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    Wednesday, February 16, 2022

    Stocks - r/Stocks Daily Discussion Wednesday - Feb 16, 2022

    Stocks - r/Stocks Daily Discussion Wednesday - Feb 16, 2022


    r/Stocks Daily Discussion Wednesday - Feb 16, 2022

    Posted: 16 Feb 2022 02:30 AM PST

    These daily discussions run from Monday to Friday including during our themed posts.

    Some helpful links:

    If you have a basic question, for example "what is EPS," then google "investopedia EPS" and click the investopedia article on it; do this for everything until you have a more in depth question or just want to share what you learned.

    Please discuss your portfolios in the Rate My Portfolio sticky..

    See our past daily discussions here. Also links for: Technicals Tuesday, Options Trading Thursday, and Fundamentals Friday.

    submitted by /u/AutoModerator
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    RBLX tumbles -15% after earnings miss

    Posted: 15 Feb 2022 01:18 PM PST

    Q4 GAAP EPS of -$0.25 misses by $0.13.

    Revenue of $568.8M (+83.5% Y/Y) misses by $212.9M.

    January 2022 Key Metric Estimates:

    Revenue was between $203 million - $206 million, up 64% - 66% year over year;

    DAUs were 54.7 million, up 32% from January 2021;

    Hours engaged were 4.2 billion, up 26% year over year;

    Bookings were between $220 million and $223 million, up 2% - 3% year over year;

    ABPDAU were between $4.02 - $4.08, down 22% - 23% year over year

    submitted by /u/rockinoutwith2
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    How I made 250% virtual profit and lost 70% of my money. My story of Investing from July 2019 till date

    Posted: 16 Feb 2022 02:11 AM PST

    1. So initially, I had all the money in mutual funds and made about 12% from July 2019 to March 2020. The investment was about £50000
    2. Then with the initial Covid shock, I panicked and took out all the money and maintained cash position till April 2020
    3. About August 2020, I started investing in Call options in mostly growth stocks and the portfolio zoomed to 150% by Feb 2021. I remember the date 12th Feb when I had the highest gains.
    4. Then the portfolio crashed and my profits came down to 70%. I started averaging down in Zillow, Baba and JD thinking they will eventually go up.
    5. It kept on falling, by June 2021, my profits were 0-5%. Then I sold all my Call options in growth stocks and bought call options in PayPal, Docusign and FB.
    6. Baba, JD and Zillow which made up my 70% of the portfolio became worthless day by day
    7. The portfolio kept on dropping and now I am down by almost 70% of my initial invested amount. My portfolio shows about £20000
    8. It hurts to see the loss of hard-earned money. I got carried away with my genius gains of 150% in 2020.
    9. Now, my aim is to recover at least my initial investment but I don't want to deal in Options. But, I can't see how can I make gains in a reasonable time without dabbling in Options.
    10. I feel particularly unlucky because what I thought good stocks became worthless e.g. BABA, JD, Zillow, FB, PAYPAL, DOCU
    submitted by /u/polapts
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    Can somebody help me understand losing money in the stock market?

    Posted: 15 Feb 2022 10:17 PM PST

    I'm looking to start investing but I would need one of my parents since im a teen, so I got a question. Is it possible to go way into debt by accident? I don't want my parents going into debt because of a mistake I made

    submitted by /u/ijustghostedmyfriend
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    Intel to Acquire Tower Semiconductor for $5.4 Billion

    Posted: 16 Feb 2022 04:32 AM PST

    It looks like Intel is looking to increase their custom foundry capacity through acquisition to compliment their current organic fab build-out efforts. Interestingly, the numerous mentions of Tower's deep customer relationships makes me wonder if they were also working to beef up the customer service aspect of the custom foundry side as well (I have heard some talk that Intel has a relative paucity of experience working as a fab for external customers, but I have no evidence one way or another).

    From the press release: https://www.intc.com/news-events/press-releases/detail/1527/intel-to-acquire-tower-semiconductor-for-5-4-billion

    SANTA CLARA, Calif. & MIGDAL HAEMEK, Israel--(BUSINESS WIRE)-- Intel Corporation (Nasdaq: INTC) and Tower Semiconductor (Nasdaq: TSEM), a leading foundry for analog semiconductor solutions, today announced a definitive agreement under which Intel will acquire Tower for $53 per share in cash, representing a total enterprise value of approximately $5.4 billion. The acquisition significantly advances Intel's IDM 2.0 strategy as the company further expands its manufacturing capacity, global footprint and technology portfolio to address unprecedented industry demand.

    ...

    Tower's expertise in specialty technologies, such as radio frequency (RF), power, silicon-germanium (SiGe) and industrial sensors, extensive IP and electronic design automation (EDA) partnerships, and established foundry footprint will provide broad coverage to both Intel and Tower's customers globally. Tower serves high-growth markets such as mobile, automotive and power. Tower operates a geographically complementary foundry presence with facilities in the U.S. and Asia serving fabless companies as well as IDMs and offers more than 2 million wafer starts per year of capacity – including growth opportunities in Texas, Israel, Italy and Japan. Tower also brings a foundry-first customer approach with an industry-leading customer support portal and IP storefront, as well as design services and capabilities. Disclosure: INTC shareholder

    edit: added a section from the press release

    submitted by /u/Not_FinancialAdvice
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    Four bank have custody of over US$179 Trillion in assets

    Posted: 15 Feb 2022 11:30 PM PST

    That is not a typo, Trillion. These are a special type of bank called a custodian bank:

    BNY Mellon, US$45.3 trillion in assets under custody and/or administration as of September 30, 2021 - source

    State Street, US$43.3 trillion in assets under custody as of September 30, 2021 - source

    JPMorganChase, $31.3 trillion in assets under custody as of the September 30, 2021 - source

    Citibank, over $28 trillion in assets under custody as of 2021 - source

    This is the aggregate of assets(in value) managed by mutual funds like BlackRock and Vanguard who are required to hand over custody of the proxy voting rights of stock held in their ETFs to these banks.

    In this way these four banks control the boards of every major publicly traded corporation. And they do it by voting the shares you purchase.

    For the full picture: https://thehotstar.net/theblackstone.html

    submitted by /u/Unlucky-Ad-6034
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    Why would someone purchase 3.5 billion in extremely deep ITM SPX calls?

    Posted: 15 Feb 2022 09:18 AM PST

    I was looking through option flows last night and found that 3.5 billion in premiums was paid for SPX calls for 12/16/22. With a strike between 1000 and 1300. I get that normally deep ITM calls are a hedge for the downside, but this seems extreme since SPX is trading around 4400.

    Link to a screenshot of the options. https://www.reddit.com/user/MordantBengal/comments/st7w2c/unusual_option/?utm_medium=android_app&utm_source=share

    submitted by /u/MordantBengal
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    Wholesale prices rise 1% in January, up 9.7% over the past year

    Posted: 15 Feb 2022 05:50 AM PST

    Prices at the wholesale level twice as high than expected. What asset classes survive, thrive, or get waxed? It seems stunning that the smartest guys in the room couldn't see this coming. It's almost as if the FED is managing politics more than rates.

    submitted by /u/OnThe45th
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    Airbnb Q4 2021 Earnings Report

    Posted: 15 Feb 2022 01:53 PM PST

    https://money.yahoo.com/airbnb-q4-earnings-2021-211553102.html

    • Revenue: $1.53 billion versus $1.46 billion expected
    • Adj. earnings per share: $0.08 versus $0.03 expected
    • Gross bookings: $11.3 billion versus $11.09 billion expected
    submitted by /u/LuxGang
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    Can someone help me understand inflation, supply chains, and interest rates?

    Posted: 15 Feb 2022 09:55 PM PST

    Greetings!

    I am trying to understand what is going on right now regarding inflation. My knowledge is very limited, but here is what I think I understand as of now.

    When the pandemic started, the Fed lowered the interest rates to stimulate the economy and avoid a recession. During the pandemic, disruption of supply chains coupled with high demand (since we managed to avoid a recession) caused an inflation surge. In order to slow inflation, the Fed should raise interest rates, but that could disrupt the stock markets.

    This is where it gets mushy in my head. Why would higher interest rates slow inflation, and why could they disrupt the stock markets? How exactly are all these concepts tied together, and how do we move forward?

    Thank you for your help!

    submitted by /u/Charbel33
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    Facebook/Meta "fair value estimate" at Morningstar is 400/share.

    Posted: 15 Feb 2022 07:20 AM PST

    Meta Platforms, the parent of Facebook, reported mixed fourth-quarter 2021 results. Revenue was slightly ahead of expectations but the firm missed on the bottom line. We have slightly lowered our revenue growth assumptions for Meta, resulting in a $400 fair value estimate.

    Total fourth-quarter revenue came in at $33.7 billion, up 20% year over year. Advertising revenue increased 25% as businesses continued to allocate their ad dollars to Meta's platforms. The family monthly active people count increased to 3.59 billion during the quarter, from 3.58 billion in the previous quarter and 3.3 billion the year before. Average revenue generated per person increased 9% from last year and 15% from the prior quarter, indicative of healthy advertising demand. With increase in investments in metaverse and the firm's advertising offerings, operating margin declined nearly five percentage points to around 33% during the quarter.

    FWIW.

    I'm starting to nibble, personally. Buying initial position in 1/3rds (starting today @ 219/share), then possibly slowly adding more depending on how other individual stocks do, affecting my cash position.

    • Core ETF holdings: SCHD, SCHY, SCHB, SCHA

    • Individual holdings: AAPL, CRM, GOOGL, FB, DIS

    submitted by /u/Beetlejuice_hero
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    The keeping strategy

    Posted: 16 Feb 2022 01:23 AM PST

    So i am new to this whole stocks thing. I plan to buy the following stocks and i wanted to hear some more opinions before going in. I am not buying stocks i can trade all day. It is just to invest some of my money so it might throw of some profit instead of keeping it all in a savings account.

    General Dynamics Lockheed Martin Raytheon Alphabet inc Apple inc Tesla LVMH Hermes

    I friend told me to not just invest on one sector but to buy different stocks, so that if one goes down, it doesn't hit too hard. I know that i will not be a millionaire in 5 years but i just wanted your opionion on this investment strategy.

    submitted by /u/Jony76
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    r/Stocks Daily Thread on Meme Stocks Wednesday - Feb 16, 2022

    Posted: 16 Feb 2022 04:00 AM PST

    The meme stock scheduled posts will run Mon to Fri and won't be a sticky; you're probably seeing this because automod sent you here or you woke up early Wall St time; good morning!

    Full list of meme stocks here. This will be updated at least once a week.


    Welcome traders who just can't help them selves discuss the same exact stock that's been discussed 100s of times a day. I get it, you want to talk about what's popular, what's hot, and that 1.. single.. stock you like.. well here you go! Some helpful links just for you:

    An important message from our mod u/TCGYT regarding meme stocks.

    Lastly if you need professional help:

    • Problem Gambling: Call/Text: 1-800-522-4700 or chat online now.
    • Crisis Hotline (24/7): 1-800-273-TALK (8255) (Veterans, press 1) or Text "HOME" to 741-741
    submitted by /u/AutoModerator
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    What are the best ways to learn the foundational skills of assessing a stock?

    Posted: 15 Feb 2022 06:14 PM PST

    I am trying to find a course or good places to build my foundational understanding of assessing a stock. Some online sources are okay but, a lot of them don't start with the fundamentals they explain the P/E ratio then explain the numbers that are used to calculate it but they don't explain those numbers and etc...

    I am just trying to find the best place I can learn the abc's (not "always be closing")

    submitted by /u/johnsongin
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    Marriott's stock rallies into record territory after revenue more than doubles to beat expectations

    Posted: 15 Feb 2022 05:33 PM PST

    The stock has rallied 10.1% over the last three months.

    I'm interested to see what the rest of the year looks like for them. On one hand, they enjoyed success from pent up demand of leisure travel despite Omicron and overall COVID concerns. On the other hand, lucrative business travel will take a while to rebound to pre pandemic levels (if ever)

    submitted by /u/sportsfan510
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    Is it normal for 1099Bs to show bogus wash sales?

    Posted: 15 Feb 2022 04:49 PM PST

    Yes, it's a 1099b from Robinhood, yes, I know they suck, yes, I've already transferred to a reputable brokerage.

    Everything that the 1099b is showing as a "wash sale loss disallowed" doesn't appear to be a wash sale at all.

    For example, buy 1 share on 1 feb. Buy another share 2 feb. Sell both shares 28 feb for a loss. The loss from the 1 feb purchase is showing as a "wash sale disallowed." But I've exited the position entirely and have not re-entered (or bought anything substantially similar). Not a wash sale, right?

    Is this normal for 1099Bs, and it leaving it up to us to figure out if it's a true wash sale? I'm planning on figuring all of these bogus wash sales into my total gain/loss for the year, but will this potentially trigger an audit? Or are these specific numbers not reported to the IRS?

    submitted by /u/Jasonmv222
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    I'm convinced in Emerging Markets booming in the next decade, but I'm unsure how to invest in individual stocks

    Posted: 15 Feb 2022 04:02 PM PST

    I know there are mutual funds/ETF's for emerging markets specifically but I'd rather hold the individual shares in my own name.

    Does anyone know a transfer agent where a basket of different emerging market stocks could be purchased and held?

    submitted by /u/EenAfleidingErbij
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    Shopify Announces Fourth-Quarter and Full-Year 2021

    Posted: 16 Feb 2022 04:29 AM PST

    Fourth-quarter 2021 Merchant Solutions Revenue exceeds $1 billion for the first time

    Fourth-Quarter Financial Highlights

    • Total revenue in the fourth quarter was $1,380.0 million, a 41% increase from the comparable quarter in 2020.

    • Subscription Solutions revenue was $351.2 million, up 26% year over year, primarily due to more merchants joining the platform.

    • Merchant Solutions revenue was $1,028.8 million, up 47% year over year, driven primarily by the growth of Gross Merchandise Volume ("GMV"), exceeding $1 billion of revenue for the first time in a single quarter.

    • Monthly Recurring Revenue ("MRR") as of December 31, 2021 was $102.0 million, surpassing $100 million for the first time. MRR increased 23% year over year, up from $82.6 million as of December 31, 2020 as more merchants joined the platform and the number of retail locations using POS Pro increased. Shopify Plus contributed $29.8 million, or 29%, of MRR compared with 25% of MRR as of December 31, 2020.

    • GMV for the fourth quarter was $54.1 billion, an increase of $12.9 billion or 31% over the fourth quarter of 2020. Gross Payments Volume ("GPV") grew to $27.7 billion, which accounted for 51% of GMV processed in the quarter, versus $19.1 billion, or 46%, for the fourth quarter of 2020.

    • Gross profit dollars grew 37% to $692.7 million in the fourth quarter of 2021, compared with $504.4 million for the fourth quarter of 2020. Adjusted gross profit dollars grew 37% to $700.6 million in the fourth quarter of 2021, compared with $510.6 million for the fourth quarter of 2020.

    • Operating income for the fourth quarter of 2021 was $14.4 million, or 1.0% of revenue, versus income of $112.5 million, or 12% of revenue, for the comparable period a year ago. Adjusted operating income4 for the fourth quarter of 2021 was $130.2 million, or 9% of revenue, compared with adjusted operating income of $200.0 million or 20% of revenue in the fourth quarter of 2020.

    • Net loss for the fourth quarter of 2021 was $371.3 million, or $2.95 per basic and diluted share, compared with net income of $123.9 million, or $0.99 per diluted share, for the fourth quarter of 2020. Q4 2021 net income includes a $509.7 million net unrealized loss on our equity and other investments.

    • Adjusted net income for the fourth quarter of 2021 was $172.8 million, or $1.36 per diluted share, compared with adjusted net income of $198.8 million, or $1.58 per diluted share, for the fourth quarter of 2020.

    • At December 31, 2021, Shopify had $7.77 billion in cash, cash equivalents and marketable securities, compared with $6.39 billion at December 31, 2020. The increase reflects $1.5 billion of net proceeds from Shopify's offering of Class A subordinate voting shares in the first quarter of 2021 and $0.5 billion of net cash provided by operating activities, partially offset by the purchase of equity and other investments during 2021.

    *SHOP is down around 4.3% in premarket, compare to +3% premarket before ER release.

    Edit - source https://www.newsfilecorp.com/release/113952/Shopify-Announces-FourthQuarter-and-FullYear-2021-Financial-Results

    submitted by /u/OM-myname
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    $TSLA Bullish price is 287USD (DD)

    Posted: 15 Feb 2022 02:49 AM PST

    No emotions, minimum speculations, just raw impartial numbers. We will answer once and for all what is the fair value of TSLA.

    Chapter 1. Bull thesis (and other lies I tell myself?)

    Let's start with the typical bull thesis. The one you have probably encountered many times in the wilderness of reddit or twitter. It goes like this:

    • Tesla's car sales will grow 50% annually for foreseeable future. Eventually reaching annual production rate of 20M by 2030. Source: Technoking himself

    • Net margins will stay as high or even grow further from the latest 13.1% (Q4 2021). Commonly cited reasons are 4680, Gigacasting... maybe even Alien Dreadnought?

    • Tesla is a tech company. They will generate tons of revenue by selling software such as Fraud Full-Self-Driving, and might eventually launch their own marketplace (see AppStore).

    • Tesla is... ETF? (cannot add a link to youtube video, but it is from solving the money problem)

    • Tesla sexbot. Enough said.

    Let's start with an automotive sales part:

    • Say Tesla is such GigachadTM that it reaches 20M sales without reducing the prices or introducing the cheaper model(s). According to Q4 2021 Financial Report, current ASP is $50.7K, derived as auto revenue excl. regulatory credits divided by the number of delivered cars. Assuming 3% average inflation for the next 9 years (incl. current spike) the ASP in 2030 would be $66.2K (50.7 x 1.03^9)

    • With net margins of 13% that would result in 66.2K x 20M x 0.13 = $172B net income.

    • Eventually growth by 2030 will taper and converge to automotive industry average. As of writing, PEs of auto peers: Toyota - 9.64, Volkswagen - 6.88, Ford - 10.10, GM - 7.10, BMW - 4.75. But Tesla being Tesla, so we award an automotive Tesla PE of 15.

    • Tesla market cap by end 2030 is (drum roll...) 172B x 15 = 2.58T. An absolute automotive leader with 20M sales at an average price of 66.2K USD, with outstanding operating margins (~twice the industry average), with PE 15 (approximately twice the industry average) will triple from the current valuation (or double from January 3's)?

    • Taking an average of 7% market growth leads to Net Present Value (NPV) of 2.58T / 1.07^9 = 1.4T*, so ... Tesla on January 3rd was pretty fairly valued? Although why would anyone invest in a single stock for a 7% growth versus investing into SPY?

    • From the other angle, if you invest in TSLA now (market cap of 890B as of writing) it will return you (2.58 / 0.89)^(1/9) = 1.125 or 12.5% annually. Not too shabby, but also anything but impressive in contrast to its growth in the last two years.

    But careful observer would remind me that we are talking about Tech company and not an Auto company. But before we go there... let's discuss what is wrong with the bull thesis above.

    Chapter 2. Automotive market.

    Many analyses that I have read address future volumes only from the perspective of the supply. Analyses argue that the ramp up of the existing factories plus the introduction of new ones can support 50% growth, eventually reaching 20M car sales by 2030. What they often fail to address is the total addressable market (TAM), which is in our case the EV market in 2030. To be clear, below we will include both plug-in hybrids (PHEV) and battery electric vehicles (BEV) as parts of the EV market. The main reasoning is that for a wide target audience PHEV covers 95% of all use-cases (daily trips within a city) with electric power, therefore creates a real alternative to buying BEV (what happened to me and my wife personally).

    No doubt the EV market will be enormous by 2030. In particular:

    • EU proposes to ban new ICE cars by 2035 (source). Citation: "... if the EU raised its CO2 emission reduction targets to 50% by 2030, it would bring new fossil-fuel car sales across the bloc down to virtually zero by then... Brussels also proposed allowing plug-in hybrids to count as low-emission vehicles up to 2030 ...". From this we can assume EV penetration rate of a 100% in EU by 2030.

    • China plans to transition 40% vehicles sales to so-called "New Energy vehicles" (that include plug-in hybrids, fuel cells, and battery electric vehicles) by 2030 (source). So EV penetration rate in China of 40% by 2030.

    • and USA target half of all vehicles sold in 2030 in US to be electric (also includes plug-in hybrids, source), i.e. 50% EV penetration rate for the US by end 2030

    • The rest of the World mostly do not have any plans for phasing-out Internal Combustion Engine (ICE) cars (source). Anecdotally, when I visited my hometown of 300K population (in former USSR country) last winter I couldn't locate a single EV, whereas they are common in European city where I live now. We will make an assumption of 20% EV penetration rate for the rest of the world.

    2019 automotive sales by region as a percentage of the global are as follows (source): China - 26.5%, EU - 25.3%, US - 18.0%, Rest of the World - 30.2%. By taking into account assumptions on regional EV penetrations rate, we obtain: 0.265 x 0.4 + 0.253 x 1.0 + 0.180 x 0.5 + 0.302 x 0.2 = 0.509 or 50.9% global EV penetration rate.

    The next step is to evaluate total car sales in 2030. There are various forecasts, however most of them are in the same ballpark. According to ResearchAndMarkets (source) global automotive sales should reach 122.8M units by 2030. Worth noting that global automotive sales did not practically rise since 2016. Yet most of the research firms keep 2030 target by adjusting CAGR, which I personally find as an unlikely scenario. Especially with the recent inflation, chip shortage, supply chain and other issues.

    Nevertheless, by multiplying forecasted global automotive sales to global EV penetration rate we obtain 62.5M EV cars (PHEV + BEV) to be sold in 2030. It is important to understand that this is a bullish estimate rather than the base. First of all, we applied a very rude global level calculation. To be more accurate we need to apply analysis on the regional levels. In particular, auto sales for the rest of the World and China are expected to grow much faster than in the EU region. Therefore, lower EV penetration rate of the former (20% and 40%) relative to the latter (100%) would result in the lower global EV sales by 2030 than we estimated. Second, it is clear by commentary of the experts and the press that the aforementioned phase-out plans are ambitious and can be taken as a stretch targets. Elon in 2020 himself believed that the global BEV market would only be 30M by 2030 (source).

    Chapter 3. Tesla's market share.

    From EV-Volumes.com, we can take the annual global EV sales for the past years. It's easy to estimate Tesla's market share from this graph:

    • 2018: 245K / 2082K = 11.8%
    • 2019: 367K / 2276K = 16.2%
    • 2020: 500K / 3240K = 15.4%
    • 2021: 936K / 6750K = 13.9%

    Not to raise an alarm, but it looks like Tesla's market share peaked at 16.2% and already started to decay. Two years is a bit short of a timeframe to make conclusions on the trend. But it is difficult to restrain yourself from making a connection between the loss of Tesla's market share and ramp up of Chinese OEMs, VW (id family), and wide range of PHEV from legacy.

    For 2030, in my most bullish view Tesla can at most maintain its 13.9% market share. Take into account the combination of increasing aforementioned competition and almost nonexistent roadmap of Tesla. To elaborate, Tesla has in production four models (two original designs from aesthetics perspective - head and tail lamps, bumpers, interior, etc.) - Model S/X and Model 3/Y. Cybertruck is expected to launch soon, however according to Elon himself, the target for CT is a mere 250K annual production.

    Model S/X is already a 10-years old design (except for the front facelift and an interior update). Model 3/Y's original design is 5-years old with no major updates yet. Given the 4-5 year median time between announcements and production of Tesla, we should not expect any new mass production model(s) before 2026. Especially given an already long pipeline of unfinished projects (Cybertruck, Roadster - niche product, Semi, etc.). By that time Model 3/Y would be 9 year old design (comparable to the current state of Model S/X).

    We have observed firsthand what such aging without any major updates might mean for the sales. Since 2018 combined sales of Model S/X dropped from 101.5K to 24.4K in 2021 (it was going down consistently for all the previous years as well, so do not attribute overall drop just to a model refresh). It is not difficult to understand why. When someone buys a new car for $100K, that person wants to make sure that people around recognize it as a new car for $100K and not say 10-year old used one for the price of $30K.

    So in order for Tesla to keep up the market share it needs to step up its game in introducing new models and doing major updates for existing ones. If people will start considering Model 3/Y to be rather outdated, the demand will fall off the cliff as we have seen with Model S/X. The fall of Model S/X can be attributed to the release of Model 3/Y. But unlike in 2017, there are far more alternatives now to the aging Model 3/Y as well.

    Despite all that, let's consider Tesla will sustain its 13.9% market share through 2030. Recall our estimates on EV global sales of 62.5M in 2030 and we obtain 8.7M Tesla cars to be sold in 2030. This is whopping 56.5% lower than in the original bull thesis, and will respectively lead to a TSLA valuation of 1.12T USD in 2030. An annual return of 2.5% (below inflation) if you invest at current prices.

    Chapter 4. ASP

    Perhaps for Teslanaires throwing $50K at a car is no big deal, but for most people said $50K is actually big money. If Tesla wants to sell 8.7M cars it needs to either (or preferably both) reduce the ASP of existing model lines or introduce cheaper ones. Especially given the aforementioned points on increasing competition, poor roadmap and aging line-up.

    8.7M correspond to 7.1% of the total projected car sales in 2030. Only two brands (note, not manufacturers) had comparable market shares in 2020, namely Toyota with 8.5% and Volkswagen with 7.8% respectively (source). It is only logical to assume that the price distribution of Tesla cars should follow that of a Toyota or Volkswagen rather than, for example, Mercedez-Benz (3.1%) or BMW (2.7%). Neither Toyota Motor Corporation nor Volkswagen Group do not break down the sales and revenues by brands. We will take Toyota as an example as it only contains 2 major brands (Toyota and Lexus) in contrast to 5 major brands of Volkswagen (Volkswagen, Audi, Skoda, Seat and Porsche).

    According to the latest Toyota Financial report (Q1-Q3 combined) ASP of Toyota car is 3.8M yen or 33K USD, estimated by dividing automotive revenue of 23.3T yen by car deliveries of 6.1M. In reality these 23.3T yen also included financial services, and 6.1M deliveries also include Lexus, but it's a good enough approximation. Under the assumption that Tesla can dictate $5K premium for the same market share, Tesla's 2030 ASP is $49.5K (38K x 1.03^9) or 25% lower than the original bull thesis assumption of $66K.

    Deducting these extra 25% results in TSLA valuation by end 2030 of $840B, or -0.7% annual return if you invest today. See the discrepancy between these numbers and 3-10T valuations TSLAnalysts target for as soon as 2025? And they often claim that nothing other than auto sales are included in their models.

    Margins.

    One topic I will not touch in this post is net margins, as it deserves its own DD. For now we assumed the same margins in all of the cases. In fact, lower ASP (e.g. cheaper models), increasing number of service centers (to keep up with production), etc. would definitely put a pressure on margins. On the other hand Tesla investments in Gigacasting and structural batteries might (or might not) help to increase margins. Drawbacks of the latter two is lower (to none) repairability that would lead to higher warranties costs. As I said, the topic deserves its own DD.

    Chapter 5. Share dilution or Twitter polls

    When we discuss the share price we should also touch such concept as share dilution. Even if Elon personally says enough and stops diluting shareholders via his out-of-this-universe bonus plans. Note that for the last 5 years alone number of outstanding shares increased from 0.8B to 1.12B (source), and to my understanding that might not yet include non-executed options of Elon (experts please weigh in).

    Due to the expected high-growth, i.e. ramp ups of existing factories Gigafactories and introduction of new models, Tesla is unlikely to offer stock buybacks until 2030. And even if we assume that Tesla will not raise any more funds either, share dilution will still take place via employee stock compensations alone.

    A good comparison would be Amazon, unlike Microsoft or Apple who offer a lot of buybacks. For the last 7 years Amazon experienced an average share dilution of 1.1% (source). Needless to say this is a bullish target for a company in a more infancy stage such as Tesla. Applying average of 1.1% over the course of 9 years (end of 2030) brings total share dilution to 10.3% (1.011^9).

    On top of that, Elon demonstrated that not only he loves to bonus compensations, he is open to sell them, i.e. increase the float. Which is in short to mid term is even more important for a stock price than outstanding shares as it increases the supply on the open market. But in shouldn't play a role in theory for the long term (again, in theory).

    The results:

    If I would want to invest in Tesla now, such that it returns me in average annually 10% (vs 7% average of SPY) and we apply:

    • our estimated target for market cap of 840B USD,
    • and take into account bullish 10.3% share dilution,

    Tesla should not be valued more than: 840 / 1.1^9 / (1.103) = 323B USD today

    Or with the current number of outstanding shares: 323B / 1.123B = 287 USD per share today

    For Tesla bulls: before you say it's outrageous, note how this model still results in $TSLA current market cap equivalent of Toyota and way bigger than VW group. And all that due to the high expectations of growth alone. However, expectations of high growth over the long timeframe involves a lot of risks, that we didn't even account for.

    Chapter other product lines of Tesla:

    As for the other product lines, it's difficult to judge them now as they are in their infancy. Solar installation seems to be dropping since the days of SolarCity (source). Since 2018 solar installations seems to be recovering and the energy storage seems to be increasing (source: latest quarterly report). However, it is clear from the financial statements that both of these businesses lose money already on the gross margin level. In particular, Tesla reported Automotive Gross margins of 29.3% and Total Gross margins of 25.3%.

    How a company exactly calculates gross expenses might differ, but losing money on the gross margin is rarely a good sign. It often means that the costs of goods sold already exceeds the selling price. Think of it as Tesla spending $100 to buy solar tiles, another $50 for shipping, and $200 for labor to install it, whereas only sells it for $250 to a customer. On top of that there are operational expenses that include general management and accounting, engineers, marketing, their bonuses, office expenses, etc. that affect Operating margins.

    The TAM of storage and solar by 2030 is debatable. It is clear however, that the biggest solar companies in the world (source) have valuations of just few billions. So adding 100s of billions to Tesla's valuation based on Solar business is unreasonable. I bet the same holds for energy installation business.

    Chapter Hype: Fraud Self Driving

    This one is the closest to my heart. Disclaimer, I work for the top automotive semiconductor company and contribute to automotive sensors for high-level autonomy. And by proxy, I also have some understanding of the post-processing side of things, what Silicon Valley folks refer to as Machine Learning, Sensor Fusion, Behavioral Planning, etc. So I could probably write the whole DD just related to this topic, but instead I will try to keep this chapter simple. No discussions on the strategy, sensor suits, architectures. We will only talk about simple concept - disengagements.

    Since Tesla doesn't share any statistics on disengagements of FSD, we can only rely on the videos coming from the OG Tesla shills beta-testers. If you explore the prairies of Youtube you will encounter hundreds, if not thousands, of FSD videos. At first, you would be even impressed. But we fellow investors should not mix emotions with raw numbers.

    After your careful research you would realize that (anecdotally) average disengagement rate is about 1 disengagement per 1-5 miles. Elon's statements on Tesla being on the path of marching nines is heavily misleading. If you think emotionally, a car driving all by itself for 1 to 5 mile is an impressive feat. And maybe it is, which is not an achievement of Tesla per se, but the whole industry since the days of Darpa's challenges and even before.

    But if we think practically, we realize that 1-5 miles is too short of a distance. In average US driver drove 14000miles in 2019 (source). For the sake of the argument, let's say that not all FSD disengagements would have led to lethal accidents if not taken. Be it 10%... f**k it, say 1%. That is still 1 lethal accident per 100-500 miles. Or 28 - 140 lethal accidents per year. Would you trust a system to drive you or your loved one home, if you know that the system will try to (or successfully) kill you every second week or even day.

    If Tesla reduces disengagement rate from there by 100, You still end up with 0.28 - 1.4 dangerous disengagement per year. That's where the big problem starts to appear. Since a car is NOT trying to kill you for 364 days in a year, you start to become complacent and that's where the first accidents will happen. After few lethal accidents people perhaps will become very cautious again.

    Fast forward, Tesla reduces disengagement rate by another factor of 100. Now it's one lethal accident in 100-300 years! Tesla so far produced 2.5M cars with FSD take rate of 10%, i.e. 250K wild FSDs out there. And that results still in 830 to 2500 lethal accidents per year due to FSD.

    And that is how marching nines looks like. When Tesla will fight against statistics as people will get more and more complacent. But we are long way from this.

    Chapter Hype: To be continued...

    I could also rant about 4680, Gigacasting, vertical integration. Especially on the last topic I have something to say from semiconductor perspectives (given Tesla's ambitions with FSD chip and DoJo). But all of these topics I might include in some other DD later on.

    Chapter History.

    A bit of a detour into a history of stock market. I like to compare Tesla to Cisco. Just like Tesla, Cisco was the stonk in 2000. Cisco actually was the World's biggest company by market cap with a valuation of 500B, adjusted to inflation - 800B. But that number makes no justice to what Cisco was. In 2000 the World GDP was about 34B vs 84B now (source: statista), SPY was around 150 vs 470 now. So, Cisco price was equivalent to 1.25 to 1.5T of today's dollars.

    And yet, market analysts did claim that Cisco still had a lot of room to grow. For instance, this bloomberg article claims Cisco was the safest Net play back then. And another nice fella from Credit Suisse believed Cisco will be valued at 1T in just a few years! 1T of 2000 dollars no less. Does such claims sound familiar? At the time of the article, 37 investment banks rated it buy or strong buy, and NONE sell or even hold! By the way, article was released on 19 March 2000. See how they almost perfectly timed the top?

    By looking at CSCO all-time chart you can see how the story ended. In 20 years the price haven't recovered to it's ATH. Add to that how much market has grown, inflation, and you will realize that the real returns are much worse than -28%. Nowadays Cisco is the real solid company with a current valuation of 230B and PE ratio of 20. The problem is it was just too overvalued and too overhyped around 2000. Was Cisco a part of the future back in 2000? Absolutely. But sometimes you need to ask yourself how much that future is worth.

    It doesn't really matter whether Tesla is 1-5-10 years ahead of competition. What matters is how much that lead actually worth?

    Conclusion

    My conclusion results that the bullish target for TSLA is 287USD. I am not a financial advisor so only you yourself are responsible for you financial decisions.

    P.S. Fun fact, $TSLA is valued at approx. $890B / 2.5M = $356K per every car Tesla ever sold (it was $480K per car as late as January 3). When Hertz "announced" 100K order from Tesla, $TSLA jumped around $400K per every car. This creates an interesting philosophical question: didn't we just discover perpetuum mobile? You can buy a Tesla car from a wealth generated by $TSLA which in fact would increase the value of former even more. Could it be that all Tesla buyers are former or current $TSLA holders? khm....

    Edit: since many people are so kind to ask me to short Tesla, I just wanted to make clear I already shorted: positions. Main position is 25x 250p Jan'23.

    submitted by /u/Spare-Help562
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    What’s your outlook on VIAC?

    Posted: 15 Feb 2022 01:55 PM PST

    It seems so far that Paramount+ is doing very good, but that earnings miss though, even though their revenue was up…I don't even know what to think anymore. I have money there, and I don't know if it's a nightmare came true or something to be very happy about!

    submitted by /u/realjasong
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    Russia returns some troops to base in areas near Ukraine

    Posted: 15 Feb 2022 12:57 AM PST

    Source: - https://www.reuters.com/world/europe/russia-returns-some-troops-bases-areas-near-ukraine-report-2022-02-15/

    MOSCOW, Feb 15 (Reuters) - Some troops in Russia's military districts adjacent to Ukraine are returning to their bases after completing drills, Russia's defence ministry was quoted as saying on Tuesday, a move that could de-escalate frictions between Moscow and the West.

    Russia's Interfax news agency cited the ministry as saying that while large-scale drills across the country continued, some units of the Southern and Western military districts have completed their exercises and started returning to base.

    Russia has amassed over 100,000 troops near Ukraine's borders, prompting fears of an invasion, especially as Moscow's Feb. 10-20 joint drills with Belarus mean that Ukraine is almost encircled by the Russian military.

    Russian markets reacted positively to the news and the rouble , which has been under pressure due to fears of fresh Western sanctions in the event of a war, gained 1.5% shortly after the defence ministry announcement.

    Although Moscow has denied ever planning to attack Ukraine, it has demanded legally binding guarantees from the United States and NATO that Kyiv will not be allowed to join the military bloc. Washington and Brussels have so far refused to make such pledges.

    German Chancellor Olaf Scholz was expected in Moscow later on Tuesday to meet President Vladimir Putin in a high stakes mission to avert war.

    submitted by /u/johnsoft223
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    Metaverse stocks with near-term potential, or the industry still too "far out" at this point.

    Posted: 15 Feb 2022 06:09 PM PST

    The "metaverse" seems all the rage lately, the hype making it seem like we're about to be thrust into some bright new science fictiony future. Intrigued, I took a small position in Matterport as my lone metaverse stock, but the performance has been pretty Meh-tterport so far. What do you see as the potential for this industry near term? Will big players such as META or GOOGL simply buy up babies like MTTR, or are can companies such as MTTR or U become big players on their own in the long term?

    submitted by /u/Clear_Lead
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    12 Rules for Avoiding Misery

    Posted: 15 Feb 2022 02:47 AM PST

    A young teenager contacted me on Reddit, asking me to tell him how he can predict stocks. He asked a person who, after 2 years, still cannot understand how the stock market works, not to mention predicting, but what I realized is, if I ignore his question, he will ask someone else, and I think I am a tiny bit wiser than others who wouldn't mind selling their future for gambling on the stock market. After long typing I realized that it would make sense to post my thoughts here, perhaps someone else might want to read it.

    I ended up writing 12 points, even though I didn't plan to write more than 4. Why did I name this post this way? Well if I named it '12 Rules for Success on the Stock Market' I would trick many people, since I am not successful at first place, plus the whole idea about this post is to help people be wiser and avoid losing their investments. Once they figure this out, then they can also make profits. If you focus on profits from the very start you might end up having nothing. Plus if I knew how to be successful I wouldn't be here, would I? So here's what I learned in the last 2 years.

    FYI: I learned all of that by making mistakes, so this is just my experience and you shouldn't use it as a guide or the ultimate truth!

    1. Get to know the company and try to understand the principles as much as you can.
      What is their goal? What are their promises? What promises have they kept in the past? What is their vision and when should it become reality? How much money do they have in cash? And so on. If everything sounds great or promising then there's SOME hope.
    2. Go to their website and read their quarterly reports as well as other documentation.
      This will give you a better insight on whether the company is healthy or not. It is obviously not enough but still better than nothing.
    3. Check if they are hiring.
      Often on their websites they might have open positions - if you see a small company like ABGD (Alpha Beta Gamma Delta Inc.) with big promises but you don't know if it's true or not, then you can go to their website and check if they have open positions. In this case with the fake company ABGD, they have a lot of open positions which MIGHT mean that they have the money to pay them, they plan to go big and that's all a SMALL sign that people are working behind it. It is not enough, but if there are 5 open positions in a team of a 100, but everybody is talking about it, then stay away from this hype.
    4. Read the news.
      Keep yourself up to date. Yahoo Finance is a great platform to show you the news from different sources. You don't need to read every single one of them but you need to know what is going on. Don't sit and wonder why your stock is 80% down in the last month.
    5. Don't buy/sell depending on the news.
      Often the media tries to scare or encourage people to do something, one article is not enough to convince you that everything is great. Take your time and don't trust everything you read. Many will get scared sometimes for no reason but remember why you are there. Sometimes it is good to go against the crowd.
    6. Don't invest in too many companies.
      It might be good to have a diversity in your portfolio because then if one goes down the others will support your finances, but that is often silly because you cannot keep yourself up to date with 30-50 companies, therefore you cannot control your money. But if you have a portfolio of 3-5-10 companies then you have a better control over your investments because you know what's going on and you will know if one day the company goes shit and it's time to pull.
    7. Don't think short-term - always look at things long-term.
      Like 2-5 years. Maybe more sometimes, not 2-5 months from now. Don't be short-sighted unless you want some quick profits. Companies can't grow massively in just half a year, but a stock could. If you are focused on quick profits, then you have to look for a hype, not values or mission.
    8. Never punish yourself for making a mistake in the past.
      You should learn from the past but you live in the present so if you lose money that doesn't mean you should gamble now to return your loses. You will lose even more this way. Always be patient and learn from your mistakes. Even the richest had to fail many times in order for them to succeed.
    9. Invest what you can afford to lose.
      I know everyone says that but some people really don't know this. If you have $1000 but you think you might need them in a few months then don't invest them. If you think that you only need $500 and you can live perfectly fine with $500 less then invest $500. If you lose them one day then you won't have to stress yourself about it. But if you win, then it'll feel like you have a bunch of apple trees in your garden. FREE FRUITS! Unlike apples, money don't grow on trees but they grow on the stock market. Money kept under your mattress will have the same worth as the mattress one day.
    10. Take some profits out!!!
      Don't make the mistakes that I did where you triple your income in few months and then you let your money there thinking that it will be like that forever! You need to take some profits out. The stocks will always go down, some will go bust, but having some money out will give you the chance to invest more or invest in something new. If you wait until you have 10 or 100x gains, you might quickly end up with a lot less than what you had at the peak, or go minus. Being in minus is fine as long as you remember that you're there long-term and the company will grow again, but having your money stuck there for 2-3 years when you know you could've made even bigger investments if you took the profits out, will only prevent you from getting rich.
    11. If you don't know much about stocks and what the companies do and you are very emotional person, then invest in ETFs.
      The growth there is small, but it is a great way to preserve your wealth from being eaten by the inflation, plus if you keep investing every month a bit, after 10-20 years this small growth of 1-5% a year, could become 30-50% a year. This should be your retirement money, but if you want to have a house in 10 years from now then ETFs are not gonna be for you.
    12. Any small profit is a profit.
      Most amateur investors lose their money. If you manage to not lose your money and one day leave even with 10% more, you still did well and better than most, so don't hate yourself for missed opportunities. There will be more chances.
    13. Don't listen to any Redditor online, including me.
      As you can see I am not that competent in what I do because I said there will be 12 Rules, but instead there are 13. We are all here to grow and get rich, but if we knew the secrets, insights, hidden knowledge, and made a great fortune and have a great life etc, then probably we wouldn't sit here trying to inform ourselves and look for the next big thing. The successful people here are a very small percentage. Most of the people are here to fix their mistakes, become better at what they do, and so on. You'll get so many bad pieces of advice and people might trick you into believing in something that is a complete BS, so if you want to avoid mistakes caused by someone else, then simply listen to no one. Learn from them, learn from their mistakes and successes but ALWAYS decide what is the best for you! Don't let others do that for you. I hope this will help you to become successful and remember, don't listen to me.

    Good luck!

    submitted by /u/rotloch
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    BMY and Senior Notes Offering?

    Posted: 15 Feb 2022 02:37 PM PST

    Hey gang, novice here but one lucky enough to have a significant percentage on BMY, and I'm seeing all this news about $6B in senior notes? I'm able to infer what they are, but what might this mean for the future?

    Thank you much!

    submitted by /u/ecm27
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