Short-Term TSLA Price Movements - 2013

[30seconds]

for fun (and profit), I think we should add comments / predictions about 2014 general Model S demand. I've been polling my non Bay Area friends that are 1. at least kind of interested in cars (i.e., drive German or Japanese luxury) OR 2. have a reasonable engineering / geek bent and have been pleased to track their progress through a. what are you talking about, b. I've heard of that, c. F**&(G awesome and d. that's what I'm buying or wish I could.

Basically between Elon's comments about comfortably above 400 / week production (I assume for good reason) and my own, non-scientific, but reasonable cross section I would not be surprised if the 2014 MODEL S (not X) demand guidance starts to push 50-60k. Walking that backwards, I expect that the 2013 production guidance at this call will exceed 25,000 and be furthered strengthened with commentary that Tesla is production constrained.

Then, somewhere, sometime soon afterwards I expect more people to realize that they have done this with ZERO advertising, NO deliveries outside North America, and WITHOUT a dealer network. Plus with a MASSIVE technical and patent advantage. Once that sinks in, then maybe, more investors will realize that this is a significant disruptor to the transportation industry and comparing revenue multiples to F or GM is no longer valid.

Just think, the best BMW can do is a limited production, 22 KWH, smart car that goes 0-60 in Yawn, fits me you and a dog, and can maybe go 180 miles after a motorcycle engine kicks in.

Meanwhile, your Model S, besides smoking the new M5 (hey and I'm a big BMW M fanboy), updates its own firmware and has been just shown to be upgradable to at least 85kwh (probably to future higher capacity batteries) in a matter of minutes.

IMHO demand upside is much, much bigger than the street currently is projecting.

 

[Jack6591]

Like Elon I am long on Tesla, will not play the market based on a potential bad quarter or two, other than accumulate more shares whenever possible. I am focused on Gen 3. But good luck to all you guys who're playing the market. Hope it works out for you all.

Slow and steady wins the race. Purchasing shares for the long term makes great sense.

Options trading is a hoot. Makes life worth living.

I guess it's all about balance.

 

[Julian Cox]

Very interesting sequence of events all of last week that are likely to significantly affect sentiment.

Seeking Alpha TSLA news flow shut down heading-off a strategic wave of advertorials for the shorts.

DB upgrade substantially consigning bearish $84 PT GS piece to history.

Then GM Steve Girsky's aknowledgement that Tesla could be a big disruptor.

And then this: Detroit Files for Chapter 9 bankruptcy. GM CEO: Auto industry had role in Detroit fiscal slide

(Note it is that the video that auto-plays on opening the page is a choice of an advert for GM Dealer finance and for Chevrolet Elite dealers - oops I suspect no-one called those ads unless it was to seek reassurance that their vehicle deposit was not lost).

Another interesting series of quotes: GM Dan Akerson: If you go back to the early 1960's Detroit was the Silicon Valley of America, if you were an engineer you wanted to be in Detroit. I think this is something that future prospects will factor into their thinking, do I want to move to a city that's bankrupt. All three of the big OEM's are viewed as Detroit based companies when in fact they aren't.

Note to Akerson: In 2013 Silicon Valley is the Silicon Valley of America, it has Tesla in it, and apparently that is where the engineers want to be.

I would suggest Akerson is correct, that it does not matter that GM or any of the Big 3 have offices and manufacturing in many locations both inside and outside of Detroit, with regards to mood and sentiment Detroit is to the Big 3 as the Golden Arches is to McDonalds, and it is not for the first time that the Big 3 have been associated with the concept of bankruptcy (and ongoing government debt).

Between Akerson and Girsky GM is apparently sinking a combined 8-figure executive compensation program into confounding TSLA shorts and promoting TSLA at GM's expense. Nice.

I can well imagine that this sequence of events is sufficient to trigger numerous funds to re-evaluate long term buy and hold positions in Ford, GM and Fiat/Chrysler with enough identifying Tesla and the QQQ containing Tesla as a long term trend to build meaningful additional support under the stock.

On a philosophical point: As soon as the money involved is discretionary wealth (something that is broadly true of all wealth in publicly traded shares) then all movements of money are ultimately based on sentiment. Even the idea of paying tax is arguably founded upon sentiment (risking being chased down by the IRS feels bad). While to eat or not to eat is not a discretionary choice offered by human biology, in the case of discretionary wealth, the nature and brands of the food that actually gets bought is hugely subject to sentiment including fashionable trends. Definitely the choice of cars is (nobody is going to use discretionary wealth to buy car they don't feel good about when they have a choice to simply buy one that they do feel good about instead). Even stocks in old companies in long established industries that trade on solid fundamentals and pay regular dividends are bought on sentiment with respect to safety and stability.

Regards to sentiment, this is the grand stack of cards upon which the Tesla short argument is based - i.e. A criticism that the stock its trading on sentiment (with the implication that there is something wrong with that). By the same argument, events that bolster positive sentiment and seriously degrade the credibility of negative sentiment (for example the notion that Detroit will inevitably wake up and eat Tesla) must be frightening for the shorts who first and foremost acknowledge that sentiment is a key driver of the TSLA price ahead of established fundamentals.

I have for a long time stated that TSLA should go to $140 (conservatively) on Q2 earnings. It seems increasingly likely that this will happen prior to Q2 earnings on sentiment alone, and that Q2 update on progress with the fundamentals will provide an additional rally on a squeeze that is not factored into the price prior to Q2E. For example I have still seen shorts out there banking on the announcement of a Q2 loss, and I think that is unrealistic.

 

[Acmykguy]

As far as $ very small but as far as contracts 2x the number of calls. $ wise is only 3-4%. They are deep ofm puts so a punishment by market will not make up for all losses of calls just reduce them.

- - - Updated - - -

Like Elon I am long on Tesla, will not play the market based on a potential bad quarter or two, other than accumulate more shares whenever possible. I am focused on Gen 3. But good luck to all you guys who're playing the market. Hope it works out for you all.

You can actually do both. I have some accounts 401k etc I just buy on dips. Then a "fun " acct where I try to play dips and speculate. I guess I have nothing better to do with my time. :wink:

- - - Updated - - -

Slow and steady wins the race. Purchasing shares for the long term makes great sense.

Options trading is a hoot. Makes life worth living.

I guess it's all about balance.

Thumbs upJackl1956

 

[clmason]

How do you feels about Gen 3 ASP of $53.5k in 2019? This is what Deutsche Bank has modeled not their report. This does not give me a warm and fuzzy feeling about their modeling unless they assume Gen 3 ASP is derived from a mix of models including something significantly higher in price (roadster version 2?). Their model shows 130,000 units at this price, so I'm not so sure about that product mix assumption either.

Kind of disappointing to me if it turns out to b true.

 

[Jonathan Hewitt]

How do you feels about Gen 3 ASP of $53.5k in 2019? This is what Deutsche Bank has modeled not their report. This does not give me a warm and fuzzy feeling about their modeling unless they assume Gen 3 ASP is derived from a mix of models including something significantly higher in price (roadster version 2?). Their model shows 130,000 units at this price, so I'm not so sure about that product mix assumption either.

Kind of disappointing to me if it turns out to b true.

I'm not an expert but that sounds ok to me.The cheapest Model S compared to the most expensive one is almost a 2x difference. $53.5K might be a little high if it starts at $30,000 but if it starts at $40,000 it might be too low.

 

[bonnie]

How do you feels about Gen 3 ASP of $53.5k in 2019?

I'm not sure what all the factors were that contributed to that, but I assume inflation is one. You're talking six years out.

Tesla has consistently said that Model X will be 'comparable in pricing' to a similarly featured Model S. I assume that means two things: 1) Things like AWD will be a premium over Model S pricing, and, 2) as Model S pricing increases, the 'comparable price' will be based on the NEW Model S price, not the Model S price at the time they made the announcement.

 

[clmason]

I'm not sure what all the factors were that contributed to that, but I assume inflation is one. You're talking six years out.

Tesla has consistently said that Model X will be 'comparable in pricing' to a similarly featured Model S. I assume that means two things: 1) Things like AWD will be a premium over Model S pricing, and, 2) as Model S pricing increases, the 'comparable price' will be based on the NEW Model S price, not the Model S price at the time they made the announcement.

Just read their logic on the $53.5K. It's is $45k starting price plus 18% premium for options.

Do we assume gen 3 will start at $39k for early reservations. Then within a quarter of launch price increase to $41k, then $43k a year later, then $45k the next year in 2019? Or will it never be $39k without tax credits?

 

[vfx]

2) as Model S pricing increases, the 'comparable price' will be based on the NEW Model S price, not the Model S price at the time they made the announcement.

And and subsequent increases would apply to both cars.

 

[JRP3]

Stripped down G3 base model at $35K, loaded/tricked out/max optioned/etc. $65-$70K, I can see ASP near $50K.

 

[FredTMC]

Stripped down G3 base model at $35K, loaded/tricked out/max optioned/etc. $65-$70K, I can see ASP near $50K.

Also keep in mind that the first year or two of gen III production will be heavily weighted to the "loaded" version with the largest battery option (think BMW M3 first, then 335 then 328 much later). The demand for gen III will probably exceed production in the first few years and TM won't need to introduce the base model with the small battery. All this helps gross margins early on for gen III. This is especially important considering that elon said that margins for Gen III won't be greater than 20%.

 

[clmason]

... This is especially important considering that elon said that margins for Gen III won't be greater than 20%.

Deutsche Bank report has gen 3 at 26.6% margin by 2019 at 130,000 vehicles. They see Tesla following Porsches high margin Business model.

 

[DaveT]

Also keep in mind that the first year or two of gen III production will be heavily weighted to the "loaded" version with the largest battery option (think BMW M3 first, then 335 then 328 much later). The demand for gen III will probably exceed production in the first few years and TM won't need to introduce the base model with the small battery. All this helps gross margins early on for gen III. This is especially important considering that elon said that margins for Gen III won't be greater than 20%.

Yeah I remember Elon Musk saying at Teslive that GenIII would get lower gross margin... Does anybody know exactly at what time during his talk he said that? I'd like to hear his exact words again.

 

[FredTMC]

Deutsche Bank report has gen 3 at 26.6% margin by 2019 at 130,000 vehicles. They see Tesla following Porsches high margin Business model.

Yeah, they are entitled to their opinion... Elon's main point is that he wants huge adoption of EVs and his mass market car (at the expense of gross margin). He won't be happy until EVs approach units sold v ICE (or well on its way to over take)

 

[JRP3]

Also keep in mind that the first year or two of gen III production will be heavily weighted to the "loaded" version with the largest battery option (think BMW M3 first, then 335 then 328 much later).

I can see them doing just that but I really hope they don't, for two reasons. 1. Put out the basic model first, easier and faster to build, fewer things to go wrong, and easier to correct when they do. 2. Prove that Tesla actually can produce the affordable vehicle they have been promoting. Or at least mix in some basic cars with the higher end vehicles. With the higher production volumes they will be doing for the G3 that should be easier.

 

[clmason]

I think the writing on the wall is that gen 3 will not be mass market affordable. Maybe others have already come to this conclusion. I was holding out and had faith that gen 3 would truly be a car for the masses but that just does not seem to be the reality. Tesla is emulating Porsche, and as such will remain relatively boutique and high end. As an investor this makes makes perfect sense. As a buyer, it's just a bit disappointing that the price of gen 3 is 2x a true mass market car. Total cost of ownership does help offset the retail price...still not in the range of mass market.

 

[Alpha]

@clmason, it ain't over till the fat lady sings!

 

[sleepyhead]

I think the writing on the wall is that gen 3 will not be mass market affordable. Maybe others have already come to this conclusion. I was holding out and had faith that gen 3 would truly be a car for the masses but that just does not seem to be the reality. Tesla is emulating Porsche, and as such will remain relatively boutique and high end. As an investor this makes makes perfect sense. As a buyer, it's just a bit disappointing that the price of gen 3 is 2x a true mass market car. Total cost of ownership does help offset the retail price...still not in the range of mass market.

It's a "mass market" car just like a BMW 3-series is a "mass market" car. It will sell in the hundreds of thousands per year. Actually if the 3 series sells several hundred thousand a year then the Gen 3 will probably sell over $1m+ per year eventually. EV's are so much better that it is not even fair.

Tesla cars are similar to the iphone. Many people around the world still can't afford the iphone, so they get the cheap phone that they can afford. Apple has done really well though and made their products affordable to say 50% of the world. Now there is finally talk about a "cheaper" iphone model that will target the rest of the world that couldn't afford a normal iphone.

Tesla will make cheap cars eventually, but there is no reason to do so until you have way too much cash on your Balance Sheet.

 

[JRP3]

I suppose it depends on your definition of mass market car. Since the average purchase price of a vehicle in the US for 2012 is around $30K I don't think a mass market car means sub $25K. Especially 3-4 years from now, and counting the lower operating costs of an EV, I consider an EV in the $30K range to be a mass market car.

 

[vfx]

I think the writing on the wall is that gen 3 will not be mass market affordable....

Elon said at TESLIVE that we was will to loose the high end brand image in order to achieve his goal of worldwide EV adoption. (paraphrasing) He said at the Stockholders meeting that the Bluegen3 will be mid 30's.

I agree that price buys a bare bones car.