2017 Investor Roundtable: TSLA Market Action

[TradingInvest]

Stock price around $500 at that time seems plausible to me, though I think that would still mean the market as an aggregate would be undervaluing the company.

I don’t take the second bet listed here Wednesday, that is, I don’t bet that I know the timing of when the aggregate of rational and irrational market actor decisions (the stock price) will coincide with the company’s underlying value. I only take the first bet below. fwiw, not saying you are taking that second bet.

Totally agree with you and Warren Buffett.

 

[RobStark]

What am I missing here?

The plant -- which the United Auto Workers has been trying to help employees organize -- has more than 10,000 workers, almost double the 5,500 who workedthere in 2006.

5500 = 426k
Why 10k = 100k?

Toyota assembled cars at Fremont.

Tesla manufactures cars at Fremont with about 80% of parts made by Tesla, though obviously not all at Fremont.

 

[ValueAnalyst]

I like your 100 - 125k for S & X combined. I'll go with 180k Model 3. I would be very happy with that for 2018. Now for 2019 I want at least 400k Model 3...

Edit: Elon himself said that he guaranteed 10k a week by December of 2018 and that from 5k to 10k would be a step change. Once I put that through Elon reality translator, I get that they *might* exit 2018 with 10k per week. So in that case we are looking at 5k a week from when they first hit it through the rest of the year, which by definition is less than 200k. Unless you still think they will hit 5k per week by the end of this year. I will be nothing short of shocked if they pull that off at this point.

Ok, thank you. Three things:

1. Could you please share where you read/heard that it would be a "step change?" I'd like to take a look at the direct quote and see the context.

2. What do you think of the supplier comment re: 10,000/week in 2Q18?

3. If you expect only 180k Model 3's to be manufactured in 2018, then do you also believe new reservation holders will not get their cars by mid-19 at the earliest?

I don't think 5,000/week is possible at this point at end-17. 4,000/week less than likely. 3,000/week I think is possible. So one month behind.

Seems that the primary point of difference between your and my forecast is what happens between when Tesla reaches 5,000/week and 10,000/week. Linear rise or 5,000/week throughout and 10,000/week in December (or something close to that like January/February). Agreed?

 

[ValueAnalyst]

My 2 cents.

TSLA will not hit $2800 by March/April 2019, not even close to that level. We are unlikely to get a major short squeeze, because too many people have been preparing for the short squeeze. That's the strange thing about the stock market.

What's most likely to happen is Tesla will ramp up Model 3 production with occasional bumps here and there. This is not the first time they ramp up production, they have done much more difficult things in the early years. Maybe I should say "we" instead of "they" because we are all shareholders. But they are doing the hard work. I feel guilty.

By early 2019, Tesla will be producing ~10,000 Model 3s a week with nice margin, Model Y, Semi, Pickup will be coming...... at that time the stock probably will be around $500. If everything goes smoothly, including the Gigafactory 2 ramp up, the autonomous driving development.... then I would be surprised if the stock stays below $1000.

Based on my conversations with TT007, he is a great, honest guy, not a troll. He has extensive stock knowledge not only about TSLA and chart. Combined with his willingness to take leveraged position, I bet he will become a billionaire in the end. The only problem is that a concentrated and leveraged position tend to wipe out people during road bumps. He will not be wiped out this time. After this round, his approach will be much safer.

This is like the repeat of 2016, don't be upset when the stock goes lower.

Thank you for the color.

Would you mind sharing a back of the envelope calc of how you tie 10,000/week run-rate with nice margin to $500 per share?

 

[pGo]

Numi housed production engineering, but definitely not desigh engineering for engines, transmissions, HVAC systems, Sound Systems, etc., etc. The design personnel was scattered around the world between Toyota and GM design centers. This is huge difference. Add all of the software engineering done by Tesla and you have your answer.

My impression was that Dana is not counting design and engineering but what you’re suggesting is true, makes sense. Vertical integration would increase the headcount.

But then out of 35k employees, only 10k are in Fremont? Just trying to figure out if Tesla is as good as the previous owners.

 

[MP3Mike]

Tesla manufactures cars at Fremont with about 80% of parts made by Tesla

I think the window sticker on the Model 3 disagrees with that percentage. I don't know what a Model S/X one shows.

 

[RobStark]

I think the window sticker on the Model 3 disagrees with that percentage. I don't know what a Model S/X one shows.

Monroney stickers don't tell you which companies build what.

Some assemblies(a combination of parts) are counted as a single part for Monroney Purposes.

 

[theschnell]

Ok, thank you. Three things:

1. Could you please share where you read/heard that it would be a "step change?" I'd like to take a look at the direct quote and see the context.

2. What do you think of the supplier comment re: 10,000/week in 2Q18?

3. If you expect only 180k Model 3's to be manufactured in 2018, then do you also believe new reservation holders will not get their cars by mid-19 at the earliest?

I don't think 5,000/week is possible at this point at end-17. 4,000/week less than likely. 3,000/week I think is possible. So one month behind.

Seems that the primary point of difference between your and my forecast is what happens between when Tesla reaches 5,000/week and 10,000/week. Linear rise or 5,000/week throughout and 10,000/week in December (or something close to that like January/February). Agreed?

1) It was during Q2 conference call. Whether he used the words "step change" or whether that was my interpretation of what he was saying I don't know. But that's where I recall hearing it. I don't have time to look up now, but if it's not there I made it up.

2) Supplier comments are very weak places to place much importance. But I would love to be wrong and they do 10k per week in July. That would be great. I just find it unlikely looking at the current success of the 0 - 5k ramp that all us bulls were saying "this time is different". And I think it will be different in that they will hit 5k per week at some point, but obviously not as soon as we all hoped unless they somehow shockingly pull it off by December.

3) Basic math would suggest and support that conclusion, yes.

I heard something in the Q2 call that made me think the jump from 5k to 10k was a step change requiring a new production line or significant reworking of current line. If I am not making that up, then by definition the jump from 5k to 10k will not be linear. If not linear, then the timing of that jump will differentiate who is right in this question. He guaranteed 100% they would be there by December of 2018. I wonder how many were cringing as much as I was when he guaranteed 100%. I mean that's crazy talk. What if there is an earthquake in Fremont that damages the plant? Does he still guarantee 100% that they will produce 10k model 3 a week by December 2018? That's an extreme example but there are hundreds if not thousands of variables that could make that goal impossible. So anyway, Elon almost always overpromises and under delivers on timing. Not on products. Those are great, but on timing. Call me jaded. I've been burned too many times. Still hold huge position percentage wise but not sure it does anyone any favors to generate unrealistic expectations.

 

[AlMc]

I have been discussing the reasoning for the roughly $40 SP drop over the last two weeks. Many reasons have already been discussed but one that has not:

Mutual Funds year end is Oct 31st IIRC. Settlement for the sale of any stock held would be dictated by selling before close today. It is certainly possible that many of these funds have been booking profit for their calendar years.

 

[TMSE]

I have been discussing the reasoning for the roughly $40 SP drop over the last two weeks. Many reasons have already been discussed but one that has not:

Mutual Funds year end is Oct 31st IIRC. Settlement for selling any stock held would be today. It is certainly possible that many of these funds have been booking profit for their calendar years.

If the mutual funds are selling only to book profits with no change in their outlook, wouldn't they buy back immediately after?

 

[AlMc]

If the mutual funds are selling only to book profits with no change in their outlook, wouldn't they buy back immediately after?

I would think they could buy right back in. I do not know if there are any restrictions on selling/buying back in quickly. Someone with more experience is more than welcome to correct me.

 

[Navin]

See my response to your comment in Papafox thread

 

[TMSE]

See my response to your comment in Papafox thread

What are you talking about?

 

[AlMc]

See my response to your comment in Papafox thread

Thanks. I did see it. I believe the sell off was hastened by this type of mutual fund profit taking.

 

[AlMc]

What are you talking about?

He indicated that that was entirely possible (mutual fund sell off) based on a Fidelity Mutual Fund manager who liked TSLA leaving his position.

 

[SteveG3]

1) It was during Q2 conference call. Whether he used the words "step change" or whether that was my interpretation of what he was saying I don't know. But that's where I recall hearing it. I don't have time to look up now, but if it's not there I made it up.

2) Supplier comments are very weak places to place much importance. But I would love to be wrong and they do 10k per week in July. That would be great. I just find it unlikely looking at the current success of the 0 - 5k ramp that all us bulls were saying "this time is different". And I think it will be different in that they will hit 5k per week at some point, but obviously not as soon as we all hoped unless they somehow shockingly pull it off by December.

3) Basic math would suggest and support that conclusion, yes.

I heard something in the Q2 call that made me think the jump from 5k to 10k was a step change requiring a new production line or significant reworking of current line. If I am not making that up, then by definition the jump from 5k to 10k will not be linear. If not linear, then the timing of that jump will differentiate who is right in this question. He guaranteed 100% they would be there by December of 2018. I wonder how many were cringing as much as I was when he guaranteed 100%. I mean that's crazy talk. What if there is an earthquake in Fremont that damages the plant? Does he still guarantee 100% that they will produce 10k model 3 a week by December 2018? That's an extreme example but there are hundreds if not thousands of variables that could make that goal impossible. So anyway, Elon almost always overpromises and under delivers on timing. Not on products. Those are great, but on timing. Call me jaded. I've been burned too many times. Still hold huge position percentage wise but not sure it does anyone any favors to generate unrealistic expectations.

Schnell is not making it up. I don't remember exactly either, but, there was something they made a point about sharing re getting to 10K along the lines of there being more to it than simply more of the same of the ramp to 5K. I'm not 100% on this, but I'm not too far from as close to 100% as I get (I also cringed a bit at the 100% guarantee or certain bit, but not for quite the same reason).

 

[ATHiker]

The article about Taiwanese supplier referred to 3000/week and 5000/weer as ***sets*** of parts, so 3000/week and 5000/week directly translates to quantity of cars.

It is true that actual schedule of production and parts supply are related but clearly not matching.

A vehicle can have multiple sets of something. For example, brake pads are sold in sets for front or rear wheels. Some brakes have multiple pads - one for each rotor - and a set consists of just one wheel. I'm just pointing out that it's ambiguous, not trying to rain on anyone's parade.

A key takeway from the supplier news for me was that Tesla was expecting to double production between late Q4 and early Q2. That's obviously been pushed back a little bit but it gives us a sense of what the pace of the ramp should be as they start pumping out cars.

I'll also be honest and say that production of 5,000 Model 3s a week by year-end was never my expectation. For Tesla to have done that would have been absolutely phenomenal. Heck, for them to be at a 5k/week pace by July next year would be extremely impressive. Volume manufacturing is hard. Put another way, this stock is materially higher if they're profitably turning out 5,000 Model 3s per week next summer.

 

[AlMc]

Schnell is not making it up. I don't remember exactly either, but, there was something they made a point about sharing re getting to 10K along the lines of there being more to it than simply more of the same of the ramp to 5K.

Agreed. The conversation on that topic indicated that doubling from 5K to 10k would NOT cause a doubling of Capex to get there.

 

[ValueAnalyst]

I have been discussing the reasoning for the roughly $40 SP drop over the last two weeks. Many reasons have already been discussed but one that has not:

Mutual Funds year end is Oct 31st IIRC. Settlement for the sale of any stock held would be dictated by selling before close today. It is certainly possible that many of these funds have been booking profit for their calendar years.

Somebody should correct me if I'm wrong, but from what I've seen working with mutual funds, that's not how their profit is calculated. I believe this reasoning is way off.

 

[Hogfighter]

I remember listening to the Q2 2012 CC. Elon stated that the S ramp was unknown for 2012, but that they would make over 20,000 vehicles in 2013. You could almost hear the collective laughter from the analysts. The vast majority thought (1) impossible to build that many, and (2) no demand for that many.

We all know the rest of the story. This feels very much like October 2012.