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Barry Randall

 
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  • The Bizarro World Of Tesla Longs [View article]
    You may be right about the tattoos, but my story was about Tesla stock, which trades at a forward P:E multiple of 170. Harley-Davidson's forward P:E is 15.

    Tesla has done a lot of things right, and full credit to them. But how many capital-intensive industrial companies trade for periods of time measured in years at P:E multiples over 100? Over 50? Over 20?

    Tesla deserves a premium over Ford, GM because, in their narrow niche, they've taken some market share. But further growth will require mass-market cars with lower per-unit profit margins. That's a recipe for valuation compression, not expansion.
    Jun 5 11:24 AM | 2 Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    It's my understanding that Japanese traffic laws combined with their population density make owning very small cars (known as "micro-cars") the norm there. A car the size of the Leaf is actually a full size car in that context.

    However, in other parts of Asia, like Southeast Asia (e.g. Vietnam) small trucks, usually made by Japanese manufacturers, are very common, because of the need to either do rural farm work, or transport goods from rural areas to the cities. These are very small trucks, however, like Mazda B2000s or Toyota Hi-Luxes or other vehicles that aren't even sold in the United States anymore.

    I don't foresee pure EVs selling well in less developed countries because infrastructure (e.g. power lines with predictable, steady voltage and current) are so important to the cars' utility.
    Jun 5 11:12 AM | 1 Like Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    Porsche (as a publicly traded entity) is nothing but a holding company with about 20 billion Euros worth of shares of Volkswagen - about 30% of VW's market cap - plus a few billion Euros in cash. Porsche (the car manufacturer) is a wholly-owned subsidiary of Volkswagen. Porsche (the car maker) sold about 125,000 cars in 2012.

    So comparing Tesla to Porsche in that way is inexact as Porsche shares have only a 2nd derivative relationship to Porsche automobiles.

    Dealers are typically not owned by the car manufacturers themselves but are independent entities, at least in the United States.

    I know that about 80% of Ferrari's profit comes from licensing and merchandising of the Ferrari brand (e.g. T-shirts). It stands to reason that Volkswagen probably collects some revenue and profit from licensing the Porsche brand and by holding events for Porsche drivers.
    Jun 1 02:21 PM | Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    Thanks; the funny thing is, I admire Elon Musk for Tesla's success so far and the Model S clearly satisfies a lot of buyers and drivers.

    But the number of people here who impute all manner of meaning to that early success is even greater than I thought when I gave this piece its title. After 20 years as a professional money manager, I'm still amazed when I encounter people who personalize their stock purchases; any criticism of their motivation or prediction of the future that differs from their own is rejected with an almost visceral reaction - like I've criticized their kids or spouse.

    Oh well. Good luck to Tesla longs. When the Carlos Ghosns, Sergio Marchionnes and Ferdinand Piechs of the world come gunning for your favorite car company, you will need it.
    May 30 09:44 PM | 4 Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    Mr. Holt,

    Thanks for the thoughtful, fact-based and well-reasoned comment.

    Barry Randall
    May 30 11:03 AM | Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    The Tesla's range is directly proportional to the power capability of its battery pack. The 85 Kw-H pack is vastly more powerful than the 25 Kw-H pack in the Leaf. So it has a vastly greater range. It also weighs 1300 lbs more and costs more than twice as much.

    The Leaf is not going to "win." I never wrote that so don't put those words in my mouth. The Leaf is relevant to the discussion because it a) exists today; b) is selling well; c) is manufactured by one of the largest auto companies in the world; and d) has extremely satisfied customers. All these facts together mean that if and when Tesla produces a "mass market" car, it will meet formidable competition. This will mean lower profit margins for Tesla and would therefore put pressure on the company's stock valuation.

    You remember that this site is called, "Seeking Alpha," right?
    May 30 10:55 AM | 2 Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    Please get back to me when you locate where I wrote that the Leaf is going to kill the Model S.

    I'll save you the trouble: I never wrote that. Of course, that would make you willfully ignorant, but it probably won't stop you from imagining things in the future.
    May 30 10:49 AM | 3 Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    Except Don King was never smart enough (like Elon) to get into businesses where the government can't subsidize things fast enough...like space travel and solar power and...wait for it...electric cars.

    Don has better hair than Elon though...
    May 29 08:01 PM | 1 Like Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    The issue raised by "Cassina Tarsia" was 'compromise." Spending $60,000 on either a 5-Series or a Model S makes them comparable. And when you compare the ranges, it's clear that the Model S's range is compromised.

    I'm fully aware of the relative eMPG ratings of both the BMW and the Tesla; the Tesla's is as good as you note. But it has to be to have a range expected of a $60,000 luxury car.

    The M5 is not comparable because it costs significantly more than the base 5-series and the Tesla.

    I'm hugely optimistic about electric cars and I'm rooting for Tesla to succeed as a company. But I wouldn't dream of investing in a capital intensive, cyclical, highly regulated business via a company with a forward earnings valuation that is 10x that of its best-run competitors (e.g. Ford).
    May 29 07:27 PM | 2 Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    You crack me up.

    First you say Americans want a car with no compromises. Then in the next sentence you mention...a compromise: the price point. Oh, you forgot range and re-fueling time but that would be piling on.

    I did not compare the Model S to a Leaf; I compared the Leaf to Tesla's planned Gen III model. So that's two strikes.

    "No one...NO ONE wants a car that simply goes 75 miles, looks like a science project, and then takes 12 hours to recharge. That's a Leaf. "

    And yet Nissan is on track to sell 30,000 Leafs worldwide this year. Are they all like fruitcakes: gifts to others that no-one wants? No, 80% of automobile trips made in the U.S. are sub-40 miles. The Leaf handles that just fine. Probably why I saw three Leafs here in Minnesota in the last 24 hours. Just an anecdote, not research. I've seen one Model S since January 1.

    You just hang out there in Bizarro World. We'll be back here on Planet Earth.
    May 29 06:55 PM | 1 Like Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    "Learn investing 101 before you write articles here."

    Yeah, I think I passed that course: the technology fund I manage has an information ratio of 1.10 (look it up - I'll wait here for you.)

    "If you can't grasp what is propelling the stock higher than (sic) don't make up silly theories."

    Geez, I thought I summed it up pretty neatly:
    "Tesla stock is being propelled higher by a frothy mix of unexpected profits, huge short interest and a collective amnesia that there already exists quite a few electric cars available for sale at much lower prices than Tesla's excellent Model S."

    "Tsla (sic) should be around $250/share."

    And yet it's not. Why is that? Why are you wrong? And if you're wrong about that, why should we pay attention to your made-up "Fundamental Theorem of Investing?"
    May 29 06:37 PM | 4 Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    A sincere thanks for your fact-based comments. A welcome respite from the unicorns and rainbows offered up by most others.
    May 29 06:25 PM | 1 Like Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    Range is directly proportional to weight and cost; all the EV manufacturers are utilizing the same off-the-shelf L-ion battery technology. Tesla (like Whole Foods) was successful in realizing there was a sub-market of cost-no-object consumers who are willing to pay up for what the consumers feel is a premium experience. That's great, and full credit to Tesla for figuring that out.

    But Tesla has no patent or other stranglehold on that market; and Nissan, Ford, Mitsubishi and a dozen other car manufacturers can quickly cobble together a nice car with a bigger battery pack to serve that niche market. The car business is at heart a scale business. If Tesla wants to stick to it's current market, it will succeed and probably be eventually profitable in an un-subsidized way. But if they go toe-to-toe with the Big 6, they'll lose.

    And the Tesla is not out-selling the Leaf. Current sales rates have the Leaf selling 30,000 units worldwide in 2013; roughly 40% of that in the United States. Tesla has indicated that they have orders in hand for 20,000 Model S's, but their current rate of production will result in sales figures less than that for calendar 2013.

    But the two cars are addressing different markets and are therefore not directly comparable.
    May 29 06:04 PM | 5 Likes Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    You seem more sensible than many of the others commenting on my story, but let me take mild issue with one of your statements:

    "The p/e ratio does not matter at this point in the growth stage, as long as pie in the sky projections have some level of possibility of being reached."

    The P:E ratio does matter, in that Tesla bulls keep trotting out the fact that the company recently reported positive earnings (dubious though they may be with the warrants and the credits from other car manufacturers). If the company is now "profitable" then it's absolutely fair game to use that in a P:E comparison. And unlike dot-coms of the late 90s, many of which turned out to have fabulously profitable business models like eBay, Tesla is at heart a car manufacturer, which is a low-margin, deeply cyclical business. So it's current P:E looks even more bizarre in that context.
    May 29 05:58 PM | 1 Like Like |Link to Comment
  • The Bizarro World Of Tesla Longs [View article]
    Next time, before you comment, you really should read the whole story. I compared the Leaf (which exists in the real world) with Tesla's planned Gen III car (which does not yet exist in the real world, but is supposed to be available in two years).

    To say that the Tesla Model S is without compromise is delusional. The S's direct competition is a BMW 5-Series, which has an 18.5 gallon tank and gets over 33 mpg on the highway. That gives it a range of 625 miles, vs. between 200-300 for a Model S. Oh, and it takes more than 5 minutes to replenish that range when you're out of charge in the Tesla (or the Nissan Leaf for that matter).

    Get a grip. It's a nice car. Not nirvana.
    May 29 05:53 PM | 3 Likes Like |Link to Comment
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