Short-Term TSLA Price Movements - 2014

[anticitizen13.7]

> Bots and HFT systems are designed to make lots of money quickly. [poster]

They may be originally designed with that in mind but lately mostly provide needed market liquidity. This was extensively covered here recently so why the FUD?

Because I believe with a high degree of certainty that it's true: http://www.economist.com/news/books...overs-more-shenanigans-wall-street-fast-times

The HFTs’ trading edge comes from two different sources. When an investor presses the button to deal, that signal is sent to a broker or bank, who in turn is supposed to search the many different stock exchanges for the best price. But because of the time taken for trading signals to be sent down the wire, those orders arrive at different stock exchanges at separate times.
The HFTs were sitting in wait, and used their advantage to exploit the time differences.

Often, the HFTs place buy or sell orders for small amounts at individual exchanges. When those orders get filled, that is a signal that a big investor has a much bigger stake to offload. Sometimes the HFTs’ orders are designed not to be filled, but to flush out which way the institutions are planning to trade; HFTs comprise half of all trades on the American market but submit almost 99% of the orders.

Perhaps the best analogy is with the people who offer you tasty titbits as you enter the supermarket to entice you to buy; but in this case, as soon as you show appreciation for the goods, they race through the aisles to mark the price up before you can get your trolley to the chosen counter.

> I recommend that most people ignore wild movements and hold their shares for a long time. [ac13.7]

Being LONG does not necessarily mean one never sells shares, that is being a 'lazy long'. Profits cannot be reinvested so grandchildren or charities greatly benefit in future? Passing up profits makes no sense; holdings should be managed. Profits are how you increase your corpus. Short term price moves ARE important to Long term investors.

Describing normal volatility as 'wild' to excuse not participating at all, ever, is a head-in-the-sand stance. If you stipulate that ER time specifically is off limits for trading stocks, then that would be understandable.
--

The caveat is that I also recommended an exit strategy in several of my other posts.

I've observed that most people buy high and sell low. It seems to be a psychological peculiarity of the human species, and I've read that the emotional impact of fear of loss is 2x that of happiness from gain. I made my recommendations because I don't think it serves people to run for the exits whenever TSLA slides $10-$20 when nothing fundamental has changed about the company.

I actually do agree that holdings should be managed. My retirement accounts are largely low-cost index funds that I re-balance once each year, or when the difference in asset allocation from my target percentages reaches a certain amount. Holdings in individual stocks are basically bets on 10x, 20x, or more growth over a decade or more. I don't pursue any strategy of optimization here because I don't have the time to worry about short term trading, and because I'm OK with getting a good return, not an optimal return. Maybe I'll lose out on making a couple extra $, but that's a trade off I make in order to reduce stress. Yes, I am a "lazy" investor http://www.bogleheads.org/wiki/Lazy_portfolios However, I am also disciplined in my approach:biggrin: Most people here seem to be active traders and have some holdings in derivatives. I think that's ok, so long as one accepts the risk. I just like to share my strategy too, and attempt to prevent panic among those who may be reading the thread (but not participating) and worrying.

 

[TSLAopt]

A "defense" is more than just stating how wrong someone is, but also giving facts and evidence to support how right you are.

Its easy to say that TSLA will go up long term. There isn't any evidence to the contrary. But there is plenty of things that can go wrong short term, ala Q1 & Q3. Each time "longs" give the patriotic hurrah only to be disappointed when TSLA doesn't meet their expectations, so what happens when the next Q1 or Q3 comes around? Have "longs" learned anything new from their "discussions" as to what happened? No. So plenty of people are going to get burned buying calls when they should have taken a critical approach.

This board isn't interested in learning. They just want to bash anyone willing to have the balls to make predictions after everything happens.

Instead of complaining about the discussion why don't you actually discuss you specific points again so that longs can discuss why they believe your points are wrong or invalid? Then you can counter them with specifics (no personal insults)...or come to an agreement of disagreement on the presumptions that form your short term argument of the stock.

 

[NigelM]

> Bots and HFT systems are designed to make lots of money quickly. [poster]

They may be originally designed with that in mind but lately mostly provide needed market liquidity. This was extensively covered here recently so why the FUD?

Housekeeping request to everyone to use the "Reply With Quote" button when you want to quote someone else. The little blue/white arrow box that automatically appears is a hyperlink to the original post, this allows folks who visit intermittently during the day to back track and follow a conversation. It also makes it possible to read the full text of a quote that has been shortened.

Thank you.

 

[Twiddler]

Things have not been this bad in this thread since the days of Bill Hamp, which was a great bottom indicator.

 

[NigelM]

Mod Note: the discussion on Doug Kass got split to a new thread - Management-Stock-Options-and-other-nonsense-from-Doug-Kass

 

[davecolene0606]

So, interesting read here, from the shorts, all I gotta say is, don't mind what ur doin but quit it with the inaccurate info and innuendo (i.e. statements that are questions designed to mislead) The facts (known information) are so easily attainable via SEC documents or a factory tour it is ludicrous to go beyond that. The track record of this management team matches their statements and outlooks over and over again.
I own just a couple of stocks and a pretty plain 401k plan (index funds after I did the math on "mutual fund fees", but, holy smokes what an education on manipulation and misdirection I have gotten watching the press and posters with an agenda (up or down, but mostly down) do to influence an outcome. My observation says, take your own occupation or something you know well, watch an incident or story emerge about it, and, one stands there mouth agape at the inaccuracies being hurled.
This forum is a goldmine of info and observations and frustration surfaces when wild inaccuracies are flung. There are absolutely folks who are hugely invested in existing infrastructure and financial instruments that are worthless in a sustainable energy/transportation economy (a centuries worth). These guys are not all the shorts, but sure to be, are part of the general noise to make everyone think fossil fuels are the answer to jobs and our future. (ala the chick with the lisp that keeps telling u how great coal/oil and now gas are the future so, log on) They are ridin that wave however for.... short term gain.
So, as an observer, investor (long@26, 54, 123 & 185) I would suggest any strategy is welcome discussion parted from stupid (I mean stupid) on purpose wrong info/innuendo.
I spend my time here for rational discourse, I read/listen/watch the rest for entertainment and demonstrative instruction of what not to do with my investment in TSLA.
If ever there was a legit stock option comp program TSLA. has it as it is attached to definitive milestones (SEC filings), gee, 28% gross margins on a production constrained product with a clear path to clearing the constraints along with an expanding consumer appeal at ever increasing affordable options with... k u get my point.
So, short term, volatility caused by ignorance,disbelief followed by purposeful misleading statements/questions with malicious intent.
Past that, lots of room for Puts, Calls, shorting and adding to ones position on the down swings... but make no mistake, we are reliving the end of whale oil, buggy whips and horses. I would only add that as we are off the gold standard in exchange for the oil standard, the stakes are higher than ever and there will be desperate efforts to cling to the status quo by the minority that currently has an interest in milking it for as long as possible.

Just the facts mam, just the facts.

Fire away

 

[green1]

Watching the news since the earnings call is quite entertaining. There are stories on both sides, but wow the exaggeration. "Tesla losing 50 million, model x delayed again" read one headline, and next to it was "Tesla beats analysts expectations, reiterate buy rating with target of 275"
Without knowing which of these articles is reaching a wider audience it is hard to guess which way the stock will go on Monday! (I'm still expecting up long term, but I sure can't guess the short term with all those media stories on opposite ends of the spectrum)

 

[Auzie]

Media like CNN or Bloomberg are becoming less and less relevant every day. Investors are becoming increasingly informed in variety of ways that bypass traditional media distributors.

 

[GravityPull]

Find the Truth

fwiw, Paulo Santos over at Seeking Alpha, had put out an article after Wednesday's call suggesting that North American sales being up sequentially 10% was due to Model X reservations as Tesla had not specifically said Model S sales in North America up 10%. Paulo went on to continue claiming North American Model S sales have peaked. I called IR this evening, actually spoke with Jeff Evanson, and he said unequivocally Model S sales were up 10% in North America. He was also aware that the company had not stated this as clearly as they could have.

Hi SteveG3
Thank you for calling Tesla Investor Relations. I too, read what Paulo said, but unfortunately I was influenced by it. What you did was what all threads, not just Tesla threads, can benefit from, a concerted effort to get to the truth!

 

[mrdoubleb]

I was somewhat worried after Q3 about consumer perception of the fi*e cases, any regulatory steps, those kinds of things, but Tesla's handling of the situation (and the response of this community) will be taught in crisis management courses for years to come.

This time around I am just laughing at the silly comments & stupid headlines and the selling that went on last week. Watching my profit melt away to 20% of what it was a few weeks ago is not that funny, but I know the fundamentals have never been better.

People talk about TSLA as a momo stock, and I suppose when you look at market reactions it is true, but to me all this means is, that once Mr. Market realizes the possibly bright, but uncertain Tesla future is suddenly the reality of today, the TSLA climb will be that much steeper. To me this ER and really the call later that day, was the biggest de-risking I've seen so far:
- Tesla beat production & delivery guidance, revenue and profit forecast in a quarter they knew was going to be their worst, as about 1/6-1/7 of their production will be on a ship as (yet) unrealized sales.
- Q2 guidance is up to record production (8.5-9k) and deliveries (7.5k).
- Pana cell production on course to be resolved in Q3 with their new lines coming online shortly (but shipping takes long)
- Lathorp + hiring 2000+ people + July installation of new production line tells us, that when those extra cells from Japan do come in, we can expect a huge jump in production. I am thinking an 8-9k Q3 (2 weeks off in July!) and a huge 12k+ Q4 to meet or exceed 35k sales this year.
- Gigafactory breaking ground next frikkin month + Pana letter of intent signed.
- X design locked, production prototypes by Q4, deliveries starting next year with a steep ramp in Q2.

What does this mean short term? Yeah the bears may have their way in Q2 and maybe even in Q3 (“production plateaued in Q3” type of nonsense headlines due to the 10 day stand-down to upgrade the lines), but once the new line comes online, expect a "Tsunami of hurt" - for them. These will be the late Q3 headlines & PRs by Tesla:

- Gigafactory construction under way in Nevada or Texas with Tesla holding on to the second site for future expansion
- Model S production rate close to 1k per week thanks to the new line and extra Pana cells
- Tesla guides to slightly exceeding 35k sales
- Model X production prototype reveal announced for Q4 as a big media event - expect another boost of X reservations as a result
- A 1000+ cars have been delivered to China, reservations are through the roof

And just when you expect things to quiet down, Q1 will be all about impending deliveries of X, first media reviews of the car and Gen3 prototype reveal at the Detroit or Geneva motorshow or a separate Tesla event during H1 2015.

This is a freight train revving up, so if shorts want to stand in its way, they can be my guest.

 

[Larken]

I was somewhat worried after Q3 about consumer perception of the fi*e cases, any regulatory steps, those kinds of things, but Tesla's handling of the situation (and the response of this community) will be taught in crisis management courses for years to come.

This time around I am just laughing at the silly comments & stupid headlines and the selling that went on last week. Watching my profit melt away to 20% of what it was a few weeks ago is not that funny, but I know the fundamentals have never been better.

People talk about TSLA as a momo stock, and I suppose when you look at market reactions it is true, but to me all this means is, that once Mr. Market realizes the possibly bright but uncertain Tesla future is suddenly the reality of today, the TSLA climb will be that much steeper. To me this ER and really the call later that day, was the biggest de-risking I've seen so far:
- Tesla beat production & delivery guidance, revenue and profit forecast in a quarter they knew was going to be their worst, as about 1/6-1/7 of their production will be on a ship as (yet) unrealized sales.
- Q2 guidance is up to record production (8.5-9k) and deliveries (7.5k).
- Pana cell production on course to be resolved in Q3 with their new lines coming online shortly (but shipping takes long)
- Lathorp + hiring 2000+ people + July installation of new production line tells us, that when those extra cells from Japan do come in, we can expect a huge jump in production. I am thinking an 8-9k Q3 (2 weeks off in July!) and a huge 12k+ Q4 to meet or exceed 35k sales this year.
- Gigafactory breaking ground next frikkin month + Pana letter of intent signed.
- X design locked, production prototypes by Q4, deliveries starting next year with a steep ramp in Q2.

What does this mean short term? Yeah the bears may have their way in Q2 and maybe even in Q3 (“production plateaued in Q3” type of nonsense headlines due to the 10 day stand-down to upgrade the lines), but once the new line comes online, expect a "Tsunami of hurt" - for them. These will be the late Q3 headlines & PRs by Tesla:

- Gigafactory construction under way in Nevada or Texas with Tesla holding on to the second site for future expansion
- Model S production rate close to 1k per week thanks to the new line and extra Pana cells
- Tesla guides to slightly exceeding 35k sales
- Model X production prototype reveal announced for Q4 as a big media event - expect another boost of X reservations as a result
- A 1000+ cars have been delivered to China, reservations are through the roof

And just when you expect things to quiet down, Q1 will be all about impending deliveries of X, first media reviews of the car and Gen3 prototype reveal at the Detroit or Geneva motorshow or a separate Tesla event during H1 2015.

This is a freight train revving up, so if shorts want to stand in its way, they can be my guest.

Excellent summary!

 

[NigelM]

Just noting that Tesla has been in the news a lot recently, coincidentally Model X reservations have spiked. Now over 15,000.

 

[ItsNotAboutTheMoney]

I was somewhat worried after Q3 about consumer perception of the fi*e cases, any regulatory steps, those kinds of things, but Tesla's handling of the situation (and the response of this community) will be taught in crisis management courses for years to come.

This time around I am just laughing at the silly comments & stupid headlines and the selling that went on last week. Watching my profit melt away to 20% of what it was a few weeks ago is not that funny, but I know the fundamentals have never been better.

People talk about TSLA as a momo stock, and I suppose when you look at market reactions it is true, but to me all this means is, that once Mr. Market realizes the possibly bright, but uncertain Tesla future is suddenly the reality of today, the TSLA climb will be that much steeper. To me this ER and really the call later that day, was the biggest de-risking I've seen so far:
- Tesla beat production & delivery guidance, revenue and profit forecast in a quarter they knew was going to be their worst, as about 1/6-1/7 of their production will be on a ship as (yet) unrealized sales.
- Q2 guidance is up to record production (8.5-9k) and deliveries (7.5k).
- Pana cell production on course to be resolved in Q3 with their new lines coming online shortly (but shipping takes long)
- Lathorp + hiring 2000+ people + July installation of new production line tells us, that when those extra cells from Japan do come in, we can expect a huge jump in production. I am thinking an 8-9k Q3 (2 weeks off in July!) and a huge 12k+ Q4 to meet or exceed 35k sales this year.
- Gigafactory breaking ground next frikkin month + Pana letter of intent signed.
- X design locked, production prototypes by Q4, deliveries starting next year with a steep ramp in Q2.

What does this mean short term? Yeah the bears may have their way in Q2 and maybe even in Q3 (“production plateaued in Q3” type of nonsense headlines due to the 10 day stand-down to upgrade the lines), but once the new line comes online, expect a "Tsunami of hurt" - for them. These will be the late Q3 headlines & PRs by Tesla:

- Gigafactory construction under way in Nevada or Texas with Tesla holding on to the second site for future expansion
- Model S production rate close to 1k per week thanks to the new line and extra Pana cells
- Tesla guides to slightly exceeding 35k sales
- Model X production prototype reveal announced for Q4 as a big media event - expect another boost of X reservations as a result
- A 1000+ cars have been delivered to China, reservations are through the roof

And just when you expect things to quiet down, Q1 will be all about impending deliveries of X, first media reviews of the car and Gen3 prototype reveal at the Detroit or Geneva motorshow or a separate Tesla event during H1 2015.

This is a freight train revving up, so if shorts want to stand in its way, they can be my guest.

I think you're painting a rose-tinted picture on the ER. There was nothing that changed the fundamentals.

Tesla resolved the production question in 2013Q1.
Tesla resolved the margin question in 2013Q4.
Tesla hasn't fully resolved the demand question and 2014Q1 wasn't rosy, with guidance just being hit with Norway's "borrowed" April sales.
Tesla hasn't fully resolved the Model X, with another quarter passing and another delay announced.
Tesla wasn't even clear on the US demand and it took someone here to contact IR to confirm that the 10% sequential demand was specific to Model S.
China has begun, but overall demand and import barriers aren't entirely clear.

I don't think Q3 production ramp will say anything with it including new, large markets. Tesla has proven they can do production.

To me it's the Model X that's pivotal. Forget the design lock, forget the damned falcon wing doors, what matters will be that the range won't be much affected and more importantly, that the Model X has an excellent 4WD system and good towing capability. If the Model X's utility performance is well-regarded, that's where a price explosion could come, because not only would it help Model X demand, but it will put Tesla in a position with strong fundamental technology that will allow them wider future market coverage.

On top of that there are the Superchargers. I think it'll be very interesting to see the effect on demand of this year's rollout. Extensive coverage means more routes covered that could be pivotal in getting more early pragmatists to buy.

I don't think that Driver Assistance and the interior will be addressed until after the Model X release, but I think they will be important for sustaining Model S and Model X demand.

 

[kenliles]

Probably not much issue here, but a good to know
Toyota to end supply deal with Tesla early (TSLA) | Seeking Alpha

 

[Matias]

I'm saying that TSLA can be like AMZN in that it will grow very well while making very little earnings to show for it because it keeps making large capital investments. That would result in a very high P/E.

Correct me if I'm wrong, but to my understanding investments don't affect to earnings directly, only after depreciation. So Tesla's investments now only affects earnings in future years, because the cost of e.g. building is spread out over the predicted life of the building, with a portion of the cost being expensed each accounting year.

 

[vgrinshpun]

Correct me if I'm wrong, but to my understanding investments don't affect to earnings directly, only after depreciation. So Tesla's investments now only affects earnings in future years, because the cost of e.g. building is spread out over the predicted life of the building, with a portion of the cost being expensed each accounting year.

This is true for the capital expenses, but in addition to capital expenses TM invests significant sums of money in development of future model(s). These expenses are booked as part of R&D which come off the top line in the year expenses are incurred, i.e. directly affect earnings.

 

[Matias]

This is true for the capital expenses, but in addition to capital expenses TM invests significant sums of money in development of future model(s). These expenses are booked as part of R&D which come off the top line in the year expenses are incurred, i.e. directly affect earnings.

Yes. But my point was, that one can not say, that Tesla does not show earnings because it invests so much. As you pointed out, R&D is different thing.

- - - Updated - - -

It's perhaps worth noting that Tesla really doesn't intend to make profit for a very, very long time beyond what's necessary to stay afloat. Elon's goal is to accelerate EV adoption, not make money. Consequently, they'll be shoving every revenue penny back into Tesla for a long time.

Tesla guided to barely being cash flow neutral for the year in the ER as they spend for the X and the Gigafactory. But they could basically say they intend to stay relatively cash flow neutral for the next, what, 5 years?

Free cash flow and profit are different things. You can simultaneously make profit and be cash flow negative. This would e.g. be situation, if you make large investements

 

[vgrinshpun]

Yes. But my point was, that one can not say, that Tesla does not show earnings because it invests so much. As you pointed out, R&D is different thing.

I'l have to disagree with you here, last quarter Tesla invested so much in Selling and General Expenses and R&D Expenses that after subtracting them from the Gross Profit the earnings turned out to be small. To put all this in perspective, consider the numbers for Q1 (non GAAP, without treating lease related revenue as deferred). As you can see from the example below the (automotive sales) earnings were only 7.78% of the gross profit (while operating margin = 13,940 / 711,317 = 1.96%), because Tesla invested heavily into the expansion (SGA) and future models development costs (R&D):

Automotive Sales:________$711,317K
Gross Profit:_____________$179,103K
Total for SGA and R&D:____$165,163K

Earnings:_______________$ $13,940K

I think that the difference is in semantics: you seem to think that R&D and SGA are not "investments", but they clearly are. If Tesla Motors would not plan for expansion and decided just to maintain status quo, i.e. produce around 30,000 vehicle per year, they clearly would not need to invest so much in future growth (as far as SGA and R&D are concerned), so their operating margin would not be 1.96% as shown above, but in the mid-teens, as they projected to be in future years.

Edit: Fixed the math - operating profit in Q1 was 1.96%, while earnings were 7.78% of the Gross Profit.

 

[Matias]

Thank you!

 

[mrdoubleb]

I'l have to disagree with you here, last quarter Tesla invested so much in Selling and General Expenses and R&D Expenses that after subtracting them from the Gross Profit the earnings turned out to be small. To put all this in perspective, consider the numbers for Q1 (non GAAP, without treating lease related revenue as deferred). As you can see from the example below the (automotive sales) earnings were only 7.78% of the gross profit, because Tesla invested heavily into the expansion (SGA) and future models development costs (R&D):

Automotive Sales:________$711,317K
Gross Profit:_____________$179,103K
Total for SGA and R&D:____$165,163K

Earnings:_______________$ $13,940K

I think that the difference is in semantics: you seem to think that R&D and SGA are not "investments", but they clearly are. If Tesla Motors would not plan for expansion and decided just to maintain status quo, i.e. produce around 30,000 vehicle per year, they clearly would not need to invest so much in future growth (as far as SGA and R&D are concerned), so their operating margin would not be 7.78% as shown above, but in the mid-teens, as they projected to be in future years.

Exactly! And that's when I would sell all my shares... I think we as investors, fans and supporters need to understand,that at this stage of its lifecycle Tesla absolutley has to "spend money as fas as they can without wasting it". If they were OK with producing a single luxury sedan model at 30k per year run rate, there would be no point in investing in them - or at least the stock price would really be completley unjustified.