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DaveT: Add my thanks to you (and your wife) for your detailed posts. I, like others, do have some concerns about Elon/Tm response to the third fire (second by road debris). You are obviously a very logical person and can overcome an emotional 'knee jerk' type of response with logic. You take time and analyze the situation before a rash reaction.
My thought: You are unique in the investing world. Unfortunately, 'mo-mo' stocks move on emotion/perspective of the market. The first fire, with a logic driven response by Elon was muted relatively quickly. This most recent fire, on the heels of the first one and with fear in the market that TM will not be able to maintain their perfect execution that they have come to expect will need more than words from Elon/TM. He can express the freakishness of the circumstances and remind people of the crash tests and overall safety of the car vs ICE vehicles (which I agree with) but I think to instill confidence he must acknowledge that he will personally, along with his engineering team, conduct more thorough testing and implement changes to make the battery pack even safer. These fixes need not be expensive....Kevlar for the undercarriage and raising the highway speed height of the car....But if he does this BEFORE any government body suggest a probe it will do a lot for investor and potential buyer confidence.
Execution at this level, dealing with any problems head on to improve the product will make the company stronger and provide more incentive for potential Gen III reservations/purchases. If we have more fires, freakish or not, it will adversely affect the master plan and thus the stock and company valuation.
My thought: You are unique in the investing world. Unfortunately, 'mo-mo' stocks move on emotion/perspective of the market. The first fire, with a logic driven response by Elon was muted relatively quickly. This most recent fire, on the heels of the first one and with fear in the market that TM will not be able to maintain their perfect execution that they have come to expect will need more than words from Elon/TM. He can express the freakishness of the circumstances and remind people of the crash tests and overall safety of the car vs ICE vehicles (which I agree with) but I think to instill confidence he must acknowledge that he will personally, along with his engineering team, conduct more thorough testing and implement changes to make the battery pack even safer. These fixes need not be expensive....Kevlar for the undercarriage and raising the highway speed height of the car....But if he does this BEFORE any government body suggest a probe it will do a lot for investor and potential buyer confidence.
Execution at this level, dealing with any problems head on to improve the product will make the company stronger and provide more incentive for potential Gen III reservations/purchases. If we have more fires, freakish or not, it will adversely affect the master plan and thus the stock and company valuation.
JRP3
Hyperactive Member
NHTSA might decide not to investigate but Tesla still needs to address this in some way.
Thanks DaveT for your new update on where the stock may head. I enjoy your reading and find it useful to try and calculate my next move.
I think Elon won't say as much compared to the first fire. Because essentially, it's going to be a substantial repeat and there's nothing new other than the known metallic object this time around is a tow hitch. As for the NHTSA doing an investigation, at this point, I think it'll have a slightly higher chance being investigated than the first time around. However, like the first fire, there's a probability that Tesla's design won't be investigated because it's just one of those freakish accident. But I think if there's another fire or so in the immediate future, I'm pretty sure NHTSA would be forced to look into the problem.
I think Elon won't say as much compared to the first fire. Because essentially, it's going to be a substantial repeat and there's nothing new other than the known metallic object this time around is a tow hitch. As for the NHTSA doing an investigation, at this point, I think it'll have a slightly higher chance being investigated than the first time around. However, like the first fire, there's a probability that Tesla's design won't be investigated because it's just one of those freakish accident. But I think if there's another fire or so in the immediate future, I'm pretty sure NHTSA would be forced to look into the problem.
I most respectfully disagree. I think Elon/TM must investigate, speak and offer a remedy to make this the safest car battery pack in the world. There may not be an NHTSA investigation. Still, confront the perception of a problem head on. Say something to the effect..."The model S is the safest car in the world. There have been two freakish accidents involving road debris that hit the undercarriage of the car with such force that it would have done'XYZ' damage to an ICE vehicle. Instead, it pierced the battery pack. The car, sensing possible danger alerted the owner to stop the car and exit the vehicle, potentially saving his life. We take great pride in our product and reputation as having the best engineered car in the world. We will study this incident and see if there is anything we can do to see if there is anything we can do to add further protection for the battery against any further freakish type accidents. I will personally look into this with my engineering department."
Outcome: Simple: Lose some of the aerodynamic advantage of lower car at highway speeds by not allowing the 'low' setting on the air suspension
More complex: Better protection for the battery pack to puncture and/or fire suppression system. I prefer the former to the latter.
When dramatic events happen like yesterday’s 3rd Tesla fire, sometimes you need to take a step back from the noise and seek clarity and insight.
Evaluating the 3rd Fire
To me the logical and obvious culprit is some freakishly shaped object that was able to somehow get under the car and then shoot up into the battery pack (similar to the 1st fire). I call it “freakish” because most object will either 1) not fit under the car and thus be dragged in front of the car, or 2) be short/thin enough to fit under the car and the car passes over the object. But for the object to fit under the car but then at the same time to shoot up with enough pressure to puncture the 6mm ballistic shield protecting the battery pack, that is what I call freakish.
The unfortunate thing is that this episode of driving over a freakishly shaped object and causing a fire has happened twice in just one and a half months. This naturally leads people to think that the so-called “freakishly” shaped object maybe isn’t so freakish after all and might be common. And this is what I believe is driving a lot of fear and doubt right now.
I personally look to the most logical and objective explanation, and to me it’s difficult to see a normal-shaped object being able to fit under the car and then shoot upward to the battery pack with such force to puncture a ballistic shield. Elon Musk wrote about the first fire, "The geometry of the object caused a powerful lever action as it went under the car, punching upward and impaling the Model S with a peak force on the order of 25 tons.” (Model S Fire | Blog | Tesla Motors) To me this makes sense. The geometry of the object needs to be shaped in such a way that it actually fits under the car and when it does go under the car it punches upward with an insane amount of lever action force to cause major damage. This is not a common occurrence, and that is why I call it freakish.
Tesla will likely address this 3rd fire with a more detailed statement or blog post in the coming days. Given the facts that we have so far, I would foresee either Elon or someone else sharing similar information as the 1st fire. The culprit was a freakishly-shaped object that could have killed the driver in an ICE car but the driver was kept safe in a Model S.
The difficult part of this 3rd fire is that it’s happened before, so there will be some natural resistance from people in receiving and accepting this explanation.
What helps is that the Model S is built like a tank. In terms of safety, I can’t think of another car I’d rather drive.
So, this 3rd fire… it too shall pass.
>>>>
Hi Dave
I have tremendous respect for you and all that you have provided us. Because of you and others I have made a lot of money from Tesla stock!
However it sounds to me that you believe the bottom surface of the Model S is perfectly level (or flat) underneath. That would explain why you believe an object would not get bumped by the car as the underbelly passes over even if the very front of car cleared the object. I just went out to my Model S, raised it up to its highest level from the ground, crawled under the front end of the car and can see it is not a level or flat surface. There are certain parts that hang down that could cause a Non Freakishly shaped object to suddenly become mobile and bounce up into the underbelly of the car. From looking at the underbelly it actually seems likely that an object of a certain size would start bouncing around under the car depending on its location. Away from the center of the car seems more precarious.
I am no longer holding shares, just some 2015 Leaps as I believe Tesla will in fact change the world and one day have a value well over $500/share. However I believe the stock is heading lower for a while. I am not and never have been short on any stock.
Attachments
Recent Woes of TSLA, good news for Tesla
Hello All,
Been pretty busy at work (having my own little melt down moment but it shall pass). I have been taking my time to think about the recent happenings and will be breaking it down.
1. Q3 Earnings Many people speculated that everything was being downplayed, Elon was tired, etc. The fact of the matter is, Wall Street expectations were too high -- I can't blame them, it's Elon Musk. What we need to realize (much of which Analysts have said already) is that this was a great report. They beat, grew cash while expanding, and hit the bullish end of deliveries.
2. Overall market The market is definitely heated and many are expecting the mega-growth that occurred during the beginning of the year. It just isn't going to happen. Expectations got way too high and people got greedy. They want hyper growth and I suspect many saved their capital for TWTR today.
3. The Fire The third fire really isn't a big deal in the grand scheme of things. If you stop and think about why the Model S' pack got on fire... it's because the surface area of the pack is inherently larger. If it was a gas car, a fire would need to occur if the object pierced the gas tank (located in the back) or took out some other piece of the car that would make it fish tail or cause an accident. So let's put this all to rest, the Model S is safer. It gives you time to get out and the results are more predictable. In all cases, the passenger compartments were protected. Problem is, these are all occurring with a relatively small number of deliveries and the Media is looking for a story. A simple Google Trend analysis of TSLA will display this.
Google Trends
4. The Shorts who lost their shorts In Q1 there was a ton of money lost. You better believe these traders want that cash back. This is the perfect time. We saw much FUD floating around and we are seeing affects now. The stock was pressed to the point of tripping a circuit breaker. This even made me nervous and I was with Tesla the time Peter Rawlinson had to leave.
Key Takeaways Today, I left my Tesla position fully. The factors above are too much to fight in the short run and my overall long term bull strategy is to accumulate more shares. Right now the kitchen is too hot and the news is going to be continuously running its course. It just so happened to work out for me that my tax strategy aligned with my losses for my short term options plays (which went to 0). I was able to book some lovely profits at minimal tax. The Tesla story is not done, and I think it's going to be a nice run up. What's good is that expectations can now come back to earth and leaves more potential for surprise. I will be entering Tesla again, for those who can't be bothered placing frequent trades, don't look at your accounts for the rest of the year. The shorts will have their way and I think the way we will know if we are heading towards a Q1 repeat is looking at the next short interest report. Right now there really isn't a technical bottom. The next "floor" in my mind is the price of the secondary which was in the 90's, which I think Elon will agree is the "fair" valuation of the company.
I am fairly confident NHTSA will investigate here just to do its due diligence and Tesla will be coming out with a blog post. It needs to be even better than the first one and I hope it will be media rich with some kind of diagram. Although the last point was great, people still don't get it. I am waiting on the sidelines with cash + margin and will definitely be taking Tesla on the ride up in 2014. Funds will be scooping up the shares after the tax year window is over. I'm psyched and I can't wait.
Hello All,
Been pretty busy at work (having my own little melt down moment but it shall pass). I have been taking my time to think about the recent happenings and will be breaking it down.
1. Q3 Earnings Many people speculated that everything was being downplayed, Elon was tired, etc. The fact of the matter is, Wall Street expectations were too high -- I can't blame them, it's Elon Musk. What we need to realize (much of which Analysts have said already) is that this was a great report. They beat, grew cash while expanding, and hit the bullish end of deliveries.
2. Overall market The market is definitely heated and many are expecting the mega-growth that occurred during the beginning of the year. It just isn't going to happen. Expectations got way too high and people got greedy. They want hyper growth and I suspect many saved their capital for TWTR today.
3. The Fire The third fire really isn't a big deal in the grand scheme of things. If you stop and think about why the Model S' pack got on fire... it's because the surface area of the pack is inherently larger. If it was a gas car, a fire would need to occur if the object pierced the gas tank (located in the back) or took out some other piece of the car that would make it fish tail or cause an accident. So let's put this all to rest, the Model S is safer. It gives you time to get out and the results are more predictable. In all cases, the passenger compartments were protected. Problem is, these are all occurring with a relatively small number of deliveries and the Media is looking for a story. A simple Google Trend analysis of TSLA will display this.
Google Trends
4. The Shorts who lost their shorts In Q1 there was a ton of money lost. You better believe these traders want that cash back. This is the perfect time. We saw much FUD floating around and we are seeing affects now. The stock was pressed to the point of tripping a circuit breaker. This even made me nervous and I was with Tesla the time Peter Rawlinson had to leave.
Key Takeaways Today, I left my Tesla position fully. The factors above are too much to fight in the short run and my overall long term bull strategy is to accumulate more shares. Right now the kitchen is too hot and the news is going to be continuously running its course. It just so happened to work out for me that my tax strategy aligned with my losses for my short term options plays (which went to 0). I was able to book some lovely profits at minimal tax. The Tesla story is not done, and I think it's going to be a nice run up. What's good is that expectations can now come back to earth and leaves more potential for surprise. I will be entering Tesla again, for those who can't be bothered placing frequent trades, don't look at your accounts for the rest of the year. The shorts will have their way and I think the way we will know if we are heading towards a Q1 repeat is looking at the next short interest report. Right now there really isn't a technical bottom. The next "floor" in my mind is the price of the secondary which was in the 90's, which I think Elon will agree is the "fair" valuation of the company.
I am fairly confident NHTSA will investigate here just to do its due diligence and Tesla will be coming out with a blog post. It needs to be even better than the first one and I hope it will be media rich with some kind of diagram. Although the last point was great, people still don't get it. I am waiting on the sidelines with cash + margin and will definitely be taking Tesla on the ride up in 2014. Funds will be scooping up the shares after the tax year window is over. I'm psyched and I can't wait.
goodluck with your strategy but what if TSLA suddenly rises north of 150 or 160 again next week? You gonna stay on the sidelines or buy back in at a higher price? Are you prepared to make that decision?
Pessimistic market sentiment will drive a stock toward values where it becomes undervalued but with companies that have strong revenue growth, strong balance sheets, huge market potential, even the pessimistic market sentiment can only drive the stock price down to a certain limit. The question is: what is that limit?
If there was something that happened that fundamentally changed Tesla's story (ie., sliced demand in half or more), then the bottom would be very very deep. But in this case, it's not something that changes the Tesla story or demand in a fundamental way. Sure, current perception is AT RISK of turning negative but all the apparent facts lead me to believe that Tesla can adequately address the situation and mitigate most of the effects.
So, in this case it's not a fundamental re-valuation of the company but rather a correction caused by a shift in sentiment. In sentiment corrections (especially with companies with strong revenue growth), there is a limit to the downward pressure. The stock in the 130s is very close to that limit IMO (based on my valuations w/pessimistic mood).
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Yeah, I'm not sure people realize how cheap the 130s for TSLA is. Demand has only grown over the past few months, supply issues are being worked out (or supposedly 2014 issues are mostly resolved), and Tesla is just getting started. Tesla could deliver 40k cars next year ($4 billion revenue) and 80k cars in 2015 ($8 billion revenue) with close to 30% gross margin. And it's market cap is only $16.8 billion. It's a steal.
If Tesla can hold above $133, then I see it likely popping back up to the 150s+ very soon. This over-correction I don't think will last long. I was planning to wait until Monday to get 2016 LEAPs but now I'm tempted to start converting some my common stock held over a year into 2015 LEAPs tomorrow because I don't know how much longer this fire sale will last.
I've been reading a lot of the articles that came out today on the fire and particularly was paying attention to the comments from readers. Very reassuring to read how sensible people's reactions have been and Tesla had overwhelming support from the readers. With that type of public opinion I don't think the fire will have any meaningful impact on sales of the Model S.
There's very strong resistance points at 133, 120, and 108.
Guys, keep in mind this is not a company that has hit it's peak and is now going down (ie., growth rate decelerating, revenues shrinking, market share collapsing). To compare it with Apple at $700 is pure silliness IMO. TSLA is just getting started, and at some point (probably very soon) this will bounce and people will be wishing they could have got in in the 130s. It's mind-boggling to me that TSLA is in the 130s now and people are jumping in hand over fist. But I understand the fear, uncertainty and doubt and it's amplification as the mind races to worst-case scenarios. This isn't a time to be stuck in worst-case scenario fears. The 130s is a time to be buying and adding to your long-term core position. I don't give much specific buying advice often. But there it goes. 130s is a fantastic buying opportunity.
I suppose it's hard for me to see any particular point as a level of support at this point. In the short term threads, as we descended from $190, there was constantly talk of support at one level after another and each one fell like a domino.
Obviously there's some point where TSLA is crazy undervalued, but after hearing it was a bargain so many times I'm skeptical any price is undervalued until we see the bottom well in the rear view mirror and can only call it with the benefit of hindsight. Well, I suppose it could have technically been undervalued the whole time and it's just extra-undervalued now.
I've basically got a 30 day wait before I can put back anything into TSLA or I suffer some major tax hits, so I guess I'll see where it's at in a month.
Obviously there's some point where TSLA is crazy undervalued, but after hearing it was a bargain so many times I'm skeptical any price is undervalued until we see the bottom well in the rear view mirror and can only call it with the benefit of hindsight. Well, I suppose it could have technically been undervalued the whole time and it's just extra-undervalued now.
I've basically got a 30 day wait before I can put back anything into TSLA or I suffer some major tax hits, so I guess I'll see where it's at in a month.
Surfside, thanks for finding that post. I've been reminded of that post and was going to go look for it, but thanks for finding it for me.
I'm going to post a few snippets from my August 21 post for myself because I need the reminder.
"My current theory is that chasing buyers and momo traders will take this stock to new ATHs (timing depending on overall market conditions), and at some time buyers will dry up and traders will reverse their position and we'll see another correction fueled by uncertainty, doubt and fear (the extent though depends on various factors like how deep and pervasive the fear is). Buying on the correction will always pose certain risks because there's always the possibility of the stock going lower or breaking through another price support barrier and hitting new lows. But if somehow you can time it right (which is difficult and requires a lot of accuracy, and even at that there's still a lot of risk cause each dip can look different), I think there could be some opportunities for gain."
"A downtrend of that level could likely sink TSLA into a downtrend as well (as well as other leaders) and we could see some great buying opportunities (ie., low option premiums). The problem will be most people will be too scared to do major buying (for fear of things going a lot lower). And since we're human, we'll likely be influenced by the fear of others and will be timid."
"And I hate to say it but I might even need to stay away from TMC and other places during that time because I might get influenced by those in fear. We'll all be licking our wounds at that time and counting our losses. But hopefully, I'll be able to find the clarity, wisdom and courage to make some bold moves. Maybe we should just decide right now... if we have a perfect storm in the next 6 months (SPY in low 140s, DOW under 13000, 2016 LEAPs available, and TSLA at 110-140), then who's in to make some bold moves?"
Definitely lots of fear going around and licking of wounds. The "perfect storm" scenario is a bit different than I had described (the entire market is not in a major correction) but I think it's similar because Q3 ER and the 3rd fire do not change the long-term prospects for Tesla.
One of the reasons why it's difficult to buy when things are going down is because people project the past into the future, meaning when it starts going down and keeps going down, they think that it will continue to go down (thus the fear gripping TSLA investors). For some companies, it really does continue to go down (ie., BBRY, Nokia, Barnes and Noble, etc). But Tesla is different IMO. This is not a fundamental-driven correction, it's a sentiment-driven correction that will be remedied when sentiment turns back positive. And sentiment can turn positive very quick, especially when the company is growing revenue at a 100% annual growth rate like Tesla is.
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Thanks Fast Laner, that's very thoughtful. I know everyone here has had a tough past week, so I also want to wish everyone a pleasant night for you and your families.
Exactly. This thing will go back up as fast as it came down. So many people who love Tesla but are really scared and sold, so many shorts ... it's the perfect storm for rapid upward movement. Once this thing starts looking solid and climbing back up, shorts will need to cover and those who got out will want to get back in real fast. Everywhere you read people who made lots of profits are really scared. It's easy to quote Buffet about being greedy when others are fearful but it's much harder to do. I'll slowly be doubling down if we keep falling further and once this things pops back up it'll be great.
I think I'll disagree with this. and I hope it does not occur as it's my opinion that the stock will be healthier long term if it rises in a more deliberate manner commensurate with achieved vs anticipated progress (and this from a strong long). We will have many many more of these over the many years to come
Mario Kadastik
Active Member
Just for the statistics I'd point out the two posts I made in the fire thread:
Ugh. Another Model S fire - 2013-11-06 - Page 40
Ugh. Another Model S fire - 2013-11-06 - Page 43
So statistically the two fires cannot possibly give us any true separation power for claiming that Model S would be more risky car. We just don't have enough statistics to make claims either way, but if we do take the number of expected fires to be even tiny the probability is still high enough to see 2-3 fire events to be fully normal. Now if the Model S starts to go up in flames every 3 weeks, then that's different.
However as the majority of people know zip about statistics the sudden appearance of multiple fires in a short timeframe will make for fearsome "statistics" and will have a short term impact. This is the reason I sold almost all of my short term options (December, most of March) that still had some decent value. I kept a small portion in case there is a recovery and actually added a bit to my January 2015 LEAPs. The rest of the money I'm holding to the sidelines until we look to have consolidated at some price point or re-enter ~$160 region in short term and will most likely enter next week with 2016 LEAPs. But short term owning short term options that aren't PUTs is very very risky as I don't see a decent catalyst that could bounce the stock up fast (i.e. 1-2 months). The fundamentals haven't changed so 1+ year performance is still going to be good, but anything shorter term is too tough to call for me...
Ugh. Another Model S fire - 2013-11-06 - Page 40
Ugh. Another Model S fire - 2013-11-06 - Page 43
So statistically the two fires cannot possibly give us any true separation power for claiming that Model S would be more risky car. We just don't have enough statistics to make claims either way, but if we do take the number of expected fires to be even tiny the probability is still high enough to see 2-3 fire events to be fully normal. Now if the Model S starts to go up in flames every 3 weeks, then that's different.
However as the majority of people know zip about statistics the sudden appearance of multiple fires in a short timeframe will make for fearsome "statistics" and will have a short term impact. This is the reason I sold almost all of my short term options (December, most of March) that still had some decent value. I kept a small portion in case there is a recovery and actually added a bit to my January 2015 LEAPs. The rest of the money I'm holding to the sidelines until we look to have consolidated at some price point or re-enter ~$160 region in short term and will most likely enter next week with 2016 LEAPs. But short term owning short term options that aren't PUTs is very very risky as I don't see a decent catalyst that could bounce the stock up fast (i.e. 1-2 months). The fundamentals haven't changed so 1+ year performance is still going to be good, but anything shorter term is too tough to call for me...
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