Tesla Supercharger Profits, Investing in Solar

Leave a reply

Here is an article that I wrote at SeekingAlpha that got published yesterday – “In the Land of Irrelevant Numbers, Tesla gave us a Goldmine” – in response to an article by another author calling supercharger numbers irrelevant. I attempt to calculate how Tesla can profit from Supercharging.

Recently, I also wrote about investing in JA Solar and how options can make the investment a better deal. JA Solar is one of my favorite Chinese solar manufacturers. You can actually use the same options trick with other solar stocks like Jinko Solar and Sunpower.

Your other almost no risk option to invest in solar is of course, getting Solar Panels.

The Economics of Rooftop Solar and Viability In Virginia

2 Replies

Rooftop Solar pricing has come a long way in the last few years. So much so that 3$/W installed price seems to be the norm. Recently I got quotes for a system for our house in Charlottesville from several local installers and quotes ranged from $2.50/W to $4/W depending on the installer and the technical details of the system (mono vs poly panels, string vs regular inverter etc.)

For the calculations, I will assuming a 3$/W installed price and using PVWatts to calculate the power produced by a 5kW system in Central Virginia for our roof pitch and orientation. Using these details, PVWatts says the system will generate about 6300kWh/year. At our electricity rate of about 11c/kWh that would be worth about $690/year.

Before subsidies, system cost is $15,000. Annual reduction in power bills is $690. That is a return of 4.6%/year. Now for the good part. Power prices go up about 3%/year. Solar panels degrade 0.7% every year. So this payout increases every year by over 2%! It is like a dividend growth stock that raises dividends by 2% every year.

Now let’s add in the 30% federal subsidy. That drops the price to $10,500. That raises the annual return to 6.5%.

Now if you do get a system for $2.50/W, the price after subsidies for a 5kW system would be $8750. This would increase your annual returns to 7.9%.

Not only that, this income is tax free. Calculating how long it would take to recover the initial $8750 at a 7.9% return that grows by 2% each year gives us just under 12 years.

Here are the payouts of a system over 25 years:

Here is the cashflow including initial investment and one inverter replacement after 12 years costing $3000.

If you are in a state with more sun or have a better oriented/pitched roof for solar (try PVWatts), then the payoff can be even faster.

In Albemarle County and in the City of Charlottesville, solar installations are exempt from property tax. Basically, the value they add to your house is not added to your property tax bill.

If your power is supplied by Dominion Virginia Power, then you can consider their Solar Purchase Program, where they will buy the entire output of your solar system and pay you 15c/kWh for 5 years. However this is treated as taxable income. Since you are selling all the power from the system to Dominion, that system can be depreciated, essentially offsetting the tax liability. This is just an opinion. Consult your accountant before trying or wait for my update after I file next years taxes. Be warned though, the program might be gone by then. Just FYI, we ended up getting a nearly 7kW system for an approximate price of $2.50/W. The installation is still in progress and I’ll post more details on that in a later blog post at my other blog.

Update: Here is an update on my installation along with an installer selection guide.

Does The Drop Really Make Apple A Buy?

Leave a reply

Parchayi and me long Apple (AAPL) but am not adding to my Apple position on this dip and here is why.

Simply, Apple’s growth has slowed down to nothing. I recently compared Apple’s growth to that of Google (GOOG) and Microsoft (MSFT), and both those companies seem to be growing faster than Apple.

A picture is better than a thousand words. Here is what Apple’s growth looks like:

There is a distinct downward trend to Apple’s growth that started in 2011. This also coincides with the year that Apple replaced major improvements in it’s devices and moved on to incremental updates. Here is a quote from the Engadget review of the iPhone 4S that sums up the iPhone and subsequent generations perfectly:

“iPhone 4S does everything better than the iPhone 4, but it simply doesn’t do anything substantially different.”

Can Apple reverse this trend? For Q1 2014, Apple guided essentially zero growth from Q1 2013.

Is this the beginning of an upward trend? Or is this just a short term part of a longer downward trend? The picture is not clear yet. I would wait for next quarters results before investing in Apple. I’m not selling yet either, though. For just one reason. I finally think this might be the year that Apple steps up to the plate and makes an iPhone that can compete with its larger screened NFC toting Android brethren.

Disclosure: Long AAPL, GOOG

Big Dividends From American Oil, My Tesla Hedge

Leave a reply

Many of my articles on Tesla (TSLA) on Seeking Alpha have some commenters that fall into one of these camps:

  1. Not convinced that Global Warming is occurring
  2. Not convinced that Global Warming is harmful
  3. Not convinced that humans are responsible
  4. Convinced that Electric Vehicles are dirtier than gas vehicles

This article is for all of them and for everyone else who would like to enjoy great dividends from American companies producing local American oil and natural gas. All the companies on this list are reasonably well covered at Seeking Alpha and with this article I hope to help you in finding high dividends from American oil producers.

American Oil Production

It surprises many when presented with the fact that America is the top oil producer in the world in 2013. Here is available data for 2013 from the EIA in Thousand Barrels/day.

The US has also been growing its production steadily.

At the same time imports are falling (graph is in thousand barrels).

America also leads the world in natural gas production. This is where things get interesting for investors. There is an American Oil and Natural Gas boom and there is ample opportunity for great dividends because a lot of the oil and gas production and transport companies are structured as Master Limited Partnerships – MLPs.

Currently many upstream (and to a smaller extent, pipeline) MLPs are trading at below normal values thanks to attacks by an analyst firm called HedgeEye on several large MLPs such as Linn Energy (LINE) and Kinder Morgan (KMP).

Thanks to the ongoing negativity, both those form my two favorite picks. If you are not a fan of K1s at tax time both the companies have alternative options: Kinder Morgan Management (KMR) and Linn Co. (LNCO).

I won’t go into much more detail here because both Linn and Kinder Morgan are heavily covered stocks. But I’ll say this much that in spite of the bad environment, Linn has managed two major acquisitions and a dividend increase is imminent. This has driven the stock back up into the 30′s but there is still room to grow. I believe that any dividend increase will push the stock back up to levels before the Hedgeeye attacks.

Here are the top 5 upstream MLPs in size and their dividends. Linn Energy is almost as big as the rest of them combined so before you invest, note that most of these are small companies.

Dividend % (As of 1/16)
Linn Energy 9.5
Breitburn (BBEP) 9.7
Vanguard (VNR) 8.3
EV Energy (EVEP) 9.1
Legacy (LGCY) 8.4

From the list it is easy to see that spectacular dividends are not hard to find from American Oil. Here are the total returns for them in the last 5 years.

LINE Total Return Price Chart

Every single one of them outperformed the S&P 500, which had total return 134% measured using SPY (SPY) over the last 5 years.

Conclusion

While my wife and me do a majority of our driving in an EV, are planning on getting solar panels and also invest in green energy companies, I treat our oil and gas investments – great dividends from the American oil and gas boom – as our hedge to green energy.

Disclosure: Long TSLA, KMP, LINE, LNCO, SPY

Tech Titans: Performance Of Google Vs Apple Vs Microsoft

1 Reply

There was a time in 2012 when people were betting on Apple (AAPL) stock to reach $1000 before Google (GOOG). Since then Apple is down from it’s over $700 peak while Google is making new highs over $1000. In the mean while, Microsoft (MSFT) stock is up about 40% in one year while Apple is essentially flat.

So what changed? Which stock looks the best going forward? These are the questions I hope to answer with this article by looking at revenue and earnings growth for all three.

Revenue

5 year TTM Revenue change charts for Google show that in the last five years, Apple has handily beat both Google and Microsoft. But from the chart, it looks like Apple’s growth has flattened, while it hasn’t for the other two.

GOOG Revenue (TTM) Chart

Looking at the last one year, it seems both Google and Microsoft have Apple beat for revenue growth.

GOOG Revenue (TTM) Chart

Earnings

Apple’s 5 year earnings growth is equally impressive:

GOOG EPS Diluted (TTM) Chart

However, the last one year has been even worse for Apple earnings than it was for their revenues while Microsoft and Google have shown much better progress. Especially Microsoft.

GOOG EPS Diluted (TTM) Chart

Apple

So what happened at Apple? Well the answer to that is simple. Apple’s growth was tied mainly to the demand for iPhones and then iPads. In the last few years, Apple’s improvements to the iPhone have been incremental from the user perspective, especially considering the dramatic improvement in Android phones. The iPad also now has significant competition from other tablets.

The iPhone was introduced in 2007, the iPad in 2010. In theory, to keep up that spectacular growth that Apple has been enjoying, it would have made sense to launch a new line of products – an Apple television set or a significantly redone and completely re-imagined “magical” Apple TV box. Or something else.

Alternatively, Apple could have stepped up the competition by introducing a larger variety of phones, tablets and computers in different sizes. With it’s vast resources and ungodly amount of money Apple could have executed its product strategy better.

Apple is trying to improve margins by selling a premium priced, yet not made from the usual premium materials, iPhone 5c. It also marks a departure from their usual tactic of just making the previous generation the cheaper model. My personal opinion is that if they had kept the old iPhone 5 alongside the new iPhone 5s, nobody would have paid extra for the iPhone 5s. After all as far as the user goes, the only meaningful difference is the fingerprint sensor. I can’t imagine anyone paying $100 for that.

For the next iteration of iPhones, what I would like Apple to do, is have two product lines: the normal line and the “c” line and give the user screen size choices in both lines like this:
Normal Line: iPhone 6-4, iPhone 6-5 with the only difference being the screen size, the rest of the internals being the same
“c” Line: Similarly iPhone 6c-4, iPhone 6c-5 and if they really want to keep their low end phone as a 6c-3.

The iPhone just looks dated compared to the new 1080p screen 5″ phones from the competition. Similarly with the iPad. Keep the specifications of the 10″ and the mini the same except for screen size.

For computers, Apple really needs to start competing with convertible ultrabooks.

Short term, Apple will probably get a significant boost from it’s deal with China Mobile and the launch of the new iPads and iPhones in this quarter and I expect the negative EPS growth trend to slow down, if not reverse.

Google

As evidenced from the charts above, Google’s revenue and EPS have continued to grow steadily for the last five years and unlike Apple, there has been no perceptible slowdown in growth. Google is the undisputed leader in web search, online advertising and mobile advertising. Google also is the most innovative company on the planet, period. Also, Google brings in 10% of total worldwide advertising dollars. That includes all forms of advertising, not just internet based. Google is the undisputed leader of web adertising and also owns half of mobile ad revenue.

Unlike Apple, which focuses on a few products and services, Google goes in all directions at once, sees what sticks, and then develops on that. This makes Google a very agile company to meet customer needs. What makes Google unique is their acceptance of out of the box ideas, even in non-core areas such as self driving cars, being an ISP, generating green power etc.

Also finally, the fruits of their Motorola acquisition can be seen with the new Moto X and Moto G phones.

Going forward, I expect the same level of growth from Google as they take more global advertising dollars, launch more products and services and take market share from other online services like Facebook and enterprise products from Microsoft.

Microsoft

For someone who follows the media, the charts for Microsoft would be surprising. All we hear is that nobody wants a Windows Phone, Office products are being replaced by the cloud, mobile devices are eating Windows market share. But in spite of all this, Microsoft has surprisingly manage to grow both revenues and profits!

Microsoft also followed Google’s footsteps in acquiring a phone company, Nokia (NOK) and I think that is a great step forward for Microsoft as it attempts to compete with Apple and Google. I have covered Microsoft before and presented the view that Microsoft is the one company that competes with almost every tech company in some way and with the Nokia addition they just added to that list.

Even though the changed in Windows 8 were very unwelcome, I think Microsoft’s new unified strategy is a big step forward with one “Modern” interface across all product lines. I’d say it was the opposite of too little too late – too much too early.

Looking forward, with growing Windows Phone market share, growingenterprise product market share, succes of the XBox One and growingBing market share - at the expense of Yahoo (YHOO), a growing cloud presence, fantastic new convertible Ultrabooks running Windows Microsoft seems to be turning around and their stock performance from this year might continue.

The Numbers

P/E P/S Ex Cash P/E Dividend
Microsoft 13.74 3.87 10 3%
Google 28.87 6.23 25.5
Apple 13.95 2.95 9.5 2.3%

It looks like Apple and Microsoft are currently similarly valued by earnings and Google is valued over twice as much. We can see that Google’s growth is steadier and higher than the others (with the exception of TTM EPS growth by Microsoft). This just about justifies the P/E premium that Google commands. Amongst Apple and Microsoft, the numbers logically make Microsoft seem the better bet for now. However, the impact of Apple’s new products remains to be seen.

Longer term, Apple needs a new line of products or significantly more diversification in their existing product lines. Just financial engineering as suggested by Carl Icahn is a mere distraction. Apple needs to get back to growing earnings and revenue.

Disclosure: Long AAPL, GOOG. May open a position in MSFT

The Rise Of Tesla Stock And Big Auto’s Lack Of Focus

Leave a reply

What is driving Tesla Stock Higher Now?

Three recent news items are responsible for driving Tesla’s (TSLA) stock higher in the last few days:

1. Chinese Website - Tesla opened a Chinese website where they are taking $40,000 deposits for the Model S. This is equivalent to the Signature deposits so it is possible that the Model S Signature is coming to China.

2. Swiss and German Superchargers – Tesla opened up it’s first Swiss supercharger and it’s first German Superchargers.

3. Jan 2015 Unveiling of the Model E - This surprising news now puts a clearer timeline to the Model E, potentially putting a launch date of the car at end of 2016 to 2017 based on the Model X timeline.

My personal opinion is that the last item is what caused the stock to move. I have been covering Tesla, here at Seeking Alpha, for a while now. Every article I write about Tesla brings out at least one thread of comments, that other auto manufacturers will catch up before Tesla’s Gen III launches with a viable (long range) and affordable electric car. The other common thread in many Tesla related articles attempts to cast doubt on the greenness of electric vehicles, which I discussed here.

I have touched on GM’s (GM) Cadillac ELR before and with this article I hope to compare future and current electrics and how automakers lack of focus is preventing this from happening.

Automaker Focus

For someone who wishes to use an electric car as their only vehicle, the only current viable option is a Tesla. My wife and me use her Nissan (NSANY) Leaf as our primary vehicle but we still need a gas car for weekend trips or when we need the cargo room of an SUV. The Leaf is a very economical car to lease, especially after fuel savings.

When we leased the Leaf, there were only three available electric car options -

Mitsubishi i Too basic and yet expensive
Nissan Leaf Best choice, decent price for available features
Ford (F) Focus Similar features to Leaf, arguably better battery but too expensive

When it comes time to replace the Leaf, we will have one additional option, the BMW i3. It is possible that the Honda (HMC) Fit EV, GM Chevy Spark EV, Mercedes B Class Electric, Toyota (TM) Scion EV also make it nationwide by then. However, all these vehicles have the same problem as the Leaf – range limited to only in-city, daily commute kind of driving.

When it is time to replace that next car, I’m now even more hopeful that the Tesla Gen III will be an option. What this will offer us is a 200 mile range. Maybe more, if we decide to spring for a bigger battery. At this point our second car would be relegated to either one or two annual trips or trips where we need the cargo room of an SUV – I’m assuming here that the Model E will have a lot more cargo room than the Leaf, considering that the Model S has more cargo room than many compact SUVs like the Audi Q5. Alternatively, if the Tesla Gen III SUV is imminent, we could go completely Electric with a Leaf and a Tesla SUV, hopefully with solar panels.

All this while, not a single automaker has announced or even talked of plans of a long range electric bigger than a very compact car. The only rumors are those of a BMW i5 – possibly a stretched out BMW i3. So the range will still be inferior to the Gen III and it is very doubtful that BMW can bring this car to the market in time to compete with the Gen III.

Instead of focusing on bringing a better electric car, manufacturers are giving us cars which are limited to a few states and designed for regulation compliance. At the same time, they are planning on launching Fuel Cell cars, which are no more than a joke. There is no infrastructure to support fuel cells. These cars will also be limited to small markets and extremely expensive compared to electrics.

Nissan has announced one potentially promising electric car – the Infiniti LE – but that has been indefinitely delayed and no details about range were ever made public. So even Nissan, the automaker with the largest electric focus is far behind Tesla in providing a viable electric car.

Almost all big auto makers are working on too many things simultaneously and so far have been unable to provide any really exciting viable green car. If manufacturers really want us to believe in fuel cell cars, they need to start investing in fuel cell infrastructure first. Just like Tesla is investing in Superchargers.

It is this lack of focus that is providing and will continue to provide Tesla room to grow unabated. This is not even considering other things that a Tesla brings to the table like Wifi updates. We just got our first recall for the Leaf – a software update for which we need to go to the dealer. And this doesn’t even take into consideration that it is not just Electrics that Tesla competes with. The Gen III will compete with every other luxury car.

Even amongst super-cars the major names like Ferrari, Lamborghini, Porsche, McLaren etc. are completely avoiding electrics while embracing hybrids. This will make room for small auto makers and new comers to spring up. That is how Tesla started with it’s Roadster. Now we haveDetroit Electric and the latest announcement from Saleen Automotive (SLNN) that they plan to make a new electric car.

Comparing Tesla Valuation With Other Automakers

A recent Seeking Alpha article discussed how overvalued Tesla is compared to other manufacturers by looking at their P/S ratio.

TSLA Revenue (Quarterly) Chart

However, what the author fails to take into account is the growth expected from Tesla. Revenues are expected to double in 2014. This would justify the premium that Tesla trades at.

The author states that “The idea that TSLA deserves to trade at a premium multiple of 20+ fold in Price/Sales and Price/Book is ridiculous.” However, Tesla is also expected to grow revenue at 20+ fold compared to the other automakers.

Conclusion

There is no viable upcoming electric competition for Tesla and there is unlikely to be in the time-frame of the Gen III launch. This will give Tesla a huge first mover advantage.

Disclosure: Long TSLA, NSANY