Best Pick for 2021 – Short Tesla

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Best Pick for 2021 – Short Tesla
<a href="https://pixabay.com/users/lobpreis/">lobpreis</a> / Pixabay

Whitney Tilson’s email to investors discussing Tesla’s Q4 production and deliveries; Hypercharts’ updated charts; Model S erupted ‘like a flamethrower.’; Spiegel Dec. letter; Kass: my best pick for 2021 – short Tesla; bull-bear arguments & debate.

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Q3 2020 hedge fund letters, conferences and more

A bunch of bullish and bearish arguments below for you to chew on…

Nomad Investment Partnership On Why The Debate Over Growth And Value Is Unnecessary

Alex RoepersThe value vs. growth debate is one of the oldest arguments of the investment world. Value investors generally believe they have the right strategy, and until the financial crisis, the returns appeared to justify this conclusion. Q3 2020 hedge fund letters, conferences and more However, growth investors have ruled since 2009. And before that, growth Read More


Tesla's Q4 Production And Deliveries

1) Tesla reported its Q4 production and deliveries on Saturday and the stock rose 1.6% to an all-time high yesterday. Here’s Hypercharts’ updated charts on Tesla’s deliveries, revenues, margins, etc.

2) An article in WaPo: A Tesla Model S erupted ‘like a flamethrower.’ It renewed old safety concerns about the trailblazing sedans.

3) Doug Kass and Mark Spiegel remain bearish on the stock.

Kass: My Best Pick for 2021 - Short Tesla

Tesla has been in existence for 17 years and has never been profitable despite having no competition.

By DOUG KASS

Jan 02, 2021 | 08:00 AM EST

Stocks quotes in this article: TSLA, VLKAF, F, GM, FCAU

Tesla's (TSLA) shares have climbed from about $80/share at year end 2019 to almost $700/share.

Buoyed by its inclusion in the S&P Index, the company's market capitalization is now over $650 billion - representing possibly the biggest single large cap bubble in history.

"Noted competition will include the Audi Q4 e-tron and Q4 e-tron Sportback, BMW iX3 (in Europe & China), Mercedes EQB, Volvo XC40, Volkswagen ID.4 and Nissan Ariya, while less expensive and available now are the excellent all-electric Hyundai Kona and Kia Niro, extremely well reviewed small crossovers with an EPA range of 258 miles for the Hyundai and 238 miles for the Kia, at prices of under $30,000 inclusive of the $7500 U.S. tax credit. Meanwhile, the Model 3 now has terrific direct "sedan competition" from Volvo's beautiful new Polestar 2 and the premium version of Volkswagen's ID.3, and next year from the BMW i4."

- Mark Spiegel

As noted above, faced with an onslaught of competition - by Audi, Volkswagen (VLKAF) and others - and a relatively shallow moat, Tesla's market capitalization is now over 5x that of Ford (F) , General Motors (GM) , and Fiat Chrysler (FCAU) , which, as a group, sell 17 million units/year vs. Tesla's estimated production of 500k cars in 2020.

Tesla's has little proprietary in terms of electric car technology - while its global competitors have over a century of experience of consistent manufacturing and distribution of high-quality automobiles, and which subsidize ongoing operating losses from their electric car efforts.

Tesla has been in existence for 17 years and, adjusted for the sale of emission credits, has never been profitable despite having no competition, and no need for advertising.

Despite limited world-wide competition, Tesla has propped growth by cutting unit prices. What happens when the well reviewed competition gears up for delivery in 2021? Market share will be pressured and operating margins will decline.

Meanwhile, management turmoil has intensified over the last two years.

Bottom Line

In an era of cultism, Tesla is the stock (and Bitcoin is the currency)!

Bull-Bear Arguments And Debate

4) A guy named Gary Black tweeted this bullish outlook:

bullish outlook

5) Another friend’s bearish take:

The bigger picture is this: Musk has spent 5-10 years talking about achieving 500,000 cars by 2018, alternatively by 2020, or alternatively 1 million cars by 2020. In the end, Tesla achieved the absolute bottom of range at the very end of the time period.

It’s like the student handing in a paper on the very last minute of the semester’s grace period, which then squeaked by with the absolute minimum passing grade.

So in other words, Tesla managed to meet, on this metric, the absolute minimum it had promised over the last 5-10 years.

Usually, a company that’s trading at a premium in the market -- let alone a company that is trading at roughly 100 times the standard industry valuation multiple -- would have to actually *beat* its guidance over some period of time, let alone 5-10 years. Here, Tesla managed to cough up the absolute bare minimum in order to do what the most generous definition had been of its promises over the last 5-10 years.

The same goes for those driverless robotaxis. It managed to deliver only 1 million of those by the end of 2020.

Oh wait, Tesla didn’t deliver one million robotaxis yet? And they’re not appreciating from the original $40,000 purchase price to at least $200,000 by the end of 2020? That can’t be. Surely Musk would not have lied about those things, would he?

At least *this* tesla is *trying* to drive by itself:

https://twitter.com/Mtass7/status/1345122982763622401?s=19

Meanwhile, the global EV sales numbers for November are in, and Tesla fell to 13% market share (19% BEV only) which was down from 18% in August (27% BEV only):

Global Tesla total Total EV sales Tesla total % BEV BEV %
Jan 2019 10340 153695 7%
Feb 2019 14050 111541 13%
Mar 2019 38084 224335 17%
Apr 2019 20823 166200 13%
May 2019 23156 179270 13%
Jun 2019 48788 264591 18%
Jul 2019 23284 148144 16%
Aug 2019 26758 157696 17%
Sep 2019 49821 183393 27%
Oct 2019 16565 149552 11%
Nov 2019 31337 176547 18%
Dec 2019 63148 279214 23%
Jan 2020 12779 150613 8%
Feb 2020 16276 116170 14%
Mar 2020 60131 192380 31%
Apr 2020 14793 110274 13%
May 2020 24607 144600 17%
Jun 2020 49765 229894 22%
Jul 2020 32956 247575 13% 159575 21%
Aug 2020 42887 240981 18% 161457 27%
Sep 2020 65814 345519 19% 241519 27%
Oct 2020 35968 341531 11% 230000 16%
Nov 2020 54566 414368 13% 289000 19%

You can see that the heavily US-weighted “rest of world” category -- which excludes Europe and China -- was down 1% year-over-year in November. This is Model 3 only, by the way, not all Tesla vehicles -- for the Model Y was not yet sold outside North America yet:

Model 3 Global Europe China ROW (US etc) ROW growth y/y
Jan 2019 7277 0 0 7277
Feb 2019 10436 3757 0 6679
Mar 2019 33187 15771 5300 12116
Apr 2019 17464 3738 3000 10726
May 2019 17965 2489 2000 13476
Jun 2019 39632 11604 6500 21528
Jul 2019 19057 3478 1800 13779
Aug 2019 21336 5286 1500 14550
Sep 2019 39201 17490 4200 17511
Oct 2019 13359 1767 500 11092
Nov 2019 25878 7380 4658 13840
Dec 2019 53742 22137 4800 26805
Jan 2020 10013 1517 3183 5313 -27%
Feb 2020

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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