
Tesla drops 7% after Goldman Sachs says the stock is worth $180 - janober
https://techcrunch.com/2017/07/05/tesla-drops-7-after-goldman-sachs-says-the-stock-is-worth-180
======
tonylo
The analyst in question, David Tamberrino, ranks 10,337 out of 10,667 on
TipRanks, meaning he is one of the worst analysts and has been wrong all the
time. Link: [https://www.tipranks.com/analysts/david-
tamberrino](https://www.tipranks.com/analysts/david-tamberrino)

Those who keep repeating that Tesla stock is "overvalued" should understand
that a stock's "value" is based on the current value of all future cash flows.
Ford and basically all the other incumbent car companies are generating
profits now, but are stagnant and waiting to be disrupted. Meanwhile Tesla's
revenue is $7B last year, will be $10B+ this year, $20B+ next year, and $60B
in 2020. Which companies are overvalued and which would you rather own?

There's a reason Wal-Mart's top and bottom lines are both several times that
of Amazon, yet Amazon is now worth twice as much as Wal-Mart. It's about
growth and future addressable market.

~~~
austenallred
To quote Marc Andreessen:

"A few common fallacies about valuation of public and private technology
companies: First, ask any MBA how to value tech companies, she'll say
"discounted cash flow, just like any other company!"

Problem: For new & rapidly growing tech companies, up to 100% of value is in
terminal value 10+ years out, so DCF framework collapses. You can run as many
DCF spreadsheets as you want and may get nothing that will help you make good
tech investment decisions.

Related to fact that tech co's don't have stable products like soup or brick
companies; future cash flows will come from future products.

Instead, smart tech investor thinks about: A future product
roadmap/opportunity, B bottoms-up market size & growth, C talent and skill of
team. Essentially you are valuing things that have not yet happened, and the
likelihood of the CEO and team being able to make them happen.

Finance people find this appalling, but investors who do this well can make a
lot of money. Spreadsheet investing is often disastrous. Doesn't mean cash
flow doesn't matter, in fact opposite: this is the path to find tech companies
that will generate tons of future cash."

~~~
11thEarlOfMar
> Instead, smart tech investor thinks about: A future product
> roadmap/opportunity, B bottoms-up market size & growth, C talent and skill
> of team. Essentially you are valuing things that have not yet happened, and
> the likelihood of the CEO and team being able to make them happen.

This thinking is what led me to buy GOOG(5x), TSLA(12x), NFLX(7x), YELP (ouch)
and LC (oucher). I am buying what I believe the company will become, not what
the company is. It's risky, and only a portion of my portfolio goes into these
high-risk investments. Much of the rest is in mutual funds.

MBAs might do a little better in income investing for dividends. It's a
totally different view, but investors need to understand that as well when it
comes time to transition from growth to income stocks.

~~~
weston
You could also invest in the Vanguard Information Technology ETF (VGT) fund,
which is an ETF of 365 tech stocks.

------
solaxun
It is not manipulation. The stock is tremendously overvalued and has been
basically forever, but that doesn't mean it will go down. Unfortunately
"fundamental value" doesn't mean shit in a popularity contest where you have a
lot of retail money investing in whatever they happen to like.

Although equities historically are the asset class providing the best return
over the long-run, this is why I prefer bonds. With a bond, if your analysis
is right, you get paid at maturity. With a stock, you can be right, and it
doesn't matter. Stock is only worth what somebody will pay for it, and that
can largely be determined by sentiment.

~~~
jfaucett
> It is not manipulation. The stock is tremendously overvalued.

This. I was going to say even $180 is still ridiculously overpriced.

Teslas statements are not good by any means when compared to GM and are even
poor when compared to a company in problem times like Ford. Tesla even has
massively less capital expenditures than both GM and ford. For instance, Fords
after tax income was 4 billion, they had capex of 1.7 billion, and an EPS of
+0.2. Compare this to Tesla at -0.6 billion revenue, 0.7 billion capex, -4.8
EPS (and they are issuing new shares each quarter for financing). Yet Ford
cost $11 a share while paying out a 5% dividend - and this is all from a
company in rough patch.

I have no idea why anyone is putting so much money into Tesla. You have to
give Musk credit for great marketing and creating a cult around his image and
ideas.

~~~
wonder_bread
Listing current financial metrics compared to incumbent automakers kind of
misses the point on Tesla. Not that it isn't "overvalued" (might be the most
ambiguous word in investing) but Tesla's annualized GM is ~8% better than
Fords, they own the refueling network (as opposed to incumbents which
outsource it to gas stations), and are poised to control much of the future
battery supply. Your Musk marketing comment is spot on in my opinion but at
the end of they day these are not analogous companies financially, Tesla's
charted a much-bifurcated path to growth and profitability relative to current
auto companies.

~~~
JumpCrisscross
> _[Tesla] are poised to control much of the future battery supply_

"Chinese companies have plans for additional factories with the capacity to
pump out more than 120 gigawatt-hours a year by 2021, according to a report
published this week by Bloomberg Intelligence... By comparison, when completed
in 2018, Tesla Inc.’s Gigafactory will crank out up to 35 gigawatt-hours of
battery cells annually.

...

Roughly 55 percent of global lithium-ion battery production is already based
in China, compared with 10 percent in the U.S. By 2021, China’s share is
forecast to grow to 65 percent, according to Bloomberg New Energy Finance."

[https://www.bloomberg.com/news/articles/2017-06-28/china-
is-...](https://www.bloomberg.com/news/articles/2017-06-28/china-is-about-to-
bury-elon-musk-in-batteries)

~~~
frozenport
Further, the Chinese government can say "fuck you" (as they have done with
other companies) and make it prohibitively expensive to obtain the raw
materials used for battery production.

~~~
jimmywanger
Incorrect.

China comes number four on the list of lithium producing companies.

Much of the world's lithium reserves seem to come from South America.

[http://investingnews.com/daily/resource-investing/energy-
inv...](http://investingnews.com/daily/resource-investing/energy-
investing/lithium-investing/lithium-producing-countries/)

~~~
frozenport
You need other minerals, which are collectively termed "rare earth minerals":

Rare earth element map: In 2013, China produced about 90% of the world's
supply of rare earth element ores. The USGS Mineral Commodity Summary [2]
reported production tonnages for Australia, the United States, India, Brazil,
Russia, Vietnam, and Malaysia. Rare earth element exploration and/or
development is being done in Canada, South Africa, Thailand, Malawi, and Sri
Lanka; however, production from those countries was insignificant during 2013.

[http://geology.com/articles/rare-earth-
elements/](http://geology.com/articles/rare-earth-elements/)

Further China has already show willingness to ban export of these materials
(for example in 2010). At the end of the day the risk to the production of
batteries in particular has motivated vulnerable countries like Japan to
develop alternative processes:

[http://fortune.com/2016/07/12/honda-rare-earth-battery-
hybri...](http://fortune.com/2016/07/12/honda-rare-earth-battery-hybrid/)

------
redm
I just don't see Tesla becoming mainstream before traditional manufacturers
fill the potential market opportunity. Volvo just announced they will only
produce Hybrids in the future. [1] All the major manufacturers have hybrid
programs they are bringing to the mass market.

It's not that Tesla will or won't be successful, it's just that as it
succeeds, it's changing the ecosystem around it. Traditional manufacturers
offerings are becoming more and more attractive.

I think Tesla is appealing to the tech/gadget market right now. For me,
everything about Tesla cars and its buying process feels new and fresh. But..

When it comes time to buy my next car I'll probably end up going to
traditional car dealerships, looking around, test driving, and picking
something through a traditional channel. It's just the path of least
resistance and there's a lot more variety.

[1]
[http://www.yorkdispatch.com/story/money/business/2017/07/05/...](http://www.yorkdispatch.com/story/money/business/2017/07/05/volvo-
make-electric-hybrid-vehicles/103446460/)

~~~
MichaelApproved
> When it comes time to buy my next car I'll probably end up going to
> traditional car dealerships, looking around, test driving, and picking
> something through a traditional channel. It's just the path of least
> resistance and there's a lot more variety.

I believe Tesla is gearing up for the car purchase _after_ your next one.
You're currently thinking in terms of a car that you'll be driving. For those
cars, you're right, there are other car manufacturers that will be more
successful.

However, once cars are fully automated, the entire game will change. Market
leaders of today will be up-ended. That's when I believe Tesla, Google, and
anyone else who has driverless technology will take over the industry.

That goes double for the taxi companies like Uber, Lyft, Juno, etc.

~~~
chx
This insidious definition of Uber as a taxi company must be highlighted. Their
entire business model is based on them insisting they are not a taxi company
and as such the taxi laws do not apply to them. Everyone knows this is
horseshit and when there's no focus on it , just calls Uber a taxi company and
ignores cheerily the devastating effect Uber has on the rule of law. What
would remain of society if every company could pick which regulations they
want to keep and which ones they don't?

~~~
rlanday
They're not a taxi company. They do not take street hails and as such, their
regulation needs are different. For example, there's no need (or at least less
need) for the government to regulate fares since people trust the Uber app to
give them a fair price (whereas if you're a tourist and you were to just hop
into a random unregulated car you hailed, it would be difficult to tell if you
were getting a fair price).

~~~
icedchai
They are functionally equivalent to a taxi company and should be treated as
such.

------
dave1619
I've been invested in TSLA since 2012. And there's always been people saying
it's "over-valued", especially the media or folks who don't believe in Tesla's
mission or potential. The best thing I've found is to work the numbers a few
years out and see what you come up with. Sure, each person's forecasts will be
different, but I base my numbers off of company forecasts and also Tesla's
track record.

2020 deliveries: 1M vehicles (according to company guidance) Average sale
price per vehicle: 900k Model 3 and Model Y x ASP $42k = $37.8B. Plus 110k
Model S/X x ASP $90k = $10B. Total revenue $47.8B

Gross margin = 25% (company guidance is 30%+ for Model S/X and "mid-20s" for
Model 3/Y).

Gross profit = $12B

Operating expenses = $6B (note: It's difficult to predict operating expenses 3
years out, but Tesla will likely experience a lot of operating leverage as
their sales will grow much faster than R&D and sales.)

EBITDA: $6B

P/E multiple: 30 (note: If targets are achieved in 2020, Tesla likely to be
growing 50% year in revenue and would likely fetch a 30-40 P/E multiple.)

Market cap: $180B

# shares outstanding: 185M shares (currently 164M outstanding)

2020 stock price = $972

A few comments:

1\. The above are my forecasts based on my beliefs that Tesla can reach their
own forecasts of # vehicles delivered in 2020 and gross margins.

2\. Each person has their own beliefs/ideas of Tesla. So, I'm not trying to
convince anyone.

3\. This model can be tweaked based on changes in # vehicles delivered, gross
margin, or operating expenses... to name a few factors. So, it's not perfect
but it gives the basics.

4\. If you find someone bearish on TSLA and who thinks it's "overvalued", ask
them to give you numbers like I have. Chances are they won't be able to.

5\. The Model 3 will be the iPhone moment for autos. A sexy car that redefines
transport and brings in high margins. This is why Tesla has potential to be
the most valuable company in the world by 2025.

6\. Tesla's moat grows as they execute faster than any other auto company.
It's not appropriate to value TSLA based on other auto makers. It's like
valuing AAPL in 2007 based off of Nokia and Blackberry.

~~~
pdq
You believe Tesla is going from zero Model 3's to 900k Model 3's in a 3-year
timespan?

To put that into perspective, that's more annual production and sales than the
Toyota Camry plus Toyota Corolla.

[https://en.wikipedia.org/wiki/Toyota_Camry#Sales](https://en.wikipedia.org/wiki/Toyota_Camry#Sales)

[https://en.wikipedia.org/wiki/Toyota_Corolla#Sales](https://en.wikipedia.org/wiki/Toyota_Corolla#Sales)

~~~
dave1619
[http://corporatenews.pressroom.toyota.com/releases/world+mos...](http://corporatenews.pressroom.toyota.com/releases/world+most++popular+model+global+sales+2013.htm)

Corolla sales are above 1.2M per year.

The 900k number is Model 3 and Model Y.

~~~
nojvek
Current model assumes one car per person. That's because only one person can
drive a car.

How many self driving Teslas could be needed to meet transportation demand for
just the US. A lot more than a million.

If Tesla can actually deliver a mass produced self driving car while everyone
is still figuring out how to make electric cars with good mileage then they
become the next Toyota. Just like Apple became the next Nokia.

------
mvpu
I guess Goldman knows better how to value a young car company that moves 5
times faster than the rest of the industry, makes mind blowing products that
people want to buy without even seeing them, has an unprecedented cult
following with many betting their entire 401k on the company, _and_ has
survived many near death moments and came out strong... I wonder what gives
such armchair analysts conviction to comment on companies like Tesla, Amazon
and Netflix who are driven by irrationality and ambition.

~~~
grandalf
Excellent point. What's interesting about it is that a stock price contains
all sorts of assumptions and information and blends it all together into one
number, which is simply the last price that a share traded at based on supply
and demand.

Surely Goldman has baked a lot of assumptions about market expectations into
this assessment, and surely Goldman is wrong about many of those assumptions
and right about others. A more nuanced analysis would be a probability
distribution of possible price bands at various future dates.

Surely by Goldman's logic it is irrational to buy (or perhaps even to hold)
Tesla stock at above $185. But Goldman's analysis would also likely have
discouraged investment in many other successful firms over the years.

One doesn't listen to Goldman because the advice is true, one listens to it
simply to reduce the probability of major deviations from the mean across a
portfolio.

------
deedubaya
Something not really mentioned here is that many of Telsa's investors aren't
in it necessarily because of what the financial statements show. They're
pouring money into a company they fundamentally believe in -- into a movement
which they feel obligated to contribute to.

The stock price is probably overvalued by the books, but for humans desperate
to embrace a company who's making an attempt to make a better, cleaner world,
there likely isn't a value too high. Ecological returns > monetary returns?

~~~
hinkley
Typical argument on the Internet:

Well, I like the status quo. If you don't like it, vote with your wallet and
quit complaining.

<six months later>

Hey, everybody, look at the stupid people voting with their wallets!

------
samsonradu
GS is somewhat notorious for this kind of manipulations:
[http://www.rollingstone.com/politics/news/the-great-
american...](http://www.rollingstone.com/politics/news/the-great-american-
bubble-machine-20100405)

~~~
keketi
If the manipulation works, was it really manipulation?

~~~
SEJeff
The SEC generally thinks so, and punishes those found guilty with hefty legal
fines.

~~~
FLUX-YOU
Pretty sure SEC fines are just cost-of-doing-business territory for the likes
of Goldman.

~~~
ethan_g
No, this is not the approach at any of the large banks.

It's not the fine that kills you. It's when your customers lose your trust and
no one trades with you any more. Goldman has a ton of competitors in all their
businesses that would pounce on any angle they could use to lure away
customers. Committing fraud, etc, is a quick way to lose all your customers.

Plus the SEC and other regulators have a lot of political pressure to nail the
big banks for any misbehavior.

Big banks are paranoid about these things and have huge compliance departments
to minimize the chance of anything going wrong with a regulator.

------
ww520
Classic unfolding of buy on rumor and sell on news. Before solid news came
out, the hype drove the stock high. Now that the Model 3 news has been
steadily coming out, it's time to sell. GS is just following the basic
sentiment swing.

~~~
_rpd
And even if you believe that the stock price should be $500, it pays to sell
on something that is widely perceived by others as a sell signal and then buy
back in when the stock price is lower. Very little long term information is
provided by this short term drop.

------
gogotsla
For everyone in this "it's overvalued camp" \- I've owned TSLA since a little
after the initial IPO when Jim Cramer advised everyone to sell
([https://www.youtube.com/watch?v=6nYPhi0LwO0](https://www.youtube.com/watch?v=6nYPhi0LwO0)).
I have heard analysts and everyone under the run yelling sell over this last 7
year run. It was overvalued at 50. It was overvalued at 100. Oh, so fair value
according to GS is now 180?

It's really incredible to me when everyone gets on HN and puts on their
equities analyst hats. You guys get it wrong time and time again - and the
same applies for REAL equity analysts who actually post analysis that people
pay for. Let's not forget AMZN was a junk stock going to 0 in the nineties. In
recently memory, CRM, NFLX and FB were all considered stocks that could go to
0 and no one had any business owning.

I'm not even going to offer any analysis of why I'm continuing to hold my TSLA
stock in this post - I'll just say that my bull thesis on the company remains
true. If anything, Elon has finally kept a promise with Model 3 production. If
you want the company's long history of missing promises, go watch Revenge of
the Electric Car
([https://en.wikipedia.org/wiki/Revenge_of_the_Electric_Car_](https://en.wikipedia.org/wiki/Revenge_of_the_Electric_Car_)).
Once again, the company blew past every imaginable deadline, was left for
dead, and is now the highest-valued automaker in the country.

The solaxun comment that was #1 when I posted this is fundamentally correct -
if you want to talk valuation, go trade bonds and please leave your BS end of
the world market analysis to Zerohedge.

~~~
nonoamzn
Also remember that AMZN went on to lose 90% of its value in the early 2000s.

At what point would you consider TSLA to be overvalued? Do you have an idea of
where your personal alarms start buzzing? Anyone can say the naysayers are
wrong on the climb but the problem with bulls is their optimism and it would
be interesting to see your working that justifies a particular price for TSLA.

------
almost_usual
Tesla is a Benjamin Graham textbook definition of a speculative stock. Very
high risk.

------
inthewoods
I love Tesla, but I'm reminded of this quote from Scott McNealy during the
first tech bubble:

"[T]wo years ago we were selling at 10 times revenues when we were at $64. At
10 times revenues, to give you a 10-year payback, I have to pay you 100% of
revenues for 10 straight years in dividends. That assumes I can get that by my
shareholders. That assumes I have zero cost of goods sold, which is very hard
for a computer company. That assumes zero expenses, which is really hard with
39,000 employees. That assumes I pay no taxes, which is very hard. And that
assumes you pay no taxes on your dividends, which is kind of illegal. And that
assumes with zero R&D for the next 10 years, I can maintain the current
revenue run rate. Now, having done that, would any of you like to buy my stock
at $64? Do you realize how ridiculous those basic assumptions are? You don’t
need any transparency. You don’t need any footnotes. What were you thinking!"

[http://blog.huncap.com/?p=34](http://blog.huncap.com/?p=34)

~~~
JumpCrisscross
> _At 10 times revenues, to give you a 10-year payback, I have to pay you 100%
> of revenues for 10 straight years in dividends_

Or you spend 10 years growing revenues by 10x and then, at the end of your
10th, 11th, 12th, 13th, 14th and 15th years, pay a dividend equal to 5% of
revenues and earn your investors a 9.3% IRR. Or grow revenues 20x and yield
them almost 25% of IRR. (Both analyses assume you close down shop at the end
of Year 15 and so represent lower bounds.)

High-multiple plays rely on growth. Whether that growth assumption is rational
depends on the context.

------
namuol
I don't see this being mentioned anywhere, but the biggest reason I'd be wary
of _any_ consumer vehicle manufacturer's high stock price is that the demand
for cars will decline in the following decades as self-driving vehicles
dramatically reduce the demand for ownership.

~~~
ng12
And who's building the self-driving vehicles? Who's technology are they using?

~~~
solomatov
According to navigant research
([https://www.navigantresearch.com/research/navigant-
research-...](https://www.navigantresearch.com/research/navigant-research-
leaderboard-report-automated-driving)), it's GM (who bought cruise
automation), and Ford (who bought a majority share in Argo AI) who are the
most advanced.

~~~
nojvek
"who are the most advanced". Any sources for this? As far as I'm aware none of
their cars are on the road in the hands of customer.

Also a lot of this companies are betting on Lidar becoming magically cheaper.
Buying a company doesn't necessarily mean they'll kill it. Big companies have
a lot of politics and red tape before integrations can even happen. I was at
MS when they bought Skype and later Nokia. Middle management blew the whole
thing up.

------
gregjw
Maybe it's manipulation so that insiders can get much richer by buying in as
the price drops and ride the inbound wealth if the Model 3 is successful.

GS complaining about a price dropping is always a self-fulfilling prophecy and
hopefully, Tesla can very quickly bounce back.

~~~
almost_usual
It's a highly volatile speculative stock, the price is going to fluctuate
often because it's based on imaginary value.

~~~
solomatov
It's not imaginary, it's just uncertain.

~~~
almost_usual
The grand vision of Tesla and what's driven the price up does not exist. If
you were to ask someone the idea of Tesla and why it's worth so much I'm sure
you'd hear an "imaginative" answer.

~~~
solomatov
Personally, I don't believe that Tesla will capture the auto market in a way
that justifies the current price. It's a great company, with the great
product, but the market is overcrowded, and I am sure that the margins will
suffer because of this.

------
austenallred
It's back to where it was in June, still almost 2x from where the stock was in
December.

I had my entire net worth in Tesla for a while (financial advisors do not
recommend this - [http://www.marketwatch.com/story/elon-musk-to-the-guy-who-
in...](http://www.marketwatch.com/story/elon-musk-to-the-guy-who-invested-his-
net-worth-in-tesla-we-wont-let-you-down-2016-11-17)), and even _I_ thought the
current price was a little bullish for my taste. This price is still high but
a little more back-to-reality than toying with $400/share was.

~~~
antaviana
Unless such financial advisor is Warren Buffet, who said "Diversification is
protection against ignorance. It makes little sense if you know what you are
doing."

~~~
gertef
Warren Buffett's net worth is spread across many more than 1 equity. (Yes, his
wealth is in a single holding company, but that company owns a diverse array
of businesses.)

It's also interesting that no one provides a source for that supposed
attribution.

~~~
austenallred
It is now, but it wasn't when he was younger. There aren't many companies in
the world he could have 100% of his net worth in at this point.

------
dgudkov
Ok, two major events just happened that could influence Tesla stock -- the
Goldman Sachs report and the Volvo statement about ceasing production of pure
fossil-fuel cars. Why is the drop attributed exclusively to the former?

~~~
Aron
Because that's what the title of the article said. (approximately). Anyway, I
would have made the same point. Also, delivery numbers kind of disappointing.
Also, oil price collapse. Also, the market has been sniping some of the top
speculatives lately. etc. I think we rather consistently underestimate the
complexity of the market.

------
skinnymuch
Tesla has dropped another 6% today. Almost 14% total. Great time to buy. If it
drops below $300 price, even more so.

------
tcskeptic
I think the real question w/r/t manipulation is whether GS is somehow short
TSLA and profits from a drop.

~~~
solomatov
Stock manipulation is a federal crime. I am sure, GS doesn't do this,
otherwise feds would notice them.

~~~
nojvek
Ha! Trump just deregulated a whole bunch of things. What makes you think this
is not possible in Trump's America where more than half of Congress is made up
of Billionaires or people strongly funded by Billionaires?

------
DeBraid
Tesla is the new Amazon. Analysts doubt its profitability, but sales & stock
price march higher.

------
sova
It's easy to dispute value without looking at all at volume.

------
oxryly1
Well, if Goldman Sachs says so... _eye-roll_

------
mdns33
bunch of average joe's commenting on Tesla. duh huh..

------
callmeed
Good. When Tesla stock goes under $200/share, its basically an opportunity for
free money.

Take a look at the long term chart for TSLA (5+ year). The stock dips below
200 (often right around 180), then within 6 months its back over 250.

Nothing to do with fundamentals, Tesla's true valuation, or technical
analysis. If you have working eyeballs you can see it.

If TSLA gets to 180 (which I doubt), buy some stock, make 25-50%, and thank me
later.

~~~
nandemo
What you're doing _is_ technical analysis. It doesn't work.

