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Gary Black

8 Dec, 10 tweets, 3 min read

According to S3 Partners, $TSLA shorts have lost $35B in 2020. I talk with many TSLA shorts, and have been on the other side of their trade all year. Here is where $TSLAQ got it wrong: Way under-estimating TSLA TAM, and in thinking ICE-branded EV launches would hurt TSLA.

2/ Street estimates are soaring. $TSLA 2020 and 2021 EPS ests have almost doubled this year, as Y has quickly become TSLA ‘s best selling model with less than 20% cannibaliz’n of M3. Model Y is now being taken global. Meanwhile, China volumes will be 50% of TSLA volume in 2021.

3/ When I argued with shorts about Model Y, they missed that Y was a small SUV and M3 was a small sedan. The two don’t compete. And yet, shorts would argue Y would massively cannibalize M3. Y more than doubled $TSLA ‘s US TAM, from 25% to 66%, and will do the same globally.

4/ From my $TSLAQ discussions, I gathered that few had taken the time to drive the various TSLA models, esp the new Y. None did focus groups with TSLA owners, or very few discussed TSLA with rival dealers, all which shocked me. Their research consisted mainly of current year...

5/ ...and backward-looking financials, and their best materials were charts comparing $TSLA mkt value to ICE mkt values - mindless since going forward TSLA’s competitors are AMZN, GOOG, AAPL, NIO, and RIVN. $TSLAQ would make fun of my forecasts to 2025, saying it was impossible.

6/ The second worst mistake $TSLAQ made was in thinking ICE competitors could just launch their own EVs, and like magic TSLA would lose share. The opposite happened: ICE competitors launched EVs, got non-EV customers interested in EVs, and after comparing, many bought Teslas.

7/ But the worst $TSLAQ mistake was in thinking $TSLA could be valued like an auto company at 7-8x EPS, even though TSLA was posting 40%+ volume growth and 50%+ EPS growth. Basic finance dictates how multiples are derived, and no company growing vols at 40%+ is valued at 7-8x.

8/ So here we are entering 2021, with the same $TSLA setup as 2020:
1/ 40%+ vol growth for next 5 yrs, as global EV adoption soars from 3% today to 20% by 2025 (6x).
2/ TSLA EV share continues to grow as new EV buyers choose TSLA’s superior range, power, FSD, and #1 brand.

9/ President-elect Biden will make clean energy a focus of his Presidency, and restore the $7,500 tax credit for $TSLA buyers. This trend is repeating all over the world, with leaders passing new regs that ban or penalize those making gas-powered cars that harm our environment.

10/ On valuation, $TSLA looks crazy cheap if we go out 3-4 years. I forecast FY’25 EPS of $24, which implies a 2025 P/E of 27x, assuming zero reg credits, an -11% ASP drop vs now, and flat TSLA EV share. At a 2025 P/E of 50x (2x 2025-30 growth), that’s $1,200 ~$830 present value.

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More from @garyblack00

Gary Black

@garyblack00

5 Dec

Indexers need to buy ~120M $TSLA shares before 12/21. They will likely buy them Wed-Fri 12/16-12/18. Indexers can’t buy early because it could lead to dispersion (deviation from bm). There is no way of knowing how many TSLA shares traders have bought in front of indexers.

2/ We do know $TSLA has run up 47% since announcement vs 16% of float needed by indexers. On avg, 49M TSLA shares have traded per day since S&P announced. In the 10 days pre-announcement, 27M shares traded per day. Over 13 days, that’s 290M extra shares.

3/ No one knows how many shares were sold multiple times the last two weeks by traders. We don’t know how many of these $TSLA shares traded will be made available to indexers between 12/16-12/18. We know indexers need 120M shares. There are still 7 more days of potential buying.

Read 4 tweets

Gary Black

@garyblack00

4 Dec

Raising my $TSLA PT to $830 from $720, reflecting increase in TSLA EV share from 22% to 25%.

Oct YTD TSLA share now 25% vs 17% in FY’19, despite slew of new EV offerings.

$830 PT over 6-12 mos reflects FY’25 EPS of $24 (was $21) @ 50x P/E = $1,200, disct’d back @ 9.5% = $830.

2/ At $590, $TSLA underpriced at 62x FY’22 EPS $9.50 (Street $5.40), and 40x FY’23 EPS $14.80 (Street $5.95) with 50%+ 5-yr vol and EPS growth. At 1.2x FY’22 PEG, only mega-cap growth name cheaper than TSLA is $FB at 1.1x PEG (avg R1G PEG 2.0x). At $830 PT, TSLA has +40% upside.

3/ My new $TSLA non-GAAP EPS:
FY’20: $2.50 (no chg)
FY’21: $4.80 (no chg)
FY’22: $9.50 (vs $8.70)
FY’23: $14.80 (vs $13.00)
FY’24: $19.70 (vs $16.60)
FY’25: $24.00 (vs $21.00)

My new TSLA FY’25 delivs are 4,000K vs 3,520K prior (equal to 5.0% overall SOM vs 4.4% prior)

Read 7 tweets

Gary Black

@garyblack00

2 Dec

Here are 10 reasons why you should be buying $TSLA today at $560:

1/ Huge EV runway ahead, with global EV penetration now 3% likely to go to 20-25% by 2025 (6-8x increase).

2/ TSLA’s EV share continues to grow - not fall - as TAM expands, even as ICE competitors launch...

their own EVs. New EVs take from ICE vehicles, not other EVs. This is the biggest research flaw in $TSLAQ ‘s short thesis.

3/ $TSLA has several positive Dec/Jan catalysts to propel it higher, including wide FSD release (12/15), MIC Y production (12/15), CyTruck update (12/15).

4/ FY’21 vol guide of 800K+ will exceed Street ests of 774K (1/27). That will spark a fresh round of 2021 $TSLA earnings increases, pushing TSLA PTs higher.

5/ Biden’s 1/22 inaugural address will include clean energy, incl restoration of $7,500 credit on all EVs, incl TSLA.

Read 8 tweets

Gary Black

@garyblack00

2 Dec

$TSLA stock will likely continue to climb into the 12/21 S&P rebalance, as index mgrs complete much of their purchase of 120M TSLA shares by Fri 12/18. I’m not as optimistic as others about TSLA ‘s ultimate price rise, given TSLA’s 43% increase since 11/16 vs 16% float needed.

2/ It’s difficult to quantify how much front running has been by HFs and traders who have bought $TSLA in anticipation of index funds having to buy TSLA on the rebalance at the prevailing market price. Looking at trading volumes pre- and post-announcement...

3/ $TSLA has traded 51.5M shares per day (of 760M float) since 11/16 vs a 10-day avg of 26.6M shares per day prior to 11/16. That implies 250M excess shares traded since 11/16, which could just be multiple round-trips of algo- and day trading by all mkt participants.

Read 4 tweets

Gary Black

@garyblack00

1 Dec

Key debate: How many $TSLA shares are needed prior to 12/21 inclusion?
1/ Indexers only: 120M (16% float)
2/ Indexers + active mgrs: 120M + 180M=300M (40% float) at bm wt

My feeling: It’s closer to 120M since: 1/ Active mgrs with S&P bms could have bought TSLA all along, and..

2/ Most funds with S&P bms are core/value and will find $TSLA expensive at 150x 2021 Street EPS. Growth mgrs usually use R1000 growth as their bm. That said, with TSLA in their bm at a 1.4% wt, mgrs have to make a conscious decision to own or not own it. It’s too big to ignore.

3/ Here’s the math:

$TSLA wt: (760M float x $590)/ ($31.4T+$0.5T)=1.40%

Index mgrs: $5Tx1.4% /$590= 120M shares (16% float)

Active mgrs: $7.6T 1.4%/$590=
180M shares (24% float)

Index mgrs: 1.4% wt mandatory
Active mgrs: 1.4% wt optional

Read 4 tweets

Gary Black

@garyblack00

28 Nov

For those who are new followers, I went long $TSLA in Sept 2019, and hold it at 20-25% of my portfolio. It remains my largest position. My $720 TSLA PT has increased twelve times since Sept 2019 as fundamentals have steadily improved. I have never reduced my TSLA price target.

2/ I consider myself a disciplined growth investor. I like companies with best-in-class products, expanding TAM, brand leverage, and megatrend secular tailwinds. I always have a fair value that I think a stock is worth, calculated on present value of future earnings. $tsla

3/ Like many growth investors, I trade opportunistically around my positions - meaning, if I see a decline of 10-15% coming, I will lighten up and buy back at a lower price. Conversely, if $TSLA gets slammed for a reason I think is dumb (e.g., product recalls), I buy more.

Read 5 tweets

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