Tesla Lays off Staff. Will it Survive?

Dear Reader,


Tesla announced last Friday it is cutting around 7% of its staff after recently having cut staff again.

https://www.cnbc.com/2019/01/18/tesla-to-cut-its-workforce-by-around-7-percent.html

Also, the subsidies Tesla is receiving are about to be phased out. Will Tesla, the electric car manufacturer, survive? For the next 1-2 years Tesla will survive because the momentum(inertia) of the enterprise is strong. After that, I think there is real danger that Tesla is in danger of ceasing to function as a going concern.

Currently, I think Tesla Inc. is worth around 34% less than its current market capitalization of around 52 bln. USD and stock price of 302.26 USD. In other words, I think Tesla's stock should be trading at 200 USD and this price could be reached in circa 1 year.

Why? Because as Elon Musk states clearly in his letter announcing the layoffs in order Tesla to remain a viable automobile manufacturer it has to be able to produce mass, not expensive cars at scale. He even openly admits what I have stated in posts on Tesla before - that Tesla is a very young car producer and has much to learn. Basically, he tacitly admits Tesla currently lacks the know-how to produce mass cars at scale efficiently - that is with profit. Musk says that in Q4 2018 and Q1 2019 Tesla is about to show a tiny profit with its GAAP results. But as I have read some sites state that Tesla is recognizing advance orders in the current period...

It is worth noting that this is Tesla's second round of job cuts in a year. Truth be told, according to Musk Tesla's full-time employee headcount number grew by 30%. An important fact is that the subsisdies Tesla receives for producing electric cars are about to be phased out. According to Musk the Model 3 price has to fall from 44 000 USD to 35 000 USD and Tesla is supposed to still be a viable(profitable) company. Is it really possible? I will write something I have already written many times - without a technological breakthrough slashing the Tesla model 3 price from 44 000 to 35 000 USD or circa 20% is not possible.

Because of the ferrous metals inputs and other technological impediments the current technology of producing electric cars is simply not profitable.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Kind regards,

Petar Posledovich

Microsoft. What Drives Microsoft's Stock?

Dear Reader,


Microsoft recently became the world's most valuable company for a short while.

Microsoft's stock did not fall as much as Amazon's and Apple Inc's stocks in the recent stock market correction. Why the remarkable resilience or to put it poetically margin of safety of Microsoft's stock?

I see several reasons. First, Microsoft's past, present and future is still intertwined with the personal computer. Champagne may be forever, but personal computers are not going away either. Second, Microsoft is the second largest cloud computing provider after Amazon. The cloud computing market seems to be exploding and Microsoft is even increasing its market share. Third, clients are embracing Office 365 offerings which are also basically a cloud computing service. The Microsoft Office suite along with Azure are the main drivers of Microsoft's future growth, while the Windows franchise provides the needed safety net.

Satya Nadella turns out to be quite a skillful manager who puts to work his software as a service and infrastructure knowledge to good use. To round it all up, Microsoft's hardware efforts seem to be getting traction as well.

In short, I believe Microsoft's stock is currently about 20% underpriced from its current level of 102.80 USD.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Kind regards,

Petar Posledovich

Apple Warns on IPhone Sales. What Next?

Dear Reader,


Apple Inc., the manufacturer of IPhones, Mac computers, Ipads and various other gadgets and services last week issued a warning about lower expected IPhone sales, predominantly in China which caused Apple's stock to crash by nearly 10%.

So after the fall, is Apple fairly valued? I would say now the company is 10% undervalued. Why? Because it is too early to announce a coming recession in the global economy. I think global GDP will start shrinking somewhere in 2022. Yes, China is decelarating, but the fall in China's GDP growth will be gradual. I forecast China's GDP year on year growth will fall to 3-4 percent in the coming 3-4 years.

Apple, however, still faces an unexploitred niche. Apple's smartphone market share is quite low, actually - around 15.6%. The telecommunication operators are subsidizing IPhone models, so actually some of the models are not that expensive. I forecast that Apple will increase its market share in the smartphone market in the coming years. I used to own an Android smartphone, now I own an IPhone XR with IOS. Actually, IPhones are quite good, Android phones too. But the largest Android phone markers like Samsung and LG have been rasing prices, so the price/quality ratio of IPhones is getting better, although they are still expensive smartphones.

What is more, Apple Inc. is moving into services with the AppStore. Apple Inc. is almost giving away the lowest priced 9.7 Ipads with which you can enter the AppStore and enjoy its benefits. Slowly, but surely Apple's services revenue will increase both as a nominal number and as a share of Apple's sales altogether.

So Apple's stock is trading at 148.26 USD currently. I think Apple's intrinsic value is higher and its stock price will rise by 10-15% from the current levels in the next 1-2 years.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Kind regards,

Petar Posledovich