2017 Investor Roundtable: TSLA Market Action

[RABaby]

I think there's a sad reality regarding Elons "bottleneck" tweets from over a week ago.

Basically, if Elon thought the bottlenecks would clear within a week or two, he likely wouldn't have bothered tweeting about the delays.

I'll feel better when there's production volume evidence that ramp has begun, but I'm not optimistic it'll happen in next few weeks

A favorable scenario is current bottlenecks resolved by ER in Nov AND confirmed during ER.

Announcement by Elon on bottleneck progress before ER would be awesome but unlikely IMO

Musk found the bottlenecks.
400 to 700 of them were sent packing last week.
The machinery should be smoother going from here.

 

[AlMc]

I definitely agree with you here. It's a common management technique to set goals slightly out of reach, yet possibly attainable. But Elon has taken it to another level, and I believe it's serving it's purposes well with him. By pushing for super aggressive goals that likely aren't going to be attained by his teams, he's (in a sense) ensuring that his teams will work their butt off trying to attain those goals. And if Elon publicly announces those goals and announces the goals not as aspirational but as real goals, then it only serves to motivate his teams to work even harder. Even if Elon knows they are aspirational, there's no benefit to say they are aspirational because it can be taken as an excuse for his teams to not try hard for them. Now, if the teams get close to reaching them, Elon is very happy. He knows they've worked harder than almost humanly possible. But if the team is not close to reaching the goal and has missed significantly, then he knows that he's got a suboptimal team/manager... either they didn't work as hard as he wanted them to OR they were incompetent. Either way, they deserve to be fired (at least in his perspective), thus you fire them... as in the case of recent Autopilot lead firings.

The chances of Elon changing this management technique is very low. It's because he's getting the results he wants from it. And he's likely to continue to use it. Thus, as long as Elon is in charge (ie., as CEO) we can expect the product ramps to be delayed... since they stated goals were stretch/aspirational goals, serving more to motivate his employees rather to appease shareholders.

Folks, this isn't reasoning by analogy... it's reasoning by first principle.

Agree. I actually was fooled into hoping things changed with EM goals when he said many moons ago now: 'A win should feel like a win'

 

[TMSE]

Or maybe I’ve missed it... have you posted your model here?

And if you haven’t posted it here, then why do you keep talking about it?

VA will keep talking about her/his model, until and unless we all subscribe to her/his super-duper premium service. Resistance is futile.

 

[TrendTrader007]

Okay lemme extol the virtues of the weekly hollow red candle at the expense of distracting from the highly productive discussion about M3 delays
There have been only 6 instances of weekly hollow red candle since TSLA started trading in 2010
Here was the first one in September 2011 on low volume and marked an all time low $22.29
The stock went up over 17X since then in less than 6 years

 

[TrendTrader007]

The second hollow red weekly candle occurred in June 2013 again on low volume leading to 94% price appreciation over next 4 months
3rd hollow red in September 2013 presaged a temporary top after a nearly 5X run up in SP in less than 6 months

 

[TrendTrader007]

There was a minor hollow red weekly candle in May 2015 nothing to write home about and similar in June 2016
The real winners came recently in February 2017 near the 13 weeks EMA after which SP appreciated by approximately 54% in 4 months
And last week's hollow red right on 13 weekly EMA on low volume
All this is highly significant in my estimate

 

[TrendTrader007]

As a random example please note the innocuous looking hollow red weekly candle in AMZN chart on low volume in June 2015 right near 13 weekly EMA
AMZN doubled since then

 

[ggr]

I certainly hope your plan,
and lay of the land
Includes All of Tesla
since there may be something else'la
The powerwall, and PV folks
suggested, and it'z no joke
130 milez south of tampa
and nothing much will hamper
In the land of the newly wed and nearly dead
installs may begin whilst it still 17.
so tesla energy,
should be
in your plan, if you can
{discontinuity}
"gully foyle is my name
"terra is my nation
"deep space my dwelling space
"the stars, my destination
(YEE HAW!)

{{{IE i may be able to get a PV array and power wall in just a few months in an area of Florida TE isn't in yet}}}

Quant suff.

 

[TrendTrader007]

So my dear reader
TSLA might be where NVDA was in May 2016 at $34.09 sitting right on 13 weekly EMA ready to go up 5X over the next 18 months to $2000 or so

 

[TrendTrader007]

I believe we're at an inflection point right here in terms of SP
Technicals tell me that SP is likely to defy all odds
And throw caution to the wind
Fundamentals shall be preceded by technicals
SP merely resting here
Simply a calm before the perfect storm
The time to be super/ultra bullish on SP is right here right now
If I were a betting man
My money would be on TSLA running up fast and furious over the next 18 months to $2000 or so

 

[DaveT]

I believe we're at an inflection point right here in terms of SP
There are two camps of longs
Cautious longs like Dave T
And ultra bullish like ValueAnalyst
Technicals tell me that SP is likely to defy all odds
And throw caution to the wind
Fundamentals shall be preceded by technicals
SP merely resting here
Simply a calm before the perfect storm
The time to be super/ultra bullish on SP is right here right now
If I were a betting man
My money would be on TSLA running up fast and furious over the next 18 months to $2000 or so and proving Value Analyst right

I’m very very bullish from 2018 on, especially when Tesla starts reporting profit with M3 in high production. It will trap the bears and will likely result in multi-year run. But I’m also realistic. We’re not seeing $500 anytime this year. And we’re not seeing $1000 anytime next year. Or $2000 anytime in the next 18 months. Would love to bet on that.

 

[BornToFly]

Over the years, DaveT has been a forum downer, cautioning the bulls, and right too many times to count. Personally, I try to invest with a little more caution by listening to Dave, while I dream big about early retirement and barrels of cash after reading posts by TrendTrader007....

(In other words, Dream with TT007, but invest with DaveT)
P.S. - I have no idea if that is advice or not.
P.P.S. - I do hope TT007 is right this time, so I can retire all ready!

 

[Snapdragon III]

Some thoughts on TSLA price action.

Back in mid-May I wrote the following here:

After Q1 earnings, I'm less bullish on TSLA's short-term prospects (even though I'm still overall bullish short to medium term). Q1 earnings showed Tesla's expenses growing significantly after SCTY acquisition, and SCTY not contributing much profit due to a very low NCI (Net loss attributable to noncontrolling interests) number ($66m compared to $200M+ in previous quarters). As a result, Solarcity is a bigger drag on Tesla than I'd hoped for. And there's almost zero chance Tesla gets added to the S&P 500 this year. And I just don't see Tesla turning a profit until maybe Q2 of 2018, which would report in early August 2018. So until then, I'm not sure if we really will have the big catalyst needed to get us into the mid-400s and 500s. It's possible but not sure how likely that Tesla will turn a profit in Q1 2018.

So until early or mid-next year, I'm expecting TSLA to be consolidating in the 280-420 range. It could go lower than 280 if there a global crisis or sorts, a market crash, M3 ramp goes bad, or a number of other reasons. It could go higher than 420, if Tesla Energy ramps more than most expect or if someone Tesla surprises with a fast M3 ramp this year. But I think the greater likelihood is consolidation in a wide 280-420 range.

I still think sentiment around TSLA is good. Even talking heads (ie., CNBC folks) are starting to consider Tesla a "tech company" and lots of people want to get behind the name because it's becoming a cool stock to hold. Also, I think Tesla also has some good news coming this year... M3 deliveries, Tesla Semi, new Gigafactories, etc. So, I think it's enough to sustain the positive sentiment around the stock. Normally, I would say the range would be 280-380 (based on technicals) but I'm extending it to 420 because of what I think is positive sentiment that can be sustained around the stock. But knowing TSLA, I expect volatility.

It took AAPL to show growing profits with iPhone for it's $15 to $100+ run.
It took FB to show growing profits for its run from sub $30 to $100+.
It took GOOG to show growing profits for it's long multi-year run.

More recently, it took AMZN to show growing profits (mostly from AWS) for it's stock price to go from $300 to 900.
And it took NVDA to show growing profits for it's stock price to go from sub $20 to $100+

All these example, growing profits were a result of:
1. larger-than-expected market, and
2. the ability of the company to seize the market with large margins.

I think it's going to take TSLA to show growing profits and then we'll see a dramatic multi-year run that will surprise most people. But those growing profits aren't going to come this year. When they do come though (I'm expecting mid to late 2018), then I expect to see some real fun.

On another note, the reason why growing profits serves as fuel for a dramatic stock price gains is because 95% or more of investors simply don't operate out of "faith" in the founder. For example, very few had "faith" in Bezos, Jobs, Zuckerburg, etc before they showed growing profits. But after growing profits, everybody jumps on the bandwagon and proclaims how great those CEOs are. It's because growing profits is 100x easier for most to get behind than a "visionary" CEO who is promising future profits. This big shift in TSLA will likely happen next year.

I still think most of this is relevant. We have been consolidating in the 280-420 range (though slightly tighter). And while I think there's still chance of TSLA breaking out of that range (either high or low end), I think the most likely scenario is that TSLA remains in this consolidation stage, 280-420, until at least the end of this year.

The most significant recent positive news was strong S/X sales, which should mean a fairly strong Q3 earnings. While the M3 ramp is disappointing and also brings some level of uncertainty, strong S/X sales means that Tesla can weather the storm (or longer production hell) of M3 ramp because it's got strong revenue with their existing product line. It's also going to be interesting to see TE revenue in Q3.

I like this, and think it is insightful, but I am a fairly doubtful that Tesla will show a profit in 2018, or even in 2020. What makes you think that they won't just keep ramping up investments in multiple new gigafactories, Semi production lines, Model Y production lines, etc? If the Model 3 manufacturing gets rolling, and things are looking good, the amount of credit they would have access to would be sufficient to keep growing at crazy pace while remaining unprofitable for years. As long as they were executing reasonably well, I don't think there would be that much pressure from shareholders, and I don't see Elon saying "Lets slow down to get profitable." I feel like he even hinted at this a couple conference calls ago, when he was talking about the spending being within their control, and choosing to grow fast, or Ludicrous. The upside is if they never show a profit, us shareholders will be less likely to demand it. It will give them a big advantage over their competition, who's shareholders would never stand for them canceling the dividend, and loosing money for the next 5 years on purpose to compete with Tesla. If Tesla can get big enough so that they are materially cutting into the competitors profits, along with being able to invest a much higher percentage of revenue, it could turn into a very powerful moat for Tesla. I think Tesla will be able to get away with not being profitable, and will not be punished by the market, largely because there are tons of investors (LIKE ME) who looked at Amazon for years but never bought it because "They aren't making any money." Everybody (me) is fighting the last war, and has sworn that they will not make that mistake again.

I feel like the examples you gave above of the FANG stocks are largely fundamentally different in that they are mostly software based. The dynamic of discovering a larger than expected market, and capitalizing on that market works much better with software, where you can make unlimited almost free copies, than it does with large manufactured goods. As you said above, it took Amazon getting into software with AWS for the stock to go crazy. Elon is right that the machine that builds the machine is the key to it all. With out it, they will never be able to profitably capitalize on the huge market they have waiting for their Tesla's.

I am only half joking when I leave you with this. We might have to wait until the distributed power system, and supercharger network, is built out on Mars before we see any profits out of Tesla.

 

[TradingInvest]

We are likely to reach $1000 in 26 months, and $1800 in 38 months, based on my estimated sales and gross margin in 2018, 2019, and 2020. Assume L5 does not work, Tesla Network not in operation, and there is no short squeeze.

If Tesla's self driving starts to work in this time frame, then my estimate is conservative.

I hold onto my shares and still adding.

 

[BornToFly]

We are likely to reach $1000 in 26 months, and $1800 in 38 months, based on my estimated sales and gross margin in 2018, 2019, and 2020. Assume L5 does not work, Tesla Network not in operation, and there is no short squeeze.

If Tesla's self driving starts to work in this time frame, then my estimate is conservative.

I hold onto my shares and still adding.

Where is the "Please GOD let him be right!" emoji?

 

[TrendTrader007]

I’m very very bullish from 2018 on, especially when Tesla starts reporting profit with M3 in high production. It will trap the bears and will likely result in multi-year run. But I’m also realistic. We’re not seeing $500 anytime this year. And we’re not seeing $1000 anytime next year. Or $2000 anytime in the next 18 months. Would love to bet on that.

Never say never
No one can accurately predict the SP over any given time frame
It's merely an exercise in abstraction and probability
Personally it matters little to me whether the SP is $400 or $2000 over the next several months
I'll make money as long as SP is anywhere over $275
I've been wrong TMTC
However I've usually always made money despite being wrong because I bet on the improbable and the few times those improbables come true I make a killing more than enough to compensate for all the times I'm wrong
I suspect my batting average is 70 to 80% directionally
In other words I'm right 7 to 8 times out of 10 in the direction of SP movements but not necessarily on the magnitude of the move
what you and some other realistic bulls are discounting is the irrationality of the markets
You have the luxury of being more sure of your predictions than I can be of mine because most of the times the markets behave rationally and 8 to 9 times out of 10 those who predict that SP will be relatively well behaved will be proven right. After all how many times a year do you get major tropical storms hitting Houston ? But when they do the results can be much more impressive than expected by most "rational" observers
1 to 2 times out of 10 SP of any given stock will defy all rational expectations and seems to me that this may be one of those times
the reason I would not make a bet on the magnitude of the SP movement is because I don't need to
As long as I get the direction right I'm golden
The way to make money in the markets is not to worry about being right or wrong
It is to Simply bet on the direction of the move
That itself is really hard for most investors to accomplish
The reason why I'm making so seemingly outrageous SP predictions is because we are breaking out of a multi year trading range and seems to me that we are in a similar situation as in 2013 except even stronger technically
So it's wrong for "realistic" bulls like you to pick on ultra bullish investors like Value Analyst because even though the odds are long, at the end of the day, when and not if the SP starts ramping up seriously then all your "realistic" assumptions will be discarded by the bull market to wayside

 

[TradingInvest]

Studying the fundamentals, watching out for competition, material/parts availability, charts, technical indicators...... all the research is only part of the puzzle.

If you have serious money on the line, you should have an action plan. On one hand you want to maximize the potential gain, on the other hand you don't want to be wiped out by a black swan event. Losing that one million dollar account is really losing 10 million future dollars.

When I use margin, I make sure it's less than 20% and I have means to handle the potential margin calls. I feel shorts will lose this round. But anything can happen in the stock market.

 

[Snapdragon III]

Never say never

what you and some other realistic bulls are discounting is the irrationality of the markets
You have the luxury of being more sure of your predictions than I can be of mine because most of the times the markets behave rationally and 8 to 9 times out of 10 those who predict that SP will be relatively well behaved will be proven right. After all how many times a year do you get major tropical storms hitting Houston ? But when they do the results can be much more impressive than expected by most "rational" observers
1 to 2 times out of 10 SP of any given stock will defy all rational expectations and seems to me that this may be one of those times
the reason I would not make a bet on the magnitude of the SP movement is because I don't need to
As long as I get the direction right I'm golden
The way to make money in the markets is not to worry about being right or wrong
It is to Simply bet on the direction of the move
That itself is really hard for most investors to accomplish
The reason why I'm making so seemingly outrageous SP predictions is because we are breaking out of a multi year trading range and seems to me that we are in a similar situation as in 2013 except even stronger technically
So it's wrong for "realistic" bulls like you to pick on ultra bullish investors like Value Analyst because even though the odds are long, at the end of the day, when and not if the SP starts ramping up seriously then all your "realistic" assumptions will be discarded by the bull market to wayside

I could not agree more! Tesla breaking $1000.00 a share in 2018 would probably not make it on the "Top 10 irrational market moments of 2018" list. Crazy stuff happens all the time in the stock market, the trick is predicting it in advance.

 

[ValueAnalyst]

I’m very very bullish from 2018 on, especially when Tesla starts reporting profit with M3 in high production. It will trap the bears and will likely result in multi-year run. But I’m also realistic. We’re not seeing $500 anytime this year. And we’re not seeing $1000 anytime next year. Or $2000 anytime in the next 18 months. Would love to bet on that.

I'll take you up on this. I see on the three you mentioned happening in the corresponding periods you listed.

 

[bdy0627]

Some thoughts on TSLA price action.

Back in mid-May I wrote the following here:

After Q1 earnings, I'm less bullish on TSLA's short-term prospects (even though I'm still overall bullish short to medium term). Q1 earnings showed Tesla's expenses growing significantly after SCTY acquisition, and SCTY not contributing much profit due to a very low NCI (Net loss attributable to noncontrolling interests) number ($66m compared to $200M+ in previous quarters). As a result, Solarcity is a bigger drag on Tesla than I'd hoped for. And there's almost zero chance Tesla gets added to the S&P 500 this year. And I just don't see Tesla turning a profit until maybe Q2 of 2018, which would report in early August 2018. So until then, I'm not sure if we really will have the big catalyst needed to get us into the mid-400s and 500s. It's possible but not sure how likely that Tesla will turn a profit in Q1 2018.

So until early or mid-next year, I'm expecting TSLA to be consolidating in the 280-420 range. It could go lower than 280 if there a global crisis or sorts, a market crash, M3 ramp goes bad, or a number of other reasons. It could go higher than 420, if Tesla Energy ramps more than most expect or if someone Tesla surprises with a fast M3 ramp this year. But I think the greater likelihood is consolidation in a wide 280-420 range.

I still think sentiment around TSLA is good. Even talking heads (ie., CNBC folks) are starting to consider Tesla a "tech company" and lots of people want to get behind the name because it's becoming a cool stock to hold. Also, I think Tesla also has some good news coming this year... M3 deliveries, Tesla Semi, new Gigafactories, etc. So, I think it's enough to sustain the positive sentiment around the stock. Normally, I would say the range would be 280-380 (based on technicals) but I'm extending it to 420 because of what I think is positive sentiment that can be sustained around the stock. But knowing TSLA, I expect volatility.

It took AAPL to show growing profits with iPhone for it's $15 to $100+ run.
It took FB to show growing profits for its run from sub $30 to $100+.
It took GOOG to show growing profits for it's long multi-year run.

More recently, it took AMZN to show growing profits (mostly from AWS) for it's stock price to go from $300 to 900.
And it took NVDA to show growing profits for it's stock price to go from sub $20 to $100+

All these example, growing profits were a result of:
1. larger-than-expected market, and
2. the ability of the company to seize the market with large margins.

I think it's going to take TSLA to show growing profits and then we'll see a dramatic multi-year run that will surprise most people. But those growing profits aren't going to come this year. When they do come though (I'm expecting mid to late 2018), then I expect to see some real fun.

On another note, the reason why growing profits serves as fuel for a dramatic stock price gains is because 95% or more of investors simply don't operate out of "faith" in the founder. For example, very few had "faith" in Bezos, Jobs, Zuckerburg, etc before they showed growing profits. But after growing profits, everybody jumps on the bandwagon and proclaims how great those CEOs are. It's because growing profits is 100x easier for most to get behind than a "visionary" CEO who is promising future profits. This big shift in TSLA will likely happen next year.

I still think most of this is relevant. We have been consolidating in the 280-420 range (though slightly tighter). And while I think there's still chance of TSLA breaking out of that range (either high or low end), I think the most likely scenario is that TSLA remains in this consolidation stage, 280-420, until at least the end of this year.

The most significant recent positive news was strong S/X sales, which should mean a fairly strong Q3 earnings. While the M3 ramp is disappointing and also brings some level of uncertainty, strong S/X sales means that Tesla can weather the storm (or longer production hell) of M3 ramp because it's got strong revenue with their existing product line. It's also going to be interesting to see TE revenue in Q3.

Thanks for that post, Dave. It's good to see you in the market action thread. I much prefer having some rational/skeptical voices here for balance. Clearly there is a Model 3 ramp delay but no way to know how bad until we actually start seeing some significant deliveries. This may just be the beginning of a longer delay or it may be the end of a short delay. Trading-wise, it's prudent to be cautious here. By that I mean J18s or less. On the other hand, I sense that the Semi reveal may be pretty big. We'll see.

There also appears to be a likely delay with level 3+ autopilot. Could be a really bad delay or ? Do you have any thoughts on where Tesla is at with their FSD goals? Thanks for the input!