2017 Investor Roundtable:General Discussion

[Ovulation]

As an owner of a 2014 S? No.

The interior of the Model S, while spartan, is not "Fisher Price cheap plastic" in appearance at all like the workhorse truck is. That being said, I agree that Model S/X interior is not up to the mega-luxe standards of high-end German brand models.

It's a big controversial to say that on this board, there are lot of people out here who are brain washed by Steve Jobs who told them that simplicity has something to do with Zen Buddhism and when they don't like the designing they are not enlightened ... some kind of hillbilly's

 

[ValueAnalyst]

Thanks. I am thinking that with a third shift and all the new markets opening up, S and X could trend up to 30K/quarter from Q1 to Q4 this year.

July's Model 3 final reveal should boost demand for Model S/X since any new reservations for the Model 3 won't be able to get it until end-2018.

 

[MitchJi]

I am long going into the ER. Here are my musings:
M3 Guidance:
Market setup: I think this will be the main show. 80% of the expectation is here, so bad guidance would by itself tank the ER, but reaffirming good guidance can by itself lift it. I think the market would be “shocked” by reaffirming shipments by end of July and say 50k for this year
My take: This one is pretty easy actually. This is the last ER where the M3 is still perfect. If they have a late supplier they probably don’t know it, and even if they suspected they could say happy things if they wanted to. If they have line problems they don’t know it yet. So 90% chance they reaffirm good scheduling and outlook.,

Exactly except that the chances are at least 98% unless something extremely unlikely happened in the four days since Elon's TED talk (like a plane crash full of equipment from Grohmann).

S/X:

Market setup: Expect 50k 1H ?? 2H. Everyone knows that Tesla over commits and misses.

My take: They are doing such a better job of setting goals. They said 50k for 1H and delivered 25k in Q1. It has been a long time since they made meeting delivery goals seem routine. With everything firing and no scheduled shutdown, and demand in Asia seeming robust (korea?) they could be having a good Q2. I expect they could do like 28k, in which case I hope today they guide to 26k. Guiding up would be a very firm vote of confidence in demand. 2H guidance is a wildcard. Osborning is a bit of a risk. I think they have to give some 2H guidance, so probably 50k. Interesting side note, the Q1 delivery number was exactly 25k. No way that doesn’t get revised up in the results.

Guidance, they could have a surprise bump in guidance due to hiring the third shift.

Its obvious to me that they are planning to eliminate any possibility of Osborning be adding features and making substantial price reductions to the MS-MX, without reducing their margins. They are waiting to do that until the M3 price are released because they want to maximize their income in the meantime. They could have a small dip before this becomes known, but after that you can expect a substantial increase in demand and a corresponding bump in the SP.

• Andrea James in IR. This makes me all warm and fuzzy inside.

Do you know that Andrea is married?

• Elon cocky on twitter. I am not normally a fan of reading Elon tea leaves because he is cheerful and upbeat all the time. But it’s a small factor
• Macro’s on huge tear. Tesla is if anything underperforming.
• ZEV credits: Unknowable. High sales=profitable quarter.
• I hope they stay quiet about cap raises. Just because you plan to doesn’t mean you need to talk about it in the ER. Or better yet say they plan to self-fund.
• They scheduled the referral reward VIP event June 2-3. That includes a factory tour and "Model 3 viewing". These raise interesting possibilities for showing a complete M3 line and/or complete model 3. Could be nothing (just a regular tour with mostly built M3 line, and the same 2 prototype M3's.

I believe that they plan to fund the Gigafactories with some combination of self-funding, partnership and government incentives.

I think that the event will probably be substantial, but I think that they won't reveal the important facts until it happens.

 

[winfield100]

In 5 years, TSLA will probably drop from 1000 to 850 and he will say he was right.

post 2:1 split?
as this "Tes'lantic" destroys the "ICE'bergs"

 

[luvb2b]

so now for my "final answer" to how to position for earnings.

first, i moved 2/3rds of my at-risk capital into september options, which would be timed properly with a possible s&p 500 addition (assuming gaap profits this quarter and next). these also have the benefit of a lower delta to adverse share price movement vs. near term in the money options.

next, i moved up my in the money nearby option strikes. it cost me a little in time premium but effectively cut my risk in near-term options to 1/3rd of my at-risk capital. this is an amount i am willing to lose if the stock flops.

i also maintained full size going into the report (after going back and forth about reducing several times). the main reason i maintained full upside quantity is that i am still convinced we get a very solid beat, and i feel the street estimates as a whole are far away from my estimate of reality. i think despite the lower quality of the beat the results will still show operational excellence. and demonstrated operational excellence and record revenues + record gaap/non-gaap profitability going into a model 3 launch are not reasons longs would sell.

it makes me nervous to see so many people going in on margin but on the other hand all the shorts are on margin too.

guidance is one thing i haven't taken into account, but as long as the pipeline remains full it think the positive earnings can repeat prior to model 3 launch. and that's all it would take to trigger an s&p 500 inclusion coming into the conversation.

quick review of open interest going into the earnings - still heavily tilted on the call side but now a few more puts involved too. 315 at the money strike highlighted in yellow. i posted the 5/5 weekly and the 5/19 monthly expirations. not enough open interest at the 5/12 expiration to bother.
View attachment 225480 View attachment 225481

now going to turn my attention to the image below, posted by @Wenche on the market action forum (linked below). i have been following the ib short updates for some time. although they don't give you exact number of shares shorted by customers, they do update weekly with this type of bar chart. the big long left bar you see is the value of tesla shares short, the second bar is the value of vxx short. keep in mind vxx is a volatility tracking etf that basically erodes towards zero constantly. voting with their dollars, a meaningful percentage of traders is saying tesla is a much safer short than something that has historically done nothing but go down, reverse split, and then go down some more.

although no scale is given, you can compare the short value to other stocks before and get some idea if shorts have increased or decreased. as of 4/14, the value of tesla shares short was 15% lower than the value of vxx short. at 4/28 the value of tesla short is nearly 50% greater than value of vxx short. similarly vs. a different stock on the list like vmw i find that on 4/14 the value of tesla shares short were about 8.5x vmw, and today that difference is 10.5x. use some assumptions and estimations, i come to the tesla short shares having increased by 10-15% over the last 2 weeks.

in summary i have to agree that the shorts are not only not backing off, they are adding to their positions. perhaps the biased sample of stinking alfa authors that troll these forums is not the best indicator of the average short.

View attachment 225400

 

[MitchJi]

July's Model 3 final reveal should boost demand for Model S/X since any new reservations for the Model 3 won't be able to get it until end-2018.

It's a miracle!

I believe that my projection (big increase in demand due to increased features and price reductions) is more bullish than yours.

 

[ValueAnalyst]

It's a miracle!

I believe that my projection (big increase in demand due to increased features and price reductions) is more bullish than yours.

Ha! I'm glad. Really.

What's your forecast for Model S/X in 2H17?

I project 65,000 units in 2H17 globally, with their respective market shares above 35% in their niche luxury sedan/SUV markets in the US.

 

[racer26]

It's a big controversial to say that on this board, there are lot of people out here who are brain washed by Steve Jobs who told them that simplicity has something to do with Zen Buddhism and when they don't like the designing they are not enlightened ... some kind of hillbilly's

Its not the S's simplicity which makes me say its not up to the mega-luxe standards of the high-end German cars (note, I'm not talking about 3 series/C class, or even 5 series. I'm talking about fully decked 7-series and S-class, and Bentleys and the like, which in fully-optioned trim are substantially more expensive than many Model S's - hell, some of the option prices on the mega-luxe marques are nearly the price of a Model S). The interior components simply aren't as mega-luxe. Alcantara everything, super-plush seating, leather coated everything else, etc. The S doesn't have it. I don't believe you need a billion physical knobs and controls to be mega-luxe, but you do need better materials and craftsmanship than the S has.

 

[22522]

There are people who know stuff on this board. I am not one.

Here is what I think (hope) will happen:

1) Elon is pretty bright.
2) He knows that $7,500 is a lot of money to people he wants to sell cars to.
3) He will at some time announce plans to deliver product in a way that gets the entire tax credit for all US customers currently in line.

This will increase closing percentage by x%, or say about X,000 units.

X,000 times $40,000 is a reasonable amount of money.

The stock will go up.

 

[jhm]

Delphi to spin off powertrain unit, eyes developing tech; stock rises

Not sure if this has been posted, but it seems like a pretty significant move for GM.

Chris McNally of Evercore ISI said in a research note that
the spinoff would allow "investors to invest in a clean, high
growth" autonomous and electric vehicle company, and "separates
the traditional Powertrain division where investors are less
clear about the strategic direction of diesel penetration and
the internal combustion engine over the medium/long term."

 

[sub]

I've given up being optimistic about sp bumps after earnings, never seems to happen and I doubt it will happen today either. I'm long shares only and don't plan to sell them until I'm a teslanaire so short term fluctuations are meaningless. That being said, I do have a little more spring in my step on green TSLA days.

 

[RobStark]

Delphi to spin off powertrain unit, eyes developing tech; stock rises

Not sure if this has been posted, but it seems like a pretty significant move for GM.

You do know GM spun off Delphi in 1999?

 

[luvb2b]

oh and one last thing - i converted some in the money nearby calls to stock + nearby puts. this will allow me to unload some shares into a rally that happens from confusion around the report. assuming of course i can understand what's going on faster than the computers and act accordingly if needed.

so now for my "final answer" to how to position for earnings.

first, i moved 2/3rds of my at-risk capital into september options, which would be timed properly with a possible s&p 500 addition (assuming gaap profits this quarter and next). these also have the benefit of a lower delta to adverse share price movement vs. near term in the money options.

next, i moved up my in the money nearby option strikes. it cost me a little in time premium but effectively cut my risk in near-term options to 1/3rd of my at-risk capital. this is an amount i am willing to lose if the stock flops.

i also maintained full size going into the report (after going back and forth about reducing several times). the main reason i maintained full upside quantity is that i am still convinced we get a very solid beat, and i feel the street estimates as a whole are far away from my estimate of reality. i think despite the lower quality of the beat the results will still show operational excellence. and demonstrated operational excellence and record revenues + record gaap/non-gaap profitability going into a model 3 launch are not reasons longs would sell.

it makes me nervous to see so many people going in on margin but on the other hand all the shorts are on margin too.

guidance is one thing i haven't taken into account, but as long as the pipeline remains full it think the positive earnings can repeat prior to model 3 launch. and that's all it would take to trigger an s&p 500 inclusion coming into the conversation.

 

[ValueAnalyst]

Its obvious to me that they are planning to eliminate any possibility of Osborning be adding features and making substantial price reductions to the MS-MX, without reducing their margins.

How could added features and substantial price reductions not reduce Model S/X margins?

Both of those changes would reduce margins to below what margins would be otherwise.

 

[MitchJi]

How could added features and substantial price reductions not reduce Model S/X margins?

Both of those changes would reduce margins to below what margins would be otherwise.

Battery cost reductions, AP hardware and software cost reductions, reductions in costs due to alien dreadnaught production line.

The smallest one items on that list are the AP related reductions. The software costs will be amortized for over a much larger number of sales, and we all know that hardware costs are plummeting. I think that when the M3 ls launched that they could sell the full autonomy suite for $1-3k and it would still be a cash cow.

We don't know the timing of the alien dreadnaught production line improvements (incremental rollout) or the cell cost reductions but probably sooner rather than later for the cells.

 

[mongo]

I've given up being optimistic about sp bumps after earnings, never seems to happen and I doubt it will happen today either. I'm long shares only and don't plan to sell them until I'm a teslanaire so short term fluctuations are meaningless. That being said, I do have a little more spring in my step on green TSLA days.

Same here, picking up more shares yesterday was not my best idea, and today is rosey in the wrong way, but long term everything should be a ok.
(Better if Tesla sold conversation kits)

 

[austinEV]

Do you know that Andrea is married?

I wasn't hitting on her... I think that she is uniquely qualified to help craft good IR guidance and results. Assuming she has that much pull, but I would hope she does. Or if you are joking then Whoooooosh over my head.

 

[ValueAnalyst]

Battery cost reductions, AP hardware and software cost reductions, reductions in costs due to alien dreadnaught production line.

The smallest one items on that list are the AP related reductions. The software costs will be amortized for over a much larger number of sales, and we all know that hardware costs are plummeting. I think that when the M3 ls launched that they could sell the full autonomy suite for $1-3k and it would still be a cash cow.

We don't know the timing of the alien dreadnaught production line improvements (incremental rollout) or the cell cost reductions but probably sooner rather than later for the cells.

I agree with your line of thinking on battery cost reductions (because of which we may see some gross margin improvement today) as well as AP software margin contribution in 2H17 and 2018.

OTOH, I don't expect Alien Dreadnaught related boost to margins until mid-18.

I estimate that higher-than-expected gross margin will be the biggest source of beat today.

 

[MitchJi]

I wasn't hitting on her... I think that she is uniquely qualified to help craft good IR guidance and results. Assuming she has that much pull, but I would hope she does. Or if you are joking then Whoooooosh over my head.

Yes, I was joking!

 

[austinEV]

Yes, I was joking!

And she is out of my league...