2017 Investor Roundtable: TSLA Market Action

[Thumper]

Only another $60 and my SCTY shares will be profitable.

 

[ValueAnalyst]

This is your daily reminder that short-term moves are highly unpredictable, and often counter-intuitive, especially in TSLA.

FUDsters and bear attacks may come back at any moment.

Majority of my position is in stock with moderate amount of margin and some Jan19 LEAPs.

 

[Waiting4M3]

This is your daily reminder that short-term moves are highly unpredictable, and often counter-intuitive, especially in TSLA.

FUDsters and bear attacks may come back at any moment.

Majority of my position is in stock with moderate amount of margin and some Jan19 LEAPs.

In the medium term, I expect potentially another round of assault in mid-late Oct:

• Q3ER will show Tesla auto margin, Elon can explain with "soap" but Tamborino will not get it
• M3 capex will hit the balance sheet
  
• Semi and maybe additional GGF will have been announced, and market will be shocked at the cash needed, just like after the M3 Mar'16 reveal

OTOH, if semi/GGF announcement has any surprises, such as a partnership with potential customers, GGF already breaking ground (like TIM), and/or M3 configuration opening to non-Tesla customers in late Sep or early Oct, or higher than 1500 M3 delivered in Q3, we may see a bump in late Sep - early Oct first, before the shorts come back to try to push it down again.

 

[erha]

We are only about 5.4% away from ATH now. Two more days like this and we are blasting through the ceiling

 

[D-egg-O]

Q3ER will show Tesla auto margin, Elon can explain with "soap" but Tamborino will not get it

This will never get old. Still chuckling thinking about it.

if semi/GGF announcement has any surprises, such as a partnership with potential customers

I posted this (link to video) in the Tesla Semi thread. I wouldn't be surprised if some of the customers in the video below, especially Swift, are the ones currently giving Tesla feedback on the semi design.

 

[sunhelm]

This may not be tesla and this may be the new trump era EPA style 'alternative fact green' because http://www.durandnow.com/Project_Tim_Highlights-page-002.jpg mentions carbon capture and EOR. Enhanced Oil Recovery does not smell like Apple nor Tesla, it smells like Chevron.

So when viewed with this lens, it seems the Tim comparison with Gf1 looks like a copy and paste exercise that looks good on powerpoint replete with Trumpisms. No offense to z driver.

 

[neroden]

Agree with "they can borrow for 8 years at 5.25% ! By god, do it!"

Disagree with "5.25% used to be an investment grade bond rate. If interest rates go up, it may well be so again!"

Agree & Disagree with "Rates are likely to go up -- Tesla cannot guarantee that its credit rating will go up enough to offset this."

I've studied and analyzed macroeconomics very closely for nearly two decades. Today's economy cannot support 5.25% 10-year yield. I cannot support 3% 10-year yield either. Yes, the rates will go up over the next 12-18 months, but very slowly (~0.25% increase every third meeting), because there still is some slack in the employment market, especially in "part-time due to economic reasons" bucket. This, in addition to low rates in Europe, will keep US rates on its slow-rise trend. We haven't even reached 2% inflation rate!

Tesla's credit rating will in fact improve enough to offset any rate increases in the 12 months. Interest rates do not rise linearly with credit ratings; they jump once the company drops to junk category. Tesla's credit rating will move to investment grade by the end of 2018, and its interest rate will decline below 4%. This is will more than offset any increases from the Fed.

Agree and disagree. Tesla is likely to be upgraded next year, but not to investment grade. Bond rating companies can be ultra conservative. I think the best we can hope for next year is BB+/Ba1, and that probably not until late in the year. Investment grade -- maybe in 2019.

I defer to your expertise on the Fed rates. The Fed probably can't raise rates much.

However, even if Fed rates stay low, overall market interest rates could jump, as much as a percentage point, in case of war with North Korea (which I really hope doesn't happen), a threat to default on the national debt (apparently not particularly likely... this year), further political chaos, etc. etc.

I am now hearing *4.875%* rates for Tesla's 8-year bond. That's a 2.8% spread over the 10-year Treasury bond. It's 0.625% above the prime rate. There are investment grade bonds paying 4.24% right now! This is really a very good deal for Tesla. I think there is no guarantee that they will get an equally good deal next year, though hopefully they will get a better deal.

 

[neroden]

Tesla Aims for Lower Yield Than Ratings Peers on Debut Bond

Geez. I don't dare to hope for 4.2% like Netflix. That would be extraordinary. At that rate, it would start to make sense to refinance the long-dated non-recourse debt.

 

[MitchJi]

If you guess that Model 3 5k/week build plan is almost done in terms of equipment in place, then you can also guess that the 10k/week build plan equipment is *not*.

Elon said that they are planning to increase production by:
1. Running the line faster.
2. Modifying the line where necessary to increase the throughput. Worst case they need to run a small sections of the line in parallel.

So we can safely assume that the bulk of the equipment for 10k per week is already in place.​

 

[Waiting4M3]

Would be nice to hang out in the $360s for a while, here is the cumulative # of shares over the last year, $360s is one of the least traded range.

 

[Starno]

It's funny how since the last few days TSLA takes all the gains the first 2 hours and then flat the rest of the day

 

[Jayjs20]

It's funny how TSLA was ignoring macros all day until now

 

[SBenson]

My sense is the current bond deal is just a sample of what is about to come. I see Tesla turning up Cash Flow from Operations or EBITDA very significantly as Model-3 ramp finishes. Even at 5K rate these metrics should be pretty substantial. Bond market looks at these things to a large degree. Once the next round of gigafactories are announced, I see a lot of debt issued, my guess about 5Bil, and potentially taken up at Investment Grade rates. This is really super good stuff as yet another bear argument (dilution) is severely mitigated going forward.

 

[neroden]

My sense is the current bond deal is just a sample of what is about to come. I see Tesla turning up Cash Flow from Operations or EBITDA very significantly as Model-3 ramp finishes. Even at 5K rate these metrics should be pretty substantial. Bond market looks at these things to a large degree. Once the next round of gigafactories are announced, I see a lot of debt issued, my guess about 5Bil, and potentially taken up at Investment Grade rates. This is really super good stuff as yet another bear argument (dilution) is severely mitigated going forward.

If I were on the Tesla board, I would keep the debt/equity ratio below 1, just for safety.

 

[Todd Burch]

Are we going to see a rise into the close? My spidey sense tells me so.

 

[D-egg-O]

Disclaimer: Maybe Google finance is wrong with the current upper BB range, but the last time we closed more than $10 above the upper BB this year was... never. We came close on April 3.

 

[Jayjs20]

stockchart has it at 360. Either way, we're still well above the upper BB.

I've also been looking at the early April timeline and wouldn't be surprised if we're hit with a small amount of consolidation before we continue heading up.

 

[SBenson]

If I were on the Tesla board, I would keep the debt/equity ratio below 1, just for safety.

It might be prudent but I rarely see Tesla resorting to safety on anything. Moreover I see that the debt/equity for Consumer Discretionary sector in US is around 2 on a weighted average basis. On the high side it approaches to almost 3. So Tesla has plenty of room to borrow with the current equity being about ~6.5Bil and debt/equity being only about 1.15. The equity might grow with the ramp too.

I don't see many reasons not to tap the bond market for about 5bil early to mid next year.

The next 4 Gigafactories will need a ton of capital. Some of it will come from Operating Cash, some will come from partners. But a lot still needs to be financed. I see debt being the main instrument going forward.

 

[D-egg-O]

stockchart has it at 360. Either way, we're still well above the upper BB.

I've also been looking at the early April timeline and wouldn't be surprised if we're hit with a small amount of consolidation before we continue heading up.

Thanks. I had a feeling Google's wasn't updated.

 

[ValueAnalyst]

My sense is the current bond deal is just a sample of what is about to come. I see Tesla turning up Cash Flow from Operations or EBITDA very significantly as Model-3 ramp finishes. Even at 5K rate these metrics should be pretty substantial. Bond market looks at these things to a large degree. Once the next round of gigafactories are announced, I see a lot of debt issued, my guess about 5Bil, and potentially taken up at Investment Grade rates. This is really super good stuff as yet another bear argument (dilution) is severely mitigated going forward.

If I were on the Tesla board, I would keep the debt/equity ratio below 1, just for safety.

I don't expect another round of significant debt issuance, especially to the tune of $5 billion.

Remember: the vast majority the of capital expenditures in building Gigafactories is in the final year because for equipment and tooling. By then, Tesla will be able to finance these things with internal cash flow.

This week's debt issuance is a temporary stepping stone to accelerate Gigafactories 2 through 6 by one year.