MorningWord 9/28/16: The Martian

by Dan September 28, 2016 10:04 am • FREE ACCESS

Yesterday, CEO of SpaceX, Tesla (TSLA) and Chairman of SolarCity (SCTY) Elon Musk laid out his plans to bring humans to Mars in the next decade and to eventually colonize the red planet. Here is how the transport system will look (it’s got a 2001 Space Odyssey vibe):

Here is the two hour presentation, in which Musk laid out his plans in great detail. He seems sincere and focused:

SpaceX’s stated goal has always been to colonize mars and make humans a multi-planetary species. Transporting stuff to the ISS has always just been its training wheels. Musk’s mind works on infinite time horizons. While most people are worried about the next recession, or next terrorist attack, Musk is focused on long term possibilities that would need humans on another planet in order for the species to survive. (global warming, nuclear war, asteroid strike, etc)

Musk said that, without any snags, the first passengers to Mars could be as soon as 2024. That seems quick! That estimate is just a few years after Musk expects to produce 1 million electric cars (in 2020).  But for Musk which seems more interesting? Compare these two goals, the potential impact for humanity, and the legacy it would leave and there is absolutely no comparison. I’m not saying his electric car and solar interests aren’t important (it seems his Plan A has always been to try to stop global warming, and his Plan B was to get to Mars in case he couldn’t) his proposed acquisition of SCTY and his lofty aspirations for electric cars and solar panels to go mainstream prove that. But they also may prove to be a mere distraction in a few years for a guy willing to risk his billions of dollars on a manned mission to Mars, televised live to the entire planet.

It’s possible Musk will get bored and annoyed with tedious and challenging automobile production schedules, home battery packs and solar panels in the next few years, and focus his mind beyond. That would probably mean unloading the boring stuff on some bigger company with a track record of smooth production. I could see all of the automobile and home holdings being wrapped up into one company. To be honest, Musk is the type of guy you want dreaming up all this stuff, but Apple’s Tim Cook is the one you want maintaining production schedules for Tesla’s mass market ambitions.

TSLA’s $30 billion market cap (which is 60% of General Motor’s (GM) $50 billion) is clear evidence that investors are willing to give Musk the benefit of the doubt of how all this shakes out.  TSLA is expected to lose 900 million in net income on a GAAP basis in 2015 on $8 billion in sales, while GM is expected to book $9bn in net income on $159 bn in sales. In 2015 TSLA sold 50,580 cars, GM sold 10 million!

I want to reiterate a point I have made a few times in this space about Musk. The company’s valuation is NOT on him. He’s talked his stock both up and down in the past. At this point it’s on the investment community. They should know to discount production schedules yet expect insanely high quality cars. The notion that he will be able to hit the Model 3 projections to produce hundreds of thousands at the proposed price point of $35,000 in 2018 seems ludicrous though. This should be discounted in the stock price. It is not. But, that may be to to the planet’s benefit, and an example of the “In Defense of Bubbles” theory. And Musk is in it with his investors, putting his his money where his mouth is as a 21% holder of TSLA, SCTY and estimates that he owns about 25% of SpaceX.

But I can’t imagine Musk spending much of his time on TSLA once the Model 3 launch comes and goes. That has always seemed to be the end game. 10 years ago he laid out his master plan for electric vehicles. To a large degree he has proven his concept. The Model 3 is the end of that 3 part vision, and once that’s complete he should pass the baton to a mass producer to sell those things and focus on more important things.

Lastly the chart of TSLA is starting to look like one of those bio-domes Musk has proposed for his Mars colony. It could prove to be just as dangerous as those glass death draps on a break below $200:

TSLA since 2010 IPO from Bloomberg
TSLA since 2010 IPO from Bloomberg