- The competitiveness of Tesla.
- Tesla’s relationship with its suppliers.
- The challenges Taiwan suppliers face.
This article is intended for ordinary investors who invested or intend to invest in Tesla and its supply chain.
A.The competitiveness of Tesla
1.The competitions in the car itself
- Avant-garde, high-end: The brand-name companies, such as those appeared in 007 movies. Maybe someday silent Lamborghini and Ferrari will become trendy.
- Family commute: The big companies, GM, Toyota, Ford.
- The low-cost: Chinese car makers.
2.The competitions in technologies for autopilot
- Intel, Nvidia, etc.
- Many experienced workers have been working on the process and technology of the key parts of cars for decades. How to move the whole clusters of suppliers from Japan, German, Swiss, and Taiwan to the US?
- How to establish partnerships?
4.Other big battles of the magnificent CEO
- Tesla Gigafactory.
- Tesla Charging Stations (worldwide?)
- Send people to the outer space, SpaceX.
- Build a tunnel in CA.
- Put laces in our brains.
Imaging one day most of us do not need to buy a car, but instead leasing time-sharing self-driving cars from Tesla. Our houses are powered by the Solar City. Our best people sent to outer space are all superhuman.
We did not see other successful companies, Intel, Microsoft, Google, Facebook, IBM, Cisco, Nvidia, Qualcomm, burning investors’ money the way Tesla did.
Let’s compare the earnings part of Tesla with GM and Ford. You can get this kind of information from Yahoo and many other sites, also from Earning Channel.
|Symbol||Price 3/26||P/E ttm||EPSttm||GR_EPSy||REV2016||GR_REVy||RPSttm|
Notice that, Tesla’s annual revenue growth was 56.5%. However, its revenue is only 1/28 of GM. When it grows to be as big as GM, can it earn 6.13 per share for the shareholders? From the table above, for ordinary investors, GM seems a lot safer.
Let’s look closer, Q4 2016 was the only quarter Tesla made money. It was also the only quarter GM had a negative growth in EPS in the past 8 quarters. But the drop of GM’s EPS was mainly due to the comparison with the surge of 2015 Q4.
Now, the revenue. The growth of Tesla is impressive as it delivered Model 3. GM, considering its size, had a pretty good growth in the last four quarters. So, one need to guess, when the revenue of Tesla becomes 1/2 or 1/4 of GM, which of the two companies will bring more profit to the ordinary investors.
We are not saying that General Motors is better. General Motors has its own problem to face, otherwise, the price-earnings ratio will not be 5.63. P / E is the result of investors voting with real money. Can GM (management, research, trade union) meet the challenges of future design, manufacturing, and operational models?
For trading, let’s look at the charts. First the long-term monthly chart. We can see that some early investors already made a fortune, with a gain of 1818% since the low of 2011.
Since 2014, the price moved in a wide flat channel to digest the previous price growth. Is it now forming a higher base or a top? We can’t predict.
Since electric cars or auto-piloting are sensitive to government sponsorship, the macroeconomics, and the sentiment of environmental protection, there are too many factors that affect the stability of the growth.
Take FCAU for example. The recent surge of Fiat-Chrysler may be due to the expectation that FCAU could benefit from the relaxing of the environmental protection by the new government.
Another major example is solar companies. When the government stops or reduces subsidies, many companies are in trouble.
So, our suggestion for ordinary investors is to stay away from the high-priced and high-risk stock. Even if Mr. Musk may pull it off and become a super trillionaire, retail investors should not follow suit.
Let’s look closer. From the recent monthly and weekly charts, the price of Tesla is near the upper walls of both channels and is not a good time to buy.
We compare with General Motors. It’s weekly and daily charts tell us, it’s a good time to buy, at least for the short term. Whether to buy-and-hold, you need to figure out if GM is up to the challenge. Because GM’s price-earnings ratio is low, you can at least use the band trading technique to make a profit. If the trend is right, you can gradually increase your position.
If you are interested in using a channel trading to create a long position for GM, please download Earning Channel to assist you. You can use the Action Plan of the Earning Channel to set up the channel trading lines. Then Earning Channel will automatically alert you the optimal trading timing.
B.The supply chain
Taiwan has several key suppliers in the electric vehicle industry. Many of which have worked hard in this field for 30 to 40 years. Some are Tesla’s exclusive partners, and some are expanding their business to supply low-cost cars in China.
Notice that “Tesla boss Elon Musk has warned in the past he would fire suppliers” “Tesla’s policy is to terminate any supplier that is unable to meet their contractual milestones or violates their non-disclosure agreement,”
In the case of life and death situation, we can understand Tesla’s strict requirements for suppliers. However, we are mainly concerned about whether the retail investors can buy the stocks of Tesla and its suppliers. We must consider whether Tesla’s suppliers are competitive enough to survive.
As for the Chinese market, it is cruel as usual. Who can provide faster and cheaper solutions will get the market. When the current suppliers can not outperform themselves, they are in danger.
So, for ordinary investors that share the dreams of Tesla, beware not only on Tesla itself but also on its suppliers, when it comes to investing in their stocks.
If you are not interested in overseas stocks you can skip the following. However, if you follow expert’s advice and try to diversify your investment, the following discussion may be of some value to you.
Now let’s look at some of the stocks.
First, the unfortunate Germany company, “The loss of the order sent shares in SHW, which assembles pumps and engine components as well as brake discs, to a four-month low on Tuesday.”
Now, some of the Taiwanese stocks.
In the charts below, some of the prices were below zero, this is due to the fact that these companies raised private funding but did not disclose the number of shares equated to. Also, notice the colors of the candlestick bars in Asia is opposite to the US. In Asia, red is up, green is down.
Many of the car suppliers’ stock in Taiwan went skyrocketing in the past few years. Our suggestion is to follow Peter Lynch’s advice, to avoid skyrocketing stocks. They often go down the way they went up. If you can’t read Chinese, you can still figure out from the pictures. Next time, we can discuss some of the suppliers in the US.
Tung Thih was found in 1979. Its revenue was mainly from the rear radar detector. An increment more than 500 folds since 2009 till the top in 2016. Wasn’t it tremendous?
If you follow channel trading, even if you are not an insider of the company, you should be able to avoid the drop from 590 to 290. The most recent drop was due to the revenue declined by 40% in Feb.
Please refer to “Topping Patterns and Channel Trading” for handling this kind of situation.
The major business of Cub Electric Part is TMPS (Tire-pressure monitoring system), which has now become the standard for many countries.
From the monthly chart, the price is near the lower wall. It is now at the turning point of either forming a very large top; or back to the long-term monthly up-channel.
It is better to wait for the price to bounce back up to either the channel-buy-point or the channel break-down-line, before making your decision to long or short.
Bizlink provides the battery cables for Tesla. Its monthly charts look healthy.
Hota provides the key component in the gearbox for Tesla. The price chart seems to be forming a top. One should look into the detail of the company before buying.
Not to make the article too lengthy, we’ll come back and discuss these companies if the readers are interested. But a better way is for you to download Earning Channel and play with it, and figure yourself.
The above shown monthly charts are guidelines. For trading, you should use the monthly channel as the guideline, weekly channel as the reference, and daily channel for the action.
Although the potentials for the electronic cars and auto-piloting are great, it is a money burning game. If you buy these stocks now, it is almost like horse racing. Should you bet on a young stallion, the old fame, or the massive and cheap?
For the key part suppliers, they have to be nimble and be always on their toes. An unexpected wave may have them capsized.
Another factor for investing in Taiwanese stocks is that the stock market is heavily weighted by foreign institutions. Ordinary investors should closely watch the US stock market and the performance of the major players. To electric car components, at least to pay attention to, Tesla, GM, Ford, and S&P500.
Hope this article is useful to you.
Good luck on your investment.
The editors of Earning Channel do not have the above-mentioned stocks and do not intend to buy/short in the coming 3 days.
The Earning Channel software, as well as the articles, tutorials and suggestions in the website and social media, are provided as tools and references to help users develop their own market analyses and make their own investment decisions. Users are ultimately responsible for the way in which they use this information to invest in the stock market. Nothing associated with the Earning Channel or the information presented in articles and tutorials should be interpreted as direct advice on buying or selling of securities.