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

bloomberg.com

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

#11

Post by jacques_chester »

SeanBoocock wrote: post #3

I wonder what underpins these sorts of targets. Tesla has 177.29 million shares outstanding [1]. At $10/share the market cap would only be $1.77 billion. At first blush that seems like a large discount on Tesla's assets (real estate, facilities, parts on hand, cash/cash equivalents). At the same time Tesla is servicing $12.7 billion in debt [1]. What does $10/share represent? Why not $1 or $30? Genuinely curious abou…

I can't find the note, only the same quotes from it.

I imagine the basic assumption is that if the market is tapped out, revenues will slow, plateau and then begin to fall before Tesla reaches sustained profitability. That means debts will begin to grow again.

Current book value is about $26 a share, of which about $12 is cash on hand. If debt remained constant but no new cash came in, book value goes to $14 at the moment of bankruptcy. Discounting for "bankruptcy really sucks for shareholders", $10 is a fairly defensible worst-case.

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

#12

Post by beepboopbeep »

lisper wrote: post #7
SeanBoocock wrote: post #3

I wonder what underpins these sorts of targets. Tesla has 177.29 million shares outstanding [1]. At $10/share the market cap would only be $1.77 billion. At first blush that seems like a large discount on Tesla's assets (real estate, facilities, parts on hand, cash/cash equivalents). At the same time Tesla is servicing $12.7 billion in debt [1]. What does $10/share represent? Why not $1 or $30? Genuinely curious abou…

It's all bullshit. I once did some consulting for a very well known person in the financial services industry, a recognized leader in the field. As part of that work I got to see his financial "models". They took the form of the most incredibly complicated Excel spreadsheets I have ever encountered. They were real monsters with hundreds of thousands of rows, dozens of workbooks. Being a software engineer, I wrote som…

100% I've seen the same thing. But they think they're all brilliant masters of the universe. Frightening when you think on how common place that is in the industry. That said, I do believe that the larger firms have begun to evolve away from that.

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

#13

Post by lisper »

dnadler wrote: post #9
lisper wrote: post #7

Earlier quoted context omitted.

It's all bullshit. I once did some consulting for a very well known person in the financial services industry, a recognized leader in the field. As part of that work I got to see his financial "models". They took the form of the most incredibly complicated Excel spreadsheets I have ever encountered. They were real monsters with hundreds of thousands of rows, dozens of workbooks. Being a software engineer, I wrote som…

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 sounding like they're just making shit up, but volatility does not actually correspond with what most people consider the word "risk" to mean. It also relies on the assumption that past volatility is a reliable predictor of future volatility for a particular security, which is often not true. And ML is bullshit because if you throw enough data at a regression algorithm it will find something that looks like a signal but will in fact almost certainly just be a coincidence if you actually do the statistical analysis properly.

So yes, I'm probably being a bit harsh. There are probably analysts who actually know something, and MPF is actually not totally worthless. But "it's all BS" is a pretty good first-order approximation.

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

#15

Post by memmcgee »

ycombonator wrote: post #14

Just a simple question from equity markets ignoramus. How does a stock value affect the company when the shares are already sold ? (Other than some shares are held by Musk and employees)

It affects a company's ability to raise future money. In the case of Tesla, Musk and his other projects are heavily leveraged on his $TSLA shares. There's a very real house of cards that could come falling down in Musk-land if TSLA drops too much.

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

#16

Post by hn_throwaway_99 »

TYPE_FASTER wrote: post #4

> the electric car market The size of the electric car market = the size of the car market now.

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.

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

#17

Post by zaroth »

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 question this piece of research."

If even Cramer is willing to call bullshit on this, it makes you wonder. Is there any duty of care in these analysis? Are they merely op-ed of another name? Or if they are supposed to mean something, what kind of repercussions should follow from this kind of malfeasance?

But most of all, remember the old adage, when there’s blood in the streets...

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

#18

Post by asaph »

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 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)

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

#19

Post by robjan »

hn_throwaway_99 wrote: post #16
TYPE_FASTER wrote: post #4

> the electric car market The size of the electric car market = the size of the car market now.

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.

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

#20

Post by thoughtstheseus »

SeanBoocock wrote: post #3

I wonder what underpins these sorts of targets. Tesla has 177.29 million shares outstanding [1]. At $10/share the market cap would only be $1.77 billion. At first blush that seems like a large discount on Tesla's assets (real estate, facilities, parts on hand, cash/cash equivalents). At the same time Tesla is servicing $12.7 billion in debt [1]. What does $10/share represent? Why not $1 or $30? Genuinely curious abou…

Basically what assets it has like inventory, PP&E, IP, etc. less any debt or liabilities the company has. Typically that sets the bottom range of value. In more distressed situations you would assume the assets are slowly destroyed by the company over time as it continues to operate and wastes the asset before they can be sold.
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