TSLA

Investment Analysis Clubs Saul’s Investing Discussions
1

Saul,

I think it was you that asked for comments on, and I think it was, this article:

http://seekingalpha.com/article/2280323-how-not-to-write-a-t…

All I can say is that it has been a hellova education on the risks of the TSLA model, clear and easily defined bifurcation of sentiment, interests and comments, and finally, makes me want to sell my TSLA at a nice profit and then wait until it falls further since, based upon some of the realistic, negative posts, it sure seems impossible for TSLA to just keep on going up…like Z. There are so many potholes in their runway, they simply have to fall into one of them.

I’d probably wait for a sharp spurt up and then sell (remember, I’m now carefully in selling mode anyway) down to a half position, hoping to buy back in at a cheaper basis and after taking some profit.

I’m not a trader but this looks just too iffy to keep on spiraling up and I sure don’t want to give back all my hard won profits.

Mykie

2

PS

I have read every comment and continue to do so. The present total is 285 and I imagine, still growing.
Mykie

3

All I can say is that it has been a hellova education on the risks of the TSLA model, clear and easily defined bifurcation of sentiment, interests and comments, and finally, makes me want to sell my TSLA at a nice profit and then wait until it falls further since, based upon some of the realistic, negative posts, it sure seems impossible for TSLA to just keep on going up…like Z.

Hi Mykie,

Yes, I thought it was a great article. As you know, much as I love TSLA the company and Elon Musk, I sold out of TSLA stock. It’s a very high capex and R&D business. (On the other hand I think Zillow has a long way to grow. It is low capex and R&D and its current profits are being masked by its huge advertising spend to seize territory and establish itself as the #1 company in its field (which it is close to doing). On the other hand, it will be a long time, and a long struggle, until TSLA is the #1 car company.)

Saul

4 Likes
4

(On the other hand I think Zillow has a long way to grow. It is low capex and R&D and its current profits are being masked by its huge advertising spend to seize territory and establish itself as the #1 company in its field (which it is close to doing). On the other hand, it will be a long time, and a long struggle, until TSLA is the #1 car company.)

Hi Saul,
I agree with your statement on TSLA and Z. I do have hopes/belief that TSLA will be successful in the long run but on the other hand, the ups and downs seem to be guaranteed, with so many big risks and big potential so I also sold my TSLA, keeping 2 shares for spotting purposes. I expect to assess it again for a buy the next time if craters. It’s quite interesting to have so much confidence in the CEO but also, to have him quite far out there on a limb.

And based upon your logic with Z (which is one of my best performers these days), would you use that same logic with AMZN? I bought some shares back a ways and am still under water but am intrigued with Bezos and what he eventually will do once he has the world by the short hairs.
Mykie

5

And based upon your logic with Z (which is one of my best performers these days), would you use that same logic with AMZN? I bought some shares back a ways and am still under water but am intrigued with Bezos and what he eventually will do once he has the world by the short hairs.
Mykie

Hi again Mykie, I’m hesitant with AMZN. While the CEO of Z is focussed on making a profit as soon as possible, Bezos couldn’t care less, as far as I can tell.

JMO

Saul

1 Like
6

Mykie,

You wrote that the article on TSLA made you feel it was impossible for TSLA to keep going up at this time “like Z”.

I wrote back and said that I thought they were very different as TSLA was high Capex and R&D, while Z was low, and that Z was just spending on advertising to establish itself as the dominant in its field, which it has almost done, while TSLA had many, many years to go to do that.

You then asked if I could use the same logic with AMZN (dominant in its field), but I said I had doubts since Bezos seems to have no interest at all in making a profit.

I’d also like to add that

  1. AMZN is very high Capex (building out distribution centers)
  2. AMZN is basically a store (with the razor thin margins that that implies), while Z can be as high margin as it wants as it’s selling a service and has low overhead.

Best

Saul

2 Likes
7

1. AMZN is very high Capex (building out distribution centers)
2. AMZN is basically a store (with the razor thin margins that that implies), while Z can be as high margin as it wants as it’s selling a service and has low overhead.

Thanks Saul,
I’m in the Z camp, out of the TSLA camp and wavering on the AMZN camp but am underwater there and not buying more at even lower levels.

The larger issue for me is how to deal with momentum stocks.
First, they have lots of profit potential so I want to own them.

Second, once I buy and they continue up to an unusually high valuation, vaguely referred to priced for perfection, I’m looking for an exit, (like TSLA).

But I have no rationale why I sold today instead of 6 months ago or six months hence. It seems I should have some rationale that should at least be used as a stopping/reconsider to hold longer point.

Third, due to either the icon busting business model or incredible growth, or some other unusual quality, I do think they need to be treated/thought about differently.

SUMMARY:
I’d like to have a metric (or maybe more than one) to act as a tripwire that I can use so that when a stock crosses that wire, (like TSLA which seems to have the next 10 years of growth already priced into their shares),I can sell out and hold a few shares to notice when it drops back down again for another assessment.

Or, portfolio allocation could be the way to keep them in touch with reality. For example, I didn’t buy a full position in TSLA but a half position with the other half in SCTY. Maybe buying momentum stocks should not take up more than (10%?) some predetermined percentage of your portfolio or only remain there as long as the price is under_____?

QUESTION:
How do you think about them? (Of course, if you bought them when they were very small or young, that would minimize the problem but still, at some point you have to decide to sell.)

Chime in guys/gals since all ideas are a gift to be pondered and maybe mixed together.
Mykie
PS analyzing my actions with TSLA;
MACRO to MICRO ISSUES:
I made a nice profit; the market is getting up there; I want to build my cash reserves for future buying and option trading; TSLA has so many big barriers to overcome; if they overcome them, it won’t be without hiccups during which I could jump back in; they are going to have tremendous debt to manage; their international rollout plan is genius but very expensive to implement; without a dealer network they don’t have to share the profits but then, no one else can subsidize/assist them with what they must do. Finally, if they never come back to earth, there are plenty other fish in the sea. (Musk is an incredible brain/visionary but I do think his vaulted reputation lends itself to ignore some of the difficulties on the road to success but that are already built into the stock price.)

2 Likes
8

Mykie, great post and great questions. Here are my notes on Zillow’s results for the first quarter of this year. I got then probably from a mixture of the quarterly report and takes from the Z board. As you’ll see, it’s a litany of up 70%, up 62%, up 56%, etc for every metric you can think of.

May 2014 Announced Mar quarter earnings.

Record Revenue of $66.2 million, up 70%.

Record quarterly and all-time traffic, and April 2014 hit another record of nearly 79 million monthly unique users on mobile and Web (up 50% year-over-year).

They added an impressive 4,654 net new Premier Agent subscribers during the quarter and now have about 53k subscribers, up 56% from last year, and their average revenue per subscriber hit a record high of $286.

Their traffic to the site is incredible. Average monthly unique visitors were up 51% to 71 million. They generate about 47% of the industry’s traffic on desktop and mobile. They thus have a huge lead on any competitor, which attracts real estate agents looking for the largest audience for their advertising dollars.

Financial Highlights
• Revenue grew 70% to $66 million. This was their 14th consecutive quarter of growth over 67%!!! Just think of it!!!

• Marketplace revenue grew 72% to $53 million. The real-estate sub-category (the other being mortgages) grew 77% to $46 million.

• Display revenue grew 62% to $13 million. Display revenue is a not core growth driver, but importantly adds a layer of high-margin revenue for reinvestment purposes.

• Mortgage marketplace revenue grew 45% to $7 million.

??• EBITDA grew 71% to $8.7 million. This nearly doubled their guidance of $4.5 million.

• I use adjusted EBITDA (which they provide) and I figure a tax of 35%. With that, they made 13 cents in adjusted EBITDA per share, but, as I have said, they are spending a bunch to get control of the industry.

• They have $447 million in cash and zero debt.

Key Metrics
• Premier Agent subs grew 56% to 52,968 with an impressive 4,654 net new adds.
?
• Average monthly unique visitors (traffic) grew 51% to 71 million.

?• Loan requests for Zillow Mortgage Marketplace grew 29% to 5.8 million.

• Their rental marketplace had 14.5 million monthly unique users . They are just starting up monetization of this program.

Revenue growth from the Premier Agent biz is accelerating with 76% growth this quarter compared to 68% last quarter and 65% the quarter before.

I mean, really, what’s not to like? (And there are lots more statistics in the report).

I’m willing to accept a high P/E or P/S ratio with metrics like this. I guess I don’t have any fixed signal telling me when it’s time to leave. It’s more intuition. It’s easy with stocks like WPRT which was losing gobs of money, with falling revenue and closing down factories and laying off workers. They may pull out of it and do fine, but that’s not where I want to put my money. Or INVN or ELLI, each as I remember it, with three successive quarters of declining earnings. MTZ, on the other hand, had been doing well but sounded as if they had been blind-sided by their biggest customer and were in catch-up mode. It made me realize how cyclical they really were. This is just ramblings but I hope it’s helpful.

Saul

For FAQ’s and Knowledgebase
please go to Post #2176

3 Likes
9

Mykie, A little more on TSLA. This is from an article by a short, but there is a lot of common sense in it.

Saul

There is an old saying, “A horse that can count to ten is a remarkable horse, not a remarkable mathematician.” Likewise, a well-managed car company revolutionizing the transportation industry is a remarkable car company, but not a remarkable business. The truth of the matter is that Tesla will always be a hugely capital-intensive business just a few bad quarters away from bankruptcy. Sadly, many investors will learn this lesson the hard way it seems.

In short, although Tesla is among the best and most innovative car companies in the world, the stock is outrageously overpriced and is a terrible long-term investment. Moreover, the company operates in a high fixed cost and highly competitive industry that has on the whole made negative returns for its investors.

10

but there is a lot of common sense in it.

Hi Saul and thanks for your great post on when and why you sell.

Z is a most amazing company and I’m glad I own some. Maybe it’s going to be like Netflix? The problem with Z is when to buy more, not when to sell and if it ever takes a breather, I will get some more. Imagine, it has almost doubled in the time since I bought it which was in February!

Anyway TSLA is a great stock to make money with. The volatility is exciting and if it ever gets back to earth, I’m back in for a second moon shot. We’ll get some chance at short term profits when there’s news, good or bad, about the Giga factory so that’s what I am watching closely.

I’m now looking for some other high flyer to dump so I’ll have some more money to buy when we get a correction.
Mykie
PS Z can’t possibly keep this torrid pace up so eventually there’ll be a selling opportunity but with those numbers, it isn’t now.

1 Like