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#102
sleepyhead said:
Now that TSLA is in the 140s, it is slowly becoming a bargain again, but I am still not a buyer. Not that I don't like TSLA but I just don't see enough near-term upside in order to get in. I think there is some possibility that the stock goes back into the $150s quickly, but I don't see it going much higher in the near future. At a minimum I would expect a double bottom and there should be another buying opportunity in the 130s. I can also envision a scenario where the stock goes a lot lower from here, and to be honest that is what I am waiting on before I go into TSLA full force. I still have my December bull call spreads, but the stock needs to go up 20% for me to cash in on them. I will hold them to expiration, but I have already written them off as a loss since I don't see TSLA going that high. Let's take an objective view at what is in play for TSLA:

Post ER Sell-Off - Remember that TSLA went as low as $146 a day post ER and that drop looked like it was only the beginning. Then we got news that a second Model S caught fire by running over some road debris, which caused the stock to go down to $132 but now it is back up to $145. What I am trying to say here is that the relief rally may not last too long. Yesterday evening I was thinking that if Tesla were to go down to $100, there would be a dead cat bounce somewhere along the way. This could be that dead cat bounce.

Second Debris Fire - This is not cause for concern as far as safety goes, but rather a cause for concern that Tesla might have to re-engineer the protective shield. This wouldn't be a problem, but a potential recall may be costly if not only to shareholders; bad news = lower stock price, even if actual costs are smallish. Also it might be more difficult to re-engineer while keeping battery swapping capability.

Elon Musk Blog Response - Unless Elon says that he will pay for a recall out of his own pocket, I cannot come up with a scenario where his blog post will do anything but cause the stock to go down (or at least not up by a big amount). Here is how I see the possibilities unfolding:

- Elon says that the car performed as designed and nothing needs to be changed.
- The car needs a recall and the battery shield will be redesigned for future models.
- The car will not be recalled, but future cars will have different shield design. Unlikely outcome IMO.

In either case, I see the stock going down. The market might interpret the first option as "there is risk EV's will catch fire and there is nothing anyone can do about it,". The latter two options will be perceived as costly.

Sentiment Shift - There is a clear sentiment shift with TSLA that started with the first fire and has been getting worse over the past week. There are still many people who believe that that TSLA is worth $60 like in Damodaran's DCF model. There are also a lot of people, who think like me, that there is no upside to purchasing TSLA shares right now, since you will be able to buy them cheaper next week and at worst at the same price next month. Sentiment is clearly bearish and it will take a lot more than one blog post from Elon to shift the sentiment. It might be a while before sentiment shifts to positive; probably not until we get good 2014 guidance as was the case with SCTY.

Market Perceived Growth Rate - This is the major reason why I am not buying any TSLA yet. We all talk here on TMC like Tesla's 100% revenue growth rate is a foregone conclusion and that it will continue for another 3-5 years. But Tesla has not shown that it is growing at that rate and the market needs to see evidence before multiples start expanding again; once again we need good 2014 guidance which will not happen for another 3 months. Let's take a look at actual growth rates:

Q1 4900 cars sold
Q2 5150 cars sold for a 5% growth rate
Q3 5500 cars sold for a 7% growth rate
Q4 6000 cars sold for a 9% growth rate

All this extrapolates into a 30% growth rate and not 100% as we all believe will happen. I believe that Tesla will grow revenues at 100% for at least the next two years, but there is evidence to the contrary and the market might not believe it.

Supplier Constraints - Investors are getting tired of excuses and there is no reason to buy now, when you can buy once the constraints are resolved. The market gave Tesla the benefit of the doubt in Q2, but now it will wait till they are resolved.

VIN Assignment Chart - I believe that this is the reason that TSLA went all the way up to $194. It looked for a while that Tesla was producing 700 cars per week and growing at a very fast pace. Even Wall St. analysts were using this chart to show how fast Tesla was growing. In reality it is producing 20% less cars, hence the 20% lower stock price.

Potential Upside - I believe that we need Q4 guidance before TSLA makes another big move up. On the other hand it seems like Tesla has had a lot of great news coming in post ER in the past two quarters, so I wouldn't be surprised to see more catalysts coming this week and next. But without any catalysts I don't see a need to buy TSLA right now. When that catalyst comes you will know when to get back in.

Potential Downside - There could be a NHTSA investigation or another fire. Just as there are potential positive surprises, there could be negative ones. The problem with negative sentiment is that it will take two or three positive catalysts to have the same affect on the upside as one negative catalyst will have on the downside.

Valuation - If Tesla were a mature company it would need $10b in annual sales, 20% gross margin, 10% net margin, and $10 EPS to justify its valuation. It would have to sell 100k model S/X per year. So that is still 2016 time frame. A lot of growth is already priced in even at a $145 price. Obviously TSLA deserves a growth premium, but since Tesla is only showing a 30% growth rate (QoQ in FY13), that growth premium is likely to decline until it can prove the 100% growth rate. Once again the buy point is the day of 2014 guidance (if around 40k) or supplier constraints are resolved and Tesla is producing at least 700 cars/week. 550-600 cars will not cut it. Many people still believe it is overvalued today.

TSLA's climb will not follow a channel and move gradually towards $1,000. Just look at AAPL's chart and follow the Apple PDF with the timeline. You will see that there were many periods where AAPL would get stuck in the funk at the disbelief of the Apple Investment forum members. Just look at how it hit $270 in Apr. 2010 and how it was still at $240 four months later, before going up 50% to $360 just six months later. I think that you have to pick your battles with these hyper-growth companies and right now the odds favor the shorts. I will get back in when the odds start favoring the longs again; i.e. 2014 guidance and/or supplier constraints resolved and heading towards 800 cars/week.

I still believe that TSLA will double by the end of next year, but I am starting to recognize that we on TMC are willing to give TSLA a much higher multiple since we are true believers. The market doesn't get emotional and it may take a little longer for it to realize TSLA's potential and our price targets may end up being a little too optimistic too soon. I remember reading in the AAPL PDF that the board had price targets that always took a little longer than expected to materialize. Because of this a lot of people ended up buying the wrong OTM options and some lost a lot of money because of this. I was thinking $400 at end of 2014 is doable, but now I am thinking that we are 6 months ahead of the market on TSLA, and unfortunately it will take time for valuation to catch up. At the same time this allows us to buy TSLA while it is still cheap. On the flip side you have to be cognizant that you might be buying in too early and sometimes have to be patient to be able to buy in at a lot lower rate. This is especially true if you are playing options. They might seem cheap today, but I might be buying them a lot cheaper next month if TSLA consolidates from here.

General Market - Even though TSLA is a low-beta stock, there is a real risk that it goes down even further with a potential market pullback that can begin any day now. TSLA is low beta because it defied market gravity when sentiment was positive. It will not have this magic when the sentiment is bearish.

Final Word - As much as I would love to see Tesla make a swift recovery to $170 for my BCS's to finish ITM, I really don't see it happening that soon. I feel that TSLA is heading towards a period of consolidation that may last two to three months. I don't see the upside in buying TSLA right now, so I will be sitting on the sidelines for a while longer. I still feel that solar presents a much better risk/reward profile, especially right now, and I have the vast majority of my funds invested in solar right now.

Solar Bonus - If I had to guess what happens over the next two days, I would say that YGE and HSOL load up the bases tomorrow and then CSIQ hits a grand slam on Wednesday. This is a "just for fun" prediction and the markets can be very fickle and finicky, so nothing will surprise me with solar. Q4 is going to be extremely good for Chinese solar, extremely good! And even if Q3 is only good, I am expecting big guidance and comments from CEO's about the huge solar demand. It truly is an exciting time to be investing in solar and it is only getting better every day. It is actually getting exponentially better on the news front.

Sooner or later the market catches on and it is better to be in sooner than later. I kept buying JASO on weakness over the last few weeks and now it went up crazy on what seemed like a minor piece of news. When a stock is undervalued it will go up crazy on the smallest news. Now imagine if a big piece of news comes out on a company like JASO or SOL. These companies are priced extremely cheaply and it is easy for them to go up. Unfortunately, a lLack of news makes them go down, like is the case for SOL over the past two months. I have been buying a lot of SOL lately on weakness as well. I feel like it will eventually have its day, and it tends to happen a lot sooner than you expect (which is where I might go wrong with TSLA, by waiting too long to get in).

The recent typhoon in the Philippines was the strongest storm on record in the whole world. The cause for it coulb be global warming that could have lead to rising sea temperatures, which in turn leads to stronger hurricanes, a.k.a. typhoons, a.k.a. cyclones. This is a really sad story with tens of thousands losing their lives in this storm alone. This week also happens to be the week of U.N. Climate talks in Warsaw. And the Philippines are pleading for a rapid adoption of renewable energy. This could lead to striking a big deal by 2015, the new deadline established when the previous 2009 deadline was not met for a global climate deal. It is a good time to be investing in renewables and electric vehicles. Solar is going to be a big winner over the next few decades, and the market doesn't even see it coming. Great time to be an investor.

Tearful plea from Philippines delegate as typhoon overshadows opening of UN climate talks - The Washington Post
Click to expand...


Looks like we had our dead cat bounce yesterday.

Now the question is will this be a double bottom or will the stock continue to go down? I am still not a buyer, but might start nibbling at TSLA if it hits the $120s.
 
#105
sleepyhead said:
I just wrote about them, because they are the first two Chinese solar companies to report earnings for Q3. Now that the losers are out of the way, the real fun will begin with CSIQ tomorrow.
Click to expand...

With all the pre-announcements and Turkey, Ontario and China deals, why not a whisper about the 200 + 300MW deal in Pakistan for 2014 & 2015....will they fold that into earnings, or is it not material? They seem curiously quiet about what looks on the outside like a major deal.
 
#106
Bgarret said:
With all the pre-announcements and Turkey, Ontario and China deals, why not a whisper about the 200 + 300MW deal in Pakistan for 2014 & 2015....will they fold that into earnings, or is it not material? They seem curiously quiet about what looks on the outside like a major deal.
Click to expand...

It is definitely material and a big deal. My guess is that they are saving the announcement for ER day FSRL-style, but I don't know for sure. Maybe there is some paperwork that is preventing them from disclosing it officially. It is hard to tell, but my guess always was that they will save this big announcement for ER day for a double whammy of positive news.

If they don't announce it then I hope an analyst brings it up on the conference call. So I guess they kind of have to disclose it.
 
#107
sleepyhead said:
...since Tesla is only showing a 30% growth rate (QoQ in FY13)
Click to expand...

No-one expected a 100% growth rate each quarter. Except you, apparently. We all were targeting close to a 100% YoY growth rate. 22K cars in 2013, 35K-40K cars next year, and then Model X adds to that for 2015.

In Q3, Tesla sold 5500 cars. They made close to 6500 - the difference are in the shipping pipeline. Now that the pipe's mostly filled, production should map pretty closely to deliveries, unless they add new countries that also need a new pipeline.

It's real hard to predict where Tesla will go in the short-term. As we start seeing Model X Alpha prototypes, ride events, test drives, etc., the stock could easily take off. Heck, the promising service announcement could give a boost. And yes, there is risk on the downside as well.
 
#108
smorgasbord said:
No-one expected a 100% growth rate each quarter. Except you, apparently. We all were targeting close to a 100% YoY growth rate. 22K cars in 2013, 35K-40K cars next year, and then Model X adds to that for 2015.

In Q3, Tesla sold 5500 cars. They made close to 6500 - the difference are in the shipping pipeline. Now that the pipe's mostly filled, production should map pretty closely to deliveries, unless they add new countries that also need a new pipeline.

It's real hard to predict where Tesla will go in the short-term. As we start seeing Model X Alpha prototypes, ride events, test drives, etc., the stock could easily take off. Heck, the promising service announcement could give a boost. And yes, there is risk on the downside as well.
Click to expand...

While I agree that there is a pipeline, the current QoQ growth rates is what Sleepy was using to come to the 30% YoY growth rate region. Yes we expect 100% growth from 2013 to 2014, but the past three quarters haven't shown that this is the course right now. We know that it comes from supplier constraints right now, but Tesla has to demonstrate that they resolve those and the QoQ numbers go up enough to demonstrate YoY of 100%. Once they do (probably Q1 2014 production numbers show enough of an increase of Q4 that we can estimate full year to be 100% YoY and if the guidance already at Q4 agrees with that, then the stock price will correct back to the proper growth path.
 
#112
Mario Kadastik said:
While I agree that there is a pipeline, the current QoQ growth rates is what Sleepy was using to come to the 30% YoY growth rate region. Yes we expect 100% growth from 2013 to 2014, but the past three quarters haven't shown that this is the course right now. We know that it comes from supplier constraints right now, but Tesla has to demonstrate that they resolve those and the QoQ numbers go up enough to demonstrate YoY of 100%. Once they do (probably Q1 2014 production numbers show enough of an increase of Q4 that we can estimate full year to be 100% YoY and if the guidance already at Q4 agrees with that, then the stock price will correct back to the proper growth path.
Click to expand...

Yes, this is what I meant. I still believe that there will be 100% delivery growth rate in 2014, but Tesla is showing a 30% growth rate when you extrapolate the deliveries growth from Q1 to Q4E 2013.

fjm9898 said:
CSIQ report before open, so you missed the boat.

Fly on the wall has CSIQ consensus at 0.36 as well sleepy, just a FYI.
Click to expand...

Thanks, that is what yahoo and marketwatch shows. That 0.60 number from Rothschild is just one estimate, and that is what raised consensus to 0.36. I haven't run the numbers in a spreadsheet but a quick calculation shows that CSIQ should beat the high end estimate of $0.60.
 
#113
sleepyhead said:
Yes, this is what I meant. I still believe that there will be 100% delivery growth rate in 2014, but Tesla is showing a 30% growth rate when you extrapolate the deliveries growth from Q1 to Q4E 2013.
Click to expand...

I still think you need to factor in the cars Tesla built in Q3, but hasn't delivered due to stocking the Euro pipeline, into the equations:

Q1 4900 cars
Q2 5150 cars for a 5% growth rate
Q3 6200 cars for a 20% growth rate
The question is what Q4 will come in at. At the stated 550cars/week, that would be 7150 cars for Q4, or a 15% growth rate. And that's if they are steady state throughout Q4.
 
#116
smorgasbord said:
I still think you need to factor in the cars Tesla built in Q3, but hasn't delivered due to stocking the Euro pipeline, into the equations:

Q1 4900 cars
Q2 5150 cars for a 5% growth rate
Q3 6200 cars for a 20% growth rate
The question is what Q4 will come in at. At the stated 550cars/week, that would be 7150 cars for Q4, or a 15% growth rate. And that's if they are steady state throughout Q4.
Click to expand...

I understand what you are saying, but that is not how the market works. The market only looks 3 months out and all they see is deliveries. Producion is increasing faster, but so are cars in transit: next quarter it will be cars in transit to Japan and UK (just making this up, but there will be new countries) on top off Europe, and the quarter after that it will be Chinese cars in transit in addition to everything else. So even if production grows at a faster pace, so will cars in transit. Remember that the market has a short term view.


Side note: After taking some profits on CSIQ (still holding a ton of CSIQ, because it is only getting started), I started dabbling at TSLA once again today in the $139's. Bought a few June calls, J15s, J16s, and stock. I don't think the worst is over, but there is a chance that we had our double bottom yesterday (although it did not hit $133 like I think it should) and don't want to miss out. I bought longer term calls, because I actually hope that TSLA goes down lower so that I can buy more next month. If it doesn't go down then I will make money on what I bought. It is a win-win situation and that is how I invest: put myself in win-win situations.
 
#117
smorgasbord said:
No-one expected a 100% growth rate each quarter. Except you, apparently. We all were targeting close to a 100% YoY growth rate. 22K cars in 2013, 35K-40K cars next year, and then Model X adds to that for 2015.

In Q3, Tesla sold 5500 cars. They made close to 6500 - the difference are in the shipping pipeline. Now that the pipe's mostly filled, production should map pretty closely to deliveries, unless they add new countries that also need a new pipeline.

It's real hard to predict where Tesla will go in the short-term. As we start seeing Model X Alpha prototypes, ride events, test drives, etc., the stock could easily take off. Heck, the promising service announcement could give a boost. And yes, there is risk on the downside as well.
Click to expand...

Hi SB. Question for ya... Where are you getting q3 "produced" cars as 6500?! I don't think TM has disclosed how many were produced in Q3. If they really produced around 6500 they should've disclosed it during Q3 ER/call. IMO, this would've resulted in a smaller price hit once the street realized they had great Production increase qtr to qtr but "cars in transit" to EU resulted in only 5500 deliveries. My view is that TM produced less than 6500 in Q3, or they would've used this "transit" explanation

comments welcomed
 
#118
FredTMC said:
Hi SB. Question for ya... Where are you getting q3 "produced" cars as 6500?! I don't think TM has disclosed how many were produced in Q3. If they really produced around 6500 they should've disclosed it during Q3 ER/call. IMO, this would've resulted in a smaller price hit once the street realized they had great Production increase qtr to qtr but "cars in transit" to EU resulted in only 5500 deliveries. My view is that TM produced less than 6500 in Q3, or they would've used this "transit" explanation

comments welcomed
Click to expand...

Its very possible that they only produced ~5,800 cars and that they stopped shipping cars in September to maximize deliveries in Q3; that could be why Norwegian deliveries are so low in October. There is no proof that production is growing a lot faster than deliveries. They can easily play that game if they wanted to to maximize deliveries each quarter. Not saying that they are, but we just don't know.
 
#119
sleepyhead said:
Its very possible that they only produced ~5,800 cars and that they stopped shipping cars in September to maximize deliveries in Q3; that could be why Norwegian deliveries are so low in October. There is no proof that production is growing a lot faster than deliveries. They can easily play that game if they wanted to to maximize deliveries each quarter. Not saying that they are, but we just don't know.
Click to expand...

yep. I agree. My guess is TM tries to minimize the cars in transit at QTR end. I agree that deliveries (sales) is the main component the street cares about for this "growth" stock. GM is secondary. 2014 guidance would've helped support the stock price too but as we know TM decided not to issue 2014 guidance until next year. Ouch
 
#120
FredTMC said:
yep. I agree. My guess is TM tries to minimize the cars in transit at QTR end. I agree that deliveries (sales) is the main component the street cares about for this "growth" stock. GM is secondary. 2014 guidance would've helped support the stock price too but as we know TM decided not to issue 2014 guidance until next year. Ouch
Click to expand...

And this would make sense if you knew that production will grow by a very big percentage as soon as supplier constraints are resolved. Since TM expects these constraints to be resolved in about three months, and the stock was so priced so high, it only makes sense to play these games. That is probably what Elon meant when he said that the high stock price affects the way they do business (or whatever his exact words were).
 
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