2017 Investor Roundtable: TSLA Market Action

[AlMc]

I'm still baffled by a Wall Street analyst predicting almost zero Model 3 deliveries in 2017, after five prototypes have been spotted, management has guided to exponential production ramp-up starting in just two months, and more than 500 thousand people have put down deposits...

What in the world, Adam?

I agree it may be baffling but his recent letter certainly affected the SP today. It is, IMO, impossible to justify a $305 PT on one hand and the 2K delivery number on the other. In the long run he will probably have to change his tune.

While I don't agree with your 2017 M3 production/delivery numbers I certainly feel it will be considerably more than 2K.

If he is correct, the SP will take a much bigger 'hit' than it did today.

 

[ValueAnalyst]

I think 20% GM would be the absolute floor. Not because I know anything about manufacturing Solar tiles, but because they just wouldnt do it otherwise. I think GMs can be much higher in fully automated production with first principles in mind. Glass is as cheap as any material on the planet and easier to work with then almost every material you could think of for a roof. Elon himself said he was dumbfounded by the fact it wasn't already done. Its not going to get cheaper then asphalt because that product is only made to last 15 years, but it could be cheaper then everything else on the market and that includes the active solar tiles at 50-70%. $11/sq.ft. for the inactive tiles, it is already extremely competitive. The market is absolutely huge but you are right that most will not do the math until after they have an electric car or if they live in places like CA where electricity pricing is ridiculous.

Given how popular Tesla is and will continue to be in CA as the Model 3 ramps up, even if only electric car owners in CA order the Solar Roof v1 in the next three years, that would more demand than Tesla can supply: 25k in 2017, 50k in 2018, and 100k in 2019, by my estimate.

I worry more about 2022 and beyond. The cost of solar has to come down 30% between now and then just to offset Federal incentives. I could definitely see solar roof files come down 30% in that time with a fully automated manufacturing process. The other problem is that solar is the thing hurting solar the most by suppressing the cost of electricity by which we gauge the value of solar. As costs come down, demand should go up so this should resolve itself, but only time will tell. Certainly EVs will cause demand to go up.

Cost of electricity is a win-win for Tesla: if it goes up, they win on the energy generation side; if it goes down, they win on the energy consumption side. I think, net, Tesla would benefit more if the cost of electricity declined since the Automotive business comprises a much larger percentage of revenues and future profits.

In terms of volumes. There are 5 million roofs per year that are replaced or new construction. Most would not fit into the prerequisites that I gave for solar tile, but at least 20% would. I could see volumes of 500,000 per year in 3 years. If you use the model 3,S,X production as a proxy, you could assume that most of those people will get solar at some point, if they don't already have it. What percent would opt for tile? maybe 20%. So if Tesla is producing a million+ cars a year, that is 200,000 solar roofs alone. I think Tesla's brand is so strong that people will opt for Tesla panels or solar tiles if they own a Tesla. It wont hurt that they will be competitive.

I agree that most all-electric car owners will opt for solar at some point, but I'm not sure if Tesla will be able to ramp up Solar Roof production quickly enough to realize your projection. They would need to exercise the option to expand Gigafactory 2 to 5 GW. Do you have an estimate of the cap-ex required to do that?

500,000 Solar Roofs per year would bring in ~$40B in revenue and at 20-25% gross margin $8B-10B in gross profits per year. If the demand is there, it would make sense to spend up to $5B to pull forward Solar Roof production, but Tesla would need another capital raise. Also have to ask, are those dollars better spent on the energy consumption (i.e. automotive) side? Or utility-scale energy storage side?

To me, Tesla seems to have a larger competitive advantage on the automotive side, so it may make sense to widen that moat, but I don't think Elon is thinking in those terms. From the mission statement perspective, it probably makes more sense to spend any additional dollars on Tesla Semi or utility-scale energy storage. I would appreciate some insight on this from those who are more knowledgeable in how much each of Tesla's segment contributes to lowering carbon emissions.

 

[TrendTrader007]

100% of my shares are lent out, which means I have no margin buying power today, so I couldn't take advantage of this gift we got today with the small SP drop. I just started the electronic transfer of more funds from my bank account, which could take 3 days. I hope the SP doesn't recover to quickly....

I stopped lending out my shares approximately 3 months or so ago precisely because of this reason
I figured I was losing out on approximately $40000 to $60000 a year of interest income by not lending out shares to short sellers but on the other hand I was able to buy lot more shares on margin plus it removed the rather unlikely but theoretical risk of failure to deliver borrowed shares in case of a super short squeeze
I'm in a similar situation in the sense that I'm waiting for more margin approval to add to my position
I expect to be able to buy more stock in the next couple of days though
Also, I'm a margin player and I'm always cash poor but in the past whenever I did have cash I just did wire transfers it costs an extra $30 or so but that's nothing
On the other hand lot of times forced waiting actually got me a better price

 

[AlMc]

I can NOT verify this and cross posted on the 'General' thread as well:

Model 3 Owners Club on Twitter

This link claims there are close to 100 model 3s in Ohio for testing.

Edit: thanks to @Lump for this second link which is probably where they are testing

Home - TRC

 

[TrendTrader007]

i think i will wait to buy more stock
close to $300 will be good time to buy it, closer to 50 day SMA. it may take a few to several days but patience will pay off
a $15 discount on SP will save me anywhere from $45000 to $75000 depending on how many shares i buy
that is worth waiting for
OTOH if the stock takes off then i'll continue to make $
no problemo!

PS: lately i have been dead wrong on this stock so more likely than not this sucker will take off before i can buy anymore
i mean Nasdaq chart looks super so why on earth will TSLA not follow
i dunno i guess i'll just buy the damn thing as soon as i can and regret at leisure

 

[neroden]

I don't know what crack everyone is smoking. Complete loss on me over here looking at the Tesla roof. I had a roof put on my house and it was over $12,000 in 2003. That roof was an imitation asphalt shingle 50 year roof (which really doesn't last 50 years.)
I just ran the price for a Tesla roof with no solar and.... ITS CHEAPER THE SHINGLES! $11,300.

I just had 12kW of solar put on my roof three years ago. It was over $55,000 not including credits and tax incentives. Tesla's solar roof is CHEAPER than my roof plus the my solar.

The problem is Tesla is not releasing the information like what is the kWh of the their roof.
I don't think people are actually doing the math or I am doing something wrong with the Tesla calculator.

I strongly suspect it depends where you live, and also, Tesla needs to release the kW of the roof tiles.

 

[neroden]

In the northeast heating oil is common. My heating oil bill for a year is more than my annual (elected as wind sourced) electricity. The P+I payments on a 15-20 year home equity loan for 21 panels together with heating oil boiler replacement by multi unit mini-split heat pump was LESS than my current electricity + heating oil bills!

You need to get off heating oil ASAP! It's been grossly cost-ineffective for over 25 years. You should probably replace it with a heat pump right now, if the electriciy feed to your house is powerful enough. (If you need to add the solar and Powerwalls to avoid overloading the grid connection, then I guess you wait.) Even if you're selling the house, getting off the heating oil is very definitely a selling point.

 

[CyberDutchie]

Yesterday's early morning (4am GMT) note by Adam Jonas, Morgan Stanley followed by another one 24 hours later:

The Race for Miles and Data: Lyft and Waymo Join Forces on Robo-Taxis

The race to commercialize autonomous vehicles is as much about turning cars into data capturing, content delivering transport drones as it is about reducing fatalities and increasing efficiency of the fleet. Waymo and Lyft bring complementary skills to the mission.

Lyft and Waymo, Alphabet's self-driving car unit, confirmed they have struck a deal to accelerate the roll out of autonomous cars through live commercial projects and R&D efforts.

Seems old news:

Waymo And Lift Form Self-Driving Partnership To Take On Uber

Adam Jonas then gives his thoughts on this development in three points, which I will spare you. Basically he is repeating the main motivation of the downgrade in this note: intense competition for Tesla from well-funded tech giants in the shared-mobility space.

I don't think this latest note will have any impact on share price tomorrow.

 

[NicoV]

I agree it may be baffling but his recent letter certainly affected the SP today. It is, IMO, impossible to justify a $305 PT on one hand and the 2K delivery number on the other. In the long run he will probably have to change his tune.

While I don't agree with your 2017 M3 production/delivery numbers I certainly feel it will be considerably more than 2K.

If he is correct, the SP will take a much bigger 'hit' than it did today.

He may have to change his estimates after the next earnings release. By that time, his 2K target should already have been reached, and I doubt that Tesla will stop producing Model 3 to save his face.

 

[ev-enthusiast]

Did some new Model 3 owners already receive their invitation for the Model 3 reveal event?
Will this be an official event with live stream?

 

[Lessmog]

Did some new Model 3 owners already receive their invitation for the Model 3 reveal event?
Will this be an official event with live stream?

From the other round-table thread:

It's a VIP fremont factory tour (June 2 and June 3) for the referral program winners where they'll have private viewing of Model 3.

@FredTMC, @AlMc and I will be there. Anybody else from this thread that is going?

 

[Navin]

Hard to imagine but we are literally 10 bucks away from
ATH. stay strong out there. M3 reveal is coming in a few weeks.

 

[Tslynk67]

i think i will wait to buy more stock
close to $300 will be good time to buy it, closer to 50 day SMA. it may take a few to several days but patience will pay off
a $15 discount on SP will save me anywhere from $45000 to $75000 depending on how many shares i buy
that is worth waiting for
OTOH if the stock takes off then i'll continue to make $
no problemo!

PS: lately i have been dead wrong on this stock so more likely than not this sucker will take off before i can buy anymore
i mean Nasdaq chart looks super so why on earth will TSLA not follow
i dunno i guess i'll just buy the damn thing as soon as i can and regret at leisure

Is this an advice?

 

[ValueAnalyst]

I expect oil prices to start moving up from here. Feel free to follow ValueAnalyst1 on twitter for more on this.

Although Tesla would do well even in low oil price environment, higher oil prices are bullish for TSLA and may ignite the short squeeze.

Regardless, I am sticking with stock only with a conservative amount of margin.

The post above is from seven days ago, which is when the oil prices bottomed.

News since then have been supportive of further increases throughout the rest of the year.

This is very positive for TSLA, as every dollar increase in gas prices sweetens an all-electric option over ICE by ~$500 per year.

 

[Reciprocity]

Given how popular Tesla is and will continue to be in CA as the Model 3 ramps up, even if only electric car owners in CA order the Solar Roof v1 in the next three years, that would more demand than Tesla can supply: 25k in 2017, 50k in 2018, and 100k in 2019, by my estimate.



Cost of electricity is a win-win for Tesla: if it goes up, they win on the energy generation side; if it goes down, they win on the energy consumption side. I think, net, Tesla would benefit more if the cost of electricity declined since the Automotive business comprises a much larger percentage of revenues and future profits.



I agree that most all-electric car owners will opt for solar at some point, but I'm not sure if Tesla will be able to ramp up Solar Roof production quickly enough to realize your projection. They would need to exercise the option to expand Gigafactory 2 to 5 GW. Do you have an estimate of the cap-ex required to do that?

500,000 Solar Roofs per year would bring in ~$40B in revenue and at 20-25% gross margin $8B-10B in gross profits per year. If the demand is there, it would make sense to spend up to $5B to pull forward Solar Roof production, but Tesla would need another capital raise. Also have to ask, are those dollars better spent on the energy consumption (i.e. automotive) side? Or utility-scale energy storage side?

To me, Tesla seems to have a larger competitive advantage on the automotive side, so it may make sense to widen that moat, but I don't think Elon is thinking in those terms. From the mission statement perspective, it probably makes more sense to spend any additional dollars on Tesla Semi or utility-scale energy storage. I would appreciate some insight on this from those who are more knowledgeable in how much each of Tesla's segment contributes to lowering carbon emissions.

You make a very cogent argument, you really do. But, my assumption is based on the simple premise that Tesla wouldn't go to all the trouble to invent a completely new and really revolutionary product and distract from the model 3 and have a huge reveal and take deposits and have multiple tweets to announce the timeline for placing orders..... Just to only take enough tiles for 25,000 homes and lose money on them. Oh, and all while abandoning the first principles. I could be wrong and it might all just be smoke and mirrors to gauge demand.

Don't get me wrong, I think the 3 is the only thing that matters over the next 18 months. Getting up to decent production volumes (5000+/w) at 25%+ margins. But I just don't see why they would go to all that effort if they only intend to focus on traditional solar panels in Buffalo and but really make that many tiles. There is also the comment about the amount of technology that went into the connectors for the tiles. There has been at least a fair amount of effort from r&d. Tesla is hiring roofers.... Why would they even bother if they roof wasn't at least important. I know the next step is to streamline the install.

When you look at the tiles you could imagine Elon saying why can't we just make single cell panels that we drape over the roof like a blanket and minimize production time, materials and install costs and the got it down to the smallest reasonable unit which should make it easy to manufacture in mass.

Maybe demand is inline with my expectations and that will drive the effort in much the same way demand pulled GF1 and model 3 forward 18 months. Maybe demand is more inline with your expectations and we won't hear much about as it will just be a tiny part of the TE business.

 

[ValueAnalyst]

You make a very cogent argument, you really do. But, my assumption is based on the simple premise that Tesla wouldn't go to all the trouble to invent a completely new and really revolutionary product and distract from the model 3 and have a huge reveal and take deposits and have multiple tweets to announce the timeline for placing orders..... Just to only take enough tiles for 25,000 homes and lose money on them. Oh, and all while abandoning the first principles. I could be wrong and it might all just be smoke and mirrors to gauge demand.

I agree with you, but to play devil's advocate, shorts would say Elon is trying to do something to make it look like the SolarCity acquisition wasn't all for naught and wasn't a bailout. I am very surprised that they're bringing this to market at the same time as the most important few months in the Company's history/future when there are so many people doubting them. That's... ballsy.

Tesla is hiring roofers....

Does anyone know how many roofers Tesla is hiring?

When you look at the tiles you could imagine Elon saying why can't we just make single cell panels that we drape over the roof like a blanket and minimize production time, materials and install costs and the got it down to the smallest reasonable unit which should make it easy to manufacture in mass.

I'm sure he's asked that question. What's unclear is if the physics would allow it at this time. Let's see what they accomplish with v1 first.

Maybe demand is inline with my expectations and that will drive the effort in much the same way demand pulled GF1 and model 3 forward 18 months. Maybe demand is more inline with your expectations and we won't hear much about as it will just be a tiny part of the TE business.

Elon already confirmed "slow" ramp-up for the Solar Roof. Even though my projection assumes 100% growth rate, it starts from a very low level of 25,000 units in 2017. And we haven't yet heard how many people put down deposits...

I want to be as optimistic as you. Luckily, I don't have to be at this time since the SP, I believe, is much below intrinsic value.

 

[TrendTrader007]

Buying 2500 shares at the open at market
It could be TSLA or it could be SNAP
Or it could be GM or F

 

[AlMc]

Buying 2500 shares at the open at market

Please help your TMC friends by bidding $320 and start the SP rise today.

 

[Vad42]

Buying 2500 shares at the open at market

Can you adopt me? Please? I'll let you drive my Tesla.. I just wish I could DREAM of having such amounts to "play" with....

 

[TrendTrader007]

Can you adopt me? Please? I'll let you drive my Tesla.. I just wish I could DREAM of having such amounts to "play" with....

It could be 2500 shares of SNAP or F or GM
Or TSLA