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Tesla Will Survive and Ride the EV Growth Curve
Source: WSJ

Tesla Will Survive and Ride the EV Growth Curve

Tesla’s plan to reduce headcount by 7% does not change our long term view on the company. Note that Tesla increased headcount by 30% last year to ramp Model 3 production. Realized manufacturing efficiencies will allow the company to reduce headcount while increasing output.

  • Musk’s blog post indicated the company made a small GAAP profit in Dec-18, but less than the 4% reported in Sep-18. The fractional profit in December was driven by higher priced models (i.e., the average Model 3 priced around $55k), but the growth in the EV market will come from the sub $40k model.
  • Tesla needs to operate more efficiently and sell cheaper models to survive and ride the growth of EVs. Given the recent news of a 10% workforce reduction at Spacex, Musk’s focus appears to be shifting to profitability.
  • EVs accounted for 1% of cars sold worldwide last year; as prices fall, we estimate that EVs will be 100% of cars sold in ~20 years. Over the next decade, we believe Tesla can capture 20% of US EV market (down from Tesla’s 50% US EV market share in 2018). If EVs account for a third of cars in the US in the next 10 years and Tesla has 20% share, the company would sell 1.3m cars annually in the US alone, compared to 245k sold worldwide in 2018. Assuming outside of the US accounts for more than half of EV sales, Tesla can grow units at 25% per year for the next decade and ramp sales from 245k cars in 2018 to over 2.5m cars in 2029.
  • We estimate the average selling price of the recently announced EVs from Audi, Jaguar, and Porsche will be $85k, higher than the advertised ~$75k price. Mainstream automakers (GM, Ford, Toyota, Honda, etc) don’t yet have a scalable, affordable EV option. Eventually, they will. This year Tesla will begin to sell the most attractive sub-$40k EV (accounting for battery range and vertically integrated tech).
  • As a reminder, Tesla has a $920M note due in March of this year (convertible at $360). We believe the company does have cash on hand and significant cash flow from operations to service the debt, and there is a chance the debt converts if the share price is above $360 on the due date. There is an additional $566M note due in November of 2019, but the conversion price is currently significantly out of the money at $759.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Tesla
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Netflix: Revenue Upside to Be Re-Invested into Original Content

Netflix: Revenue Upside to Be Re-Invested into Original Content

Here are our five key takeaways following Netflix’s December results:

  1. Netflix reported Dec-18 revenue essentially in-line and earnings 25% above street consensus. The company guided Mar-19 revenue 2% below the street and earnings 33% below the street. The disconnect between Mar-19 revenue guidance and street consensus can likely be attributed to the street mis-modeling the rollout of Netflix’s recent price increase.
  2. Regarding the price increase, here’s the key quote from Netflix: “But you also see ASP domestically improve over the course of the year. And that’s what we think will drive an acceleration in revenue growth over the course of 2019.”
  3. The incremental revenue generated by the price increase will be reinvested in original content. Netflix’s original content spend is increasing: the company plans to create more shows and the cost per episode is rising.
  4. One unexpected comment from the earnings release was related to the impact of Fortnite as a competitor. While Netflix is the gold standard of original streaming video content, the company will face an increasing headwind from live streaming content. Netflix’s new CFO, Spence Neumann, was formerly CFO for Activision Blizzard and has familiarity with gaming, which dominates live streaming today. Read more about our thoughts on the rise of live streaming.
  5. Overall, Netflix is continuing to execute well as highlighted by the success of their original content and international subscriber growth. While the company has a meaningful growth opportunity related to continued international expansion, we think the probability of significant upside to revenue and earnings will diminish.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Netflix
2 min. read Show less
018 – Eric Menees

018 – Eric Menees

Eric Menees is the CEO of Hexis. He received his Bachelors from UT Austin with a triple-major in Mechanical Engineering, Biochemistry, and Neuroscience Scholars.

Top 3 Takeaways

  1. Hexis is building real-time emotion modeling technology.
  2. The success of wearables will depend on nuanced combinations of form-factor and function.
  3. The entrepreneur mindset is different from the mindset of a scientist.

Show Notes

  • [0:58] Eric explains what Hexis is.
  • [2:07] What tradeoffs is Eric making between vision and execution?
  • [3:08] Definitions of neurotechnology.
  • [4:00] Neuroscience-informed software.
  • [5:30] How does Hexis work?
  • [6:18] The wearable market.
  • [7:13] Neurotech, wearables, and fashion.
  • [8:40] Eric’s predictions for wearables.
  • [10:30] Translating literature into a product.
  • [11:50] Eric’s background & education.
  • [13:00] Entrepreneurship vs. academia.
  • [15:00] Why neuroscience is a great way to drive positive impact.
  • [16:45] Eric’s favorite neuroscience book.

Selected Links

Related Podcasts

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Neurotech, Neurotech Podcast
1 min. read Show less