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Recent Tesla Developments And Their Implications Going Forward
- There have been many developments in Tesla since I last wrote about it.
- This article covers those developments, both positive and negative.
- I am still of the opinion that Tesla's share price greatly overstates its value, and as we've seen, Tesla has actually started missing its own deliveries guidance.
Long-Term Macro Trends Supporting $310 Price Target For Tesla Motors
- Initiating coverage on Tesla Motors at a price target of $310, rounded down from discounted terminal value analysis yielding $318 value.
- Pure electric vehicles provide the best value proposition to consumers and the Model S compares favorably to other high end vehicles. Concerns over demand are unwarranted.
- Stock valuations are likely to expand going forward; technology stocks are leading the way in P/E expansion. Tesla's astronomical valuation is likely to persist until the market pops.
- While some short arguments are valid, TSLA is likely to continue moving higher over the next several years.
- Long term prospects for the business are sound. Short sellers face the risk of TSLA organically growing into its lofty valuation.
Audi Confirms 300-Mile Range EV, Plans To Compete With Tesla
- Audi confirms two new pure electric cars will enter production.
- First up is the R8 eTron super-sportscar, to be unveiled in January 2015.
- Far more important is the 300-mile range EV family car, set to start production in calendar year 2017.
- Audi looks serious about competing with Tesla.
- Volkswagen makes ten million cars per year, and has huge procurement scale and manufacturing efficiency advantages.
Tesla Reported Deliveries Don't Seem To Jibe With External Data
- Tesla reported year-to-date deliveries of 21,821 vehicles.
- U.S. registrations total only 9,331.
- Export figures through August 31, 2014 suggest no more than 4,556 vehicles were shipped abroad.
- WSJ estimates put September deliveries at 3,274.
- Total registrations, apparent exports and the WSJ September estimate equals 17,161 vehicles - far short of the 21,821 reported by Tesla.
- Tesla Motors delivered well during the quarter, doubling its revenues and gross profits. Revenues swelled due to automotive sales and margins expanded as well.
- Production for the quarter was lower than expected at 7,200 vehicles. Tesla has lowered its production guidance to 33,000 vehicles for 2014.
- The rollout of the Model X has been delayed. Originally scheduled for launch by the end of this year, the release has been pushed forward to Q3 of 2015.
- Tesla remains focused on its main production target of 500,000 cars by 2020, a prospect that has helped keep investor confidence and share prices aloft.
- Share prices are likely to remain bullish in the long term, Tesla still remains under pressure to improve on its production performance and meet launch dates in the future.
Tesla's Best Prospects Might Be Outside North America
- Elon Musk predicts overseas sales will make up 50% of Tesla's total for 2015.
- Europe is a bottom-up growth market because of the public's environmental awareness, but American cars have a poor reputation.
- Asia is a top-down growth market, but some resistance to electric cars exists in this brand-conscious region.
- Tesla market value today is about $1 million per vehicle to be sold in 2014, which is equivalent to 49-99x that of leading car producers.
- With a flawed strategy, Tesla is directly aiming at disrupting the trillion dollar auto industry and consequently the bigger energy industry.
- Given the major strategic challenges that Tesla is facing, full-time dedicated leadership of Musk is a very basic prerequisite.
Elon Musk Appears To Have Misled Investors On Tesla's Most Recent Conference Call
- On the Q3 conference call, Tesla CEO Elon Musk blamed the company's guidance reduction on "production problems".
- Musk stated that "...demand is not our issue. Production is our issue".
- Musk also made a VERY specific statement regarding inventory. That statement is highlighted and contradicted below.
- Tesla Model X release will be delayed till third quarter of 2015.
- Musk mentions two of the problems causing the delay, the “Falcon Wing doors", and “the Secondary Seats".
- Examining these problems shows why the delay will be so long.
- Musk will now personally make sure all these problems are not only solved but Tesla will end up with a much more sell-able car.
- The assumptions embedded in Tesla's stock price reflect best-case scenarios.
- Many Tesla investors are under the influence of the halo effect.
- There will come a time when Tesla encounters unexpected hiccups, and when it does, many of these investors will turn on the company: that will be the time to invest.
Tesla Model S Sales May Be Slowing In The U.S., But Does It Matter?
- Various estimates indicate Model S sales may be down YTD vs. 2013 in the United States.
- This may appear to be a bad sign, but it is a natural result of the huge pent-up early demand from buyers who modified their purchase cycles to buy Teslas.
- Tesla has very high customer satisfaction rates, but it is too soon for repeat customers to make up a significant proportion of sales.
- As well, Tesla is working on building market share among those buyers who are evaluating cars as part of a normal purchase cycle.
- Key stats going forward are the retention rate, and switching rate from other luxury/high-performance car brands.
Inefficiencies In Transition To New Assembly Line Force Tesla To Revise Outlook
- Tesla earnings impacted by shift to new production facility.
- Introduction of the Model X by mid-2015 should help Tesla meet production rate targets.
- Tesla continues to develop lease program to attract buyers.
Update: Tesla Earnings Highlight Spending Ramp-Up And A Time To Sell
- Tesla posted revenue growth, beating both revenue and earnings estimate. The company announced its plan to ramp up production. Expenses are expected to increase.
- Tesla remains a sell amid disproportionate high valuation that can’t be justified on any level.
- I was wrong about the results below guidance as catalyst for downward trend. Nonetheless, the stock is down 9.5% since the initiation.
Update: Tesla Earnings - The Positives Outweigh The Negatives
- Tesla cuts its Q4 deliveries target and slightly delays the Model X introduction.
- But reassures on its revenue growth and profitability outlook, while dismissing concerns about a near-term capital raising.
- The positives outweigh the negatives and we reiterate our $305 base case valuation.
Today, 12:19 PM
Today, 11:05 AM
- Automobile stocks are higher as a group after oil prices slide.
- General Motors (NYSE:GM) is up 2.3% and Toyota is 1.1% higher, while shares of Ford (NYSE:F) are just poking out a modest 0.1% gain.
- There's some concerns that Ford's big bet on aluminum loses some of its relevance if gas prices shoot lower.
- Daimler (OTCPK:DDAIF) and BMW (OTCPK:BAMXY) are both beating broad market averages with +1% gains.
- EV automaker Tesla Motors (NASDAQ:TSLA) is down 2.1% on the day.
Mon, Nov. 24, 1:42 AM
- Tesla (NASDAQ:TSLA) is in talks with BMW (OTCPK:BAMXY) over a possible partnership in battery technology, charging stations and light-weight components, Elon Musk told German weekly Der Spiegel.
- In an interview published on Sunday, Musk called BMW's carbon fiber reinforced car body parts "interesting" and "relatively cost efficient," and expects Tesla to have a battery production plant in Germany in five to six years.
Wed, Nov. 19, 10:34 AM
- Tesla Motors (TSLA -4.1%) trades lower after Morgan Stanley lowers its forecast for 2015 Model X deliveries to 5K from 15K.
- The investment firm is now below the Street consensus with a 2015 EPS estimate of $2.45 on Tesla.
- Elon Musk has tweeted that rumors (MS reference) about the EV automaker canceling its Model X falcon wing door plan are false. Tesla labels the doors "falcon wing" because they are hinged near the roof and open up similar to DeLorean cars from the 1980s.
Fri, Nov. 14, 11:24 AM
- Tesla Motors (TSLA +0.9%) is offering discounts on some 2014 Model S vehicles, sources tell Consumer Reports.
- The publication says the Model S price cuts are being determined by the length of time since production and miles on the odometer.
- The development isn't completely shocking with rave reviews out for the 2015 Model S and plenty of anticipation for the Model X.
- Still, some Tesla watchers such as Stanphyl Capital Management are pointing at the "production-constrained" claims of Elon Musk in prior statements.
Thu, Nov. 13, 2:47 PM
- The top powertrain business development exec at Tesla Motors (TSLA +1.5%) says the automaker's storage battery system for residential solar rooftop setups will be ready in the second half of 2015.
- The comments from Mateo Jaramillo were made at the California Power and Gas Conference in San Francisco.
Wed, Nov. 12, 10:06 AM
- The landmark emissions deal struck between the U.S. and China has implications for the automobile industry even if it is largely symbolic, according to analysts.
- There's some speculation that bickering between the nations over spying and other free trade issues won't reel in China-Western auto joint ventures and impact government EV subsidies as the nation stays focused on pollution control.
- Automaker stocks: GM, F, TM, FCAU, HMC, OTCPK:NSANY, TSLA, OTCQX:VLKAY, OTCPK:DDAIF, OTC:HYMLF, OTCPK:BAMXY, OTC:KIMTF, OTCPK:MMTOF, OTCPK:PEUGF, TTM, TSLA.
Thu, Nov. 6, 8:22 AM
- Tesla Motors (NASDAQ:TSLA) CEO Elon Musk was pressed harder on production numbers during the automaker's earnings call than during previous quarterly calls.
- The exec says hitting the 50K Model S delivery mark in 2015 won't be "super hard" based on where the company is currently trending.
- On Model X production: Musk is quite hesitant to throw out any hard numbers with production still at risk of delays, although he notes he's confident demand will end up very high. The slight delay in the X launch is due to Tesla's quest for high standards. "It's hard to engineer and it's hard to produce," says Musk.
- On capital: "We don't see any near-term need to raise money," notes Musk.
- Earnings call transcript
- TSLA +2.80% premarket to $237.60.
Wed, Nov. 5, 4:36 PM
Wed, Nov. 5, 4:30 PM
- Tesla Motors (NASDAQ:TSLA) says it delivered 7,785 Model S units in Q3 vs. company guidance of 7.8K and expectations from analysts in the 8K-8.2K range.
- As tipped in an Elon Musk tweet last week, deliveries in North America were up 65% Y/Y during the month of September.
- Non-GAAP gross margin was 23.0% vs. 26.8% in Q2 and 22% a year ago. Higher R&D expenses on the dual motor drive were a factor.
- Tesla took in $31M from powertrain sales during the quarter and $93M in regulatory credits.
- Guidance: Tesla expects to produce 35K for the full year and deliver 33K. Previous projections for 2015 are held firm. The automaker expects its non-GAAP gross margin rate to exceed 28% in Q4. Model X deliveries are slated to begin in Q3 of 2015, a few months back from initial projections.
- A conference call is scheduled for 5:30 PM ET (webcast).
- Tesla shareholder letter (.pdf)
- TSLA +4.8% AH to $242.00.
Mon, Nov. 3, 1:12 PM
- A review of the Tesla Motors (TSLA +0.7%) 2015 Model S P85D out from Motor Trend seems to back up the claims of Elon Musk on the lightning-fast acceleration of the vehicle.
- A 3.1-second 0-to-60 MPH time (almost F-1 territory) is recorded in testing of the +$100K sportscar.
- "Brace yourself, Teutonic Status Quo, because the quickest-accelerating sedan in the world isn't German anymore. It's from California," expounds MT.
- What to watch: Automobile insiders say the P85D is a brand builder, but the appeal of the Model X to the masses is still the essential variable to the Tesla equation.
Thu, Oct. 30, 9:09 AM
- How bad is the smog in Beijing?
- The China Fashion Week show in the nation's capital included the introduction of new lines of face masks from well-known designers.
- Twice this month smog in Beijing has soared past the 400 level on a pollution index which marks 300 as a hazardous level.
- The worsening smog situation in China has led many cities to take new measures to support the electric vehicle industry.
- Related stocks: F, GM, OTCQX:VLKAY, TSLA, TM, HMC, OTCPK:NSANY.
Wed, Oct. 29, 7:31 AM
- The city of Shanghai has exempted close to 400 Model S buyers in the region from paying $12K each for a license plate.
- The initiative by the local government falls in line with efforts by Beijing to promote the electric vehicle industry.
- Tesla Motors (NASDAQ:TSLA) is in discussions with other major cities across China on scoring similar exemptions for buyers.
Tue, Oct. 28, 8:18 AM
- Shares of Tesla Motors (NASDAQ:TSLA) move higher in early trading.
- CEO Elon Musk disclosed via Twitter that September sales for the EV automaker in North America were up 65% Y/Y to contradict a report from the WSJ and other news sources citing data from Ward's Auto showing a slowdown in the U.S.
- Another important distinction from Musk is that the US Bank leasing deal provides a better interest rate to Tesla buyers - but not lower revenue for the EV automaker.
- TSLA +3.5% premarket.
Mon, Oct. 27, 2:47 PM
- Shares of Tesla Motors (TSLA -5.5%) are volatile with talk building up that data from Ward's Auto shows slowing Model S demand in the U.S.
- Sources say the research firm tabulated a 26% Y/Y drop in unit sales for Tesla during September.
- There's already some bulls out defending Tesla, noting the month was expected to show a year-over-year drop.
- What to watch: Look for management commentary on the impact of the planned shutdown of Tesla's plant in Fremont this summer when the company reports Q3 earnings on November 5.
- Previously: The EV automaker announced a new leasing program featuring lower payments.
Mon, Oct. 27, 8:13 AM
- Tesla Motors (NASDAQ:TSLA) announces a new leasing program is available for customers through US Bank.
- The terms of the lease deal allow customers to back out of their obligation within three months of purchasing a Model S if they aren't satisfied with the vehicle.
- Lease payments on a new Model S can be as much as 25% lower through the US Bank program, writes Elon Musk on Tesla's blog.
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