2017 Investor Roundtable: TSLA Market Action

[Krugerrand]

It's also unfortunate that the company omitted the delivery in transit numbers from the quarterly report while at the same time heavily emphasizing how they would upgrade the service and loaner floats with new cars. Unfortunately, whether it was intended or not, this is not an example of clear, honest and accurate communication to the market.

OMG. For realz? Hope they fired the person who forgot to add the number to the report. And gosh having people ask what the number was and then Tesla reporting it a couple days later and stating it will always be included in reports going forward - HORRORS!!!!

 

[everman]

You should not even think about buying J19 LEAPS, other than cheap very high strike price lottery tickets, unless you are extremely confident that the SP will increase substantially by mid 2018 at the latest.

If that happens that will dwarf the relative iv related options price changes. Example, despite suggestions that they were overpriced I bought J19 $240's for $19.50, in November, the second day that they were available with the SP at about $180. Currently at $99.80. Still a five bagger, after the huge dip.


Bad idea, if you are extremely confident that the SP will increase substantially by mid 2018 at the latest.

Beyond that maintaining a position in which the delta's will cancel out is very complex. If you blow it you could lose a lot.

Summary: a very risky strategy ill suited for traders who are not options experts.

The synthetic long position isn't complex to manage. When it is set up with prices cancelling each other out, one simply gains exposure to the 100 shares of stock, with 1:1 upside and downside as if you owned the stock, especially when held to expiration.

If the position is set up at $300 for a break even, and the stock price is $310 at expiration you gain $10/share x 100. If the stock is $290, you lose $10/share. The risk is in the interim, if the stock is significantly lower than your set up price, you risk the shares being put to you. This can come into play if set up in a company with significant dividends and the put purchaser can gain by calling away the stock to poach the dividend, which is not a problem in $TSLA.

The synthetic long for '19 strikes allows plenty of time for the shares to increase above $300, and exposing you to a $1:$1 gain along with the share price, giving you exposure to 100 shares. You can also usually set them up so you get paid a small amount to open the position.

Punchline is, it is not very complex at all, and has no major downsides other than the intermediate risk of being put shares during a large drop if you weren't expecting it.

Please let me know if there is another scenario I'm missing that has significant risk, different than owning 100 shares of stock.

 

[geneclean55]

I don't see why 3500 would be considered unusually light.
As per their delivery description:
1) There should be less 100kWh equipped cars currently en-route overseas.
2) An out-sized proportion of 100kWh equipped cars that were made went to loaner/demo fleet and not customers.

Actually, it makes me wonder if some production line efficiencies were introduced during the long down-time in Q1. If so, I wonder how much they could go above 25,700 produced.

 

[Plotinus]

I don't see why 3500 would be considered unusually light.
As per their delivery description:
1) There should be less 100kWh equipped cars currently en-route overseas.
2) An out-sized proportion of 100kWh equipped cars that were made went to loaner/demo fleet and not customers.

1 - The 100kWh issue has been resolved and absorbed and shouldn't lead to a bigger gap between produced cars and delivered cars or cars in transit. It was a production issue in the first place so it would affect both columns. It's all about that gap. The "in transit" number per se may mean a lot of different things, but it's essential to know this number to understand how many cars Tesla actually sold during the quarter and the half.
2 - Tesla made 7000 cars during 1H 2017 that it didn't sell. They don't say no to 7000 customers cause they want to upgrade their demo fleet instead. The causation is the other way around. They're using this opportunity to upgrade their loaner/demo fleet, which is nice.., while succesfully (as is apparent) creating an obfuscating narrative.

 

[geneclean55]

1 - The 100kWh issue has been resolved and absorbed and shouldn't lead to a bigger gap between produced cars and delivered cars or cars in transit. It was a production issue in the first place so it would affect both columns. It's all about that gap. The "in transit" number per se may mean a lot of different things, but it's essential to know this number to understand how many cars Tesla actually sold during the quarter and the half.
2 - Tesla made 7000 cars during 1H 2017 that it didn't sell. They don't say no to 7000 customers cause they want to upgrade their demo fleet instead. The causation is the other way around. They're using this opportunity to upgrade their loaner/demo fleet, which is nice.., while succesfully (as is apparent) creating an obfuscating narrative.

1. Nebulous
2. Opinion

 

[Reciprocity]

I don't see why 3500 would be considered unusually light.
As per their delivery description:
1) There should be less 100kWh equipped cars currently en-route overseas.
2) An out-sized proportion of 100kWh equipped cars that were made went to loaner/demo fleet and not customers.

Actually, it makes me wonder if some production line efficiencies were introduced during the long down-time in Q1. If so, I wonder how much they could go above 25,700 produced.

You have no proof of #2. I have had 2 loaners I'm the past 2 weeks and asked for 100s and they kept saying they did not have any. All CPO cars or new x75Ds only. And the X's where the only they had received that here new.

 

[EinSV]

1. Nebulous
2. Opinion

And speaking of obfuscation .... Pay no attention to that Model 3 behind the curtain ....

 

[geneclean55]

You have no proof of #2. I have had 2 loaners I'm the past 2 weeks and asked for 100s and they kept saying they did not have any. All CPO cars or new x75Ds only. And the X's where the only they had received that here new.

You were unlucky?
And I am going off the official press release?

Also
Tesla plans to deploy fully-loaded P100Ds as loaner vehicles in all service centers

 

[Reciprocity]

You were unlucky?
And I am going off the official press release?

Also
Tesla plans to deploy fully-loaded P100Ds as loaner vehicles in all service centers

Yeah they said that and they say lots of stuff but this service center got 10 new model x75Ds and 0 model Ss and told me that they had been using CPOs as loaners and never had any Xs until recently. So I'm unlucky and so is Chicago's ritzy northern suburbs.

 

[vgrinshpun]

It all sounds great when you choose this mythical gas peaker that only runs for an hour a year as your comp. But the gas peaker can keep running for days, and keep generating power for weeks when there is a sweltering heat wave and there is no wind energy for weeks (case in point: SA's power crisis last year). The battery storage, OTOH, doesn't supply any power beyond the 129 MWh, and loses 10% in RT efficiency losses. It has some use in reducing routine peaks or very short periods of power outages, but is of little use for prolonged periods of high power demand.

This is a random assortment of nonsense.

The monthly capacity factor of the peaker plant is 5-10%. So what you call "mythical" is actually real. Due to requirements of fast start-up and ramp-up, the peaker plants are predominantly simple cycle type, and, therefore, are not as efficient as the combined cycle plants. That is why peaker plants are not run "for days, and keep generating power for weeks". This is a job reserved for combined cycle power plants due to their higher efficiency.

For more on peaker vs. combined cycle read here.

 

[Plotinus]

1. Nebulous
2. Opinion

Huh? It's in the quarterly report. They've fixed the issue (=resolved) and it lead to very good sales numbers for June (=absorbed). Whatever confusion is left should be cleared by deduction.

I mean you even rely on this understanding in your own point, where you give a higher proportion of 100kWh going to the demo fleet as an explanation for why delivery numbers are relatively low. Obviously they don't send 100kWhs to the demo fleet if there are customers waiting for them and there's a bunch of 100kWhs in limbo after production, but before in transit and delivery, which is what you're relying on if you claim that the issue hasn't been resolved and absorbed, but deflate the number of cars in transit or delivered.

 

[geneclean55]

Yeah they said that and they say lots of stuff but this service center got 10 new model x75Ds and 0 model Ss and told me that they had been using CPOs as loaners and never had any Xs until recently. So I'm unlucky and so is Chicago's ritzy northern suburbs.

Or more likely, the fully loaded loaners got shipped overseas first - I know it sucks.

 

[geneclean55]

Huh? It's in the quarterly report. They've fixed the issue (=resolved) and it lead to very good sales numbers for June (=absorbed). Whatever confusion is left should be cleared by deduction.

I mean you even rely on this understanding in your own point, where you give a higher proportion of 100kWh going to the demo fleet as an explanation for why delivery numbers are relatively low. Obviously they don't send 100kWhs to the demo fleet if there are customers waiting for them and there's a bunch of 100kWhs in limbo after production, but before in transit and delivery, which is what you're relying on if you claim that the issue hasn't been resolved and absorbed, but deflate the number of cars in transit or delivered.

Is it though? They did meet guidance after all.

 

[AlMc]

Huh? It's in the quarterly report. They've fixed the issue (=resolved) and it lead to very good sales numbers for June (=absorbed). Whatever confusion is left should be cleared by deduction.

I mean you even rely on this understanding in your own point, where you give a higher proportion of 100kWh going to the demo fleet as an explanation for why delivery numbers are relatively low. Obviously they don't send 100kWhs to the demo fleet if there are customers waiting for them and there's a bunch of 100kWhs in limbo after production, but before in transit and delivery, which is what you're relying on if you claim that the issue hasn't been resolved and absorbed, but deflate the number of cars in transit or delivered.

Actually, they do ship the 100kWh to the loaner/test fleet at this point. My theory (IMO) they could not get the 100kWh overseas in time for deliveries in Q2 so they sent them (arriving now in Devon at least) to be used as loaners/demos. Why? For Q3 they now can make/ship the 100kWh overseas or in NA to arrive in time for Q3 deliveries AND they have those 'used' 100kWh at the Service Centers/galleries that they will discount in late August/early September. A discounted 100kWh (esp Ps) will command very high GMs even with the discount.

This may have been out of necessity (problem manufacturing the pack) OR it could be planned as it appears Q3 will have the most Osbourning with the 3s being in 'slow ramp' mode.

 

[3Victoria]

Most read on the Guardian site: Elon Musk's big battery brings reality crashing into a post-truth world | Tim Hollo

 

[dennis]

Elon definitely talked about when the features and prices were revealed demand would increase.

Why wait to reveal those things. Obviously, as I posted at that time, to avoid canabalizing MS-MX sales.

They want to wait as long as possible to announce those things because they want to milk the profits as long as possible.

It's pretty clear to me that they plan to reduce the MS-MX prices about the same time as they open the M3 configurations.

@MitchJi are you willing to double down on the box of chocolates? I predict that S+X pricing will remain firm through at least 12/31/17. Tesla needs all the margin $$ they can get from S+X to offset the poor startup margins for Model 3.

 

[FredTMC]

@MitchJi are you willing to double down on the box of chocolates? I predict that S+X pricing will remain firm through at least 12/31/17. Tesla needs all the margin $$ they can get from S+X to offset the poor startup margins for Model 3.

Thx Dennis. Tesla combined auto GM will steady improve after Q3.
Analysts SHOULD be intelligent enough to know its just transient.

The question they should keep asking every call is what's the target steady state GM on Model 3 once production is over 250K per year. That's the real end game

The bear analysts will focus on the transient BS. It's funny

 

[mmd]

This is a random assortment of nonsense.

The monthly capacity factor of the peaker plant is 5-10%. So what you call "mythical" is actually real. Due to requirements of fast start-up and ramp-up, the peaker plants are predominantly simple cycle type, and, therefore, are not as efficient as the combined cycle plants. That is why peaker plants are not run "for days, and keep generating power for weeks". This is a job reserved for combined cycle power plants due to their higher efficiency.

For more on peaker vs. combined cycle read here.

Is it really? Here is the complete solution proposed by SA government:
South Australia to build battery storage and gas-fired power plant in $550m energy plan

The six-point plan, entitled South Australian Power for South Australians, will be paid for out of state government surpluses. It encompasses:

• Building of the largest grid-connected battery in Australia to store energy, funded by a new renewable technology fund
• Construction of a government-owned 250MW gas-fired power plant to provide emergency back-up power and system stability services for South Australia
• Introduction of new ministerial powers to direct the market to operate in the interests of South Australians
• Incentivisation of increased gas production to ensure more of the state’s gas is sourced and used in South Australia
• Creation of an energy security target to require a proportion of power used within South Australia to be generated within the state.

The new gas-fired power plant is budgeted to cost $360m, while $150m will be committed to the SA renewable technology fund – broken up into $75m in grants and $75m in loans – and new grants to incentivise new gas production are worth $24m.

The batteries have their use in short periods of peaks, while the natural gas combined cycle plants have a different use case. That 5-10% time could be all in one stretch during a year. Say, there is heat wave or a power plant outage and the crisis lasts 10% of the time of a year (5.2 weeks ) = 36 days.
This 250 MW plant can supply for all 36*24 hours , and costs $360M.
What will be the cost of the battery storage system to supply the same power for same period? Let's just find the cost of the batteries at $250/Kwh.
36*24 h* 250 MW * $250/KWh = $54 B!
OK, I will be generous and say the crisis lasts only for 2 days. That is still $3 B! And then, you need the generators (solar/wind etc.) to actually generate the power and store it in the batteries.

Here is GE CC turbine; 62% efficient and 30 mins start up time to full power.

Completely different use cases. And SA government understands that quite well. They are the ones who went through the power crisis.

 

[neroden]

If you enjoy ridiculous levels of exposure, here's a fun options combo known as "synthetic stock". Sell a 330 put, to pair with your 330 call. What that will do is hedge out the time value decay and volatility decay of the long call. Also the sum of the deltas will always be 1. So it's like having 100 shares of stock without having to pay $31300. And there is no margin interest to pay. There is a price (no free lunch)! This will remove the long call's downside risk protection. Instead of the call slowly going to 0 in a worst case scenario, the call will go to zero, and the short put will go very negative. Please use with caution!

Also watch out on the *whacked* taxation law on this in the US (it's called "section 1260"), if you plan to carry to execution. You basically have to close the trade short-term (less than a year) to avoid penalty taxation. This piece of weirdness caught me out. (I would have been fine otherwise; I opened the position at a credit thanks to the high borrowing rates. But I missed this bit of weird tax law.)

 

[geneclean55]

Huh? It's in the quarterly report. They've fixed the issue (=resolved) and it lead to very good sales numbers for June (=absorbed). Whatever confusion is left should be cleared by deduction.

I mean you even rely on this understanding in your own point, where you give a higher proportion of 100kWh going to the demo fleet as an explanation for why delivery numbers are relatively low. Obviously they don't send 100kWhs to the demo fleet if there are customers waiting for them and there's a bunch of 100kWhs in limbo after production, but before in transit and delivery, which is what you're relying on if you claim that the issue hasn't been resolved and absorbed, but deflate the number of cars in transit or delivered.

Actually, I just re-read this. I specifically mentioned the in-transit number of 3500 and how it relates to prior in-transit numbers, so I would appreciate it if you didn't twist that into saying I was talking about the 22000 Q2 delivery number of which I made no mention.
If you believe Tesla and InsideEV who said - prior to the Tesla press release I might add- that very little 100kWh production occurred for April, and most of May, then it is impossible to "resolve" and "absorb" all global transits of Q2 customer-designated 100kWh cars during the month of June.
AIMc's suggestion that a number of these cars missed the Q2 deadline were subsequently re-purposed as loaners/demos for US and foreign markets during Q3 seems plausible to me. Result - lower number of customer designated in-transit cars.

To tie it in more closely to your point on deliveries. If there were production delays for 100kWh cars in April , May (there definitely were! go check out the MX 2017 VIN thread for example) then to play catch up in June you aren't going to devote production for overseas deliveries, instead you are going to squeeze in as many US deliveries as possible. Hence, reduced numbers of cars on boats in-transit and more deliveries in the hands of US customers.