Tesla Inc (TSLA)

The cars, concepts, and what they’ve done for the automotive industry has been fantastic. You really have to buy into electric cars and that Tesla is going to have a very dominant position in electric cars and their battery technology. His concern would be that they have been a catalyst for a significant change in the automobile industry, and there have been huge investments by Ford, Chrysler and GM. Everybody is getting into this business, and are catching up. Tesla is not going to always have the dominant lead that they currently have.

Has a very weak balance sheet. If there is a very weak balance sheet and a very high market valuation, which this company has, then going to the stock market to raise money is always an alternative. As long as Tesla has a poor balance sheet, that is an alternative. However, there are no visible earnings, so you are fundamentally buying this on a wing and a prayer. The stock is in a trading band, suggesting that the next low is $271.

He equates this with what we saw in the 2000 timeframe in regards to Internet related stocks. Electric vehicles will be operated over time, but a number of things have to happen. We have to have a better production for electricity. Also, will Tesla be able to operate production for the demand. OK for 30,000-40,000 cars, but if looking at mass production volumes to hit the kind of demand expected, it would fundamentally change the automotive landscape. To him, that is not possible. He considers this as a vapour stock.

A very high profile stock. Thinks the company could go bankrupt. They are really doing things to push forward the adoption of electric vehicles, and have burned through $5 billion of capital in the last 12 months. Expects they will burn through another $5 billion in the next 1-2 years. They are going to have to do multiple capital raises. So far, the market has been willing to give boatloads of cash to them.

If you took what has happened at this company, missing on their production forecast, the margin impact, and blowing through about $4 million this year in cash, and if you took the name of Tesla off, this stock would react incredibly differently. It seems that these newer type technology companies have so much hype and enthusiasm and people treat them differently. When you are paying today what you expect people to be paying in the future, and then it doesn't happen, that is a really dangerous proposition.

$1.8 billion a year is how much cash they are burning through. That is not good. Also, there are over 30 automobile manufacturers globally. He doesn’t like buying a company with that much competition. Even their competitors are bringing out electric cars. Lithium is very poisonous and the batteries are in the bottom of these cars, so what is going to happen to the batteries after they have finished with their useful life.

He puts this on the same wavelength as Netflix (NFLX-Q), but with even greater volatility and a greater valuation. Trading at almost 2X the beta of the S&P, so it is a volatile name. Bloomberg, indicates the company will not be profitable until 2019. Trading at 58X 2019 estimated earnings. There is a lot of uncertainty in the space, because it is still a breakthrough area. The market has very high expectations for the company going forward, so any slowdown in growth, execution problems or lack of capital could lead to a correction. There is competition on the horizon, whether Audi, BMW, Volvo or Mercedes. This could present some risks to Tesla.

This is going to need a lot of cash. They advertise model 3 at $35,000, and when it comes to Canada, it will be in the $70,000 range. Need a lot of money to get production up and running to the levels they want to go to. The cash burn rate is very high. Thinks you will have lots of opportunities to back up the truck going forward. A large part of the company is due to subsidies. Not a company he would be looking to own at this time. A momentum play rather than an investment.

A concept stock. It may or may not win the automobile award. We are now starting to see that BMW is making almost as many electric vehicles as Tesla. Audi and Mercedes will be right behind. We also know Ford and GM will be in the run as well. The stock price does not make any sense given the current market outlook, but if they are able to sell everything they’ve got, the stock price is not going to fall and you’ll probably make money on it. Prefers BMW that sells at 8 or 9 times earnings and pays a nice dividend. It sells 8%-10% more cars every year. Believes their I-series will be every bit as attractive as Tesla, in the longer-term. They also pay a 4.5% dividend yield.

An electric car company as well as having interests in solar. Prefers BYD Company, a Buffet backed electric car manufacturer out of China. Tesla is not the only electric car manufacturer in the world. A Tesla car costs $120,000, and there aren’t a lot of people able to afford that kind of price. This stock is relatively speculative. Wait for it to take back its new highs. Should it break through that level on greater than 40% average daily volume, that would be an indication the stock is heading reasonably higher. There are other manufacturers like BYD and BAIC in China, which are going after the lower end of the market, and expects they will be relatively successful, along with buses, trucks, etc.

This owns its space. It is the peer company. Doesn’t think the electric car is going to survive, but this company is going to continue to command the space. It won’t matter that he doesn’t make money. (Analysts’ price target is US$345. )

You have to be out of your mind to buy the stock. It’s impossible to value this. Has a market cap that is greater than General Motors (GM-N) and Ford (F-N) combined. They don’t make money, and may never make money. They’ve discounted all the cars in their showroom by 26%. The vehicles are amazing and he would love to have a Tesla, but he wouldn’t own Tesla stock.

The stock is expensive: 365 PE, but the growth rate is 30%. He sees competition coming from other names. There is risk in terms of valuation and future competition.

*Short* (Top Pick Sep 2/16, Down 74.94%) He was forced out of it in the spring. They were overvalued and starting to roll over. 11 times book value. 5 times sales. There are no earnings. There are lots of people trying to short it now. It is a cult stock.

It loses money and there is no prospect in the near future. Its business is heavily subsidized by governments. He does not like that. There is a lot of work to be done before this market changes.