2017 Investor Roundtable: TSLA Market Action

[jhm]

Let me get this straight: Tesla's H1 sales of Models S & X are up 53% y/y, while US auto sales are down, -2.1% for the same period. But Tesla is the one with a plateau problem?

 

[MitchJi]

At least I could figure out what the market was reacting to with the SolarCity news. This is just *nonsense*. (like the Feburary 2016 dip)

Better than expected Model 3 production rate; S & X production at the high end of guidance, deliveries at the low end but within guidance; NASDAQ doing OK; other carmakers doing jack and *sugar*... Sure, Tesla got an imperfect IIHS score, but this is simply silly. It has to be supply and demand. Someone is unloading shares.

I think that part of the issue is sector rotation out of the qqq.

I converted a portion of my holdings to LEAPs. The valuation does not reflect the upcoming 3x growth next year.

Great move!

 

[Starno]

Let me get this straight: Tesla's H1 sales of Models S & X are up 53% y/y, while US auto sales are down, -2.1% for the same period. But Tesla is the one with a plateau problem?

Wall Street is obsessed with quarter results, 1 year is too long for them ...

 

[Curt Renz]

View attachment 234348

This is perhaps more suited to the TSLA Techncial Analysis thread, but I'll follow up here.

He's likely basing that on a common Fibonacci retracement of 38.1966% from the June high back toward the November low, which I place at $307.24. Today's low so far is $309.61, which could be close enough to validate his prediction of a significant bounce point.

EDIT: Meanwhile, there were a couple of gaps this week that may need to be filled. A gap occurs when a day's high is lower than the previous day's low. They are often filled before too long.

 

[Esme Es Mejor]

Bought another 100 shares at 311. Now have 1000 shares total. Holy cow.

No leverage. No margin. Buy and hold.

 

[Cosmacelf]

Tesla stock had surged too high too fast. There was negative news that could have sparked a pullback during the last 6 months, but the eminent arrival of Model 3 acted as a bulwark. Nonetheless, the latest news about seeming Model S and X saturation in the US finally broke through, and momentum investors pulled back sparking the downturn.

I suspect the stock will not recover until positive real hard numbers are published, meaning substantial Model 3 deliveries. Which means end of Q3, beginning of October. The next hard number release will be Q2 financial results in about a month, but that won't be a positive. Even casual readers of this forums and the usual blogs will be in a good position to know what the numbers will show beginning of October. So, September would be a good time to buy Tesla stock again, assuming Model 3 deliveries actually happen.

 

[Off Shore]

They have to have some cultish motivation

Or financing from some entity that's not looking to make money.

 

[Zhelko Dimic]

At least I could figure out what the market was reacting to with the SolarCity news. This is just *nonsense*. (like the Feburary 2016 dip)

Better than expected Model 3 production rate; S & X production at the high end of guidance, deliveries at the low end but within guidance; NASDAQ doing OK; other carmakers doing jack and *sugar*... Sure, Tesla got an imperfect IIHS score, but this is simply silly. It has to be supply and demand. Someone is unloading shares.

Pendulum swung the other way. Momentum traders were helping us up, now they are dragging us down...

 

[dennis]

This is the first true indication of the demand ceiling on the S&X (cap at 22-25k/quarter).

Geez, I wonder if this limit of 25K/quarter for demand has anything to do with the limit of 25k/quarter of S+X production that Elon discussed on the Q1 call? The S+X production line is limited to about 100K per year. Tesla tweaks product capability, incentives, product availability (inventory vs. custom build) etc. to match demand to that level of production. And it doesn't currently make financial sense to invest capital in increasing S+X production (and demand). It's that simple.

Here's the transcript, slightly edited:

Elon Reeve Musk - Tesla Motors, Inc.

Well, I think, we feel pretty good about achieving the sort of the 100K – roughly 100K total for the year for Model S and Model X, combined. That's where we kind of want to be. The manufacturing system and the supply chain is all sort of set up for that level. We continue to be surprised by how sort of frankly naïve people are – a lot of people are about production and supply chain. It's as though there is some like easy way to increase production. It's truly not. Any given production system, you design it for optimal output and then you aim to improve efficiency, reliability, quality, and so forth at that output. But the Model S and Model X system as we said last year, was designed for 100,000 units, and now initially to get to that rate, we have to use a lot of overtime, a lot of expediting, and that affected our gross margin on the car. And now we're sort of at steady state with kind of the top part of that S-curve that we're targeting. And so now focus for Model S and Model X is improving production efficiency, continuing to improve quality and...

...Yeah, and internal costs and so forth to sort of and to get the automotive gross margin of Model S and Model X to the 30% level that we've been aspiring to for a while.

 

[NicoV]

Because the production line maxes out right around 100k. Even if there was demand for 200k, Tesla wouldn't be able to build them.

I'm surprised people keep discussing all this other stuff and are forgetting the tesla imposed supply constraint.

Perhaps after model 3 they will add or update lines, but the plan has been to Max at 100k for several years now and focus on model 3.

The statement was about demand, not productions capacity. More production capacity can be built if the demand is there.

 

[ValueAnalyst]

From the last earnings call:

Elon Reeve Musk - Tesla Motors, Inc.

Sure. With respect to the battery stuff, it's a little lumpy right now because we had a big inflation in fourth quarter with Southern California Edison. And then we had a bit of a gap between the Powerwall 1 and Powerwall 2. So we should start to see that correcting in, Q2, Q3, and particularly, towards the end of this year I would expect quite a dramatic ramp in storage deployment, like really dramatic.

 

[jhm]

Oil surging. EIA just announced a very large total oil (crude + product) draw.

Not so fast. An extra 18 million barrels just rolled into retail channels. US domestic consumption is up 13% in one week, REALLY??? Nah, that 13.4 million barrel draw is little more than channel stuffing. This is an illusion for the unwary.

Shorting Oil, Hedging Tesla

 

[Curt Renz]

The statement was about demand, not productions capacity. More production capacity can be built if the demand is there.

Good point. Meanwhile, the advertising lever is still available to be pulled. Here in Chicagoland there remains a huge number of potential buyers minimally aware of Tesla or electric cars in general. A significant number still have not even heard of Tesla and its cars. Only a minority of people follow the financial news. Of course once the Model 3's are in customers' hands, word-of-mouth advertising should pick up quite significantly.

 

[Jayjs20]

It's getting to the point where I may just throw my personal plans out the window and buy in now. I'm in full FOMO mode now.

 

[ValueAnalyst]

Not so fast. An extra 18 million barrels just rolled into retail channels. US domestic consumption is up 13% in one week, REALLY??? Nah, that 13.4 million barrel draw is little more than channel stuffing. This is an illusion for the unwary.

Shorting Oil, Hedging Tesla

I was actually surprised why US domestic consumption was down in the last couple of weeks, so part of this should be reversal of that. Also, US driving season started last, so this week's report is reflecting that.

 

[D-egg-O]

The only thing nuttier than the drop we've seen the last few days is if the SP would jump right back up to 370 tomorrow. The trigger? A tweet showing SN1 Model 3 rolling down the B-E-A-UTIFUL bamboo floor quality control station. One can dream, right?

Disclaimer: This is all wishful thinking, not all intended to start any rumors.

 

[JBRR]

 

[DurandalAI]

Let me get this straight: Tesla's H1 sales of Models S & X are up 53% y/y, while US auto sales are down, -2.1% for the same period. But Tesla is the one with a plateau problem?

There are always multiple facets to a story, and you can thoroughly expect that unless extreme efforts are made to be impartial, only one facet will ever be presented by any party, even/especially news agencies. Not to get too far OT, but that's one of the reasons why politics have become so very polarizing of late, because people can get their confirmation biased news from whatever source they want without exposure to any opposing views. In the case of the financial markets, there are billions and trillions of dollars at stake, so in no way to I expect any news source that accepts advertising to be unbiased from what their masters tell them. As with all things, follow the money, and the money wants Tesla to fail.

 

[Tslynk67]

Well, if I haven't just gone and bet the farm on my very first ever call - J18 560's, what the hell! I'm mad, I am!

Edit: I lied, not knowingly, is actually December 17 520 - not an advice - and not really a farm, a few bags of sausages, perhaps

 

[aznt1217]

Good point. Meanwhile, the advertising lever is still available to be pulled. Here in Chicagoland there remains a huge number of potential buyers minimally aware of Tesla or electric cars in general. A significant number still have not even heard of Tesla and its cars. Only a minority of people follow the financial news. Of course once the Model 3's are in customers' hands, word-of-mouth advertising should pick up quite significantly.

What's your take on what is happening right now? I think it's a mix of correction & overreaction to news tid bits:

- Model S IIHS
- Misreport of GS Demand for S & X
- Model 3 Doubt