Introducing our 7th Lead Advisor!
The secret is (almost) out! Join 7investing's founder and CEO Simon Erickson on Wednesday, January 19th at 11 ET as he announces this extremely exciting addition to our team...
Tesla's stock has been highly-charged and is already up more than 400% during 2020! But does the electric vehicle innovator have any more gas left in its tank? Our 7investing team weighs in with our candid thoughts about Tesla -- which is a conversation that both current and potential investors don't want to miss!
September 23, 2020
For the first time ever, your @7investing team discussed Tesla’s market opportunity, battery technology, forward strategy and current valuation LIVE on air!
Are we fully charged on TSLA? Check out Episode 34 of the 7investing podcast to hear our candid thoughts on this disruptive company.
0:09 – Introduction (Simon)
3:45 – Market Opportunity (Steve)
7:25 – Battery Technology (Maxx)
13:11 – All About Elon (Austin)
21:00 – Valuation (Simon)
24:31 – Q&A (Team)
Simon Erickson 0:09
Hello, and welcome everyone to our 7investing livestream about all things Tesla! My name is Simon Erickson. I’m the founder and CEO of 7investing, where it’s our mission to empower you to invest in your future. Our business here at 7investing is providing our seven top stock ideas every month for just $17. But our mission to empower others we also offer a ton of free content such as this livestream this morning about all things Tesla. Before we jump in a few reminders before our livestream commences. The first is this is an objective analysis of Tesla. It is not a promotion, or a recommendation of the company’s stock. Secondly, none of this material should be considered as personalized financial advice, and thirdly, our team or our live audience may have positions in the companies that are mentioned. So with all of that in mind, I’d now like to introduce my fellow 7investing advisors. First, a shout out to our colleague, Matt Cochrane, who isn’t able to join us on the call this morning, but I am joined by Steve Symington, Maxx Chatsko and Austin Lieberman. Gentlemen, how are we doing this morning on Tesla’s Battery Day?
Steve Symington 1:19
Austin Lieberman 1:21
Simon Erickson 1:22
To kick things off Tesla’s growth story has been simply incredible. It’s grown from being a conceptual idea of using battery technologies and electric vehicles to becoming one of the most innovative companies on the planet. It has a long list of achievements during the past 15 years, which includes the initial introduction of its roadster, the unveiling of its Model S vehicle, it’s more affordable Model 3 vehicle, its SUV Model Y, and expanding its Gigafactory footprint across the entire country and also around the globe. It’s also now developing revolutionary new autonomous driving capabilities, and has its sights set outside of the auto industry as well now introducing solar power and battery storage solutions for its residential and commercial energy customers.
Simon Erickson 2:12
But in the first section, which I’d like to touch on here, is well, Tesla’s accomplishments have been impressive indeed, its stock performance of the last year has been downright meteoric. Tesla’s stock is up more than 420% during just 2020, alone, and up more than 800% during the past 12 months. With the company’s recent five for one stock split, meaning it now has a lower price per share. It’s widely expected to attract even more attention from individual investors. And so that brings us to our livestream call here today. What are we as individual investors to do is Tesla’s still in the earliest innings of a multi decade growth trajectory, or after its recent run up it is it is it indeed losing a bit of its charge? Our 7investing advisors will all be weighing in on several different topics on today’s livestream call. We’ll start with Steve who will describe Tesla’s market opportunity. We will then go to Maxx to discuss some of its unique battery technology. We will then go to Austin to discuss Elon Musk and Tesla strategy. And then I’ll round it out with Tesla valuation and what we think about the stock today. And then at the very end, we’ll wrap everything up together with our team’s thoughts about Tesla as an investment, and then also take your live questions from our audience. So if you would like to ask a question, please submit it with your name at the bottom of the live stream screen. So with that in mind, Steve, let’s start with you. What can you tell us about Tesla’s addressable market opportunity?
Steve Symington 3:45
So, in my mind, Tesla’s opportunity, it’s tempting to think about it as just selling electric vehicles. And that’s what the way a lot of people want to value, the stock will talk about valuation later. But and that is the most significant piece of its revenue pie right now, of course. So the name of the game right now is to maximize vehicle unit sales, while simultaneously bolstering gross margins. That means reducing manufacturing costs. And in keeping with the battery presentation later today, one of the biggest opportunities for doing so lies in improving their battery technology, which Maxx will talk about shortly. But the key for now is getting as many vehicles on the road as possible. And once they’re, they’re capitalizing on what should turn out to be a multi trillion dollar opportunity not just for electric vehicles, which the electric vehicle market in and of itself stands poised to replace vehicles that use combustion engines in the coming years. And that’s an industry that should be worth almost 4 trillion per year, globally over the next decade or so, but also trying to help usher in fully self driving vehicle technology in the process. Now, that brings us to Tesla’s plans to build its own Robo taxi fleet which could serve as another incremental high margin source of revenue for the company. By sharing rider fees with owners of Tesla vehicles. Now the folks over at Ark infamously pegged that market as being worth as much as 2 trillion by itself over the next few years. And I think that can be a conservative estimate. But it’s one industry that essentially remains unaccounted for largely by the vast majority of investors as they try to value stocks like Tesla. And that, I think, is the real opportunity. At the same time, a lot of people doubt whether Tesla can deliver on full self driving. But Musk himself recently offered an interesting update to that and on Twitter last month, just over a month ago, he tweeted that a fully rewritten version of their full self driving software will be on the way in the very near future. Now, last month, he said, judging by the 6 to 10 week timeframe he provided that means it could happen as early as next month, he basically said that, it will be a quote, quantum leap and improvements over the previous previous FSD software, because it is a full architectural rewrite to foundational rewrite for Tesla autopilot and something he’s been running personally in his own vehicle. So it’ll be really interesting over the next few weeks to see what Tesla unveils there, because if it is indeed a quantum leap, it could go a long way toward helping them realize that vision. So in my view, I guess the other thing to keep in mind is that’s not even to mention, we haven’t even touched on their solar, or powerpack energy storage ambitions, which is an entirely different additional market in and of itself. So in my view, really the optionality that Tesla enjoys is staggering, ambitious, sure. But if it can deliver on its goals of reducing manufacturing costs, and maintain its lead in electric vehicles, battery technology, and FSD tech combined, it’s really not hard to see how the market might continue rewarding it with these eye popping multiples, as it steadily realizes even a few of those ambitions on a growing scale.
Simon Erickson 6:59
Maxx, we’ll turn it over to you for the next section. You know, Steve was talking about several of those markets are multiple trillion dollars addressable market opportunities for Tesla, right, you’re just within the vehicles. Also within the autonomous opportunity. The battery or the the the opportunity in the energy industry is with solar as well. But all of that kind of hinges on batteries is the common thread together. What do you think about Tesla’s ambitions and its technologies in batteries today?
Maxx Chatsko 7:25
Yeah, so if Tesla’s energy business was a standalone business, it would be pretty impressively large in the last 12 months. And to June 30, the company sold about 1.7 gigawatt hours worth of energy storage products that generate one and a half billion dollars in revenue. That also includes a slowdown from the pandemic, in the quarter for the last quarter. So, you know, things could have been growing even faster, if not for that. So it’s still kind of divided into the applications, obviously, right? Tesla sells things like the power wall, which is for residential and commercial applications, right, put on your hous,e you put on your business. It also sells, which is most of the business today, utility scale products, so things like the mega pack. So for these, it’s really targeted at grid resilience initially. So things like replacing a natural gas peaker facility, right, that has a, it’s very expensive to run and operate, you don’t use it very many hours of the whole year, there’s obviously a lag for starting those up/shutting those down. But a battery can be on the grid almost instantaneously. So a lot of value proposition there. And it’s also proven to be a good test run for a new product that Tesla’s testing out, which is called auto better. So auto better allows utility scale battery customers to optimize when they sell their energy into the market. So this makes a lot of sense, obviously, in utility scale markets, but some analysts have wondered if this is, you know, maybe the testing ground for opening this product up maybe in the next decade for all fleet owners of Tesla vehicles, right. I mean, if you have a Tesla, and it’s got an 85 kilowatt hour battery, and it’s sitting in your garage or on your driveway, and your local grid needs a little juice, I mean, you could potentially sell some of your excess energy that’s just sitting in your driveway. And, you know, also decrease the cost of car ownership. So lots of things that have to happen there from a regulatory standpoint or even hardware and infrastructure but something to keep an eye on right there for that. So, you know, with it being Battery Day, I think it’s important maybe to go over some of the basics in terms o,f you know, we think of a batteries thing, it’s lithium ion batteries are all kind of the same, right? And that’s not really true. As Tesla shows so, you know, investors have to think of batteries are going to be very application specific, right. I mean, what goes into a utility scale battery like the mega pack, obviously, you have a lot more wiggle room with weight requirement. It can be sitting in a field somewhere, it doesn’t really matter how heavy the thing is, right? But that’s not the case for something like a vehicle, right a Roadster, a semi Model 3, anything like that. Weight is very important power density or energy density rather is very important. You know, so different battery chemistries, different battery cell designs all come into play. So that’s kind of what the rumors are for today, right? And Musk kind of walked that back in a tweet just earlier here about trying to set expectations a little bit below, you know, world changing events. But there’s been some rumors of, you know, what could the announcement be today, maybe it’s a 1 million mile car, or, you know, the battery pack will last that long. Maybe it’s something like an iron phosphate chemistry, which Tesla’s using with its battery cell provider in China, which is CATL. So with the walk back comments, I’m not sure how we’re investors should expect that to be I mean, it makes sense. He said, You know, there’s going to be time to ramp up production capacity.
Maxx Chatsko 11:03
Anything with with ramping up from the lab scale, or pilot scale up to commercial scale for manufacturing is obviously very difficult as Tesla investors know, all too well. But I think investors could be pretty happy if Tesla just announces an advanced battery architecture, and with some improvements in chemistry, so maybe look for something along the lines of using a little more nickel in the cathode that can lower the cost of the overall battery. Maybe we can add some ceramic coatings to the separators, which would increase the longevity and the cell cycling capacity. And one of the bigger advancements I’m not sure if this is really ready for primetime, but you never know with Tesla would be introducing silicon into the anodes. So silicon has been the awesomest material, we want to use that Nanos. But the problem is, it expands and contracts way too much. There’s too much volume metric change when you’re charging and discharging a battery. So it causes way too many problems. It just can’t be used safely in any applications. But with some recent advances in nanotechnology, we could use silicon nanoparticles perhaps or silicon nano wires, which wouldn’t go through the same volumetric change. And that could greatly increase charging speeds for batteries and also energy density. So just given Musk his comments about, you know, these battery announcements that he’s going to make today would be for the semi or the Roadster. You know, maybe this is silicons time to shine here in the next few years. So I guess all we really can do is wait for later today.
Simon Erickson 12:34
Yeah, great points, Max. And like you mentioned, there’s going to be a Tesla announcement later today for their own livestream for their Battery Day. We’ll keep an eye out for some of those new chemistries, like you mentioned some of the improvements in the energy density. Maxx, you also mentioned Elon Musk tweeting and of course, Elon Musk is one of the key components of Tesla. It’s a lot of the reason that people invest in Tesla has been his execution, which has been fantastic for several years now. Austin, let me turn it over to you. What can you tell us about Elon Musk? Well, I’m sure there’s a lot to talk about with Elon Musk, but what can you tell us about his strategy for Tesla going forward?
Austin Lieberman 13:11
Yeah. As an investor, I love to focus on leadership and management of companies. I love investing in founder led companies. Elon Musk is not technically the founder of Tesla, but for all intents and purposes, he is, most of his net worth is, in fact, tied up in Tesla. So I consider him just like a founder. Just like Maxx talked about, I don’t know of another CEO of a company, especially around a $400 billion company, that has the ability to move the stock price, like Elon Musk can, not saying he does it intentionally. But whether he tweets something that might be construed as positive or negative about the company, we have seen Tesla’s stock price move 10, even 20% on the back of Elon Musk tweet’s sometimes. So what I want to dive into is not just the Elon musk that we see out there on Twitter and through social media that can be that that can be pretty polarizing. I want to talk about Elon Musk in kind of three segments. I’m going to talk about his education, his history as a founder and operator ,and then Elon’s strategy for Tesla. And then a little bit we can’t talk about you Elon Musk without talking about his history as a marketer for the company, which is what has made him such an exciting follow on Twitter. So Elon was born in South Africa in 1971. That makes him 49 years old today. I can’t believe he’s only 49 years old. Think about the things that he could achieve for this world and potentially on other planets in for the remainder of his life. That’s exciting to think about. His estimated net worth is around $100 billion as of September 2020, and much of it is tied up in Tesla and SpaceX. From an educational standpoint, he studied economics and physics at the University of Pennsylvania and he graduated in 1997 with a Bachelor of Science degree in Economics from the Wharton School, and a Bachelor of Arts degree in physics from the College of Art and Sciences. I went to college and I had trouble finishing with one degree. So early on in his education, we already started to see how much of a go get her, and a thinker and achiever. Elon Musk was. His tenure in Silicon Valley started in 1994, with two internships. One was an energy storage startup and the other was at a startup called Rocket Science Games. And by one of his early mentors, they’re the person that hired him, he was actually noted to have boundless energy and a hacker background, and he wasn’t afraid to go figure things out. That was according to Bruce Leake who was actually a lead engineer, eventually, behind Apple’s QuickTime product. In 1995, the education he had already gotten wasn’t enough. He started his PhD at the University at Stanford in energy and physics. And he actually applied to Netscape and never heard back. So shortly after that, I don’t know if it was out of spite or why. But he left the graduate program at Stanford, and dropped out, and launched an internet startup instead. And so just imagine what the world would be like, in maybe Tesla doesn’t even exist, if Elon Musk heard back and got that job at Netscape. So my takeaway there is, even early in his educational career, Musk was known as a creative go getter. He’s an engineer by training. And that has heavily influenced the strategy as a founder and CEO, especially at Tesla and SpaceX. So let’s jump into my segment two, let’s talk about Elon as a founder and an operator. In 1995, he co founded Zip2, which was a web software company that developed internet city guides for newspaper publishing companies, and eventually sold to Compaq. From that Musk received $22 million. And we’re going to see an interesting trait here of Musk piling this money that he gets from these endeavors into his next company, which is a similar strategy that he’s applied from a product perspective to build Tesla and we’ll get into that later. So then, in March of 1999, he piled that $10 million into x.com, which is a financial services company that merged with a company called Confinity. The important part about this-Confinity owned PayPal. In October 2002, PayPal was acquired by eBay, and Musk received $165 million, leaving the company. In 2002, he founded SpaceX. So interesting fact there. He was a part of SpaceX long before he was a part of Tesla.
Austin Lieberman 17:35
And SpaceX is the space exploration company that he still runs today alongside Tesla. And we’ve all seen it in the news. With their recent launches. In 2004, Musk led an investment round in Tesla, joined the Board of Directors, and eventually assumed the CEO role and took over as product architect in 2008, right after the great financial crisis. He holds both of those positions today. And a little interesting fact, Musk is the longest tenured CEO of any automotive manufacturing company. Pretty interesting when we think about Tesla’s history there. My takeaway from this section is that for as much criticism as Musk gets, he has a long history as a founder and operator at very successful innovative companies. He’s invested his own money into each of his ventures. So his financial success is aligned with shareholders, especially at Tesla, where most of his net worth is tied up. So let’s talk a little bit about strategy at Tesla. And if we followed the company, we have seen this played out. And remember, Elon’s history of investing proceeds from previous sales into his next company, he did, he’s done the same thing with products at Tesla to grow Tesla. So they started out trying to make consumer electric vehicles even possible. There was no infrastructure, you couldn’t charge them. And nobody even believed in the possibility of making cross country trips in electric vehicles. It was just a dream. So they started with a very expensive, premium roadster. And this was a key move. They did this to gain brand recognition, take in some pre sales, and then use those reservations to fund the production of that vehicle in 2008. After that, they have increasingly introduced new vehicles at lower price points to try to grow their market, which we talked about earlier, and they’ve been highly successful. So they introduced the more affordable Model S, which brought in their market and then they used that money to pilot into the production of the Model X and the Model3 in 2015, and 2016, respectively. They produce their vehicles on their own in their own manufacturing plants, which gives them control over every single detail in the process. This is important for Tesla, but it also gives them a lot more risk. And so there can continuing that strategy today, we’re seeing it with battery manufacturing. We’re seeing them introduce new vehicles, the Cybertruck. I’m excited about that I have a reservation, not sure if I’ll ever buy it, but I thought it was awesome to get a reservation. And finally, we can’t mention Elon Musk again, without talking about his social media activity. He’s transitioned from having to be the entire public relations team for Tesla in the early days, to which has gotten him in trouble, even with the SEC at times, to more of what we would expect from a CEO on social media. But he’ll always be Elon. And so we should always be ready for some of his antics as a promoter of the company. But I do think he’s made some significant improvements in the way he acts on social media, which is has been good for the company. And he’s had to because he’s gotten some heat from the SEC. So wrapping that up on Elon Musk, hope you enjoyed learning about him as a educator, and operator, and then a little bit of a marketer, and so thrown it back over to you, I think, Simon?
Simon Erickson 21:00
Perfect. Yeah, thanks very much. Austin, Elon, definitely a trump card, both a great operator that’s really involved in the details of Tesla, but also a promoter of the company too, that likes to speak his mind out there on Twitter. The last thing that I’d like to talk about in our livestream, before we turn it over to Q&A of the questions that you have for us, is about Tesla’s current valuation. Tesla today has a market cap of around $414 billion, that’s right at around $425 a share, after its recent five for one stock split. And just to put that into context, this is a very expensive stock to buy, there was a lot of expectations for Tesla to expand beyond just becoming an auto manufacturer of electric vehicles, to using that battery technology for other things. And to give a little bit of background on that when we look other automakers out there, Ford Motor is valued at $27 billion, General Motors at $43 billion, Honda motors, just the motor division of Honda $42 billion general mode, I’m sorry, Toyota motors $183 billion, and Daimler at $55 billion. So if you add all of those other automakers together, you still are not getting the same market capitalization that Tesla has. What this means is the market is very the stock market is very clearly pricing and growth for Tesla outside of just autos, perhaps that’s the power provider using solar panels to do distributed energy, perhaps that’s using batteries to sell to other vehicles, perhaps it’s the robo taxi network that Steve mentioned earlier. And I’m glad that he went to all of those different addressable markets that Tesla has, because it’s going to have to execute there. And it’s going to have to succeed there as well. Just to put a little bit more context behind this – other utilities in the United States, such as National Grid, currently has a market cap of around $40 billion. Duke Energy at around $60 billion. So could we have a distributed energy angle for Tesla, perhaps. Could it be a power producer that competes against NextEra energy and their solar production, that’s a company worth $140 billion. But if you look at even if Tesla was the highest valued automaker in the world, putting it around $200 billion market cap right there, you still got another half of the stock that is exposed to other disruptive opportunities that it has. And so my takeaway for this section is, we really need to see those addressable markets that Steve mentioned in the first section of this call, see if they can disrupt that $4 trillion vehicle market, that $2 trillion Robo taxi fleet market, and then also the multiple trillions of dollars that are awaiting them in energy storage, and in power production. There’s a lot of opportunities for Tesla, that are already baked in, at least to some degree in the expectations of the stock. And so with that in mind, we’re now going to open up to the entire team. We do have a couple questions that are coming in. Thank you for everyone who is submitting questions. We got a couple earlier too that we’ll read through, but I’ll make an attempt and sending these live as we as we receive them to the advisor on the call that mentioned it here during our livestream. The first question is from from Ken: where do you think electric vehicles will be in five years, and as other companies invest in electric technology will this change Tesla’s valuation? So where were electric vehicles be in five years? And will other companies be investing in electric technologies that affect Tesla? Steve, do you want to take the first crack at that one?
Steve Symington 24:31
Yeah, I was just thinking that might be a good one for me, the electric vehicles and another five years are having one I think it goes without saying that we’re gonna see a lot more of these on the road. There are you know, several of the the biggest manufacturers just the even the legacy manufacturers have announced roadmaps that largely revolve around DV technology. So I want to, uh, Volkswagen, I think comes to mind, they said something over the next five years or so they’re looking at actually, you know, basically rolling out in all DV lineup. I know, there’s electric versions of several flagship Ford vehicles coming out. And, you know, some of the big ICE fans, internal combustion engine fans are kind of up in arms about it, but that’s the way it’s going. And, you know, you kind of lose the the sound but gain the torque and, and, and then it’s just, you know, fossil fuel, I think it’s just going to go the way that EV and that’s the way we’re going to see it. But yeah, it’s, it’s hard to put a number on that, you know, without digging in and finding, finding specific citations on studies. But I think it’s going to be one of those curves, you know, just like your your ecommerce versus in person retail, you know, where it happens slow, and then happens much more quickly. But I think everybody else is going to be playing catch up, to be honest, behind companies like Tesla, and I’ve said that before on previous podcasts is that as Tesla wins, everybody else loses. And, yeah, that’s as a Tesla shareholder, I can maybe say that with a little bit of bias. But I’m not the only one obviously thinks that way.
Simon Erickson 26:22
Yeah, I agree. Just to add with what Steve said, Ken, I think one of the big advantages for Tesla is the data advantage. They’ve got autopilot, collecting a lot of data out there, because it’s actually self driving itself. Tesla, of course, a big part of this thesis is getting to full self driving. We’re not there yet. But people have already put $8,000 down for the software package that would enable Tesla’s to completely drive themselves in the future, perhaps be a robo taxi, where you send your car out, Tesla gives people rides around like Uber is doing today. But it’s keeping the entire share, and Tesla’s making maybe taking 20% of that to the Tesla network. In addition for all of that data that it’s generating, while it’s being a robo taxi or autonomous service, that’s just training its neural networks to be even better at self driving. And I think that’s the big advantage they have over a lot of those other vehicle manufacturers, is actually the behind the scenes and the data centers and the neural networks their training, so they can recognize things better and drive more effectively and safely. Next question, I think is coming in on the screen live from Steve Albert looks like it says: how can I invest in Tesla’s growth indirectly? Do they have any suppliers that have a moat of any kind? Maybe, Maxx, do you want to start with that one and Austin chime in if you’d like to also?
Maxx Chatsko 27:35
Yeah, I’m not too well up on the on the vehicle angle of it. But for batteries, I think we’ll start to see some differentiation. I mean, there’s going to be deals just for specific materials. And if you look at the Technology Roadmap for batteries versus so the current generation now. In the next five to seven years, there’s going to be something called just advanced designs, advanced generation batteries, and then the next frontier is kind of like towards the back end of the 2020’s. Maybe like a solid state battery. So all of these are built differently. They’re constructed differently, they all have different material requirements. So there might be some plays there in terms of picking up on one of those before kind of before Tesla really announces or has their production ramped up, but um, so it’s still too early for that angle, though.
Steve Symington 28:28
Something to add.
Austin Lieberman 28:29
Woah, Steve. Woah woah woah.
Steve Symington 28:33
Austin, you go ahead, you got this.
Austin Lieberman 28:35
I’m just kidding
Steve Symington 28:37
But no, speaking of Elon, yesterday, as part of that tweet, where he’s talking about kind of playing down the battery expectations, he said we intend to increase, not reduce battery cell purchases from Panasonic, LG and CATL, possibly other partners, to instead, however, even with our self suppliers going at maximum speed, we still see significant shortages in 2022 and beyond unless we take action ourselves. But I guess in a way, you could look at companies like Panasonic and LG as indirect plays, but even then, I think it’s a small enough piece of their own revenue streams that it’s not something where I would go out and and try and invest in their growth because their supplier to Tesla, it’s not like being a supplier to Apple. You know, for example, where you can find someone you know, that might jump like that, but my two cents go ask them.
Austin Lieberman 29:25
Yeah, the only thing I’ll add is, I as an investor try not to invest in any company that is super reliant on another company using using their products as a manufacturer or something just because all it takes is one decision or, you know, maybe Tesla decides they used to use Nvidia GPUs, I think in their vehicles, they decided to make their own and Nvidia was able to sustain that they’re a huge company. But if it was a smaller company that could destroy an investment thesis. The way I try to think about investing, maybe off of a trend like EV’s or Tesla, especially if they get the autonomous vehicle network going, is what are the second and third order effects that might happen from that. And for me, one of the things I’m thinking about is maybe we’re looking at, especially with Coronavirus, a shift away from big cities to where people are living more in rural areas. And then what are some ideas that might come up from that as companies I like. I’m not talking about any specifically, this about Tesla. But that’s how I think about investing off of some of these these company thesis’s or big trends.
Maxx Chatsko 30:30
Yeah, Austin makes a good point about you know, you don’t want just invest in a company because it’s supplying Tesla, if it’s too much of it’s revenue stream. So like 10 years ago, there was a company A123 systems. It’s a big battery IPO, big battery company, right. Supposed to have everybody using electric vehicles. It was just kind of like too early, and it had some manufacturing issues, but one of the reasons that it had to file for bankruptcy was it was very reliant on Fisker initially Fisker automotive and other failed company, I think. And then when Fisker ran into issues, it kind of just, you know, took the bottom out from A123 systems business model is using that as like an anchor customer for revenue and to get to scale. So that fell out. And then, you know, the rest is history. So so Austin makes a good point.
Steve Symington 31:15
Same thing happened at GTAT, GT Advanced Technologies, they were supposed to be supplying sapphire glass to Apple. And then it turned out there, they had a super unfavorable contract with Apple, where if they didn’t meet certain milestones, all of a sudden they went from, it went from 60 to zero real quick. And everyone was stunned because GTAT was supposed to be this big Apple supplier. But yeah, lots of examples to that end.
Simon Erickson 31:41
Great points. We’ve got two more questions before we wrap it up real quick here, one from Scott that says: planning on selling off 10% of my holdings, every time Tesla gains 10%. Is that a good strategy? How much would you hold long term?
Simon Erickson 31:54
Now again, we can’t give personalized financial advice, Scott. So this is just an opinion of us on the team. But with a company like Tesla, as volatile as it is, or even a tweet from Elon Musk about funding secured can make big volatile changes in the stock price. I think it’s very difficult to build an investment thesis just around those, that volatility of the stock. This is one that moves around a lot. And certainly from my perspective, this is a company that you need to look for the long term, what’s the progress they’re making, in battery technology, or the number of deliveries of the cars that they’re delivering, or the number of cars that they’re producing all around the world or wherever Elon is going to go with a robo taxi network, or autonomous driving. That’s really the key to investing in thesis, I think that if you’re a buyer, you don’t want to just be looking to get in and out every 10% like that, to really buy and hold for a company like this because it’s such a long term disruptive approach. And Austin, I’m going to give you the last question, which is coming from JT, which is, do you think electric vehicles will be Tesla’s biggest revenue stream in 10 years?
Austin Lieberman 32:55
Wow. No. And it really this has less to do with Tesla. And more to do with the way that we see some of the world’s most innovative companies evolve over time, is a lot of times, their revenue comes from places that we never expected and innovations we never expected. Tesla’s one of the most innovative companies in the world. So I think most of their revenue will come from other places. And Hannah is here as well. So, hey Hannah.
Simon Erickson 33:25
I think she’s a Tesla fan as well. Right? Did she did she have an opinion on whether he V’s or the rest of Tesla was selling?
Austin Lieberman 33:30
Well Elon just tweeted. So she, every time Elon tweets, she runs in and tells me what he tweeted about.
Simon Erickson 33:35
That’s great to know. Okay, we’re gonna get her on the next show for some comments about Elon Musk. Final question, before we sign off here, we did promise this was going to be an objective call and not a promotion for Tesla as a recommendation. So just around the horn real quick on three thumbs up, thumbs neutral, or thumbs down on do you think Tesla will outperform the S&P during the next one year? Again, will Tesla’s stock today at $425 a share outperform the S&P? 1,2, 3,..? Two ups, three downs and you count two for Maxx there. I think Austin’s daughter was a neutral, at least from this perspective. Oh, that looks like a down too so it’s down four up two. And the other question is over the next five years from today, do you think Tesla’s stock will outperform the S&P? Yes or no? Three up one down for five years for Tesla again. We pointed out it’s an expensive stock right now there’s a lot of expectations built in as an investor it’s going to be a question of whether Elon and the rest of his company can perform on those expectations. Gentlemen, thank you very much for joining our 7investing team call today and our livestream on Tesla. It’s been a fascinating stock. It’s one that’s in the news a lot.
Simon Erickson 34:56
Our mission here at seven investing is to empower people to make better investing decisions. We’d like to offer our objective advice on what’s going on out in companies that are in the stock market. If you would like to learn more about 7investing, our website is 7investing.com. If you’d like to sign up and get our seven best stock ideas every month for $49 it’s 7investing.com/subscribe. On behalf of all 7investing advisors, my name is Simon Erickson. We are here to empower you to invest in your future. We are 7investing.
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