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Comment by jfaucett | Hacker News Reader

> It is not manipulation. The stock is tremendously overvalued.

This. I was going to say even $180 is still ridiculously overpriced.

Teslas statements are not good by any means when compared to GM and are even poor when compared to a company in problem times like Ford. Tesla even has massively less capital expenditures than both GM and ford. For instance, Fords after tax income was 4 billion, they had capex of 1.7 billion, and an EPS of +0.2. Compare this to Tesla at -0.6 billion revenue, 0.7 billion capex, -4.8 EPS (and they are issuing new shares each quarter for financing). Yet Ford cost $11 a share while paying out a 5% dividend - and this is all from a company in rough patch.

I have no idea why anyone is putting so much money into Tesla. You have to give Musk credit for great marketing and creating a cult around his image and ideas.

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Listing current financial metrics compared to incumbent automakers kind of misses the point on Tesla. Not that it isn't "overvalued" (might be the most ambiguous word in investing) but Tesla's annualized GM is ~8% better than Fords, they own the refueling network (as opposed to incumbents which outsource it to gas stations), and are poised to control much of the future battery supply. Your Musk marketing comment is spot on in my opinion but at the end of they day these are not analogous companies financially, Tesla's charted a much-bifurcated path to growth and profitability relative to current auto companies.

> [Tesla] are poised to control much of the future battery supply

"Chinese companies have plans for additional factories with the capacity to pump out more than 120 gigawatt-hours a year by 2021, according to a report published this week by Bloomberg Intelligence... By comparison, when completed in 2018, Tesla Inc.’s Gigafactory will crank out up to 35 gigawatt-hours of battery cells annually.

...

Roughly 55 percent of global lithium-ion battery production is already based in China, compared with 10 percent in the U.S. By 2021, China’s share is forecast to grow to 65 percent, according to Bloomberg New Energy Finance."

https://www.bloomberg.com/news/articles/2017-06-28/china-is-...

Relative to the companies their stock is being compared against I'd say I'm still pretty impressed with their lithium-ion production plans.

It's perhaps worth noting that musk has said:

> I will announce locations for between two and four Gigafactories later this year – probably four.

This puts them in the range of around 175 (35 * 4 new + Nevada) gigawatt-hours annually. They are certainly looking to compete in this space

It's worth noting though that the estimates for the Gigafactory have been massively revised (although no one seems to pay any attention to it) and will now be producing 100+ GWh of batteries yearly and Musk had stated that they're announcing 2-4 more this year.

Further, the Chinese government can say "fuck you" (as they have done with other companies) and make it prohibitively expensive to obtain the raw materials used for battery production.

Incorrect.

China comes number four on the list of lithium producing companies.

Much of the world's lithium reserves seem to come from South America.

http://investingnews.com/daily/resource-investing/energy-inv...

You need other minerals, which are collectively termed "rare earth minerals":

Rare earth element map: In 2013, China produced about 90% of the world's supply of rare earth element ores. The USGS Mineral Commodity Summary [2] reported production tonnages for Australia, the United States, India, Brazil, Russia, Vietnam, and Malaysia. Rare earth element exploration and/or development is being done in Canada, South Africa, Thailand, Malawi, and Sri Lanka; however, production from those countries was insignificant during 2013.

http://geology.com/articles/rare-earth-elements/

Further China has already show willingness to ban export of these materials (for example in 2010). At the end of the day the risk to the production of batteries in particular has motivated vulnerable countries like Japan to develop alternative processes:

http://fortune.com/2016/07/12/honda-rare-earth-battery-hybri...

i am invested in Tesla because i feel like they have the best chance of seizing the bulk of the autonomous car market, out of the publicly traded companies available to me.

I could be totally wrong, but being first will allow them to grab the lions share of the business opportunities, and let them vertically integrate aka Tesla run uber, Fedex etc.. Being second is like being second with PageRank.

Definitely, I feel like it's partially just a question of what a full-stack 21st/22nd century auto company is going to be worth once the dust settles after the autonomous car wars. If it still means producing close to 10 million cars a year while also being a leader in autonomous driving software then we could be talking about a multi-hundred billion dollar company in the making. If, however, the number of cars needed to be manufactured drops precipitously and a number of strong competitors emerge in autonomous transport they may end up relying on their semi-truck and energy network investments a bit more. Only time will tell

Battery production is dominated by Chinese companies and having to maintain a global proprietary charging network is a liability.

> Battery production is dominated by Chinese companies

Tesla has built the largest factory in the world for the sole purpose of producing batteries. Battery production is about to be dominated by Tesla.

China has several times more actual output capacity than what is planned for Tesla's factory.

Yes, the country is going to have more output than one company

Probably because the perception of Tesla is that it's more than just a car company. Retail investors don't see much of a future in the American car industry so they're betting hard on tech-first innovation.

I wouldn't buy Tesla for more than $200 but I really don't think it's hard to see why people do.

Which makes it a high risk speculative stock. You're essentially gambling on the future knowing the present company is extremely overvalued. I wouldn't even call it "investing" if you were to purchase their stock right now.

"Overvalued" is a funny term -- how can you overvalue a company who's competing on innovation? Remember people said the same thing about Facebook when they were worth $50b and Google when their only products were search and gmail. I agree that it's a risky buy, I disagree with the notion that there's something fundamentally wrong with high-value speculation.

Agree, there's nothing wrong with high value speculation as long as you recognize it.

Tesla is overvalued. If you were to take a present snapshot in time (a data point) and compare the assets and cash value of Tesla with what its stock price is it would be wildly off.

Everyone always remembers the winners, the Googles, Microsofts, and Facebooks. No one remembers the hundreds of dot bomb companies (including Cisco) that saw tremendous loss in stock when everyone thought they were "certain" to succeed.

I liken this stock to the first few quarters of GoPro leading into Christmas. Investors are making it pop up and down, but the moment the possibility of massive growth and revenue meets up to reality, it'll slide down to a reasonable price.

"People don't buy what you do, they buy why you do it."

https://www.ted.com/talks/simon_sinek_how_great_leaders_insp...

You lost me with that quote.

Interesting - having seen the linked TED talk, I immediately understood. Maybe worth a watch?

People don't buy Tesla because of what it does (make a profit selling cars) they buy it because they're making cars "to make the world a better place," by releiving reliance on fossil fuels.

The why is more influential than the what. It's the same reason people are dumb enough to pay a 40% premium for Apple products that are equal in any meaningful metric to a PC.

Investors buy on future prospects of a company. While Ford or GM seem like a good value to you and me, where is the future upside to these two companies? They are in about every country, they have vehicles in about every configuration. Tesla has a lot more upside for future growth.

Then again, this is why companies like Ford and GM pay dividends on their stocks ... stockholders don't expect them to grow, just keep making money.

Why do people compare Telsa to companies like Ford and GM? Genuinely curious because I see it a lot. Both those companies sold over 1.2 million cars last year. Tesla around 16K. Numbers are US only.[1]

[1]http://online.wsj.com/mdc/public/page/2_3022-autosales.html

>> It is not manipulation. The stock is tremendously overvalued.

> This. I was going to say even $180 is still ridiculously overpriced.

My thoughts:

- Goldman Sachs (GS) makes buy helping other people buy and sell Tesla-related securities, profiting whether Tesla shares go up or down, and I simply don't trust the recommendation enough to make bets on the recommendation's value

- No one knows if the stock is overvalued because no one has perfect information about how Tesla will actually perform, including both Tesla & GS

- If I actually did know where Tesla shares would go, I wouldn't tell anyone, unless revealing the price would be a bigger windfall for me than keeping the information confidential

But if "how Tesla will actually perform" in the future is already priced in today, the stock can't continue to go up unless it continues to be overpriced.

What is it with this "already priced in" bullshit? It should be obvious by now that stock prices are not based on pure, rational calculations of value. This is why one single news article, like this one, can drop the value of the stock by 7%. The only way to know how Tesla will perform is to watch things unfold. A few years back, when Tesla was struggling to make the Model S happen, would you say that its current success was "already priced in"?

I would say that most of the big investors who are betting against Tesla are finance people, with a relatively poor understanding of the real potential for this company. They tend to see it purely as a car company. They don't understand that Tesla's battery production, their solar and utility-scale energy storage businesses are also worth quite a bit. They don't understand that the self-driving technology has a lot of value as well. They also don't understand that Tesla's electric cars are currently outperforming every other electric car, and every production ICE car as well. And lastly, they don't understand that Tesla is basically the Apple of cars, they sell cool, hot ticket items. Finance people who think "Tesla just can't unseat GM and Ford" are have definitely not "priced in" all the information.

The people who are betting for Tesla are either people more familiar with technology, or people who are just really rooting for change, and happy to see a newcomer finally shake things up. The latter have not "priced in" much information either, they are going based on hope. I personally think that Tesla has a very good shot at succeeding. Not only because Elon Musk does seem to eventually deliver what he promises, but also because the company has so many people rooting for it. These days, when Tesla needs financing, they just issue more shares, and people buy them up. This basically means that Tesla can pull itself out of debt very easily. I don't think that Ford and GM can say the same, they do not have millions of small investors rooting for them, ready to pull them out of debt. If Tesla slips up in its Model 3 deliveries, even by quite a bit, I do think the stock price will suffer, temporarily, but I think that most people will forgive them. Many people, myself included, are just very happy to see electric cars finally becoming a reality. I know that if Tesla ever drops near $200 again, I will be buying a whole lot more of it.

> What is it with this "already priced in" bullshit? It should be obvious by now that stock prices are not based on pure, rational calculations of value. This is why one single news article, like this one, can drop the value of the stock by 7%.

Perhaps some market participants value the price targets of Goldman Sachs, and this new information triggered a price readjustment to the extent that these participants traded the stock today?

As a pro Tesla techie+investor, I'm willing to pay up to $N per share for Tesla. The more below $N it is, the more I feel I'm getting a better deal. That doesn't have much to do with how much I believe, or don't believe in Tesla as a company.

I'm willing to pay up to a certain amount for a Model 3, just like I'm willing to pay up to a certain amount for a share of Tesla. No matter how much I like a Model 3, I'm not going to buy the last car on the lot for 2x the price because it's the last one. I'll just wait until there's another one at the regular price.

How do you calculate what you believe is a fair price for Tesla shares? What would your current fair price be?

>> How do you calculate what you believe is a fair price for Tesla shares?

That is the question for which everyone wants to an answer that only they know :) You can build really sophisticated models to predict stock prices, but all models are really just making guesses about what a fair stock price is.

Some common questions to ask are:

- Does it have a positive the ACID test ratio? [1] Looking at the balance sheet [2], do the current assets exceed the current liabilities? If everyone thinks Tesla can pay it's bills, but you think they will have trouble doing so, you may believe a fair price is lower than what everyone else thinks.

- Does the company have a sensible price-to-earnings ratio? [3] Looking at the stock info [4], how much weight should you put on the P/E when determining what a fair price is?

- How fast is the company growing? Looking at the income statement [5], do you believe Tesla will grow faster or slower than it has been? And is your estimate higher or lower than what other people are guessing?

- How much will Tesla have to pay for Lithium in the future? [6] Do you predict that Lithium will cost more or less than the other people are guessing, and how much should your estimate factor into determining a fair value for Tesla stock.

[1] http://www.investopedia.com/terms/a/acidtest.asp

[2] https://finance.yahoo.com/quote/TSLA/balance-sheet?p=TSLA

[3] http://www.investopedia.com/terms/p/price-earningsratio.asp

[4] https://finance.yahoo.com/quote/TSLA/?p=TSLA

[5] https://finance.yahoo.com/quote/TSLA/financials?p=TSLA

[6] https://www.metalary.com/lithium-price/

Talking about share prices is pointless without referring to number of shares. Tesla wouldn't be worth 16 times more than Ford just because their share price was 16 times higher. Tesla's market cap being $11B higher than Ford is surprising but then Tesla has momentum that investors are factoring in to the potential future value of the company. Ford has cash-flow but is stagnant; Tesla announced in May that they doubled their Revenue from 1st quarter 2016. The challenge for traditional car companies is that their new competitor is acting and being treated by investors as a speculative stock.

Also, in your comparison of the financials you have called Tesla's after tax income for 2016 their revenue. And Fords capex for 2016 was just under 7B. From where did you source those figures?

(Ford) http://www.marketwatch.com/investing/stock/f/financials (Tesla) http://www.marketwatch.com/investing/stock/tsla/financials

Can you explain the relevance of $11/share for Ford?

It's a stock that's sanely valued and offers a dividend. I believe the author of the comment is pointing out a lot people think emotionally with their money.

Ford seems like a bargain at this price. (Disclosure: I've been in F around $6.)

I think the smart money should be looking at which established car-maker will be best able to make the transition to a future with electric personal vehicles and autonomous cars. It's clear there's going to be some kind of disruption in the next several years, and new players and the survivors are going to be splitting up the bounty.

People are buying Tesla stock based on the idea of what the company can become, not what it is right now.

Judging Tesla based on current numbers is simply being short-sighted. They have yet to produce a mass-manufactured car, sure, but unless you've been living in a cave, you know that the release of the Model 3, a car with over 400,000 reservations, is coming soon, and that's going to create somewhere between $13-17 billion in revenue as people pony up the money for the car.

And the engineering?

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