Tales From The Future

Tech, long/short equity, growth at reasonable price, value
Tales From The Future
Tech, long/short equity, growth at reasonable price, value
Contributor since: 2014
"You know I think I'll trust today's battery builders to know what they're doing,.."
I fully agree.
The two Korean giants (LG Chem and Samsung) have already signed up most automotive brands globally for EV battery supply. Even Panasonic is free to supply others with cells (they sell some to VW).
To assume that Tesla can somehow win in this low-margin sector long-term as a new entrant is more than optimistic.
Batteries are similar to computer chips and solar cells in this regard - very heavy cap-ex per $ of revenue coupled with constant technology bumps.
No wonder the three sectors are filled with pioneer casualties even as revenues exploded (true for chips, solar and batteries).
"Do the math!!!"
I did the math. One more time:
1) Tesla and Panasonic are only building a pilot plant (14% or 20% of revised / original size).
2) Tesla currently doesn't have the money (see their cash on hand and other cap-ex obligations) and Panasonic doesn't have the willingness ("show me REAL orders first, Elon-san) to invest more.
3) Despite this, Tesla keeps talking about 500k EV batteries per year and 35 GWh / 50 GWh in the press - as if the current pilot plant could ever achieve that output.
If analysts had some balls they would finally ask some hard questions on a CC - including the whereaboits of the $2bn (2014 capital raise) earmarked for the ENTIRE Gigafactory project and long spent (on mostly other items and op-ex !!!) by Tesla.
"That will improve cash flow and allow for model 3 investment."
Tesla bulls said the same thing about Model S 2-3 years ago.
@Zwalderon, I don't know for how long you follow TSLA, but there's one thing: There's a often a very big difference between what Tesla SAYS (announces) and DOES.
I will believe in the "biggest factory" title once they start adding additional sections AND invest billions more.
PS: Here's what Tesla had to say about the subject:
1) Chemistry
It makes sense to use a different chemistry for storage vs EVs.
2) Factory Size
So Tesla wants to build an even bigger factory in the end (7X of current size versus origibal 5X in floor space)
The question is of course how they will finance all that...and by when.
These plans smell typical Musk to me (overpromise, then underdeliver years late)
Author wrote: "But why assume that Tesla is going to manufacture cylindrical cells? "
Well, because the CTO at Tesla said so numerous times.
They will likely change the size a little from 18650 to 20XYZ, but that's it (larger cylindrical cells).
Size is one thing, investment numbers are another. Tesla and Panasonic combined only invested $374million so far (as of Jan 2016) and the shell structure is done.
Unless they add 10 secret underground floors and invest another $3-4bn nobody is going to tell me that this will become the largest Li-ion battery factory in the world.
Dave wrote: "Space X is the ONLY organization that has ever "landed" a first stage booster on a launch pad."
Hmm, no. There's this Jeff Bezos guy:
"Blue Origin's New Shepard rocket first stage descends toward its landing pad..."
See more at: http://bit.ly/1QL5LLI
The coincidence is funny because both CEOs have a huge ego and a bubbly stock as day jobs. At least AMZN has tons of revenue and finally a P/E ratio now, although it's in deep space as well with a triple-digit number around 400 ;)
My point was: It's all been done before (if you follow my link above you will see that Nissan's plant is massive considering they also produce batteries in Europe and in Japan, three EV battery plants in total; Tesla on the other hand has one plant for the whole world at the moment).
Compared to Tesla, Nissan(-Renault) doesn't shout about its battery plant from the rooftops in every public interview.
The quietly ship their cars. And even if the are behind their own internal projections, they remain the global market leader in EVs:
"A total of 302,000 electric vehicles have been sold by Renault-Nissan worldwide and a record breaking 84,754 units were added only last year [2015]. The Nissan Leaf remains the bestseller among EVs and has so far been acquired more than 201,000 times."
Now compare the market caps and other financial ratios of Nissan-Renault with those of TSLA.
Looking 15 months back, GPRO was at the height of its success in the mainstream media. See for example this article:
(No offense/reproach to the NewYorker, it's generally an excellent magazine...)
There was also a secondary with the usual Wall Street suspects.
Without patting myself on the back too much I'm glad that I WARNED about GPRO back on Sept 30, 2014 with my blog article above.
It was close to the top for GPRO.
Great comment and summary!
Zwalderon wrote: "The people who embrace that vision are those people who want to drive a car superior to ICE vehicles powered by energy that isn't destroying our climate."
First we need a clean(er) energy for EVs to really make eco sense, especially in places like China (dirty coal plants...). But leaving that aside, all car makers will offer longer-range EVs by 2020.
Where does that leave Tesla (and Tesla's market cap) once we get dozens of longer-range PHEVs and EVs from all major ca brands PLUS new battery technologies around 2020-2025?
Here's the full CNBC interview with Mr. Bass:
Worth watching!
Cameron, you are cherry-picking one number, the FT employees and even that falls short (btw, we are already over 15 months into the project, not one year).
What about the 5.8m sq ft and the $5bn in total investments originally planned until October 2017?
Let's say Panasonic and Tesla invest another $125million in the coming months, that will only add up to $500million in total (project-to-date since 2014).
At the same time Tesla claims to build the "biggest" battery factory in the world, doubling global Li-Ion production in one swoop?
If so, that's good news for any large car maker. They can replicate Tesla's "biggest" factory for a mere half a billion - which is chump change given their annual budgets.
I will say it again: The numbers don't add up until Tesla and Panasonic invest another $4.6bn into the project.
Cameron wrote: "i.e., not numbers that were ever agreed to or promised by Tesla."
That's not true. The numbers/projections Nevada used came from forms filled out and handed in by Tesla (in 2014). These PDFs are available online:
See for example page 14, page 18 and page 40.
Nevada used these numbers, provided by Tesla in official application forms. What else should they use?
No analyst on Tesla's CC to date has ever
A) questioned these assumptions and actual numbers (growing gap between reality and projection since the project started in 2014)
B) the fact that Tesla spent most of the money raised in early 2014 (over $2bn !) on op ex and not on the actual Gigafactory cap-ex - all that while only constructing a pilot plant (roughly 14% of total re-submitted building size).
should say: B) QUESTIONED the fact that Tesla spent...
"Also, according to Tesla, the gigafactory will not be completed until 2020."
That was the original plan. They would have to start pretty soon. It takes about 3 years before cells can roll of the assembly line.
Adding the building shell(s) and floors alone will take about one year - this would of course be visible immediately.
I will believe in the remaining 6 phases (or "modules") of the factory once actual steel structures go up.
We will most likely know well before any additional construction starts because Tesla has to raise money first. The math is simple, compare:
The full $5bn until 2020 (originally end of 2017, Tesla stretched it out) minus the small amounts Tesla/Panasonic spent so far, namely $374million combined - less than 10% of the total until 1/2016.
Cash on hand as of 2016 and other major cap-ex needs (Model3, international expansion etc.)
That's a huge gap.
LG Chem, Samsung, Panasonic Japan, BYD plus Nissan (both jn-house) and many other Asian companies (there are almost no Western battery producers left at the cell level) already produce the same "things".
So why do you think the Gigafactory will change the world? Because Elon said so?
Here's a video on Nissan's US plant (with some numbers attached, keep in mind Nissan currently uses smaller batteries in current LEAF compared to Tesla) from a greenie scientist visiting the plant recently:
Tesla and Mr. Musk can talk about a future Gigafactory 2 or 3 (as well as low-orbit satellites, electric planes and trips to Mars colonies...) all day long but all this has to be FINANCED somehow.
More debt and/or more dilution.
Maybe Tesla should first finish the pilot plant with Panasonic and get the Model X production issues fixed?
Otherwise creditors may not be willing to fund any new "adventures" in 2016-2020...
Author wrote: "Was This Nevada Gigafactory Such A Good Idea In The First Place?"
That is indeed a very good question given the upcoming competition from
a) established Li-Ion suppliers like LG Chem and Samsung with economies of scale and supply contracts with almost all global car brands for EV batteries and
b) new battery technologies on the horizon beyond 2020 (solid state etc) - just as the GF is supposed to reach full output.
High vertical integration increases the risks for Tesla and is incredibly cap-ex intensive once Tesla scales to Model3 volumes.
It is still unclear to me when Tesla will actually finish the entire GF. The current balance sheet doesn't support an expansion - and the stock and credit markets could be turning south in 2016. Not a good outlook for momo stocks in search of fresh funds...
VJET, a small company with quite simply a horrible income statement (almost no revenue for a long time, now growing losses).
I wouldn't touch it - even for "adventurous" people (still) interested in 3D stocks.
Some bigger competitors at least have more IP/patents and cushions (cash) available.
The latest Gigafactory numbers up to Dec 31, 2015:
"In Q4 2015, Tesla reports an investment of $78
million, for a PTD investment of $310 million;
PENA reports an investment of $58 million for a
PTD investment of $64 million; or a combined
PTD investment of $374 through year-end 2015. "
(PENA = Panasonic North America)
Original linked PDF from DiversifyNevada (Feb 1, 2016, PDF):
It's easy to see:
The factory is well below the initial projections in terms of investments and employment.
How can $TSLA claim to create the biggest battery factory in the world with these small cap-ex numbers?
That's even if PENA continues to invest more in the interior build-out in 2016.
Either Tesla starts adding the remaining six "modules" (or whatever Tesla wants to call the building sections) or this remains just a large pilot section compared to the initial GF plan/project.
Below are the latest numbers up to Dec 31, 2015:
"In Q4 2015, Tesla reports an investment of $78
million, for a PTD investment of $310 million;
PENA reports an investment of $58 million for a
PTD investment of $64 million; or a combined
PTD investment of $374 through year-end 2015. "
(PENA = Panasonic)
Original linked PDF from DiversifyNevada (Feb 1, 2016, PDF):
The factory is well below the initial projections in terms of investments and employment.
How can $TSLA claim to create the biggest battery factory in the world with these small cap-ex numbers?
That's even if PENA continues to invest more in the interior buildout in 2016.
Either Tesla starts adding the remaining six "sections" / "modules" (or whatever Tesla wants to call it) or this remains just a large pilot section compared to the initial GF plan/project.
I certainly wpuldn't short the stock no longer in the single digits. The easy money on the short side has been made from almost $100 at the peak (with lots of WS scumbaggery around the secondary in late 2014).
I see two issues on the product side:
1) Saturation. With no moving parts there is little incentive to upgrade. There are only so many action/sports fanatics.
2) Stabilization and audio issues that are hard to resolve given the space constraints. GoPro footage often ends up in a visual vibrating mess with microphone "tornado audio".
"If you were one of MS's elite private clients, and you took advantage of the opportunity of a lifetime to buy some of that last stock issue at $243, relying on Jonas' phenomenal price targets (480 or whatever the nonsense was at the time), how happy would you be today?"
Very well said. The rich "muppets" (GS term for said clients) who were taken for a ride finally woke up and won't play along forever.
Fool me once...
"Hulu gets most of their content from the owners of those media companies who have a stake in it. If Apple buys Hulu, then those companies won't be contributing their content to it."
Exactly, and these media companies (most likely) won't sell in the first place.
Hulu is/was their defensive move against new (tech) entrants.
"You may not realize this, but the way to increase your portfolio worth is NOT to play it like a roulette table. "
Believe it or not, I was long TSLA when it was trading in the $20-30 range back in late 2012. I sold out as it approached $100 and then started shorting as it went to $200-250 and then near $300.
I usually know when to leave the roulette table.
PS: And buying Hulu likely isn't in the cards for anyone short-term, as others mentioned.
Hulu was/is a DEFENSIVE move by the large TV networks, why would they want to sell out to a tech company?
Hulu ownership structure as a reminder:
Hulu, LLC
NBCUniversal Television Group (32%)
Fox Broadcasting Company (36%)
Disney–ABC Television Group (32%)
I think the author of this article should address this important point.
Finally, a lot of content is local. Apple would need to buy or even create lots of overseas content as well to be able to appeal to a global audience.
I just don't see this happening on a grand scale given Apple's high margins. The jury is still out how profitable NFLX can really become. They of course embarked on this strategy (a truly global audience in almost 200 countries AND creating own content as a leverage against content owners...).
Ironically it's still the financial services and insurance unit in Asia that brings most of the bacon home for SNE, not consumer electronics or media.
What I like is they finally cut off or at least separated bleeding units (PC, TVs). Currently mobile is their only problem child.
"It is a long term hold."
Yes, it will rise forever from now on, like all momentum and "cult" stocks. Just look at the long-term charts of darlings GPRO or DDD....oh, wait. Make that former darlings fallen from grace.
Why should TSLA be a long-term hold long before it has proven that it can actually make money (regularly) AND with lots of new competition coming until 2020?
A huge part of the value of Netflix is that it's available on basically all platforms and devices. Apple on the other hand only offers the bare minimum of services on other platforms (Music for Android plus iTunes for Windows). I don't see Apple willing to support all these third-party platforms (the DVD service could be split off, but the platforms have contracts with NFLX)..
As for the rest, Apple can create a NFLX competitor quickly if so needed/wanted:
- Apple has the money to finance its own shows or get (time-)exclusive access
- Apple has the content delivery network(s)
- Apple has the content in iTunes (it can change from a la carte pricing to monthly subscriptions if needed)
But I don't see why AAPL WANTS to do either move (creating its own content or buying NFLX). NFLX so far makes little money.
Sech, wrong. You must confuse me with someone else (maybe Mr. Petersen or other contributors). I started warning (and later shorting) when Tesla's stock price was in the triple digits.
Apart from the probability. I'm not sure regulators would approve this buyout.
An AAPL x NFLX combo might have too dominant a market position in some countries.