Articles/megaposts by DaveT

[Brando]

What does Consumer Reports claim about Tesla reliability? Model S and do we have enough years for Model X?

Of course Model 3 will at best be based on Brand [TESLA] history.

Who will look it up? and please post, thank you!

 

[DaveT]

Thanks Dave for the post.

In my opinion, this approach is a) far too expensive and b) has a low chance to stick with the majority that view it.

I think Tesla's current approach of fighting this is understated in nature, but has the best chance of succeeding. The word of mouth of Tesla owners, which is growing exponentially by the day with the massive success of Model 3, will in my opinion counteract any negative propaganda that's put out by the media and/or special interest groups. The people that view these materials are going to be increasingly either a) owners of a Tesla or b) one text away from a Tesla owner. Either one of these groups will feverishly defend Tesla and Elon in its current state and will render all negative press essentially useless. People simply won't buy the garbage.

I don't think Tesla needs to take any measures whatsoever to create a positive image campaign. What I think Tesla should focus all its energy on is creating massive coverage of the repair network, increase part availability, and shorten repair times down to days instead of weeks. This will ensure that Tesla's current strategy will remain strong for years to come.

Regarding costs for what I'm proposing, in my Part 5 I lay out a plan to start with 50 people and a specific campaign that really doesn't have any additional costs beside the personnel expenses. So for 50 people x $100k per person in salary/expenses, that would be $5 million. I don't think that is "far too expensive". In fact, it's very reasonable and inexpensive, and a no-brainer to try.

Regarding repair network, yes Tesla needs to up their game in that area and in terms of service. But that does not come mutually exclusive to their need to show up to win a media war.

I'll also go into some further thoughts regarding this in my next part.

 

[DaveT]

I'm really sorry Dave (that is my problem I know). I think we (US citizens) lost the media wars long ago.
Is there anything in the media you actually trust? At best I think of Ronny's line - Trust but Verify.
Personally, I distrust first until I can verify. Seems to work more often than not.
Tesla has never had "good press" if I'm remembering correctly (this could be another problem of mine).

Talking/showing your Teslas is worth more than a thousand words (10,000 words?). I suspect you already do.

For those that play the stock market and try to understand Wall St. then the best strategy I've read about is:
A Field Guide To Potential Securities Violations By Tesla's Foes — In Depth | CleanTechnica

I really worry your energy is being miss directed. BUT if it is your passion, then by all means you must be true to yourself and follow your passion to where it leads. And please don't get discouraged. Most all of us really appreciate your well thought out articles and comments.
AND you are so fortunate to own 2 of the 4 Tesla models. enjoy - sure you are.

good luck and good fortune and thanks again.

PS- as you well know, Elon has always avoided the Madison Avenue angle. Better to just have the best product - spend money on improving the product and NOT spend money trying to convince people you have a great product. continuous improvement as fast as reasonable - staying ahead of the competition (when we actually get some real competition).

warning: I'm not all that clever/smart when it comes to our modern world and understanding how it works.

A few thoughts here.

First, media today has become very distributed.

"New media" is far and wide, and consists of literally hundreds of thousands or millions of people making their living in various ways... ie., Youtube, Instagram, blogs, etc.

Further, even mainstream media has shifted to becoming more of a platform of sorts. In other words, what you might see as a news site is actually a platform for thousands of writers to post their opinions, and those articles aren't scrutinized very heavily. Consider BusinessInsider, Fortune, Forbes, Yahoo Finance, etc. They literally have thousands of writers each, but not in the typical sense of employed full-time writers. They are platforms. ie., How Fortune draws from 5,000 outside contributors - Digiday

Point being, "media" nowadays is almost as hard to box-in as the Internet.


Anyway, I'll address more in my next blog about the idea of how it's not enough to just make a good product, since the messaging is part of the product, especially in this age.

 

[hcsharp]

Personally I'm having a hard time believing that 30 journalists a day will show up for an all-day affair. It seems unprecedented. No other company could do that, or ever has to my knowledge. Certainly no other automaker could do that. Could Apple do that? I doubt it.

There's also no guarantee that all the stories that come out if this effort will be positive. The trendy thing to do right now is bash Tesla. An all-day media tour won't necessarily prevent that.

I'm not necessarily saying your idea is bad. Tesla is currently failing at communications. Anything would help. I just wonder if it could be realistically executed with that level of success.

 

[neroden]

I don't think Tesla needs to take any measures whatsoever to create a positive image campaign. What I think Tesla should focus all its energy on is creating massive coverage of the repair network, increase part availability, and shorten repair times down to days instead of weeks. This will ensure that Tesla's current strategy will remain strong for years to come.

I am entirely agreed with farzyness, except that I also think Tesla needs to fix their software practices so that they stop breaking things in updates.

This requires fixing internal communications so that there is actually a feedback loop from customers to software developers, which is currently missing.

Tesla has committed several cases of shooting themselves in the foot and damaging their own reputation due to their commnications failures. The failure to roll out service centers geographically. The failure to stay on top of parts orders / parts shortages. The delivery fiasco at the end of Q3 (which has not been fully resolved) where people keep having delivery dates cancelled on short notice and cars pulled out from under them. The software downgrades and total nonresponsiveness to bug reports. The inability to get the paperwork right on deliveries (dating back to 2013!).

If they got this stuff right (and at this point I do *not* think they will), the word of mouth would go back to being 100% positive, and with this many owners, word of mouth is all you need. But I've been disrecommending Tesla for years due to the lack of a local service center, and now I have to warn would-be owners about software downgrades too. I would like to go back to being able to unreservedly recommend Tesla.

 

[farzyness]

I am entirely agreed with farzyness, except that I also think Tesla needs to fix their software practices so that they stop breaking things in updates.

This requires fixing internal communications so that there is actually a feedback loop from customers to software developers, which is currently missing.

Tesla has committed several cases of shooting themselves in the foot and damaging their own reputation due to their commnications failures. The failure to roll out service centers geographically. The failure to stay on top of parts orders / parts shortages. The delivery fiasco at the end of Q3 (which has not been fully resolved) where people keep having delivery dates cancelled on short notice and cars pulled out from under them. The software downgrades and total nonresponsiveness to bug reports. The inability to get the paperwork right on deliveries (dating back to 2013!).

If they got this stuff right (and at this point I do *not* think they will), the word of mouth would go back to being 100% positive, and with this many owners, word of mouth is all you need. But I've been disrecommending Tesla for years due to the lack of a local service center, and now I have to warn would-be owners about software downgrades too. I would like to go back to being able to unreservedly recommend Tesla.

Thanks neroden.

I am actually of the boat that I think Tesla *will* get all this stuff right, and in rather short order. All of it is rather small in nature and requires 3-4 strong leaders maximum within the company to properly prioritize the changes that are necessary. It's much easier to 1) solve part shortages and 2) poor communication than to 3) ramp up a never-done before car platform. Most companies in the US that are worth anything can and do 1 and 2 very easily and consistently. 3 is the very hard one, which Tesla has achieved. Once the focus shifts then 1 and 2 will be fixed faster than most will realize.

 

[neroden]

I think communication problems are a corporate culture issue, and I think corporate culture is very, very hard to change. I still *hope* they'll fix these problems, but they need a really loud wake-up call or they won't.

 

[DaveT]

Just wanted to keep people up to date with my TSLA thoughts. I just posted this this morning, DaveT on Chatstarter: "Has Andrew Left just started a mass exodus of..." .

Has Andrew Left just started a mass exodus of TSLA shorts?

https://citronresearch.com/wp-conte...opinion-on-Tesla-too-compelling-to-ignore.pdf

Here’s the thing about Citron and Andrew Left. This is one of the biggest defections we have ever had in the TSLA short world. He’s not just a TSLA short who’s become a TSLA long. Rather, he’s an ideological TSLA short with a large following who’s become a TSLA long. This is important to note, because it is exactly this kind of defection that is needed to mental the shorts. In a way, one of their leaders need to jump ship to the other side in order for the others to do the same.

In war language, this is one of the top generals of the enemy who didn’t decide to commit suicide, but rather he decided to join the other side because he says the other side is going to win and it’s obvious.

This could be the catalyst that TSLA needs to really lift off out of the 250-380 range it’s been stuck in for years.

TSLA needs to have a shift in momentum and investor sentiment, and Andrew Left of Citron has provided what could be that pivotal moment.

Now I know there are some people who don’t think the world of Andrew Left. He’s been an ardent TSLA bear and short for many years. And there are many TSLA bulls who cringe just at the thought of his name or Citron. Some of the fear and FUD that he and others spread about TSLA were exaggerated and turned out to be largely untrue. Thus, I’m not going to defend Andrew Left’s past. But, in the larger scheme of things, if TSLA is going to have the “short burn” that many TSLA bulls have been waiting for, there needs to be a covering of the shorts.

That “short covering” has been eluding TSLA investors for years. And even with reaching 5000 Model 3s a week, Tesla was stuck in the 250s.

In recent weeks, TSLA shorts have been spreading a narrative that Q3 and Q4 results will be one-off good results but after that demand will crash and Tesla will be in trouble.

What Andrew Left’s report does is it brings doubt to shorts regarding their own narrative. Andrew Left’s position is that Q3 and Q4 is actually a start of many good quarters to come, and also of the beginning of a huge run in the stock price.

Shorts can counter and claim that Andrew Left is spreading FUD against the shorts and just wants to ride a pump and dump. Regardless, the shorts have seen one of their ideological leaders not only jump ship but join the other side, and this has the potential to start a mass exodus of TSLA shorts to join him.

Tomorrow Tesla reports Q3 earnings and has given people less than 48 hours notice. I think this has given less time for market makers to sell calls/puts for earnings, thus there will be less price manipulation with earnings price action.

Good luck to all TSLA longs.

 

[TSLA_Hopeful]

Dave, what is your take on today's earnings vs. May 2013? Do you think we have a similar reaction, or a more subdued but long term rise like first half of 2017?

 

[DaveT]

Dave, what is your take on today's earnings vs. May 2013? Do you think we have a similar reaction, or a more subdued but long term rise like first half of 2017?

I posted earlier my thoughts at DaveT on Chatstarter: "The coming Tesla cash cow - part 2" .

But I think this Q3 earnings was the best earnings Tesla has had since Q1 2013, by far.

It marks the transition where Tesla has reached a point where they are covering all operating expenses with gross profit. So, now as revenue grows, gross profit will grow and increase net profit substantially. It's what all true TSLA investors have been waiting for for years.

I think it's taken some shorts and skeptics by surprise, because they don't understand and haven't worked out the numbers of Tesla selling 500k cars/years at a 25% gross margin with operating expenses only slightly increasing year to year. Once you work out those numbers, it becomes clear that Tesla has a great business as long as they have demand for their products.

That's why the crucial question this past year has always been how good is the Model 3, and how much demand will it carry. And that's why I've been so bullish as well. Because I think the Model 3 can carry at least 500k cars/years demand. And when you work out the numbers that's plenty to have stellar profits.

What I think is significant about this earnings also is that is so clear in the numbers that Tesla has a great business. $300M of profit in one quarter for a company that is just getting started. And now they are accruing positive cash flow as well.

It's going to be hard for the number-crunching analysts to discount this earnings because it speaks for itself.

I am expecting analyst upgrades this week.

And for those analysts that don't upgrade, they really ought to be fired, because this earnings really is the turning point for Tesla and it's clearer than day. And if they can't see that, then they have no business being an analyst.

 

[30seconds]

Any thoughts on what the P&L / cash flow will look like in 2019 (assuming no Model Y)? I'm expecting a flat to slightly reducing GM but increasing revenue another 15-20% (y/y) as volume continues to pick up from Fremont. Starting to rethink if GM will maybe stay at 25% for 2019.

 

[neroden]

Although Tesla is guiding flat GM more or less, I expect GM to improve; cost engineering is actually Musk's and Tesla's core competency, IMHO. I expect a big boom in capex and opex as service centers are deployed across the US, and then a bigger boom as the factory facilities for Model Y and Semi start construction. Energy storage will grow exponentially and start to become significant as the economies of scale kick in -- and the Solar Roof will start making a profit contribution.

 

[tlo]

And for those analysts that don't upgrade, they really ought to be fired, because this earnings really is the turning point for Tesla and it's clearer than day. And if they can't see that, then they have no business being an analyst.

Agree 100%. I even think this is Tesla's best ER, period, including 2013.

I'm completely disgusted at the analyst reaction:
Bloomberg - Are you a robot?

 

[DaveT]

I posted earlier my thoughts at DaveT on Chatstarter: "The coming Tesla cash cow - part 2" .

But I think this Q3 earnings was the best earnings Tesla has had since Q1 2013, by far.

It marks the transition where Tesla has reached a point where they are covering all operating expenses with gross profit. So, now as revenue grows, gross profit will grow and increase net profit substantially. It's what all true TSLA investors have been waiting for for years.

I think it's taken some shorts and skeptics by surprise, because they don't understand and haven't worked out the numbers of Tesla selling 500k cars/years at a 25% gross margin with operating expenses only slightly increasing year to year. Once you work out those numbers, it becomes clear that Tesla has a great business as long as they have demand for their products.

That's why the crucial question this past year has always been how good is the Model 3, and how much demand will it carry. And that's why I've been so bullish as well. Because I think the Model 3 can carry at least 500k cars/years demand. And when you work out the numbers that's plenty to have stellar profits.

What I think is significant about this earnings also is that is so clear in the numbers that Tesla has a great business. $300M of profit in one quarter for a company that is just getting started. And now they are accruing positive cash flow as well.

It's going to be hard for the number-crunching analysts to discount this earnings because it speaks for itself.

I am expecting analyst upgrades this week.

And for those analysts that don't upgrade, they really ought to be fired, because this earnings really is the turning point for Tesla and it's clearer than day. And if they can't see that, then they have no business being an analyst.

I was interested in finding out what the analysts had to say after this earnings, so I found this:
Here's what every major analyst had to say about Tesla's profits: 'This quarter was different'

It turns out the vast majority seem to be in some kind of denial. It sounds to me like they just don't like Tesla, regardless of what they numbers show. I thought numbers would convince at least some of them, but it looks like most of them just don't care. I think the bias goes deeper. Perhaps they are victims of the negative media war against Tesla. Or perhaps Elon really gets on their nerves. Or perhaps they just don't get Tesla and never really driven at length a Tesla or talked directly with owners. I don't know. But there's definitely seems to be bias, and a strong one.

I think if the stock price rises above $360, then there could be a cascade of several positives for Tesla. First, they'll likely just issue equity for the $920 converts due in Feb 2019. And that would actually make their balance sheet stronger. And in turn, that could cause some of the analysts to revisit their Sell recommendations.

Also, as the stock price rises, it could cause pressure on some of the negative analysts to revisit some of their assumptions. Most of these analysts cover a lot of stocks and they just can't put in the time needed to really study one stock in depth. Thus, what you see is actually a lot of shallow thinking. And even when Tesla blows their estimates out of the water, there's no real deep examination either.

Regardless, at the moment the analysts in general aren't helping TSLA.

Just like we saw a major defection with Andrew Left at Citron, we're needing to see some analyst defections as well.

DaveT on Chatstarter: "I was interested in finding out what the..."

 

[JRP3]

I think the bias goes deeper.

Been that way from the beginning, for various reasons. Some people just keep doubling down on the hatred, completely removed from reality.

 

[30seconds]

NYC hedge fund crowd is decidedly anti-Tesla. This is the group that the analysts talk to most often (and try to get jobs from to join the buy-side), the group that ranks them in the IIS survey and provide most of the trading profits to the banks.

They talk to large long funds as well, but there are far fewer and they trade less

 

[The Blue Owl]

It turns out the vast majority seem to be in some kind of denial. It sounds to me like they just don't like Tesla, regardless of what they numbers show. I thought numbers would convince at least some of them, but it looks like most of them just don't care. I think the bias goes deeper. Perhaps they are victims of the negative media war against Tesla. Or perhaps Elon really gets on their nerves. Or perhaps they just don't get Tesla and never really driven at length a Tesla or talked directly with owners. I don't know. But there's definitely seems to be bias, and a strong one.

The reaction on Spiegel's Twitter feed, both from him and his fellow short travellers, was first shock, immediately followed by denial: "these numbers cannot possibly be true; and even if they are, Q4 will be worse; and even if it won't, Q1 '19 will be". Etc.

We can dismiss Spiegel et. al. as blind idiots but, you ask, why are the analysts in (partial) denial? Because analysts are just people, and they float in the same ocean of systematic disinformation as all of us. The purpose of disinformation is not to persuade, but to sow doubt; to weaken the information links connecting true/likely premises with evidence leading to true/likely conclusions, and replace them with a new infrastructure built on wacky assumptions, fed with blatant lies, ending in conspiracy theories ("accounting fraud"). Informed actors like market analysts start to doubt themselves, and the much more numerous uninformed bystanders are left open to believing anything.

You can see this playing out on Twitter regarding the pipe bombs that have been sent to various Trump critics. Feeds are rampant with shouts of "False Flag!". As (mostly) rational observers, to us this picture appears bewildering, just like the attitudes about Tesla. However, if we zoom out of any local subject and look around, we discover we are now living in the Great Dissolution age. Truth is dead, truth remains dead, and we have killed it.

 

[Unpilot]

The reaction on Spiegel's Twitter feed, both from him and his fellow short travellers, was first shock, immediately followed by denial: "these numbers cannot possibly be true; and even if they are, Q4 will be worse; and even if it won't, Q1 '19 will be". Etc.

We can dismiss Spiegel et. al. as blind idiots but, you ask, why are the analysts in (partial) denial? Because analysts are just people, and they float in the same ocean of systematic disinformation as all of us. The purpose of disinformation is not to persuade, but to sow doubt; to weaken the information links connecting true/likely premises with evidence leading to true/likely conclusions, and replace them with a new infrastructure built on wacky assumptions, fed with blatant lies, ending in conspiracy theories ("accounting fraud"). Informed actors like market analysts start to doubt themselves, and the much more numerous uninformed bystanders are left open to believing anything.

You can see this playing out on Twitter regarding the pipe bombs that have been sent to various Trump critics. Feeds are rampant with shouts of "False Flag!". As (mostly) rational observers, to us this picture appears bewildering, just like the attitudes about Tesla. However, if we zoom out of any local subject and look around, we discover we are now living in the Great Dissolution age. Truth is dead, truth remains dead, and we have killed it.

Sigh...I wish you were wrong...but I fear you are right.
I have talked with and tried to understand Flat earth believers and chem trail believers and Obama was/is a Muslim not a US citizen believers.

Once someone goes down a certain rabbit hole it seems almost impossible for them to get out. That of course is because you can find any number of people and "news" sites to feed you information you want to see/hear.

I fear for our survival because we can't focus on real issues (climate change denial being number one)

 

[dhrivnak]

Just wanted to keep people up to date with my TSLA thoughts. I just posted this this morning, DaveT on Chatstarter: "Has Andrew Left just started a mass exodus of..." .

Has Andrew Left just started a mass exodus of TSLA shorts?

https://citronresearch.com/wp-conte...opinion-on-Tesla-too-compelling-to-ignore.pdf

Here’s the thing about Citron and Andrew Left. This is one of the biggest defections we have ever had in the TSLA short world. He’s not just a TSLA short who’s become a TSLA long. Rather, he’s an ideological TSLA short with a large following who’s become a TSLA long. This is important to note, because it is exactly this kind of defection that is needed to mental the shorts. In a way, one of their leaders need to jump ship to the other side in order for the others to do the same.

In war language, this is one of the top generals of the enemy who didn’t decide to commit suicide, but rather he decided to join the other side because he says the other side is going to win and it’s obvious.

This could be the catalyst that TSLA needs to really lift off out of the 250-380 range it’s been stuck in for years.

TSLA needs to have a shift in momentum and investor sentiment, and Andrew Left of Citron has provided what could be that pivotal moment.

Now I know there are some people who don’t think the world of Andrew Left. He’s been an ardent TSLA bear and short for many years. And there are many TSLA bulls who cringe just at the thought of his name or Citron. Some of the fear and FUD that he and others spread about TSLA were exaggerated and turned out to be largely untrue. Thus, I’m not going to defend Andrew Left’s past. But, in the larger scheme of things, if TSLA is going to have the “short burn” that many TSLA bulls have been waiting for, there needs to be a covering of the shorts.

That “short covering” has been eluding TSLA investors for years. And even with reaching 5000 Model 3s a week, Tesla was stuck in the 250s.

In recent weeks, TSLA shorts have been spreading a narrative that Q3 and Q4 results will be one-off good results but after that demand will crash and Tesla will be in trouble.

What Andrew Left’s report does is it brings doubt to shorts regarding their own narrative. Andrew Left’s position is that Q3 and Q4 is actually a start of many good quarters to come, and also of the beginning of a huge run in the stock price.

Shorts can counter and claim that Andrew Left is spreading FUD against the shorts and just wants to ride a pump and dump. Regardless, the shorts have seen one of their ideological leaders not only jump ship but join the other side, and this has the potential to start a mass exodus of TSLA shorts to join him.

Tomorrow Tesla reports Q3 earnings and has given people less than 48 hours notice. I think this has given less time for market makers to sell calls/puts for earnings, thus there will be less price manipulation with earnings price action.

Good luck to all TSLA longs.

Dave I fully agree but I think there is one more thing going on. And that is the Model 3. The Model 3 is good, very good and Tesla is showing they can make a lot of them and make them at a profit. The Model S was good the the large luxury segment is small. The midsize sedan is BIG and Tesla is showing it can successfully compete if not dominate there.

 

[neroden]

I think if the stock price rises above $360, then there could be a cascade of several positives for Tesla. First, they'll likely just issue equity for the $920 converts due in Feb 2019.

Actually, I think they won't. Musk likes having tighter control over the company and fewer shares outstanding; he's declared that they're just plain going to pay off debt; he's said the company is constrained more by ability to execute than by dollars as of Q2 (mythical man-month stuff). Tesla can pay the bonds off. The hedges will pay off any increase in value over $360 until the warrant strike price (which is $512.66) gets hit, so the amount Tesla has to pay to pay the bonds off is constant until the warrant strike price. I conclude they will most likely pay them off.

Repeating Q3's performance in Q4 is +$881M FCF, minus $230M for the SolarCity bond repayment, minus say $200M in extra capex/opex to start the service center rollout and move money to China. Repeat +$881M again in Q4, pay off the $920M, and even with $400M of "extra" (over Q3) capex in Q1 and no other improvements in profit, they'll end with over $3 billion cash at the end of Q1. I think this is a highly pessimistic estimate given Tesla's continued guidance for fairly low capex.

Looking at the balance sheet, I expect the SREC loan facility to be closed; it's high-interest-rate, and it's small enough to be more trouble than it's worth to borrow against the SRECs. Treat 'em like ZEVs. I think they might not refinance the Dec 2018 term loan even though it's for a special-purpose VIE, since it looks like it's variable-rate and the interest rates are getting worse; might as well pay it off entirely. (This is known as "cleaning up the balance sheet.") Even paying those off still leaves Tesla with plenty of cash going into Q2 2019.

By the way, I think Musk will meet the operational requirements for his first tranche of free stock as early as next July; the stock would have to be over $560 for him to actually get the tranche, however. The Board has therefore incentivized him to reduce the number of shares outstanding.

Tesla should be added to the S&P 500 after Q1 2019 is reported, i.e. in May. I'd guess S&P funds will be forced to buy about 5% of the float at that time (8 million shares). We know even Andrew Left's low case is $599/share...

Issuing 2.5 million shares of stock at $360 is likely to look financially unsound to someone, like Deepak, looking forward. The dilution could be very expensive financing, and if they don't need it for a specific project, it would make sense to get financing literally any other way. (Not as expensive as Elon's compensation package, but well, Elon might be worth it.)

Most of these analysts cover a lot of stocks and they just can't put in the time needed to really study one stock in depth. Thus, what you see is actually a lot of shallow thinking. And even when Tesla blows their estimates out of the water, there's no real deep examination either.

Yeah, they're mostly lazy dumbasses.