General Discussion: 2018 Investor Roundtable

[Tenable]

Yes, which is exactly why no sell-side analyst is predicting this anytime in 2018 (and 2019 I think).

I'm as unhappy as anyone with Tesla's recent misses (given my significant options losses) but if Tesla doesn't hit 10k by the end of 2019 I'll eat a sock.. and then charge at Elon w/ a boring flamethrower.

Edit: Should read "not a flamethrower"

Edit 2: Changed to "by the end of 2019" to more accurately reflect my thoughts.

 

[TheDoktor]

I'd bet against it as well. Lol, did you create an account just to troll VA?

No, I’ve been reading here for a while so I thought I’d sign up.

It’s good to see VA here, not on the offensive against the mocking beats over at SA. This is bull territory, so bear sentiment doesn’t get much time here, but I appreciate the more sober bull discussions - helps with perspective. On SA bulls tend to dig in their heels and can’t express any doubt

 

[Tenable]

No, I’ve been reading here for a while so I thought I’d sign up.

It’s good to see VA here, not on the offensive against the mocking beats over at SA. This is bull territory, so bear sentiment doesn’t get much time here, but I appreciate the more sober bull discussions - helps with perspective. On SA bulls tend to dig in their heels and can’t express any doubt

Welcome

 

[TheDoktor]

Welcome

Thanks

 

[Reciprocity]

Based on all the misses, I think expectations need to be tempered.

5K/wk - end of Q2, most likely means 5K/wk full rates - earliest starting of Q4, or end of Q4
10k/wk - before we see this we will likely see some for of cap raise, GF announcement, MY pre-orders ...and so forth ... so too early for me to even think about

I still have many questions as to what is required to go from 5k to 10k/w. I recall some quotes of little or no capex required to 50% of the original capex to double production. I took this to mean some parts of the line would need duplication and other parts could just be sped up. We know that they will need more German battery pack lines or do they? I'm lost on that as well. The new equipment is supposed to be 4 x faster and smaller. That accounts for 2 of 4 zones? Either way, the risks should diminish as they ramp to 5k and the next step is mostly a matter of duplication as increased speeds can be tested well before. To me it seems getting to 5k is the biggest problem, the rest is just time and money to duplicate systems that will be known to work. They also do not pay for this equipment until it's installed and running and since it's a duplicate, the programming should port right over. Obviously this is an over simplification of the complexity that lies ahead, but the risks should be much less then what it was going from 2k-5k/w. Two full lines gives you some redundancy, but not much given the demand. Still I wonder if down time can be managed in a way that one line is always running and when parts of both lines are always running with only parts of one line taken down for maintenance. One section of one line at a time, but find a way to take advantage of the parts of the line that are still running. This may be way too complicated to make it worth the while vs just having a complete shut down, especially given that the 10k/w line might share parts of the same line with other parts duplicated for slower processes.

 

[Lessmog]

I'm as unhappy as anyone with Tesla's recent misses (given my significant options losses) but if Tesla doesn't hit 10k in 2019 I'll eat a sock.. and then charge at Elon w/ a boring flamethrower.

Edit: Should read "not a flamethrower"

Certainly not a Boring flamethrower!

 

[RobStark]

Technically I think so. Tesla shipped cars (Roadsters) in 2008, 2009, 2010, but hardly any in 2011 or 2012.

Tesla shipped about 600 roadsters in 2011. Tesla refused to give plain numbers just saying 2100 total through 2011 and 150 in Q4 2011. Starting in 2012 they gave hard annual numbers for global sales starting with 2900 total. But the evidence does suggest ever increasing numbers from 2008-2017.

Tesla Motors, Inc. Fourth Quarter and Full Year 2011 Shareholder Letter

 

[ValueAnalyst]

I still have many questions as to what is required to go from 5k to 10k/w. I recall some quotes of little or no capex required to 50% of the original capex to double production. I took this to mean some parts of the line would need duplication and other parts could just be sped up. We know that they will need more German battery pack lines or do they? I'm lost on that as well. The new equipment is supposed to be 4 x faster and smaller. That accounts for 2 of 4 zones? Either way, the risks should diminish as they ramp to 5k and the next step is mostly a matter of duplication as increased speeds can be tested well before. To me it seems getting to 5k is the biggest problem, the rest is just time and money to duplicate systems that will be known to work. They also do not pay for this equipment until it's installed and running and since it's a duplicate, the programming should port right over. Obviously this is an over simplification of the complexity that lies ahead, but the risks should be much less then what it was going from 2k-5k/w. Two full lines gives you some redundancy, but not much given the demand. Still I wonder if down time can be managed in a way that one line is always running and when parts of both lines are always running with only parts of one line taken down for maintenance. One section of one line at a time, but find a way to take advantage of the parts of the line that are still running. This may be way too complicated to make it worth the while vs just having a complete shut down, especially given that the 10k/w line might share parts of the same line with other parts duplicated for slower processes.

I don't think anyone knows the answer to your question. For example, we didn't know about the very sophisticated automated parts conveyance system bottleneck until last week, even though 5k/w was originally planned for exit-17, so who knows what will pop up on the way to 10k/w. The last I heard about 10k/w was when we were told people should have absolutely zero doubt that it would happen in 2018.

 

[elasalle]

I still have many questions as to what is required to go from 5k to 10k/w. I recall some quotes of little or no capex required to 50% of the original capex to double production. I took this to mean some parts of the line would need duplication and other parts could just be sped up. We know that they will need more German battery pack lines or do they? I'm lost on that as well. The new equipment is supposed to be 4 x faster and smaller. That accounts for 2 of 4 zones? Either way, the risks should diminish as they ramp to 5k and the next step is mostly a matter of duplication as increased speeds can be tested well before. To me it seems getting to 5k is the biggest problem, the rest is just time and money to duplicate systems that will be known to work. They also do not pay for this equipment until it's installed and running and since it's a duplicate, the programming should port right over. Obviously this is an over simplification of the complexity that lies ahead, but the risks should be much less then what it was going from 2k-5k/w. Two full lines gives you some redundancy, but not much given the demand. Still I wonder if down time can be managed in a way that one line is always running and when parts of both lines are always running with only parts of one line taken down for maintenance. One section of one line at a time, but find a way to take advantage of the parts of the line that are still running. This may be way too complicated to make it worth the while vs just having a complete shut down, especially given that the 10k/w line might share parts of the same line with other parts duplicated for slower processes.

To go from 5K to 10 K they need to decide whether:

1. double capacity
OR
2. improve existing (kinda improve the m/c that builds the m/c)

Option 1 might be costly, but yield quicker results. Option 2 might be more optimal, but it could screw existing timelines.

I think Fremont will run out of space for Option1. But if working capital is not an issue, I think best to go with 1. What we learnt from M3 production should be applied to MY, and M3 factory design should be baselined and capacity just doubled. All improvements should then be just applied to MY, Semi, Roadster and later S?X lines.

They need to keep going, with just minor improvements for 5K to 10K to happen ASAP.

This might be over simplification ..

 

[bdy0627]

5k/wk Q3 sometime.
10k/wk first half 2019

I think those are very reasonable at this point, especially the 5k/wk. I will be surprised if a steady rate of 5k/wk is reached before Q3 but also surprised if it is not reached before Q4. I think predicting 10k/wk is really wild guessing based upon the information we have right now. I would be surprised if they hit a steady rate of 10k/wk before Q2 2019. For the stock, I think 5k/wk is enough to strongly support a rise. As usual, I think the market will anticipate it several months before.

 

[DragonWatch]

I will always go back to the fundamentals, when I have not forgotten what it was that I was originally thinking about. You may have read this, but it is striking to the point of; is this really from an author on SA. Tesla Analysts See Soaring Sales Amid Investor Skepticism

Up until I retired from active duty in February 1994, my wife and I routinely donated blood. However, once back in the states we were no longer allowed to do so. Why? Guilt by association:-( England had had a large outbreak of Mad Cow disease and we had traveled in and around England during that period and therefore unable to donate our blood. If any of you are considering a military career, I say become a British officer! During one of my last joint war games, the Brits hosted it, and while I had the graveyard shift, we ate in a British mess hall. OMG I was escorted to a table with a white table cloth, silverware and china plates, and called Sir so many times I had to check my name tag to ensure my last name was spelled correctly. They even had a menu! Granted my last name begins with an “S” and my namesake in England hosts one of the tallest cathedrals in Europe, but I doubt that was . . . Oh, in the US field mess I typically would wait until my folks were fed, then have some spaghetti scooped onto a slice of bread, I’d slap another slice on top and call it good ~ swallowed down with my second pot of coffee for the day. I think it was wonder bread

Okay, to the point. My road trip last September to visit where Xena came from was almost as exciting as my first visit to the “wall” in Nuremberg, Germany, back in 1971; in both cases it was just to look If you do not recall, that afternoon following our tour, Xena was violated when her back windshield became the scene of a “smash and grab.” And as a result there was a long delay in posting my experience/tour.

Bringing you back around; since that time we all discovered that those thousands of parts and robots waving to us on the tram, was not because the humans had stopped for lunch. I do have a picture, taken by my wife, of me using the owners key card attempting to unlock a M3. I am now thirty pounds thinner, and the belly is missing but, with few exceptions, some folks have been exhibiting symptoms of Mad Cow disease. I love a good steak, but come on folks, the Tesla fundamentals are still very strong and if I stuck my head outside the computer, I would probably know that much better.

Please do not tell me, the owner/employee with a baby car seat of his M3 was a plant for gullible Tesla owners supercharging their Ss and Xs after hours at the Fremont plant. PLEASE

 

[SteveG3]

I have July 2018 and April 2019.

I think the 5K time is optimistic (just 1 month off ideal... possible, but I don’t advise counting on it) and the 10K time is quite optimistic. There may be as much as 6 months where Tesla restricts capex on the ramp from 5K to 10K. Fortunately, they may get to 7K to 8K during that time period maxing out existing equipment. This was alluded to on the Q3 call (comment about 6, 9, or 12 months... not clear which time period the most attractive balance of speed vs cost will be for the ramp to 10K. Think they said 6,9,12, but perhaps was 3,6,9).

One of the most overlooked points in my view of last week’s call is consistent with, and probably requires, such a slower move from 5K to 10K - by as early as Q3 this year possibly, sustained (and without being able to go to the transcript at the moment I might not name the correct metrics) positive cash flow and/or net income.

While I do think it’s unhelpful to take every goal as permanent and every timeline as a done deal, I still think this new goal has gone under the radar. Sounds to me like a shift in Tesla’s strategy designed to emphatically counter the “can’t make money on EVs” narrative, one of the key bear mantras for years. This new goal could have a big impact on valuation if retained as a goal and executed within the next year or so. fwiw, I suspect the slower schedule for the 5K to 10K ramp also represents that there has been learning from the Model 3 ramp- pushing things on speed is desirable, but, not to break-the-rampup speed.

 

[ValueAnalyst]

I think the 5K time is optimistic (just 1 month off ideal... possible, but I don’t advise counting on it) and the 10K time is quite optimistic. There may be as much as 6 months where Tesla restricts capex on the ramp from 5K to 10K. Fortunately, they may get to 7K to 8K during that time period maxing out existing equipment. This was alluded to on the Q3 call (comment about 6, 9, or 12 months... not clear which time period the most attractive balance of speed vs cost will be for the ramp to 10K. Think they said 6,9,12, but perhaps was 3,6,9).

One of the most overlooked points in my view of last week’s call is consistent with, and probably requires, such a slower move from 5K to 10K - by as early as Q3 this year possibly, sustained (and without being able to go to the transcript at the moment I might not name the correct metrics) positive cash flow and/or net income.

While I do think it’s unhelpful to take every goal as permanent and every timeline as a done deal, I still think this new goal has gone under the radar. Sounds to me like a shift in Tesla’s strategy designed to emphatically counter the “can’t make money on EVs” narrative, one of the key bear mantras for years. This new goal could have a big impact on valuation if retained as a goal and executed within the next year or so. fwiw, I suspect the slower schedule for the 5K to 10K ramp also represents that there has been learning from the Model 3 ramp- pushing things on speed is desirable, but, not to break-the-rampup speed.

The metric named in the Update Letter is "positive operating income" and Elon on the call said possibly GAAP. This is key to understand, because going from 5k/w to 10k/w sooner rather than later would increase the possibility of quarterly income turning positive in 2018, but reduce the possibility of positive free cash flow, which the management confirmed will not happen in 2018 in response to AJ's question.

 

[ggr]

Tesla shipped about 600 roadsters in 2011. Tesla refused to give plain numbers just saying 2100 total through 2011 and 150 in Q4 2011. Starting in 2012 they gave hard annual numbers for global sales starting with 2900 total. But the evidence does suggest ever increasing numbers from 2008-2017.

Tesla Motors, Inc. Fourth Quarter and Full Year 2011 Shareholder Letter

Some people here hate to be refuted by mere facts! ;-)

 

[SteveG3]

The metric named in the Update Letter is "positive operating income" and Elon on the call said possibly GAAP. This is key to understand, because going from 5k/w to 10k/w sooner rather than later would increase the possibility of quarterly income turning positive in 2018, but reduce the possibility of positive free cash flow, which the management confirmed will not happen in 2018 in response to AJ's question.

In the call the term “consistently” was used. I took that to mean, once we hit this metric, we will not reverse. Going slower with the ramp in my view makes a quarter or two of a reversal to negative operating income considerably less likely (going slower may well be required). While on one level this seems irrational to focus on not having a quarter or two reversal, it appears to be a response to an irrational component of Wall Street and a flood of irrational media criticism (“selling EVs can’t make money”) that will help Tesla’s mission.

 

[anon]

I think the 5K time is optimistic (just 1 month off ideal... possible, but I don’t advise counting on it) and the 10K time is quite optimistic. There may be as much as 6 months where Tesla restricts capex on the ramp from 5K to 10K. Fortunately, they may get to 7K to 8K during that time period maxing out existing equipment. This was alluded to on the Q3 call (comment about 6, 9, or 12 months... not clear which time period the most attractive balance of speed vs cost will be for the ramp to 10K. Think they said 6,9,12, but perhaps was 3,6,9).

This is a good point and I don't think there has been enough discussion of this here. Even in the last conference call, Deepak talked about "10,000 plus" for next year, rather than just 10,000. So I don't expect to see a target of 10,000. Instead, I expect to see either:
- A ramp to ~7k on the current line, then adding the second line later, so total production of ~14k/week by mid-2019.
- Keeping to 5k or a little more on the current line, then incorporating improvements into the second line so that it can reach 7k or more, to give total production of ~12k/week by mid-2019.

 

[Gerardf]

Montana totally lost it today when someone posted a link to his tiprank.
He posted :

Please show me where, before yesterday, I ever encouraged anyone to short Tesla? (And even yesterday comes with lots of caveats, and my own suggestion that it will take more time to play out.
So, I classify you as congenitally dishonest. Really, a disgrace to the race.

( that was not aimed at me, but to an SA user 10583191).
Someone else made a comment that Montana might work at Heartland fund, no reply, all got quickly deleted.
Montana’s bio does mention he works at a family fund / family office.

 

[ValueAnalyst]

You don’t understand the severity of the situation. Not only has Tesla lost out on several billions of dollars of Model 3 revenue (remember the “100,000 to 200,000 units in 2H17?”), but the two-quarter delay also pushes back ALL of Tesla’s upcoming products: Semi, Y, Solar Roof, Powerwall, Powerpack, new Gigafactories, and other. Did you catch the part about Solar Roof in the letter? Musk’s preoccupation with SpaceX in the last six months will have cost TSLA shareholders tens of billions of dollars in lost opportunity, as potential customers buy other cars, crossovers, trucks, non-solar roofs etc., while hundreds of thousands of Model 3 reservations holders will lose out on the $7,500 federal tax credit.

Any other CEO would have been fired over this, but we are about to award him with a handsome comp plan...

I had always wanted to get to one of these "Most" lists. Please help me achieve my goals; your help is greatly appreciated.

 

[JRP3]

Happy to oblige.

 

[Reciprocity]

Montana totally lost it today when someone posted a link to his tiprank.
He posted :

Please show me where, before yesterday, I ever encouraged anyone to short Tesla? (And even yesterday comes with lots of caveats, and my own suggestion that it will take more time to play out.
So, I classify you as congenitally dishonest. Really, a disgrace to the race.

( that was not aimed at me, but to an SA user 10583191).
Someone else made a comment that Montana might work at Heartland fund, no reply, all got quickly deleted.
Montana’s bio does mention he works at a family fund / family office.

Maybe MS never said explicitly to short Tesla, but this is at the end of every hate filled article:

Disclosure:

I am/we are short TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am short TSLA via long-dated options

If you needed anymore evidence, this is his Twitter profile in its entirety (and my cat has more twitter followers then this guy):

Montana Skeptic

@MontanaSkeptic1

I write about the firm at which finance intersects religion: Tesla, Inc.seekingalpha.com/author/montana…

New York NY & Bozeman MT · seekingalpha.com/author/montana…

Strictly from the twitter perspective, this is what the guys does with all his time:

"I write about the firm at which finance intersects religion: Tesla, Inc"

Now maybe the real Montana has many different twitter profiles, one for each of his/her interests, but this appears to be his day job.

This is his/her seeking alpha profile:

Montana Skeptic
Bonds, long-term horizon, portfolio strategy, contrarian
Member Since 2015
I manage a $1B+ portfolio for a family office. Our investments include bonds, equities, hedge funds, and private investments with a wide geographical and asset class dispersion. I have a J.D. degree from Yale Law School and practiced for 30 years as a trial lawyer in commercial cases.

The fellow in my icon is Galileo Galilei, who famously said: Eppur si muove.

I say, less famously: Time is the only reliable solvent of idiocy.

You can email me at [email protected] & follow me on Twitter where I am @MontanaSkeptic1

I can tell you that there isnt a billion dollars in Montana. Its a beautiful place but that is because no one lives there. Given the visceral hate in MS's articles, its probably clear why he wants to remain anonymous. I cant imagine his clients would want to read his work and I wonder how much of their money he has lost.