Cory Diary : Tesla Q4'21 Earning Call

The call basically is funny. Elon being himself like an engineer do not want to say what the analysts want to hear. They were looking for roadmap and near term but he talking production issues, no CyberTruck, and then he go on with his vision of FSD, RoboTaxi, Humanoid .... haha

Here's a quick summary and what he meant I believe in his calls.

Highest operating margin in the industry. Another Gross Margin High and Production High despite continue Supply chain constraints. And this will continues to Year 2022. This shake those analysts who register a big issue. But to Elon he has same issue in 2021 too and we have record quarters. The fact of matter is Elon expects 50% growth in Year 2022. I think likely more. Even at 50% this is phenomenon growth and profits for year 2022. And this can be met by Fremont and Shanghai Giga factories alone since is still under utilized due to supply chain issue which every company in the world facing too. 

And to Elon minds because of part shortages and super high demand in Model 3 and Model Y, why the heck we need a roadmap or Cyber Truck at all. No additional Model needs to be delivered as it does not make sense since not enough parts even to meet current demand. This is super bull case for supply chain management.  New model needs new expensive production tool, factory learning and will be taking away parts from M3 and MY. Total output will decrease if they focus on new vehicles. He will have new models RD ready if production needed.

Texas and Berlin started production last Q. Focus now on volume production. New factory towards end of this year. To me this is like bonus. If world wide supply chain improves, bang ! we going to have a super quarter.

He aren't doing 25k compact car. Which is quite obvious. Parts are critical now. Why on earth we want to put them in a cheap product. Certainly this going to premium cars for better margins.

Elon expects FSD this year. Maybe possible. He then talked about future robot products. I think this is his hope not immediate future. He even go on about Humanoid. Personally I find it impossible to achieve even in next 5 to 10 years. Is more like a smokescreen. This aren't important unless we set our price target that we invest today is $10k ....

And for the PE matters. It has dropped to PE 83 @ $850. This is using very conservative estimate of  annualized non-growing numbers which is 850/2.54 x 4. Super quarter Tesla riding on cash cow train.

Elon being Elon do what's matter logically. That's why he is the world richest man incidentally and able to do mission impossible in SpaceX.

Cory

2022-0129

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Cory Diary : Tesla Investment updates

Got into Tesla early this year and "Trapped" by the tech correction. Waited 6 months with DCA before Tesla ATH. Now with recent Growth stocks correction, how long it is going to last this time ? Tesla is not only growing significantly but also getting more profitable unlike SE or GRAB which are in burning cash stage.

Few things to watch.

1. Giga Berlin approval

2. Elon Option expiry sales in last stages.

3. Q4 Shipment data

4. Q4 Results

Good News is Biden concedes. This is significant which mean no union subsidy yet for EV cars.

https://www.politico.com/news/2021/12/16/biden-concedes-bbb-bill-wont-get-passed-this-year-525194

Facts

1. Elon will pay $B of taxes for this year on his Options and Stock Sales. IIRC more than 50% tax.

2. Elon will have more shares after this sales due to not all option shares exercised are sold

Allocation

Share allocation hits 8.5% of portfolio. Time to rest for DCA considering my average price has now increase to 800+ ? Last buy at 935. Averaging up is quite interesting.

Cheers

Cory

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Cory Diary : Averaging Up Buffer

The Lesson

Have been interested in a particular stock but kind of late in the game. The first thing I do is to throw in an initial position. Get my skin in it. For the size can be throw of dice as long is not too big. I did it into with too big an initial position and unfortunately the Tech market corrected in early 2021. The size was about double of roughly my average trading size. Well, I was in FOMO. Wanted to scale up quickly. Maybe just Bad timing. During the course learned a lot of Averaging Down. Not a very shiok time to invest. haha. About monthly. Sometimes I reduce my size and traded twice. Trading Fee not my primary consideration but trying to build a position safely and having the conviction that long term the stock price will come back up and there will be a flip in profitability. In that sense, the stock must be something I have strong believe in.

Averaging Up

Now after more than 6 months, the stock broke new high. Position size wise is still not to the level I wanted. Need it to be doubled at least to feel the impact to the portfolio. In fact, feel so good with the way the company is going. Maybe tripled. And this present an issue on how to Scale Up safely. We want to avoid a situation where the market correct after backloading at high prices which negate all the profits and effort of past 6 months.

For example Tesla Stock. Use chart to see where is the bad case situation. Say $900. Do an estimate average cost after profit around 800. Currently trading slightly above $1000 which likely due to Elon Musk selling his shares before Option Expiry else it would have been much higher imo. Compute my average cost after deducting profit from my purchase price. I can use $100 gap. Therefore if is below $800 cost price, i can continue to buy some shares to average up. Once it hits 800, I stop and wait for stock price to hit the next higher level. In this way I created a buffer of ensuring profitability or MOS. Depending on individual we can increase the buffer and this will reduce my averaging up possibility. Why we do this is for emotional and depth of conviction reasons. Another is we want to avoid a situation where a good profitable position turns negative due to averaging up which can be quite painful.

The Mentality of Celebrating Others Success

Now, we can look from another view point on conviction. Say our average cos is $800 again. A new investor wanted to wait after Elon sells finish before he adds. He simulate a scenario of not to wait and add at $1100 ? That's 37.5% more than an investor who enters at $800. He has a mental block that he do not want to lose out to those who bought cheaper and decided to wait. Let's say the expectation on both investors are $3000 in 3 years. And each bought with US$10k at $800 and $1100 respectively.

What's the profit for the investor with $800 base cost ? 12.5 Tesla shares will be a profit of $27.5k. How about the investor with $1100 base cost ? 9.09 Tesla Shares will be a profit of $17,271. He can also wait for $1000 before enter and the profit will be $20k. Which is not significantly far behind from an investor with $800 base cost. What he has to get over is the kiasu mentality vs the potential of Tesla Car driven away autonomously. In investment, is not to beat the other investor but to beat oneself. Don't lose sight of it. There is always an investor who pay a much lower cost than us. The only difference is whether you know him personally or not.

Cory

2021-1211

Cory Diary : Tesla Q3 2021

That's for Period of Jul, Aug and Sept.

Tesla Deliveries below. Basically we track Cars as the company is on execution phase. The tech is already developed. The company do many other important stuffs (other than cars) but I would classify them as bonus for simplicity. So as we can see, another wonderful result. Do you know another fact, this figures are known before the result. ( Hint ! ) Not sure why but it is what it is.

Key Development

Basically the factories of-course and we can see this will cover next few Qs of production increase.

Key Metrics

For EPS 1.86 is now roughly driving PE of 120 Only ! We can try use 1.44 (Non-GAAP) and it will be PE 156 if we view stock based compensation. Assuming Stock Price 900.

Company Strategy

Over a multi-year horizon, they expect to achieve 50% average annual growth in vehicle deliveries.

My Brief

Tesla just has to continue executing their production well and we will ride the growth story. In my earlier post (link)  I mentioned Tesla PE has came down significant as it is on growth path. PE 1200 is not reflective of the ground situation. That time PE is already down to 175. Now is 120. Can we imagine what will be the next PE in next Q report and the next after ? Seem like no brainer ? What is the risks ?

Cory

2021-1022

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Cory Diary : Tesla 2021 Q2

Tesla

Spectacular Result from Tesla yesterday. Best Quarter so far.

YOY

Net Income 1.4B from $104M

Non-GAAP earnings per share of $1.45 ahead of $0.98 expectation

Revenue rose 98% to $11.96 billion, from $6.04 billion a year ago

Operating cash flow of $619M

Produced 200k Vehicles

Operating Margin of 11%

Bitcoin-related impairment of ($23 million)

Solar and energy storage business rakes in $810M Rev. 116% from same Q last year.

The business is damped by ...

The chip shortage “remains quite serious,” Chief Executive Elon Musk said in a call after the results. “The chip supply is fundamentally the governing factor on our output,” and it’s hard to say how long it will last because it’s out of Tesla’s control, he said.

 “To better focus on these factories, and due to the limited availability of battery cells and global supply chain challenges, we have shifted the launch of the Semi truck program to 2022,” it said.

and today by Chinese Tech and Education Stocks sell down. Tesla PE has come down from 1200 range many months ago to less than 175 ! with it's  growth. That's how amazing the business ability to scale.

Took the opportunity to do a little DCA on Tesla Shares in a Sea of Red Tides. 

Cory

2021-0728

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.