Tesla Motors: 5 Things I Hate About You

Shares of Tesla Motors (NASDAQ: TSLA  ) earlier this week touched $200 per share for the first time in its history -- a valuation that at one point pegged Tesla at a whopping $25 billion, making it worth nearly half of General Motors (NYSE: GM  ) , which currently commands just a $56.5 billion valuation.

While most investors are cheering on this astronomical rally, which has seen Tesla shares sextuple in less than a year, I couldn't be more opposed to it. You see, I'm one of the very few brazen investors with the guts (or insanity) to bet against Tesla Motors. On Monday, I added to my existing short position in spite of recent strength in the company.

Before I review why I'm short and lend my opinion on why I added to my short position, let's have a look at the bullish side of the argument so that we can have a better understanding of why Tesla shares have rallied as furiously as they have over the past year.


Source: Tesla Motors.

Why Tesla's share price is up 500%
The primary factor pushing Tesla higher is its revolutionary product and its innovative leader. As Foolish auto guru John Rosevear noted in our discussion of CEO Elon Musk in December, Tesla is the only major car brand to be successfully introduced over the past 50 years. The United States' major carmakers have plotted for years the varying ways they could bring a purely electric vehicle to market, but none have achieved success on such a scale as Tesla and its Model S, which has nearly triple the driving range of some of its peers.

Tesla's success is quite evident via its order history, which has exceeded the company's expectations in each of the past three quarters, resulting in adjusted profits in 2013 for the first time in Tesla's history. In other words, the viability of Tesla's operations has been demonstrated and is no longer in question, allowing investors to instead focus on what the ceiling for Tesla's product could be.

Now let's look at some of the reasons I've decided to add to my short position in Tesla.

Tesla: 5 things I hate about you
There are a number of factors that have me believing Tesla is grossly overpriced. But rather than ramble on, I've narrowed my dislike of Tesla into five separate components.

1. Production capacity relative to value
Perhaps nothing turns me off to Tesla more than the fact that it's valued at $24 billion despite having produced fewer than 28,000 total EVs (assuming 6,700 deliveries in the fourth quarter) since its inception in 2003. By comparison, Toyota Motor (NYSE: TM  ) is capable of producing that amount in just over one day! Yet if you compare the valuation on these two companies, you'll see Tesla is worth about one-eighth the value of Toyota, the world's most valuable auto manufacturer. That certainly doesn't make sense to me.

Tesla has a number of ongoing production expansion initiatives that could bring total unit capacity to 40,000 by the end of 2014. While that's an improvement, it's still just a spec on the radar when compared to Toyota and General Motors, which are fully capable of 9 million-10 million units of production annually. What this equates to is a production value per car of about $1 million for a Tesla Model S, compared to an average value per vehicle of $5,000-$20,000 for the major worldwide automakers.

Now, understand that I'm not oblivious to the fact that the Model S is a revolutionary step up in EV quality, or that it won Motor Trend's car of the year award in 2013, but a premium that's at least 50 times higher than Toyota just doesn't make any sense.

2. A lack of EV-based infrastructure
The pace at which EV charging stations are popping up across the U.S. is improving, but the infrastructure is in no way as encompassing as the 500% rise in Tesla's share price would make it appear.

According to U.S. Census Bureau figures from the beginning of the year, there are 121,446 total gas stations in the U.S. deriving $249 billion in annual sales and employing close to 927,000 people. This figure isn't too surprising as fossil-fuel-powered vehicles dominate our roads.

Source: Tesla Motors.

Looking at EVs, we have some 20,100 charging parking stalls located across the United States as of October. However, these are merely stalls to charge your vehicle and don't allow you to pull in, "fuel up" per se, and leave. Charging your EV can require, according to Tesla's interactive app, anywhere from nine-and-a-half hours to fully charge in a 240-volt outlet to 52 hours for a full charge in a standard 120-volt outlet in order to get up to 300 miles out of the vehicle!

The solution to that is Tesla's Supercharger stations, which can quickly recharge a battery up to 50% of capacity within 20 minutes. This is, without question, the closest direct comparison to the gas stations we have now. Tesla notes on its website that it currently has 74 of these supercharging stations in service in the U.S.

Now, you do the math: 121,446 versus 74! Maybe now it's easier to understand why I feel a current lack of infrastructure should be a big impediment to Tesla's current valuation.

3. No GAAP profits
I don't blame this one bit on Tesla, but Wall Street and investors got into a nasty habit years ago of calculating profits and losses with the intent of excluding one-time costs and benefits. As it relates to the bottom line, though, these costs and benefits can be crucial in our understanding of a company.

As I stated above, Tesla has indeed turned profitable on a non-GAAP, or adjusted, basis over the past year as auto sale prices have improved and higher-margin cars with 85-kWh-battery packs, which have better driving range, were sold. But this non-GAAP profit only tells half the story.

For one, we have to factor in Tesla's highly coveted zero-emission-vehicle credits, which afforded it roughly $122 million in total revenue through its first three quarters of fiscal 2013 -- that's nearly 9% of Tesla's total revenue in 2013. In 2014 and beyond, these credits will be nonexistent. Once you factor back in things such as lease accounting, stock-based compensation, and non-cash interest expensing, Tesla actually produced a GAAP loss of $0.32 per share in the third quarter and has lost $57.8 million through the end of the third quarter in 2013. Even removing these factors and focusing strictly on automotive sales and then removing costs of production, R&D, and selling, general, and administrative expenses, you'll see that Tesla is still losing money. 

In other words, let's not kid ourselves that Tesla is a profitable powerhouse just yet.

4. Its cars are still too exclusionary
Even as a short-seller, I'd be lying through my teeth if I didn't note that Tesla's Model S is a genuinely beautiful car. I remember seeing it for the first time and thinking BMW had done something truly amazing with its 7-series only to discover it was a Model S. But looks can also be deceiving.

Source: Pestoverde, Flickr.

With that revolutionary car comes a revolutionary price tag of $70,000-$100,000, effectively pricing the majority of the population out of owning a Model S. Furthermore, because the vehicle is so new, and there is no used EV market for comparative purposes, you can't lease a Model S, either. Plainly put, you can either afford a Model S, or you can't.

Even for those who are able to afford the Model S, there's still a question of charging viability. If you live in a swank downtown condo, there's a possibility that you're only choice is to park out on the street, which is fine for any fossil-fuel-powered vehicle, but it doesn't work when you have an EV that demands a plug for charging purposes.

Tesla's vehicles are clearly unique, but they're still far too exclusionary to become a mainstream item on our roadways.

5. Poor history of meeting deadlines
This last factor I've touched on a number of times previously -- and it's somewhat negated by having an innovator and risk-taker like Elon Musk as your CEO. Namely, Tesla has had a really hard time meeting its production and development timelines.

I probably already know what you're thinking: "The market is forward-looking and doesn't care what Tesla's done in the past. Look at the fourth quarter, when Tesla dramatically beat its production guidance!" While I'll admit recent Model S production is hitting the mark, it hasn't always been that way for Tesla. In fact, the debut of the Model S was delayed a number of times, and it isn't the only casualty.

Last year, Tesla announced it would be delaying the debut of the Model X SUV a full year until late 2014 from an expected commercial production date of late 2013. The inability to stay on course is a point that's frustrated me with Tesla in the past, and it's one that current shareholders seem largely OK with ignoring. Tell me, what happens when the considerably cheaper Model E, which is expected to debut in 2017, gets pushed out a year or two like all of its preceding models? My guess is some very unhappy shareholders. 

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Read/Post Comments (47) | Recommend This Article (15)

Comments from our Foolish Readers

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  • Report this Comment On February 13, 2014, at 12:18 PM, Jim5437532 wrote:

    Safety hazards (skimping on safety), lying, hyping, overcommitting, playing blame games, playing semantics, denial, Tesla cult (fan boys, shills, scammers, spammers, slanderers, bullies, snobs) and other sleazy business practices is what I don't like about Tesla.

    The Tesla model X. is the ugliest car ever made. They are the first manufacture that I know of that has made the gullwing uncool. I doubt those doors will do will in snow, ice and garages with low clearance.

    Tesla is one of the first auto manufacturers to have their production car's computer connected to the Internet, which opens up customer vehicles to many security risks. Tesla recently hired a hacker, probably to try to combat the security threats.

    Tesla had a bad start in Norway. Tesla was not proactive in properly testing Tesla Chargers to make compatible with Norway's power grid. Resulting with many disgruntled Norwegian Tesla customers that could not charge their cars. Despite complaining for several weeks to Tesla customer support and service the problems, the issues were not resolved. So customers went to the media. Tesla management claimed they didn't know there was a problem until they saw it in the headlines. So there are also serious communication problems at Tesla. Despite customers complaining for many months in the US about Tesla charger connections overheating, melting and burning the problems have not been resolved. Tesla did not declare a recall until the Tesla fire hazards were reported to the media and government agencies. The Tesla software update charger "fix" has been insufficient, Tesla charger connections are still overheating, melting and burning. According to some Tesla customers the software update, may have introduced a fire hazard. Allegedly under some circumstances, sometimes the software increases the current instead of decreasing the current when a fault is detected. Despite Tesla promising to address the Tesla charger connection fire hazards in a timely manner, Tesla has been slow. Tesla is still in denial about the Tesla charger fire hazards. Tesla is playing blame games trying to pin the rap on house wiring and wall outlets. There is no doubt that in some cases there are and will be bad house wiring and wall outlets; but that should not be used as a scapegoat. Tesla is putting itself in a position of huge liability that could destroy the company. Tesla is putting customers at risk gambling with safety.

    The Tesla model S. still has defects that make it a fire hazard. Tesla charger connections are still overheating, melting and burning. Tesla batteries are poorly located and poorly protected. Tesla is Junk.

    On 1/9/2014 Elon Musk said that replacement adapters that are part of the recall would be mailed out within two weeks. A month later Tesla customers have still not received the replacement adapters that are part of the Tesla model S. recall.

    Several people have been injured by faulty Tesla charge connectors. Tesla is big on making promises and hype, but short on delivery. Tesla needs to start making safety a top priority. Tesla needs to stop playing blame games and games with semantics. Tesla needs to stop lying. Tesla needs to be proactive instead of reactive. Tesla is being a follower of technology, rather than a leader. Tesla is a greedy corporation that has a disregard for safety. The Tesla model S. is an E-Pinto.

  • Report this Comment On February 13, 2014, at 12:31 PM, countrarian wrote:

    In order for Tesla to meet the bullish analysts sales goals it needs to experience a unit growth rate FASTER than Apple did from the introduction of the iphone 3 to date, and Ford did with the Model T.

    It's a momentum play pure and simple. When the music stops guess who will be left holding the bag?

    (The same smaller retail shorts that always do in situations like this).

  • Report this Comment On February 13, 2014, at 12:33 PM, Jason89 wrote:

    Wow, you are betting against a momo stock, that was one of the most shorted last year, and shorts continue to lose money.

    That doesn't seem very smart. Let me explain what could go wrong point by point.

    1) Tesla is getting priced as a technology company not a car company. This will only stop when it stops rolling out innovative techology or growth falls to bellow 25%. If you are pricing differnt than the market, you are likely to have a poor idea of valuation.

    2) Telsa will have completed its BEV infrastructure in the US by the end of next year. It is already building in Europe, and then will soon build in china.

    3) Agree Here

    4) Management knows this, and is developing lower range cars. Blue Star and China are what is propelling the stock up

    5) I thought they had beat expectation on meeting deliveries. All the autos hype. Tesla is behind about 1 year on optimistic schedules. Toyota is about a 7 years behind on their fuel cell car. Tesla has out executed all the big autos, and this good management despite over promising on delivery dates is one reason to value the stock high.

  • Report this Comment On February 13, 2014, at 12:37 PM, Pondee wrote:

    I get that you believe TSLA is over valued. It probably is. I'm interested in your thoughts on AMZN another high priced company that may not be "a profitable powerhouse just yet."

  • Report this Comment On February 13, 2014, at 12:40 PM, kalikgod wrote:

    Great article. I am a long TSLA since 2011 and enjoy hearing well thought out criticisms to the stock price.

    I'll give you my reactions to you TSLA hates:

    1. This is absolutely true, but the other side is no other automaker is growing their production capacity at 25% - 50% per year. An Audi or BMW comparison is better than Toyota at this point and I would say that if Tesla can reach half of either production capacity they can command an equal valuation on these terms. So this is priced into the future, let many things TSLA.

    2. This is one I completely disagree with. The brilliance of the Model S is that it doesn't require the local infrastructure that other electrics do. It just limits their target market to those that can access electricity where they park. That is not a limiting factor at their current volumes and price range. For long distance travel, Tesla is covering the infrastructure in an way that no other automaker would dare. The SuperCharger network is a key sales advantage to anyone else that tries to compete with their products.

    3. I understand the complaint, but at this point in Tesla, I don't care about GAAP profits. Cash is king for them. If they can continue their expansion on all fronts (production, retail, SuperCharging, model lineup) by using the gross profits from their current sales, it is a huge win. No point in paying taxes on profits when that money is better used to improve your point back at #1.

    4. Model S was designed to be an aspirational product. They have hit it out of the park. If they can approach a combined 100k worldwide sales between it and Model X, watch out when the next gen platform hits. It will have a similar effect to when the iPhone went from $600 to $200 on contract (not on the same scale). People will go from wishing they could afford one to being able to justify the purchase. Expect this to happen again with a 4th generation platform.

    5. 100% agree with this. Musk pushes the limit on all his projects in order to get great results. The nature of this is deadlines slips. But if you look at the rate of the their tech development, it still blows away everyone else in the market. They are about to release their second major generation change in vehicle software since the Model S was released 18 months ago. That is unheard of in the automotive world.

    The other thing to consider is that other automakers are so secretive about their product developments, you don't see how far behind their products run. Nissan is going to be a full two years behind releasing their next gen battery for the LEAF, but nobody seems to notice. This electric car thing turned out to be harder for the big automakers than people expected. Audi still has nothing, BMW is just getting to market with an expensive LEAF fighter, Merc is just using Tesla, ditto Toyota, GM can't build a competitive BEV and is losing big time by not getting a plug-in SUV to market, Nissan still has nothing from Infiniti because of the massive screwup of not actively cooling the battery packs, and Honda just refuses to think anyone will ever want anything with a plug. It will be interesting to see what happens the next 5 years.

    Great article and look forward to your response.

  • Report this Comment On February 13, 2014, at 12:44 PM, Johnny04 wrote:

    Sean, as far as I know stocks go up when more people buy than sell and go down when more people sell than buy, correct? So does it matter what you hate or dislike about Tesla? As long as more people love it than hate it and as long as more people want its cars than it can produce, shorting seems unwise. Am I wrong?

  • Report this Comment On February 13, 2014, at 12:57 PM, weaponz wrote:

    1. Production capacity relative to value - Tesla will most likely make 50k+ Tesla Model S in 2014. But even if you use the 40k number. $25,000,000,000 / 40,000 = $625,000. Which is half a million. That said, Tesla will continue to grow and sell 2x more cars in 2015 and so on.

    2. A lack of EV-based infrastructure

    The reasons why you have 121k gas stations is because unlike an EV, you don't fill up on gas at your house. The only time you need to use superchargers is on long trips. So 99% of the time your charging from the convenience of home. As the saying goes "there is no place like home". Most of these gas stations are located in cities where you have 5 gas stations on the same corner. By the end of this year Tesla will have most of the US covered in superchargers.

    An Ev infrastructure is also extremely cheap to build. And also there are other faster methods of charging other than superchargers. Not as fast but faster than 9.5 hours. One is a Tesla Twin charger which charges in 4.5 hours. And the other ic CHaDeMO which is a 2 hour charge.

    3. No GAAP profits

    In Q3 the ZEV credits were worth very little to almost nothing already and had no impact on Tesla's profit. And GAAP really has issues because it needs to find a way to classify Tesla's new financing because it is not a lease. Tesla is profitable, but they are reinvesting the profit into the business and growing the company. That is the correct approach for growing companies. (see Amazon)

    4. Its cars are still too exclusionary

    There is a big enough market that can afford the price tag. Keep in mind that savings in gas and maintenance would lower the true cost of ownership. So it is more affordable than most 70k - 100k cars. And if you are buying a car in the pricetag of the Model S and own a condo, chances are your condo has parking.

    The parking in cities will be more of an issue when the Model E comes out with price tag of 35k. But by then it will be less of a problem as cities like NYC have committed to make 20% of new parking EV ready.

    5. Poor history of meeting deadlines

    Tesla has kept some deadlines and others they missed. The Model S delay was due to stock collapse in 2008 made getting a loan much more difficult and Model X delay was to increase production for Model S due to better than expected sales. That goes for all businesses. Even if the Model E gets delayed by 1 year which I don't think it will, it won't be the end of the world.

  • Report this Comment On February 13, 2014, at 1:02 PM, bstaurrey wrote:

    Show me a stock that, historically, has not eventually been brought down to earth in terms of market cap or PE. I don't know if your current short position will work but eventually fundamentals will collide with the stock price. At one point the Model T was revolutionary. The bottom line is that plants and infrastructure don't get built for free; that money has to come from earnings or share dilution. This stock is way over valued but, then again, so are many stocks today.

  • Report this Comment On February 13, 2014, at 1:11 PM, NavyChum wrote:

    Short TSLA? "Now, you will pay the price for your lack of vision!"

  • Report this Comment On February 13, 2014, at 1:19 PM, chrischamb1 wrote:

    Keep shorting this momentum/growth stock Genius....This stocks price IS NOT based on Valuation, it is based on revenue expansion, sales growth and innovation!! Yes, you can trade this stock as it will ebb and flow and definitely have pullbacks. But, it's overall trajectory for the next several years (baring some catastrophic event for the company or world economy) will be up and just as those who have "bought and held" have a hell of a paper gain, I would say by on the dips (back at about $150) sell on the spikes (the next one being about $250) or buy and hold if you have a 2-4 year window....you'll be glad that you did!!

  • Report this Comment On February 13, 2014, at 1:27 PM, Phrontrowalpine wrote:

    Sorry, but your valuation is not all inclusive. Tesla has more products and services emerging than just the Model S. They have home and business use battery backups that use smart technology to dodge peak rates from utility companies, they are building the largest privately funded infrastructure of Superchargers, not to mention they will build a giga factory capable of producing twice the current international volume of lithium ion batteries! That's more than simply dividing their market cap by number of produced vehicles. Okay, the BIG ONE is cost, $100,000-$120,000 K is what I spent on my Yukon purchase price, about $40K, fuel has cost $50,000, so that $90k, plus all the repairs to parts that a Tesla doesn't even have. So, shoot, I spent $100,000-$120,000 on a GM Yukon and I didn't even get the luxury of 0-60 in 4.2 seconds, of that amazing infotainment system. So, invest in your own equipment and don't depend on oil companies. Having my own Tesla beats spending 50k on gas any day. Also, imagine waking up to a full tank every day for about $8.

  • Report this Comment On February 13, 2014, at 1:28 PM, SteveTG3 wrote:

    @Sean,

    here's where I think you need to reexamine your points

    1. Market cap per car at a "50X premium to Toyota"

    a. Average sale price for a Tesla globally $100K, Toyota (estimating) $20K

    b. Tesla gross margins 25% and improving +without ZEV credits+ , Toyota gross margins, I would imagine 12% would be a generous estimate.

    YOUR 50X PREMIUM IS ACTUALLY A 5X PREMIUM, given that YOY Revenue at Tesla are up 500%, probably 25X Toyota's, I think the premium is fine.

    2. There is a terrific charging infrastructure for 98% of usage that was put in place in the early 20th century... look around you, there's probably an example of this infrastructure within 8 feet of where you are reading this.

    that 2% of usage? not yet as convenient as an ICE car, but they are working on it. they've said in the past 80 to 100 mile distance between SuperChargers... I think they'll be close than that. Charging time not as good as an ICE, may take a decade to do catch up... BUT, will an ICE ever have instant torque, added storage and safety of no drivetrain (engine block of ICE a safety factor as it can be shoved into you in an accident)? no. instant torque, etc, a disadvantage every time you drive an ICE. extra wait to recharge a disadvantage 2% of the time you drive a Tesla.

    3. They are cash flow positive... however you reconcile earnings, basically, at 20K car run rate they are more or less break even on eps, incremental sales lead to earnings (though some will be invested into increasing production capacity by orders of magnitude).

    4. Gen III

    5. It is normal and expectable for large scale production projects to run over a year or so. Given that Model S and X are there first fully in house productions, 1 year delay I think is a good track record. Look at SuperChargers... they are ahead of schedule.

    what's more, they have at least a 3 year technological advantage (I suspect 5 years) over the rest of the auto industry. if Gen III is a year late it wont make any difference.

    Sean, when you look at the 7 fold increase in Tesla, and think "must be a short." Imagine they were a small biotech and in 2012 they got their first drug approved by the FDA (getting production up to 20K where they could stay in business before running out of money), got recommended the drug glowingly recommended in the New England Journal of Medicine (Motor Trend, Consumer Reports), and began expansion into the EU and China.

    the kicker, this first FDA approved drug (Model S/X) is the precursor of a drug in the lab they think will have applicability orders of magnitude larger (think 2 million units per year and growing in the 2020s rather than 25K

    today).

    how much does a tiny biotech go up when its first drug is approved? glowing recommendation? global expansion.

    7 fold as unusual as it is, can and is appropriate.

    Sean, I understand you've had an emotional reaction, that's fine and normal (and very good that you realize this)... very good, a reaction... and now? I'm sure you have a very good response to your current circumstances open to you.

  • Report this Comment On February 13, 2014, at 1:30 PM, SteveTG3 wrote:

    (point 2. should have read "no engine block sitting right in front of you under the hood.")

  • Report this Comment On February 13, 2014, at 1:43 PM, Petronilus wrote:

    It's great that people can find reasons to hate Tesla Motors, but before getting excited, don't forget:

    1. We are talking about a company that kicked the ass of the car industry launching a car that has won reviews everywhere e.g. "Car of the year" (Automotive Magazine) and "Best car ever" (Consumer Reports 2013), safest car ever (yet to injure anyone and got the highest metrics of safety data from NHTSA's testing).

    2. The company is lead by a visionary genius who should make every other car company envious. Paypal, SpaceX, SolarCity and Tesla Motors are all leading in their fields.

    Obviously people with a stake in the traditional gas based car industry can find reasons to hate Tesla Motors.

    People should rather hate the fact that much of our US$17 trillion debt is linked to a oil centric economy that won't last forever where we depend on foreign oils and have spent several trillion US$ on wars to protect that oil supply. Hopefully we can get on a better track of a next generation economy before the rest of the nation follows Detroit's bankruptcy.

  • Report this Comment On February 13, 2014, at 1:51 PM, mowensmd wrote:

    It's amazing how every Short article I read has the same misconceptions.

    I love seeing that, reinforces my long-term bullishness.

    Of all of the above, which will fail?

    1. They don't ramp production (see charts so far...)

    2. Totally off-base. Sean doesn't understand yet.

    3. Same as always.

    4. Yes, this according to plan.

    5. Not really that off.

    Can someone please give me a valid reason other than these why Tesla will be stopped?

    1. Dealer networks. (Tesla will go Federal and win if needed, not too worried. It's the future of buying and nearly 100% of comments on this topic online favor Tesla)

    2. Competition. I don't believe in Hydrogen. Lots of articles about this online, but bottome line using Natural Gas to make hydrogen to put in your car...we'd be better off just putting in natural gas. While that IS a competitive strategy, it benefits long-haul trucking much more than passenger cars. It won't happen. Hydrogen won't happen. Hydrogen generators at home? Solar is more efficient. Hydrogen genterator in your car? Why take a generator with you in the car vs. a battery (50% vs. 80% efficiency)? Why build the expensive refueling Hydrogen stations (as Sean points out) instead of not...?

    3. They can't make Gen III. I'm not betting against them on that one. Guidance and history continues to support them here.

    4. Other companies make a compelling EV? First, GOOD! That just speeds up adoption. Tesla will still have the charging network for highway travel (which I use, it's brilliant in ways I won't go into here) and the reputation, Top 5 Consumer Reports. Other ICE makers showing their ineptitude with i3/I8 and worse.

    What else? I mean, we run out of Lithium, Elon just snags an asteroid. Serioulsy.

  • Report this Comment On February 13, 2014, at 2:19 PM, gjsuhr wrote:

    I like the Tesla Model S, and if Tesla was earning $100,000 per car, their PE would be a very reasonable one....somewhere around 10.

    Since they can't earn $100,000 on an $80,000 car, they will have to sell a lot more cars. Personally, I don't think the market for $80,000 cars is all that big. I know BMW, Mercedes and a few others sell models in that range, but most of their sales are lower priced.

    That being the case, Tesla will need to produce their $35,000 car with roughly equivalent range to get into the high volumn part of the market. I doubt they can do it. It's not really a secret how to get more range, you just include a bigger battery. The problem is, the cells that make up the battery (Li-ion) have been commercially produced for over 20 years now. Expecting them to come down radically in price seems unlikely. If they do, I'd happily buy a $35,000 Tesla, but on the chance they don't, I won't buy the stock.

  • Report this Comment On February 13, 2014, at 2:23 PM, Majek wrote:

    @ Jim5437532,

    I think I've read your opinions about Tesla on other sites and articles. You still seem to think your opinion has an impact on the stock price. It doesn't. Neither does mine.

    You embellish, exaggerate and misrepresent just as much as you claim Musk and Tesla does.

    Not one report that Tesla's computer system has been hacked and deemed unsafe. You claim "Tesla recently hired a hacker, probably to try to combat the security threats." If there have been no reports of their computer being compromised, hiring a "hacker" is being proactive and not reactive. Yet you claim Tesla is reactive.

    If a fire starts in a wall and not at the connection to the car, how is that false reporting on Tesla's part?

    Sounds to me like you got burned (pun intended") by shorting the stock or you job is in jeopardy because of Tesla's success.

    You need to embrace the innovation and hope the other auto makers follow Tesla's lead. If not the old, stodgy, auto manufactures will become extinct, at the very least , a fraction of what they are today.

    Safety? 5 star rated! How can you say they do not care about safety? Not one person has died while in an accident in their Tesla.

    NHSTA will come out with their conclusion to the investigation on the fires soon enough. They may see nothing wrong or they may feel Tesla's battery was at fault. Claiming Tesla is lying is not going to change NHSTA investigation results.

    I could go on and continue to rip apart your comment, but I've made my point clear enough.

    You are blowing FUD and it's clouding your vision. Embrace the change that is occurring in the auto industry, fighting it is futile and makes you look foolish.

    I am not saying Tesla deserves to be trading at $200. I am saying that your negative comments have no effect on the stock and are baseless.

    At least the author laid out his well thought out reasons as to why he doesn't like Tesla. You are just grasping at anything to keep you from falling.

  • Report this Comment On February 13, 2014, at 2:39 PM, bstaurrey wrote:

    I like the Tesla car and what the company is doing. I have a C-max plug in and average 100 mpg in a very cold climate. I also have a full solar house (PV and hot water) But let's remember that the vast majority of electricity in this country comes from dirty burning coal. Additionally, there are many environmental issues with the large battery packs. As Apple is finding with their stock price as they try to come out with the next big thing Tesla is only as strong as their technology stays relevant. That could change in a second with a better mousetrap.

  • Report this Comment On February 13, 2014, at 2:59 PM, Pixma25 wrote:

    Regarding #1 and using your metrics. Toyota has sold 200 million cars since it started and the company is worth nearly 200 billion. That's $1,000/car. Ford has sold a billion vehicles and the company is valued at 60 billion. That's $60/car. So, how do you explain that Toyota is worth nearly 20x Ford?

  • Report this Comment On February 13, 2014, at 3:37 PM, Majek wrote:

    @Fastally,

    Great!!

    Now your neighbor's sister-in-law can afford to buy a Tesla.

  • Report this Comment On February 13, 2014, at 3:57 PM, elanmorin5 wrote:

    I'm so glad to hear people are still shorting this stock... after the run-up I was getting a bit concerned about taking some profits. Thank you to all TSLA shorts... early retirement here I come.

  • Report this Comment On February 13, 2014, at 3:59 PM, elanmorin5 wrote:

    @Majek "Jim" is a bot... he copy-pastes the same post on every Tesla article around the web.

  • Report this Comment On February 13, 2014, at 4:07 PM, Capt601 wrote:

    bstaurry. check your facts on power gerneration. currently 37% of Us power is from coal sources. yes some states are at 80-90% but overall US is using only 37% coal. thats an old argument. and a number that is dropping every year.

  • Report this Comment On February 13, 2014, at 4:09 PM, Capt601 wrote:

    I'm wondering if Jim gets a bonus for being the first one to respond on every Tesla article. and than he never responds to his poor discussion points. if things happened the way he says, Tesla would have been shut down from the beginning and we would be seeing Teslas on fire on the side of the road, killing innocent people and houses burning down.

  • Report this Comment On February 13, 2014, at 4:17 PM, DrDauger wrote:

    Thank you so much for your part in personally financing TSLA's next short squeeze. Starting at $35/sh, I'm long TSLA and enjoy my year-old P85 Model S immensely.

    I applaud the other corrections discussed and add, re: #4, you _can_ lease a Model S:

    http://www.teslamotors.com/models/design

    and used Model S' hold value very well:

    http://www.forbes.com/sites/jimgorzelany/2014/02/07/tesla-mo...

  • Report this Comment On February 13, 2014, at 4:23 PM, Capt601 wrote:

    I think pretty soon I'll be seeing the author standing on the street corner with a tin cup collecting change with a sign saying "Big oil fooled me into shorting Tesla, please help".

    Lets see, wasn't the last successful US auto company to start up Chrysler? more than 100 years ago, not 50.

    only 28,00 cars since 2003? really. the roadster was not even their own car but built on lotus frame. more of a R&D, limited car of only 1500. so since Model S deliveries begin about 1.5 years ago, they are close to 30,0000.

    and limited charging? have you really done zero research on Tesla or any EV? 99% of charging is done in your own home. very simple. all while you sleep. no messy gas stations to deal with. and if not outlets are everywhere, as stated above. and why does every weak article always only point out that it takes 10 hours to charge it up? who drives there car until it is completely empty? ICE car owners do, because it is a very inconvenient process to stop at the gas station every day. EV owners simply come home and take 5 seconds to grab a clean plug and plug their car in. lo and behold, they have a full tank every morning. imagine that with an ICE car. and all while you sleep.

    poor history of meeting deadlines? its a new company in an industry that hasnt had a succesful startup in over 100 years. 1 year is not really too much time when they are years ahead of any other auto company.all of the other car companies can only think of adding gas engines to EV's and pretending it is an EV. they are clueless and that is why Toyota and Daimler invested in Tesla.

    and at this point im glad they are putting the money back into the business. what else should they do with it. slow down production so they can keep more cash? wow. this is a sad argument.

    the best thing Tesla has going for them is lack of dealer network and supercharger network. supercharger network is the biggest component that sets Tesla apart and will make it extrememly difficult for any others to catch up. do you really think big oil is going to want GM or Toyota setting up their own supercharger network? dont think so.

    as for dealers, they hate tesla for many reasons. mostly they cant scam their way into the process as the middleman and add to the cost of the car for zero benefit. second, Tesla makes every ICE car on their lot a piece of junk. Every benefit of an EV puts down the hundreds of ICE cars sitting their waiting to be sold. they have zero incentive to sell the EV. and lastly is service. EV's have very little service, and that is how dealers make their money. scamming consumers into paying for unneeded services at every opportunity. why is Tesla the only manufacturer with over the air updates that can be done in your own garage? dealers!!! they dont want it to happen, as it stands now, you get a notice of an update with every other car and you have to go by the service center. and guess what, they have you again to sell more unneeded services. and the dealers know that if you update at home you wont come by and get scammed by them.

  • Report this Comment On February 13, 2014, at 6:17 PM, todamo13 wrote:

    Good points, Capt601 ^

    I don't have Tesla stock (unfortunately got out at 120) but I am rooting for the company. We need to get to the post-fossil fuel era ASAP.

    I would like someone to do the sort of comparison that the author of this article did using Toyota, but instead with BMW (valuation, production capacity, etc). Toyota is a commodity carmaker, so it's not a good comparison.

  • Report this Comment On February 13, 2014, at 6:30 PM, Pietrocco wrote:

    Thank you.

    Finally and intelligent article on Tesla from TMF!

    I have been saying the same things on the SA board, and been completely dismissed :-)

    We will see.

    Sean, you could have added the 25 million shares dilution to happen soon (the usual, stock options granted at low prices).

    Best,

    Lorenzo

  • Report this Comment On February 13, 2014, at 6:57 PM, cooter1127 wrote:

    Sean

    Thanks for the article, I could not agree with you more. I am personally too risk averse to short anything, but I definitely think that your position is more correct than any long position originating above $100 a share, probably closer $75 or $50. I especially appreciate that this is the first article I can remember reading outside of accounting journals that actually takes issue with Tesla's reporting of Non GAAP financials.

    Lorenzo good call on the impending equity dilution, something has got to give either that or they continue taking on more debt. The only reason their cash flow has stayed positive is that it being propped up by financing activities. From an operational standpoint it looks like they are spending twice as much cash as they bring. They might be growing but that growth is not sustainable given their cash flow structure.

  • Report this Comment On February 13, 2014, at 7:17 PM, jmc6237 wrote:

    I'll buy one in cash with my Bitcoins

  • Report this Comment On February 13, 2014, at 7:29 PM, GaryDF wrote:

    I respect all your concerns except one: the lack of a large network of charging stations. You overlook one very important charging station that many consumers have ready access to: their GARAGE. You also overlook that, equipped with a home solar panel, Tesla owners can be operated their cars at virtually no cost and that they leave virtually no carbon footprint. The idea that one can own a world-class car that is as luxurious as a Mercedes, accelerates like a Porsche ... yet costs virtually nothing to operate ... is very compelling, and will continue to drive sales through the roof worldwide.

    Obviously.

  • Report this Comment On February 13, 2014, at 8:59 PM, pimpie wrote:

    What a joke! He's like a baby crying with a soiled diaper! "On Monday, I added to my existing short position in spite of recent strength in the company."

    Brazen enough to short the stock?! What do you take us for, fools? TSLA was the most shorted stock through 2013! How bold of you Mr. @TMFUltraLONG!

    1. Company is supply constrained and over subscribed. The analysis should be higher prices, fatter margins. Or, recognize that states will pay big bucks for new auto manufacturing - here in Ontario the government is looking at $1b for stupid Chrysler to keep minivan production in the province (gross). Capacity can be added with time, but $0.2 on the dollar for capital investment.

    2. No infrastructure in... Mexico!? They are building the infrastructure which then becomes a revenue generating asset through licensing to Toyota, Mercedes, whomever. The infrastructure is there, and it's a revenue stream! Remember last week when 2 model S' drove across America in 76 hours!?

    3. This is a growth company. Profits are bad because R&D is huge. If you want to buy a dinosaur, go buy that in and out of bankruptcy GM or something else that's completely irrelevant in 2025. TSLA (and SCTY) are 'overvalued' because they are pure plays on the future, and there's obviously a lot of demand for a future with sexy cars and reliable cheap power!

    4. You suck at economics! The S is a $100k car that is faster, sleeker and more comfortable than a $150k luxury car (or so says an owner that before his S had a Bentley GT). But each mile you drive you save $0.25, so 15,000miles / year and the car that is worth the same based on features costs you $4000 less per year to operate (and no regular maintenance). I mean, you really must hate money!

    5. Instead of "consistently exceeding expectations" you somehow wrote "poor history of meeting deadlines".

    I'm long from 29 and 131. I'll pull a bit off the table around 210, I hope you'll cover your shorts around there.

    You're short the future and with such an awful piece of analysis, I don't even feel bad!

    http://paddymack.ca/2013/11/27/to-short-tesla-motors-is-to-s...

  • Report this Comment On February 14, 2014, at 6:32 AM, MadCapitalist wrote:

    Do you really hate Tesla Motors as the title suggests? Or do you hate the valuation?

    It's important to make a distinction between a company and its stock price. A great company can be a poor investment if the stock price is too high, and a not-so-great company can be a great investment if the price is low enough.

    I think the jury is still out on whether Tesla will be a great company in terms of generating attractive profits. They seem to be brilliant, but as Warren Buffett once wrote:

    “My conclusion from my own experiences and from much observation of other businesses is that a good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row (though intelligence and effort help considerably, of course, in any business, good or bad). Some years ago I wrote: “When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.” Nothing has since changed my point of view on that matter. Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

    1985 Letter to Berkshire Hathaway shareholders

    http://www.berkshirehathaway.com/letters/1985.html

    The automobile business is challenging enough. The electric car business is even more challenging. I wish them luck.

  • Report this Comment On February 14, 2014, at 8:33 AM, kca124cain wrote:

    Another Tesla S fire. This one in Toronto "earlier this month". While the Tesla was parked. Tesla covered this one under their warranty according to Tesla. Everything was hush-hush until the news just broke today.

    Most car fires which are not intentional or not due to serious accidents, are actually electrical fires. Tesla has now had 4 that we know of (1 from a collision) and who knows how many more that have been kept from the media.

  • Report this Comment On February 14, 2014, at 8:41 AM, arondaniel wrote:

    @Jim#######

    "Tesla is one of the first auto manufacturers to have their production car's computer connected to the Internet, which opens up customer vehicles to many security risks."

    Care to ask a software security expert about this one? Most modern cars are controlled by software, and most use standard networking protocols.

    The difference is, other automakers have no security at all. All you need is physical access to the car and you can hack in and do whatever you please.

    I'd prefer a car that was built using modern software security practices. Hacking in is not strictly impossible, but hackers are not irrational and tend to attack the lightly defended targets first.

  • Report this Comment On February 14, 2014, at 8:58 AM, Jim5437532 wrote:

    Did a brand-new Tesla spontaneously combust?

    In the Toronto Tesla garage fire it is doubtful that the Tesla charger system is at fault because it allegedly wasn't plugged in. Tesla offering to pay damages, suggests that the source of the fire was the Tesla model S. I would be interested in seeing the fire department's investigation. I don't trust Tesla's so-called "investigations", they are more like denial and blame games.

    The Tesla model S. still has defects that make it a fire hazard. Tesla charger connections are still overheating, melting and burning. Tesla batteries are poorly located and poorly protected. Tesla is Junk.

    On 1/9/2014 Elon Musk said that replacement adapters that are part of the recall would be mailed out within two weeks. A month later Tesla customers have still not received the replacement adapters that are part of the Tesla model S. recall.

    Several people have been injured by faulty Tesla charge connectors. Tesla is big on making promises and hype, but short on delivery. Tesla needs to start making safety a top priority. Tesla needs to stop playing blame games and games with semantics. Tesla needs to stop lying. Tesla needs to be proactive instead of reactive. Tesla is being a follower of technology, rather than a leader. Tesla is a greedy corporation that has a disregard for safety. The Tesla model S. is an E-Pinto.

    Tesla and Tesla fan boys have a bad record when it comes to safety. They have a tendency to hype safety, yet they sweep safety concerns under the carpet and drag their feet to resolve safety issues. They often threaten, harass, slander, bully, censor safety advocates, critics and skeptics. That is not a culture of safety.

    Tesla fabricates more excuses than it does cars.

  • Report this Comment On February 14, 2014, at 9:41 AM, drax7 wrote:

    EV is the future, tesla has a first mover advantage, just like amazon in the past and netflix recently, their vsluation will eventually exceed over 100 billion within 3 years.

    You lost me at 6700 cars for the 4th quarter.

  • Report this Comment On February 14, 2014, at 3:03 PM, 0gre wrote:

    >>> This is, without question, the closest direct comparison to the gas stations we have now. ... Now, you do the math: 121,446 versus 74! <<<

    This kind of comparison is pointless. Most Tesla owners fill up at night at home without bothering with fill up stations.

    While the number of remote fuel up locations is massively lower, the convenience of never having to fuel up when you are close to home is a massive advantage and eliminates the need for many fill up stations.

    EV owners are definitely limited outside their home range, but within that range, it's a much better experience. That's not reflected in your crude comparison.

  • Report this Comment On February 14, 2014, at 6:59 PM, 68surfer wrote:

    @jim

    What exactly is your agenda? Sounds like someone who has lost a bunch of money shorting Tesla. You are likely the FOOL who started the garage fire in Toronto! Please stop this stupid FUD copy and paste routine that makes you look like an idiot and a troll. BTW I have no vested interest in Tesla other than keeping tabs on new and innovative technology. Get a life for gosh sakes man/woman/child. Cheers!

  • Report this Comment On February 15, 2014, at 2:07 PM, x000ald000x wrote:

    The price of TSLA is due to an ongoing short squeeze. Shorts get margin calls when the stock goes against them. They are forced to either cover, at any price, or put up more capital. That has helped propel the stock from $35 to $200.

    But the huge short interest in TSLA is the same % now as it was at $35! New shorts keep coming in!

    So the stock can squeeze even higher. Much higher. (refer to chart of VW common stock 2005-2008)

    But Musk can use the overvaluation to his advantage by issuing more shares to raise capital for the giga battery plant.

    So ironically, the squeezed TSLA shorts have aided Tesla tremendously. Whether their sacrifice is enough to turn Tesla profitable in the mass markets remains to be seen.

  • Report this Comment On February 15, 2014, at 2:35 PM, cmalek wrote:

    "5. Poor history of meeting deadlines"

    How long does it take the "established" car makers to put a new model on the street? 3,4 5 years? How is Tesla different?

  • Report this Comment On February 15, 2014, at 4:36 PM, Monclover wrote:

    I love to hate The Tesla. There is simply nothing of substance with a car that simply looks good, but underneath it is nothing but old technology. For someone who wants a car for very limited use and can wait around for 2 days to recharge on 120 volt household current, or 9-1/2 hours on 240 volts, all the while driving your electric bill through the roof, then that $70,000 plus price-tag is the car for you. But Tesla is using old battery technology and does not have capital or the expertise to delve into any meaningful battery research. And finally, I can envision gangs of Recharging Stations where you have to take a number and wait your turn to recharge. I in the meantime simply pull-up across the street and fill-up with that terrible old fossil fuel which takes only a few mintutes after which I wave over to Tesla and drive away.

  • Report this Comment On February 15, 2014, at 10:12 PM, damilkman wrote:

    FOOLS, have you forgotten the internet bubble? Were treating TSLA as a technology company and forget why the those hordes of companies did not meet expectations. LEVEL3 was supposed to clean AT&T's clock. Juniper was supposed to destroy Cisco, Netscape obliterate Microsoft. What happened?

    The few companies that made expectations had a moat they could preserve. The question regarding Tesla is do they have a moat and what is it? The moat appears to be the batteries. If you believe that Tesla's moat is impossible to breach, LONG away.

  • Report this Comment On February 16, 2014, at 1:01 PM, exileonmainst wrote:

    I enjoy the magical thinking behind excusing GAAP profits and loses. The company, their shill or the investor says, "Well this this will only happen once, so it doesn't count."

    The cars are good looking, innovative and issue of 'fueling' not that big of a problem. The leader is a forward thinking person with the resources to think big. But this stock is too expensive.

    The question of what to do about the heat generated when using batteries is a very tough problem that has plagued all manner of battery applications. And heat generated is energy wasted. This will continue to be a problem until newer materials and manufacturing processes are developed to use or prevent the heat in the first place. I suspect manufacturing defects to be the #1 cause of heat problems and perhaps using 3D printing manufacturing processes in making components could reduce the chances of such defects.

    As far as any environmental benefit of any battery car, as long as the power being put in is generated by coal, oil or gas and we count the power input in making the batteries and rest of the vehicle, then there is no environmental benefit.

    As a consumer, I look at the cars like I look at other expensive cars: very nice and maybe some day. Then I get back into my paid for and equally good looking F150 and drive away.

    Future problem: where is the infrastructure to properly exchange, recycle and dispose of old batteries? Here's an environmental and economic problem I haven't seen much written about.

  • Report this Comment On February 21, 2014, at 4:32 PM, Fracguy wrote:

    I guess I'm jealous of those that bought into TSLA.

    I had considered shorting it at $35. Am sure glad I chickened out.

    TSLA is the source of many folks' Schadenfreude.

  • Report this Comment On February 22, 2014, at 3:31 PM, Badskpr wrote:

    I am wondering why there is such a blockage on getting RENAULT ZE VEHICLE DEALERSHIP in the United States. RENAULT FLUENCE ZE 5 passenger range 125 miles/drop battery system retail 30,000 USD/ TWINGO 4 passenger Hatchback 18,000 USD/ZOE 4 passenger hatchback 17000 USD/ KANGOO ZE Van MAXI 35,000 USD, Mini 18,000USD. What is wrong with investors, if these cars are in sixty countries? Why could this be manufactured here on an Indian Reservation like Torres martinez with disabled veterans running it?

  • Report this Comment On February 24, 2014, at 9:39 AM, rocinanate3d wrote:

    There is one big reason that Tesla deserves a second look. It has new technologies specifically design a better battery that will spill over from cars into other handheld/mobile devices. That is fairly cutting edge technology which makes it a company to watch.

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