2017 Investor Roundtable: TSLA Market Action

[zdriver]

How can they tell if shorts are up, vs down less? I mean sure, when TSLA goes up at all I think to myself, "I'm up" even if it is below where I bought, but I don't claim to be net positive.

They don't, they're just taking the delta of the total position at open vs close, possibly adjusted for additional shorting/covering.

 

[TradingInvest]

Bring it on Chanos! I will watch this explode in his face and end his questionable career.

Chanos is the guy who disclosed he was shorting BABA (when the stock was around $65), now it is at $181. He shorted CAT and CAT more than doubled. He shorted China for years saying China's situation was 1000 times worse than Dubai, but China is doing fine after all his FUD.

Now he is saying Elon will leave in 2020! Talking about spreading FUD. Elon said he will NEVER leave Tesla. I think what's really happening is Chanos is running out of money to short more, now he is begging other people to short. Without new shorts depressing it, this stock would jump to $500 in a month, and that jump would push it to $2000 because of short squeeze. He knows how dangerous the situation is for shorts. So he keeps pushing/begging other people to short more.

For the fun of it, I listed Chanos' talking points and attached my view.

He said "the company is burning more than $1 billion in cash each quarter and will have a harder time tapping the capital markets if and when Musk leaves".

"If you wouldn't be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes."

2017 is a big year for Tesla. Tesla has been preparing to fire all the cylinders: both Model 3 and Solar products are ready to ramp up production. This is the most cash intensive time, they order all the machines, robots, parts, but no cashflow until they start production in scale. Losing money at this phase is part of the game, every investor understand it except Chanos. Tesla predicts to have 25% gross margin on Model 3 once the production reaches 5,000 per week. Imagine what the gross margin would be after it reaches 10,000 per week. I think in the end the gross margin will be above 30%. Model 3 is a 10 year program, they will produce 5 million on this line, and likely to open another 2 lines, one in EU, one in China. In a 10 year period, it seems to me Tesla can sell 15 million Model 3s and bring in total gross profit of 200 billion dollars.

Knowing how Elon and Tesla work on things, it's highly likely they will achieve the Master Plan 2, which described a Tesla Network in detail. Under that scenario, Tesla can make additional $10,000 from each car through the network (Assume Tesla earns $5 per day from each car on network), or $50,000 from each car if Tesla owns the car. Average these two parts to $30,000 per car, the total gross profit from Model 3 would be around $800 billion in 10~15 years. Let's skip Model Y, Semi, pickup truck, Model S, Model X, supercharger network, energy storage, solar roof, and Tesla AI.

There is a reason why Elon said Tesla will likely to become the largest company in the world; why Gene Munster said Tesla is Amazon 10 years ago, and will be the best performing large tech in the next 5 years; why Ron Baron said Tesla will gain 20 fold in 10~15 years; and why Trip Chaowdry said buy every dip.......

Recession will not be a problem for Model 3's demand, rather it will drop material cost and improve margin. Model 3, even at full production, only accounts for less than 1% of the global car market. It's by far the most compelling car in the world, the car will sell it self. This also addresses Chanos' point that EV competition is coming. It's a huge market, new EVs will take ICE's market.

"every executive leaving" - more world class people are joining, incompetent people are living. They are not really incompetent, just don't meet the Tesla bar.

"Elon is leaving" - I have to laugh at this one. No comment.

 

[Curt Renz]

I've posted this in the TSLA Technical Analysis thread, but it may bear repeating here.

CNBC - After today's close: Three stocks to buy on the dip

The third one analyzed technically is TSLA.

I agree that the three tops seen in the $280's from 2014 through early this year have proven to be support over the last six months. That is often the case when resistance that's been demonstrated several times is eventually exceeded. A number of TMC members have been looking for the $280's as a potential buying area, but I suspect that the $292.63 low on November 2 will be as close as it ever again gets.

 

[elasalle]

You are not thinking like Elon. Elon is thinking going from 5K to 10K is a chance to entirely redesign the manufacturing process

You mean, as soon as he is out of hell, he wants to go back in?

 

[dc_h]

You mean, as soon as he is out of hell, he wants to go back in?

Exactly. Stock goes zero if they change the assembly line after they hit 5000. They tweak and use the merge the BIW line of S/X to increase capacity.

 

[neroden]

sorry, here it is:
Software 2.0 – Andrej Karpathy – Medium

He's correct in his description. What he perhaps misses is that there are huge classes of problem for which this sucks massively, or is even flatly unacceptable. Though he does mention it. In "Software 1.0" areas, computers genuinely are *much* better than us -- humans are quite terrible at precise calculation and precise, exact reasoning.

In "software 2.0" areas, frankly, humans are actually quite good, and will be much better at most such areas than computers for my life and the life of several generations after me. There will be certain specialized problems where we can make computers better than us (like playing Go), but don't expect them to handle the more open-ended problems.

One reason is that we have a form of integration between different types of problem-solving in our brains; between the "software 2.0" style which we are very good at, and the "software 1.0" style which is superior for a vast number of applications but which humans are terrible at, and between several other styles which are not properly documented yet. The integration between these methods in computer science is an area which is barely started and is nowhere near as good as what we do.

Most of my examples for why full self-driving is not going to be better than competent human drivers are examples of these complex interaction areas; examples of where humans use their rational intelligence to apply a pattern matching module from a seemingly unrelated part of their life, where it is never going to be cost-effective to train the car's computer to know enough to even have that module, let alone to know that it needs to use it.

I much prefer a "cyborg" solution where the car does what it's best at, while the human does what they're best at, and *either* can hit the brakes.

 

[neroden]

Can you please provide an illustration? I've always thought that it can influence the "direction" of the SP (e.g., your usual metrics like max-pain on Fridays, Open interest change, etc.) but not sure if option bid/ask price has a direct causation that a stock bid/ask price can do.

Well, it's really only affected by BIG options trades. But here's a theoretical illustration of how it starts:

Some big player buys 10000 $280 Ps expiring Jan 2018. Delta is -.254. The market-maker is now short 10000 $280 Ps and probably can't match it with an options seller. So the market maker delta-hedges by selling 254000 shares of stock. Big purchase, has an effect. As the price moves the market maker rehedges and makes large changes in their stockholding.

 

[neroden]

The tour guide told us we were one of the first people who will have seen Model 3 line in action. He also explained there are currently three lines operating. Line one for S, two for X and three for Model 3. Line one will combine S and X production in the future, freeing up line two to be reconfigured as the second production line for Model 3.

Could your numbering be wrong? Line one was the original S line and line two was the (much more automated) line designed for both S and X but being used only for X. I believe line two was going to be used for S and X and line one was going to be dismantled and reconfigured.

If you heard the opposite, that's actually significant news (and pretty weird, honestly).

 

[neroden]

Yea, I kinda feel that way as well. If they announce partnerships for the Semi along with production schedules, that could move the needle north. But other than that, most likely won't do much. (Unless they give a 3 update that is better than expected)

I believe the most likely thing to affect the stock price at the semi reveal would be if they announce a specific list of customers who have signed contracts to buy the semi if-and-when it it is produced. (Regardless of production schedule.) Second most likely is if he gives a number of customers but doesn't say their names.

Anything else... honestly I expect very little reaction either way. But what do I know, I'm awful at the short term.

 

[neroden]

I don't know if you had the chance to listen to the call. They gave us a bit of a glimpse of the difference between the two ramps. While going to 5K was about building and using new equipment, going from 5K to 10K is about figuring out what can be optimized from the 5K to get to 10K with little expenditure (i.e., speeding up robots), and what will just need an additional set of equipment.

I would therefore point out that they are probably already trying to get certain parts of the lines up to 10K (specifically, those which are already close to it), while they try to get the slow parts of the lines up to 5K.

 

[defc0n]

B

I am still assuming buy the rumor, sell the news on Semi reveal and am saving another cash infusion for post reveal. Maybe your short calls will move back down by then temporary as well.

I think the semi reveal will certainly be well received, but the timeline given for the semi to have any real volume will be far enough away that people generally won’t want to bet their money on it now. Agree on sell the news, just don’t know how much lower it can go late this week / early next. I do think there is a chunk of money to be made between tomorrow’s open and Friday’s open, followed by the sell the news dip shortly after open. Will be fun to watch regardless, let’s see how wrong I am.

Still a lot of FUD out there for me to hold out hope for 250-280 between now and Q2 or so. Q4 should look scary as well as far as the fundamentals go, so keep that in mind. Q1 will be terribly important for Tesla in my opinion to show Model 3 production is going well.

 

[dc_h]

Could your numbering be wrong? Line one was the original S line and line two was the (much more automated) line designed for both S and X but being used only for X. I believe line two was going to be used for S and X and line one was going to be dismantled and reconfigured.

If you heard the opposite, that's actually significant news (and pretty weird, honestly).

Could be a sign of rebuilding line 1 better than line 2 could be tweaked, and then rebuilding line two for the Model 3. If they built a new combined S/X line with Model 3 learning, they might be able to increase capacity high enough to support a pickup truck.

 

[dc_h]

I believe the most likely thing to affect the stock price at the semi reveal would be if they announce a specific list of customers who have signed contracts to buy the semi if-and-when it it is produced. (Regardless of production schedule.) Second most likely is if he gives a number of customers but doesn't say their names.

Anything else... honestly I expect very little reaction either way. But what do I know, I'm awful at the short term.

I’m still hoping a Sprinter style commercial truck is the other thing. Building body panels in Michigan for assembly in Fremont or another site. A single Sprinter style truck would replace the gas and pollution equivalent of 10 to 20 cars. These are also used in urban locations where their impact is greatest.

 

[defc0n]

By the way, to me it’s painfully obvious Chanos is directly attacking semi reveal buy the rumor. He wants to keep the bear story alive we are currently in, and probably wants to finally get out at about the same price point I want to buy . I don’t anticipate that much of a reaction though, to most he has become the boy that cried wolf.

 

[AlMc]

I’m still hoping a Sprinter style commercial truck is the other thing. Building body panels in Michigan for assembly in Fremont or another site. A single Sprinter style truck would replace the gas and pollution equivalent of 10 to 20 cars. These are also used in urban locations where their impact is greatest.

MY WAG is that the Semi will be offered in two battery sizes. 150-200 mile range for short haul and 300-350 for longer range. The surprise with be capability of charging 3-4x after than our personal vehicles.

I suspect we will hear about number of deposits.

 

[TrendTrader007]

Bring it on Chanos! I will watch this explode in his face and end his questionable career.

Chanos is the guy who disclosed he was shorting BABA (when the stock was around $65), now it is at $181. He shorted CAT and CAT more than doubled. He shorted China for years saying China's situation was 1000 times worse than Dubai, but China is doing fine after all his FUD.

Now he is saying Elon will leave in 2020! Talking about spreading FUD. Elon said he will NEVER leave Tesla. I think what's really happening is Chanos is running out of money to short more, now he is begging other people to short. Without new shorts depressing it, this stock would jump to $500 in a month, and that jump would push it to $2000 because of short squeeze. He knows how dangerous the situation is for shorts. So he keeps pushing/begging other people to short more.

Totally! The guy sounds like a total loser. I don’t follow his career closely but seems to me that his major bet that really paid off was Enron. I don’t think he has done very well after that. I know he’s probably a low level billionaire in single digits but nothing to write home about. I don’t know the size of his short bet against TSLA but I wouldn’t be surprised at all if your and mine combined long position in TSLA is twice the size of his short position. I mean between the two of us we’ve got it easily covered. In any case I wouldn’t take the guy seriously
I watched Masayoshi Son interview yesterday and I loved that guy! That is the kind of winner I wanna listen to, not some cynical loser

 

[TrendTrader007]

For the fun of it, I listed Chanos' talking points and attached my view.

He said "the company is burning more than $1 billion in cash each quarter and will have a harder time tapping the capital markets if and when Musk leaves".

"If you wouldn't be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes."

2017 is a big year for Tesla. Tesla has been preparing to fire all the cylinders: both Model 3 and Solar products are ready to ramp up production. This is the most cash intensive time, they order all the machines, robots, parts, but no cashflow until they start production in scale. Losing money at this phase is part of the game, every investor understand it except Chanos. Tesla predicts to have 25% gross margin on Model 3 once the production reaches 5,000 per week. Imagine what the gross margin would be after it reaches 10,000 per week. I think in the end the gross margin will be above 30%. Model 3 is a 10 year program, they will produce 5 million on this line, and likely to open another 2 lines, one in EU, one in China. In a 10 year period, it seems to me Tesla can sell 15 million Model 3s and bring in total gross profit of 200 billion dollars.

Knowing how Elon and Tesla work on things, it's highly likely they will achieve the Master Plan 2, which described a Tesla Network in detail. Under that scenario, Tesla can make additional $10,000 from each car through the network (Assume Tesla earns $5 per day from each car on network), or $50,000 from each car if Tesla owns the car. Average these two parts to $30,000 per car, the total gross profit from Model 3 would be around $800 billion in 10~15 years. Let's skip Model Y, Semi, pickup truck, Model S, Model X, supercharger network, energy storage, solar roof, and Tesla AI.

There is a reason why Elon said Tesla will likely to become the largest company in the world; why Gene Munster said Tesla is Amazon 10 years ago, and will be the best performing large tech in the next 5 years; why Ron Baron said Tesla will gain 20 fold in 10~15 years; and why Trip Chaowdry said buy every dip.......

Recession will not be a problem for Model 3's demand, rather it will drop material cost and improve margin. Model 3, even at full production, only accounts for less than 1% of the global car market. It's by far the most compelling car in the world, the car will sell it self. This also addresses Chanos' point that EV competition is coming. It's a huge market, new EVs will take ICE's market.

"every executive leaving" - more world class people are joining, incompetent people are living. They are not really incompetent, just don't meet the Tesla bar.

"Elon is leaving" - I have to laugh at this one. No comment.

Yeah! The guy lost all credibility the second he stated Elon leaving by 2020! EM is clearly on record that he is never leaving Tesla!
This dude is a perfect contrarian indicator

 

[TrendTrader007]

I've posted this in the TSLA Technical Analysis thread, but it may bear repeating here.

CNBC - After today's close: Three stocks to buy on the dip

The third one analyzed technically is TSLA.

I agree that the three tops seen in the $280's from 2014 through early this year have proven to be support over the last six months. That is often the case when resistance that's been demonstrated several times is eventually exceeded. A number of TMC members have been looking for the $280's as a potential buying area, but I suspect that the $292.63 low on November 2 will be as close as it ever again gets.

The guy on CNBC sounds really knowledgeable about TA. I like him and I think he’s right about TSLA
On monthly we’re sitting right over 13 month EMA and if this holds in November, which I think it will, then we’ll likely ramp up seriously over the next several months
In the worst case scenario even if we end the monthly candle exactly the way it is right now that would be a total win for longs however I strongly suspect that the November candle is likely to end up much better looking than this current red one , most likely a white candle

 

[TrendTrader007]

What if this month is like October 2012 and then we end up going up 3 to 6 times over the next year or so seems improbable right now but crazier things of happened in the stock market and I would not count out that scenario. In fact I’m counting on it
What if there is an unexpected good news on model three ramp up and that lights the fuse under the stock and the shorts run for cover and this things goes up crazy in A melt up scenario and goes up from 300 to $1000 or $1800 within the next year it is possible I would not bet against it

PS: that would make me and TradingInvest and Steve G and Neroden and PApafox and The Professor and lots of longs here very very rich

 

[CyberDutchie]

Could your numbering be wrong? Line one was the original S line and line two was the (much more automated) line designed for both S and X but being used only for X. I believe line two was going to be used for S and X and line one was going to be dismantled and reconfigured.

If you heard the opposite, that's actually significant news (and pretty weird, honestly).

I stand corrected. Yes, line one will be reconfigured to become 2nd line for Model 3 production. Line two will be the combined for S and X moving forward.

It makes more sense, line one is spaced out a lot more, compared to line two. When the Model S line was designed they had so much floor space available—I still remember from the Model S launch party at the factory how huge that factory is.