I'm sure your question is directed toward those who understand trading. I do not. Wanting to participate, I will opine. Tesla is nearly impossible to value, since it's breaking new ground. Personally, I think it was comfortably valued at $350 per share in 19Q3, based on my value analysis. Now, with GF3 online, that valuation should be able to double. GF3 is not producing at capacity but it will before the end of the year. I expect to see 700K vehicles per year as the production rate at the end of the year. Given a doubling of the production rate in the near term, Tesla should support $700 share price. My thought is that Tesla can reasonably be valued between $400 and $800, at this time.
Before the markets open, I will share a bit more detail on my view of Tesla value. Current factors - Battery supply is the BEV production problem that everyone needs to solve. This is why Tesla is the 800# gorilla and legacy automakers are the fragile startups that can't seem to get their BEV programs off the ground. We know Tesla has a run rate that will supply 450K vehicles per year but we have not yet seen capacity that can further higher production rates. It's easy to believe Tesla's Grohmann division, together with COTS robotic suppliers, can build another set of manufacturing tooling to expand production lines. It's more difficult to believe Panasonic can scale to 54GWh of annual production when they had such trouble scaling to 35. - Tesla has cited 65% cap-ex reduction on Giga Shanghai over Giga Nevada and Fremont. Consider this, along with reduced shipping costs on materials and reduced labor, as well as a base price on the MIC Model 3 of $46K USD (it's $40K USD in the states) when you work up your margin model. Then, mix in the reduced cost of not having to ship vehicles back to china, where their components originated. Giga Shanghai will double capacity but I project it will conservatively triple margins. The high margin vehicles are not the S/X. The high margin vehicles are the MIC 3, which they are now scaling to 500K units per year. - Consider the fifth general assembly line at Fremont. That's a 25% increase in production capacity that is 100% pre-sold. - Keep in mind, Tesla generated $1B of spare cash in 2019, while hyper-scaling production and building a new plant in Shanghai. Non-considered factors - Dry anode production will bring a huge step forward in battery production scale, as well as unit cost. I expect a 3-4x production improvement with a similar cost reduction. - Solar roof to come online at scale in the next three months - Tesla Semi to start limited production in Q3 of 2020. - Model Y to start production in the next 30 days with first deliveries in March. - Model Y designed to manufacture significantly more efficiently than the model 3. - FSD to come online as a productized ride service by about 2022. If Google were to spin-off it's Waymo One division, they could raise a lot of money from the equity markets. For some reason, Tesla's FSD has been entirely ignored. Now we are seeing Tesla is ahead of everyone else on several fronts, when it comes to FSD. Tesla's implementation is generalized. Tesla cars do not require highly detailed, location specific, maps to operate in FSD. Tesla's FSD is a huge leap ahead of all competitors, in this regard. This is before we consider Tesla FSD requiring a small fraction of the power Google's solution does. Google's solution uses Chrysler mini-vans fitted with large alternators. Uber, also a credible competitor, has struggled in a similar fashion. Tesla's FSD should be valued far beyond the implementations of Google or Uber. - Tesla Energy continues to scale very quietly. Tesla is already an energy producer on the scale of a small state, with several power purchase agreements. Tesla GridManager software continues to evolve. One day, we will realize Tesla has built the next generation energy Grid framework while everyone else is using 20 year old recloser designs and MV90 smart meters. Tesla Energy is quietly creating the distributed, smart, grid of the future. As BEV become more popular, we will need a much smarter grid. Tesla is a good portion of the way there, already. Power companies are going to have little choice but to adopt the Tesla grid platform or they will be forced to regulate charging times and levels. - Supercharger network. Non-tangible thoughts on Tesla valuation - It has become clear that Tesla analysts have had epic levels of ignorance. A Canaccord Genuity changed from bear to bull in 2019 after driving a Tesla. Before that, he was literally explaining how bad the cars are without having seen one. We have seen this pattern repeat itself countless times. Weapons grade ignorance is the norm, not the exception. - Tesla shorts, like Jim Chanos, have largely been driven out of business by way of being stripped of their money. Tesla shorts were the story of 2019. It appears that story has ended. The bear case is a tough sell in 2020. - Tesla cars are more software than hardware. Tesla has more software engineers than hardware engineers. No other auto manufacturer is positioned to compete with Tesla on an integrated, intelligent, vehicle platform. Even Ford has said they need to partner with Rivian and VW for an EV platform because they can't afford to develop their own program. Tesla is much further ahead than Joe Sixpack understands. - The only company that might have a chance of bringing competition to Tesla in the main stream is VW. VW is structuring itself in a way that is a threat to Tesla's dominance but it has many years of hard work and uncertainty ahead of it.
I want to make a post about BEV competition. Anyone who plays racket sports knows that a very small imbalance in talent will result in match that appears visually one sided. The slightly better player will be able to control the weaker player, driving them out of position, making them run, wearing them out, and ultimately making the match look like the better player is dominating. That's how I see the BEV market. Tesla is in position to make money. Tesla has the best battery supply in the world. Tesla has a manufacturing automation division. If Porsche wants to improve the Taycan spec to match range with the Model S, they will have to build less cars since they will be using cells that could be built into other vehicles. Lowering production numbers will likely cause BEV programs to operate at an even greater loss, unless they can charge a strong premium on the extended range models. Even if they do, Tesla can bump up the Model S to achieve whatever range they want. Soon, Tesla will be making their own cells and will be in full control of battery operations to scale as they wish. As the Model S creeps up to 400 miles of range, the Taycan is just under 300 miles. Elon is talking about bumping the S up to 500 miles of range. I expect that will happen if/when a decent competitor achieves 300 miles.
Here is an interesting frame from a flyover a friend in Shanghai shared, last night. This is the scrap pile at Giga Shanghai. Check out the hood damage on the bottom white car. Something didn't go well. lol!
Tesla IPO of $200B with a $300M over-allocation option. Given Elon's comment on the EC there is no need to raise capital, I suspect this is a response to the coronavirus epidemic.
Cathie Wood (of ARK Invest) made an interesting comment, this morning. She said she wouldn't be surprised if Elon announced a second Gigafactory in China to show support for the Chinese government. I agree, it sounds like an Elon move, but I am extremely skeptical given Tesla would not have built in Shanghai without the Chinese conceding to allow Tesla to own the property and 100% of the business. If they can get a similar deal elsewhere in China, I have no doubt the pile drivers will be rolling soon.
The share dilution and coronavirus has Tesla above $810, right now. If someone understands what is driving this valuation, I would appreciate being brought up to speed.
I sometimes like to buy strangles and high volatility stocks expired at the end of the day on Friday, might consider doing this in Tesla tomorrow, but wow volatilities just so high.
Quick Update. Giga Shanghai phase 2 construction workers are now in a 2 week quarantine. Best case, construction will re-start around the first of March. The coronavirus has had small impact on the production ramp and will have a more significant impact on the build timeline. Cars are currently being produced and shipped at a modest rate. There are also cars on Pier 80 in San Francisco. Tesla has sent several ships full of cars to Asia recently. This was to mostly stop so I expect the shipments are a response to the coronavirus. Giga Berlin is 60% cleared of trees but is currently shut down by court order. A group of environmentally minded men and women, all of whom have gluten alergies, use Apple computers, and have beards and hair buns, have petitioned the court to stop Giga Berlin site clearing. It is currently expected the injunction will be lifted in a few days but I will be following this space. There isn't a lot of time to lose on this project timeline before it will impact the 2021 production target. The whole project is tremendously organized on site. They even have quite a few hectares of small animal resettlement space. If this project is permanently halted, I don't see how any project will ever be allowed to proceed in the future. Surely this is an anti-Tesla maneuver, far more than naturalist activism.
A Porsche Taycan just burned down in Florida. Not being a Tesla, it isn't news. I'm going to guess it was hot off a charger. Less likely is that it was still hot from severe use. There are currently 130 Taycans in the US so this fire will most certainly elicit a response from Porsche. It could bring about a quiet reduction of peak charge rate or an hp limit, depending on the trigger event. Porsche has an extremely thin lead on Tesla in both charge rate and performance so this will be interesting. There are legions of people who think an electric car is just a normal car with a motor and battery such that a child could build one. Porsche put a ton of effort into the Taycan. I'm confident the Taycan is a good design but this is likely to end up being another piece of evidence that it's easier to talk about building a better car than Tesla than it is to actually do it. Someone will do it, for sure, but it is very difficult to beat a strong incumbent in any field.
The Taycan may have a slight edge in some categories over the Tesla. For example, the Taycan 0 to 60 time is 2.4 seconds versus the Tesla's model s performance of 2.5 seconds. Over all the Tesla blows away Taycan in the important categories. For example price, the Taycan starts at $186,000 versus the Tesla model s performance which starts in $101,000. A huge difference. The other big category, the Taycan has a range of only 192 miles versus the teslas range of 326 miles. All factors considered the Tesla is far superior.
I encourage you to not underestimate the Taycan or the Volkswagen group. The Taycan is an excellent car. It is well built and well designed. Porsche is no slouch. The Taycan tops Tesla in performance and charge rate. This affects the market, a little bit. If these performances need to be walked back and Tesla re-gains the lead, it will also have an effect on the market, if only a little bit. There is a large cemetery of Tesla Killers. Porsche will not be one but this *might* turn into another example of a company being flip with regard to out performing Tesla and then failing. VW already had egg on it's face saying it would build a better car than Tesla at half the price. Shiite Tesla fans seem to go crazy when companies talk about beating Tesla with talking points that are not credible. Instead of this response, we should love these opportunities to take money from the folks caught in the feedback loop feeding the anti-Tesla frenzy.
There are rumors of tesla using LiFe4 cells in the MIC base range Model 3. While not earth changing, this would be a significant development if the rumors come to reality.
I'm not a Tesla lover by any means, but I am a technology lover and Tesla is just way too far ahead in the battery ability. The range the vehicle can travel on a single charge is the single most important factor. Everyone else is just too far behind... Will they catch up? Maybe one day, but that lead to significant today.
A quick note about the new Tesla price target from Piper Sandler of $928. It came out this morning. I believe the entire thought process went like this, "Tesla has been going up. It's currently around $900. Let's bump our price target a little above $900 so we don't look like clowns." Not joking.
When I was a professional trader we use to joke that analysts were sheep. When a stock goes from $10 to $100 analysts upgrade it. But it goes from $100 to $10 they downgrade it... Geeez thanks!
