Tesla Inc is ahead of the rest of the technology world on so many sides that can be difficult to follow. The company’s self-driving, battery and drivetrain technology may be at the heart of its business, but there is something else scaring Wall Street on Thursday morning. “Flexible circuits” are apparently the new big disruptor in the tech world.
Tesla appears to be advance every day in new areas, and Thursday may have taken the company’s fear in a new direction. An auto components company, Lear Corporation, has been the particular target of discussions about the disruption.
It is certainly a subject that will separate the bulls from the bears.
Tesla’s flexible circuits won’t kill wiring
It was @ ValueMaven42, a Tesla Inc stock bearer, who caught our attention on the exchange on Twitter.
– Negative discount Rt (@ ValueMaven42) July 27, 2017
Lear Corporation released its profit figures for the three months through June on Wednesday morning before the market opened. On the company’s conference call, which took place around 8 a.m., an analyst thought it was time to bring up Tesla Inc.
Chris McNally of Evercore asked, “I’m kind of sure some analysts in the queue will be asking questions about Tesla’s future use of flex circuits to drastically reduce the amount of wiring, for example. What if this is an existential risk for your utility company? “
You can see the full transcript of the call at In search of the alpha.
Flexible circuits were not a new idea for the bosses of Lear Corporation, the company that was asked to comment on new Tesla technology. As the firm’s Frank Orscini told the analyst, “We’ve actually used flexible circuits in the past. We have the technology in our product portfolio.
The The supplier of automotive seats and electrical systems probably isn’t too worried about Tesla just yet. If anything, auto components of the type the analyst asked about are a weak spot for the company.
The really interesting idea is the drama invoked. McNally doesn’t ask if Tesla might be a threat, he asks if the company is a “existential threatIt is true, however, that Wall Street analysts have posed this question to ICE automakers since the production of the first Model S. Perhaps it is time to find out about the impact Tesla could have on the market. automotive components market.
What is a flexible circuit anyway?
Many readers, even those keeping an eye on Tesla’s stocks, may need to take a minute to find out what Mr. McNally was talking about.
Flexible circuits are essentially electrical systems that can be bent and molded in a more exotic and fit-for-purpose way than traditional wiring. Tesla recently obtained a patent for the use of flexible circuits to interconnect its batteries in January 2013.
Tesla may be able to significantly reduce the amount of wiring necessary in its vehicles because of this type of technology. To our knowledge, the company does not yet use it in their designs. This could cut costs, and may even make cars easier to produce than those with traditional wiring.
This appears to be the source of Mr McNally of Evercore’s claim. Although the folks at the Lear Corporation didn’t seem to take the threat very seriously. CEO Matthew J. Simoncini told McNally: “Trying to find a more efficient way to remove wire from a vehicle is nothing new.”
Frank C. Orsini, senior vice president of the cabinet, went on to say: “We don’t see the use of yarn shrinking. Wires are a very secure way to connect signaling and data communication in the vehicle. So right now the trends are adding circuit content and adding module content.
Tesla could damage automotive components
There is a valid question to ask about automotive components in the EV age. If Elon Musk and his teams end up developing the necessary designs and parts, will there be room for traditional OEMs?
This can only happen, of course, if Tesla Inc really changes the look of a car’s interior. If the bulls are right and the world is moving quickly to electric vehicles, there could be unspeakable chaos in the world of auto parts.
Everything from cables to headlights could be threatened by Mr. Musk’s electric crusade. Even the car’s tires could be at risk. It’s the kind of magical thinking, of course, this really should not be engaged when selecting stocks for a portfolio.
Mr. McNally may be just trying to assess the risks to the auto parts industry in a world of electric vehicles. We have no clear information that Tesla will use flexible circuitry to revolutionize automotive components. Elon Musk surely has enough on his plate at the moment.
Is the Tesla Stock Hype Getting Too Hot?
If you own Tesla shares, you probably want to know why people who buy at current prices are doing so. It would help you make a decision about the future of your portfolio. This is an important part of thinking about stock trading.
Right now, there may not be a lot of people buying Tesla Inc stock for its “flex channel” potential. These types of conversations, however, should get you thinking about the future of the stock. Do you think Tesla can disrupt any industry it associates with? Do you think that the only thing holding back the business is the limitation of resources?
If people are buying stocks because of technological achievements that haven’t even happened yet, it can be a bad sign. Elon Musk runs a great company, and it has been very successful so far. That doesn’t make him capable of achieving anything, however. While betting on the visionary might sound like a good idea, keep in mind that valuation needs to have some relationship to discounted future cash flows.
The Tesla share was by a kind of rebalancing in recent months. Because profits are expected on August 1, expect choppy trading to continue for now. Now is not the time to bet on risky half-theories about the future. Tesla’s stock already carries enough risk.