2017 Investor Roundtable: TSLA Market Action

[D-egg-O]

TMC-ers: The most important point I heard from this call was Elon's pointing to importance of the software in a machine that build the machine, and that other manufacturers wouldn't be able to replicate that. That's new piece of info and critically important too.

Because, until now, I could imagine that Tesla would do automation better than the others, but I thought it would be temporary lead, maybe marginal, figured 10-40%. However, now you add massive scale software, and software is hard, and, it's completely different competency than manufacturing... You end up with exactly one company in the world that has competency in massive manufacturing(getting better, not quite there) and massive software development: Tesla (well, maybe Samsung too).
Sure, there are some that can do this on a smaller scale, like Kuka and whatnot, but it's one thing to program a single robot and another to write ERP software like Tesla did.

This does convince me Tesla will have enduring advantage in manufacturing in few years time... of course, it will take long time before this info is relevant or well understood, so here is our informational advantage, applicable for a long term only though

And for any potential doubters in the role of the software, I'm certain Elon and the team have spent lots of time thinking about this and know more than average forum visitor...

As someone who works in the automotive industry, I 100% agree. My experience so far is this, traditional automakers outsource a bunch of software work (product software and production equipment software). It shows in the products end performance and UI.

Legacy automakers are selling the equivalent to "dumb phones, blackberrys, palm PDAS, etc." Tesla has the "iPhone" equivalent. It's so obvious, it's not even funny.

 

[Zhelko Dimic]

View attachment 225543 Gap support at $295 to 290
50 day moving average support at $280
$270 next support level
So we go down another 13% from today's close or 18% off ATH worst case scenarios
Big freaking deal
Considering that this stock will continue to make new ATH from here on forward as M3 ramps up I couldn't care less for short term pain. I'll gladly endure all my margin calls and steep option losses for a chance to make much more in this truly great stock over the next several months and years

It would make sense that there is some shakup along the lines you mention.
I'm not sure it will happen.
We're too close to M3 production start. Market understands disruption that M3 is, and there are too many players that want to take positions before the start of sales. Hence any dip may be shallow and/or short lived.

If you look at the history of highly anticipated product releases, runups happen before the release, and they usually wrap up shortly after product is released. This is followed with a dip that goes on for quarter or two, and then, assuming product is truly transformational for the company, new rally in earnest begins, and could take years. I wish I could remember where I read this description with nice graphs...

I'm not sure Tesla will play out the same; as someone said, it's a very binary stock, loved or hated, and that seems to compress the time that it takes for scenarios to play out. However, I feel buying interest will play similarly to above description and arrest any sort of correction one would expect here.

Also, still lots of shorts. Market always wants to hurt maximum number of participants - I doubt they get off easy...

 

[Zhelko Dimic]

Last quarter there was a freudian slip. Elon mentioned about the Machine that designs the machine. Then I think he corrected himself and went to machine that makes the machine. I did feel at that time that it was not a casual mistake. Probably they have been talking about this internally for a while

They have been thinking about this for a while and are tipping their hand only now.

Oh, wow!
Collective AI that drives all robots and organizes itself to build cars? Eventually orders more of itself when data from the field warrants it? Carefully orchestrated dance of robots that gets better and better as they spend more time building their product!

Yes, please (btw, this is fun speculation, if future like this happens, it will be rather far in the future, not basing my investment decisions on it. Not an advice!)

 

[TradingInvest]

You post a lot of upbeat statements, but your average is only $209? That shows, when you purchased your own TSLA shares.

Now, or any post ER bump will be a good time to short/sell the shares. Many weak shorts are gone. Will be much less support on the way down. In 1-2 years, weak fundamentals will give some great returns. IMHO. If you have the stomach to digest upto 50% paper loss in the interim.

mmd, do you have a short position on Tesla? Shorting more? I have a large long position and plan to add more shares.

 

[vgrinshpun]

There was a steady decline in shares available for shorting at Fidelity throughout the day. It was consistent with the SP slide, so I think it is safe to assume that Wednesday was a net shorting day.

As for the price action tomorrow, we are likely to see a lot of down pressure, but I am wondering if we can hold 20 day SMA ($307.06) or find support around $305 level, although as it stands right now it will be a tall order. I would call holding $300 tomorrow a victory.

 

[neroden]

i'm aware... now extrapolate that to TSLA being higher valued than both GM and F...

You've missed that GM and Ford are discounted by the stock market for a notorious history of mismanagement, which continues, and for exceptional efforts to avoid manufacturing electric cars.

There was a period after the asbestos lawsuits when the major asbestos manufacturers looked "cheap". They weren't.

Compare Tesla to, oh, I don't know, BYD or Nissan, and you might have a better point of comparison. Passing GM or Ford is more about GM or Ford than it is about Tesla.

 

[neroden]

@myusername, this is not addressed to you, I have no hope left that I can help you understand. We think very diferently (Of course I'm right ) This comment is here so you don't think I'm addressing you, since we exchanged couple of thoughts...

TMC-ers: The most important point I heard from this call was Elon's pointing to importance of the software in a machine that build the machine, and that other manufacturers wouldn't be able to replicate that. That's new piece of info and critically important too.

Because, until now, I could imagine that Tesla would do automation better than the others, but I thought it would be temporary lead, maybe marginal, figured 10-40%. However, now you add massive scale software, and software is hard, and, it's completely different competency than manufacturing... You end up with exactly one company in the world that has competency in massive manufacturing(getting better, not quite there) and massive software development: Tesla (well, maybe Samsung too).
Sure, there are some that can do this on a smaller scale, like Kuka and whatnot, but it's one thing to program a single robot and another to write ERP software like Tesla did.

This does convince me Tesla will have enduring advantage in manufacturing in few years time... of course, it will take long time before this info is relevant or well understood, so here is our informational advantage, applicable for a long term only though

And for any potential doubters in the role of the software, I'm certain Elon and the team have spent lots of time thinking about this and know more than average forum visitor...

To add to this. This is the sort of software Tesla is *good* at; similar to the software which runs the mechanicals of the car. The sort of software Tesla is *bad* at is user-facing software, but that doesn't matter much in this manufacturing environment.

 

[neroden]

The only problem with this speculation is that Q2 of last year, the share price was around low $200 and a lot of longs were waiting on the sideline to buy more shares when bottom is formed. But currently it's already over $300, investors had so much expectation going into the earnings that they had already accumulated lots of shares, count me in as one of them. And plus, this earnings is so controversial I don't believe the shorts will back off since they have a lot of negative things to say too. It's gonna be another tug of war between the shorts and the longs. Prepare yourself for a drop due to a lot of the weak longs gets scared. But I'd love to be wrong since I'm in the same boat as all of you.

I've got short puts which execute at $300. Honestly I'd love to see them execute and get stock; they were "hope this executes" puts.

But anyway, I think $300 is likely to act as a psychological support level. Various technical support levels are immediately below it at $295, $290, $280, and $270... it's gonna be hard to drive the stock below that; enough traders and algobots follow the right sort of technicals to jump in and buy when that happens. Tesla was actually able to *dilute* at $262, which shows very strong buying pressure at that price. If the stock starts to drop below $270 without any real long-term bad news, I'd be very surprised. But then, something equally stupid happened in February 2016 (the drop to $150 was incomprehensible to me).

 

[Mike Smith]

Opened around 304 in Germany, now up to around 308

 

[Mike Smith]

307 in pre-market. M3 timeline and MS/X margins were the two biggest issues in my opinion, and they were both excellent. I wouldn't be surprised if tsla closes higher today.

 

[steve3]

307 in pre-market. M3 timeline and MS/X margins were the two biggest issues in my opinion, and they were both excellent. I wouldn't be surprised if tsla closes higher today.

Add to that (bold mine), the $4b cash on hand, more than enough to safely cover M3 launch & ramp w/o further cap raise. Top line record revenues also supports the progressing story/picture.

 

[ValueAnalyst]

Maybe when Elon said there was going to be "Stormy Weather in Shortsville", he really did mean Shortsville, New York.

I wish there was an ROTFLMAOYSST emoji

 

[ValueAnalyst]

Those who frequently buy high sell low, you are helping the shorts to stay alive. If this has been a persistent problem for your account, message me, I can help you set up some rules. I have been doing an "investment + trading" approach which worked really well for me. I have a separate thread to explain how it works. It's easy to follow without stress.

If you care about Tesla, care about making money, you seriously need to take a look of your approach and fix the problems. I hope every Tesla supporter do well. Every dollar you lost through the buy-high-sell-low process should be worth twenty dollars down the road, so don't take the loss lightly.

I do think TSLA will reach $3000 in less than 10 years. But no one can predict the path with high reliability. Find the best approach for your situation.

I agree with this post 110%. It also applies to those who buy highly priced high implied vol OTM call options that expire OTM.

 

[ValueAnalyst]

I wonder if Tesla delayed the solar roof until after earnings to stamp out any potential shorting after the miss.

Tesla does not time announcements in order to manipulate the stock.

I would not be an investor if they did.

 

[Tslynk67]

I saw nothing bad in the earnings, but I neither saw nothing new. I suspect the markets were looking for something to wow them, this didn't happen. I also fancy that they're attributing the good Q1 deliveries on the pop in HK and then making the assumption that future demand will therefore be lower.

For me it's a very positive earning call as I see no new risk, M3 on-track, TE and solar bubbling underneath for the future.

If I'm being selfish though, I'd love a big dip in the SP as I'm expecting a tax refund of around $6.5k in the coming weeks and would very much like to buy more at a lower price.

 

[ValueAnalyst]

Thanks. FWIW I'm not expecting the shorts to be forced out any time soon -- all along I've been thinking it'll happen after Model 3 has been out for a while. (If Model 3 comes out in late July, Q3 numbers still won't look that great, and it's the likely-to-be-very-good Q4 numbers which will have the major effect on chasing short-sellers away. So Feburary 2018, perhaps, at the earliest.)

It may be earlier than your estimate. The gap between management guidance vs. consensus baked in the share price is so wide that even the Model 3 final reveal event (i.e. rise in reservations to above 1 million) may ignite the initial stages of a short squeeze with more to come later in the year. By the way, 2H17 is exactly when I expect a significant rise in oil prices too.

Given the losses this quarter, I suspect TSLA won't qualify for the S&P until end of after Q2 2018 (released August 2018). It could be quite a disruptive addition; the success of Model 3 in Q4 2017 / Q1 2018 should be obvious and is likely to lead to an even larger market cap before TSLA is added to the S&P. It's messy when a very large cap stock gets added (not so messy when a stock gets added to the "bottom" of the list).

Finally a realistic S&P500 addition timeline. The Model 3 ramp-up will keep the bottom line in red at least until the end of the exponential part of the S-curve ramp-up and probably through first part of the linear ramp-up, so 2Q18. 3Q18 seems like the likely quarter for S&P500 addition, but after all the discussion on this forum around resulting significant reduction in float, I now expect shorts to definitely want to reduce their short positions by 3Q18 to less than 5% of float.

Despite all the cynicism here, I actually think this was a very positive report.

The most important factor in calculating Tesla's intrinsic value, by far, is the Model 3 timeline and demand. The company is on track to meet its INTERNAL target of July production start and the anticipation is higher than for any other consumer product in history, including the iPhone.

The second most important factor in calculating Tesla's intrinsic value is profitability, and Model S/X combined margin was at record high.

The third most important factor in calculating Tesla's intrinsic value is Tesla Energy's growth and profitability. Management guided to continued very high level of growth and gross margin was 30%, significantly higher than expected. SolarCity just ended door-to-door sales, so expect SolarCity related SG&A to drop in a very significant way in 2Q17.

Above all, competitive advantage is the umbrella that protects all of this, and we just learned that the software that will control the machines that build the machines will be yet another source of sustainable competitive advantage: "Others won't be able to copy."

This was an extremely positive report, even beyond my expectations.

Do not let price action determine how you interpret facts.

 

[jschwefel]

Maintaining Model S and X demand in light of the Model 3 is a bit concerning. This is the first ER I know of where demand for the S was questionable. I wonder if Tesla would be better off dropping the cute S3XY lineup and differentiate them with say S, X, 3S, and 3X? The 3S is obviously the Model 3 Sedan, and the 3X is the smaller SUV.

As Tesla continues to make tremendous improvements in product design (note the wiring comments on the Model Y on the call), they'll have to manage the desire for that improved technology by limiting features and capability until their flagship models catch up.

 

[ValueAnalyst]

It would make sense that there is some shakup along the lines you mention.
I'm not sure it will happen.
We're too close to M3 production start. Market understands disruption that M3 is, and there are too many players that want to take positions before the start of sales. Hence any dip may be shallow and/or short lived.

Exactly.

 

[ValueAnalyst]

Maintaining Model S and X demand in light of the Model 3 is a bit concerning. This is the first ER I know of where demand for the S was questionable. I wonder if Tesla would be better off dropping the cute S3XY lineup and differentiate them with say S, X, 3S, and 3X? The 3S is obviously the Model 3 Sedan, and the 3X is the smaller SUV.

As Tesla continues to make tremendous improvements in product design (note the wiring comments on the Model Y on the call), they'll have to manage the desire for that improved technology by limiting features and capability until their flagship models catch up.

Management specifically said the demand to meet 1H17 47k-50k target as well as 100k in 2017 is there.

Combined with the significant recent price drop for Model S, and improved battery cost due to Gigafactory ramp-up, I expect Model S/X demand and margins to be healthy at 25% in 2Q17 and move up gradually to 120k/year run-rate and 28-30% gross margin throughout 2H17 and beyond.

 

[ValueAnalyst]

This _is_ your first rodeo, eh?

My first rodeo was more than a decade ago in Houston. It was fun. Lots of cowboy hats and boots. I met my ex at the show.

I'm not sure why you're so concerned about how many times I've attended rodeos.