Short-Term TSLA Price Movements - 2014

[chickensevil]

It's a good thing Elon doesn't post what he eats for meals on Twitter or people would speculate that those meals had significance in the stock price of the company

Not sure what his schedule is but I think I know what he had for dinner...Elon Musk on Twitter:

Must be why the stock is up pre-market (I'm sorry I couldn't resist... please don't hurt me)

- - - Updated - - -

BTW:
http://www.reuters.com/article/2014/09/08/us-markets-stocks-idUSKBN0H310H20140908

U.S. stock index futures are slightly lower on Monday, with investors finding few reasons to extend a long-running rally that has taken indexes to repeated records amid overseas concerns and few domestic catalysts.

With the overall market starting off down if we stay in the positive today at all I will be happy.

 

[Derek Vinyard]

here's the BBG fresh article mentioning Musk's statements with regard to Toyota and Panasonic

By Craig Trudell
Sept. 8 (Bloomberg) -- Tesla Motors Inc. may partner with
Toyota Motor Corp. again in the future, Chief Executive Officer
Elon Musk said.
“If you look out maybe two or three years from now, I
would not be surprised if there was a significant deal with
Toyota and Tesla,” Musk told reporters today in Tokyo. While
Tesla and Toyota have no definitive plans, Musk said he
envisioned a larger project than their deal for the RAV4
electric vehicle.
The comments come as the two carmakers wind down sales of
the jointly developed RAV4 EV after delivering only about 2,000
units since it went on sale two years ago. Since that project,
both companies have taken separate paths, with Toyota now
preparing to sell its first fuel-cell vehicle, a technology Musk
has ridiculed.
Toyota has no comment on Musk’s remarks, spokesman Ryo
Sakai said.
While people with knowledge of the matter have told
Bloomberg News that the RAV4 EV project was marred by clashes
between engineers, Musk said today that Tesla has “a very good
relationship with Toyota.” After having panned hydrogen-powered cars as “fool cells”
in the past, he told reporters today at an event marking the
start of Model S deliveries in Japan that there was some value
in experimenting with other technologies.

Battery Supplies

At an annual shareholders’ meeting in June, Musk, 43, cited
a squeeze in battery pack supplies as one reason why Palo Alto,
California-based Tesla and Toyota would take a year or two
before making any plans to build another vehicle together. Tesla
last week selected Nevada as the site for a “gigafactory” to
produce the most lithium-ion car batteries in the world.
Tesla is courting Panasonic Corp., another Japanese company
and shareholder, to invest in the factory to supply cheaper
batteries and help transform the maker of the $71,000 Model S
sedan into more of a mass-market manufacturer.
Musk today reiterated that he envisions Panasonic providing
30 percent to 40 percent of the investment needed for the
factory. Tesla has estimated that the plant could cost as much
as $5 billion by 2020.
“We are probably pushing Panasonic faster than they would
normally go,” Musk said today. “I think it will turn out well
for both companies.” Panasonic spokeswoman Yayoi Watanabe declined to comment on
Musk’s remarks, saying only that the company would be a major
partner to Tesla.
“The speed at which Panasonic is making decisions is
extremely impressive,” Musk said. “We really feel very honored
that they would take a risk on Tesla.”

 

[vgrinshpun]

FBN Securities, an US based institutional brokerage company initiates coverage of TSLA (streetinsider.com):

FBN Securities initiated coverage on Tesla Motors (NASDAQ: TSLA) with an Outperform rating and a price target of $325.00.
For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.
Shares of Tesla Motors closed at $277.39 yesterday.

 

[chickensevil]

here's the BBG fresh article mentioning Musk's statements with regard to Toyota and Panasonic

After having panned hydrogen-powered cars as “fool cells”in the past, he told reporters today at an event marking the
start of Model S deliveries in Japan that there was some value
in experimenting with other technologies.

That is a... nice... way to put that. That is quite a change from the conversation during Q2 when AJ was asking why people keep pushing fuel cells when they are "bull****" (his word). Someone must have talked with Elon after that ER to tell him he needs to be a little more diplomatic with Toyota since they are a major stakeholder in the company.

 

[Derek Vinyard]

FBN Securities' upgrade

@chicken - fully agree ! indeed, I forgot to highlight this sentence.:wink:

by the way, FBN Sec' upgrade. Thanks to vgrinshpun's headsup!

 

[RobStark]

That is a... nice... way to put that. That is quite a change from the conversation during Q2 when AJ was asking why people keep pushing fuel cells when they are "bull****" (his word). Someone must have talked with Elon after that ER to tell him he needs to be a little more diplomatic with Toyota since they are a major stakeholder in the company.

Elon is in Japan today for the first deliveries of Model S in Japan.

If he reiterated the truth that fuel cells are bovine feces the Japanese Press would keep asking questions regarding Toyota and Prime Minister Abe's advocacy of fuel cells. He does not want to talk about that. He wants to talk Model S.

 

[Lump]

In a note published Monday morning, FBN Securities analyst Shelby Seyrafi initiated coverage on Tesla Motors Inc (NASDAQ: TSLA) with a Buy rating and a $325 price target.
Seyrafi's Buy rating for Tesla, like many, is based on the future growth opportunities of the company. She noted Tesla currently holds only 2.2 percent of its worldwide addressable market for premium sedans, which leaves tremendous room for growth. Seyrafi also noted the Model 3 is expected to sell at $35,000 to 40,000, about half of the current price for the Model S, which she said should be a "significant" catalyst for growth.
As a final note, Seyrafi stated that Tesla's Gigafactory is expected to be fully operational in 2020.

 

[chickensevil]

Looks tentatively like we are shrugging off the drop from friday right now I am sure the note from FBN Securities plus the new deliveries happening in Japan is helping this out some.

Also helping is that the Nasdaq is up .12% as well

 

[jhm]

I'd say "show me the math".

Very well, the Gigafactory is expected to reduce the cost of battery by 30% or more. Current cost is $200 - $250 per kWh. To be conservative, a 30% reduction is a savings of at least $60 per kWh or $60M per GWh.

The Gigafactory will cost as much $5B and produce 50 GWh per year at full capacity. To break even, the factory must produce 83.3 GWh (= 5000 / 60). Ramping up production linearly has an average output of 25 GWh per year. So ramping up over 40 months, 3.33 years produces 83.3 GWh ( = 3.33 × 25 ).

Thus, under conservative assumptions the Gigafactory can pay for itself before it reaches full capacity. If the savings or net cash flow is even greater than $60 per kWh or if the cost of the Gigafactory is less than $5B, then breakeven will be reached even faster than 40 months. For example, $75 per kWh would generate $5B over a 32 month ramp up.

Note also that the Gigafactory will cost about $1B for the building and $4B for the equipment. If the ramp up stretches out over several years, the cash flow needed for equipment can be spread out over the ramp up period. Suppose the ramp up is 40 months, then about $100M is needed each month. Going back to $60M per GWh, once 20 GWh has been installed, the cash flow from production will exceed the monthly investment in equipment. That is, the Gigafactory can be cash flow positive just 16 months into a 40 month ramp up. Thus, the capital required needs only bridge to the installation of the fist 20 GWh of capacity. This includes the building and $1.6B in equipment, $2.6B, which is also offset by $0.8B in cash from early ramp up. Thus, as little as $1.8B is required upfront. Tesla has raised some $2.3B already, and Panasonic promises about $1B over the ramp up. So this is more than adequate. No more capital is required for the first Gigafactory. Indeed, current capital may even suffice for a second Gigafactory if timed appropriately to leverage cash flow from the first Gigafactory. But don't tell the shorts about this, they still think Tesla will have to raise more capital.

 

[chickensevil]

Morgan Stanley Bearish On Autos | Benzinga

Morgan Stanley is becoming more bearish on the Auto Market:

”We think now is a great time to reduce exposure to US auto names as the value of US SAAR (volume x price) is setting new records. Easy credit and leasing will no doubt push volume and mix to even higher highs. Multiples should be lower, in our view.”

They had previous cut Ford (F) to underweight and today dropped General Motors (GM) to underweight. While I don't think this issue is going to have a perceivable impact on Tesla (relating to sales) it is something that could cause people to get a little scared about TSLA (the stock) when looked at the overall market. I would love MS to release a new outlook at Tesla in light of these recent downgrades on F and GM.

 

[ItsNotAboutTheMoney]

Very well, the Gigafactory is expected to reduce the cost of battery by 30% or more. Current cost is $200 - $250 per kWh. To be conservative, a 30% reduction is a savings of at least $60 per kWh or $60M per GWh.

The Gigafactory will cost as much $5B and produce 50 GWh per year at full capacity. To break even, the factory must produce 83.3 GWh (= 5000 / 60). Ramping up production linearly has an average output of 25 GWh per year. So ramping up over 40 months, 3.33 years produces 83.3 GWh ( = 3.33 × 25 ).

Thus, under conservative assumptions the Gigafactory can pay for itself before it reaches full capacity. If the savings or net cash flow is even greater than $60 per kWh or if the cost of the Gigafactory is less than $5B, then breakeven will be reached even faster than 40 months. For example, $75 per kWh would generate $5B over a 32 month ramp up.

Note also that the Gigafactory will cost about $1B for the building and $4B for the equipment. If the ramp up stretches out over several years, the cash flow needed for equipment can be spread out over the ramp up period. Suppose the ramp up is 40 months, then about $100M is needed each month. Going back to $60M per GWh, once 20 GWh has been installed, the cash flow from production will exceed the monthly investment in equipment. That is, the Gigafactory can be cash flow positive just 16 months into a 40 month ramp up. Thus, the capital required needs only bridge to the installation of the fist 20 GWh of capacity. This includes the building and $1.6B in equipment, $2.6B, which is also offset by $0.8B in cash from early ramp up. Thus, as little as $1.8B is required upfront. Tesla has raised some $2.3B already, and Panasonic promises about $1B over the ramp up. So this is more than adequate. No more capital is required for the first Gigafactory. Indeed, current capital may even suffice for a second Gigafactory if timed appropriately to leverage cash flow from the first Gigafactory. But don't tell the shorts about this, they still think Tesla will have to raise more capital.

You are assuming that the Tesla would be selling batteries at current prices, given them very high margin. But if Tesla did that they would not be able to raise volume. Tesla needs to operate a lower margin to lower prices to increase volume. And you can bet that the Gigafactory cell output will only be marginal supply, so Tesla will only enjoy significant cost savings as they raise volume. I'm sure Tesla wants to build the Gigafactory quickly to get ahead of any new technology and because the short the lead time, the faster they get to volume, the faster they can pay off the cost of capital and get to lower marginal pricing.

 

[ckessel]

I think it's ridiculous to think that the drop wasn't due to Elon's comments.

ZOMG! Did Elon retract his statement? The stock is right back to where it was near the end of day Thursday!

(that's sarcasm, in case someone missed it...)

 

[AudubonB]

ZOMG! Did Elon retract his statement? The stock is right back to where it was near the end of day Thursday!

He likes his stock price shaken, not stirred.

 

[Curt Renz]

Morgan Stanley Bearish On Autos | Benzinga

Morgan Stanley is becoming more bearish on the Auto Market:



They had previous cut Ford (F) to underweight and today dropped General Motors (GM) to underweight. While I don't think this issue is going to have a perceivable impact on Tesla (relating to sales) it is something that could cause people to get a little scared about TSLA (the stock) when looked at the overall market. I would love MS to release a new outlook at Tesla in light of these recent downgrades on F and GM.

The report below from Dow Jones appeared in my TD Ameritrade account. I bolded the font for the phrase concerning TSLA.

8:08a ET September 8, 2014 (Dow Jones)Morgan Stanley Steps Back on US Auto Sector -- Market Talk
8:08 EDT - Morgan Stanley says U.S. auto makers may be cutting into future demand as they drive to increase volume at the expense of profits. Firm cuts its rating on Ford (F) to underweight with a $16 price target saying expectations for its new 2015 F-150 pickup are too high as margins on the new truck could be lower than the outgoing truck due to up-front costs and competition. Morgan Stanley also trims its price target on GM to $29 from $33, saying it sees Tesla Motors (TSLA) "as the only US auto manufacturer stock offering any upside to fair value." F slips 1.9% to $16.81 and GM falls 0.6% to $34.06 premarket. ([email protected])
(END) Dow Jones Newswires

 

[chickensevil]

He likes his stock price shaken, not stirred.

Couldn't resist... sorry.

- - - Updated - - -

The report below from Dow Jones appeared in my TD Ameritrade account. I bolded the font for the phrase concerning TSLA.

8:08a ET September 8, 2014 (Dow Jones)Morgan Stanley Steps Back on US Auto Sector -- Market Talk
8:08 EDT - Morgan Stanley says U.S. auto makers may be cutting into future demand as they drive to increase volume at the expense of profits. Firm cuts its rating on Ford (F) to underweight with a $16 price target saying expectations for its new 2015 F-150 pickup are too high as margins on the new truck could be lower than the outgoing truck due to up-front costs and competition. Morgan Stanley also trims its price target on GM to $29 from $33, saying it sees Tesla Motors (TSLA) "as the only US auto manufacturer stock offering any upside to fair value." F slips 1.9% to $16.81 and GM falls 0.6% to $34.06 premarket. ([email protected])
(END) Dow Jones Newswires

Thank you for that. Cause as I went looking through google searches for this, I didn't see any direct reference to TSLA. This is good that they haven't changed their mind about it

 

[eepic]

Very well, the Gigafactory is expected to reduce the cost of battery by 30% or more. Current cost is $200 - $250 per kWh. To be conservative, a 30% reduction is a savings of at least $60 per kWh or $60M per GWh.

The Gigafactory will cost as much $5B and produce 50 GWh per year at full capacity. To break even, the factory must produce 83.3 GWh (= 5000 / 60). Ramping up production linearly has an average output of 25 GWh per year. So ramping up over 40 months, 3.33 years produces 83.3 GWh ( = 3.33 × 25 ).

Thus, under conservative assumptions the Gigafactory can pay for itself before it reaches full capacity. If the savings or net cash flow is even greater than $60 per kWh or if the cost of the Gigafactory is less than $5B, then breakeven will be reached even faster than 40 months. For example, $75 per kWh would generate $5B over a 32 month ramp up.

Note also that the Gigafactory will cost about $1B for the building and $4B for the equipment. If the ramp up stretches out over several years, the cash flow needed for equipment can be spread out over the ramp up period. Suppose the ramp up is 40 months, then about $100M is needed each month. Going back to $60M per GWh, once 20 GWh has been installed, the cash flow from production will exceed the monthly investment in equipment. That is, the Gigafactory can be cash flow positive just 16 months into a 40 month ramp up. Thus, the capital required needs only bridge to the installation of the fist 20 GWh of capacity. This includes the building and $1.6B in equipment, $2.6B, which is also offset by $0.8B in cash from early ramp up. Thus, as little as $1.8B is required upfront. Tesla has raised some $2.3B already, and Panasonic promises about $1B over the ramp up. So this is more than adequate. No more capital is required for the first Gigafactory. Indeed, current capital may even suffice for a second Gigafactory if timed appropriately to leverage cash flow from the first Gigafactory. But don't tell the shorts about this, they still think Tesla will have to raise more capital.

The theoretical savings of 30%, or $60/kwh, would be a cost savings over an alternative supply (which doesn't exist) and not physical dollars generated that would pay for the capex on the gigafactory.

Remember that all the partners in the gigafactory also expect a % return on each kWh produced, so there has to be some % margin between the gigafactory production cost and the price it goes to TM as a component in a car. At steady state, if we assume 50 GWh a year @ $100/kWh and a 15% producer margin, the payoff would be:

$5B (revenue) x 15% = $750mm/year (of course TM's own investment gets internalized back)

With these numbers, even at full capacity it would take a few years to generate the actual product to "pay off" the gigafactory. Note that I'm not arguing the merits and business brilliance of the gigafactory, just our semantics here.

 

[hobbes]

Elon is in Japan today for the first deliveries of Model S in Japan.

Elon tweeted a pic of japan deliveries, hope there will be some more news coming on this:

Elon Musk on Twitter:

An article on this on WSJ:
Tesla of Model S Is Japanese - Japan Real Time - WSJ

 

[jhm]

You are assuming that the Tesla would be selling batteries at current prices, given them very high margin. But if Tesla did that they would not be able to raise volume. Tesla needs to operate a lower margin to lower prices to increase volume. And you can bet that the Gigafactory cell output will only be marginal supply, so Tesla will only enjoy significant cost savings as they raise volume. I'm sure Tesla wants to build the Gigafactory quickly to get ahead of any new technology and because the short the lead time, the faster they get to volume, the faster they can pay off the cost of capital and get to lower marginal pricing.

Not true. I am assuming that Tesla can sell a kWh at $60 above cost. At what retail price is Tesla currently selling? Is it more than $300? $210 cost would be consistent with a gross margin of 30% on $300 price. Now if they can drive the cost down to $150, then they can also lower the price to $210 and still make $60 and have nearly a 30% margin. I don't think they would have any demand problem at this price. For example, their 10 kWh stationary system for homes could sell like hot cakes at $3000. The current price is about $10,000. Would Toyota like to lock in battery packs at $250 per kWh? Perhaps. In any case, addressing multiple markets like this helps to derisk concern about limited demand.

The other side of this coin is that, it looks like the Gigafactory could drive the cost down much lower than $150, perhaps under $120 if you follow recently released information about labor, equipment and energy costs at the Sparks Gigafactory.

In all I think $60 net is fairly conservative. Even if you 2 ant to play around with $50 or $40, the mathematics still work, if you allow for a slower ramp up cycle, 48 or 60 months respectively. So basically, the optimal rate of expansion will depend on how much demand there is. The higher the demand in dollars across all addressable markets, the more net per kWh, which in turn facilitates a faster build out.

 

[MartinAustin]

Consider also that the cost of batteries would fall anyway, even if there was no Gigafactory.

If Tesla didn't build its own factory, it would simply seek out batteries from other manufacturers, who would then build their own factories, and it's in their interests to lower manufacturing costs.

Imagine a world with no Gigafactory. Tesla says "Hey Panasonic, we really need a ton more batteries than we've been buying so far. No, really... we MEAN IT!!! ASAP!!!"

Panasonic would undoubtedly add more manufacturing capacity. Perhaps LG and Samsung would also get into it. By this point, Tesla would be defining a standard shape and composition of battery to allow manufacture of battery packs no matter where the cells came from. The desire for increased profits and price competition among the suppliers would lead to research into how to make the batteries more cheaply.

All this is academic, since Tesla is creating its own factory. Tesla will automatically see the massive drop in manufacturing costs due to carrying out all the steps in one building, and at such a massive scale, and doesn't need to administer standards amongst its suppliers since it is creating its own batteries, and tweaking things as it sees fit at times and places of its own choosing.

Once you consider the difference in cost between Gigafactory-produced packs and those made with externally-supplied cells, the cost reduction isn't as significant. (though it will be real)

 

[SteveG3]

fwiw, perhaps Elon made his comments on the stock price last week to tap the brakes a bit knowing he would say something about the likelihood of a more substantial new Toyota deal within the next two trading days. The stock price seemed capable of passing $300 as it was, and his talking about Toyota might have seemed capable of leading to a crazy spike that would later be sold off. Think of the Jonas' report in February that spiked shares from ~$200 to $265).

I know this it the short-term thread, but for long term investors I don't think spikes like that one from Jonas' report (which are later sold off, leading to "Tesla bubble popping?" FUD headlines) are really helpful to Tesla or TSLA.