Top Tesla Analyst Jumps Ship, Reveals Herself As Tesla Fangurl

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Andrea JamesAndrea James has been one of the top Tesla analysts on Wall Street in the past several years. As she noted in a blog post yesterday, though, she was not going to be asking questions on the Tesla conference call last night for the first time in 21 quarters.

“Wowza, what happened?!” Well, the 34-year-old who had been working for Dougherty & Company since 2009 decided to take on a new challenge, founding Solve for X Coaching (h/t “geneclean55“). But she also decided to go out with a bang.

Jumping down to the chase, the key thing is that this lady, who had dug into Tesla’s financials and manufacturing process more than all but a few people (… if that), was finally allowed to but TSLA shares (which she couldn’t do while working as an independent analyst for Dougherty & Company). I think you know where this is leading. Here’s the punchline: “I can’t wait to buy in.”

But I encourage you to take a bit more of your time to read these segments from Andrea:

Being a Wall Street stock analyst on Tesla Motors (TSLA) shares from 2010 to 2016 has greatly enriched my life and understanding of the world. I took pride in the depth of my analysis and research — I always started from a position of skepticism and asking, “Where could Tesla go wrong?” But early on, it became clear that the bigger question — the world changing one — was, “Where could Tesla go right?”

My firm gave me the opportunity to call the truth on Tesla as I see it. And we get to that truth by analyzing the following three questions, at their simplest: Does Tesla have a technology lead that is real? Can Tesla build it? Will people come?

Answering those questions took me on a journey into researching battery pack manufacturing, touring battery manufacturing competitors, creating relationships with suppliers, and constantly talking with industry. My financial model, which I built from scratch, modeled out Tesla revenue and expenses for the next several years at a granular level — even at some points analyzing the costs of a lithium-ion battery down to the cathode, anode, electrolyte and separator. I have written volumes of research for Wall Street clients addressing Tesla-related topics. Unfortunately, that research is not available to the general public and was shared only with firm clients.

Does Tesla have a technology lead that is real? Can Tesla build it? Will people come?

Yes, yes and yes.

As I said at the top, Andrea has been one of the best Tesla analysts on Wall Street. As a Tesla fan and TSLA shareholder, there must be some bias in there, but the fact of the matter is that TSLA has risen from $20/share in 2010 to $222/share today, and Tesla just moved its 500,000/year production target from 2020 to 2018 on the back of an obscene number of Tesla Model 3 reservations.

model3_side
Tesla Model 3 @ Unveiling Event | Image Credit: Kyle Field, for CleanTechnica

Again, on the conference call last night, Elon gave subtle but clear indication that Tesla seems to be far ahead of any company in bringing down EV battery prices, the essence of bringing down electric car prices. He also noted Tesla’s ability to move faster than any of the large automakers, something anyone who studies startups vs large corporations should know well.

For the past several years, there have been naysayers at every step claiming that Tesla was on the verge of failure and would be bankrupt soon. Well, there were some tough times where that wasn’t far off, but Tesla got through them, and I think you have to be quite the pessimist to fall in that camp today. When asked specifically about when naysayers like Bob Lutz and Jim Chanos would come along, Elon laughed last night that there will always be naysayers, and some will say it’s “impossible” until it’s done … and then some of those people will say it was “obvious” that it would happen, ironically.

Andrea James, starting out as a strong skeptic, obviously isn’t one of those naysayers. After doing her homework much better than most of these analysts do, studying Tesla in greater depth than almost anyone has the time and resources to do, she is apparently a Tesla fangurl. I’d take that as a sign if I still fell into the skeptics camp.

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Zachary Shahan

Zach is tryin' to help society help itself one word at a time. He spends most of his time here on CleanTechnica as its director, chief editor, and CEO. Zach is recognized globally as an electric vehicle, solar energy, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, Canada, and Curaçao. Zach has long-term investments in Tesla [TSLA], NIO [NIO], Xpeng [XPEV], Ford [F], ChargePoint [CHPT], Amazon [AMZN], Piedmont Lithium [PLL], Lithium Americas [LAC], Albemarle Corporation [ALB], Nouveau Monde Graphite [NMGRF], Talon Metals [TLOFF], Arclight Clean Transition Corp [ACTC], and Starbucks [SBUX]. But he does not offer (explicitly or implicitly) investment advice of any sort.

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39 thoughts on “Top Tesla Analyst Jumps Ship, Reveals Herself As Tesla Fangurl

  • I hope she got paid well as a stock analyst, because being prohibited from personally buying the stock must have *hurt*, when she knew it was going up from $16 to $200+….

    • I got burned by almost every single stock investment I made in my early 20s despite having done lots of research and thinking I knew what I was doing. So I’ve avoided the stock market since then, but if I wanted to get into it again, TSLA would have been it. Unfortunately I didn’t have the money to do it when it was cheap, and now it just looks overvalued… Even Elon calls the over 200 price crazy. Yeah, it will not be crazy if they get to 500k cars a year and beyond, but there’s a lot that can go wrong on that road.

      • Suggest you get a copy of A Random Walk Down Wall Street by Malkiel. It’s an excellent way to understand why stock picking is a poor way to invest. Buy the market. Over time the market goes up.

        • Very true old mate
          Over time it will be a good investment if has value and substance

        • Buying a broad cross-section of the market has only been reliably a good rule since World War II, though some would argue since the 1920s. It’s not a good rule in most foreign markets. In the 19th century the recommendation for a solid portfolio was bonds. Bonds have gotten less safe, unfortunately.

          Honestly, I think rule #1 for investing is, if you can’t afford to lose it, don’t invest it. Sometimes I break that rule but only in very conservative ways.

          Stock picking is… extremely hard. Somebody’s got to do it or the market ends up consisting entirely of Enrons (if everyone is passive, frauds will take over all the indexes), but it’s extremely hard to do in any remotely competent fashion.

          One rule of thumb is: if you think you can beat the market, that means you think you have some information which most of the market does not have. What is that information? Is it real, or does the market actually know something you don’t?

          One of the things most of us here know, which the market *doesn’t* for the most part, is that electric cars are going to completely replace all gasoline cars. Anyone who doesn’t think that will happen would assume that Tesla would have a much lower rate of demand than they actually do, and would assume that competition would reduce Tesla’s demand (up to a certain point it won’t; both Tesla and the other EVs will eat market share from ICE cars.).

          • Even Buffet has been getting it wrong lately.
            That should give the rest of us pause….

          • ” if you think you can beat the market, that means you think you have some information which most of the market does not have”

            When I started investing I figured that I was reasonably intelligent and good with numbers. That if I was willing to work a bit then I could do a reasonably good job of picking stocks which were likely to grow over time.

            Then I read an interview with Peter Lynch who was running the Magellan Fund at the time. Magellan was the absolute rockstar of mutual funds, it was on a long run of highly successful years.

            In the interview Lynch stated that he had a minimum of one face to face meeting per year with the CEO of every company in which he owned stock. I realized that I couldn’t even get the CEO’s secretary to answer my phone call. There was no way I could have the sort of access a large investor would get. And I had no team of highly skilled researchers.

            Then someone told me about “Random Walk”. Interesting read, but I didn’t want to believe it. I figured that smart people must be able to beat the market over time.

            So I bought a database for all mutual funds over the last several years (20? don’t recall the depth). And I applied all my statistical skills looking for predictors – ways to pick the winners.

            First thing I found is that there aren’t any long term winners. Some funds have really great short term success but then drop back into the pack. (Read the part about 100 people lined up on the end zone line and flipping coins to see who gets to advance ten yards. Chance, alone, says that some will have a good short run.)

            Second thing I found is that there is no apparent way to tell in advance who is likely to have a good run. Success is not predictable, just recognizable after the fact.

            End of story, for me. Invest in index funds. Keep management costs really low. Don’t put myself in a position where I need to sell stock into a down market.

          • “One rule of thumb is: if you think you can beat the market, that means you think you have some information which most of the market does not have. What is that information? Is it real, or does the market actually know something you don’t?”

            -I like that. That’s what turned me into a “*never* get into the stock market” into an investor. And I think it’s clear from the piece Andrea James wrote that the closer you look, the more compelling TSLA is. But who knows? Unforeseen challenges and mistakes are just that.

            Other stocks are much harder for me. The solar industry is going to explode, but it’s very challenging to see who has genuine long-term advantages. I thought Yingli had scaled up enough and had enough backing from the Chinese government that it was a safe bet, and I got burned. I’m still invested in SPWR, FSLR, and SCTY because I think they have genuine competitive advantages. But I’m more concerned about SCTY for a few reasons I’ve written about here.

            Have invested in some large established companies that I think are set to do well in cleantech for decades to come, but they are subject to inefficiency and management problems that are extremely hard to see without an insanely deep and well done study.

            But yeah: “if you can’t afford to lose it, don’t invest it. “

      • Elon is possibly being realistic so take his word is my advice

      • Unless I missed something, Elon called the $200 price range crazy about 2-3 years ago, when they were at least 6 years away from a production rate of 500,000 pa. They had very little experience of mass production, and the Model 3 was just a glint in Elon’s eye.
        We now have a smooth assembly line up and running for the Model S, at rates about 2-3 times higher than they were then, the Model X in regular production (with lots of expensive lessons learned) and a number of alpha prototypes of the Model 3 already on the road.
        And suddenly that 500k production rate is less than 2 years away. (If Elon is to be believed…)
        Oh, and the 400,000 paid reservations…
        So the value of the company is clearly much higher than it was just two years ago. If $200 was expensive 24 months ago, it’s starting to look quite cheap now.
        But who knows… Volatility = risk. Growth = risk.
        I sold quite a bit at about $260, and made a bet on VW instead. Right now, that one’s looking a lot better than Tesla.

        When investing in individual stocks, remember that it’s a bit like roulette. You can bet on red and black and it’s mostly random. You can pretend to guess where the ball is going to land, and some of the time you’ll actually get it right. If you spent all day at the casino you’d be unlikely to significantly over- or under-perfrom the “market”. But every so often (about 1/37) the little ball lands on zero. And you lose everything.
        Example: Less than a year ago, SunEdison was over $30 a share. By April, it had lost 99% of its value. I bought some at about 30 cents, thinking it was worth a bit of a gamble. Within 48 hours it was no longer SUNE, but SUNEQ. Caveat emptor.

        Unless you’re really smart or really lucky, don’t try to pick stocks with money you can’t afford to lose.

        • I wonder what Elon’s thoughts on the price are now. But think he’s matured enough to not make comments like he did in 2013. I assume he genuinely feels confident about getting to 500,000/year, but is nervous about the challenges. Hasn’t said recently that a tsunami of hurt is awaiting shorts 😀 but he bought in when the stock fell to the mid-100s (perhaps just to provide some investor confidence) and I’d do so if it goes there again without any visible disasters.

    • Very much so she could have turned 100 k into a few millions

  • I listened to the earnings call on the way home from work today. By the time I got off the train, a penny had dropped.

    The ability to ask a supplier for a quote on a cool half million widgets is all powerful. The cost of many widgets is all in the start – the run can be relative peanuts.

    Today’s announcement isn’t just about wait time; it’s about profit margin. The margin on Model three, just went up several notches.

    • Indeed. Or at least the contribution margin went up. Based on their track record, I’d estimate that they’ll plow it all back into capital investment and the resulting depreciation will result in net zero profit, aka break-even. And that’s ok because they’ll be sitting on some manufacturing capacity then.

    • But tesla has probably designed a M3 that is only profitable at high volumes. They chose to design a compelling high volume car that probably won’t be significantly profitable per unit until later in its lifecycle. In other words, the cost savings from high volume purchasing is already “spent” by the M3 design.

      One major reason most EV are unattractive to most people is that they are designed to not lose too much money on low volume. Tesla is the only company so far who is trying to hit a home run with their product plan.

  • All that Model 3 income will likely be pumped into capital to produce the Model Y and updated roadster. I wonder which of the two will be announced first and what the timeline on the Model Y will be. The Model Y should result in another 400k+ reservations shortly after being revealed.

  • I’m surprised by the drop in Tesla’s stock price today after the accelerated ramp up plans revealed yesterday. It does not appear Wall Street trusts the likelihood of the timing given Tesla’s past delays. With a focus on ease of manufacturing though, the industry may be surprised by how quickly production can ramp up and with reasonable (at least average) quality and reliability.

    • Yeah. Maybe because of the capital raise and/or equity dilution needed. Or maybe lack of trust. Or maybe just have to wait for the reports to be written, upgrades to be given, and then see the pop.

    • Moving from a <100,000 cars per year to a 500,000 cars per year company in a couple of years is likely an idea that would scare the market. Getting close to one million per year by 2020 has got to knock people back.

      Look at the comments here. Most of us are really wondering if it is possible.

    • Ramping up that fast takes a lot of money and adds a lot of risk. I imagine that it actually takes more money to rush to 500,000 volume than to get there at a more leisurely pace. It pushes back the time frame that they’ll actually start being profitable. A lot of investors are all about short term profit and what Tesla is doing looks bad from that perspective. By moving so fast, Tesla is now paying for a ton more building space each month,
      additional staff, additional equipment, additional superchargers, additional destination chargers, all on the presumption that Model 3 is released on time and in the numbers they’re planning for. A lot could go wrong (including a world-wide economic downturn that keeps looming) and lead to a serious waste of money, possibly even bankruptcy or other major problems, and investors don’t like that. As much as I believe in Tesla’s dream, buying their stock is still a risky bet and they could still be crushed by other companies who move more carefully with bigger bank accounts. At least I think it seems that way to a traditional investor.

      I also think Tesla has a certain rock star position in the market because, in the eyes of many, they’re literally trying to save the world. In that sense, many people will cut them slack, offer them special deals, bail them out if needed, and hold on to the stock even when it looks super risky. From that perspective, it seems impossible they could fail in the long run. I think it’s that class of investors that have gotten the stock up as high as it is.

      Of course I could be wrong on everything here. One thing I’ve learned in a couple decades of limited investing is that the stock market is not driven by logic. It’s driven by some enormously complex set of logical factors, emotional factors, fear, greed, backroom deals, and countless people trying to predict and game the system. In the end, it’s no different than gambling. Even the people that work full time making investments often can’t predict how things will move.

      • People who will bail out Tesla if needed include Larry Page and Sergey Brin. Whether the *stockholders* would be bailed out is another question.

        The stock market is easier to predict in the long run than in the short run. There are some wizards who can predict it in the short run, but I’m certainly not one of them. In the long run, it’s just a matter of enormous amounts of research and psychology… I say “just”, hah.

        We are entering a risky period for Tesla; some of the other car companies have *finally* decided to start competing with Tesla. I think they’re a bit late. But it does make it very important that Tesla not screw up in ways which allow the competitors to catch up. Tesla’s greatest advantage has been the complete refusal to compete by the “competitors”.

        In the short run, however, the stock price is driven almost entirely by wild short-term speculation. I own TSLA stock, but I frankly expect it to gyrate wildly until mid-2018, at which point if they’ve successfully executed on Model 3, it’ll go up some, and if they haven’t, it’ll go way down and probably be sold to Google or someone. I expect them to succeed, and it is a bit of a gamble.

        • Another excellent summary. And am in the same boat regarding the stock/investing.

    • Just remember that stock markets do not always move because of underlying unsubstantial information.
      Shorts longs etc however it is possible a pessimistic attitude has been perceived i would still say the price is more effected by people trying to find a skim profit they would have no idea about the company.

  • There is of course the ability of one of the auto companies doing a loss making version to drag volume away from Tesla in the hope of putting financial strain on the company.
    This may be mitigated against because my assumption is that the majority of purchases of the Model 3 for instance will be techno savvy and would not be interested in that alternate offering.
    One area of supply is lithium, which appears to have risen in value, this will cause strains, unless Tesla has locked in long term contracts.
    If the acknowledged, financial analyst with the highest standing, has quit her job to enable more personal freedom in the very area she is expert in that to me speaks volumes for the underlying structure and strength of Tesla.

    • Pretty unlikely another company is going to steal Tesla’s thunder. They won’t have the battery supply or charging system.

      Tesla already has lithium under contract.

      • Thank you Bob i vaguely do remember that.
        Without a doubt this development has caused a ripple throughout the auto industry which has not moved far from the 1930’s in their basic structure.
        It well was way past its used time date which was built on selling a poor quality product that maimed and killed then was improved and still needed huge amounts of maintenance; this product passed those old para-dimes which were so not consumer friendly.

        • In other words short sell make a profit it has nothing to do with the stock value it is done on numbers.
          In reply to Tony

        • Agreed. Funny that “because no one had done it in ~100 years” made many of us think “it couldn’t be done.” It needed to be done. Time was ripe.

          • I have a relation who has never had a car works in I T it will not surprise, if the first one will be the model 4.
            He is the kind of person who will take up this technology

  • I think Tesla is down so much because everyone just assumes that Elon has finally gone completely crazy. A million cars/year within 36 months?
    We’ll have to wait and see…

    • That seems to be one of the most common guesses.

      I think it’s possible, but think the need for a capital raise and/or equity financing in order to support this growth is an important matter.

      And analysts also need some time to update their spreadsheets and targets and publish reports, which I assume will then jack up the price again.

      But the investment world certainly isn’t my area of expertise!

      • I’m curious as to what Tesla can do with the $400 million from the Model 3 orders. Obviously, there will be some that will ask for their deposit back but is that money in sort of escrow account or is Tesla totally free to do what they want with it?

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