2017 Investor Roundtable: TSLA Market Action

[FredTMC]

Buy short term puts when you're tempted to sell...

Or sell covered calls

 

[ValueAnalyst]

You do know that earnings is in like 3 days, right?

I expect continuation of last week's short covering ahead of earnings release, but sped up after Friday's very positive commentary around full-autonomy demo by end-2017 (which I have been predicting despite many TMC bulls' ridicule) as well as "4 more Gigafactories."

I have never seen a company grow faster than even the most bullish estimates. Few had made use of Elon's "50% CAGR" estimate a few years ago, and bears had ridiculed it to no end. Even the bulls are surprised now that Tesla is growing 80% YoY with 300%+ expected next year, so imagine how shorts feel after Friday's comments, which point to further accelerating growth. This is in-line with Elon's (and JB's) earlier comments around "super-exponential" growth, which is a growth model in which the growth rate itself increases through time.

I expect shorts to start running for the small exit door in a very crowded theater, starting on Monday, before The End of the MontanaSkeptic romantic drama called "Stormy Weather in Shortville"

 

[DaveT]

I expect continuation of last week's short covering ahead of earnings release, but sped up after Friday's very positive commentary around full-autonomy demo by end-2017 (which I have been predicting despite many TMC bulls' ridicule) as well as "4 more Gigafactories."

I have never seen a company grow faster than even the most bullish estimates. Few had made use of Elon's "50% CAGR" estimate a few years ago, and bears had ridiculed it to no end. Even the bulls are surprised now that Tesla is growing 80% YoY with 300%+ expected next year, so imagine how shorts feel after Friday's comments, which point to further accelerating growth. This is in-line with Elon's (and JB's) earlier comments around "super-exponential" growth, which is a growth model in which the growth rate itself increases through time.

I expect shorts to start running for the small exit door in a very crowded theater, starting on Monday, before The End of the MontanaSkeptic romantic drama called "Stormy Weather in Shortville"

I get the enthusiasm. But a run up of $36+ in 2-3 days prior to earnings is unlikely to say the least. I'd put the odds of that happening at less than 0.01%.

 

[dmckinstry]

If they never have a dividend, as long as they are doing something useful with the money, that would be fine by me. I feel Warren Buffet has commented very convincingly on this subject. It sounds stupid, but when I am thinking about investments I don't really think about selling a small portion of a position to spend the money, as "Selling". I think of "Selling" more in terms of liquidating and reinvesting the money in a different company that I think has more long term promise.

That's what I'll be doing once th SP gets high enough to buy a 3 for my daughter, and an X for myself and still leave me 80+% of my shares.

 

[AlMc]

I'd be surprised if the SP didn't close above $350 before earnings day, and $400 by EOW, if the following happens:

1) Model 3 is on time for July production start with 100k+ deliveries in 2H17, 500k deliveries in 2018;
2) Commentary around 3-4 more Gigafactories (online by 2020/21) and faster production speed for these next-gen Gigafactories;
3) Commentary around Tesla Energy ramp up throughout 2H17.

I expect all of these on the investor letter and/or earnings call.

I don't expect this, but I wouldn't mind if Tesla announced another capital raise to finance the start of additional 4 Gigafactories. I expect Tesla to have the internal cash flow and access to non-dilutive debt later this year to get the construction started, but the quicker Tesla builds additional Gigafactories, the better for long-term equity holders.

I do hope you are correct but for newbies to investing in TSLA and to this forum I would not take this as investment advice or a good strategy
When we are only 3 days from ER.

I expect ( OK, hope ) the ER/CC will be good and yield positive results post ER but $350 SP before ER and $400SP by the end of the week is even in TT007 world a bit high, IMO.

 

[ValueAnalyst]

I get the enthusiasm. But a run up of $36+ in 2-3 days prior to earnings is unlikely to say the least. I'd put the odds of that happening at less than 0.01%.

I think it's important to look at it as a percentage rather than dollar value.

It's merely a ~10% move in three days in TSLA, which has many times moved more than that in one day, is the most heavily shorted stock, with the fastest top-line growth ever in large-cap stock market history.

So although it's not 100% likely, I'd handicap it at more than 0.01%.

 

[ValueAnalyst]

I do hope you are correct but for newbies to investing in TSLA and to this forum I would not take this as investment advice or a good strategy
When we are only 3 days from ER.

I expect ( OK, hope ) the ER/CC will be good and yield positive results post ER but $350 SP before ER and $400SP by the end of the week is even in TT007 world a bit high, IMO.

Agreed 110%. I should add that I am doing nothing different to take special advantage of this short-term move I am predicting (hoping). I don't play the short-term volatility. I stay away from options or excessive use of margin. I have a long-only diversified portfolio in which TSLA is my largest position, and I expect to hold it for many years to come without trading it, even if an April 2013 type of short-squeeze happens in the coming weeks.

 

[DaveT]

I think it's important to look at it as a percentage rather than dollar value.

It's merely a ~10% move in three days in TSLA, which has many times moved more than that in one day, is the most heavily shorted stock, with the fastest top-line growth ever in large-cap stock market history.

So although it's not 100% likely, I'd handicap it at more than 0.01%.

I get the volatility after earnings and definitely wouldn't be surprised if stock moves 10% after earnings. It's just that if you're expecting a 10% move prior to earnings, then you're going to be disappointed.

 

[ValueAnalyst]

I get the volatility after earnings and definitely wouldn't be surprised if stock moves 10% after earnings. It's just that if you're expecting a 10% move prior to earnings, then you're going to be disappointed.

Well let's see how it plays out. I am usually on the optimistic side with short-term expectations, which is why I focus on analyzing and investing for the longer term. I'll leave the short-term predictions to people smarter than me going forward.

 

[DaveT]

Well let's see how it plays out. I am usually on the optimistic side with short-term expectations, which is why I focus on analyzing and investing for the longer term. I'll leave the short-term predictions to people smarter than me going forward.

Maybe we should have a bet, then you can see you're on the optimistic side with long-term as well.

Here's the bet (since you've stated multiple times that 4M cars delivered in 2020 is your base case):
If Tesla delivers 4M or more cars in 2020, then I'll give $10k to a charity of your choice within a week of 2020 delivery numbers being announced.

If Tesla delivers less than 4M cars in 2020, then you will give $10k to a charity of my choice within a week of 2020 delivery numbers being announced.

You up for it?

 

[ValueAnalyst]

Maybe we should have a bet, then you can see you're on the optimistic side with long-term as well.

Here's the bet (since you've stated multiple times that 4M cars delivered in 2020 is your base case):
If Tesla delivers 4M or more cars in 2020, then I'll give $10k to a charity of your choice within a week of 2020 delivery numbers being announced.

If Tesla delivers less than 4M cars in 2020, then you will give $10k to a charity of my choice within a week of 2020 delivery numbers being announced.

You up for it?

You wouldn't believe how often I get these offers. And my answer is always the same: No deal, as I have enough riding on my predictions.

I appreciate the offer and the charity aspect.

 

[Starno]

I'd be surprised if the SP didn't close above $350 before earnings day, and $400 by EOW, if the following happens:

1) Model 3 is on time for July production start with 100k+ deliveries in 2H17, 500k deliveries in 2018;
2) Commentary around 3-4 more Gigafactories (online by 2020/21) and faster production speed for these next-gen Gigafactories;
3) Commentary around Tesla Energy ramp up throughout 2H17.

I expect all of these on the investor letter and/or earnings call.

I don't expect this, but I wouldn't mind if Tesla announced another capital raise to finance the start of additional 4 Gigafactories. I expect Tesla to have the internal cash flow and access to non-dilutive debt later this year to get the construction started, but the quicker Tesla builds additional Gigafactories, the better for long-term equity holders.

The issue is a lot of shorts simply don't believe in Elon Musk. Like Elon could say " We're going to deliver 500k car by end of the year ", they will just respond " He is full of crap" . As long as it's not factual, a lot of short seller won't let it go.

As long as it's commentary, they don't care. Thus I don't believe in a huge short squeeze this week.

 

[DaveT]

You wouldn't believe how often I get these offers. And my answer is always the same: No deal, as I have enough riding on my predictions.

I appreciate the offer and the charity aspect.

I have a hard time taking much of what you say seriously. And now with your response, even more so.

 

[ValueAnalyst]

I have a hard time taking much of what you say seriously. And now with your response, even more so.

Ok. Thanks for letting me know.

I appreciate your work and hope that we continue to enjoy your interviews. I think you have added a tremendous amount of value to TMC, TSLA shareholders, and Tesla itself. Keep up the good work.

 

[DaveT]

Ok. Thanks for letting me know.

I appreciate your work and hope that we continue to enjoy your interviews. I think you have added a tremendous amount of value to TMC, TSLA shareholders, and Tesla itself. Keep up the good work.

Best of luck to you as well. FWIW, I think you'd do better by admitting your lack of experience in the stock market rather than trying to pretend you're an experienced stock analyst.

 

[neroden]

I'd expect dividends in maybe 10 years.

Very unlikely. Google, Amazon, and *Berkshire Hathaway* are not issuing dividends yet. Companies with charismatic founder/CEOs who think they have lots of great things to invest in -- they don't issue dividends.

Tesla is just going to keep reinvesting in expansions of one sort or another. Eventually, they'll run out of *good* ideas and he'll start investing in completely hare-brained expansions (some would say that Google has already done this). Sometime *after* that is the time you want to get out... I'm hoping that won't be for at least 30 years, though.

Alternatively, if they don't expand forever, they'll make so much money that they'll decide to go private and buy back all of our stock -- also a possibility.

 

[neroden]

I see the purpose of Tesla as a funding mechanism for SpaceX hardware. In about 10-15 years, SpaceX will probably start building factories for the ITS, at which point Elon will want to extract value from Tesla. I see dividends as the most straight forward way to transfer capital without selling shares.

It actually depends on the tax law... it might be more advantageous for Musk to have Tesla buy SpaceX bonds, honestly.

 

[doctoxics]

The issue is a lot of shorts simply don't believe in Elon Musk. Like Elon could say " We're going to deliver 500k car by end of the year ", they will just respond " He is full of crap" . As long as it's not factual, a lot of short seller won't let it go.

As long as it's commentary, they don't care. Thus I don't believe in a huge short squeeze this week.

Earnings are factual. If we get an earnings beat greater than a dollar ("the street has GAAP earnings at $-0.67), then a short squeeze is definitely a possibility on Thursday and Friday.

 

[ValueAnalyst]

The issue is a lot of shorts simply don't believe in Elon Musk. Like Elon could say " We're going to deliver 500k car by end of the year ", they will just respond " He is full of crap" . As long as it's not factual, a lot of short seller won't let it go.

As long as it's commentary, they don't care. Thus I don't believe in a huge short squeeze this week.

This is a fair point; however, it assumes shorts will be the driver behind a short squeeze. I expect solid quarterly results and further positive guidance in the investment letter and on the earnings call to bring in new longs and additional purchases from existing longs. This may lead to shorts being forced to cover despite whether they "care" or not about what management says.

 

[Reciprocity]

Dividends are great and all, but it really means the company has given up on growth or at the very least is not be aggressive in trying to grow organically.