2017 Investor Roundtable: TSLA Market Action

[Waiting4M3]

I wonder if some shorts are finally taking today's opportunity to unwind?

Interesting, maybe the high short interest is finally paying off

 

[jhm]

Tesla Solar Roof

I'm hoping we can have thorough and consolidated discussion in one place.

 

[erha]

320 --> Time for shorts to panic. Earnings miss, TSLA recovered in a day or two. Adam Jonas comes out with negative/conservative report, TSLA recovers within hours

 

[Waiting4M3]

But there never seems to be any repercussions for these analysts being so bad at their jobs. This analysis is so bad, but in 6 months most will have forgotten how horribly wrong he is. Just pretend the past never happened.

6 months? PPS is already creeping back toward $320. AJ's comment will be forgotten in 6 hours. In 6 months I don't care if Jonas et al still have a job. I won't have a job by then, I'll be retiring on my TSLA stocks. The analysts can keep babbling away at things they don't understand, and I can dedicate my full time attention in ignoring them. bwahahahaha...

 

[ktrivedi70]

How the Model 3 will ramp up is unknown. Maybe everyone is being a bit optimistic. That's fine. But Jonas's estimations are so far removed from what I consider to be reasonable, conservative estimates that I think there are three possibilities. 1) He is right because he sees/knows something no one else does. 2)He is wrong and is truly terrible at his job. 3) There's some screwing around going on here with deliberate low-ball estimates.

 

[cranker2k]

FYI - Two bearish articles (here and here) were just published simultaneously on SeekingAlpha closely following today's downgrade. In the meantime, my articles on the bull side continue to get rejected... who knows why.

Who's doing the approval?

 

[MitchJi]

This Billionaire Believes Tesla Inc Is Still a Seven-Bagger Opportunity -- The Motley Fool


This Billionaire Believes Tesla Inc Is Still a Seven-Bagger Opportunity
Chamath Palihapitiya of Social Capital sees the Model 3 as the automotive equivalent of the iPhone.

Motley Fool Staff
(the_motley_fool)
May 15, 2017 at 11:30AM

Motley Fool analyst Matt Argersinger recently returned from the 2017 Sohn Investment Conference in New York City, where he heard some of Wall Street's top investors and fund managers take the stage to share their views on various companies.

In this segment from Market Foolery, Matt shares why Chamath Palihapitiya, founder of venture capital firm Social Capital (and part owner of the Golden State Warriors), is bullish on Tesla (NASDAQ:TSLA).

A full transcript follows the video.
Listening to it now. He believes that just the cars (M3 = iPhone 3) are a seven bagger in ten years. Matt (the reporter) said that when Chamath Palihapitiya first said Tesla the response in the room was laughter (because the market response to TSLA is bipolar). . He also said that in his opinion he made a pretty compelling case.

His fund is invested in the convertible bonds he believes gives investors 95% of the upside. I disagree with that assumption. That's only correct if the SP only gets to 6-7 x.

 

[elasalle]

AJ is smart guy, but he keeps saying two futuristic terms "sustainable transport and mobility", he puts a lot of leverage on this and seems to always be negative on whether Tesla can meet its near term production goals.
So, balls back on Tesla's court - as long as semi-flawless execution of Model 3 begins in July I think we are in for some fireworks.

 

[everman]

Haha, that's one way to look at it. Adam will have to confront reality when actual numbers of cars rolling out of the factory will be significantly higher, and he will have no choice but to upgrade with a much higher price target.

Agreed, I just see this as setting up a monster upgrade in a few months when M3 starts rolling out and his production model gets revised. Can't wait to see that price target!

 

[DragonWatch]

6 months? PPS is already creeping back toward $320. AJ's comment will be forgotten in 6 hours. In 6 months I don't care if Jonas et al still have a job. I won't have a job by then, I'll be retiring on my TSLA stocks. The analysts can keep babbling away at things they don't understand, and I can dedicate my full time attention in ignoring them. bwahahahaha...

Well said

 

[Bet TSLA]

Love these buying opportunities. However I fumble fingered my order near the open today, and instead of selling 20 May 19 320 Puts I ended up buying instead. Oops. The order filled immediately since my limit was on the wrong side of the spread. Oh, well. I figured it was fate and watched TSLA continue on down so that my $7.10 puts went to $9. Nice! Then the action turned and I figured I'd better get out while I was ahead, so I ended up getting $8.35 for them, a nice $2500 gain on stupidity. My first day trade in months and I didn't lose money!

So then I put in the order I meant to, and ended up getting $9.15 for the puts I had originally wanted $8 for. So thank you Adam Jonas for an amusing morning. On the other hand my portfolio is down big on this drop, so the entertainment doesn't come cheap! But I'm just playing around the edges. I'm actually quite encouraged that TSLA didn't drop more on the downgrade. Even downgrades as blatantly stupid as this one (paraphrasing: they won't deliver many M3 because people are thinking they might deliver more than they used to think -- what??!!??) often cause bigger hits. If the broad market stays steady, I think TSLA will hit a new all-time high by the end of the week.

 

[Reciprocity]

You keep repeating the easy part without ever addressing how the tempered tile shapes are formed in the production process and how they will be cut in the field for penetrations, dormers, peaks and valleys, etc.

Glass making is energy-intensive, and anything other than flat float glass involves extra steps:

Step-by-step Manufacturing of Float Glass
How is glass made - Toughened or Tempered Glass
Cutting Glass and Plastics

I honestly don't have much of a care how they cut it, and just assume they will use a tool like people who build stuff do. Maybe its impossible to cut them in the field and we should all light our stock on fire because they really messed up. Or, maybe its just as simple as dealing with slate tiles and they have a tile saw. I take Elon at his word when he says glass is easy to work with, im certainly no expert.

Its a good thing glass making is energy intensive and the solar company making the glass tiles has access to free energy from the sun.

 

[MartinAustin]

You keep repeating the easy part without ever addressing how the tempered tile shapes are formed in the production process and how they will be cut in the field for penetrations, dormers, peaks and valleys, etc.

Glass making is energy-intensive, and anything other than flat float glass involves extra steps:

Step-by-step Manufacturing of Float Glass
How is glass made - Toughened or Tempered Glass
Cutting Glass and Plastics

Why is this in the short-term TSLA movements thread... just asking

Surely there is another thread on this huge forum where it is better placed... where others are discussing the solar roof stuff

 

[brian45011]

3) There's some screwing around going on here with deliberate low-ball estimates.

In connection with the pricing of the notes, we intend to enter into convertible note hedge transactions with one or more of the underwriters or their respective affiliates or other financial institutions (the “hedge counterparties”)
Underwriters Principal Amount of Notes
Goldman, Sachs & Co. $ 425,000,000
Deutsche Bank Securities Inc. 127,500,000
Citigroup Global Markets Inc. 127,500,000
Morgan Stanley & Co. LLC 127,500,000
Barclays Capital Inc. 21,250,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 10,625,000
Credit Suisse Securities (USA) LLC 10,625,000

 

[SteveG3]

A couple of things it seems a lot of people miss about the value of the solar roof vs other roofs and why the opportunity cost of financing vs investing else where are silly arguments:

1. I don't know why people think a roof is optional and that having a roof is critical part of a home. The fact is that the solar tiles are for homes that need a new roof or new construction and that don't have solar. Homes with roofs that don't need replacing should go with solar panels.

2. All the arguments you mention fail to take into account the fact that you get a roof that is far superior to the one you are replacing and any other roof you would put on. This has a value that is conveniently left out of many people's calculations to life time return on investment. For instance, no one compares the solar roof to asphalt + solar and includes the fact that the asphalt will need to be redone every 15 years or so or more often with weather damage. Also they ignore the fact that the solar will more then likely need to be reinstalled each time. They concurrently leave off every downside to asphalt + solar when making the comparison.

3. If you put a $10,000 roof on your house that's going to last 15 years, the value it adds to your home goes down 1/15th every year, or worse as it goes down on terms of future replacement cost which will be higher then the cost today. If you put a $60,000 then subtract the solar portion to make it equivalent to the asphalt example you end up with a $40,000 value that declines in value over 100 years. This is because you can replace both solar probs of both solutions every 20 years at roughly the same cost. Assuming the panels don't get damaged by storms that do not impact the solar tiles. Every calculation I have seen outright ignores the fact that a better roof is more valuable to the owner and future buyers and more then makes up for the difference in price with longevity and flat out higher value for better looks.

Lastly, the solar roof is not for everyone. It's for everyone else. Meaning, it you need a new roof and/or you can't put panels on the front of your house and you have few to no other options then the solar tiles are for you. Solar tiles are not for you if you love on an $80,000 house, just tear off your old roof and get asphalt and traditional solar.

People need to stop comparing apples to oranges and then ignoring the benefits and value a superior roof would bring.

My main point, as I clearly wrote, is that we are likely to see criticism whether you think it is fair or not.

In misrepresenting what I wrote, you've drawn me into a discussion I said I really didn't want to spend more time on, but clearly wrote that I would rather simply acknowledge is a somewhat subjective point than reopen the debate here.

While I said the question of the value of the solar roof is debatable, the fact that Tesla put up a calculator of savings that does not even make a note about financing costs, let alone build those costs into the calculator is not debatable, and opens them up to criticism, in my opinion fair criticism.

On your specific points misrepresenting what I wrote about the value proposition of the solar roof:

1. Where did I ever say a roof was optional?

2. I explicitly said for some people it is not solely about economics. Fwiw, when I researched this last week, I found the 15 year estimate for asphalt was lower than all the websites I looked at (20-30 years was typical), and $16K to $20K cost too high (typically about $8-10K).

3. Yes, I've seen what you've seen. In the CR article they almost completely dismissed the added value of pre-paid energy to a potential buyer of the house, and many in the comments section made the same error. I never made this false claim (fwiw, more than once I pointed out that it was a large error by CR and those writing about it in the comments section).

The solar roof is not for everyone at it's current level of development. On this we agree. You may disagree, but, I feel like Elon's comments in the fall suggested it would be a no brainer for anyone replacing their roof. I wouldn't take him so literally as to criticize the statement if it turns out it's not a good choice for an $80K home, but, it's debatable currently debatable on strict economics for middle income homeowners. Debatable, as in, ambiguous enough that most will need to do their own calculation and gut feel for some forecasting of costs and savings that may vary quite widely over 30 years.

As to apples and oranges... do you now realize what the point of my post was and what I said the point was not?

Do you agree or disagree that there are people just waiting to put out articles critical of Tesla, whether reality based or not? Do you agree or disagree that marketing that calculated savings without mentioning financing expense, let alone building it into the calculation, is a significant target for these people?

 

[ValueAnalyst]

His fund is invested in the convertible bonds he believes gives investors 95% of the upside. I disagree with that assumption. That's only correct if the SP only gets to 6-7 x.

Can you expand on this please? Why couldn't he convert to stock once SP, say, goes up by 5x?

 

[sdtslafan]

Morgan Stanley slightly decreased their TSLA holdings in Q1. The cynic in me wonders if today's downgrade could be a way for them to get back on the boat.

Who am I kidding? Never mind, that would be unethical...

 

[Reciprocity]

1. Where did I ever say a roof was optional?

2. I explicitly said for some people it is not solely about economics. Fwiw, when I researched this last week, I found the 15 year estimate for asphalt was lower than all the websites I looked at (20-30 years was typical), and $16K to $20K cost too high (typically about $8-10K).

3. Yes, I've seen what you've seen. In the CR article they almost completely dismissed the added value of pre-paid energy to a potential buyer of the house, and many in the comments section made the same error. I never made this false claim (fwiw, more than once I pointed out that it was a large error by CR and those writing about it in the comments section).

1. I was not saying you said that, I was saying your estimation along with everyone else I have seen makes no concession for the fact that you must have a roof and the roof has a value which is roughly equivalent to its replacement value.

2. I hate to break it to you but a roofs warranty is not how long it will last. Many things are not covered under warranty that will force you to have to replace the roof. There are tile roofs that can last 100+ years, it doesn't mean all will or that it will have a 100 year warranty. When you are working on time scales of decades, you have a higher chance of a roof being destroyed by hail. When someone asses the value of your home, they will take into account how old the roof is and how likely it will be that it is replaced, same with insurance companies.

3. Is it against the law to pay cash for your roof? Why would anyone assume it must be financed? I have only read a couple of articles and I have not seen one actually reference that fact that if you replace asphalt with Solar tiles, the value of your home will go up beyond what just putting panels on will accomplish. There is a value to the roof on your home. If its new, it has a higher value. If its extremely durable and attractive, it has an even higher value. Pretty simple concept. If you finance it, it would be no different then using a HELOC to remodel your kitchen. If you pay cash, then no need to finance it.

A solar tile roof shouldn't be required to pay for itself anymore then an asphalt roof should pay for itself. It just so happens, the solar roof will pay for itself, even if its financed because you only have to pay for the value of the roof after 25 years vs asphalt. The asphalt roof will be worth a negative $20,000+ because it must be replaced at future rates and your solar tile roof will still be adding $50,000 or more + solar to the value of your home. The only way this doesn't work is if your house is not worth that much and you put a roof worth more then the house and that is because no one is going to pay $130,000 to live in an $80,000 neighborhood. But If you live in a $450000 house it could be very attractive for resale value to have the only $500,000 house in the neighborhood. It is really specific to where you live because there are places in SoCal where $500,000 is still in the ghetto. Again, solar tile is not for everyone, just enough to make is a killer product and for some its really the only option.

Do I agree that people who write not well thought out articles are not good. Yes, I agree. Do I agree your post is well thought out. I guess, though it exaggerates the issue of financing which is trivial at best.

 

[SteveG3]

1. I was not saying you said that, I was saying your estimation along with everyone else I have seen makes no concession for the fact that you must have a roof and the roof has a value which is roughly equivalent to its replacement value.

2. I hate to break it to you but a roofs warranty is not how long it will last. Many things are not covered under warranty that will force you to have to replace the roof. There are tile roofs that can last 100+ years, it doesn't mean all will or that it will have a 100 year warranty. When you are working on time scales of decades, you have a higher chance of a roof being destroyed by hail. When someone asses the value of your home, they will take into account how old the roof is and how likely it will be that it is replaced, same with insurance companies.

3. Is it against the law to pay cash for your roof? Why would anyone assume it must be financed? I have only read a couple of articles and I have not seen one actually reference that fact that if you replace asphalt with Solar tiles, the value of your home will go up beyond what just putting panels on will accomplish. There is a value to the roof on your home. If its new, it has a higher value. If its extremely durable and attractive, it has an even higher value. Pretty simple concept. If you finance it, it would be no different then using a HELOC to remodel your kitchen. If you pay cash, then no need to finance it.

A solar tile roof shouldn't be required to pay for itself anymore then an asphalt roof should pay for itself. It just so happens, the solar roof will pay for itself, even if its financed because you only have to pay for the value of the roof after 25 years vs asphalt. The asphalt roof will be worth a negative $20,000+ because it must be replaced at future rates and your solar tile roof will still be adding $50,000 or more + solar to the value of your home. The only way this doesn't work is if your house is not worth that much and you put a roof worth more then the house and that is because no one is going to pay $130,000 to live in an $80,000 neighborhood. But If you live in a $450000 house it could be very attractive for resale value to have the only $500,000 house in the neighborhood. It is really specific to where you live because there are places in SoCal where $500,000 is still in the ghetto. Again, solar tile is not for everyone, just enough to make is a killer product and for some its really the only option.

Do I agree that people who write not well thought out articles are not good. Yes, I agree. Do I agree your post is well thought out. I guess, though it exaggerates the issue of financing which is trivial at best.

I wish I had simply replied to you before by saying, you've reacted to what I've written, but I'm not sure that you've really read what I've written. It might help if you read what I wrote again with the possibility in mind that I am not attacking Tesla or the solar roof, but pointing out a vulnerability to criticism in their marketing of the product.

I will clarify some points in your latest reply.

1. I didn't present an estimation here. I pointed out that Tesla's calculator does not include financing costs. I didnt even see a disclaimer note on the website stating that financing costs are not included.

2. The 20-30 years was from estimates of lifetime for the roof looking at the first several articles in a google search that seemed to come from neutral sources, not, the warrantee.

3. Assuming the roof will be financed is far more generous towards making the case for Tesla than assuming the probable opportunity cost of using cash one could otherwise invest in the stock market. I used mortgage calculators to play with this and they defaulted to a 3.9% interest rate (IIRC), far far below market averages over long term periods.

What's more, on a practical level, do you really think most middle income families would not finance?

re future value of Solar Roof... in this case, Tesla's calculator assumes 30 years of energy savings, it's not clear that you stop at 30 years. Very few people have seen the roof in the real world. I'm hopeful that in real life to most people it's a big aesthetic winner. We don't know at this point. I can see adding in the pre-paid energy to the value of a house for sale, adding in the cost paid for the roof vs other options on aesthetics is much more dicey.

Finally, you wrote that the cost of financing is "at best trivial." Using the mortgage calculator the cost was roughly $50K on a $70K roof at current interest rates. $50K. What's more, interest rates today are near historical lows.

 

[AlMc]

1. I was not saying you said that, I was saying your estimation along with everyone else I have seen makes no concession for the fact that you must have a roof and the roof has a value which is roughly equivalent to its replacement value.

2. I hate to break it to you but a roofs warranty is not how long it will last. Many things are not covered under warranty that will force you to have to replace the roof. There are tile roofs that can last 100+ years, it doesn't mean all will or that it will have a 100 year warranty. When you are working on time scales of decades, you have a higher chance of a roof being destroyed by hail. When someone asses the value of your home, they will take into account how old the roof is and how likely it will be that it is replaced, same with insurance companies.

3. Is it against the law to pay cash for your roof? Why would anyone assume it must be financed? I have only read a couple of articles and I have not seen one actually reference that fact that if you replace asphalt with Solar tiles, the value of your home will go up beyond what just putting panels on will accomplish. There is a value to the roof on your home. If its new, it has a higher value. If its extremely durable and attractive, it has an even higher value. Pretty simple concept. If you finance it, it would be no different then using a HELOC to remodel your kitchen. If you pay cash, then no need to finance it.

A solar tile roof shouldn't be required to pay for itself anymore then an asphalt roof should pay for itself. It just so happens, the solar roof will pay for itself, even if its financed because you only have to pay for the value of the roof after 25 years vs asphalt. The asphalt roof will be worth a negative $20,000+ because it must be replaced at future rates and your solar tile roof will still be adding $50,000 or more + solar to the value of your home. The only way this doesn't work is if your house is not worth that much and you put a roof worth more then the house and that is because no one is going to pay $130,000 to live in an $80,000 neighborhood. But If you live in a $450000 house it could be very attractive for resale value to have the only $500,000 house in the neighborhood. It is really specific to where you live because there are places in SoCal where $500,000 is still in the ghetto. Again, solar tile is not for everyone, just enough to make is a killer product and for some its really the only option.

Do I agree that people who write not well thought out articles are not good. Yes, I agree. Do I agree your post is well thought out. I guess, though it exaggerates the issue of financing which is trivial at best.

I wish I had simply replied to you before by saying, you've reacted to what I've written, but I'm not sure that you've really read what I've written. It might help if you read what I wrote again with the possibility in mind that I am not attacking Tesla or the solar roof, but pointing out a vulnerability to criticism in their marketing of the product.

I will clarify some points in your latest reply.

1. I didn't present an estimation here. I pointed out that Tesla's calculator does not include financing costs. I didnt even see a disclaimer note on the website stating that financing costs are not included.

2. The 20-30 years was from estimates of lifetime for the roof looking at the first several articles in a google search that seemed to come from neutral sources, not, the warrantee.

3. Assuming the roof will be financed is far more generous towards making the case for Tesla than assuming the probable opportunity cost of using cash one could otherwise invest in the stock market. I used mortgage calculators to play with this and they defaulted to a 3.9% interest rate (IIRC), far far below market averages over long term periods.

What's more, on a practical level, do you really think most middle income families would not finance?

re future value of Solar Roof... in this case, Tesla's calculator assumes 30 years of energy savings, it's not clear that you stop at 30 years. Very few people have seen the roof in the real world. I'm hopeful that in real life to most people it's a big aesthetic winner. We don't know at this point. I can see adding in the pre-paid energy to the value of a house for sale, adding in the cost paid for the roof vs other options on aesthetics is much more dicey.

Finally, you wrote that the cost of financing is "at best trivial." Using the mortgage calculator the cost was roughly $50K on a $70K roof at current interest rates. $50K. What's more, interest rates today are near historical lows.

No offense intended to either of you as you are both valued members of this community:

Can you take this discussion over to the 'roof thread' or via PMs to resolve your differences?