Tesla: Ridiculous Projections Annoy Me

| About: Tesla, Inc. (TSLA)
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Summary

Tesla has announced its supercharger fee cost.

Analyst Trip Chowdhry thinks this will be a big money maker.

Can we stop with assumptions like this?

I will admit that the majority of my coverage of Tesla Motors (NASDAQ:TSLA) on this site is slanted towards the negative. Part of the reason why is because of the company's inability to meet guidance, deadlines, promises, etc. The other part comes from those who think the company can basically do the impossible, and thus the stock should be rewarded for it.

There are a couple of Tesla analysts that continue to bug me. Some of them have set ridiculous price targets on the stock, some as high as $500 a share when the stock has never hit $300 and continues to dilute investors by the quarter. These analysts feed into the elitist attitude that comes from Tesla and its supporters, sparking wild predictions that will certainly prove to be false.

So I'm here again today with another crazy prediction from Global Equities' Trip Chowdhry. If you don't know about him, he has a very lousy track record with the company, like his prediction that Tesla will be producing 800 Model X units a week by the end of December 2015 that is. Tesla did not even reach that mark on average in Q4 2016. Trip's latest pie in the sky forecast is that Tesla will generate $2.6 billion in supercharger charging fee revenues annually, a majority of which will be profits. Here are his key assumptions:

  • Average time at supercharger = 30 minutes
  • 1,500,000 Tesla vehicles on the road
  • Days in a year = 365
  • Average price of electricity = $0.16 per minute
  • Revenues to Tesla = $2.62 billion

If you do the math, you're talking about $4.80 per vehicle, per day, times 1.5 million which equals $7.2 million in daily revenue. Multiply that by the number of days in a year and you get the $2.62 billion figure. For the moment, ignore the fact that Tesla has said that supercharging charging fees will never be a profit center, like this statement on its supercharging page:

How much does Supercharging cost Tesla?

Our costs vary based on both operational and electricity costs but Supercharging is offered to our customers below the price that it costs us to provide the service. Similar to our Service Centers, this will not be a profit center for Tesla.

Anyway, back to Trip's assumptions. There will probably be a number of people arguing about the 1.5 million vehicles by 2020, but that's not the biggest problem I have. My biggest issue is that EVERY one of these vehicles will need to spend 30 minutes per day at the supercharger. Doesn't this seem a bit much, given how Tesla talks about the majority of its charging being done at home? In fact, the company on its Model S and X order pages says its calculation only assumes 10% yearly charging on the supercharging network.

Another part of this is that Tesla is giving new vehicle owners about 1,000 miles of free credits going forward. Did Trip put this into his calculation? Probably not. Also, according to the company, 30 minutes of supercharging currently equals 170 miles of range, based on the 90D Model S. Ignoring for a fact that superchargers will be much faster by 2020, that means that the average Tesla will require over 62,000 miles of supercharging per year (170 miles X 365 days). This seems to be rather high, but I don't think my math is off here, and again, by 2020, a 30-minute visit to a supercharger likely gets you well over 170 miles of charge.

It seems much more realistic that by 2020, the supercharger charging fees will only bring in a few hundred million of revenues. Trip, again, seems to be wildly optimistic in his predictions yet again, ignoring things like home charging, free charging credits, realistic daily usage, etc. It is analysis like this that gets people like me annoyed when looking at Tesla, and drinking the Kool-Aid like this is likely to end up losing money for many shareholders.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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