dmckinstry
Model X 2019
A bet that most of us would love to see lost. However, I'm with you on expectations.
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T34ME
Active Member
You mean this one?
Personally, I'm more interested in the "please can I get my model 3 before I die" emoji!
I don’t do gentlemen bets. So let’s put some money on this. How’s $10k? If loser doesn’t pay, they publicly vow to never post on TMC again.
TrendTrader007
Active Member
Why don't you guys bet against some shorts for a change
I think we're missing one key thing here, and that is leading by example. You don't motivate employees by simple demanding unrealistic goals if you don't show employees you go above and beyond with you're own work. Case in point, sleeping on the production floor while resolving Model X production issues.
In this thread: A bloody war between Bulls who think the stock will go over $400 in 4 months vs Bulls who think it will go over $400 in 4 weeks. 
Same team people.
I wanted to share the way I think of the Model 3 ramp, in terms of stock timing. (I am here to make money, so I want to know where the stock is going).
One question/debate is how well the ramp is going. The other, equally important but rarely discussed question/debate is the market expectations of that ramp. If Mr Market tends to think like AJ, just a few thousand in 2017, or none at all because "it will be just like the Model X" then even a 4-6 week slip could well be priced as a victory for TSLA.
So the price of TSLA should sort of follow [ramp success]/[ramp expectations]. Dave T's pessimism is speaking, I think, more to the expectations. The lower that denominator the easier it will be for TSLA to go up.
Musk's tweet storm "expect the worst" is about lowering expectations. Here on TMC the bias is WAY OFF on what the expectations are. If you are a big Tesla/Elon fan you probably are on the very bullish side of expectations. I suspect the market has far lower expectations, or we would be trading <300.
None of this will matter in a quarter. However, I have options so I will continue to obsess. I suspect leverage is the root of the Hyper Bull Vs Bull war of '17.
Same team people. I wanted to share the way I think of the Model 3 ramp, in terms of stock timing. (I am here to make money, so I want to know where the stock is going).
One question/debate is how well the ramp is going. The other, equally important but rarely discussed question/debate is the market expectations of that ramp. If Mr Market tends to think like AJ, just a few thousand in 2017, or none at all because "it will be just like the Model X" then even a 4-6 week slip could well be priced as a victory for TSLA.
So the price of TSLA should sort of follow [ramp success]/[ramp expectations]. Dave T's pessimism is speaking, I think, more to the expectations. The lower that denominator the easier it will be for TSLA to go up.
Musk's tweet storm "expect the worst" is about lowering expectations. Here on TMC the bias is WAY OFF on what the expectations are. If you are a big Tesla/Elon fan you probably are on the very bullish side of expectations. I suspect the market has far lower expectations, or we would be trading <300.
None of this will matter in a quarter. However, I have options so I will continue to obsess. I suspect leverage is the root of the Hyper Bull Vs Bull war of '17.
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.
I will have to disagree with you on this one. Just because Tesla is investing big time doesn't mean Tesla cannot show profits. This largely boils down to accounting. Let me give a couple of examples:
Lets say, Tesla decides to build 3 more giga factories and breaks ground on all of them next year and starts shoveling money into those projects. As long as they do not produce anything tangible, there is no depreciation happening on them they will be irrelevant to Tesla's P&L. Even if they start producing output, the depreciation will only be proportional to the number of units produced. Now, if Tesla aggressively ramps up its R&D, that will negatively impact Tesla because R&D is expensed unlike most of the car companies (except Honda I believe). In this case Tesla is profitable but cash short.
Take Uber on the other hand. For it 'investing' means entering a new market and taking share, by giving incentives, and building its network of drivers and customers. It 'invests' a lot into building this network and once it matures, it can make gobs of money (see US, which is apparently solidly profitable). This investment is solidly unprofitable because from an accounting perspective, because this has to be expensed. You cannot build up an intangible and depreciate that.
Amazon was probably somewhere in the middle between a capital intensive business (think investing in warehouses & data centers) and Uber (think investing in market share), but skewing more towards the Uber end of the spectrum. So the financials looked barely profitable until recently, even though the underlying business was pretty good. I believe the Amazon machine was also generating decent amounts of cash, Uber and to some extent Amazon are the business models where investing in growth is penalized from an accounting perspective.
Coming back to Tesla, its obviously super capital intensive, but most of the big investments are accounting friendly, as they are capitalized and depreciated. In Tesla's case, they capitalize superchargers, retail locations and service centers. So these affect the cashflow but not profitability in a significant way. That said, a portion of these investment expenses might get classed under SG&A which will hit profitability somewhat.
All said and done, Tesla has a good shot at profitability in 2018. This doesn't take away from the fact that Tesla will continue to need those gobs of money and will continue to access capital markets. Generally speaking each of these raises might also be good opportunities to add to your position.
TLDR: Tesla might be profitable as early as Q2 & Q3 '18, but will still be burning tons of cash and raising capital (debt & equity).
Bet TSLA
Active Member
Yes, that's about right. All the people talking about Tesla being more than three weeks behind just aren't paying attention. Or perhaps they don't understand what "exponential" means. Elon's prediction in June was for 30 in July, then 100 in August, then 1500 in September. They actually produced 260 by the end of September. If they had produced 130 they would be where they predicted at the end of August, but they produced twice that. So about what they should have done maybe ten days into September. That's about three weeks behind if they got the at the end of September.
Where are they now? We don't know. But if they produce 1500 in October then they will be one month behind. This is obvious. Will we know? Only if they reveal more production information. I suspect they will do that only if the news is good.
But at this point it is literally impossible for them to be more than about five weeks behind, and that is if they've produced nothing since they told us the 260 number. So please stop the nonsensical claims.
You just need to work out the numbers. Investments in new factories and production lines are largely capital expenditures, and as a result they don't impact profitability that much. Capex impacts cash flow (since money goes out) but on the profit/loss statement shows up as depreciation (usually under cost of goods). What largely impact profit/loss are the gross profit and then the operating expenses. Since Tesla will be ramping revenue and if they can keep healthy gross margins (in the mid-20s), then their gross profit will dramatically increase with the Model 3 ramp. And as long as they keep operating expenses in check (ie., SGA and R&D), then they will likely show profit during 2nd half of 2018, according to when I was last examining their financials. But you can do it yourself. Just make some projections for revenue, gross margin, and operating expenses (based on past few years growth, company guidance, etc) for 2018 quarter-by-quarter, and see what you get.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.
ValueAnalyst
Closed
No. I never bet for money, except for my investments.
Also, I just noticed that I made a spelling mistake in my reply to your offer. I meant that at least onE of the three scenarios will play out. I think it's the $1,000 in 2018 one, primarily due to a reason that hasn't been discussed in this thread.
Just wanted to clarify that I do not necessarily expect $500 with high confidence by year-end, although it is possible if Model 3 production ramps up soon.
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My bet :
End of 2017 : about 350-400
End of 2018 :about 500-600
End of 2019 : about 700-800
End of 2020 :" " 1000
End of 2021 : " " 1300
End of 2022 : " " 1690
End of 2023 : " " 2200
End of 2024 : 2856
End of 2025 : 3700
End of 2026 : 4800
End of 2027 : 6200.
Basically 30-35% growth for 10 years.
ValueAnalyst
Closed
For the benefit of those in the Market Action thread who use sentiment analysis, I note that articles on Seeking Alpha have turned more positive.
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Chickenlittle
Banned
If you pay me 10,000 dollars I will gladly not post here anymore
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.
Please allow some adjustment on this:
Elon is not setting unobtainable goals. He is stating what needs to be done for success.
From a time perspective he may be forgiving, as long as you are not twice as slow as he would be. [If you are that slow, he will just do it himself and fire you].
Here is a list of examples of requirements that are not reasonable, but must be met for success:
1) No "valves everywhere" at Space X in the fuel lines. [too expensive, too many failure points, too many control points].
2) Must reuse the rockets. [Costs will never work if you don't do that].
3) Must land on a boat. [Payload fraction for return is too high if you don't do that for many missions with today's rocket volumes].
4) Must use 18650 NCA [Nothing else is available with the density to deliver range. Yeah, it is 7,104 cells for 85kW. I know that. We have no real other choice.]
5) Must not catch on fire easier than gasoline [Safety reference standard].
6) Must be safest cars on the road. [People, that we want t o sell our cars to, will have seen lithium fires in school. We need independent test lab verification of safety].
7) Must be sexiest car on the road. Yes, 0-60 in less than 3 seconds. [Not your ordinary EV in bold.]
8) Must be sexiest car at price point. [Hire a person that was able to deliver a sexy car at GM - Delorean was the last guy with the Firebird... That is more than just design skills.
9) Must not be gender specific [Hire the person who understands the new Beetle].
10) Must meet $35K price point to be relevant [2170 battery with affordable chemistry.]
None of these are stretch/aspirational goals. These are realistic goals that must be met for success to happen. They are not negotiable.
The only thing that approaches aspirational is time. But he is serious about that. If you don't take it seriously as a supplier, or employee, you are done.
The goals are valid, real and mission critical.
I'll do it for 9
no pride
bdy0627
Active Member
This is true but to assume for market trading purposes that this is the extent of the ramp delay is risky. Although Tesla isn't saying anything about the ramp at this point, it seems pretty clear they aren't delivering 1500 in October unless we suddenly see a huge number of 3s coming out in the next 2 weeks. I think it is much safer to "assume the worst" until it appears clear otherwise. As @austinEV mentioned, what we are really trying to do is predict market sentiment. I have been a little bit surprised there wasn't more of a stock drop on news of the ramp delay. It suggests expectations are lower than many of ours here. However, if Tesla reveals a more substantial delay, on the order of a few months, I would expect the stock to decline pretty sharply short term. In reality, Tesla will do no such thing other than what they say on the Q3ER/CC. There are other things to factor in at that point: better than expected financials due to Model S/X, Semi reveal. I keep leaning towards focusing big on the longer term right now rather than trying to profit from a climb in relatively short order, but I haven't pulled the trigger to sell my J18s yet.
Adam Jonas raised price target helped matters. The SP was beginning to look vulnerable just before his note came out.
Aslo, where are the new Gigafactory announcements?? The year is coming to a close.
Aslo, where are the new Gigafactory announcements?? The year is coming to a close.
My assumption has been that they will wait until Model 3 production is ramping nicely before giving specifics on GF 3, 4, 5 etc although that could turn out to be wrong. We could hear something about GF3 during the Semi event but I am not expecting much.
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