LON:RMV | TESLA - A Warning From History

20th Aug '20 by Vsihv

84 comments 3496 reads

$TSLA & $NFLX have been fantastic investments - for Elon Musk and his investors. I have benefited via my holding in passives / SMT.

I have no position, nor any intention to acquire one - I am a coward.
In stead - consider this an unconsidered public service announcement by someone who has no right to make such announcements - thank you Tom Berners-Lee!!

My unconsidered view:

Tesla is clearly doing some amazing things & Elon Musk is a well capitalised super human in an environment where capital is cheap & plentiful. It could indeed dominate the energy production & distribution, auto & transport industries.

For all I know, Tesla is the "ultimate mobile device" & the new operating system. If we spend 8 hours a day on said "device", then Tesla is like a residential WeWork - a bulletproof WeLive if you will.

Warning from History - Radio Corporation of America - An innovator with a Visionary Leader

This was an amazing company - it launched America's first radio network in 1925.

Founded as the Radio Corporation of America in 1919, it was initially a patent trust (monopoly technology - maybe other company owners should also beware) owned by General Electric, Westinghouse Corporation, AT&T & the United Fruit Company. Some of these names are familiar from The Current War, where Nicola Telsa makes an appearance.

RCA had a visionary leader, David Sarnoff. According to Wikipedia "unlike many who were involved with early radio communications, who often viewed radio as point-to-point, Sarnoff saw the potential of radio as point-to-mass. One person (the broadcaster) could speak to many (the listeners)". I am no expert but I am pretty sure he was right.

There were some unimaginable accomplishments (I assume??): introducing the sound film technology known as photophone, the first commercially viable technology to synchronize sound and picture motion in films. RCA also pioneered the creation of color TV in 1927

David Sarnoff speculated on the possibility of “every farmhouse equipped not only with a sound-receiving device but with a screen that would mirror the sights of life”. Now I wasn't around back then, but here is a an innovation that can capture the imagination.

In 1929 an advertisement in the New York Times called attention to the impending arrival of television and presciently said that the “commercial possibilities of this new art defy imagination.” Somewhat…

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MiserableJacktPotato

27th Nov '20

No, it is nothing like saying petrol isn't safe. When petrol cars go bang they don't leave a huge crater in the road. Hydrogen also burns with an invisible flame.

The weight required to sufficiently armour a hydrogen car reduces the energy density massively.

Rusty2

I struggling to find much evidence of that. I have seen tanks shot with incendiary bullets and the army blowing tanks up.

The hydrogen tank in the Toyota is about 88kgs, so yes more than a petrol tank but hardly excessive, also you have to offset the weight of fuel, when a petrol tank is full up it will be nearly that weight, so the difference is not that great, similar to having a child on board.

i005982

30th Nov '20

I have been looking recently at an electric car to buy. to be honest, there is starting to be some competition for Tesla - for same price as the model 3, there's Audi, Merc and Polestar. For half the price of the Model 3, their's Renault Zoe or BMW Mini. I checked sales in Nov of EV's, and this is what I found "While Tesla led, despite a 5% drop in sales compared to September 2019, both Renault and Volkswagen saw massive increases (211% and 352% respectively)." I am not surprised, and looking 1 or 2 or even 4 years in the future, the RISK is the competition finishes Tesla off. Think about it - would you rather buy a BMW, Audi, Merc, Landrover, Jaguar, Porsche or a Tesla !!!

mojomogoz

Psions were so cool...I remember the partner I worked for in 90s having one...mind blowing and bound to win the hand held doo-da race...

https://en.m.wikipedia.org/wik...

William K

1st Dec '20

A Tesla.

GrahamF

“ . Think about it - would you rather buy a BMW, Audi, Merc, Landrover, Jaguar, Porsche or a Tesla !!!”

I think this is what many of the Tesla fans miss. They love the car, it’s tech, it’s design, the story behind it, it’s status as being an early leader in this market. But are they factoring in the issue of personal taste, of brand loyalty, of local allegiance. Will the French be more in favour of the Renault EVs or Teslas? Will the Brit who loves BMWs want to buy a BMW EV or a Tesla?

But the even bigger issue in some ways is what will the Chinese buy? If NIO or other Chinese EV manufacturers take off in a big way in China and then start exporting from their low cost base the idea that Tesla will rule the world is highly flaky. In my view, in general terms it is more likely that China becomes the dominant economic power in the world for the next few decades than not and the notion that US companies are the world leaders will come to be seen as being increasingly outdated.

john2

'But are they factoring in the issue of personal taste, of brand loyalty, of local allegiance'

And, even more important, reliability and longevity. Tesla have done very well to get to where they are in such a short time, but their competitors have decades of experience in car manufacture.

7th Dec '20

A great juxtaposition to this conversation...

https://lt3000.blogspot.com/20...

Lengthy but worth a read for historical perspective. Know the forces you battle!

8th Dec '20

Thanks for the link mojomogoz, as you say, a worthwhile but lengthy read which could have been reduced to about 25% of the length by elimination of the repetitions. Lyall Taylor does provide something of a summary at the end for impatient readers: In my view, value investing is not dead - it's just spent a decade going from fully priced to cheap while other market sectors have gone from fair-to-cheap to very expensive.

In brief, LT reminds us of the crazy valuations of tech stocks in the Dot.Com bubble and that value stocks (i.e. low PE ratios stocks) had the last laugh when tech share prices collapsed by >90%. Most of us accept that there will be a day of reckoning when the expensive stocks with PE ratios >100 will come crashing down and everyone will start buying utilities and other value stocks because of their large dividends. It's not a question of if, but when, and the when could be delayed whilst interest rates are too low to make other securities attractive.

So where does that leave us with Tesla? Tesla was priced at $394 on 1st November and is today, 5 weeks later, $629, up more than 50% with a PE ratio of 160. It has all the characteristics of a Dot.Com stock. Does one buy more? Does one sell and regret it when the price soars to $700? Should a non holder go short? I have no idea, so I'm going to stick in a stop loss at $600 for half my holding, and maybe $550 for the other half. The current price is on a crazy parabola and parabolas don't last for ever.

JESSE LIVERMORE

This thread does make me chuckle, Wilkonz.

Parabolas by definition do tend to +/- infinity, so to an extent they do go on forever.

Just as importantly, some of your other claims can be questioned.

1. Musk did not launch Tesla in 2003. The company was incorporated in July 2003 by Martin Eberhard and Marc Tarpenning. Musk was recruited in 2004.

2. Musk did not set up PayPal either. This company was founded in December 1998 by Max Levchin, Peter Thiel, and Luke Nosek, It merged with Musk's company X.com in 2000, with Musk fired as CEO of the merged company in the same year.

A discussion board necessarily involves the exchange of opinions, but if these opinions are not aligned to facts, how much weight can they carry?

Many thanks for the corrections, Jesse Livermore. I did not do my research properly on this occasion. And whilst the misinformation is unlikely to have much impact on the future of Tesla, I agree that one should always get one's facts right. (My information came from Youtube via Simon Whistler and I should have double-checked, or at least listened properly.)

As for parabolas, I'd be very happy for the Tesla parabola to reach infinity but we both know it won't. Whilst a bit of calculus is always useful to liven up a dull dinner party, it's of limited use with share price trajectories, as Sir Isaac Newton discovered to his cost.

PE 160?

Um no. There are numerous discussion we could have about this, but let’s go with the last reported figures.. 30 Sep 2020, trailing twelve months earnings per share, (let’s be generous here) 50 cents. What’s the share price now, 650 odd, so a PE around 1300.

Tesla bulls rarely fail to make me laugh.

Fair play to them, they know how to find ever greater fools. There’s going to be serious repercussions when this particular game of musical chairs comes to an end though.

Well done on your gains

WarrantStar

Sooner or later Tesla will be valued on the fundamentals of its likely earnings & cash flows in the next few years. Dreamers & short term momentum traders should beware!

9th Dec '20

IGotPoesJacket. Hmmm. Yes. Interesting. Stockopedia gives a PE of 168 whilst Yahoo Finance says it's 1242. Zacks gives a forward PE of 298. Your calculation is 1300 (which is probably the most accurate). No sane fundamentalist would touch this stock. But it is / was a TA dream. A PE of 1300 is not sustainable indefinitely (neither is a PE of 160) and Tesla is vulnerable to the first bit of bad news. At the moment I think we're looking at a bad case of Tulipmania so I'm using tight guaranteed stop losses for the inevitable bursting of the bubble. Is it ready to be shorted? Probably not.

sam19

What I've noticed while investing is there are two types of investors, those who want to be right and those who want to make money. The UK markets seem to be filled with those who want to be right while in the US markets they prefer making money.

You keep making money Wilkonz but be prepared for when TSLA drops because you'll have a line of UK investors saying "I told you so" as nothing strengthens the ego more than being right.

Thanks Das Kapital. Hopefully we'll all be right. The trailing stop loss and guaranteed stop loss were specifically designed for stocks like Tesla. The US markets are certainly where the money is to be made, although I'm now shifting half my portfolio from the US to China and the other emerging markets.

Stockopedia PE is a forward one, based on next years forecasts?

You might be correct, herbie47. Zack's give a forward PE of 298. It all depends on the next set of results on 3rd February 2021 and the impact they will have on the share price. As a side observation, according to Morningstar, the 'fair value estimate' on price is $319 (vs. current price of $650), despite an inflated PE. So definitely not a share for the fundamentalists, even at fair valuation.

I think PEs are a bit misleading on fast growing companies, they are priced to deliver that growth, I was looking at Shop, the other day, which also has a high PE, as only starting to produce a profit this year, but the forecasts are growing all the time, once that stops the shares will plummet.
Difficult to predict when I would be looking at the forecasts if I was a holder.
My opinion, for Tesla to really grow, they need a budget hatchback, similar to a Golf or Fiesta at around £20k. Yes prices are too high for most buyers. I only used cars now anyway, tend to get a low millage one and keep for about 6 years and then repeat. EVs are too expensive for me and the amount of miles I do, it would not save much on fuel, hardly any charging points around here either. EVs do seem to be taking much longer to get into the market, I saw a presentation, about 4 years ago predicting around 90% of new cars in the US, would be EV by 2020, I told him it was rubbish. EVs market share in US was around 2% in 2019.

one_eyed_jack

Just out of interest I compared Tesla's historic PE to Amazon's. Amazed to see that Amazon reached a PE of 3600 in Q3 2012. I used to hold Amazon, but sold out a while ago. I hold Tesla, but I fear it is mainly due to FOMO.

TESLA - A Warning from History

My unconsidered view:

Warning from History - Radio Corporation of America - An innovator with a Visionary Leader

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Vsihv

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