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Old 8th December 2016, 11:22   #1
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Default Hedge fund thinks that Tesla stock is worthless

Hi,

I am a big fan of Elon Musk and what he is upto, hence the presentation titled "Tesla is a Zero" came as a shocker

But this presentation by Mark Spiegel whose Stanphyl Capital Remains Short On Tesla Motors is an interesting read with list of electric models on the anvil.

http://www.valuewalk.com/wp-content/...egel-RH161.pdf

The reasons given by him in the annual letter to investors is this:

"We remain short Tesla Motors (ticker: TSLA; January close: $191.20) for myriad reasons. In January General Motors formally introduced its new Bolt EV which offers true five-passenger seating, a range of over 200 miles and a 0-60 time of under 7 seconds for HALF the price of the least expensive Tesla while matching its interior passenger space (albeit with less storage). Seeing as studies show that 15% of Tesla buyers come from a Prius and many others come from other inexpensive “eco-favorable” cars, I expect the Bolt to grab back a significant number of them—what I call the “stretch buyers” who paid up for a Tesla because they wanted an electric car with 200-miles of range; those people can instead now choose the much less expensive/easier to park Bolt which will be available late this year, a year before Tesla CLAIMS its “Model 3” will be available and—realistically—at least two years before it will REALLY be available.

Additionally, as I pointed out two years ago and another Seeking Alpha author pointed out recently, there’s no way Tesla will be able to profitably sell its “mass market” car at the $35,000 (pre-tax credit) price it has claimed—a base price well into the $40,000s seems much more realistic, which would automatically make it much less “mass market.” Perhaps the most interesting thing about the Bolt is that its 60kWh battery pack (made by LG) weighs just 960 pounds while the 60kWh Tesla pack (when it was offered) weighed 1125 pounds, a significant disadvantage for Tesla.

Even if the Tesla pack’s housing was somewhat handicapped by needing to be large enough for the 85/90kWh models and thus as a 60kWh “pureplay” its weight might be closer to the Bolt’s, the Bolt’s energy density-per-pound at the pack level seems to show that the assembly, housing and cooling complications of Tesla’s method of wiring together many thousands of separate Panasonic cylindrical batteries vs. Chevrolet/LG’s much simpler use of just 288 prismatic cells makes Tesla’s first-to-market approach obsolete. As de facto proof of this, every manufacturer currently developing an EV has the option of using Tesla’s “thousands of cells” approach yet (as far as I know) none of them are; it thus seems clear that large-format prismatic batteries—not available with sufficient energy density at an attractive price when the Tesla Models S&X were designed—are now the superior approach and thus may render Tesla’s Gigafactory obsolete even before it opens.

Meanwhile, Tesla’s rollout of its new Model X is shaping up to be a disaster, with various enthusiast forums reporting myriad problems with its “falcon-wing” doors, seats and general build quality, as well as a very low confirmation rate for the refundable “orders” the company claims to have. And those orders that do exist are being delivered in ultra-slow motion as Tesla—which despite years of delays clearly did inadequate Model X testing—attempts to fix the vehicle’s problems (although of course its massive size problem is unfixable).

In addition to these design and build-quality issues, the X’s $5000-$7000 premium to a comparable Model S sedan will be a huge sales-limiting factor, as nearly all of the luxury competition prices its premium SUVs considerably less expensively than its premium sedans. For instance, the most basic “X” with no options and only 220 miles of range (and unavailable until late this year) starts at $81,000 with only five seats standard; by comparison, a seven seat Mercedes GL starts at $65,000, a five-seat Porsche Cayenne at $58,000, a BMW X5 at $55,000 and the beautiful new (and award-winning) Volvo XC-90 at just $44,000.

The full letter with lots of links is here:
http://www.valuewalk.com/2016/02/sta...tors-inc-tsla/

Cheers

Vindy
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Old 8th December 2016, 12:12   #2
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Default re: Hedge fund thinks that Tesla stock is worthless

Reading the attached PDF I started feeling sadder and sadder, not because of Tesla woes but knowing in India with exorbitant import duties we will never see all those upcoming cars. Paying $49k for a futuristic car in India with great electric tech is still possible but having to pay 200% import duty on it is not.

As for Tesla they need to move fast in terms of delivering good product else competitors will take the game away from them. Maybe instead of spreading into too many lines concentration on one would be better.
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Old 9th December 2016, 08:15   #3
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Default re: Hedge fund thinks that Tesla stock is worthless

Quote:
Originally Posted by VindyWheels View Post
Hi,

Additionally, as I pointed out two years ago and another Seeking Alpha author pointed out recently, there’s no way Tesla will be able to profitably sell its “mass market” car at the $35,000 (pre-tax credit) price it has claimed—a base price well into the $40,000s seems much more realistic, which would automatically make it much less “mass market.” Perhaps the most interesting thing about the Bolt is that its 60kWh battery pack (made by LG) weighs just 960 pounds while the 60kWh Tesla pack (when it was offered) weighed 1125 pounds, a significant disadvantage for Tesla.




Seeking alpha is being too smart here. Tesla model 3 average price with all the options accounted for would anyway be closer to 40-45k , so that makes it profitable even according to them.

Secondly, it's just plain idiotic or nefarious to undermine the engineering prowess of a Tesla vehicle with a GM bolt. Tesla has proven its engineering excellence beyond all doubts. Naysayers (often paid by oil sheiks) can say what they want.
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Old 9th December 2016, 15:11   #4
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Default Re: Hedge fund thinks that Tesla stock is worthless

Telsa has been an incredible innovator who went on to disrupt the auto industry and popularised a green technology is indisputable and i don't think anybody has challenged that.

The Tesla stock valuation is a different story, from a purely valuation perspective, i do not agree with the dooms-day--zero-value suggestions/claims been made by the fund. But i do agree that the Tesla stock has always traded at inflated valuations which the numbers do not back and probably never would.

Tesla stock value today indicate the following assumptions:
  1. Tesla would go on to be a mass producer of the size of VW
  1. Tesla would pull off premium profit margins a-kin to the germans marquees
  1. Tesla has technology which would be difficult to replicate by competitors and hence will face less/no competitive pressures

These assumptions per me do not match up. Here is a beautiful deep dive into the stock story and the number correlation for a good read http://aswathdamodaran.blogspot.in/2...ise-meets.html
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Old 9th December 2016, 16:12   #5
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Default Re: Hedge fund thinks that Tesla stock is worthless

I think, it is the future potential of the company's value proposition and ability to capitalize on their disruptive market strategy that will propel and sustain Tesla, at least for the near future.

Tesla is somewhat like Amazon in their respective fields: Amazon has barely ever posted profits but yet, the stock keeps on soaring; mainly because of the company value and outlook that Bezos shows and promises his investors.

The road post Model 3's launch will give an indication where and how Tesla is headed; but I wouldn't sweat.
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Old 9th December 2016, 17:50   #6
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Default Re: Hedge fund thinks that Tesla stock is worthless

The valuation of Tesla led to its market capitalization being beyond GM. Yet Tesla are struggling to add capacity due to cashflow and manufacturing capability. A lot of cash has gone in setting up the supercharger network and product development.

Mercedes Benz had invested around 4% of Tesla but were sharp enough to sell on a high. The fact is the Mercedes and a newly vitalised reformed VW are in a position to flank and swamp Tesla.

Trump might put protectionist barriers to promote Tesla but I would not be surprised if Tesla gets acquired, Musk hives off his nanobattery project.
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Old 18th December 2016, 01:56   #7
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Angry Re: Hedge fund thinks that Tesla stock is worthless

Quote:
Originally Posted by VindyWheels View Post
...
Meanwhile, Tesla’s rollout of its new Model X is shaping up to be a disaster, with various enthusiast forums reporting myriad problems with its “falcon-wing” doors, seats and general build quality, as well as a very low confirmation rate for the refundable “orders” the company claims to have.
...
Oh yeah, the Model-X is a disaster all right !


This is almost believable till you get to this bit...
Quote:
Originally Posted by VindyWheels View Post
...
For instance, the most basic “X” with no options and only 220 miles of range (and unavailable until late this year) starts at $81,000 with only five seats standard; by comparison, a seven seat Mercedes GL starts at $65,000, a five-seat Porsche Cayenne at $58,000, a BMW X5 at $55,000 and the beautiful new (and award-winning) Volvo XC-90 at just $44,000.
Forget the Cayenne, the Model-X is comparable to the GL, the X5, & the XC-90 ?
This "report" has less credibility than an Arnab Goswami tirade on TV !

Sounds like a deliberate attempt at shorting the stock & tanking it, then taking over...
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Old 18th December 2016, 19:37   #8
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Default Re: Hedge fund thinks that Tesla stock is worthless

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Originally Posted by ajmat View Post
The fact is the Mercedes and a newly vitalised reformed VW are in a position to flank and swamp Tesla.
This is something I have wondered about. I always had this feeling that the big auto companies are letting Tesla fight the perception battle (for EV cars) and would be ready to jump in with their versions when the EV/Hybrid market is ready to take off.
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Old 21st December 2016, 22:55   #9
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Default Re: Hedge fund thinks that Tesla stock is worthless

Tesla is like Kingfisher. Flamboyant and high profile personality pursuing a highly visible business with unsound financials.

The only way this ends well is if in the coming 5 years their unit economics make sense and all the start-up formative losses turn to profits.

The issue is when will that happen ?

Musk is a cool guy but I don't wouldn't trust him with my money. He's like a rich kid with a cash burning hobby. A real businessman is purely money making oriented, and so far Tesla has proven to be a stinker in the money making department, although their technological progress has been noteworthy.

Musk has mixed hobbies and passion with commercial enterprise. It'll be interesting to see how this pans out, if the Tesla cheerleaders are right, the financial analysts will be proven that stinkers can become cash cows, and if the cheerleaders are wrong, the hard-nosed analyst's cynicism will be proven correct.

Last edited by D33-PAC : 21st December 2016 at 22:58.
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Old 22nd December 2016, 05:27   #10
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Default Re: Hedge fund thinks that Tesla stock is worthless

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Flamboyant and high profile personality pursuing a highly visible business with unsound financials.

The only way this ends well is if in the coming 5 years their unit economics make sense and all the start-up formative losses turn to profits.

The issue is when will that happen ?
Even I was in your boat, thinking that it would take half a century for Tesla to start making profits, until they reported a profit of $22 million in the last quarter. In just four years after going mainstream, Tesla posted a profit. Its unheard of among tech companies.

http://www.nytimes.com/2016/10/27/bu...ofit.html?_r=0
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Old 22nd December 2016, 07:46   #11
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Default Re: Hedge fund thinks that Tesla stock is worthless

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Even I was in your boat, thinking that it would take half a century for Tesla to start making profits, until they reported a profit of $22 million in the last quarter. In just four years after going mainstream, Tesla posted a profit. Its unheard of among tech companies.

http://www.nytimes.com/2016/10/27/bu...ofit.html?_r=0
Unfortunately those profits aren't from selling cars. They are from selling some kind of green credential tax credits or something to other companies and from their some other ancilliary tech business.
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Old 22nd December 2016, 08:14   #12
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Default Re: Hedge fund thinks that Tesla stock is worthless

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Unfortunately those profits aren't from selling cars. They are from selling some kind of green credential tax credits or something to other companies and from their some other ancilliary tech business.
Nope. The profit is mainly from increase in vehicle sales in the last quarter. The production and sale of cars increased by 92% compared to the third quarter of the previous year.

http://www.wired.co.uk/article/tesla-makes-money

http://www.forbes.com/sites/alanohns.../#5950c4d95959

There is just too much scepticism about Tesla. But it is understandable considering how young the market is and how disruptive this type of tech can be.
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Old 22nd December 2016, 23:50   #13
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Default Re: Hedge fund thinks that Tesla stock is worthless

Few points i would like to add in here.
Teslas profit comes from car sales and not ZEV which is selling credits from sales of electric vehicles to manufacturers who do not make it.

Comparing tesla to vijay mallya is laughable. Kingfisher airlines was selling premium tickets to a cost conscious nation and investing money in extravagant buys of aircraft when a lease was a cheaper alternative.

Tesla has continuously manage to sell cars at a good rate even though several states are putting a barrier to entry due to their sales model. Multiple states in US do not permit the sale of cars directly to the consumer, but still tesla does manage to sell the first and third highest selling cars in the US with the model S and model X. Nissan leaf costs 30k and comes in second.

Some things i would do differently, totally personal opinion here:
1) Tesla has multiple projects they are working on. New product launches can take your focus off the existing bread and butter frankly. Focus is very critical. Many SKUs of frequent upgrades reminds me of adobe updates on your pc.

2) Supercharger network expansion needs to be done pretty quick, but is a money drain too as each install costs about 250k to the company, plus the cost of power. Can there be a tie up of sorts with some businesses to bear the costs?

3) Many criticised the buy or solarcity but i do think it is a very good buy. That way you can have a tesla power division dealing with batteries and solar and tesla cars dealing with vehicles and superchargers.

4) Get the gigafactory and the fremont factory expansion done at a quick pace, but do continue selling your cars at a equally higher pace. Tesla needs to expand in Europe and Asia at a rapid pace.

5) Tesla is fighting multiple battles, to list a few here:
Solar netmetering is a issue in many states, each battle is different. Start uniting all the solar companies and fight as a team. Its you upstarts vs a Big Monopoly. Or maybe even a tie up will help.

Tesla car sales in multiple states is banned. Fix this. Do make people in the US realise you are a Made in America brand and are as much an american company as coco cola or chevy.

6) Model S still is their best seller even though the Model X was launched. They are still unable to sell Model X cars to the initial set of folk who reserved the cars. This is not good at all. There should be a equal distribution in production capacity to both these vehicles.

7) Focus on getting the Model 3 to the market on time. Everyone is watching you and they will keep quiet if you do. Get the company profitable and we do not want elon to think of building a tunnel under LA or a train in a tube. Let someone else do that, you are a car and power company. Do that right first.

Lastly many want Elon to do a iron man. Do remember, iron man made his money of bombs, not peace.

Maddy
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Old 8th February 2017, 14:15   #14
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Default Re: Hedge fund thinks that Tesla stock is worthless

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Originally Posted by VindyWheels View Post
Hi,

Chevrolet/LG’s much simpler use of just 288 prismatic cells makes Tesla’s first-to-market approach obsolete. As de facto proof of this, every manufacturer currently developing an EV has the option of using Tesla’s “thousands of cells” approach yet (as far as I know) none of them are; it thus seems clear that large-format prismatic batteries—not available with sufficient energy density at an attractive price when the Tesla Models S&X were designed—are now the superior approach and thus may render Tesla’s Gigafactory obsolete even before it opens.
Our of curiosity about the prismatic batteries, I tried to google it and found this link (http://www.epectec.com/batteries/pri...uch-packs.html)

Basically, prismatic ones are far more prone to swelling, which could be life threatening in a car compared to say a mobile phone.
Is this why laptops use cylindrical ones instead of prismatic?
I hope GM has done enough real life testing so that the Bolt does not end up like 'Samsung Note 7'


As a consumer, more the merrier!! More competition also leads to lower prices & gets companies on their toes instead of being complacent. So Bring Them On.
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