Narrative among some $TSLA bulls: Reducing price of M-Y by an additional $1K will increase EV adoption faster than a comparable increase in adv spend. Reducing price of M-Y by $1,000 would cost TSLA $1.2B pretax per year. I would argue a $1.2B ad campaign educating non-EV buyers why EVs are better than non-EVs would produce a far higher ROI.
@garyblack00 Yes, this is so obvious to me, puzzles me that so many people think Advertising is virtually worthless, especially for a product that is actually the best value proposition out there by far (not some inferior product we have to ‘trick’ consumers into buying somehow)
@EmmetPeppers @garyblack00 Advocates for Advertising are @Tesla stock price pumpers who live and die by monthly and quarterly results. They need the stock price up because they have taken it in the teeth for the last 18 months. Understandable, but cash will be needed for future raw material inflation.
@jlhjedi @garyblack00 @Tesla What are advocates for a Tesla share buyback then? Did you disagree with Elon on that mention last year?
I’m still in favor of a buyback . The debate is $TSLA with $22B cash and $60B free cash flow over the next five years, would I rather have FCF go into cash at 4%, or a TSLA $10B buy back over 3 years at a 20% IRR? I know that goes over many investors’ heads, but that’s the debate.
I agree…it’s my counterpoint to Elon followers who make above point about advertising money being used to pump stock price…just turn it back to them and ask if they were disagreeing with Elon on the share buyback suggestions too? As that should be the same category of “pumping the stock with buybacks” to them as “advertising to pump the stock” I highly doubt any of them were in disagreement with the idea of buybacks when it was supported/brought up by Elon
@EmmetPeppers @garyblack00 @jlhjedi @Tesla I’m not a big fan of advertising or buy-backs unless you literally have nothing else to productively spend the money on. There are so many areas for Tesla to improve its product line that I don’t see that as the case.
That’s the problem. $TSLA cash is building up at 4-5% because they can’t spend it fast enough. TSLA had $22B in cash at end of 1Q and TSLA free cash flow AFTER ALL CAPEX will total $60B over the next 5 years. If the choice is cash at 4-5% vs buying back stock at 17% IRR I’ll choose the latter.
You need working capital to not be vulnerable, $22B isn’t that much given economic conditions, their market in a potential down economy and the magnitude of company. Holding cash at 4-5% until it’s needed for business purposes versus returning it to shareholders and then doing a raise when it’s needed, with crazy bank and third party fees, doesn’t make much sense from a longterm planning perspective. It will make investment people happy short term and investors happy short term at the expense of longterm investment returns for 10+ year holders. They will get a 20%+ IRR on that $60B when spent on Tesla business improvements and new product lines.