and cost, or reduces the space, weight and cost budget you have for batteries and electric motors. By the time you've paid for it you might as well forget about the 30HP engine and put in a 100HP engine, at which point you have a Prius.
>I'd like to see about 100 mile battery only
electric/batteries works great for start/stops. For highway cruising, which 100 miles range would probably include a lot, internal combustion engine isn't that bad. I'd expect that there isn't much practical difference efficiency-wise between 20-30 miles battery range hybrid and a 100-miles range one, especially considering that the latter would be carrying additional at least 200kg of batteries.
I think we will start to see cars' internal combustion engines which are specifically targeted to work only as generators, i.e. highest efficiency only for specific rpm value - current ICEs available are "wide rpm and load range" designed to be a primary engine of a car. Volt (and Karma) as far as i understand have such generic engine, not a "generator" one. Dropping a lot of old requirements and having the ability to match generator to the engine, we may see very different engine types coming in which would match new requirements much better.
electric/batteries works great for start/stops. For highway cruising, which 100 miles range would probably include a lot, internal combustion engine isn't that bad. I'd expect that there isn't much practical difference efficiency-wise between 20-30 miles battery range hybrid and a 100-miles range one, especially considering that the latter would be carrying additional at least 200kg of batteries.
I think we will start to see cars' internal combustion engines which are specifically targeted to work only as generators, i.e. highest efficiency only for specific rpm value - current ICEs available are "wide rpm and load range" designed to be a primary engine of a car. Volt (and Karma) as far as i understand have such generic engine, not a "generator" one. Dropping a lot of old requirements and having the ability to match generator to the engine, we may see very different engine types coming in which would match new requirements much better.
Depends a lot on speed, the shape of the car, and other factors, but on the order of 10-30 HP for something like the Model S at 70mph I think.
I still really want a hybrid truck, running diesel, with the ability to seat 2 people, secure cargo space (like a custom bed with lockboxes), 4wd, and the ability to run the engine for a week or two in place as a generator (e.g. at a remote comms site). Run the engine during the day to keep the batteries charged, operate at night off battery.
I still really want a hybrid truck, running diesel, with the ability to seat 2 people, secure cargo space (like a custom bed with lockboxes), 4wd, and the ability to run the engine for a week or two in place as a generator (e.g. at a remote comms site). Run the engine during the day to keep the batteries charged, operate at night off battery.
VIA Motors is the closest thing to this that I know of:
http://www.viamotors.com/
Sadly gasoline/petrol vs. diesel. I really want diesel so I can store/transport reasonable amounts of fuel; I avoid messing with gas.
I wonder how it would deal with towing. That I6 would be inadequate for peak towing, so it would depend how often a truck going up grades, offroad, etc. and towing would need battery augmentation.
I wonder how it would deal with towing. That I6 would be inadequate for peak towing, so it would depend how often a truck going up grades, offroad, etc. and towing would need battery augmentation.
If what you want is a fast luxury hybrid, there are already high-end Lexuses (Lexii?), but I suspect you'd not like the range as much. Porche are also pushing hybrids, but again for performance, they're using the petrol.
The WEC is pushing supercapacitors into the hybrid drivetrains as a superior method of scavenging (but not storing) energy.
The WEC is pushing supercapacitors into the hybrid drivetrains as a superior method of scavenging (but not storing) energy.
Toyota is supposedly coming out in 2015 with production cars with fuel cells costing a bit more than what a Tesla battery does, but the more they produce the less costly they are. In contrast, the more batteries Tesla produces the more the cost of lithium increases.
It seems like an incredible proposition that Tesla will expand fast enough to shut out fuel cells before they get established.
It seems like an incredible proposition that Tesla will expand fast enough to shut out fuel cells before they get established.
> In contrast, the more batteries Tesla produces the more the cost of lithium increases.
This is true, but misleading. The cost of lithium is a vanishingly small component of the price of the battery, a typical quote is between 1% and 0.1% of the production cost. Lithium is one of the most common elements in the earth's crust, and is plentiful enough in seawater that it cannot run out -- before it's cost is high enough to have any real effect in battery prices, it will be well worth extracting it from the seas. (In which there is enough supply for millions of years.)
The rapid increase in demand caused by proliferation of lithium-ion batteries has spiked the price over the past decade, but that is simply because mining operations take years to spin up, so large changes in demand always lead to large-scale price action. This has not yet had anything but a negligible effect on battery prices, and it will not have one in the future.
I do not understand the current meme of trying to paint all economic issues as resource-limited. That's just not how the world works.
This is true, but misleading. The cost of lithium is a vanishingly small component of the price of the battery, a typical quote is between 1% and 0.1% of the production cost. Lithium is one of the most common elements in the earth's crust, and is plentiful enough in seawater that it cannot run out -- before it's cost is high enough to have any real effect in battery prices, it will be well worth extracting it from the seas. (In which there is enough supply for millions of years.)
The rapid increase in demand caused by proliferation of lithium-ion batteries has spiked the price over the past decade, but that is simply because mining operations take years to spin up, so large changes in demand always lead to large-scale price action. This has not yet had anything but a negligible effect on battery prices, and it will not have one in the future.
I do not understand the current meme of trying to paint all economic issues as resource-limited. That's just not how the world works.
Lithium is everywhere, but the cost to extract from seawater and such is enormous since it is very low concentration. Efficient production is limited to naturally occurring concentrations. What I've read is lithium being closer to 2-3% of the total cost of the battery. With increased demand and limited production this could increase.
Batteries are not falling in cost as predicted: "Though the projected prices are lower than current prices, they fall substantially short of the expectations which were perpetuated, notably, by Tesla CEO Elon Musk."
Tesla is buying 75% of all cylindrical li-ion batteries and to reach even 1% of global marketshare they'll need 30x more. "Cell supply is crippling Tesla’s ambitious effort to expand its global reach."
“One of the bigger challenges for us is going to be lithium-ion cell production,” Mr. Musk said at Teslive. “We need a lot of batteries.”
Whatever the merits of fuel cells, there's no way batteries won't be a limiting growth factor for battery powered vehicles.
Batteries are not falling in cost as predicted: "Though the projected prices are lower than current prices, they fall substantially short of the expectations which were perpetuated, notably, by Tesla CEO Elon Musk."
Tesla is buying 75% of all cylindrical li-ion batteries and to reach even 1% of global marketshare they'll need 30x more. "Cell supply is crippling Tesla’s ambitious effort to expand its global reach."
“One of the bigger challenges for us is going to be lithium-ion cell production,” Mr. Musk said at Teslive. “We need a lot of batteries.”
Whatever the merits of fuel cells, there's no way batteries won't be a limiting growth factor for battery powered vehicles.
Toyota (and others) have been touting fuel cells for well over a decade.
I'm not holding my breath - fuel cells are as sustainable and non-oil as flex-fuel (read: vaporware).
Musk makes some very unrefutable points here deriding fuel cells, and Ive had that opinion long before people were listening to Musk: http://cleantechnica.com/2013/10/25/elon-musk-munchen-fuel-c...
I'm not holding my breath - fuel cells are as sustainable and non-oil as flex-fuel (read: vaporware).
Musk makes some very unrefutable points here deriding fuel cells, and Ive had that opinion long before people were listening to Musk: http://cleantechnica.com/2013/10/25/elon-musk-munchen-fuel-c...
> Toyota (and others) have been touting fuel cells for well over a decade.
The cost of fuel cells has decreased to 5% of what it was then, and at least three manufacturers are coming out with limited production fuel cells cars. Just because it took 50 years to get ready doesn't mean it isn't ready.
Musk's point is basically that the energy density of fuel cells is worse than batteries. That's true, but they can be refueled instead of mechanically swapped. He says the current total cost of the system is higher than batteries. That's true, but Toyota is halving the cost every 5 years as they ramp up production, where battery cost is falling maybe 10% in that time.
The cost of fuel cells has decreased to 5% of what it was then, and at least three manufacturers are coming out with limited production fuel cells cars. Just because it took 50 years to get ready doesn't mean it isn't ready.
Musk's point is basically that the energy density of fuel cells is worse than batteries. That's true, but they can be refueled instead of mechanically swapped. He says the current total cost of the system is higher than batteries. That's true, but Toyota is halving the cost every 5 years as they ramp up production, where battery cost is falling maybe 10% in that time.
I hate to be the "revenues-dont-matter" guy, but stock prices could be based on the fact that they demonstrated that they are 4.6x more likely to succeed based on their performance this year. If stocks only followed revenues, trading would be pretty meaningless. A company like Tesla has a tipping point in value based on the viability of their model. I am in no way claiming that I think they will succeed, but this year has probably shown that they are more likely to hit a tipping point than last year. This matters a lot in highly speculative investments like Tesla.
The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".
a one out of a thousand chance at making a million bucks has a 'fundamental value' of $1000.
The problem with valuing tesla is not that it lacks 'fundamental value' - it's not even that this value is risky. The problem is that nobody knows /how/ risky that bet is.
Of course... once the uncertainty passes a certain point... it sure looks like it's completely disconnected from 'fundamental value'
Personally? I can see the 'fundamental value' in Tesla. They are building a new kind of car, and it looks like a pretty nice car. I mean, I'm not really qualified to evaluate those things, I'm not really the sort who buys expensive cars.
Now, is that value greater than the huge investment required to build those cars? Will Tesla be able to scale up to the point where they are turning a reasonable profit? Will they be able to defend their initial lead against the conventional car companies, once toyota starts making an all-electric Lexus? Yeah. Lots of very difficult to quantify risk.
I'd buy Tesla before I'd buy Facebook. Long before I'd buy facebook. But I don't have money in either.
The problem with valuing tesla is not that it lacks 'fundamental value' - it's not even that this value is risky. The problem is that nobody knows /how/ risky that bet is.
Of course... once the uncertainty passes a certain point... it sure looks like it's completely disconnected from 'fundamental value'
Personally? I can see the 'fundamental value' in Tesla. They are building a new kind of car, and it looks like a pretty nice car. I mean, I'm not really qualified to evaluate those things, I'm not really the sort who buys expensive cars.
Now, is that value greater than the huge investment required to build those cars? Will Tesla be able to scale up to the point where they are turning a reasonable profit? Will they be able to defend their initial lead against the conventional car companies, once toyota starts making an all-electric Lexus? Yeah. Lots of very difficult to quantify risk.
I'd buy Tesla before I'd buy Facebook. Long before I'd buy facebook. But I don't have money in either.
Thankfully your options are not limited to Tesla and Facebook
Eh, perhaps my point would be better phrased as:
Of all the new technology companies... my perception is that Tesla has rather more 'fundamental value.' If nothing else, they are one of the very few companies that doesn't rely for revenue on a relatively new kind of advertising.
Of all the new technology companies... my perception is that Tesla has rather more 'fundamental value.' If nothing else, they are one of the very few companies that doesn't rely for revenue on a relatively new kind of advertising.
> not whether the thing underlying the security is going to be "successful".
But that's exactly what determines how much you should pay. Fundamentals are "How much will this be worth in the future".
But that's exactly what determines how much you should pay. Fundamentals are "How much will this be worth in the future".
Your decision to invest shouldn't be equivalent to whether the company is going to be successful but whether you will get more money than what you put in (accounting for risk, alternative investments, etc).
Failing businesses are sometimes good value.
Failing businesses are sometimes good value.
"The thing underlying the security" is a dynamic thing, it grows or shrinks based on the market for their products, the execution of its executives, and the quality of its products.
If it is not going to be making significantly more money next year than this year, you'd want to build that into your decision to buy the stock. Fundamental value can be defined in a lot of ways, but growth is not reliably quantifiable. Which is why there is fluctuation in stock prices.
If I believe Tesla will continue to grow at 50-100% per year, then it may be valued reasonably right now. It may even be a bargain. If, on the other hand, I believe it is a static business now and has reached saturation of its product line in the market as it exists, I'd be a fool to pay this high a price.
There are so many variables...if you're value investing rather than growth investing, TSLA is not your stock, and won't be for another decade or two. I tend to buy into growth companies, so this looks like a chance to buy into a company I missed earlier at a slightly lower price (I don't suggest trying to time the market, but sometimes the market puts something on sale that you wanted to buy anyway). It was just such a sale (only on a much larger scale) many years ago, that led to me holding a few shares of GOOG. I bought as many shares as I could afford with what was in my trading account, and I may buy as many shares of TSLA as I can afford now (after a bit of research, of course).
If it is not going to be making significantly more money next year than this year, you'd want to build that into your decision to buy the stock. Fundamental value can be defined in a lot of ways, but growth is not reliably quantifiable. Which is why there is fluctuation in stock prices.
If I believe Tesla will continue to grow at 50-100% per year, then it may be valued reasonably right now. It may even be a bargain. If, on the other hand, I believe it is a static business now and has reached saturation of its product line in the market as it exists, I'd be a fool to pay this high a price.
There are so many variables...if you're value investing rather than growth investing, TSLA is not your stock, and won't be for another decade or two. I tend to buy into growth companies, so this looks like a chance to buy into a company I missed earlier at a slightly lower price (I don't suggest trying to time the market, but sometimes the market puts something on sale that you wanted to buy anyway). It was just such a sale (only on a much larger scale) many years ago, that led to me holding a few shares of GOOG. I bought as many shares as I could afford with what was in my trading account, and I may buy as many shares of TSLA as I can afford now (after a bit of research, of course).
Would you pay differently for a lottery ticket that had a payout of 1MM if you had the chances of A) 1/2 B) 1/5 C) 1/50 D) 1/5000?
The potential payout is unchanged, but the value of the ticket changes as it gets more likely to pay out.
The potential payout is unchanged, but the value of the ticket changes as it gets more likely to pay out.
I hope it continues to decline so I can get in. I have been shocked by how prevalent the Model S already is on American roads. And when I look at the drivers, they are by no means the stereotypical "early adopter" of tech. This signals to me that electric is not at all a barrier to the average vehicle consumer. Tesla has a focus on quality and details that other carmakers can't achieve. As soon as they are able to finance their expansion into other classes of vehicles, they will overtake the incumbents rather easily. There will be many bumps in the road as they expand, but if you are on a 20-year timeline they don't matter.
Their cash balance increased and gross margin is up to 21% from 14% last quarter on the Model S, with non-GAAP accounting. That's a fantastic number for a car manufacturer.
Of course if you only care for the linkbait, feel free to go with the GAAP numbers and ignore underlying meaning.
Of course if you only care for the linkbait, feel free to go with the GAAP numbers and ignore underlying meaning.
TSLA prefers non GAAP because it collects all money for a lease upfront. Recognizing all revenue for a lease up front isn't logical.
IIRC it's actually financing with a balloon payment (with no risk since they're not the lenders), with an option for buyback. That liability of buying back should be somewhere in the books, either accrued or entered in full.
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Or "Tesla spent $38 million on extended R&D involving extensively field testing its first production models". Take your pick.
More accurately, for R&D they spent $48 million on a non-GAAP basis and $56 million on a GAAP basis. Non-GAAP wise Tesla made money in the quarter to the tune of $16M. Their new leasing program and paying back the Department of Energy loan early helped lower the GAAP revenue fairly substantially. Cash was even better--$26 million of positive free cash flow.
I would imagine that paying back their loans will be worth quite a bit in PR.
I read a financial newspaper report earlier today predicting good results for Tesla for its quarterly earnings report today, and thus a likely continued strong performance of Tesla stock. Seeing the headline of the article kindly submitted here prompted me to read the fine article, of course, and also to check for other news stories from later hours of today about Tesla.
In approximate chronological order:
"Tesla Motors stock slides despite delivering 5,500 cars in third quarter"
http://www.mercurynews.com/business/ci_24460515/tesla-motors...
"Tesla Beats Expectations On Record Sales, Investors Decide To Sell Anyway"
http://www.forbes.com/sites/markrogowsky/2013/11/05/live-tes...
"Tesla loses $38 million; adjusted results beat forecast"
http://www.usatoday.com/story/money/cars/2013/11/05/tesla-ea...
"Tesla outlook, deliveries fall short amid capacity constraints"
http://www.reuters.com/article/2013/11/06/us-autos-tesla-idU...
So a lot of investors saw news about the same earnings report, but some considered differing additional sources of information, or simply interpreted the same report differently. Different investors have differing investment goals, so it's not completely surprising that the same news can prompt some investors to sell while others hold and a few even buy.
It will probably take a few more days to be sure what interpretation of Tesla's news is most persuasive to the largest number of investors. (Disclosure: I do not own stock in Tesla nor do I own stock in any other company. My son the hacker has an investment portfolio, but I have no idea what is in it.)
In approximate chronological order:
"Tesla Motors stock slides despite delivering 5,500 cars in third quarter"
http://www.mercurynews.com/business/ci_24460515/tesla-motors...
"Tesla Beats Expectations On Record Sales, Investors Decide To Sell Anyway"
http://www.forbes.com/sites/markrogowsky/2013/11/05/live-tes...
"Tesla loses $38 million; adjusted results beat forecast"
http://www.usatoday.com/story/money/cars/2013/11/05/tesla-ea...
"Tesla outlook, deliveries fall short amid capacity constraints"
http://www.reuters.com/article/2013/11/06/us-autos-tesla-idU...
So a lot of investors saw news about the same earnings report, but some considered differing additional sources of information, or simply interpreted the same report differently. Different investors have differing investment goals, so it's not completely surprising that the same news can prompt some investors to sell while others hold and a few even buy.
It will probably take a few more days to be sure what interpretation of Tesla's news is most persuasive to the largest number of investors. (Disclosure: I do not own stock in Tesla nor do I own stock in any other company. My son the hacker has an investment portfolio, but I have no idea what is in it.)
For any sale there will be a buy and vice versa.
For any sale there will be a buy and vice versa.
Well, yes, of course, and I think everyone here on Hacker News is aware of that. But the transaction may not occur at the price you desire. "The market can remain irrational longer than you can remain solvent" is still an important idea for investors to keep in mind.
Well, yes, of course, and I think everyone here on Hacker News is aware of that. But the transaction may not occur at the price you desire. "The market can remain irrational longer than you can remain solvent" is still an important idea for investors to keep in mind.
Not a price you desire, but always a price you approve of. (Barring margin calls and similar complications.)
If the market remains irrational longer than you can stay solvent, the market is no longer irrational.
This is what happens when you promise the sun, moon, and stars and only deliver the sun and the moon.
Tesla is a startup and at present, I can name few "startups" on the scale of Tesla who aren't losing money. Look at the likes of Twitter, Spotify and Quora, large user bases and are technically making money but still not turning a profit. Tesla is no different and to be honest, has a good chance of succeeding. Elon Musk is one talented guy who has investors swooning over him to give him investment.
Looks like the down-voting has begun, whatever. I won't let people on this site get in the way of voicing my own personal view and opinion on Tesla and their losses. Feel free to disagree.
Looks like the down-voting has begun, whatever. I won't let people on this site get in the way of voicing my own personal view and opinion on Tesla and their losses. Feel free to disagree.
A post-IPO, $21B company is still a startup?
The auto industry works a little differently. Some of Tesla's competitors have been in business for over 100 years, making primarily the same product today. Tech companies today exist in industries that didn't exist even 15 years ago.
Tesla Motors has only been around for 10 years (founded 2003), and their first product didn't sell until 5 years later. I think it's safe to say that Tesla Motors is still a startup. They are a startup in an industry that measures time in decades.
Tesla Motors has only been around for 10 years (founded 2003), and their first product didn't sell until 5 years later. I think it's safe to say that Tesla Motors is still a startup. They are a startup in an industry that measures time in decades.
That's tenuous. The telecoms industry has been around as long so is Blackberry a startup?
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Whenever people question the definition of something being a startup I just point them to this wonderful Quora answer: http://www.quora.com/Entrepreneurship/What-is-the-proper-def...
Dave McClure makes a fair point that until a company works out the following three things, they're a startup, not a business.
1. What its product is,
2. Who its customers are.
3. How to make money.
So yes, a post-IPO company valued at $21B which still hasn't worked out two of those three items is still a startup in my opinion...
Dave McClure makes a fair point that until a company works out the following three things, they're a startup, not a business.
1. What its product is,
2. Who its customers are.
3. How to make money.
So yes, a post-IPO company valued at $21B which still hasn't worked out two of those three items is still a startup in my opinion...
Applying limits : as a large company unravels towards bankruptcy, it's business plans evaporating to ether it rapidly approaches the hallowed title of a startup. By the above metric sun was a startup post 2002, AMD is still a startup, Blackberry is a startup...
Depends on your definition of startup, doesn't it? Some people prefer a definition based on growth rate. Another definition that occurs to me is a company that could perhaps one day be massively profitable, but is currently losing money.
To me, Tesla does seem to have IPOed unusually early. The "usual route" I have in mind is that tech companies typically acquire some very significant market share before their IPO. Tesla look like they're still getting started.
To me, Tesla does seem to have IPOed unusually early. The "usual route" I have in mind is that tech companies typically acquire some very significant market share before their IPO. Tesla look like they're still getting started.
They note that the reason bulls are expecting deliveries of 6,000 or more vehicles is because of issued VINs, but they believe that many of the vehicles which have been produced were used for showrooms or loaner vehicles at Tesla’s service centers or are still in transit en route to delivery.
People are really reading into things here. Expecting a company to beat guidance by 20% per quarter is alot to ask, but i suppose the type of momentum you need to bid on an already expensive stock. [They moved 5500 units on guidance of 5000].
People are really reading into things here. Expecting a company to beat guidance by 20% per quarter is alot to ask, but i suppose the type of momentum you need to bid on an already expensive stock. [They moved 5500 units on guidance of 5000].
There's a worry Tesla is hiding softening sales. They had the capacity to produce 7150 cars this quarter but only sold 5550, a difference of 1650. Some of those cars are en route to Europe, but still, the number seems high. Talking about producing vehicles for internal use and marketing purposes, along with increased investment in new models and versions, can be interpreted as "our U.S. sales are softening unexpectedly." However, it does seem a stretch to draw those kinds of conclusions.
Musk specifically covered this in the earnings call. They are production constrained and had to hold back deliveries in the US to ensure that people who made reservations in Europe two years ago would get their car.
According to the summary I've seen[1] he said they were constrained by the available supply of batteries. Now, Musk spun this as a temporary setback, but one of the most widely-reported potential issues they have is that the number of batteries they need is huge. As in, if they expand much they'd require the entire current global production of 18650 cells[2] - and that's just to produce 40,000 cars a year!
[1] http://www.forbes.com/sites/markrogowsky/2013/11/05/live-tes... [2] http://jalopnik.com/tesla-could-use-up-all-the-worlds-laptop...
[1] http://www.forbes.com/sites/markrogowsky/2013/11/05/live-tes... [2] http://jalopnik.com/tesla-could-use-up-all-the-worlds-laptop...
This is one reason Nissan makes their own batteries in their own plants.
Something doesn't add up then: if Tesla can produce 7150 cars per quarter, why is next quarter guidance only for 5K cars sold? Another new market with long lead times?
Tesla can't produce 7150 cars per quarter as of today, the production capacity as of Q3 end was probably on the order of 6200 cars/quarter. The reason guidance is lower than this, is that the company is expanding to many foreign markets and hence many cars are in transit.
This was also covered on the earnings call. Tesla is currently shipping to Europe and will if I remember correctly start shipping to China during Q4. Remember, shipping cars takes time since they need to go on freight ships.
This was also covered on the earnings call. Tesla is currently shipping to Europe and will if I remember correctly start shipping to China during Q4. Remember, shipping cars takes time since they need to go on freight ships.
I am very impressed with TSLA's 24% GAAP gross margin, and the relative lack of ZEV income. Great job, Tesla! Kudos.
In one version of accounting... In another they made $16M. What's clear is Tesla has been dramatically more successful at selling an electric car than any other company.
Nissan will sell its 100,000th all electric LEAF early next year. They sell around 15,000 a quarter.
The problem is that the current stock price implies that they will be dramatically more successful than any other car company (electric or otherwise). It's all relative to expectations.
Some market caps from Google Finance:
TM, Toyota 203.72B
VLKAY, Volkswagen AG 114.33B
DDAIF, Daimler AG (USA) 85.52B
HMC, Honda Motor Co 71.86B
BAMXF, BMW 68.69B
F, Ford Motor Company 67.33B
GM, General Motors 51.52B
NSANY, Nissan Motor 36.86B
AUDVF, Audi 36.42B
TSLA, Tesla Motors Inc 21.47B
FIATY, Fiat 9.35B
What complicates this analysis is the fact that these other companies sell in the millions--hundreds of times more cars than Tesla does in a year. Tesla's market cap is one million dollars per car to be sold in 2013.
And of course, the part which you neglected to mention: None of these companies have growth prospects which are anywhere near those of Tesla. Added in the potential disruptive potential of an all-electric car future once battery technology gets only slightly better than it is today.
I agree with you up to the point that this is a complicated analysis which can't really be done, but no further. This earnings call was really very positive, but the delivery was pretty lackluster.
I agree with you up to the point that this is a complicated analysis which can't really be done, but no further. This earnings call was really very positive, but the delivery was pretty lackluster.
Production in the quarter significantly exceeded deliveries in order to fill the pipeline of vehicles in transit to Europe and provide cars for service and marketing uses.”
- I'm not sure but does that mean they built a boat load (pun intended!) more cars than they sold? That would impact costs vs revenues/sales.
- I'm not sure but does that mean they built a boat load (pun intended!) more cars than they sold? That would impact costs vs revenues/sales.
If you think about it, the largest typical object people would buy in terms of value is a car. A house can last a last time but less so a car.
I think the reason for investor's optimism in Tesla is their vision is to get everyone a car.
If you look at the design of the Model S it can allow for a very cheap & safe car (The Tata Nano had issues with safety at first).
I would say this is still a baby as a company even now. If you saw GM's size before the financial crisis things would get more into perspective of what the potential is here. I think investors get that and this is why the premium is so high.
This is a company that can outdo GM because of the different structure. Tesla is very robotic/automated in its manufacturing & the car's drive system is just the floor. When GM wasn't so much under attack as it is now it used to regularly get under the record annual profit for a publicly traded corporation.
These crazy volatile drops are because there are lots of speculators trying to get in on the action (options, leverage.. etc). These volatile moves keep everything in balance.
I think the reason for investor's optimism in Tesla is their vision is to get everyone a car.
If you look at the design of the Model S it can allow for a very cheap & safe car (The Tata Nano had issues with safety at first).
I would say this is still a baby as a company even now. If you saw GM's size before the financial crisis things would get more into perspective of what the potential is here. I think investors get that and this is why the premium is so high.
This is a company that can outdo GM because of the different structure. Tesla is very robotic/automated in its manufacturing & the car's drive system is just the floor. When GM wasn't so much under attack as it is now it used to regularly get under the record annual profit for a publicly traded corporation.
These crazy volatile drops are because there are lots of speculators trying to get in on the action (options, leverage.. etc). These volatile moves keep everything in balance.
> I think the reason for investor's optimism in Tesla is their vision is to get everyone a car.
I suppose that's a vision, but not one that I see fitting-in with the general social and governmental direction for transportation, globally.
Why would everyone want a car, even if the infrastructure could sustain that? We don't all have our own aeroplanes or boats, we lease time on them when we need to use those methods of transport.
I suppose that's a vision, but not one that I see fitting-in with the general social and governmental direction for transportation, globally.
Why would everyone want a car, even if the infrastructure could sustain that? We don't all have our own aeroplanes or boats, we lease time on them when we need to use those methods of transport.
Electric motors can make cars smaller. Infrastructure would have a rough time with petrol cars.
A new car maker wouldn't make a difference to what would happen but if its electric I'd suppose there is a better chance.
I'd imagine governments would end up pushing it particularly in more debt laden countries. Imagine two cars on sale, one electric and one fossil fuel powered, if you needed tax revenues where would you get tax revenue from next?
A new car maker wouldn't make a difference to what would happen but if its electric I'd suppose there is a better chance.
I'd imagine governments would end up pushing it particularly in more debt laden countries. Imagine two cars on sale, one electric and one fossil fuel powered, if you needed tax revenues where would you get tax revenue from next?
Tesla's still a young company and is bound to have some quarters ending in losses for various reasons as they try to reach economies of scale. As an investor, I still feel confident that Elon Musk's "master plan" (see: http://www.teslamotors.com/blog/secret-tesla-motors-master-p...) for Tesla is starting to get underway with the latest developments on Model X (and I'm sure other models as well). The future is bright for Tesla, this loss isn't necessarily a sign of decline.
The future is bright for Tesla, but not necessarily for $TSLA (which is all the financial analysts really care about)
This distinction is so important, and so few people really grok it.
Long-term, Tesla appears to have a future, but where the stock price will settle remains to be seen.
Market capitalizations:
Ford: $67B
GM: $51B
Toyota: $203B
Honda: $71B
Volkswagen: $114B
Tesla: $19B (at ~$155)
Long-term, Tesla appears to have a future, but where the stock price will settle remains to be seen.
Market capitalizations:
Ford: $67B
GM: $51B
Toyota: $203B
Honda: $71B
Volkswagen: $114B
Tesla: $19B (at ~$155)
People bellyache about taking 20 minutes for a half charge, completely trapped in their old thought patterns around cars and ignoring the actual use case:
"Do you really want to know how long it takes to charge a Tesla Motors Model S most days? 20 seconds. That's how long it takes to plug the car in when you get home. The car is ready in the morning. It's just like your cell phone."
http://arstechnica.com/business/2013/11/tesla-lost-38m-in-th...
"Do you really want to know how long it takes to charge a Tesla Motors Model S most days? 20 seconds. That's how long it takes to plug the car in when you get home. The car is ready in the morning. It's just like your cell phone."
http://arstechnica.com/business/2013/11/tesla-lost-38m-in-th...
http://www.nasdaq.com/symbol/tsla/after-hours
Link has pricing if you want to follow along
Link has pricing if you want to follow along
There is now less expectation of future profits than before.
This was kind of a bad earnings quarter for many companies. Facebook and Apple both beat revenue targets, but some other data such as margins (for apple) and popularity with teens spooked investors. My guess is after 6 months of steady growth on tech stocks, many investors are exiting with their gains.
Does anyone care that the $100k Tesla Model S doesn't come with safety features such as blind spot monitor, lane departure warning, forward collision detection? Subaru has them all for a third of the price!
Even Musk said he reckons the price is overvalued about a month back.
A buying opportunity?
Keep dropping, I'd like to buy some.
Good buying opportunity here
Good, I hope the stock falls further so I can buy back in.
Consider that despite today's drop, the stock price has gone up 4.6x this year (from $33.87 at year-end 2012 to around $155 right now), but over the same period the company's quarterly revenues have increased only 1.4x (from $306 million in Q4 2012 to $431 million in Q3 2013).[1]
The future of a young, highly innovative company like Tesla is so uncertain that shareholders have little choice but to rely primarily on speculation and emotion rather than on analysis of (limited) facts to estimate the present value of the business.
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PS. I'm a HUGE fan of the company and Elon Musk, and want them to succeed beyond their wildest dreams.
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[1] Quarterly financial results are posted on http://ir.teslamotors.com/events.cfm
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Edits: added third paragraph; grammar.