, 12 tweets, 4 min read Read on Twitter
Negative responses to our open-source $TSLA model focus on changes we made to PP&E and R&D while maintaining our price targets. Those responses highlight the short term time horizon of analysts in the public markets and their unwillingness/inability to model exponential growth.
Based on #Tesla’s stunning results year-over-year in the first quarter relative to the $GM Bolt - the Model 3 sales up 6-fold from a base more than 50% higher than the Bolt’s, while the Bolt’s sales were flat - $TSLA should go full throttle in EV production.
The shift in our model from spending from R&D to PP&E during the next five years is based on the demand metrics for #Tesla’s EVs that are surfacing around the world Check out not only the US but also Norway which the bears wrote off after subsidies lapsed last year.
This week, @elonmusk highlighted in an internal email that #Tesla’s second quarter deliveries could surpass those in the fourth quarter, breaking another record. If so, $TSLA should shift R&D dollars to #EV capex to pull even further ahead on its autonomous vehicle strategy.
Because the investment world has been built on the linear growth industries that have evolved in post WWII experience, $TSLA’s exponential growth strategy seems out of place, if not impossible. Post WWII does not incorporate the last great wave of innovation.
The last wave of innovation - exponential growth - was not the #Internet. It was electricity, telephony, and the ICE in the late 1800’s/early 1900’s. Our shift from R&D to PP&E reflects a more aggressive pivot from trucks and utility storage to EVs based on recent EV demand.
Based on Wright’s Law, our models suggest that global #EV sales will increase nearly 20-fold during the next five years, from roughly 1.4 million last year to 26 million in 2023. $TSLA should capture a significant share of the market.
In an attempt to remain conservative, our bear case assumes that $TSLA loses two-thirds of its 17% global EV market share during the next five years and that its autonomous strategy fails, in which case our five-year price target is $560.
Our bull case assumes that #Tesla loses one-third of its 17% global EV market share during the next five years and that its autonomous strategy succeeds, in which case our five- year price target is $4,000-$6,000.
The yield curve is giving us clues that, after more than one hundred years, truly disruptive innovation and exponential growth have returned. Technologically enabled “good deflation” should increase broad based purchasing power and turbochargers volume growth.
During the 50 years ended 1929, electricity, telephony, and the internal combustion combined to turbocharge unit growth and lower inflation. The yield curve was inverted more than half of the time back then, with the steepest inversions during periods with the strongest growth.
Back to the future? Yes!
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