2017 Investor Roundtable:General Discussion

[Snapdragon III]

Is there some evidence for a heads up display in the Model 3 that I don't know about? The part of the call where they discussed the model 3 being easier to manufacture than S, and gave the specific detail about 1 screen/computer for the model 3, vs 2 for the model S. That seems like a crazy example to cite in the call if they are going to announce a second heads up display, with the associated computer to drive it, in a couple months.

It is a total guess, i think the surprises for the model 3 will be more along the lines of surprising range and performance.

 

[SBenson]

Sorry I didn't get much of a chance to read all the posts since ER. So I don't know if much of the below is already tirelessly debated. I will post anyway for those who care.

Here is an alternative-view with real-facts:

I call it alternative because the resident view on TMC is always positive.

Negatives:
S/X demand flattened out (at expected 100K rate if you will). Further S/X guidance is not given for 2H. Seems to speak for fears of of model-3 cannibalization. If S/X demand indeed goes down and if additionally model-3 ramp is slow then it will be a terrible cash torching mix. So initial model-3 production is going to be a very risky period with extremely nasty financials. We just hope that period will pass very quickly. But again who knows.

Q4 cash-burn was incredibly high. I believe none of us expected Cash from Operations to be so bad. Even if you account for the few thousand cars that slipped the quarter end, the numbers don't turn positive, still a few hundred million negative.

Model-3 capex guidance is enormous. I honestly didn't expect it to be that high. To make matters worse, it is not even for the full year.

No TE powerwall/powerpack guidance.

No guidance on FSD.

In a nutshell, we got *sugary* guidance on S/X and no guidance on TE , FSD or model-3 and a really *sugary* operating cash dynamic with an enormous capex guidance.

This will only get worse over next few quarters. The cash bleed will keep getting worse as more is invested in OpEX to support the upcoming model-3 and other things. The Capex is stunningly big.

Positives:
We got some guidance on model-3 trajectory with a *sugar* load of asterisks - global supply chain, inheriting global force majeure, slowest guy in the pack dictates the final throughput, yada, yada, yada

Keep in mind the weekly run rates Musk threw at us are with the baseline assumption that absolutely everything goes perfectly. Any one of the asterisks come into play, the ramp gets derailed. He himself said, like n times, he just doesn't know what might go wrong (if he knows, he will address right now).

Conclusion:
I am actually surprised the stock price only fell this much.

I actually think there is very high likelihood we will revisit 180s over the course of the year. That my friends I believe will be a tremendous opportunity to back up the truck, sell everything you got, buy TSLA.

PS: Musk damn well raise capital. The projected cashflow trajectory for the year is truly scary.

 

[neroden]

Eh, 3.3 billion in cash, 2.5 billion in capex, 500 million per quarter in potential operating cash flow deficit... about 700 million short by September. Could be covered by expansion of the existing loan lines, though as Musk says, it gets tight.

After running through all the numbers, most of which cancel each other out and were predictable, it would be worth looking deeply into that jump in SG&A, which is the only truly surprising thing. And it wasn't service center expansion, apparently. What was it? Any ideas?

 

[stealthology]

Let's hope we don't see $180 or $220..

 

[neroden]

Let's hope we don't see $180 or $220..

Frankly it seems very unlikely. Too many people consider the stock a screaming buy at those prices.

 

[anticitizen13.7]

Conclusion:
I am actually surprised the stock price only fell this much.

I actually think there is very high likelihood we will revisit 180s over the course of the year. That my friends I believe will be a tremendous opportunity to back up the truck, sell everything you got, buy TSLA.

PS: Musk damn well raise capital. The projected cashflow trajectory for the year is truly scary.

This was mostly my conclusion as well, after reading the Q4 2016 shareholder letter. There is still tremendous risk and uncertainty as Tesla gears up for the "Order of Magnitude" jump to the final phase of Secret Plan 1.0. The non-guidance on Energy and Self Driving leave a big question mark.

My take is slightly different on several points.

1. "Osborne Effect": I predict that Model 3 will only have minor impact on Model S orders, and no impact at all on Model X orders. The 3 and the S only really overlap with the set of buyers who could afford a 3, but are willing to stretch for an S in the interim because they must have a long range EV. Tesla has committed to delivering the latest technology to the S and X, and the S will still be a larger car with much better hatchback cargo capacity. I also seriously doubt that anyone considering a Model X would be swayed to get a 3 instead. That's like a potential Acura MDX buyer cross-shopping with a Honda Civic Touring sedan. Very unlikely.
2. Strategy should TSLA revisit 180: I think this would be a great opportunity, HOWEVER, I caution people to still only invest what they can afford to lose. "Sell everything, buy TSLA" goes against my principle of portfolio fault tolerance. Nobody should be risking their future on just 1 stock.

I call it alternative because the resident view on TMC is always positive.

I am positive on Tesla's prospects in the long run, by which I mean 5-10 years out. I am under no illusions that it will be a smooth path, and NOBODY should expect anything but a rough ride in the near term. Yes, Tesla made Model S and Model X happen, seemingly against all odds, but the following happened along the way:

• Model S took a long time to ramp.
• The Fier incidents in 2014
• The 2016 China panic, which dragged down stocks all over the markets worldwide
• Model X "production hell" and quality issues
• Autopilot crash controversy

Who knows what will happen with Model 3?

My days working at startup companies are long gone, but I remember the chaos and multiple things going wrong all the time. While Tesla is not exactly a startup anymore, it is undergoing a period of massive transition. Do not expect smooth sailing.

 

[racer26]

Sorry I didn't get much of a chance to read all the posts since ER. So I don't know if much of the below is already tirelessly debated. I will post anyway for those who care.

Here is an alternative-view with real-facts:

I call it alternative because the resident view on TMC is always positive.

Negatives:
S/X demand flattened out (at expected 100K rate if you will). Further S/X guidance is not given for 2H. Seems to speak for fears of of model-3 cannibalization. If S/X demand indeed goes down and if additionally model-3 ramp is slow then it will be a terrible cash torching mix. So initial model-3 production is going to be a very risky period with extremely nasty financials. We just hope that period will pass very quickly. But again who knows.

Q4 cash-burn was incredibly high. I believe none of us expected Cash from Operations to be so bad. Even if you account for the few thousand cars that slipped the quarter end, the numbers don't turn positive, still a few hundred million negative.

Demand didn't flatten out. The letter clearly states demand is the strongest its ever been.

What flattened out was Fremont's ability to produce cars. We're stuck with the capacity of the S/X final assembly line as the bottleneck at around 2500 cars/wk. Right now, its not worth the risk to take action to improve it and jeopardize the Model 3 timeline. Additionally, nobody really knows yet what Model 3 availability will do to S/X demand. Perhaps once Model 3 is available, the existing S/X capacity will be sufficient to meet the S/X demand at that time. If not, they can always expand it. But right now, anything that might risk the timeline of Model 3 is no bueno. It has the side effect of the guidance we got being both believable, and easily met, while still showing double digit percentage gains over the year-ago quarters.

The people that were crying for TSLA to please give believable guidance they could actually beat got their wish, and like usual, it doesn't matter what TSLA does, its still not good enough.

 

[SBenson]

Eh, 3.3 billion in cash, 2.5 billion in capex, 500 million per quarter in potential operating cash flow deficit... about 700 million short by September. Could be covered by expansion of the existing loan lines, though as Musk says, it gets tight.

After running through all the numbers, most of which cancel each other out and were predictable, it would be worth looking deeply into that jump in SG&A, which is the only truly surprising thing. And it wasn't service center expansion, apparently. What was it? Any ideas?

"500 million per quarter in potential operating cash flow deficit" -- that's quite very optimistic.

Here are all the headwinds to that
- Increasing Opex
- Potentially decreasing S/X demand, which will be a serious negative on gross margins. Incremental sales have higher margins, it goes the other way with shrinking deliveries
- Potentially negative margins on model-3
- Solar roofs? wont they be negative margin initially? But maybe this is a small negative number.

I think that operating cash flow deficit will easily exceed 1.5 billion over next three quarters, with Q3 being absolute worst, where everything collides and *sugar* hits the fan, in terms of financials.

 

[Runarbt]

Sorry I didn't get much of a chance to read all the posts since ER. So I don't know if much of the below is already tirelessly debated. I will post anyway for those who care.

Here is an alternative-view with real-facts:

I call it alternative because the resident view on TMC is always positive.

Negatives:
S/X demand flattened out (at expected 100K rate if you will). Further S/X guidance is not given for 2H. Seems to speak for fears of of model-3 cannibalization. If S/X demand indeed goes down and if additionally model-3 ramp is slow then it will be a terrible cash torching mix. So initial model-3 production is going to be a very risky period with extremely nasty financials. We just hope that period will pass very quickly. But again who knows.

Big difference on demand and what they plan to produce/deliver.

You start to sound a bit like Mark Spiegel on CNBC. :-/ They even stated flat out in their letter demand is rock solid growing 43% or something YoY(?).

They plan to deliver aprox. 50k H1. Most likely to be able to focus on model 3. No need to add extra focus areas with ramp on S and X

Q4 cash-burn was incredibly high. I believe none of us expected Cash from Operations to be so bad. Even if you account for the few thousand cars that slipped the quarter end, the numbers don't turn positive, still a few hundred million negative.

Model-3 capex guidance is enormous. I honestly didn't expect it to be that high. To make matters worse, it is not even for the full year.

It will ccost to get production up and running. Capex might also include Gigafactory as this is needed for the Model 3? Well, as the Model 3 start to produce in july with ramp in september.. I assume there wont be extra capex after ramp.. hence not for the full year.

No TE powerwall/powerpack guidance.

They did state that they expected TE to match the Car part of the business.

No guidance on FSD.

In a nutshell, we got *sugary* guidance on S/X and no guidance on TE , FSD or model-3 and a really *sugary* operating cash dynamic with an enormous capex guidance.

This will only get worse over next few quarters. The cash bleed will keep getting worse as more is invested in OpEX to support the upcoming model-3 and other things. The Capex is stunningly big.

Positives:
We got some guidance on model-3 trajectory with a *sugar* load of asterisks - global supply chain, inheriting global force majeure, slowest guy in the pack dictates the final throughput, yada, yada, yada

Keep in mind the weekly run rates Musk threw at us are with the baseline assumption that absolutely everything goes perfectly. Any one of the asterisks come into play, the ramp gets derailed. He himself said, like n times, he just doesn't know what might go wrong (if he knows, he will address right now).

You forgot confirmation that locations for Gigafactory 3, 4 and perhaps 5 will be chosen this year. To me, this is a HUUGE thing.. I was hoping for 1, and now maybe 3 "at once"? What does this say about actual demand for Model 3?

Conclusion:
I am actually surprised the stock price only fell this much.

I actually think there is very high likelihood we will revisit 180s over the course of the year. That my friends I believe will be a tremendous opportunity to back up the truck, sell everything you got, buy TSLA.

PS: Musk damn well raise capital. The projected cashflow trajectory for the year is truly scary.

I disagree. ;-)

Didn't think we'd see this much of a drop actually. And I have a very hard time imagining a drop below 250.

Scary cash flow? The money that really need to be spent.. why sit on 3.4-5 billion when there are work to be done?

Money will start to flow in september/october from Model 3. And I assume TE will contribute a lot more very soon.

Capital raise - sure, bring it on. If GF 3-4-5 can be built faster.. the faster the better.

 

[dandurston]

One thing from the ER that I don't think has gotten enough air time is that Tesla is actually crash testing the Model 3.

Only a few weeks ago they starting beta production and now built enough cars that they don't mind crashing a few. My guess is they've built several dozen by now and have recently started active testing. That'll probably be indoors for a few months, but we might see one in the wild before too long.

 

[Berwin]

I feel really foolish for thinking that yesterday's earnings report was the best news ever and that the price will soar. Bought mine at $280. I do not have spare cash to buy more at this low price now. Should I sell half and try and buy it back at a lower price?

 

[Waiting4M3]

....
Negatives:

....
No TE powerwall/powerpack guidance.

No guidance on FSD.

...

To me these maybe even be positives. Right now M3 matters, and only M3 matters. To me all the stuff they said in the ER and investor letter align with the M3 priority:

• Do the prototype production
• Get suppliers ready to start in July and go volume in Sep.
• Have lots of cash to pay for all the tools and parts.
• Keep S/X quiet to not distract from M3. If new stuff shows up for both MS/X and M3, then do 1 announcement, like AP2, or HUD (if it happens)
  
• TE is just overflow right now in case they have extra battery supply while M3 ramps. So why guide?
  
• FSD could be the equivalent of FWD for MX. If Elon focuses on it too much too early and M3 is delayed, people will cry hubris again.

All the other things can be addressed once M3 is safely on its way, in Q3-Q4 of '17 or later.

 

[Runarbt]

I feel really foolish for thinking that yesterday's earnings report was the best news ever and that the price will soar. Bought mine at $280. I do not have spare cash to buy more at this low price now. Should I sell half and try and buy it back at a lower price?

You only risk running after when SP rise. What is your price target?
How low do you expect it to drop, that u consider it worth selling? I dont thin we will se below 250, but thats my amateur guess.

I know I will hang on to mine until 1-2000$, and then 15-20$ is nothing.

 

[SBenson]

Eh, 3.3 billion in cash, 2.5 billion in capex, 500 million per quarter in potential operating cash flow deficit... about 700 million short by September. Could be covered by expansion of the existing loan lines, though as Musk says, it gets tight.

After running through all the numbers, most of which cancel each other out and were predictable, it would be worth looking deeply into that jump in SG&A, which is the only truly surprising thing. And it wasn't service center expansion, apparently. What was it? Any ideas?

"500 million per quarter in potential operating cash flow deficit" -- that's quite very optimistic.

Here are all the headwinds to that
- Increasing Opex
- Potentially decreasing S/X demand, which will be a serious negative on gross margins. Incremental sales have higher margins, it goes the other way with shrinking deliveries
- Potentially negative margins on model-3
- Solar roofs? wont they be negative margin initially? But maybe this is a small negative number.

I think that operating cash flow deficit will easily exceed 1.5 billion over next three quarters, with Q3 being absolute worst, where everything collides and *sugar* hits the fan, in terms of financials.

Additionally for an operation the size of Tesla it needs to have at least 2 Bil cash on hand just to not spook the suppliers (and financiers).

There is a need to raise at least 2 to 2.5Bil for next 3 quarters.

I honestly lost faith that Tesla will ever stop coming to markets for more capital. Even after the next round, there will always be some new products and Tesla already talking about more multi-billion dollar factories. I really wonder when Tesla will reach a sustainable positive FCF. Probably not until 2020, much likely even later.

 

[Oil4AsphaultOnly]

over 13 mill

I feel really foolish for thinking that yesterday's earnings report was the best news ever and that the price will soar. Bought mine at $280. I do not have spare cash to buy more at this low price now. Should I sell half and try and buy it back at a lower price?

The fact that you would drop all your investible cash into TSLA in one go, means that you haven't done enough research. Selling half now to try to catch a lower re-entry point is just gambling. If there's any advice I can suggest, it's to earn some more money so that you can add to your position if a lower re-entry point shows up. Otherwise, take a deep breath and plan out your entry price and exit price. Don't react to the market and think you can get a feel for which way the sentiment blows.

Good luck with your investments!

p.s. As pessimistic as Sbenson's views were, it's not impossible that TSLA could hit $180 before breaking through $300. Trump and the Federal Open Market Committee are not done having an effect on the market yet.

 

[Berwin]

You only risk running after when SP rise. What is your price target?
How low do you expect it to drop, that u consider it worth selling? I dont thin we will se below 250, but thats my amateur guess.

I know I will hang on to mine until 1-2000$, and then 15-20$ is nothing.

I intended to hang on until $350-$400. I am new to investing so correct me if i am wrong but wouldn't $2000 SP mean that Tesla would have a market cap of ~320 billion which would make them twice as large as the biggest automobile company now.

Also can anyone explain to me the impact on SP if Elon Musk decided to raise capital through equities? Thank you in advance.

 

[electracity]

Is there some evidence for a heads up display in the Model 3 that I don't know about? The part of the call where they discussed the model 3 being easier to manufacture than S, and gave the specific detail about 1 screen/computer for the model 3, vs 2 for the model S. That seems like a crazy example to cite in the call if they are going to announce a second heads up display, with the associated computer to drive it, in a couple months.

It is a total guess, i think the surprises for the model 3 will be more along the lines of surprising range and performance.

IIRC, Musk said something like "the controls will make sense at the next reveal".

If there was ever a car that looks like it was built for a HUD, it's the model 3. Requiring the driver to look right for critical information like speed seems unlikely.

A garmin add-on HUD is $129 retail.

 

[EnzoXYZ]

I feel really foolish for thinking that yesterday's earnings report was the best news ever and that the price will soar. Bought mine at $280. I do not have spare cash to buy more at this low price now. Should I sell half and try and buy it back at a lower price?

Did not think that was possible unless you bought after hour? The next trading day, today, was well under 280.

I would never buy all at once or sell all at once. This is something I learn never to do. TSLA SP is kind of predictable if you follow it closely which you should if you are putting hard earned money into an investment. Always think can I buy more if the SP drops by 20 and can I buy even more if the SP drops by 40. After all that the last question is can I double up my shares if it drops by 60. You'll be a great Tesla trader if you can answer 3 yes.

No worries I don't think you lose much compared to a 4 year college education so call it cheap education.

 

[Berwin]

How much of an impact will it be on SP if Elon Musk decided to raise capital through selling more shares?

 

[theschnell]

I feel really foolish for thinking that yesterday's earnings report was the best news ever and that the price will soar. Bought mine at $280. I do not have spare cash to buy more at this low price now. Should I sell half and try and buy it back at a lower price?

Should almost always average into Tsla, hindsight 20/20. That said, I really think $250 to $255 is the floor.

Had a member of this forum sell his whole position in the 180's with that scheme which totally backfired, and had a friend sell at $205 on the way up with that scheme in mind.

My advice. If you really believe just hang on. You will profit, as long as you're willing to wait for it.

Eric