Liron's Comments

Covid-19: My Current Model

Unfortunately I feel like the whole pandemic will only lead to a very slight overall uptick in preparedness for the next, much worse one. The biggest impact will probably be people’s perception that pandemics can be real threats.

What aspects of the world emotionally bothers you on an immediate personal level on a daily basis?
Answer by LironMay 22, 202010

I’m somewhat scared to check my email inbox in the morning because every week or two there’s something in there that existentially threatens my company, like our app not getting approved in the app store or most recently Facebook inexplicably blocking our ads.

Isn't Tesla stock highly undervalued?

Ya I’m now pretty convinced that Tesla’s market cap isn’t obviously off by an order of magnitude, and is merely a good buy with expected value similar to buying any top tech stock. So my accepted answer to the original question is “no”.

I endorse buying a significant amount (10%+) of top tech stocks and Tesla as part of a diversified personal portfolio.

Isn't Tesla stock highly undervalued?

Ok 100x Tesla's 2019 gross revenue is a stretch (100 * $25B = $2.5T = half of car industry, 5x Walmart), I didn't think that through.

For comparison, Toyota's market cap is $194B and their 2019 operating profit was $22B. Today the market is valuing Tesla at almost Toyota's level. I'll say there's at least a 20% chance that Tesla will surpass Walmart's revenue in 7 years, i.e. reach double Toyota's 2019 revenue.

If Tesla can 5x their 2019 revenue (that's $125B), then they'll probably grow into their $150B market cap with a normal P/E ratio (I'm assuming higher margins than Toyota).

So yeah, this seems like the consensus guess that the market is pricing in: Tesla keeps getting more powerful every year because it's building on a bunch of accumulated advantages, until it's one or two Toyotas, or it could somehow stumble and fire sale.

But now, on top of that, we need to layer on the Elon Musk magic. Beyond 2025, Musk is just getting started. There are going to be "oh shit" moments where threads come together. It's like when SpaceX recently announced they're planning to start launching 1,000x more weight into space each year than all the rest of the world's companies combined (not to mention reusable rockets and Starlink). I can't invest in SpaceX, but I at least want to be holding tickets to the Elon Musk / Tesla show.

Isn't Tesla stock highly undervalued?

I agree with what you're saying. My point is that public stocks rarely can be said to have a startup-like "chance to see those big numbers" (10x+ upside). When such a chance is say 20%+, then you don't need to worry too much about the 80% chance of a 0.5x or 1x downside.

Isn't Tesla stock highly undervalued?

So far the feedback in this thread has updated my opinion from "the rationalist community could conceivably agree that this is an amazing stock pick" to "this may be merely the usual kind of high-priced high-quality stock".

The point I haven't seen addressed in the comments is I think Tesla has unusually potent ingredients for a more than 10% chance of a 10x+ upside. Just scaling up its gigafactories and dominating battery production across all industries seems like a sufficient ingredient to tell a disjunction of such stories. Making an equity bet where the maximum loss is 1x therefore still seems attractive to me.

But you could probably say that about all the top 5 tech stocks, especially Amazon if I had to pick one. I do think it's currently good to own these tech stocks as a significant percentage of one's portfolio, and I guess owning Tesla may not be any better than that.

Isn't Tesla stock highly undervalued?

It seems like all the competitor EVs today have two major downsides vs Tesla: Huge price increase for same battery range ($20k or more) which I guess supports your point that Tesla's battery dominance is its main advantage, and the other EVs' autonomy features are very lacking. I also suspect that their overall car OS / software platform is lacking the design and integration that Tesla has.

Isn't Tesla stock highly undervalued?

I think Tesla is pretty clearly making the best EVs right now but ya it’s hard to say how many years of lead they have and whether the lead is growing or shrinking.

Why are you convinced that Waymo is ahead of Tesla on autonomy?

Isn't Tesla stock highly undervalued?

I think they are likely to grow to 100x their current revenue - reasoning backward from market potential the way a startup investor does, rather than anchoring from their current size.

Isn't Tesla stock highly undervalued?

I agree the market is pricing in a normal kind of expectation of “significant gains” but it’s not pricing in a major industry-changing “surprise” breakthrough announcement, which on the meta level should not be a surprise IMO, but rather the expectation. This company has ingredients in place for a massive upside. I admit I don’t know the facts here but I’m feeling pretty skeptical that BMW will have caught up to Tesla’s vehicles in 5 years or even shrunk the size of the lead, even given their currently much higher scale of car production capability.

Re autonomy, I heard on the Third Row Tesla podcast that driving a Tesla in the last couple months has noticeably better autonomy than ever and the fraction of time/situations when you can let the car drive smoothly for you without touching anything keeps increasing. They are also collecting a lot more data than Waymo, the highest quality kind of data you can get: real driving on real roads, and times when the driver disengaged autopilot.

Load More