2017 Investor Roundtable: TSLA Market Action

[racer26]

Elon on Twitter saying Tuesday or Wednesday for 8.1 release.

Setting up a week of big success, with SES-10 reflying a Falcon 9 for the first time too...

 

[FredTMC]

Sounds to me like unless they can convince 4 of the 25 GOP no voters, this bill is as it should be - dead on arrival.

I'm not sure what that means to TSLA and the market as a whole, but for the American people, its a good thing. ACA is far from perfect, but this bill is measurably worse for most of the public.

Its still staggering to me how many Americans hate 'Obamacare' but love the 'ACA', without realizing that they are one and the same.

The bill will pass. Just not today. They'll delay the vote.

 

[Zhelko Dimic]

Ok, I am a Tesla bull and believe we will see >$300 sometime, due to the M3. However, please give me the fleshed-out thesis for why it happens soon, or in the next few months. Here are the future scenarios I see playing out.

For all of these, my base assumption is that the M3 comes out in modest volumes in Q3 and better volumes in Q4. Call it a few k cars in Q3, and maybe 20-30k in Q4. With no major problems. In other words, a virtual home run in terms of market expectations. I further assume that the stock will revalue 3-6 months before the appropriate trigger actually occurs.

Stock price scenarios:

1) The mere reality of the M3 causes the jump. A reveal in July is essentially required, just before or concurrent with employees getting cars. So the final interior, specs, ordering page, and actual deliveries more than the Model X' embarrrassing 6 causes market euphoria. It is not important that the sales are not terribly accretive financially. The market loves it and the new valuation happens very soon, April, May or June of 2017.

2) The market isn't too excited about a few M3s, and wants the margin story. Most of the excitement of the M3 being a real thing is already priced in, and the market wants to see margins. The main bear argument at this point is that the M3 is a money loser, and Elon didn't help this by telling that ER story about how margins will be terrible at first. So basically the market does wait-and-see and there is a Q4 ER where they say the margins are say 25% and improving sharply. News arrives Feb of 2018, and maybe the market generally anticipates it and the new valuation happens end of 2017.

3) The Market isn't excited about a few M3s, or statements about margins or other stated successes. They want to see money. In this most bearish bull scenario the market isn't impressed by anything other than financial top and bottom line results. The volume of Q4 of 2017 or even Q1 of 2018 turns the profit story on its head (Tesla loses money, burning cash, M3 loses money on every car etc). In some ER there will be a step change in revenue and profit. That is the signal that the risk is essentially gone. The market anticipates this and is revalued in the first half of 2018, but maybe as late as March/April of next year.

Bonus wildcard scenario) Trump is called to testify in the Russia probe. Steps down complaining loudly that he is a victim promising to tear down the country behind him. Pence is president. A period of uncertainty follows, then stabilization as everyone realizes we are better off now with a sane politician with toxic policies over an unstable politician with toxic policies. This happens any time in the next 4 years. This could happen concurrently with the growth story above, causing havoc with otherwise smart option plays.


Trend trader for sure, and maybe others on this board seem to be putting a lot of faith in the first scenario. Aren't the others just as likely?

If your assumptions turn out to be right, I bet on your option #1. Main reason is that I believe market expect that Elon will screw-up, and anything resembling orderly execution will blow off the top.

But to show you that market expectations are lowered for Elon, I personally don't expect him to deliver on your assumptions - I think they're too optimistic. If they pan-out, great, but I'm bracing for something worse. In the end, it doesn't matter, we're talking few months, (as long as I resist temptation to leverage up)

 

[GoTslaGo]

So, did the sharp sell-off 2 days ago wrong-foot traders and raise confidence prematurely among the shorts? We will need to close above the high of that day ($264.80) to say with more confidence that it was a bear trap. Here's the daily chart. The main positive for me is that Williams%R reversed higher without crossing into the lower frame (-60 to -100). The 10-DMA has also crossed higher through the 20-DMA Bollinger Band centre line. I'd like to see the green 5-DMA turn upwards and to see longer green candles on MACD.

Charts don't like 'white space', so I'm also hoping price will move up to touch the upper Bollinger Band and fill the space above it. Coincidentally the Upper Bollinger Band is at $264.84 or about the same as the high of 2 days ago. Is the current set-up similar to the beginning of December (arrow on chart), right before the rally?

View attachment 219431

If you look at the December daily candles (as you pointed out), then compare it to the monthly TSLA pattern for the last 3 months there is a possibly similar pattern developing. It would need TSLA to follow tight opening and closing prices for the beginning and end of the month (intra-month not so important), for this month and next (march and April). This would need a breakout in May (coincidentally before M3 announcement in early June?).

The pattern you pointed out is the Rising Three Methods pattern (a 5 day candlestick pattern: Big green, 3 small candles within the wicks of the big green, followed by another big green) which is a bullish continuation pattern. There are rules that have to be adhered to to confirm this pattern, but if it does the upside is supposed to be really good (as we saw in December through January).

 

[Waiting4M3]

IMO the most likely scenario is a middle ground between your scenarios 1) and 2). At the point that Tesla achieves any appreciable M3 volume during 2017, all of the analysts will be forced to revisit their models for 2018 and raise revenue estimates. Yes the more bearish ones will predict GM issues, but the biggest concerns about M3 quality and ramp will have been mitigated. By Q4 there will be more visibility on TE revenues and margins and the angst over Solar City as a cash vacuum will have dissipated. So overall sentiment will be much more bullish and the stock will run!

I wonder if even by Q3 we will have some more visibility on the margin on the new 2170 batteries from TE, and along with revealing of M3's configuration/range, we will start to get a more accurate estimate of M3 margin

 

[DragonWatch]

Honestly - its Uber and SNAP's valuations in comparison to TSLA that bother me so much more than NFLX. NFLX is at least providing a popular service and making money without breaking the law.

Seek the truth; breathe light into your soul. Breaking the law? China and the US have one party control and in both countries people are angry which one is breaking the law ~ or are they both? Seek the truth.

 

[steve3]

Ok, I am a Tesla bull and believe we will see >$300 sometime, due to the M3. However, please give me the fleshed-out thesis for why it happens soon, or in the next few months. Here are the future scenarios I see playing out.

For all of these, my base assumption is that the M3 comes out in modest volumes in Q3 and better volumes in Q4. Call it a few k cars in Q3, and maybe 20-30k in Q4. With no major problems. In other words, a virtual home run in terms of market expectations. I further assume that the stock will revalue 3-6 months before the appropriate trigger actually occurs.

Stock price scenarios:

1) The mere reality of the M3 causes the jump. A reveal in July is essentially required, just before or concurrent with employees getting cars. So the final interior, specs, ordering page, and actual deliveries more than the Model X' embarrrassing 6 causes market euphoria. It is not important that the sales are not terribly accretive financially. The market loves it and the new valuation happens very soon, April, May or June of 2017.

2) The market isn't too excited about a few M3s, and wants the margin story. Most of the excitement of the M3 being a real thing is already priced in, and the market wants to see margins. The main bear argument at this point is that the M3 is a money loser, and Elon didn't help this by telling that ER story about how margins will be terrible at first. So basically the market does wait-and-see and there is a Q4 ER where they say the margins are say 25% and improving sharply. News arrives Feb of 2018, and maybe the market generally anticipates it and the new valuation happens end of 2017.

3) The Market isn't excited about a few M3s, or statements about margins or other stated successes. They want to see money. In this most bearish bull scenario the market isn't impressed by anything other than financial top and bottom line results. The volume of Q4 of 2017 or even Q1 of 2018 turns the profit story on its head (Tesla loses money, burning cash, M3 loses money on every car etc). In some ER there will be a step change in revenue and profit. That is the signal that the risk is essentially gone. The market anticipates this and is revalued in the first half of 2018, but maybe as late as March/April of next year.

Bonus wildcard scenario) Trump is called to testify in the Russia probe. Steps down complaining loudly that he is a victim promising to tear down the country behind him. Pence is president. A period of uncertainty follows, then stabilization as everyone realizes we are better off now with a sane politician with toxic policies over an unstable politician with toxic policies. This happens any time in the next 4 years. This could happen concurrently with the growth story above, causing havoc with otherwise smart option plays.

Trend trader for sure, and maybe others on this board seem to be putting a lot of faith in the first scenario. Aren't the others just as likely?

I look at the market as having multiple components that influence TSLA, maybe characterize them as rational and momentum components for simplicity's sake. And these two forces tend to play off each other, sometimes in a tug of war, sometimes piling on in the same direction. On the rational side, I think DaveT's points make a good case for upward SP pressure with Tesla's de-risked position at this point, ahead of the Model 3 launch.

On the momentum side, this component acts like a fulcrum and teeter-totter that can swing wildly. Momentum appears and disappears as an influencing factor, and can do so quite suddenly. This aspect calls on an investor's gut feel for the current situation, but then there is often both internalized & externalized pressure to try to give rational reasons for this irrational component.

It's such an individual affair, how each investor balances these two aspects in their thesis. I include a glance at the technicals, like @TrendTrader007 and @Xorbit have laid out, as part of that ephemeral & fickle momentum component, balanced by @jesselivenomore's valuable input (when it's available). It's also useful to attempt as much objectivity as one can summon, to assess the degree of cognitive consonance one applies to support a given gut feeling.

All in all, appreciate a fair portion of what gets discussed here. My core shares are salted with a few J'19 LEAP 300 calls.

 

[racer26]

Seek the truth; breathe light into your soul. Breaking the law? China and the US have one party control and in both countries people are angry which one is breaking the law ~ or are they both? Seek the truth.

My post was mainly an assertion that Uber having a $60B valuation when both their investments and their very business model are predicated on breaking the law is stupid.

 

[Chop110]

Macro is keeping everything flat.

Massive selloff's across the board. Looks like the market is bracing for some more congressional floundering.

 

[larmor]

Honestly - its Uber and SNAP's valuations in comparison to TSLA that bother me so much more than NFLX. NFLX is at least providing a popular service and making money without breaking the law.

Netflix based on brokering of media royalties and distribution. Recent forays into original content are fantastic for netflix. Tesla only makes cars and energy, no Kate and Mim Mim.

 

[TrendTrader007]

Ok, I am a Tesla bull and believe we will see >$300 sometime, due to the M3. However, please give me the fleshed-out thesis for why it happens soon, or in the next few months. Here are the future scenarios I see playing out.

For all of these, my base assumption is that the M3 comes out in modest volumes in Q3 and better volumes in Q4. Call it a few k cars in Q3, and maybe 20-30k in Q4. With no major problems. In other words, a virtual home run in terms of market expectations. I further assume that the stock will revalue 3-6 months before the appropriate trigger actually occurs.

Stock price scenarios:

1) The mere reality of the M3 causes the jump. A reveal in July is essentially required, just before or concurrent with employees getting cars. So the final interior, specs, ordering page, and actual deliveries more than the Model X' embarrrassing 6 causes market euphoria. It is not important that the sales are not terribly accretive financially. The market loves it and the new valuation happens very soon, April, May or June of 2017.

2) The market isn't too excited about a few M3s, and wants the margin story. Most of the excitement of the M3 being a real thing is already priced in, and the market wants to see margins. The main bear argument at this point is that the M3 is a money loser, and Elon didn't help this by telling that ER story about how margins will be terrible at first. So basically the market does wait-and-see and there is a Q4 ER where they say the margins are say 25% and improving sharply. News arrives Feb of 2018, and maybe the market generally anticipates it and the new valuation happens end of 2017.

3) The Market isn't excited about a few M3s, or statements about margins or other stated successes. They want to see money. In this most bearish bull scenario the market isn't impressed by anything other than financial top and bottom line results. The volume of Q4 of 2017 or even Q1 of 2018 turns the profit story on its head (Tesla loses money, burning cash, M3 loses money on every car etc). In some ER there will be a step change in revenue and profit. That is the signal that the risk is essentially gone. The market anticipates this and is revalued in the first half of 2018, but maybe as late as March/April of next year.

Bonus wildcard scenario) Trump is called to testify in the Russia probe. Steps down complaining loudly that he is a victim promising to tear down the country behind him. Pence is president. A period of uncertainty follows, then stabilization as everyone realizes we are better off now with a sane politician with toxic policies over an unstable politician with toxic policies. This happens any time in the next 4 years. This could happen concurrently with the growth story above, causing havoc with otherwise smart option plays.


Trend trader for sure, and maybe others on this board seem to be putting a lot of faith in the first scenario. Aren't the others just as likely?

Thank you for coming up with various realistic scenarios you are right any of these could happen I really do not have a clue all I can say is that the charts look Bullish and that's about it . Sure the stock could go sideways for another couple of months but it seems to me that sometime in the near future There is likely to be a significant price appreciation based on improving technical picture

 

[Waiting4M3]

Ok, I am a Tesla bull and believe we will see >$300 sometime, due to the M3. However, please give me the fleshed-out thesis for why it happens soon, or in the next few months. Here are the future scenarios I see playing out.

For all of these, my base assumption is that the M3 comes out in modest volumes in Q3 and better volumes in Q4. Call it a few k cars in Q3, and maybe 20-30k in Q4. With no major problems. In other words, a virtual home run in terms of market expectations. I further assume that the stock will revalue 3-6 months before the appropriate trigger actually occurs.

Stock price scenarios:

1) The mere reality of the M3 causes the jump. A reveal in July is essentially required, just before or concurrent with employees getting cars. So the final interior, specs, ordering page, and actual deliveries more than the Model X' embarrrassing 6 causes market euphoria. It is not important that the sales are not terribly accretive financially. The market loves it and the new valuation happens very soon, April, May or June of 2017.

2) The market isn't too excited about a few M3s, and wants the margin story. Most of the excitement of the M3 being a real thing is already priced in, and the market wants to see margins. The main bear argument at this point is that the M3 is a money loser, and Elon didn't help this by telling that ER story about how margins will be terrible at first. So basically the market does wait-and-see and there is a Q4 ER where they say the margins are say 25% and improving sharply. News arrives Feb of 2018, and maybe the market generally anticipates it and the new valuation happens end of 2017.

3) The Market isn't excited about a few M3s, or statements about margins or other stated successes. They want to see money. In this most bearish bull scenario the market isn't impressed by anything other than financial top and bottom line results. The volume of Q4 of 2017 or even Q1 of 2018 turns the profit story on its head (Tesla loses money, burning cash, M3 loses money on every car etc). In some ER there will be a step change in revenue and profit. That is the signal that the risk is essentially gone. The market anticipates this and is revalued in the first half of 2018, but maybe as late as March/April of next year.

Bonus wildcard scenario) Trump is called to testify in the Russia probe. Steps down complaining loudly that he is a victim promising to tear down the country behind him. Pence is president. A period of uncertainty follows, then stabilization as everyone realizes we are better off now with a sane politician with toxic policies over an unstable politician with toxic policies. This happens any time in the next 4 years. This could happen concurrently with the growth story above, causing havoc with otherwise smart option plays.


Trend trader for sure, and maybe others on this board seem to be putting a lot of faith in the first scenario. Aren't the others just as likely?

As you said, the market is waiting to see the below 3 scenarios before the PPS goes up:
1) that M3 is on time
2) that M3 will have good margin
3) that M3 will make a lot of money for Tesla

Regarding 1), I think all signs points to it's more likely than not that M3 is on time, I think that's also the reason behind people thinking that the M3 is already priced in.

Regarding 2) and 3), those outcome could become visible sooner than people expect.

• On the margin front, I expect the M3 to be a somewhat "normal" car + EV drive train, without crazy stuff like the FWD, the variability on margin will depend a lot on the battery. With TE kicking into high gear and Powerwall2 installation starting all over (at least where I am), we may get visibility on margin on the batteries by the time Q3 ER comes out.
  
• On the profitability front, once you know the margin, multiply that by the 400K reservation, you have a total profitability, just need to divide that by time and you get some quarterly profit which you can compare with estimated capex/expenses and look at net profit. The main unknown here, besides the margin, is the ramp speed. If Tesla ramps according to schedule it would be obvious in Q4.

So even for people expecting scenario 2 and 3, I think there is a non-trivial likelihood that we could get a bump before the end of 2017, if TE shows good margin by the end of Q3, and M3 ramps well in Q4.

 

[Papafox]

Perhaps, though I'm not sure I follow. I think the market 'trains' traders to act in a certain way (buy the dips, play the range etc) because that's what's been working recently. Playing the range, has been what's been working for traders since mid 2015. Easy money, right? That's why I think it stops working. So in essence, I feel the risky thing is to assume we stay in this range.

Yes, I'm feeling this way too. I took 15% of my money out at 280 and bought back in at 250ish. That dip play worked fine, but more importantly, I left 85% of my money in TSLA so that when the spring upward comes, I'm heavily in. Watching the after-market trading as the Q4 ER took place, we saw the stock price initially run up even on a relatively weak ER. The market slowly adjusted to a dip, but I can only imagine what would have happened if the 4Q ER had been a beat. Now we're kind of in that same situation. Will Q1 delivery numbers be good or weak? Demand looks fine for a strong quarter, but the 10 day factory break and the question marks about cars in transit remain. Q1 deliveries may be good, may be somewhat disappointing, we don't really know, just as with Q4. What we do know, however, is that the cap raise has successfully taken place at a good price and with minimal dilution, and that we're now three months closer to the release of a Model 3 that appears to still be on schedule. Bottom line: I'm not playing the 1Q delivery numbers dip game. If we see something in the Q1 delivery numbers that we think the market will respond to in a delayed reaction, I might skinny my holdings back a bit, but going into something unknown, I'd rather be heavy than light this close to Model 3 release. The spring is coiled mighty tightly.

 

[Crowded Mind]

My opinion on Q1 deliveries is that the market doesn't care as long as we're somewhere between 21k and 25k. The delivery numbers each quarter haven't moved the stock as much as I've expected in the past and the price is all about Model 3 ramp now. I will see how the premiums look next week and consider selling OTM puts and mayyyyybe calls. Though IIRC, premiums on delivery week isn't even close to premium on ER week. Oh, and jk on the calls part

 

[dakh]

@Waiting4M3 GF isn't ramped up yet and won't be for a while more, we won't get a solid read on battery margins until that's done.

 

[Fallenone]

the variability on margin will depend a lot on the battery

At the long term, I agree battery cost is key to margin. But at early ramp up, fix cost shared by low volume and production inefficiency can heavily suppress margins.

 

[Dwdnjck]

Macro is keeping everything flat.

Massive selloff's across the board. Looks like the market is bracing for some more congressional floundering.

Some criminal operations can be highly profitable.

 

[kenliles]

New CBO estimate shows 'smaller savings' from revised GOP Obamacare replacement, same coverage drops. New CBO estimate of Obamacare replacement shows no further drop in insured, but 'smaller savings'

JUST IN: OMB director tells House GOP meeting Trump is done negotiating, wants vote on Obamacare repeal Fri. - NBC Trump said to be done negotiating, demands Friday health care vote: NBC

Asked if House can pass GOP health care plan Fri., Freedom Caucus source tells @JohnJHarwood: "Nope. No way." Head of House Freedom Caucus says GOP needs 30 to 40 votes more to pass Obamacare replacement CNBC Now on Twitter

Updated @nbcnews count: 29 "no" and 2 "hell no" (Massie, Ros-Lehtinen). Ros-Lehtinen was previously "heck no." Alex Moe on Twitter

Plus another 10 or so leaning no, many of whom on the moderate end of GOP spectrum, getting slammed at home regarding the Medicaid cuts.
Not to mention Koch paying for No votes- makes it pretty iffy tomorrow--
market traders be advised

 

[geneclean55]

And yet futures just bounced. Confused

 

[AlMc]

New CBO estimate shows 'smaller savings' from revised GOP Obamacare replacement, same coverage drops. New CBO estimate of Obamacare replacement shows no further drop in insured, but 'smaller savings'

JUST IN: OMB director tells House GOP meeting Trump is done negotiating, wants vote on Obamacare repeal Fri. - NBC Trump said to be done negotiating, demands Friday health care vote: NBC

Asked if House can pass GOP health care plan Fri., Freedom Caucus source tells @JohnJHarwood: "Nope. No way." Head of House Freedom Caucus says GOP needs 30 to 40 votes more to pass Obamacare replacement CNBC Now on Twitter

Updated @nbcnews count: 29 "no" and 2 "hell no" (Massie, Ros-Lehtinen). Ros-Lehtinen was previously "heck no." Alex Moe on Twitter

Plus another 10 or so leaning no, many of whom on the moderate end of GOP spectrum, getting slammed at home regarding the Medicaid cuts.
Not to mention Koch paying for No votes- makes it pretty iffy tomorrow--
market traders be advised

And yet futures just bounced. Confused

IMO, the process is just being delayed and the market realizes that. My read is no vote tomorrow and they put it off till next week.

If they put it to a vote and it fails that is when we need to see a 5% market reaction.

Just one man's opinion.