2017 Investor Roundtable:General Discussion

[schonelucht]

The answer is to your question is yes. Having said that, there are some indications that the ramp is on track. We’ll see what management says in the upcoming report.

And, will there be more reason to think managements production guidance is more accurate this time around beyond the broken clock theory?

 

[Cattledog]

And, will there be more reason to think managements production guidance is more accurate this time around beyond the broken clock theory?

Well, that’s a bit of a non-sequitur but we get your drift. I don’t know. It seems anecdotal evidence says yes. And my gut tells me it’s time for Tesla to ‘Kick Some **S Curve’ on the production front. They’ve kicked it on the product front - their cars rock. Time to move form the noun to the verb. I believe in them.

 

[ValueAnalyst]

And, will there be more reason to think managements production guidance is more accurate this time around beyond the broken clock theory?

It's not like Tesla is producing bitcoins. These are cars that we see, touch, smell, and some even talk to...

I don't know of anyone who tried to taste them, yet. Maybe bears will experience the sweet taste of Model 3.

 

[mongo]

And, will there be more reason to think managements production guidance is more accurate this time around beyond the broken clock theory?

Squarely reports v.s. information available
Q2: estimate based on prediction of line set up and supplier pre-installation testing
Q3: estimate based on trial runs of line and a short time of fixing line/supplier issues
Q4: three months of running the line and correcting issues

I'd say there is reason to expect the estimate will be much better.

 

[viridi]

I just do not understand the obsession from analysts on Q4 M3 production/delivery. I, of course, get that as a public company Tesla needs to show positive financial results. But, Elon was very clear that there were lots of unknowns on the M3 for Q4. If I were an analyst, I would have done what they always seem to be asking of Elon - under promise and over deliver. I would have kept my estimates very low - 1,500 at the most based on the three month delay. I also understand that Tesla needs to ramp the M3 from a cash flow perspective - this is a real issue and one that I have to imagine Elon is very aware of and, as he always does, is pushing his folks very hard to ensure as best he can that deliveries get to where they need to be as quickly as possible. Short-term, I am concerned that the market will overreact to “disappointing” Q4 M3 numbers based on absurd analyst expectations (especially from the sell-side, where the motivation for overestimating is obvious). I am also concerned that based on Vin #s some might be overestimating actual production/deliveries (this is what happened Q3). Hopefully, we are all pleasantly surprised and the Vin #s are a better indicator this time around. However, with all of this, the key to me now as an investor is progress. I do not care if things move by a week, or two, or three, etc. I am seeing progress, and I look forward to hopefully hearing if the issues causing the bottlenecks have been resolved or at least are close to being resolved. It is clear to me that substantial progress has been made in the last few weeks. I also believe there are very good signs that Tesla is gearing up to move rapidly up the S curve. Lastly, and very importantly, it is clear to me that the M3 is a hit with initial consumers. Other than minor issues here-and-there (which some, of course, are blowing out of proporation), this car is a huge hit and is really loved by those who are lucky enough to have one/drive one. We are witnessing, in my opinion, the Model T of this generation. This car is game-changing to the auto industry (and the energy industry). These changes will not only be reflected in the M3, but we also have the MY to look forward to - a vehicle that will likely be even more popular than the M3. This quarter-to-quarter focus is why so many dislike being part of a public company. At some point, hopefully in the coming weeks, the stock will reflect facts, not the stream of FUD from the shorts and the haters. Off my soapbox now and back to our regularly scheduled programming.

 

[JRP3]

If I were an analyst, I would have done what they always seem to be asking of Elon - under promise and over deliver. I would have kept my estimates very low - 1,500 at the most based on the three month delay.

You assume that an analyst wants to paint an accurate picture with some room for a positive surprise. Many seem to want the opposite.

 

[viridi]

Nope - I actually assume exactly what you are saying. I stated, “if I were an analyst” (since I would want my opinions to be as accurate as possible and actually mean something). But, I also think that investors need to stop giving so much credence to the viewpoints of analysts understanding that their motivations are often times not inline with painting an accurate picture (especially in the case of Tesla where there is so much actual data to show how poorly many of the analysts have performed when it comes to their views on Tesla).

 

[larmor]

I just do not understand the obsession from analysts on Q4 M3 production/delivery. I, of course, get that as a public company Tesla needs to show positive financial results. But, Elon was very clear that there were lots of unknowns on the M3 for Q4. If I were an analyst, I would have done what they always seem to be asking of Elon - under promise and over deliver. I would have kept my estimates very low - 1,500 at the most based on the three month delay. I also understand that Tesla needs to ramp the M3 from a cash flow perspective - this is a real issue and one that I have to imagine Elon is very aware of and, as he always does, is pushing his folks very hard to ensure as best he can that deliveries get to where they need to be as quickly as possible. Short-term, I am concerned that the market will overreact to “disappointing” Q4 M3 numbers based on absurd analyst expectations (especially from the sell-side, where the motivation for overestimating is obvious). I am also concerned that based on Vin #s some might be overestimating actual production/deliveries (this is what happened Q3). Hopefully, we are all pleasantly surprised and the Vin #s are a better indicator this time around. However, with all of this, the key to me now as an investor is progress. I do not care if things move by a week, or two, or three, etc. I am seeing progress, and I look forward to hopefully hearing if the issues causing the bottlenecks have been resolved or at least are close to being resolved. It is clear to me that substantial progress has been made in the last few weeks. I also believe there are very good signs that Tesla is gearing up to move rapidly up the S curve. Lastly, and very importantly, it is clear to me that the M3 is a hit with initial consumers. Other than minor issues here-and-there (which some, of course, are blowing out of proporation), this car is a huge hit and is really loved by those who are lucky enough to have one/drive one. We are witnessing, in my opinion, the Model T of this generation. This car is game-changing to the auto industry (and the energy industry). These changes will not only be reflected in the M3, but we also have the MY to look forward to - a vehicle that will likely be even more popular than the M3. This quarter-to-quarter focus is why so many dislike being part of a public company. At some point, hopefully in the coming weeks, the stock will reflect facts, not the stream of FUD from the shorts and the haters. Off my soapbox now and back to our regularly scheduled programming.

The fascination with the numbers on of course a basic level is just justifying market valuation with profit, etc. On a deeper level, factoring the 'telsa effect' which is that anything in the mainstream or sidestream media involving tesla, the word tesla (but nothing to do with MRI scans, sigh) results in a great amount of attention. In a market setting, where if it becomes possible to push this attention in either positive or negative direction on a daily basis, then this in of itself becomes a business. This attention can be converted to sentiment either with human buyers/sellers or algobots (at least that's what i would do if i could write an algobot and wanted to make or grow $ from the market).

Of course with 300k+ pre orders for a car, when tesla achieves volume production, and it will, then the coverage and excitement with go away, since ho hum, they are making a car which was all ready ordered.

This pattern will continue for other tesla products, as long at the 'tesla effect' continues. This includes tesla energy, solar, roof, navigation with ai, etc.

The question that remains unanswered is the tesla death ray a forerunner to wireless energy transmission?

 

[ValueAnalyst]

Question for everyone:

On what specifically will Tesla spend the incremental SG&A expense growth in 2018?

Please list the items.

No takers? Here's a few:

1. Hiring of additional delivery and customer specialists
2. A portion of higher Supercharger depreciation
3. That's all major ones I have... what else?

 

[dc_h]

No takers? Here's a few:

1. Hiring of additional delivery and customer specialists
2. A portion of higher Supercharger depreciation
3. That's all major ones I have... what else?

Larger delivery centers like Marina Del Ray and Fremont.
Urban charging centers.

Not Elon's style, but wouldn't mind more partnerships with mall operators and Starbucks maybe? Perhaps Tesla can make a better latte than Starbucks, but why bother, especially if you can offload some capex and ongoing mgmt to your partner.

 

[goinfraftw]

Oldie, but a goodie - by Walt Mossberg.

"This isn't an investment column, and I am not an investment adviser. But here's a free financial tip: if any company actually mass-produces a new, safe, practical, affordable, reliable, proven, much longer-lasting type of battery for digital devices, buy stock. Buy a lot of it. Because batteries are the key to every electronic device we now depend upon — especially smartphones and laptops — and they are the weak link in the system."

Yep. Also, I think this is a major reason why Apple will never buy Tesla (nor will any company). They're fueling the advent and propulsion of every electronic industry on the planet.

 

[DragonWatch]

Well my anniversary is off to a good start anyway

For some reason the tension here is high, oh yeah, we are on pins and needles waiting for the 4Q17 delivery numbers

Bottom line the Tesla company vision was & is to change the thinking away from fossil fuels ~ almost period The second goal is to produce/harness sustainable fuel ~ second almost period The third goal is to make the world a better place ~ the almost third period

No one; no political party, no religion, and no gang of village idiots are trying and succeeding at any one, and I mean any one of those goal.

I am no one in the perspective of the humans alive on the Earth today, but I know a good bet when I see one and Tesla is where my money is placed. I believe in Tesla fundamentals because I have micoviewed them. I am not a numbers guy, because numbers can lie ~ look at the spread of analyst from $500 to $180 per share. Thirty years from now, none of us will remember the numbers hindering or helping the SP on 3Jan17; not sure I’ll be here then though:-( ~ but I’ll try

If you are a longhorn bull like me buck up and sharpen your horn tips. The opposition is strong, but the rewards are well worth telling your children about one day Me, they will inherit our Tesla shares and our MX if not including our Tesla Truck and solar roof. At least they will be left with a roof over their heads

 

[ValueAnalyst]

Larger delivery centers like Marina Del Ray and Fremont.
Urban charging centers.

Not Elon's style, but wouldn't mind more partnerships with mall operators and Starbucks maybe? Perhaps Tesla can make a better latte than Starbucks, but why bother, especially if you can offload some capex and ongoing mgmt to your partner.

Urban charging centers/Superchargers etc. would be CapEx, but the subsequent depreciation will be partly in SG&A and partly in COGS. The large expansion in charging stations will likely not impact operating expenses until 2H18 or so, and I wouldn't expect it to be material.

Delivery centers: I mentioned the employees to be hired, and you're right, there will be additional rent expense in there as well, and probably some depreciation on furniture etc.

anything else? What else will be in SG&A growth throughout the next couple of quarters?

 

[30seconds]

Urban charging centers/Superchargers etc. would be CapEx, but the subsequent depreciation will be partly in SG&A and partly in COGS. The large expansion in charging stations will likely not impact operating expenses until 2H18 or so, and I wouldn't expect it to be material.

Delivery centers: I mentioned the employees to be hired, and you're right, there will be additional rent expense in there as well, and probably some depreciation on furniture etc.

anything else? What else will be in SG&A growth throughout the next couple of quarters?

I think the next few quarters (esp. Q2 & Q3) are going to be remarkable from a P&L standpoint. Even if / when Elon starts large investments in the next GF / Model Y / whatever is next he probably can't spend that much in Q3 or Q4. After that I fully expect him to keep on the massive CapEx train to help save the world.

 

[ValueAnalyst]

I think the next few quarters (esp. Q2 & Q3) are going to be remarkable from a P&L standpoint. Even if / when Elon starts large investments in the next GF / Model Y / whatever is next he probably can't spend that much in Q3 or Q4. After that I fully expect him to keep on the massive CapEx train to help save the world.

Again, the question is about SG&A, which is an operating expense line item, not CapEx.

Has anyone thought about SG&A line items? Do you know what goes into this expense line item of the company in which you are invested?

R&D is mostly employee salaries/bonus/benefits etc. and some smaller items such as prototyping expense for new products.

SG&A also includes Finance/Accounting/Legal/IT employees and project expense, but will this really ramp much in the upcoming two quarters?

The primary jump should be additional customer/delivery specialists and rent/depreciation of new delivery centers.

Am I missing anything major? Any help would be appreciated.

 

[avoigt]

VIN 8362 assigned.

Tesla Model 3 - Highest Recorded VIN Now 8362

Are we about to read a surprise next week? I don't think so. Maybe they thought they pick a high number for the year end but all other indications point to a much lower number of cars produced and delivered.

Anyway in a few weeks and month it does not matter anyway.

 

[Snapdragon III]

Again, the question is about SG&A, which is an operating expense line item, not CapEx.

Has anyone thought about SG&A line items? Do you know what goes into this expense line item of the company in which you are invested?

R&D is mostly employee salaries/bonus/benefits etc. and some smaller items such as prototyping expense for new products.

SG&A also includes Finance/Accounting/Legal/IT employees and project expense, but will this really ramp much in the upcoming two quarters?

The primary jump should be additional customer/delivery specialists and rent/depreciation of new delivery centers.

Am I missing anything major? Any help would be appreciated.

Would the massive numbers of roofers, trucks, project managers, estimators, people submitting plans for permits etc, that it will take for TE and solar roof to scale up fall under SG&A?

 

[DragonWatch]

VIN 8362 assigned.

Tesla Model 3 - Highest Recorded VIN Now 8362

Are we about to read a surprise next week? I don't think so. Maybe they thought they pick a high number for the year end but all other indications point to a much lower number of cars produced and delivered.

Anyway in a few weeks and month it does not matter anyway.

Damn it ~ you beat me to the punch Good job!

 

[DragonWatch]

For what it is worth. . . . In mid November I was in the Tesla shop for my 12.5K mile service, and as we pulled in there was group of trainees in the maintenance area. Seattle, WA location.

Still looking over my tree to see if any more money is there for the pickins

 

[ValueAnalyst]

Would the massive numbers of roofers, trucks, project managers, estimators, people submitting plans for permits etc, that it will take for TE and solar roof to scale up fall under SG&A?

Yes, some growth in SG&A will be attributable to Tesla Energy and all of its components... yes. Thank you.

I would think GF2 manufacturing labor expense would be included in COGS, but the items you mentioned will likely fall under SG&A.

I do not expect Solar Roof and Powerwall ramp to accelerate until 2H18, in which case SG&A growth due to Tesla Energy would occur in 1H18.