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Sal Demir

 
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  • Tesla Motors' Full Analysis 2.0 [View article]
    @gwashn

    I never made a "positive surprise" comment on Q2 and you can see from my pricing model that I care more about the long term/annual results so I'm not sure why you addressed this to me?

    Here's my only comment on Q2 results so far:

    "I'm not too worried about Q2 results, Tsla still being at infant states of production, ~500 cars in transit to EU, lease accounting effects, etc. will still be hard for many investors and analysts to digest thus still very unpredictable."
    Jul 11 10:09 AM | Likes Like |Link to Comment
  • Tesla Is About To Become An Even Bigger Bubble [View article]
    George Kesarios

    First short Tesla article on May 14, 2013 with a conclusion:

    "If you want my guess, several billion dollars at a very high cost in terms of dilution to current shareholders, making Tesla a very poor choice as a long term OR EVEN A SHORT TERM INVESTMENT"

    http://seekingalpha.co...

    Tsla price on May 14, 2013: $83.24

    A short term investment placed then would have brought in gains of 47.5% until today, in less than two months.

    Pretty good short term investment if you ask(ed) me :)
    Jul 10 05:38 PM | 17 Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    Sorry to hear you deviated from the right path since there aren't any foreseeable events to disprove and the road ahead looks great.

    1. "Just look at BMW with its first entries in the coming months (i3, i8...). "

    (I think this is my 20th response to i3, i8, ELR, Cayenne plug-in concerns :)

    i3

    Have you seen the i3? If not, please look back at its picture, # 5 in the list in my article. It has a range of 80 miles, estimated to cost $40K to $50K and it looks and performs like a box/golf cart/(insert stereotypical EV name here) No confirmed specs on its ICE Extender version yet.

    i8

    Scheduled for 2015 with an estimated MSRP of $130,000, 30 mile electric range and ICE extender, 0-60 in 4.9 seconds.
    Sure, consumers are going to wait 2 more years for a car that costs $40,000 more than Model S Perf. but performs worse (3.9 seconds vs 4.9 seconds 0-60)

    2. ABB Charging Infrastructure Tesla Supercharger

    ----------- 50 KW -------------- ------------120KW --------- (FREE)

    You don't need a rocket scientist (pun intended) to figure this one out.

    ABB and other companies' Chademo, etc. chargers are great for EVs w/ranges around 80 miles but very slow for Tesla's 215 and 265 mile ranges.

    But of course wide spread of chargers is good news for all EV producers including Tesla. They confirmed months ago they will be providing Chademo adaptors for Model S and future products.
    Jul 10 04:47 PM | 2 Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    @pgothi

    1. Enron? Really?

    First you said FCF is a better indicator, then you dismissed it when I gave Aapl's superior FCF and cash balance to inferior stock price move as example. You may think otherwise but majority of investors and analysts have always and will keep looking at Income Statements.

    Discussing "which valuation approach is better" is a separate argument we can make but definitely a waste of time when it comes to projecting Tesla share price.

    2. I went back to the filings and made sure these were $600 mil. convertible notes for stock w/ 1.5% interest. Two points;
    - $9 mil/year of interest payment isn't significant for Tsla.
    - These notes can be converted to stock @ $124.52 meaning there won't be many interest payments since many will indeed convert and sell/hold.

    3. - I think you're wrong for thinking building and improving proprietary battery mgmt system isn't a technological advantage especially when these packs are designed in a way to accommodate future cell improvements from any manufacturer. By the time other manufacturers realize how much cheaper and safer Tesla's approach is, Tesla will have 7-8 years of expertise & patents.

    Time will show who's right I guess.

    - So you agree that Tesla is the only one right now and you don't want to speculate since it isn't your area of expertise.

    4. You're welcome.
    Not sure why you think longs would turn to other stocks once the squeeze is over as long as Tesla keeps executing at this level and profits/share price rises.

    I'm not too worried about Q2 results, Tsla still being at infant states of production, ~500 cars in transit for EU, lease accounting effects, etc. will still be hard for many investors and analysts to digest thus still very unpredictable.
    Jul 10 04:24 PM | Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    Seriously classic :)
    Jul 10 02:24 PM | 1 Like Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    Per Investopedia, http://bit.ly/19i6EGo

    "Investors are interested in what cash the company has in its bank accounts, as these numbers show the truth of a company's performance.

    "For this reason, SOME investors believe that FCF gives a much clearer view of the ability to generate cash (and thus profits)."

    Not all the time :)
    Aapl had $137 billion cash at the end of 2012, much greater cash balance and FCF than any other company in the world.

    We all know how its stock has been doing. It had ~$110 billion when I jumped ship @ $694, I didn't care about their cash balance or FCF, did I? :)
    Jul 10 01:38 PM | 1 Like Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    @pgothi

    This is where we separate significantly since you're constantly referring to industry averages and traditional ratios. I know this sounds vague/non-factual but unfortunately there's no other way to put it: It's the ultimate mistake to benchmark a revolutionary company like Tesla to existing companies/industries.

    I'll answer your Tesla and my data specific questions since I don't see any point in the comparison related arguments.

    1. Earnings are indeed the driver of equity valuation, as long as there aren't any threats from foreseeable cash balance.

    2. "Even if gross margins are maintained at 25% (which again will be difficult to do for Gen III)"

    My GM calculations go down from ~30% during Model S & X deliveries by end of 2015 to around 20% 2 years into Gen3 production by end of 2019.

    3. I was a little confused then disappointed w/your interest expense comments since you sounded like you were on top of everything but clearly missed one of the biggest news (due to political reasons) about Tsla. (You can refer back to my first article to make sure you have main points covered)

    4. "Also, Tesla has no real technological advantage but a few patents on control systems and efficient battery arrangements.Both of these factors are not their competitive advantages.
    ---- Control systems have a whole instrumentation industry behind it. Honeywell is a prime example.
    ---- Android might also capture the car Infotainment systems market."

    You're starting to lose me with these comments.

    - Tesla has the advantage of being the only car manufacturer working on battery pack mgmt systems capable of using highly commoditized versions of lithium-ion batteries rather than having hundreds of patents to highly expensive, uncompetitive battery packs like other manufacturers.
    - I haven't seen any news on Honeywell or any other company entering EV battery pack/control systems, maybe you can tell us more about it?
    - Tesla's infotainment system is unprecedented. Let's give a chance to other car makers to first catch up to it and then we'll worry about Google or others to enter the market :)

    5. "Who is to say that the fickle consumer does not flock to them tomorrow. (Merc, Audi, Chevy and all auto companies are coming out with models from mid-price to sports segments)"

    You can refer to the latest Tesla article where I responded to Porsche, Cadillac,etc. plug-in theories w/some long and factual data from Porsche website, etc. Again, no threat in 2-3 years window.

    http://bit.ly/11CpE1N

    6. "On a separate note, I was also wondering how much of the recent uptrend was due to the short squeeze. I am new to the concept of short squeeze and don't exactly know what happens in the aftermath of the phenomenon. I guess I will learn soon"

    Simply put, 20% of the 47% of shorts were squeezed since March and roughly 25% remains (assuming ~2% more squeezed since the last report by Nsdq on June 14th)

    Again, I'll try to explain in a simple way.
    Nsdq reports short interest twice a month, below are Tsla data for the year. Tsla's short int. was very high in March, due to shorts like Jon Petersen saying "Tsla is running out of cash, bankruptcy coming soon". (Meanwhile bulls like me were getting prepared for the epic short squeeze:)

    Then Tesla announced its first profit, higher than expected sales numbers, fixed its mistake on financing program, Consumer Reports said its the best car ever, had a secondary offering to pay its loan back to govt., pocketed extra cash and many other positive news followed. More people started buying Tsla and as the price went up shorts had to cover their positions (purchase Tsla at these high levels which is a vicious cycle that keeps going with bulls buying and shorts covering........)

    Here we are today at ~$120 and there's still 20+% of shorts, some are new, some are the old ones holding on w/their dear lives but will have to cover as long as Tsla keeps executing at the same level.

    Settle. Date Short Interest Avg Daily Vol. Days To Cover
    6/14/2013 19,929,119 10,040,777 1.984818
    5/31/2013 18,584,615 15,751,250 1.179882
    5/15/2013 23,039,956 14,757,319 1.561256
    4/30/2013 27,501,901 3,453,140 7.964317
    4/15/2013 30,695,142 4,071,915 7.538257
    3/28/2013 31,300,039 1,365,927 22.914870
    3/15/2013 32,316,654 1,626,135 19.873291
    2/28/2013 31,954,742 3,378,947 9.457012
    2/15/2013 28,694,016 1,579,986 18.160931
    1/31/2013 26,408,269 1,676,324 15.753678
    1/15/2013 26,130,251 1,002,609 26.062255
    Jul 10 12:03 PM | 1 Like Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    1. Where did you get the 8% rate from? I have seen rates ranging from low 10%s to high 20%s before but never that low. Please let me know.

    2. I disagree, average price is and will be higher for Model S. You can see the versions and options pricing on the Tesla website. The very base price for 85Kwh is $84,000 (anybody buying an 85Kwh will buy the wall connectors for home, nobody's going to wait for 10+ hr charging)
    but I did take into account the Performance version which I've seen everywhere ($15,000 extra), Performance Plus (($21,000 extra), Signature for EU & Asia and all other options including glass sun roof, tech pckg, sound system, etc.

    3. Agreed, maybe I'll update it w/a more realistic tax rate and share dillution but again these are very small parts of the big picture.
    Jul 10 11:11 AM | Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    @gwashn

    I put up the Q1 & Q2 GM numbers so we don't use vague words like "barely had positive GM". My intention wasn't at all to perform analysis and make projections based on these numbers since Tesla is at an infant state of production. Like I said before, they started producing cars from scratch only a year ago.

    Let's just think about what that means for a second, when Ford started building cars from scratch, or GM, or Toyota......

    a. How much do you think their margins improved within the first couple of quarters/years as they literally learned how to make cars? b. How accurately do you think an analyst or anybody outside, w/out any real data would've estimated this improvement correctly?

    Trusting Tesla's guidance of 25% w/out ZEV for Q4 is really up to the investors. All companies provide guidance, some under, some over promise, some people believe them, some don't. I do believe based on margin improvements achieved by start ups my friends work at, ones I read about along with Tesla and Musk's other companies' track record so far. You're more than welcome to ignore it.

    2. "Also keep in mind that the 1q gross margin was boosted by a high grading of the order book, whereby the more expensive orders were given preference"

    I already mentioned in my previous comment and included in my pricing model the 60Kwh & 45Kwh versions to be delivered in Q2. You should also note the top of the line Signature and Performance Plus models prioritized for EU & Asia for Q3 & Q4 ;)

    Total # of Cars Delivered ----------------------... 21,850
    Model S Premium (85Kwh & Up, Perf, Sig, +) -- 13,300
    EU, Asia, Other ----------------------... 4,250
    Model S Base (60Kwh & Up) ----------------------- 3,850
    EU, Asia, Other ----------------------... 0
    Model S 45Kwh (60Kwh/Discontinued) ----------- 450


    3. "Finally, judging by your 2013 estimates, your model makes a very unreasonable assumption in that you have not allowed for any increase in overhead for the balance of the year. In view of the way the company is expanding that defies logic."

    Can you specify what expenses you're talking about? My 2013 expenses takes into account the new store openings, service stations, etc.

    Operating Expenses (2013)
    R&D ----------------------... $192,829
    Selling, General & Admin ------ $205,493
    Total Op. Expenses ------------ $398,322

    Also Tsla currently has ~$800 million cash, double the amount needed for remainder of Model X program (~$200 mil), US-Canada-EU Supercharger Network (~ $100 mil), adding swapping machinery to s/charger stations based on customer demand in US ($20-$100 mil)

    4. Not even the biggest Tesla sell side come bulls come remotely close to your projections!

    Once again, I do my own analysis, estimates, calculations, etc. I don't rely on analysts, especially the same clueless analysts that have been 100% wrong on Tesla all along. If I cared about anything they said, I wouldn't have made any of this money now, would I?:)
    Jul 10 10:41 AM | Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    "On March 28, for example, people were looking for $1.26 in EPS in 2014, and the stock was at $38. Today, those same expectations have actually dropped to $1.09."

    I'm a little disappointed that somebody as intelligent as you would be basing his/her analysis on clueless analysts' future estimates. Aren't these analysts the same people who've been missing on every single Tesla move all along? So why use their false estimates?

    For instance Bofa analysts just said Tesla's current price would be reached in 2020 with 300,000 units. Trust me, by the time Tesla delivers 300,000 units, share price will be folds and folds higher:)

    You can see my estimates in my pricing model above.
    Jul 10 10:01 AM | 2 Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    Spacex IPO will be a long time after when we reach a planet far, far away :)

    http://bit.ly/18Lgr9y
    Jul 9 03:47 PM | Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    Thanks pgothi, really enjoyed your great, factual comment. Selected it as my second "author's pick".

    Here are my responses;

    1. "When you consider the Capex required and the change in net working capital over the years, the FCF will probably be lower than net income"

    I went over this in #4 on the list above but it's a long list so I don't blame anyone for missing points :)

    "The second factor is the ~$800 million cash Tesla currently has being more than double the cost of remainder of Model X program (around $200 million), supercharger network expansion in US, Canada and EU (around $100 million), adding swapping stations based on customer demand ($50-100 million). This $400+ million cushion and revenue stream from Model S and X deliveries easily allow GEN III program continuation and essentially makes Tesla a very safe investment even if a force majeure event occurs"

    Other than above mentioned costs which add up to about half of Tesla's current cash, other foreseeable significant expenses are;

    a. Adding a second shift => Labor costs
    b. Machinery and labor for new production line(s)

    Tesla bought its current mega factory for $42 million and spent $17 million for all machinery so additional machinery and labor costs won't have as big of an impact as you're expecting.

    Also according to my calculations, Tesla will have steady positive CF no later than Q3 2012 and this will increase quarterly so I don't agree this will be an issue.

    2. "After phenomenal growth for more than 3 years, the PE will tend to come down to a more reasonable number (way below the 60, 55 and 50 you mention in 2017, 2018 and 2019). One cannot realistically predict more than 3 years in the future"

    Currently the P/E is ~ 280 if you annualize the Q1 profits of $0.11/share. At the end of 2019, if Tesla reaches the level of deliveries I'm estimating (~660,000 cars), it's still a "small" car company compared to Toyota, Ford, etc. where a single product like Camry, Focus, F150 can sell over a million units a year.

    GEN3 sales may reach those levels in following years (only ~140,000 in my model), same goes for Gen3 Crossover vs Ford Escape, Honda CR-V, etc. levels, also a cheaper version can be introduced for younger demographics, historical & projected 7% annual lithium-ion battery improvements will provide better options, etc. Basically, even at that level, Tesla will have a lot of room to grow and we all know how market darling momentum stocks are priced (For instance, one of my other investments, CMG, has been growing exponentially since Jan 2006, ~$40/share to ~$400 and still has a P/E of 42)

    3. "That's a CAGR in net income of 92% for 6 consecutive years. I find that extremely unrealistic"

    If Tesla delivers this # of cars, w/the weighted models, "sub-versions", options, etc. I calculated, it will reach that cagr.

    4. "(I don't understand the growth rates you show below your total revenues row. I daresay they are a calculation mistake)."

    Thank you for pointing this out, went back to Excel and realized this was overwritten somehow, corrected & updated now. (Doesn't affect anything important though, these were just additional stats for me)

    5. "Take a look at this absurd valuation of Apple as an example"

    That valuation was on March 21, 2012 (by an idiot) when Apple share price was ~$594 and it was the largest company in the world by market cap. Do you really think it's fair to compare my current projections for 20K car producing, tiny Tesla to projections made for the world's largest company then?

    Btw, I already said this at several Aapl & valuation related comments but I bought Aapl @ $408 and sold @ $694, didn't believe any of these professional analysts writing on Forbes, etc. (still idiots to me)

    6. "competition from coming out with comparable or even better products."

    I went over the competition in #5, they don't have anything in foreseeable future and their historical prototype to production times prove Tesla won't have a serious competition until mid-2016 at earliest.

    7. "There is also that risk of missing analyst assumptions. One miss will result in a nosedive for the stock."

    If you have read my both articles, I don't have much respect for most analysts, only care about a handful of them. Tesla will be a highly profitable company if it keeps executing at this level, its share price will follow no matter what analysts estimate quarterly.
    .
    Again, thanks a lot for the analytic and factual comment, really enjoyed it and looking forward to your future comments.
    Jul 9 01:47 PM | 2 Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    Thanks troy,

    I still like fundamentals too, but in a different way than them...see my pricing model above :)
    Jul 9 11:45 AM | Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    I remember one of my friends pointing to Bofa analyst(s)' opinion saying,

    "You really think you know better than a Bofa analyst???"

    and made fun of me when I said "absolutely". He finally listened to me after months and months of talks and invested around $50, has been a happy long since :)
    Jul 9 11:42 AM | 3 Likes Like |Link to Comment
  • Tesla Motors' Full Analysis 2.0 [View article]
    @gwashn

    I think you're forgetting the fact that Tesla started producing cars from scratch last year (first Model S was delivered in June 22, 2012), only ~253 cars in Q3, ~2400 in Q4 and ~4900 in Q1. Here are the actual numbers;

    ------------------- Q1 -------------------- Q2
    Cars Delivered ----------------- 2,400 ------------------ 4900

    Gross Margin
    (w/ZEV Credits) ---------------7.79% ------------------- 17.00%

    Gross Margin
    (excluding ZEV Credits) --- (4.43%) ------------------- 5.04%

    They more than doubled their GM and turned their (GM-ZEVs) from -4.5% to +5% in their second true quarter of producing cars. We probably won't see such an improvement in Q2 since 60Kwh version deliveries began and 500 of the 85Kwh high end versions were in transit to Europe. But it's doable to reach 25% by Q4 with deliveries of almost all 85Kwh Signature & Performance deliveries to EU and Asia in the remainder of the year along with labor, parts, logistics, etc. cost reductions.
    Jul 9 11:37 AM | Likes Like |Link to Comment
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