Short-Term TSLA Price Movements - 2016

[vgrinshpun]

Would be nice if Elon would get around to posting that blog though. Keep piling on the positive catalysts.

On another hand, let's spread the potential positive catalysts for a max impact. Looks like the leaked email should provide a nice lift to the SP...

 

[TrendTrader007]

Tsla nice gap up they'll try to sell it off in the first 30 minutes but looks like the stock wants to go higher
Weekly, monthly and especially quarterly candles look better by the day
I'll take it

 

[racer26]

I'm going to guess the gap up, plus return to yesterday's close in around 25 minutes equals a strong reduction in the available shares to short?

My accounts are tax-sheltered non-margin accounts, so I can't see short availability myself.

 

[TrendTrader007]

Shorts got a strong grip on TSLA but once the tide turns I would love to see the short squeeze of epic proportions.
It may become the stuff of history books not unlike the Porsche Volkswagen short squeeze a few years ago
Keep on shorting, shorts... Your comeuppance is near

 

[Seesaw]

Wonder when Elon will publish the blog?

 

[brian45011]

Either they got extremely comfortable with the numbers because they were so good or they took a calculated risk.

IIRC, for 1Q13 Tesla had two big factors that did not need to wait for after quarter-end detailed number crunching;

-Early in the quarter, DOE had accelerated repayment of the loans rendering their warrants worthless since the new total repayment date was earlier than the exercise date for the warrants. Reversal of the prior reserve for the warrants added abut $11 million as Other Income.

-Regulatory credits added another $85 million to Net Income. (About $68 million were ZEV and the other $17 million were CAFE/GHG). Regulatory credits in prior quarters since the IPO had been an inconsequential percentage of revenue or net income, but revenue was only $561 million in 1Q13 so the credits comprised 15% of revenue and helped convert an otherwise eight figure loss to a small profit

As to the noncash interest question, I'd defer to your expertise over mine. My crude understanding is that noncash interest is an accrual for interest not immediately payable because the notes were still outstanding. With the redemption, I'd expect this figure to decrease proportionally with the note redemption. Again, my background isn't accounting so someone else please correct me if I'm wrong.

I'm not an accountant either which is why I asked since I'm trying to understand how the early conversion will affect the Income Statement. When the notes were issued in 2013, Tesla bifurcated their value and started amortizing $83 million at 4.9% over the 5 year term of the notes as non-cash interest. At June 30, 2016, the un-amortized balance was $37 million. About 2/3 rds of the notes' face value is being converted early so that un-amortized balance may be reduced by ~$24 million, but how does that flow through to the Income Statement? (Or does the adjustment also cover 2/3rds of the previously amortized $46 million?)

 

[vgrinshpun]

Shorts got a strong grip on TSLA but once the tide turns I would love to see the short squeeze of epic proportions.
It may become the stuff of history books not unlike the Porsche Volkswagen short squeeze a few years ago
Keep on shorting, shorts... Your comeuppance is near

Please, let's not get carried away. I would not bet on short squeeze of VW proportions.

 

[Drax7]

Tesla has made mistakes, though nothing production and deliveries of 25,000 per qtr cannot overcome.
Revenues rule. Thats my working hypothesis in maintaining a position.
I had previously calculated that production and deliveries of about 1800 vehicles per week were
Necessary just to break even, making conservative assumptions.

As long as new financing and liquidity towards model 3 are viable, all is well.
Liquidity is not an issue with sales at 25,000 per quarter, and when
Liquidity is not an issue , financing model 3 should not be either
Given deposits for 375,000 cars.

Concerning solarcity I am clueless as to liquidity and financing
The business.

 

[SBenson]

Tesla is rolling out a fleet of Model X SUVs and Airstream mobile design studios

 

[Quesder]

Shorts got a strong grip on TSLA but once the tide turns I would love to see the short squeeze of epic proportions.
It may become the stuff of history books not unlike the Porsche Volkswagen short squeeze a few years ago
Keep on shorting, shorts... Your comeuppance is near

Well, most of us lost money or lost the chance to lock our earnings because of the epic squeeze belief when the stock price at +- $229. So stopping talking that and be more realistic.
I think even Q3 are good (24000 delivery), TSLA will be at roughly $245. We won't see a break through until M3 ramp.

 

[CALGARYARSENAL]

Somebody had better intel on Solar City than us?

 

[Turing]

I want to know how Tesla finances new factories after the model 3 is proven. In particular, how much can be done with debt.

The same way other car manufacturers build new factories - shop around for generous incentive and subsidized loan packages that states throw at them in the name of jobs?

 

[MitchJi]

I think that the more suggestive part is "Right now, we are tracking to be a few percentage points negative on cash flow and GAAP profitability"

For those who are willing to follow the bread crumbs left by Elon, it implies that regardless of the success of the company wide effort requested in the email, Tesla tracking to be non-GAAP profitable by significant margin.

In addition to the above, in case company's efforts on improving cash management and production/delivery are successful, Tesla can be cash flow positive and GAAP profitable as well.

BTW, Elon's email adds clarity to this exchange during the Q2 ER:

Rod Lache - Deutsche Bank Securities, Inc.

Sounds like a lot of innovation there. One last just housekeeping thing for Elon or Jason. You'd previously talked about the objective of profitability in the fourth quarter, but I know a lot's changing with the mix and also with the direct leasing. So is that also something that we should think as being pushed out a quarter?


Elon Reeve Musk - Chairman, Product Architect and CEO

Well, if you exclude Model 3 CapEx ramp, then – well in fact, really for Q3 and for Q4, Tesla would be profitable excluding the Model 3 CapEx ramp.

It almost looks like Elon allowed for a glimpse into his cards. So notwithstanding the bear view that good results in Q3 are "manufactured", they are, actually, totally natural and are consistent with what Elon expressed so well during the ER: "The real question on profitability is where do we set the dial on growth?" So here we have it, for the non-believers - a lesson of proper dialing expenses associated with growth to reveal a simple truth - that the Company is profitable if measured on the scale of growth that is consistent with the other major automobile companies.

My second hypothesis is that he was actually talking about both CapEx and OpeEx vs. profitability AND cash flow. I know, sounds a little crazy, but I think that his mind was going way faster than his ability to express it in spoken word...

How many MS-MX deliveries do you think are necessary to make this happen?

The best case scenario IMO is a high number of deliveries (24-25k) coupled with profitability and cash flow.

 

[schonelucht]

Tesla is rolling out a fleet of Model X SUVs and Airstream mobile design studios

Tesla has a top notch advertising and marketing department and it shows yet again.

 

[BornToFly]

It kills me that I don't have money right now to buy more stock. So I just did the next best thing, and bought calls for October 14 with SP of 210 for just $530. As long as delivery numbers are close to what we expect, I can't imagine the SP staying below 215 after the quarterly delivery numbers are out. Let's hope I'm right!

Edit: Went back and bought 210s with 10/7 expiration as well.

 

[MitchJi]

Well, most of us lost money or lost the chance to lock our earnings because of the epic squeeze belief when the stock price at +- $229. So stopping talking that and be more realistic.

Agreed!

I think even Q3 are good (24000 delivery), TSLA will be at roughly $245. We won't see a break through until M3 ramp.

Disagree! In addition to potentially great deliveries and profitability/cash flow we've got GF Cell production, the TE v2 reveal. I also think when Tesla and Elon are free to reveal the complete SCTY information it will switch from a drag to a catalyst:

There is a spectrum of feelings about the SCTY merger mirrored by knowledge. In general the more you know, the more likely you are to be in favor of the merger. Elon said that the fund managers he explained the merger to are 100% in favor of the deal. The obvious question is what did he tell the fund managers that he didn't tell everyone else? Synergies (layoffs) and plans for new products and price reductions, because he doesn't want to Osborn SCTY and TE sales. I believe that the new products will be compelling. We know that they are compelling enough to convince 100% of the major fund managers.

 

[Tslynk67]

Tesla is rolling out a fleet of Model X SUVs and Airstream mobile design studios

What a great idea - looks extremely cool!

 

[vgrinshpun]

How many MS-MX deliveries do you think are necessary to make this happen?

The best case scenario IMO is a high number of deliveries (24-25k) coupled with profitability and cash flow.

I also think that the best case scenario will be that they deliver 24-25K units. This will require delivering nearly all cars produced during the Q3 by the end of September, keeping the same 5K+ units in the delivery pipeline. This will have to be topped with excellent spending discipline and high CapEx efficiency. Jason Wheeler pretty much telegraphed what they are going to do in terms of this during the Q2 ER:

"On a go-forward basis, thinking about CapEx efficiency, you've heard Elon talk a lot about the machine that makes the machine. A big part of that is focusing on volumetric efficiency. In our call on Monday, I talked about how when we started to review a lot of the Model 3 CapEx plans across the company, there were a bunch of new buildings everywhere. And the reaction to that was, wait a second, we've actually got a nice facilities footprint already and how can we just densify those facilities and not have to invest further in this area? And we're starting to see a lot of that take hold now.

Second, I think we're making an attempt to crush the conventional wisdom that capacity increases only happen in step change increments and the capital that follows that in step change increments as well. And to put a little bit more color on that, there are many ways to optimize our current operations. The way to think about this is we can just drive greater throughput through the same investments. So, that's our cash position.

Finally, I'd just like to talk for a minute about expense management. In addition to our efforts on CapEx efficiency, we're also very focused on OpEx discipline. This quarter, SG&A would have been flat quarter-over-quarter in spite of our continued expansion in service and sales, were it not for the payroll taxes we paid on our CEO's options exercises. SG&A was up $19 million quarter-over-quarter on a non-GAAP basis. $17 million of that was the payroll expense associated with those option exercises. R&D now does continue to increase as we continued to march towards the Model 3 launch and continued to invest in our future. This is as predicted and as we've signaled in the past.

So to wrap it all up, we're very happy with the gross margin expansion in the quarter and we have increased our emphasis on OpEx discipline and CapEx efficiency. We believe our Q2 results reflect that and we're not backing down as we move forward."

 

[MitchJi]

I also think that the best case scenario will be that they deliver 24-25K units. This will require delivering nearly all cars produced during the Q3 by the end of September, keeping the same 5K+ units in the delivery pipeline. This will have to be topped with excellent spending discipline and high CapEx efficiency. Jason Wheeler pretty much telegraphed what they are going to do in terms of this during the Q2 ER:

Great! Thanks!

Given that I believe that they will either hit this or be very close do you think that they could do this without being at least close to 24-25k deliveries?

 

[Nate the Great]

Agreed!

Disagree! In addition to potentially great deliveries and profitability/cash flow we've got GF Cell production, the TE v2 reveal. I also think when Tesla and Elon are free to reveal the complete SCTY information it will switch from a drag to a catalyst:

Model 3 "potential" final reveal in Q4, will help push it up.