The Optimism Measurement
After the meeting, I randomly asked 23 shareholders whether they felt extremely optimistic(13%), optimistic(52%), somewhat optimistic(35%) or not optimistic at all in regard to the company’s current position and future outlook.
I wanted to compare how shareholders felt about the company. Unfortunately, I did not survey shareholders the same way as I did in the past; so I can’t accurately make a comparison to any type of historical data. Either way, to my surprise, most of the people I had talked to were not as optimistic as I had anticipated, or at least nowhere near as optimistic as in 2013, where the “under dog little car company” had established themselves by delivering the S.
Obviously, no one was “not optimistic at all” or they’d either be shorting the stock or simply not invested, but I ask it just in case. I’m going to focus on those who were somewhat optimistic because they compose 35% of my survey and held some concerns for Tesla’s near and long term future.
Besides production concerns, the most uncertainty was the creation of Tesla Energy with the power wall and power pack. Some didn’t think there would be a demand for it, but as Elon Musk has mentioned, this product will be needed more in places where electricity is extremely expensive, or in rural areas. That being said, I hope they market extensively and focus efforts in Germany, and other parts of Europe where electricity is expensive.
Lastly the new auto pilot capability, which will be released to a select few for beta testing in a few weeks, seemed concerning to some, my self-included. I got the feeling that Elon is overly confident with the autopilot, almost cocky with how he mentioned he personally tests the latest version of autopilot every week. Yes, Elon’s actions show that he is a CEO that believes in his product; But I can easily see a lawsuit arise out of this even if proper steps are taken to limit liability.
Growth and the Giggafactory (I’m assuming I’m not the only one left wondering)
The Gigafactory was talked about, and everyone knows its importance for the company, but to my disappointment, Elon did not give any estimated figures to production once the factory is online. He did mention an ambitious but realistic growth estimate of more or less 50% annual growth. According to musk the machining facility in Lanthrop California allows more final assembly to happen in the Fremont facility. It is still difficult to have any perspective of how the 5 billion dollar Giga factory will affect Tesla’s production within the next two years. I believe the effectiveness of the Gigafactory is the most concerning and unpredictable variable for Tesla and its investors for the upcoming two or three years. Space in the Fremont plant concerns analysts at Bloomberg, but with the Gigafactory and machining facility in Lanthrop, I do not think Tesla will have to worry about this for quite some time, in fact the plant is pretty huge. If you have driven by the plant, or visited the plant (before Tesla owned it), I’m pretty confident Tesla has plenty of room to grow. In addition, Elon did not expressed at all any concern about space in the meeting. Also the recent news of a new lease on an old Solyndra building just down the street should help eliminate space concern.
Where I stand, Buy or not to buy?
Tesla just got an increased credit line somewhere between 500 and 750 million dollars, which will be backed by assets. If Tesla uses it all up its credit line, in my opinion, the balance sheet will still look ok for a somewhat aggressive growth stock like Tesla. Based off the recent 10-K, the debt ratio is around .83. Taking on three quarters of a billion dollars of debt would move it to .96. Given that the Gigafactory is done within a year and deliveries are going well. Every thing should be honky-dory, and Tesla will become a pretty lucrative investment in the coming years.
It looks like a BUY to me, the company seems like it is setting itself up well for the long haul (and I’m sure Tesla will be throwing investors some golden nuggets along the way). It will show sooner than we all might think; who knows if the Model X will impress, but with the battery production soon to ramp up in the Gigafactory and machining ramping up in Lanthrop outside the Fremont plant. Tesla seems to be getting to Elon’s 50% growth target. Auto Pilot might be a success, and I feel confident production will soon excite as much as when the S first came out.
Share this Post