General Discussion: 2018 Investor Roundtable

[SPadival]

Holy batman!! I reserved when I was in the mid west (Dayton OH) on reveal night (at ~ 110k reservations). Seems they did not realise I have moved back to Australia. Tempted to start designing though .. LOL.

To keep this on topic.. will the FUDsters use this as anecdotal evidence that there have been lots of cancellations?

 

[mongo]

Tesla is in bad shape today because they bit off more then they could chew.

Nah, they haven't required a Heimlich or spit the bite out yet, so I'd say the jury is still out on if they can chew it. Of course, I'm getting antsy because it's not polite to speak with your mouth full... (see also Pythons and what they can eat without chewing at all...)

Spring rope corollary:
As long as your noggin doesn't hit the ground, the bungee cord was short enough...

 

[ValueAnalyst]

Opinion: UAW part of anti-Tesla campaign

If already posted, worth posting again.

 

[MattEnth]

Thanks for your question. As I also said many times, Q1 financials will not matter. In addition, management will likely not reveal Model 3 margin.

I see your repeated efforts to scare Tesla investors here, but it is especially interesting that you chose to ask your question here, instead of on SA. That shows intent.

So there is no point at which the Q1 report will sway your opinion? The gross margin of the first 10,000 Model 3s is an irrelevant metric to you?

My intent is to understand the logic here. I struggle to see a world in which Tesla is making 1B+ FCF in the back-half of 2018. You clearly can see that world. The truth is probably somewhere in the middle.

But I want to understand what evidence or validation you're looking for in this Q1 report, before it happens. What data points would scare the bulls? CapEx? Cash minus deposits? Warranty write-ups? Etc.

Even your answer seems to imply that nothing in the Q1 report would change your resolve, which seems like a foolish position to be spreading.

On the short side, I'd say anything above -4% Model 3 gross margin, or anything that shows increasing Model S/X demand, or anything less than 600M net losses - those stats would frighten me.

 

[ValueAnalyst]

So there is no point at which the Q1 report will sway your opinion? The gross margin of the first 10,000 Model 3s is an irrelevant metric to you?

My intent is to understand the logic here. I struggle to see a world in which Tesla is making 1B+ FCF in the back-half of 2018. You clearly can see that world. The truth is probably somewhere in the middle.

But I want to understand what evidence or validation you're looking for in this Q1 report, before it happens. What data points would scare the bulls? CapEx? Cash minus deposits? Warranty write-ups? Etc.

Even your answer seems to imply that nothing in the Q1 report would change your resolve, which seems like a foolish position to be spreading.

On the short side, I'd say anything above -4% Model 3 gross margin, or anything that shows increasing Model S/X demand, or anything less than 600M net losses - those stats would frighten me.

Maybe I'm not making my point clear; my apologies if so.

1Q18 financials will have too much noise to allow for sound conclusions. Model S/X deliveries are low, even though production was high. Tesla Energy will be lumpy due to South Australia project, which was sourced from Samsung. Model 3 will have a low number of deliveries, even though production surged towards the end of the quarter. None of these are representative of the future.

2Q18, however, will give us some clues that can be applied to the future. I am looking for an improvement in the bottom-line from 1Q18 to 2Q18, since Model 3 production will be "3x to 4x" of 1Q18, and Model 3 production will likely be the primary factor that comprises bulk of the QoQ change in financials.

 

[Todd Burch]

So there is no point at which the Q1 report will sway your opinion? The gross margin of the first 10,000 Model 3s is an irrelevant metric to you?

Yes. Elon laid this out for simpletons to understand a few quarters ago in the quarterly conference call using a company that makes bars of soap as an example. It's high school level economics, though most middle schoolers would probably understand. Not going to spell it out or provide the link for you. I suggest an entry-level economics course.

If you don't understand that gross margins at the start of a ramp are irrelevant, you shouldn't be burning your money in the market.

 

[ValueAnalyst]

DurandalAl has created a really good FUD fighting site. Early days but it shows fantastic potential. Everyone should check it out and let’s all help with this.
DurandAl said-:
“I have created TeslaFUD.com in order to act as a snopes type clearinghouse of FUD and to dispute it.”

Thank you for bring this to my attention. Tweeted it out: ValueAnalyst on Twitter

 

[Oil4AsphaultOnly]

Yes. Elon laid this out for simpletons to understand a few quarters ago in the quarterly conference call using a company that makes bars of soap as an example. It's high school level economics, though most middle schoolers would probably understand. Not going to spell it out or provide the link for you. I suggest an entry-level economics course.

If you don't understand that gross margins at the start of a ramp are irrelevant, you shouldn't be burning your money in the market.

I think MattEnth means well, and therefore I disagreed with your response to him. You're absolutely correct that gross margins at the beginning of the ramp is irrelevant, but it wouldn't have hurt to list out a few reasons why:
- fix costs (huge negative effect on margins)
- unknown marginal costs (potentially positive effect on margins, but is still unknown)

With noise like that, we need at least one more quarter of additional data to even begin to guess on their contributions to the overall gross margin.

 

[Krugerrand]

Even your answer seems to imply that nothing in the Q1 report would change your resolve, which seems like a foolish position to be spreading.

It’s as if you’ve walked into a bar somewhere in Texas and are trying to school the locals on the finer details of Jack and strippers.

Most of us have dropped our cowboy hat laden heads over our whiskey glasses and are quietly chuckling to ourselves.

A couple of the more friendly and talkative sorts are trying to edumacate you because...well, it really doesn’t matter why.

You best get outta Dodge before Tarentino and Clooney show up. Just sayin’

 

[Waiting4M3]

So there is no point at which the Q1 report will sway your opinion? The gross margin of the first 10,000 Model 3s is an irrelevant metric to you?

My intent is to understand the logic here. I struggle to see a world in which Tesla is making 1B+ FCF in the back-half of 2018. You clearly can see that world. The truth is probably somewhere in the middle.

But I want to understand what evidence or validation you're looking for in this Q1 report, before it happens. What data points would scare the bulls? CapEx? Cash minus deposits? Warranty write-ups? Etc.

Even your answer seems to imply that nothing in the Q1 report would change your resolve, which seems like a foolish position to be spreading.

On the short side, I'd say anything above -4% Model 3 gross margin, or anything that shows increasing Model S/X demand, or anything less than 600M net losses - those stats would frighten me.

To me the main risks that can come out of Q1ER are:

• not hitting 5k/wk around end of Q2
• after reaching 5k/wk, not having enough margin to produce positive cash flow and earnings

Based on Elon's letter last week, mere 3 weeks before Q1ER, the risk of these two are very low. Given the shutdown ending as scheduled, and additional 5k VIN registered on Sunday night, the risk of #1 just got even lower. Risk #2 still requires execution in Q2/3, and people are discounting Elon's tweets and leaked letters as PR stunts, which is fine. I will wait to hear from Deepak in Q1ER. I wouldn't be shocked with -25% M3 margin in Q1, but it will improve dramatically in Q2, I'm expecting 10-15%.

 

[elasalle]

Waiting for next round of VIN assignments - within next 1-2 days?

 

[dc_h]

So there is no point at which the Q1 report will sway your opinion? The gross margin of the first 10,000 Model 3s is an irrelevant metric to you?

My intent is to understand the logic here. I struggle to see a world in which Tesla is making 1B+ FCF in the back-half of 2018. You clearly can see that world. The truth is probably somewhere in the middle.

But I want to understand what evidence or validation you're looking for in this Q1 report, before it happens. What data points would scare the bulls? CapEx? Cash minus deposits? Warranty write-ups? Etc.

Even your answer seems to imply that nothing in the Q1 report would change your resolve, which seems like a foolish position to be spreading.

On the short side, I'd say anything above -4% Model 3 gross margin, or anything that shows increasing Model S/X demand, or anything less than 600M net losses - those stats would frighten me.

If I owned a donut shop and sold 1000 donuts a day for $1.59 each out of a food truck. My cost of goods per donut are 5 cents and my truck I bought in a junkyard and fixed with spare parts on weekends. My wife and I make and sell the donuts. We make 1.54 pretax.
We’re making so much money we decide to buy a two shops and hire 4 people at each shop. Our market analysis tells us we can sell 10,000 Sonya a day, but until we sell 5000 per day our overhead will result in negative net margins. Each donut after 5000 has an increasing net margin until we hit our capacity of 10,000 donuts.

If you ever have a chance, take an entry level accounting class or speak to someone who runs a business selling physical products. I learned about this freshman year accounting and again in MBA finance. If you understood Tesla cost model precisely you could determine the volume needed to go cash flow positive, assuming their cost of inputs is less than sales price. There is a lot of info on this site about their input costs that is more accurate than anything I’ve seen in the news.
I think the math supports a bullish long term and possibly medium term story.

 

[Todd Burch]

I think MattEnth means well, and therefore I disagreed with your response to him. You're absolutely correct that gross margins at the beginning of the ramp is irrelevant, but it wouldn't have hurt to list out a few reasons why:
- fix costs (huge negative effect on margins)
- unknown marginal costs (potentially positive effect on margins, but is still unknown)

With noise like that, we need at least one more quarter of additional data to even begin to guess on their contributions to the overall gross margin.

I would've been nicer if we hadn't said that very thing several times already.

 

[Waiting4M3]

Here is a simplistic model on margin. Some numbers such as overhead and material cost are WAG based on Tesla's projection. The main point is how quickly margin can improve when you start mass producing. But Q1 will look bad for sure.

 

[Jonathan Hewitt]

Why are we explaining basic financial concepts to TSLA trolls? There's no way they don't understand these things, right?

 

[Thumper]

Do we know which lines at Fremont are running today?

 

[Starno]

SpaceX's plan to fly you across the globe in 30 minutes

 

[vinvin218]

Why are we explaining basic financial concepts to TSLA trolls? There's no way they don't understand these things, right?

No, they knew better than all longs, and No again, they are not here for an answer but creating panic. EOM

 

[ValueAnalyst]

Here is a simplistic model on margin. Some numbers such as overhead and material cost are WAG based on Tesla's projection. The main point is how quickly margin can improve when you start mass producing. But Q1 will look bad for sure.

View attachment 296388

There should be a PERFECT button.

@Waiting4M3 Edit: Instead of "material costs," maybe use the term "variable costs?" Otherwise, PERFECT.

 

[erthquake]

Why are we explaining basic financial concepts to TSLA trolls? There's no way they don't understand these things, right?

The trolls aren't the target audience. The targets are new open-minded people gathering information so they don't get infected by the troll FUD.