Short-Term TSLA Price Movements - 2015

[drinkerofkoolaid]

For Tesla to really take off, Elon needs to say how many vehicles Tesla is planning to produce weekly by the end of 2015/middle of 2016. I suspect the number is well above where anyone thinks it is. Also, Tesla needs to explain why the CPO program will be very significant. The warranty on the CPO Tesla vehicles is something that no other company can match or beat, and guarantees the Model S will hold its value very nicely, compared to any other vehicle.

Also, it will eventually become clear to analysts that there is almost no way the Gigafactory won't be at capacity by 2020.
1 million Solar City customers will ensure Tesla is production constrained for many years. Imagine what happens when Solar City has 2 million customers.

 

[Papafox]

I think for Tesla to really take off they need to disprove the bear arguments:
1. That they are demand limited and the market is close to saturation.
2. That they are GAAP non profitable.

The first argument will be quite disproved in the next few quartiles. Not much to talk about, just that model X should be on time and there shouldn't be ramp up hiccups.
But the second issue... Please excuse the non professional language, but in the last earnings call Elon said this is because they are effectively leasing the cars because of the buyback guarantee. But also that there are things they can do to offset that expense, using financial techniques other car manufacturers already use. Is this a correct understanding of what he said?
If such financial techniques exist why don't they use them?

Because Tesla has billions in cash, it has chosen to finance some of the cars itself. Further, it has offered a buy-back option if the car falls below a certain value after a certain period of time. Because of this buy-back guarantee, the cost of the financing program looks more expensive than it really is, because a certain amount of money theoretically needs to be put away just in case its needed for the buy-back. If you believe that the buy-back guarantees will never be exercised, then you would agree with Tesla that non-GAAP numbers are more accurate than GAAP numbers, which include a factoring-in of the liability for the buy-back guarantee.

What Tesla plans to do when the bank account gets a little lighter is to sell these car loans to other institutions. Those institutions will continue to make interest on the loans, but they also inherit the liability of the buy-back guarantee. Thus, Tesla ends up with more money in the bank when they sell the loans, and they end up with smaller costs affecting each quarterly GAAP earnings.

There's no need for Tesla to sell these loans to other institutions right away, however. As long as it has lots of money in the bank, it might as well make a little interest from some of it.

 

[Causalien]

@jhm: you spotted the basic conditions for the clever "rolling naked short" play that some investors were running with TSLA in 2013/early 2014. It was uncovered by a poster here on this forum who saw the greatness of TSLA very early on and traded the living crap out of (made a fortune) - luvb2b.

Since you weren't a member here then perhaps you're not aware of that bit of interesting history. I'll go search for the thread...

Edit: The Rolling Naked Tesla Short

LOL, the exact moment in time I got off my butt and did some serious analysis.

May seem surprising to you all. I was actually a functioning and contributing member back then.

 

[daniel Ox9EFD]

For Tesla to really take off, Elon needs to say how many vehicles Tesla is planning to produce weekly by the end of 2015/middle of 2016. I suspect the number is well above where anyone thinks it is. Also, Tesla needs to explain why the CPO program will be very significant. The warranty on the CPO Tesla vehicles is something that no other company can match or beat, and guarantees the Model S will hold its value very nicely, compared to any other vehicle.

Are you indicating most investors agree that Tesla is production limited (and therefor needs to prove it is executing on production ramp up?),
I got a strong impression this is not the case, that most bears and even many bulls think there is a saturation of the market for Tesla, at least in the short term.
Elon can say Tesla is production limited till tomorrow.
btw looking at it this way imagine the surprise nest quarter when Tesla delivers 12k+.

- - - Updated - - -

Because Tesla has billions in cash, it has chosen to finance some of the cars itself. Further, it has offered a buy-back option if the car falls below a certain value after a certain period of time. Because of this buy-back guarantee, the cost of the financing program looks more expensive than it really is, because a certain amount of money theoretically needs to be put away just in case its needed for the buy-back. If you believe that the buy-back guarantees will never be exercised, then you would agree with Tesla that non-GAAP numbers are more accurate than GAAP numbers, which include a factoring-in of the liability for the buy-back guarantee.

What Tesla plans to do when the bank account gets a little lighter is to sell these car loans to other institutions. Those institutions will continue to make interest on the loans, but they also inherit the liability of the buy-back guarantee. Thus, Tesla ends up with more money in the bank when they sell the loans, and they end up with smaller costs affecting each quarterly GAAP earnings.

There's no need for Tesla to sell these loans to other institutions right away, however. As long as it has lots of money in the bank, it might as well make a little interest from some of it.

Thanks for the explanation.
Do you know if Tesla would become GAAP profitable by selling those loans? If so this could be another lever if the stock drops too low.

 

[drinkerofkoolaid]

Are you indicating most investors agree that Tesla is production limited (and therefor needs to prove it is executing on production ramp up?),
I got a strong impression this is not the case, that most bears and even many bulls think there is a saturation of the market for Tesla, at least in the short term.
Elon can say Tesla is production limited till tomorrow.
btw looking at it this way imagine the surprise nest quarter when Tesla delivers 12k+.

I think the bears believe Tesla is either lying, overly optimistic, delusional, or in denial, even though all data suggests Tesla is being conservative about its future plans and prospects.

 

[Robert.Boston]

Do you know if Tesla would become GAAP profitable by selling those loans? If so this could be another lever if the stock drops too low.

Tesla isn't going to be GAAP profitable until 2020 or so because it is re-investing more than every dollar of free cash flow into capex and R&D. Tesla has substantial gross margins, i.e. it earns nearly 30% profit on each car it sells. That's all we need to care about for now on the profit side. There are reasonable questions about whether all the costs are really adding to the future profitability of the company, but I believe that those costs are going to be shown to be properly contained this quarter.

 

[jhm]

After taking into consideration foreign exchange fees and the like, my Tesla grin has just begun. Giddy up!

Are you expecting FX to be favorable for Tesla? What's going on?

 

[woof]

May seem surprising to you all. I was actually a functioning and contributing member back then.

So, what happened?




(I Kid, I Kid)

 

[CALGARYARSENAL]

Are you expecting FX to be favorable for Tesla? What's going on?

It just costs me a mint to buy USD stocks. I have to pay my trading platform (Qtrade) a 2% fee to buy USD on top of the foreign exchange rate. So I am just starting to make money. Bought in at 187.88

 

[jhm]

It just costs me a mint to buy USD stocks. I have to pay my trading platform (Qtrade) a 2% fee to buy USD on top of the foreign exchange rate. So I am just starting to make money. Bought in at 187.88

I see. That's a hefty fee. Is it possible to have a brokerage account denominated in USD?

 

[CALGARYARSENAL]

I don't believe we can in our version of a tax free savings account. I am holding the stock to either zero or infinity, so FX fee doesn't bother me. Essentially it is a one off as I will not be selling. It would if I was trading it.

 

[jhm]

I don't believe we can in our version of a tax free savings account. I am holding the stock to either zero or infinity, so FX fee doesn't bother me. Essentially it is a one off as I will not be selling. It would if I was trading it.

Bummer. Well, for your sake I hope TSLA does 2% better this year.

 

[Causalien]

I don't believe we can in our version of a tax free savings account. I am holding the stock to either zero or infinity, so FX fee doesn't bother me. Essentially it is a one off as I will not be selling. It would if I was trading it.

Facepalm... IB and TOS. Wash trade etc.

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So, what happened?




(I Kid, I Kid)

It got too fun playing the FUD terminator. Have to be a bit crazy to counter their crazy logic.

 

[CALGARYARSENAL]

I used to do the wash trade with TD Waterhouse, but since I don't plan on trading around the position I didn't care

 

[32no]

Something is brewing.
1. A few weeks ago, Elon Musk briefly changed his twitter picture back to him with the violin, the same picture that he had during the Tsunami of Hurt for the shorts in 2012/2013.

2. Ben Kallo's note from a few weeks ago says:

We, however, left incrementally positive as TSLA continues to ramp Model S production, and commentary was bullish on demand in mature markets and Europe.We see significant upside as numbers are calibrated correctly and we like the Q1 setup.

3. Tesla announced deliveries beat 3 days after quarter end and said they will be doing this from now on. There is significance in the timing of such a change in reporting policy. I think Tesla has something else it wants investors to focus on in the upcoming quarterly letter/call. Perhaps Ben Kallo's statements after speaking with management were about more than just deliveries. Also, expectations are low for Q2 guidance, I saw 9,000 thrown out there. I think not many people have paid attention to the 40/60 split in first half and last half of this year, and not many people are expecting the guidance of 12k which would be necessary to hit those numbers.

4. Shorts and many of those who don't follow Tesla closely don't seem to comprehend or simply don't know that 10,030 excludes discounted and CPO cars, which might add a few hundred cars to the total.

5. Speaking of something to focus on during the quarterly letter and call, the April 30th announcement of stationary storage is in close proximity to the Q1 report. This announcement will have to deliver sufficient details and a thoroughly outlined growth plan in order to excite investors. I think that this announcement is way too major to be "buy on the rumor sell on the news" like some other less important announcements (ending range anxiety?), and this announcement has no dangerous speculation like the D and autopilot did.

So, Tsunami of Hurt 2.0? Musk seems to be warning us in subtle ways because Sproule isn't letting him do what he did in 2012/2013.

 

[Causalien]

Ah found the part about skewed option premium after 1 week if tracing. I was such an options nerd back then.

http://www.teslamotorsclub.com/show...ptions-Trading?p=342500&viewfull=1#post342500

The risk reward graph that started the investigation. Maybe it'll be useful for people today since I heard someone mention option skew.

 

[Auzie]

I see. That's a hefty fee. Is it possible to have a brokerage account denominated in USD?

I think it is possible as that is an option when configuring account. It does not make sense though.

Tax reporting of all trades must include conversion to local currency at the point of trade. That is done by the broker in local currency denominated account but not in US denominated account, so I would have to do it manually, go back in time and get exact conversion costs for each trade when the trade was done.

 

[InTheShadows]

Ah found the part about skewed option premium after 1 week if tracing. I was such an options nerd back then.

http://www.teslamotorsclub.com/show...ptions-Trading?p=342500&viewfull=1#post342500

The risk reward graph that started the investigation. Maybe it'll be useful for people today since I heard someone mention option skew.

What exactly does that graph tell you? What does today's graph look like? And, how did you graph that?

 

[jhm]

Ah found the part about skewed option premium after 1 week if tracing. I was such an options nerd back then.

http://www.teslamotorsclub.com/show...ptions-Trading?p=342500&viewfull=1#post342500

The risk reward graph that started the investigation. Maybe it'll be useful for people today since I heard someone mention option skew.

And here's the post where you explain the trade, which roughly is to hold a synthetic long and short a share. But as shares are hard to borrow, you've got to use a proxy instead. This is difficult for anyone who wants to be fully hedged but for someone who wants to hold shares, the trade I discuss is sufficient.
Advanced TSLA Options Trading - Page 10

So the big question remains, will we see a big rolling squeeze again? This time I think bulls are smarter about how to exploit it. Writing puts is the key when put IV gets well ahead of call IV.

 

[Causalien]

What exactly does that graph tell you? What does today's graph look like? And, how did you graph that?

Welp.... I am retired and on a mobile phone with intermittent internet and intermittent electricity. Back then I had 6 monitors and a super powerful computer with 50 msec lag to the server. I think I explained what it means in that thread, if not... well, let's just say you'll have to ship a computer to Rishikesh. Perhaps some other expert in options can help explain.

- - - Updated - - -

And here's the post where you explain the trade, which roughly is to hold a synthetic long and short a share. But as shares are hard to borrow, you've got to use a proxy instead. This is difficult for anyone who wants to be fully hedged but for someone who wants to hold shares, the trade I discuss is sufficient.
Advanced TSLA Options Trading - Page 10

So the big question remains, will we see a big rolling squeeze again? This time I think bulls are smarter about how to exploit it. Writing puts is the key when put IV gets well ahead of call IV.

Yeah. There were 3 different big analysis back then done by different forum members release roughly around the same time. After that the shirt squeeze began. I was wondering if it could be bigger than VW and Porche squeeze and it was.