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Gary Black

@garyblack00

10 Apr

When an investor tells me $TSLA is expensive and posts a Bloomberg screenshot showing a 157x forward EPS I lose it. Nobody would value a long tail growth name like $SQ or $SHOP or $TSLA on next year’s earnings, just like nobody would’ve valued $AMZN on next year EPS 10 years ago.

@elonmusk

2/ Every first year finance student is taught the right way to value any asset is with discounted cash flow (DCF). For $TSLA even if you don’t want to accept @elonmusk 50% volume growth assumption, assume EV adoption will grow from 3% in 2020 to 50% by 2030 (32% CGR).

3/ Next, project $TSLA EV share, which has increased steadily from 17% in 2018 to 19% in 2019 to 23% in 2020 as TSLA has expanded TAM by entering new markets and segments, and despite new competition. Even if you hold TSLA EV share at its current 25%, which is conservative..

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Gary Black

@garyblack00

18 Mar

$NKLA negative news flow likely to get much worse: Hanwa, one of two of NKLA’s remaining strategic partners (Iveco other) with 1 board seat, is cutting its 5.6% stake in half, so $175M in stock sales at same time NKLA is trying to raise $100M secondary. Here’s what I see next:

1/ Trevor sells remaining 83M shares (21% stake). Trevor likely hasn’t sold his remaining $NKLA shares so he can cut a better deal with SEC on fraud charges (no cash, unclear NKLA value post-SEC settlement). I believe Trevor will sell his remaining shares once he reaches a deal.

2/ 4/30 lockup expiration - In addition to Trevor’s 83.3M shares, on May 1 the remaining 136.7M NKLA shares subject to lock-up held by execs, board, and partners can be sold, bringing total float to 386M (from 166M). All this cashing out will put huge pressure on $NKLA shares.

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Gary Black

@garyblack00

14 Feb

Here’s the thing about bubbles: They always need more buyers to push the price higher.

The $GME bubble inflated initially as #wallstreetbets realized that with 140% short interest, $ could be made. Seeing others’ blood in the Street, HFs jumped in, further inflating the bubble.

2/ At $325, up from $20 two wks earlier w/ no chg in fundamentals, the $GME bubble was clear for all to see, but shorts needed a catalyst. The catalyst came when RH slapped a limit on new purchases, which shorts correctly perceived would keep new buyers out, and the bubble burst.

3/ Now there’s #BTC approaching $50K, up from $10K four months ago, w/ no change in fundamentals. As with $GME initially, there’s no catalyst to stop buyers from entering the #BTC bubble. Once Treasury Secretary Yellen proposes new regs, the #BTC bubble will burst just like $GME.

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Gary Black

@garyblack00

9 Feb

As an analyst, you learn to look for inflection points. If a company you own and love suddenly struggles after blowing away estimates for several quarters, you owe it to clients to check your thesis. $TSLA has now posted several red flags in a month after 18 months of killing it.

1/ Missed FY’20 deliv guidance of 500K by 353 cars. If demand is greater than capacity, why couldn’t TSLA deliver 353 more cars? Perhaps Covid related delays caused customers to not take delivery of vehicles. My sense: $TSLA pulled out all stops to get to 500K but still missed.

2/ $TSLA 4Q Adj EPS of $.80 fell way short of $1.03 est, due to weak Auto GM% (20.7% ex-ZEV vs 24.0% exp). Mgmt blamed miss on one-time factors (Y ramp, supply chain shortages, pandemic inefficiencies, S/X refresh), but all those factors (now MIC Y ramp) are continuing into 1Q.

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Gary Black

@garyblack00

6 Feb

Slow news day. Everyone gearing up for Super Bowl Sunday and Trump impeachment trial starting Tuesday. The latter will be highly entertaining for an irrelevant outcome (removal from office) that is likely to be inconclusive (won’t get 2/3 Senate to convict). $tsla

As a Republican, I hope Trump is convicted so he can never run for public office again as an Independent and siphon off votes from the Republican Party. So a conviction is good for Rs. Irrelevant means the trial won’t impact markets either way. But it will be very entertaining.

My point on the impeachment trial: It’s irrelevant because 1/ The market doesn’t care about the outcome; 2/ They won’t get the 67 votes needed to impeach because the Senators have to stand up and announce their votes. If it was a blind vote, yes, but that’s not how it’s done.

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Gary Black

@garyblack00

31 Jan

Why wouldn’t $GME execs take advantage of the $300/sh stock price to raise capital to transform their business? A $2B cap raise on $22B mkt cap (10%) would dwarf the entire $1.4B market cap at which $GME was trading 3 weeks ago. The obvious buyer? Some of the 58M shares short.

2/ Perhaps Ryan Cohen and his fellow new board members don’t want to ease the squeeze. If $GME short int fell below 100%, Reddit traders may go elsewhere. Or they don’t want to put out an S-1 that shows how bad the $GME business really is. Sunlight can be a bad disinfectant.

3/ My view: A secondary combined with new action by Treasury, SEC, or the brokers to squash $GME speculation will push GME back to $20/share. At a 50% borrow (12.5% for 3 mos), new shorts will take up the battle, much like the second wave of an infantry, and $GME will collapse.

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