Short-Term TSLA Price Movements - 2013

[Citizen-T]

I have spent a lot of time digesting all the news today and running numbers. I intend to put my thoughts together in a cohesive package, but I think the window of opportunity is very small here, so I didn't want to delay in giving you guys my punch line.

I hope that the market wakes up in a bad mood tomorrow. I'll be buying hand-over-fist.

 

[K Hall]

Same here Citizen. I need to double my position.

 

[Johan]

I'm kinda pissed right now that it's so hard for me here in Norway to trade in US options... think of what you could have made on options trading in the last few days... Just buying and then selling calls, or even better selling puts coupled with calls at corresponding strike price (the calls go up at the same time as the puts reduce in value) - all with no greater risk than actually owning the stock... I need to (again) look into if I can open an options trading account overseas...

Agree with previous poster though, I'm upping my long position as well and the -2,5% drop in after/premarket is welcome, and I will try to buy now premarket.

 

[Eberhard]

I fear, that we will see weak share prices next few weeks. What worries me most was hidden between the lines: delivery within 3 month. given a production rate of 2000 cars/month means only 6000 fix orders including european orders for the next quarter. I was always thinking, 2013 is already sold out! I think reservation/orders are only for 6-8 weeks.

 

[ppl]

I fear, that we will see weak share prices next few weeks. What worries me most was hidden between the lines: delivery within 3 month. given a production rate of 2000 cars/month means only 6000 fix orders including european orders for the next quarter. I was always thinking, 2013 is already sold out! I think reservation/orders are only for 6-8 weeks.

I think you can get a guest spot on squawk box next to the auto dealer who they are using as a tesla expert

 

[Citizen-T]

I fear, that we will see weak share prices next few weeks. What worries me most was hidden between the lines: delivery within 3 month. given a production rate of 2000 cars/month means only 6000 fix orders including european orders for the next quarter. I was always thinking, 2013 is already sold out! I think reservation/orders are only for 6-8 weeks.

I don't share your concern. Norway alone has a run-rate of nearly 5000 cars/year. The shortened delivery time tells me that they are planning to build more than 2000 cars/month.

 

[luvb2b]

I fear... I was always thinking, 2013 is already sold out! I think reservation/orders are only for 6-8 weeks.

2013 is sold out in my opinion. i posted a comprehensive model over on this thread:
http://www.teslamotorsclub.com/showthread.php/14961-Thinking-about-Q1-2013-earnings/page7

below i have copied the reservations piece. you have to put together the new reservations with cancels and deliveries, and then you can see what's left. it's pretty simple so you can put in your own assumptions and come up with your own ideas. i'm pretty sure 2013 is sold out even with high cancel rates and higher production. you could even take reservations down to 4000 the rest of the year and jack up production. still sold out.

the main problem is generating sales for 2014, and that's what the financing and other announcements that are coming are designed to do. elon is in sales mode now.

on reservations
with a lot more favorable press and users getting cars in march i think new reservations could be closer to 3400. cancels likely uptick due to the large number of configuration requests and negative nyt press. i am estimating 10,700 end of quarter reservations after cancels/deliveries.

my reservations model looks like this for the rest of the year... bold/italic = forecasts

	Prior Count	Plus New	Minus Sold	Minus Cancels	Equals End Count
2012Q3	11500	2900	250	950	13200
2012Q4	13200	6000	2400	1800	15000
2013Q1	15000	3400	5200	2500	10700
2013Q2	10700	4000	5500	1800	7400
2013Q3	7400	4500	5600	1400	4900
2013Q4	4900	5000	5600	1400	2900

 

[Yuri_G]

I don't share your concern. Norway alone has a run-rate of nearly 5000 cars/year. The shortened delivery time tells me that they are planning to build more than 2000 cars/month.

That reservation count is not just for Norway, but for all of Europe. Norway just has a disproportionately high number of the Europe reservations.

 

[aznt1217]

I don't share your concern. Norway alone has a run-rate of nearly 5000 cars/year. The shortened delivery time tells me that they are planning to build more than 2000 cars/month.

If I recall correctly, somebody in the other forum had their Factory tour rescheduled because they were retooling. Perhaps they are preparing to use the other 80% of the plant finally (or at least part of it)

 

[Citizen-T]

That reservation count is not just for Norway, but for all of Europe. Norway just has a disproportionately high number of the Europe reservations.

On further thought, I think you are right. My bad. That's much more reasonable. I was blown away when I saw that this morning.

- - - Updated - - -

I hope that the market wakes up in a bad mood tomorrow. I'll be buying hand-over-fist.

Thank you, Market.

 

[ckessel]

Well, I feel like an idiot holding my shares for Elon's "big announcement". I actually logged in and was ready to sell a bunch in the 45-46 range and thought I'd better wait since his announcement was, in his words, arguably bigger than 1 quarter probability.

Quite annoyed this morning.

 

[Citizen-T]

Well, I feel like an idiot holding my shares for Elon's "big announcement". I actually logged in and was ready to sell a bunch in the 45-46 range and thought I'd better wait since his announcement was, in his words, arguably bigger than 1 quarter probability.

Quite annoyed this morning.

I just wasn't fast enough. I had an order in at $46.50, but missed it. The stock never got back to that price.

That's ok, the market is making a mistake today. The news over the past week has been really good. While the announcement didn't meet expectations, it was by no means a bad thing. The reaction is overdone here.

The leasing option is going to drive some amount of demand, though it isn't clear how much. This should alleviate some amount of concerns about demand in 2014. The introduction of new options (such as the center console and performance plus package) are going to be margin boosters in Q2. Dropping the 40kwh version of the car will be a big boost to margins. The purchase of 100 Model S for a fleet in Las Vegas has been under-reported. The fact that there will be (presumably good) announcements every week or two from here out means continued upward pressure on the stock. Elon mentioned that they've made a lot more progress on Superchargers than we've noticed.

I could go on. The fact is, all this hype has masked a lot of things that should be reshaping your view of what Tesla is worth going forward. Here's the big one though: The number of deliveries reported far exceeds the numbers used in analyst's models. Morgan Stanley for instance was using something like 3k cars for this quarter. None were counting on profitability until at least Q4. Many of their price targets have already been taken out. These analysts have no choice but to revise their estimates. They probably would have done it already, but needed to wait for yesterday's announcement to be sure they had all the latest info.

So, I suspect we will see a lot of analysts updating their price targets based on the new volume, margins, and profitability. Some of the changes might be quite dramatic. Personally, I'd like to see Morgan Stanley return to its $250 target. =P

 

[aznt1217]

I just wasn't fast enough. I had an order in at $46.50, but missed it. The stock never got back to that price.

That's ok, the market is making a mistake today. The news over the past week has been really good. While the announcement didn't meet expectations, it was by no means a bad thing. The reaction is overdone here.

The leasing option is going to drive some amount of demand, though it isn't clear how much. This should alleviate some amount of concerns about demand in 2014. The introduction of new options (such as the center console and performance plus package) are going to be margin boosters in Q2. Dropping the 40kwh version of the car will be a big boost to margins. The purchase of 100 Model S for a fleet in Las Vegas has been under-reported. The fact that there will be (presumably good) announcements every week or two from here out means continued upward pressure on the stock. Elon mentioned that they've made a lot more progress on Superchargers than we've noticed.

I could go on. The fact is, all this hype has masked a lot of things that should be reshaping your view of what Tesla is worth going forward. Here's the big one though: The number of deliveries reported far exceeds the numbers used in analyst's models. Morgan Stanley for instance was using something like 3k cars for this quarter. None were counting on profitability until at least Q4. Many of their price targets have already been taken out. These analysts have no choice but to revise their estimates. They probably would have done it already, but needed to wait for yesterday's announcement to be sure they had all the latest info.

So, I suspect we will see a lot of analysts updating their price targets based on the new volume, margins, and profitability. Some of the changes might be quite dramatic. Personally, I'd like to see Morgan Stanley return to its $250 target. =P

True story. I picked up more shares today. I know prices seem lofty for many. MS issued a statement to investors saying they see another capital raise in the future? Any thoughts on that? I think a lot of equity analysts are rejiggering their numbers as we speak.

 

[blakegallagher]

I agree Citizen-T ... I also wish I had sold more but I don't think the stock will stay down long .... this is like the over reaction to last quarters report. People are missing the big picture .... I also think this will drive sales a whole lot .... It is a big hurdle taken care of people that they don't have to show up with a 100k dollar check in order to get a model S. Elon said he expects over 50 percent of new purchases to go through this new system.

 

[Citizen-T]

True story. I picked up more shares today. I know prices seem lofty for many. MS issued a statement to investors saying they see another capital raise in the future? Any thoughts on that? I think a lot of equity analysts are rejiggering their numbers as we speak.

The quote I saw said that given how much the stock is up, now might not be a bad time to raise money for Gen III. I haven't seen anything from Elon that makes me think they are considering this right now. I get the impression that he wants to demonstrate that Tesla can stand on its own. When they raise more capital for Gen III, it'll be from a position of strength, not from a position of "we promise we will be profitable when we report this quarter, but we want your money now".

Also, it isn't clear to me that more money will help the Gen III program at this point. Seems like they are waiting for battery tech to make its way through the pipeline. No capital raise is going to change the pace at which that happens.

 

[ckessel]

That's ok, the market is making a mistake today. The news over the past week has been really good. While the announcement didn't meet expectations, it was by no means a bad thing. The reaction is overdone here.

Oh, I'm certainly in agreement, I'm just annoyed the big surprise wasn't really that big or that much of a surprise. It's great for long term business. If Elon had just said that they were announcing lease details, I wouldn't have held my stock which would have put me in a better position to rebuy this morning.

My annoyance is Elon's over hyping affected my decision, not with the plan itself.

- - - Updated - - -

I agree Citizen-T ... I also wish I had sold more but I don't think the stock will stay down long .... this is like the over reaction to last quarters report. People are missing the big picture .... I also think this will drive sales a whole lot .... It is a big hurdle taken care of people that they don't have to show up with a 100k dollar check in order to get a model S. Elon said he expects over 50 percent of new purchases to go through this new system.

Actually, I think they do have to show up with a 100k check still. Well, mostly disbursed by the bank. It's a guaranteed buy back price, not like a lease with the return it or make a balloon payment (typically done via loan). That's probably drifting off topic. As has been noted, great for the long term, but I'm not sure how anyone can view that as more important than profitability. We already knew Tesla was doing a "lease" at some point.

It doesn't quite fit the bill either on Elon putting his money where his mouth is. It is in the sense that if Tesla's don't hold their value, he's on the hook (curious what the legal paperwork is on that setup), but he's not actually paying any money right now towards anything. Props for personally backing it though, that's not a trivial risk. I'm guessing that's partly why the banks were willing to do only 10% down and a reasonable interest rate.

 

[neroden]

The quote I saw said that given how much the stock is up, now might not be a bad time to raise money for Gen III. I haven't seen anything from Elon that makes me think they are considering this right now. I get the impression that he wants to demonstrate that Tesla can stand on its own. When they raise more capital for Gen III, it'll be from a position of strength, not from a position of "we promise we will be profitable when we report this quarter, but we want your money now".

To be blunt, if Elon has any sense, he will raise capital when the stock is flying high. (Too many companies issue shares when the price is low and buy back when the price is high.) If he manages to talk the stock up to really pricey levels and *then* dilutes it, that's just good business practice and benefits existing stockholders much more than diluting it while the stock is priced "fairly" (whatever that is).

 

[luvb2b]

the whole notion of a capital raise now is stupid. they just did one a couple months ago, and they have plenty of cash. not to mention they are going to be generating cash this quarter.

keep in mind production is 500+ per week now. elon had tweeted this in response to a question. per the blog deliveries are 500+ per week too. they are capable of making 6,000-6,500 cars per quarter. 6,000 cars x $80k selling price = $480m quarterly revenue. 25%+ gross profit = $120m in quarterly gross profit, about $30m in quarterly cash flow excluding the impact of credits. imo, that is the near future for tesla and the analysts are too stupid or too vested with their short hedgies to see it. assuming another $100m annually coming from selling various credits, you're talking about $220m in annualized cash flow from operations. i think that's a lot to fund development.

the main problem is can they build out the reservations book to keep the manufacturing line running at full capacity?

the recent data points indicate europe reservations coming in at 15 a day. we don't get usa reservations but usually usa reservations have run about 3x the europe figure (recently europe was down to 8-10 a day and us was 25-30 a day for example). if that pace is sustained they're booking 4000 per quarter. i think you'll see everything they do is focused on boosting reservations/sales.

a capital raise is useless and counterproductive imo. if they can get the reservations up they'll be in a position to generate more than enough cash to fund themselves internally.

 

[NigelM]

the whole notion of a capital raise now is stupid. they just did one a couple months ago, and they have plenty of cash. not to mention they are going to be generating cash this quarter.

Small caveat: Tesla has declared that Q1 was profitable; that doesn't mean they generated net cash for Q1 - we'll have to wait for full results before they let us know that one.

 

[luvb2b]

being profitable on a non-gaap basis means that they are now generating cash flow from operations, net of timing effects of receivables/payables and inventory. there may be capital investment that causes cash flow from investing to be negative, but that's a different issue.

when i say "net of timing effects" i mean the core business itself is generating cash. but at any snapshot you see you might find some extra receivables waiting to be converted to cash or extra inventory to complete production, etc. those things will even out over a few quarters as long as they are running the business with integrity (i.e. not building up receivables to book as revenue, etc.).