2017 Investor Roundtable: TSLA Market Action

[geneclean55]

Yeah, both reasons seem plausible so it probably is a bit of both.
Either way, at that price Tesla will be able to sell as many of these as they can make.
People seem genuinely gobsmacked at the price.

 

[Remus]

Only reason for a buyback would be for Elon to increase his relative share.

But before any consideration of any buyback there will be a Tesla buy-in of Panasonic’s Automotive Battery Business Division. This might happen as soon as Panasonic hesitates to invest fast enough for Elon’s liking.

I don’t see how a buyback would happen in the foreseeable future. Need at least 6 more giga factories, new development for model y and pickup truck, continue development for semi (it won’t make money initially with that price), mega charging network, upgrade of current super chargers to 500-1000kw charging rate. Installation of the snakes, Expansion of service network. Further expansion of service networks and operations team for robo taxi service.

And that only includes thing we know they will do. There are gazillion other things Tesla can do. What about the minibus idea? What about a Tesla home hub that control your solar panels power walls and your car? It can be expanded to control your smart home together with your car, all connected to the star link system. And it may become a third mobile operating system competing with android and iOS. What about electric ships and aircraft?

 

[Tslynk67]

A big shame the NASDAQ is closed today, so much positive Tesla news.

Just head over to Electrek and read for yourself.

I agree with Fred's speculation on the semi, and would also extend to the R2, this really hints at a battery break-though to get these numbers.

Seriously, this stock's going to explode very soon, just so much happening, the shorts can't keep a lid on it for ever.

NOT AN ADVICE.

 

[ValueAnalyst]

What's the expected range of roadster production? 25,000 units? 35,000?

This is well within Tesla's proven capacity to scale.

Way too optimistic. I’m estimating 10k/year but you wouldn’t be the first one to find that too conservative.

 

[ValueAnalyst]

A big shame the NASDAQ is closed today, so much positive Tesla news.

Just head over to Electrek and read for yourself.

I agree with Fred's speculation on the semi, and would also extend to the R2, this really hints at a battery break-though to get these numbers.

Seriously, this stock's going to explode very soon, just so much happening, the shorts can't keep a lid on it for ever.

NOT AN ADVICE.

I’m not so sure. How do we know Tesla didn’t just price the semi at cost? The $75/kWh just seems too good to be true.

 

[JRP3]

Way too optimistic. I’m estimating 10k/year but you wouldn’t be the first one to find that too conservative.

OK, what have you done with the real VA?

 

[madodel]

Way too optimistic. I’m estimating 10k/year but you wouldn’t be the first one to find that too conservative.

So I take it you don't see the Roadster 2 osborning Model 3 sales?

 

[Ugliest1]

On the one hand I want to believe this is due to high demand. But then, when they had high demand for the 3, they didn't increase the deposit but increased the planned production. So that brings me to the other hand : that Tesla needs the cash for the deposits and this is an easy way to milk companies that would deposit anyway. It's probably a bit from column A and probably a little bit from column B.

I agree with this -- and of course Tesla could *easily use* the cash [i.e., pre-countering the likely-to-be-started-soon bear argument that Tesla would fail without the deposit increase], and companies would likely pay the extra with zero complaints. $20k also seems to me to be a more reasonable deposit price for a business-oriented asset with so much reduced operating cost potential.

I think the reason the 3 deposits weren't increased was the whole intent behind providing a more affordable EV, an increase just wouldn't fit.

 

[mongo]

I’m not so sure. How do we know Tesla didn’t just price the semi at cost? The $75/kWh just seems too good to be true.

Or, batteries cost > 75/kWh and Tesla makes more on the 300 mile version. In other words 500 mile semi is priced to make 20% GM (random number) and 300 mile makes 25% GM. Price points vs cost. Gives purchasers the option to spend less, but doesn't hurt Tesla.

Edit: typo x 2

 

[Waiting4M3]

I’m not so sure. How do we know Tesla didn’t just price the semi at cost? The $75/kWh just seems too good to be true.

I wouldn't be surprised that Tesla is pricing the semi at-cost using today's #s, and they see a path to profitability by 2019's #s, as well as the recurring revenue from Megachargers. So in the worst case they will not lose $ by selling the Semi regardless of how other stuff plays out in 2 years.

 

[ValueAnalyst]

Or, batteries cost > 75/kWh and Tesla makes more on the 300 mile version. In other words 500 mile semi is priced to make 20% GM (random number) and 300 mile makes 25% GM. Price points vs cost. Gives purchasers the option to spend less, but doesn't hurt Tesla.

Edit: typo x 2

Yes - Tesla may be looking to channel buyers to long-range with Semi but short-range with Model 3. That possibility makes sense. Thank you.

 

[Tslynk67]

I’m not so sure. How do we know Tesla didn’t just price the semi at cost? The $75/kWh just seems too good to be true.

Even then it's too cheap and besides, since when did Tesla not have a healthy 25-30% margin on their products?

 

[Zhelko Dimic]

I wouldn't be surprised that Tesla is pricing the semi at-cost using today's #s, and they see a path to profitability by 2019's #s, as well as the recurring revenue from Megachargers. So in the worst case they will not lose $ by selling the Semi regardless of how other stuff plays out in 2 years.

I would think Tesla will price semi at what it anticipates 2019 prices are, and that in a way to not lose much money. Tesla wants a foothold in the market, and profits will come with production efficiency and as their costs drop. It's a delicate balancing act of managing for maximum rate of growth with cash burn that can be sustained by tapping the market either through secondaries or bond issuance.
Amazon does this all the time - enters adjacent markets at the loss, and eventually creates enough market share to be cash flow positive in that market. They have it down to the recipe. Netflix has expanded into different markets in a similar way (US, than Canada and UK, Western Countries, rest of the world). It seems to be a way of disruptors. Market share during the growth stage is much more important than profit.

 

[electracity]

On the one hand I want to believe this is due to high demand. But then, when they had high demand for the 3, they didn't increase the deposit but increased the planned production. So that brings me to the other hand : that Tesla needs the cash for the deposits and this is an easy way to milk companies that would deposit anyway. It's probably a bit from column A and probably a little bit from column B.

The most important metric for a product company is paying customers. Deposits create customers without having to actually deliver the product at the same time. Initially, Tesla's primary intent for deposits was probably to accumulate additional credibility, not cash. They are probably disappointed that the cash has become relevant.

 

[ValueAnalyst]

Even then it's too cheap and besides, since when did Tesla not have a healthy 25-30% margin on their products?

You make a good point. Past is not a 100% reliable indicator of the future, but a good point nonetheless. It would be stunning if Tesla can in fact put up 25-30% margins at these Semi prices, and I sure hope you are right.

 

[electracity]

Or, batteries cost > 75/kWh and Tesla makes more on the 300 mile version. In other words 500 mile semi is priced to make 20% GM (random number) and 300 mile makes 25% GM. Price points vs cost. Gives purchasers the option to spend less, but doesn't hurt Tesla.

Tesla is playing chess. The initial product positioning is about influencing the audiences for the truck and the company.

- Semi competitors: The pricing makes the best potential EV Semi competitors more likely to pursue less than class 8 trucks.
- Cell Production: Another massive outlet for cells encourages call makers to invest for higher volume. The ability to redirect cell production was probably already seen in the Australian battery. If Tesla was at plan for cell consumption they probably would not have had an extra 100MWh available for that project. The biggest objection from battery companies Tesla probably hears is "what if you only sell 500K cars in 2020?".
- Selling 7 cent PPAs to finance EV charging. The Semi may be the razor, the PPAs the razor blade. This is how Musk thinks. It is not how Daimler thinks.

Tesla will eventually substantially derisk the companies through interrelated business lines.

 

[electracity]

Even then it's too cheap and besides, since when did Tesla not have a healthy 25-30% margin on their products?

Don't confuse cost accounting with reality.

 

[Starno]

A big shame the NASDAQ is closed today, so much positive Tesla news.

Just head over to Electrek and read for yourself.

I agree with Fred's speculation on the semi, and would also extend to the R2, this really hints at a battery break-though to get these numbers.

Seriously, this stock's going to explode very soon, just so much happening, the shorts can't keep a lid on it for ever.

NOT AN ADVICE.

Sometimes it's deceiving. Look at yesterday : M3 is now open for non employees, yet we closed in the red...

As I previously said I think a big upward movement will come ONLY when M3 ramp updates will be given.

But it would not be the first time I'm wrong....

 

[30seconds]

I really do not feel that Tesla will be cash positive anytime in the foreseeable future. Elon is all about expansion and new ideas, they will serve as a cash burn for as long as he is the CEO as well as Chairman. I admire him very much, but I feel like he does not really have as good of a business financial sense. I know Model 3 is still vamping and once they can mass produce it, Tesla will be a cash machine. But don't you feel like Elon will make more ideas to spend all that cash? Please don't flame here, I am all in Tesla at the moment. I am just trying to bounce some thoughts here. When do you guys feel Tesla will be cash positive? Don't you feel like someone with more of a business acumen or operational expertise like Tim Cook should come in and guide Tesla to cash positive first before another expansion? That might be better for the SP.

Given that Tesla can deliver returns well in excess of prime + reasonable return the only reason to be cash flow positive is to reduce risk of being over leveraged in case of external financing drying up or recession level drop in demand.

So that depends on what cash reserves and operating levers they will have to play with if either of those cases occur.

The current increase in production is a huge step change - trying to go from 100k units to 500k (5x) inside of 12-24 months. So external financing is required as the current cash flows won’t support a 5x step up.

In the future it’s pretty unlikely that another 5x will happen in a similar timeframe. So the question becomes what type of external financing will be needed to support a 2x step function (500k to 1m)? Relative to the cash flows of a 500k business some external cash might be needed, but the risk to the underlying business will be much lower compared to today.

The world is awash with $$ looking for 7% returns. Even Apple can’t figure out what to do with their cash flows (hence share buybacks).

Leveraging this cash for growth is absolutely the right thing to do.

 

[dandurston]

Or, batteries cost > 75/kWh and Tesla makes more on the 300 mile version. In other words 500 mile semi is priced to make 20% GM (random number) and 300 mile makes 25% GM. Price points vs cost. Gives purchasers the option to spend less, but doesn't hurt Tesla.

If the $150g 300 mile Semi had a 25% margin, then it would have a $112.5g cost. If Tesla decided to offer the 500 mile upgrade at cost, then it would have a $142.5g cost ($112.5g + $30g) for a 20.8% margin. So merely offering the upgrade at cost has a huge impact on margins. So I really doubt they expect their cost to be over $30g for the upgrade because the margins would tank rapidly.

Sometimes it's deceiving. Look at yesterday : M3 is now open for non employees, yet we closed in the red...

The M3 opened for non-employees on Monday.....and TSLA went up 3%.