I'm new to investing so please bare with me but isn't Tesla the perfect option for a straddle that expires the day of their next earnings report?

I have only slept an 2 hours the past 48, so bear with me if I write the wrong word occasionally (I have already typed "I dont think like very have" once today not sure what I was trying to type, either). But if you are adding the term short term to that I didn't explain my thoughts well. Reading my previous post I think I argued points too much instead of explaining my view.

I agree with you that the valuation is bad right now, but not non-sense.

If you are trying to find a way that it is a truly viable company in the next say 12months or whatever. TSLA isn't "worth" $15b right now because it is going to be making 100s of millions soon (obv). It is going up because everyone wants to ride the electric car train to early retirement(semi obv). I think we both agree on that. However, I actually think this makes TSLA more dangerous in the short term, losing a quarter or half its value if it misses earnings or something in one of the next few upcoming quarters is very reasonable, and possibly even likely. Fear and greed are generally amigos.

I am going to be ridiculed for this probably, and maybe should be. But as far as valuation of TSLA, I think it should be viewed more like how a VC would view a start up (really simple EV equation). If you think Tesla has a 10% chance of Elon killing it and it becoming a $100b company, it is worth $10b and anything below that is profit and hang on for the ride. I think looking at it any way as an investment is wrong. Or said better, I think the valuation is really just a handicap of the tech humps. *I am ignoring point of entry for simplicity (generally think at some point you will be able to buy Tesla cheaper) and short term plays because I know nothing aboout trading*

Where I begin to diverge from you and most everyone though is that I don't agree with the statements "Tesla doesn't have any advantage" or "when the market opens up (insert old guard car company here) will be there to step in and take it" or whatever else. Especially the notion that a traditional car company can just magically compete when a market gets big enough for them to bother. What most (if not all) car companies are doing with electric cars right now is closer to someone tinkering with an old lawn mower in his garage than it is setting up to compete in a market IMO.

I don't think people realize how hard it is going to be for one of the big car companies to transition into that market. Building fully electric cars that can hold huge batteries* instead of engines at-scale will be massively hard to maneuver to on demand. It is also insanely expensive and risky for them to make a real go at it now. Car companies operations are highly highly leveraged for making their own product as efficiently as possible and thus highly inflexible. It is really hard, not impossible, but very expensive and risky to transition to a completely new market for flow shop operations. This is especially true when taking opportunity cost into account.

Manufacturing is really hard and the more efficient you are the less flexible you become. When an infrastructure/market reaches the point where the big car companies can justify going all in, Tesla will be (is) already way ahead. A CEO of a huge car company is going to need huge balls (like Musk) and risk ****ty earnings for this not to be the case.

Microsoft and the tablet market is a good example of not going all in early enough (though Microsoft didn't have the resistance/restrictions car companies have, just arrogance/wrong opinion of the markets direction or whatever to not try until it was too late), you have to have the product before the market gets to a mass scale, not jump in when it gets there.

I also think a slow (though faster than snail) steady pace for infrastructure growth is better for Tesla than an explosion (at least under the above assumptions). If there is slower growth, it allows Tesla to float along and figure out the kinks in their flow shop without having to worry about real competition.

If 1 supercharging station was within a few dozen miles of my area I would be willing to bet there would be 15+ Tesla's as soon as they got through the waiting list. There is already at least one (possibly two, but not sure if it's a husband and wife driving or two owners) and the closest supercharging station is 750+ miles away.

Obviously the point above is mostly useless and anecdotal, but if I was looking in the $90k range for cars and we had a(1) super charging station say, towards Dallas (I am in OKC area) or somewhere in the city a Tesla is a no brainer. Even if it was in Dallas it probably would be. Point is, 265 miles is far enough that the infrastructure doesn't have to be THAT good for it to be a viable primary vehicle IMO. $90k price tag is different.

If any of y'all are industrial engineers or management scientist or just better informed than I am shoot holes everywhere if I am blowin' smoke. But from my understanding you can't just replace an engine with a battery on those assembly lines and press go. I am open to being told/proven otherwise though.

*Grizy, you pointed out earlier ITT that batteries were bottlenecked I now think this is one of, or is, Tesla's biggest hurdle. Definitely much more than I originally thought.

LF, very good post. I don't think i could have said it 1/2 as well. the point on


I also think a slow (though faster than snail) steady pace for infrastructure growth is better for Tesla than an explosion (at least under the above assumptions). If there is slower growth, it allows Tesla to float along and figure out the kinks in their flow shop without having to worry about real competition.

wowed me for sure.

there is something about buying the first cool electric car with an unique look and name from this charismatic dude who put his heart and soul in it vs. buying it from some big company who puts out the same old models except with an electric engine in it. Kind of like the same with apple. especially if its worse.

Now its:
oh you got a bmw?
yeah with an electric engine in it!
oh right.

vs
oh you got one of those cool teslas that tries to do somethign different!

Nice post LF.

the other thing about tsla....

like my dad drives around a comparable mercedes..granted it is an '11 and tsla is like a '13 or whatever...but yeah even after the tax credit the tsla is like 10k more expensive but the car is just better all around. faster, more room, handles better, LOOKS much better, cheaper to operate, more convenient.

http://teslarumors.com/Teslanomics-Mercedes.html

We agree on most points actually. On this point is why I added a time element. Unless the infrastructure build out picks up pace significantly in the next 5 years, the entrenched players got more than enough time to catch up. That's where the magic and charisma of Elon Musk comes in. If he can somehow convince California to legislate (and subsidize) a supercharging network into existence in the next 3 or 4 years to enable a mass market, even a local one in CA, then he'll enjoy the first mover advantages you mentioned. Longer than that and we're comfortably within automaker's 4-6 year development cycles and that will limit his first mover advantage.

Another thing I disagree with is I think the big auto makers are already researching (and buying) the tech. The leafs and volts are very much subsidized research platforms selling at (much) higher volume than Tesla. They are not fully electric but much of the technology will transfer.

Set about 6 new all time highs today, when market was down. Up 5% in a down market. Tesla is going to $200 quickly.

The recent report about them owning 8% of the US luxury car market probably didn't hurt.

Initiated a small short position today at 143.6 before earnings tomorrow. let's see what happens. Going to keep an eye on it obviously, but I feel that even if numbers hit estimates it will be sold on the news because many people expect them to outperform.

I would advise getting out of that position asap. Tesla setting new all time highs right now. Buy now and sell at $150 tomorrow before earnings.

I like the short but take profit at anything below 141.6

Up 14% to well over 150 in after hours trading.

Beat the street with a +0.20 EPS against expectation of -0.20 EPS.

22% gross margins.

Assuming it gaps as expected, nice call.

Very impressive by TSLA, they seem to be executing pretty flawlessly.

I'm going to stick it out the short position for a bit . They guided to increasing losses in the next 2 quarters as R&D and SG&A increase. Order levels didn't ramp up dramatically as some of were predicting, which when taken into account with the incredible amount of press this car/company has received in the past couple of months leads me to believe the demand (for this 80k model) may never get higher than it is now.

Does Elon always sound like he did today on the conf call? Came off as anything but eloquent and seemed to really struggle with several of the analyst's questions. Perhaps more of a language barrier than I anticipated?

I don't mean to come off as questioning his charisma or intelligence or whatever. His resume obv is damn impressive.

This is nonsense. I would take 50-1 on the other side. Tesla are production/supply limited, not demand limited. They haven't even begun to advertise the Model S, and are just expanding into larger markets than the US such as Europe and Asia. What's more, as supercharger stations are rolled out - which they're focusing on now - the car will become more and more viable for more and more consumers. With sufficient charging stations and hot swapping (auto swapping batteries at charging stations in less than the gas fill time), which will come online in various areas next year, Tesla EVs are substantially superior to anything gasoline powered.

The risk for this company is not demand or competition. They have both of these in the bag, easily, and will until at least the end of 2014. The risk for the company are supply constraints or failures. They rely on lots of suppliers and some simply can't tool up and or run into their own issues. Other car makers have very large volume long term reliable supply chains in place; Tesla has had to start at the bottom and many of their suppliers haven't tooled up because third parties predicted that Tesla would only sell a few thousand electric cars lifetime.

There are hundreds of suppliers and some have serious issues supplying parts reliably. It takes time to switch, to tool up, and create reliable partnerships and redundancy.

This is essentially their only risk and the only thing stopping them selling 100K units/year next year.
Not a language barrier, he sounded strung out and overworked. Even if it wasn't that, smart innovative people don't necessarily make smooth talking CEOs.

It seems a lot of the gamble on tesla comes down the advance of battery technology. In the past it seems battery tech has improved around 7% per year, and it seems musk is betting that market forces are increasing around improving battery technology and thus increasing this advance beyond past predicted trends. Not a bad bet really. And tesla has designed its battery component in such a way that it can more easily assimilate these commodity advances. They have said that super charging will continue to improve down to around 10 minutes a charge, if they can pull this off it will be a significant feat. Combine this with the inevitable long term trend of increasing gas prices as more of the world competes for a finite supply of affordable oil and perhaps he can pull it off. I'd be less concerned over the engineering component at this point as an investor, musk has shown a good ability here in finding the right people and making smart strategic choices. But if battery tech doesn't improve fast enough he will never get a affordable mid range car in time and wont be able to justify investor expectation.

congrats.

I actually listened to people in this thread and closed out half my shorts at 142.09 before earnings. Still losing a lot on my other half though but my view remains that TSLA is a profitable long term short.

I do wish I know more about short term timing to get in at better prices.

Yeah my position is about 1-2% and I have a pretty good entry point of 143 so I can ride this out, willing to sit on it for a while (although the cheerleaders are going to be chattering if it goes to 200!)

At 7% a year, it takes about 10 years to double storage capacity. Charitably speaking, we need to at least quadruple (to get Tesla's top end model's range to ~1000 miles, which is about how much a commuter drives in a week). So at current rate of improvements, we're still 20 years away from something that can compete with CURRENT gasoline cars in terms of range.

Even with all the infrastructure in place, I for one find the prospect of having to "refuel" every day or even every other day (60 mile one way commute... 2 days puts me right on edge of range) rather annoying. Never mind having to recharge every single day at night.

And we are squarely in dot com mania territory.

I don't see what's so bad about having to refuel often. My car sits in my garage every night so how is that an inconvenience

Yeah, this stock is a lot like a dot com stock