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Tesla lost $38M in third quarter, stock tumbles over 12 percent

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Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#41

Post by rdl »

cs702 wrote: post #31

Tesla's stock price at present reflects and is driven primarily by the exuberant optimism of its shareholders, not by mundane financial details like how many millions the company lost or how many cars were sold last quarter. Consider that despite today's drop, the stock price has gone up 4.6x this year (from $33.87 at year-end 2012 to around $155 right now), but over the same period the company's quarterly revenues h…

The scary thing for me with Tesla stock is primarily the risks in going to large scale mass market cars, as well as the risk of another car company, or another startup, emerging to win the mass market EV space.

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#42

Post by SwellJoe »

foobarqux wrote: post #37
hackula1 wrote: post #33

Earlier quoted context omitted.

I hate to be the "revenues-dont-matter" guy, but stock prices could be based on the fact that they demonstrated that they are 4.6x more likely to succeed based on their performance this year. If stocks only followed revenues, trading would be pretty meaningless. A company like Tesla has a tipping point in value based on the viability of their model. I am in no way claiming that I think they will succeed, but this yea…

The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".

"The thing underlying the security" is a dynamic thing, it grows or shrinks based on the market for their products, the execution of its executives, and the quality of its products.

If it is not going to be making significantly more money next year than this year, you'd want to build that into your decision to buy the stock. Fundamental value can be defined in a lot of ways, but growth is not reliably quantifiable. Which is why there is fluctuation in stock prices.

If I believe Tesla will continue to grow at 50-100% per year, then it may be valued reasonably right now. It may even be a bargain. If, on the other hand, I believe it is a static business now and has reached saturation of its product line in the market as it exists, I'd be a fool to pay this high a price.

There are so many variables...if you're value investing rather than growth investing, TSLA is not your stock, and won't be for another decade or two. I tend to buy into growth companies, so this looks like a chance to buy into a company I missed earlier at a slightly lower price (I don't suggest trying to time the market, but sometimes the market puts something on sale that you wanted to buy anyway). It was just such a sale (only on a much larger scale) many years ago, that led to me holding a few shares of GOOG. I bought as many shares as I could afford with what was in my trading account, and I may buy as many shares of TSLA as I can afford now (after a bit of research, of course).

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#43

Post by hackula1 »

foobarqux wrote: post #37
hackula1 wrote: post #33

Earlier quoted context omitted.

I hate to be the "revenues-dont-matter" guy, but stock prices could be based on the fact that they demonstrated that they are 4.6x more likely to succeed based on their performance this year. If stocks only followed revenues, trading would be pretty meaningless. A company like Tesla has a tipping point in value based on the viability of their model. I am in no way claiming that I think they will succeed, but this yea…

The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".

Would you pay differently for a lottery ticket that had a payout of 1MM if you had the chances of A) 1/2 B) 1/5 C) 1/50 D) 1/5000?

The potential payout is unchanged, but the value of the ticket changes as it gets more likely to pay out.

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#44

Post by tvladeck »

cs702 wrote: post #31

Tesla's stock price at present reflects and is driven primarily by the exuberant optimism of its shareholders, not by mundane financial details like how many millions the company lost or how many cars were sold last quarter. Consider that despite today's drop, the stock price has gone up 4.6x this year (from $33.87 at year-end 2012 to around $155 right now), but over the same period the company's quarterly revenues h…

If your first sentence were true, then the stock shouldn't have been affected much by today's news. Instead, it fell significantly.

The price of the stock has to do with how much money it might make in the future, and where they are on their growth trajectory. The news today signifies that the trajectory might be lower overall, or they might be further behind than investors thought.

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#45

Post by lsc »

foobarqux wrote: post #37
hackula1 wrote: post #33

Earlier quoted context omitted.

I hate to be the "revenues-dont-matter" guy, but stock prices could be based on the fact that they demonstrated that they are 4.6x more likely to succeed based on their performance this year. If stocks only followed revenues, trading would be pretty meaningless. A company like Tesla has a tipping point in value based on the viability of their model. I am in no way claiming that I think they will succeed, but this yea…

The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".

a one out of a thousand chance at making a million bucks has a 'fundamental value' of $1000.

The problem with valuing tesla is not that it lacks 'fundamental value' - it's not even that this value is risky. The problem is that nobody knows /how/ risky that bet is.

Of course... once the uncertainty passes a certain point... it sure looks like it's completely disconnected from 'fundamental value'

Personally? I can see the 'fundamental value' in Tesla. They are building a new kind of car, and it looks like a pretty nice car. I mean, I'm not really qualified to evaluate those things, I'm not really the sort who buys expensive cars.

Now, is that value greater than the huge investment required to build those cars? Will Tesla be able to scale up to the point where they are turning a reasonable profit? Will they be able to defend their initial lead against the conventional car companies, once toyota starts making an all-electric Lexus? Yeah. Lots of very difficult to quantify risk.

I'd buy Tesla before I'd buy Facebook. Long before I'd buy facebook. But I don't have money in either.

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#46

Post by foobarqux »

toomuchtodo wrote: post #40
foobarqux wrote: post #37

Earlier quoted context omitted.

The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".

> not whether the thing underlying the security is going to be "successful". But that's exactly what determines how much you should pay. Fundamentals are "How much will this be worth in the future".

Your decision to invest shouldn't be equivalent to whether the company is going to be successful but whether you will get more money than what you put in (accounting for risk, alternative investments, etc).

Failing businesses are sometimes good value.

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#47

Post by derekp7 »

rdl wrote: post #41
cs702 wrote: post #31

Tesla's stock price at present reflects and is driven primarily by the exuberant optimism of its shareholders, not by mundane financial details like how many millions the company lost or how many cars were sold last quarter. Consider that despite today's drop, the stock price has gone up 4.6x this year (from $33.87 at year-end 2012 to around $155 right now), but over the same period the company's quarterly revenues h…

The scary thing for me with Tesla stock is primarily the risks in going to large scale mass market cars, as well as the risk of another car company, or another startup, emerging to win the mass market EV space.

If another company came up with a dual-powered version of the Tesla, then I would definitely buy that. The current round of plugin hybrids don't offer enough battery-only range for me. I'd like to see about 100 mile battery only (in case I forget to plug it in), plus a small engine and 10-gallon tank. I wouldn't think the gas engine would have to be that large, especially if it were designed to use the battery as a buffer (i.e., it would only need to have enough HP to maintain highway speed, and acceleration could be handled by the battery).

Which brings up a question -- how much horse power is needed just to keep a car cruising, without accounting for acceleration? Edit: just looked up on Wikipedia, the Model S gets 100 miles per 35kWh. So that works out to (assuming 65 mph) about 23 kilowatts average continuous output, or 30 HP. Considering that many car engines are 300 HP, I don't see a 30 HP engine being that extreme.

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#48

Post by foobarqux »

hackula1 wrote: post #43
foobarqux wrote: post #37

Earlier quoted context omitted.

The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".

Would you pay differently for a lottery ticket that had a payout of 1MM if you had the chances of A) 1/2 B) 1/5 C) 1/50 D) 1/5000? The potential payout is unchanged, but the value of the ticket changes as it gets more likely to pay out.

All I'm saying, which should be self-evident, is that a successful business can be a bad investment if the price is too high and a failing business can be a good investment if the price is low.

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#49

Post by foobarqux »

lsc wrote: post #45
foobarqux wrote: post #37

Earlier quoted context omitted.

The point is that the price is disconnected from fundamental value. Remember you are buying something, you want to know how much you should pay, not whether the thing underlying the security is going to be "successful".

a one out of a thousand chance at making a million bucks has a 'fundamental value' of $1000. The problem with valuing tesla is not that it lacks 'fundamental value' - it's not even that this value is risky. The problem is that nobody knows /how/ risky that bet is. Of course... once the uncertainty passes a certain point... it sure looks like it's completely disconnected from 'fundamental value' Personally? I can see…

Thankfully your options are not limited to Tesla and Facebook

Re: Tesla lost $38M in third quarter, stock tumbles over 12 percent

#50

Post by rdl »

derekp7 wrote: post #47
rdl wrote: post #41

Earlier quoted context omitted.

The scary thing for me with Tesla stock is primarily the risks in going to large scale mass market cars, as well as the risk of another car company, or another startup, emerging to win the mass market EV space.

If another company came up with a dual-powered version of the Tesla, then I would definitely buy that. The current round of plugin hybrids don't offer enough battery-only range for me. I'd like to see about 100 mile battery only (in case I forget to plug it in), plus a small engine and 10-gallon tank. I wouldn't think the gas engine would have to be that large, especially if it were designed to use the battery as a b…

Depends a lot on speed, the shape of the car, and other factors, but on the order of 10-30 HP for something like the Model S at 70mph I think.

I still really want a hybrid truck, running diesel, with the ability to seat 2 people, secure cargo space (like a custom bed with lockboxes), 4wd, and the ability to run the engine for a week or two in place as a generator (e.g. at a remote comms site). Run the engine during the day to keep the batteries charged, operate at night off battery.

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