Most Wall St banks’ analysts get paid to throw darts at the wall instead of doing actual research.
As a result, there’s additional fluctuations in the algo-trading dominated equity trading world.
FactSet put analysts’ consensus delivery expectations at 95,000, about 2% lower than what the carmaker ultimately reported. But the number of Model 3 deliveries, central to Tesla’s revenue growth, came in above consensus estimates. “This was an impressive delivery number for Tesla overall that should be viewed as a positive step in the right direction,” analysts at investment firm Wedbush emailed Tuesday. “Tesla beat the Street’s estimates in print but missed the 98k to 100k whisper expectations which will weigh on shares a bit as a knee jerk reaction.”
Tesla’s official guidance may not matter much, even when it makes its goals explicit. Tesla told investors (pdf) in its first-quarter update that “although we are driving towards higher internal goals, we reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019.”
Do you think that’s true? I prefer to think that they are actually trying pretty hard to perform accurate analysis and discover mispriced securities (possible exception: when they’re talking their book)… it’s just that they’re often wrong because making predictions is an extremely hard game.
Charlie Munger once said show him the incentives and he’ll show you the outcome.
Sell-side (bank or broker) analysts generate “ideas” and get paid through trading commissions. The more you trade the more they earn.
No reasonable Wall St analyst who covers 20-40 stocks will say—buy now and hold for 20 years. He’ll be out of a job.
Buy-side analyst who invest in the long-term are more likely to think ahead. But they earn money through generate returns on stocks + fees off assets under management, mostly. So their incentives aren’t always great either, as they are taking money from investors to go to another Goldman Sachs conference and pay for JPMorgan sell-side analyst research.
I know, right?
If you ask 50 independent analysts, who have never read each others’ research, for opinions, they will give you 50 different target prices based on models with different assumptions.
Put 50 analysts in New York City and you create an echo chamber.
Give them access to the internet, and the loudest voices win.
Fact - Goldman Sachs’ recommendation is more likely to move the market.
So, instead, maybe we should do own calculations, derive the price we are comfortable is—the intrinsic value estimate—and then wait for the market to hit that price.
The rest is a random walk.
But Tesla could be one of the most over- and under-valued stocks.
Valuation is an art done with numbers—so it’s part art part science.
I think there’s a lesson in this CEO’s tweets somewhere. It’s year 2019 when youngsters are using Tictoc and Instagram and Snapchat, while Tesla is a cool brand among many and has some sticky and loyal users and followers.
Notice the feature requests through its software updates sent directly to the person in charge. And the boss sometimes responds despite running 2-3 companies.
Where do I begin. $260m op. profit, Shanghai Giga trial production has begun, Model Y ahead of schedule exp. Q2 2020.
290 300 now.
I’m really uplifted by this, a company I’ve followed for 5> years and has influenced me more than any other to start investing. We’ve been through 420gate, Elon being an idiot, bankruptcy fears, but its now likelier than ever that Tesla will be around to stay.
If anyone gives a toss, my personal revised projection for FY2019:
For me, the thing with Elon Musk is, I don’t know any other high-profile CEOs that care about the really important things. This part of his interview with Joe Rogan especially resonated with me, and it’s been barely discussed in the media:
We must have a sustainable energy transport and infrastructure in the long term, so why run this crazy experiment where we take trillions of tons of carbon from underground and put it in the atmosphere and the oceans? This is an insane experiment. It’s the dumbest experiment in human history.
I bought more stocks after listening to that Joe Rogan podcast.
I would not get carried away by today’s good news though - there’s still a long journey ahead.
Fully agree with that statement by Musk, it makes no sense. Many of the first prototype(s) for carriages/cars in the 1800’s were electric. What a change it would have been had we gone electric from the onset. I think the upcoming implementation of 5G and C-V2X (Cellular - Vehicle to Everything) will give rise to autonomous vehicles and that will require fully electric everything. This is a huge step needed to raise civilisation to the next level on the Kardashev Scale, we are not even a Type 1 civilisation yet.
The main reason we didn’t was battery technology, Batteries have improved immensely but even modern batteries have nowhere near the energy density of petrol. In the end the ability to drive hundreds of miles without charging won out. We are now getting there with electric cars but the range still isn’t quite as good as a petrol car
Tesla gets their great range with a battery that literally weighs half a ton
Ye battery size is definitely an issue. What’s the sort of range a tesla gets? Is it not sufficient at the moment for an urban area? I’m sort of ignorant with cars at the moment I don’t own one this minute or see the need for one in the next while
Tesla range is very good for an EV. The long range version of the Model S has a range of 370 miles. which is plenty. But most smaller EVs have ranges just over 100 miles or so, which could see you needing to stop to charge on a long journey
I’ll be waiting on the recession to hit then coming out of such a downturn look to load up on Tesla, this stock could be the next decades Apple…plus I’m investing in Elon, you just need to listen to other top CEO’s talk about him, he’s very highly regarded.
I think there’s a lot of stuff Elon posts that’s more tongue in cheek, and designed to get a reaction.
I read that Tesla pays $0 on advertising, a controversial tweet by Musk and twitter goes bananas, he’s a very smart guy of how to get his brand out there.
Just look at him on Joe Rogan smoking weed, share price dropped, he got massive hits on YouTube because of the controversy…but did it change anything to do with the fundamentals of his EV company, no it didn’t, was all “news”
Smoking dope, “funding secured”, the Thai diver thing, the factory fires, employee work conditions and the everything else on his Twitter made me not want to buy one of their cars, nor the stock. (Data point of one, I know.)
To be fair, it does seem as if he has calmed down a bit since then (though maybe it’s just been that WeWork has been making Tesla look like a stable, well-run company the last few months, I don’t know). And it sounds like the company is making progress with free cash flow. But if I was a stockholder I’d still be nervous about Tesla’s future capital needs. And are there still chunky corp bonds due for repayment?
And are there still chunky corp bonds due for repayment?
Yes, and boy are they Chonk. Not something I see hindering progress long term though because autos, and especially TSLA are very cash generative businesses so issuing more debt is not going to be a significant factor from this point forward (cough FORD cough cough). More of an impact on earnings margins with the high interest.