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Morgan Stanley Slashes Worst-Case Price for Tesla to $10

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Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#21

Post by Animats »

See this article on the cash flow of Uber, Tesla, Lyft, and Snap.[1] Those guys have far worse startup cash flow than Google, Amazon, Apple, or Facebook. Far, far worse. It's hard to think of any business in financial history with that much cash burn up front.

Some of those guys are going to have a Chapter 11 bankruptcy haircut. They'll probably all survive, but the investors, not so much. Tesla has to raise a lot of money over the next few months. When the dust settles, Tesla may be a Chinese company. Tencent is the latest big investor.

[1] http://fortune.com/2019/05/20/fortune-analysis-the-tech-supe...

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#22

Post by tuna-piano »

Animats wrote: post #21

See this article on the cash flow of Uber, Tesla, Lyft, and Snap.[1] Those guys have far worse startup cash flow than Google, Amazon, Apple, or Facebook. Far, far worse. It's hard to think of any business in financial history with that much cash burn up front. Some of those guys are going to have a Chapter 11 bankruptcy haircut. They'll probably all survive, but the investors, not so much. Tesla has to raise a lot of…

“When the dust settles, Tesla may be a Chinese company. Tencent is the latest big investor.”

This is something people don’t understand about the trade deficit. Most people think the trade deficit means that China sends the US way more stuff than the US sends to China.

That is not true. Of course China doesn’t send stuff without asking for things in return. China sends stuff and then has the right to buy pieces of American companies and future cash flows of those companies (and government entities).

The US is getting a bunch of stuff and giving away little pieces of it’s future. This is just a visible example

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#23

Post by somebodythere »

zaroth wrote: post #17

Even Jim Cramer (famous Tesla bear that he is) took issue with this “analysis”. > Setting a price target of $10 on a $200 stock "really is insane," the "Mad Money" host said. "How about $8? How about $12? Ten basically says, 'I want to get talked about. Let's talk about me.'" > "If he had done $47 would we have talked about him? No, but 10. Ten is right in your face," Cramer said on "Squawk on the Street." "I questio…

> when there’s blood in the streets...

This applies more to the entire market or particular industries than it does to specific stocks. There are many stocks whose charts look "bloody" because they are bad businesses. Not all of them go on to make a miraculous recovery, many simply find themselves trading on the pink sheets.

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#24

Post by foldingmoney »

lisper wrote: post #13
dnadler wrote: post #9

Earlier quoted context omitted.

I mean, that sounds like maybe a bad or overconfident analyst, but it's a bit extreme to declare it ALL BS because of one guy's bad models.

Financial analysts use one of three approaches. There's the "whatever my gut tells me" approach, which is surprisingly common. There is modern portfolio theory. And nowadays there's machine learning. And it's all bullshit. MPT is bullshit because it uses volatility as its model of risk, which is IMHO the wrong model. They use it because it's something they can measure and so write academic papers about without soundi…

What was the unit of analysis? Stock, sector, index, market, world?

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#25

Post by yumraj »

Animats wrote: post #21

See this article on the cash flow of Uber, Tesla, Lyft, and Snap.[1] Those guys have far worse startup cash flow than Google, Amazon, Apple, or Facebook. Far, far worse. It's hard to think of any business in financial history with that much cash burn up front. Some of those guys are going to have a Chapter 11 bankruptcy haircut. They'll probably all survive, but the investors, not so much. Tesla has to raise a lot of…

> When the dust settles, Tesla may be a Chinese company. Tencent is the latest big investor.

I'm sure, and hope, that the US regulators will block that from happening.

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#26

Post by reitzensteinm »

zaroth wrote: post #17

Even Jim Cramer (famous Tesla bear that he is) took issue with this “analysis”. > Setting a price target of $10 on a $200 stock "really is insane," the "Mad Money" host said. "How about $8? How about $12? Ten basically says, 'I want to get talked about. Let's talk about me.'" > "If he had done $47 would we have talked about him? No, but 10. Ten is right in your face," Cramer said on "Squawk on the Street." "I questio…

It was a "worst case" target; the malfeasance is that it was placed too high. The equity will be wiped out if there's a restructuring. It's hard to imagine a future where TSLA is worth a low, but nonzero amount - there is a ton of debt first in line.

Tesla still has a non-zero risk of failing; what kind of "repercussion" do you believe there should be for pointing this out?

In my opinion, the right way to value Tesla is to figure out the NPV of Musk's autonomous network vision and multiply it by the chance of getting there.

It's not necessarily a bad investment, but it would be a crazy basket to put all your eggs in to. There's a reason the 2025 bonds are currently trading at a 9% yield...

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#28

Post by dtparr »

robjan wrote: post #19
hn_throwaway_99 wrote: post #16

Earlier quoted context omitted.

I'm an electric car fan, but this is silly. There are a huge number of car buyers that would, currently, never consider an electric car.

Some countries are already planning on banning petrol and diesel powered vehicles in the not so distant future.

Unless those countries comprise the entire market for new cars, I'm not sure that really refutes his point.

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#29

Post by throwawaymath »

zaroth wrote: post #17

Even Jim Cramer (famous Tesla bear that he is) took issue with this “analysis”. > Setting a price target of $10 on a $200 stock "really is insane," the "Mad Money" host said. "How about $8? How about $12? Ten basically says, 'I want to get talked about. Let's talk about me.'" > "If he had done $47 would we have talked about him? No, but 10. Ten is right in your face," Cramer said on "Squawk on the Street." "I questio…

I don't think I understand Cramer's argument. Is he asserting the new worst-case valuation is disingenuous because it's a "nice" number like 10?

Does that mean he wouldn't be saying anything about it if it were 11 instead? That seems like just as subjective an assessment as the one he's currently making. A seemingly "random" looking number can be just as arbitrarily chosen as a neat looking one.

It wouldn't surprise me to know analysts like to slightly round up or down a valuation target to hit a neat number like 10. But that seems like human nature to me, not a lack of integrity or critical analysis. I don't think this is a very critical heuristic to use...

Re: Morgan Stanley Slashes Worst-Case Price for Tesla to $10

#30

Post by nradov »

asaph wrote: post #18
lisper wrote: post #13

Earlier quoted context omitted.

Financial analysts use one of three approaches. There's the "whatever my gut tells me" approach, which is surprisingly common. There is modern portfolio theory. And nowadays there's machine learning. And it's all bullshit. MPT is bullshit because it uses volatility as its model of risk, which is IMHO the wrong model. They use it because it's something they can measure and so write academic papers about without soundi…

What about the guy played by Christian Bale in The Big Short[0]? Surely his models were not BS. [0] https://en.m.wikipedia.org/wiki/The_Big_Short_(film)

The thing is, it's impossible to tell the difference between clever and lucky even in retrospect. It's entirely possible that his models were BS. Even a broken clock is right twice per day.
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