Short-Term TSLA Price Movements - 2015

[aznt1217]

I can hardly wait for Lovallo’s next Tesla note. A reason to chuckle is always appreciated. He might write something like, “Model S owners have indicated no interest in battery swaps. That should hammer the final nail in Tesla’s coffin. Double down your shorts, as this one is quickly heading for zero.” :wink:

He got stomped on that CC. Bringing up ZEV credits like it was key to Tesla's business lol. You could tell by his tone of voice he was just looking to poke holes that didn't exist. If he issues another note I'd be surprised if there's any reaction.

 

[vgrinshpun]

I've gone through all of the posts after the ER CC and did not see anybody doing math on the stationary storage backlog. Somebody has to do it, because it is insane - So I am going to step in :smile:

Elon mentioned that in less than one week of taking reservation there is 2,500 reservations for powerpacks at 10 powerpacks per reservation average, as well as 38,000 reservations for powerwall at 1.5 powerwalls per reservation average. Taking into account that powerpack is 100kWh, and assuming 10kWh per powerwall this works out to 0.5GWh worth of residential orders and 2.5GWh worth of commercial/industrial orders.

To put these staggering numbers in perspective, within the one week total order intake is 3GWh, or, given that original plan for GF annual storage output by 2020 was 15GWh, this backlog is equivalent to the 10 weeks of production at the 2020 production rate!

Remember the guys that issued research report indicating that GF will be mostly idled because of Tesla not having enough demand for their batteries?? ROFL

In all seriousness, this is simply insane. Tesla comes with a product that was developed and tested in obscurity, did not have any advertising campaign, aside from the one hour event, and ended up with a backlog of 3GWh! Elon mentioned that at the current production capability they are booked through the middle of next year!

I understand that a lot of members here were burned several times (and I am not an exception), but let's get real, there is no way that we will be flat tomorrow, not if the theory of efficient markets has even 1% of truth to it. I am holding this week $235-$240 spread and May 22 $260 calls, and am expecting both to be money makers.

 

[jhm]

If true, this puzzles me a little, actually. There's a reason manufacturers generally buy from tool and die suppliers rather than make them in-house. Granted Tesla is not like most manufacturers and maybe this particular acquisition contains more synergies than are apparent, but it seems a little strange. Also, how likely is it that the workforce in an established auto supplier in a UAW dominated state will integrate easily into the Tesla culture?

I wonder if Musk see some interesting way to make such a company more efficient and more responsive. Could there be a technology upgrade that would make a tool and die company truly cutting edge? Perhaps something that would reduce the design cycle time? If Musk saw a way to make a much better company out of it, that might explain the motivation to acquire.

 

[bonnie]

If true, this puzzles me a little, actually. There's a reason manufacturers generally buy from tool and die suppliers rather than make them in-house. Granted Tesla is not like most manufacturers and maybe this particular acquisition contains more synergies than are apparent, but it seems a little strange. Also, how likely is it that the workforce in an established auto supplier in a UAW dominated state will integrate easily into the Tesla culture?

So yes, it is true.

But getting to your question regarding integrating the workforce ... I have been privileged enough over the years to have met a number of people on the manufacturing floor, many recruited directly from Detroit. The first person I met was during a factory tour (before it was running) at a Model S event. He was thrilled to be working for Tesla, bringing his knowledge and being able to contribute. He told me that in all the years working for one of the Big 3 in Detroit, this was the first time he saw it 'being done right'.

I think Tesla will do just fine with the integration. People are inspired by the vision, especially when they're directly contributing to it.

 

[Curt Renz]

If true, this puzzles me a little, actually. There's a reason manufacturers generally buy from tool and die suppliers rather than make them in-house. Granted Tesla is not like most manufacturers and maybe this particular acquisition contains more synergies than are apparent, but it seems a little strange. Also, how likely is it that the workforce in an established auto supplier in a UAW dominated state will integrate easily into the Tesla culture?

Grand Rapids is on the other side of the state from Detroit and about halfway to Chicago. Having a presence in Michigan may serve as influence for obtaining the legal right to directly sell Tesla cars to Michigan consumers.

 

[Bgarret]

Grand Rapids is on the other side of the state from Detroit and about halfway to Chicago. Having a presence in Michigan may serve as influence for obtaining the legal right to directly sell Tesla cars to Michigan consumers.

Curt, as a Michigander your geography is correct, but there is no way the purchase of a 100 person tool-and-die shop will move the political meter in Michigan a centimeter. Joel "MichiganModels" is more tapped in politically, but this is a strategic acquisition to an outstanding supplier to bring it in-house, but unless they buy the LG Chemical plant in Holland, I don't see Snyder or Michigan wising up to the Tsunami of change coming their way. Michigan will have to (regrettably) stay in the company of Texas and Arizona as perennial challengers for the Luddite awards.

 

[Krugerrand]

If true, this puzzles me a little, actually. There's a reason manufacturers generally buy from tool and die suppliers rather than make them in-house.

Yes, because it's a separate business unto itself. Sort of like making batteries or battery storage (as examples). :wink:

Also, how likely is it that the workforce in an established auto supplier in a UAW dominated state will integrate easily into the Tesla culture?

I'd imagine Tesla investigated what sort of skill set the workforce had, say auto part die experience versus license plate or fork die experience. I'd also imagine Tesla spoke to people within the company to get a sense of where they stood as far as culture was concerned. But maybe this was a hostile acquisition? In any case people always have the choice to try, learn, adapt, and keep their job, or quit and find another job more suited.

 

[sundaymorning]

I've gone through all of the posts after the ER CC and did not see anybody doing math on the stationary storage backlog. Somebody has to do it, because it is insane - So I am going to step in :smile:

Elon mentioned that in less than one week of taking reservation there is 2,500 reservations for powerpacks at 10 powerpacks per reservation average, as well as 38,000 reservations for powerwall at 1.5 powerwalls per reservation average. Taking into account that powerpack is 100kWh, and assuming 10kWh per powerwall this works out to 0.5GWh worth of residential orders and 2.5GWh worth of commercial/industrial orders.

To put these staggering numbers in perspective, within the one week total order intake is 3GWh, or, given that original plan for GF annual storage output by 2020 was 15GWh, this backlog is equivalent to the 10 weeks of production at the 2020 production rate!

Remember the guys that issued research report indicating that GF will be mostly idled because of Tesla not having enough demand for their batteries?? ROFL

In all seriousness, this is simply insane. Tesla comes with a product that was developed and tested in obscurity, did not have any advertising campaign, aside from the one hour event, and ended up with a backlog of 3GWh! Elon mentioned that at the current production capability they are booked through the middle of next year!

I understand that a lot of members here were burned several times (and I am not an exception), but let's get real, there is no way that we will be flat tomorrow, not if the theory of efficient markets has even 1% of truth to it. I am holding this week $235-$240 spread and May 22 $260 calls, and am expecting both to be money makers.

Very nice perspective. I'm hoping we get a pop past $240s tomo, but if we don't it will only be a matter of time. I am not seeing the usual bear suspects posting here today, this may be a good omen going into tomorrow. Good luck to everyone.

 

[jhm]

I've gone through all of the posts after the ER CC and did not see anybody doing math on the stationary storage backlog. Somebody has to do it, because it is insane - So I am going to step in :smile:

Elon mentioned that in less than one week of taking reservation there is 2,500 reservations for powerpacks at 10 powerpacks per reservation average, as well as 38,000 reservations for powerwall at 1.5 powerwalls per reservation average. Taking into account that powerpack is 100kWh, and assuming 10kWh per powerwall this works out to 0.5GWh worth of residential orders and 2.5GWh worth of commercial/industrial orders.

To put these staggering numbers in perspective, within the one week total order intake is 3GWh, or, given that original plan for GF annual storage output by 2020 was 15GWh, this backlog is equivalent to the 10 weeks of production at the 2020 production rate!

Remember the guys that issued research report indicating that GF will be mostly idled because of Tesla not having enough demand for their batteries?? ROFL

In all seriousness, this is simply insane. Tesla comes with a product that was developed and tested in obscurity, did not have any advertising campaign, aside from the one hour event, and ended up with a backlog of 3GWh! Elon mentioned that at the current production capability they are booked through the middle of next year!

I understand that a lot of members here were burned several times (and I am not an exception), but let's get real, there is no way that we will be flat tomorrow, not if the theory of efficient markets has even 1% of truth to it. I am holding this week $235-$240 spread and May 22 $260 calls, and am expecting both to be money makers.

Hey, Vladimir, I did do the math, but missed the notion of 1.5 Pw unit per reservation. So I get 3 GWh too, but I would add that this is about $810M in revenue. So for future rule of thumb perhaps 1 GWh of stationary is worth about $270M revenue and perhaps $54M gross profit.

So one gets the feeling that Tesla Energy revenue can grow just as fast as GF capacity can roll out. So at 50 GWh, we're looking at $13.5B in revenue and $2.7B in gross profit. How long will this take, 2019 perhaps? Meanwhile revenue from autos is about $30B, gross profit $7.5B using about 23.3 GWh of batteries. This is why we need to kick off GF2 this year; otherwise there is no capacity for growth in 2020. Stationary capacity could be sacrificed for auto capacity, but no one really wants to make such a sacrifice.

In any case, note that growing from $6B in revenue this year to $43.5B in 2019 is 64% annualized growth. We might need to revisit the Blind Faith Price Target assumption of 50% annual growth in revenue.

One other point, with this kind of opportunity for explosive growth it would be reasonable to raise capital to seize the day, but I see another opportunity that may even be better. Tesla can sell off-take agreements to finance GF expansion. I posted on this in the stationary thread yeaterday morning. Cut to the point, if Oncor wanted to lock in the option to buy 3 GWh of Powerpacks each year for 5 years at a price of $210/kWh, they could buy such a contract for about $252M upfront. This upfront money for the off take agreement essentially finances a portion of the GF expansion. Big utilities like Oncor can finance this at less cost of capital that Tesla's own cash flow, and it locks all parties into a mutually beneficial deal. A sufficient volume of OTA financing like this could avoid the need for Tesla to raise capital by issuing debt or stocks.

 

[marvinat0rz]

I understand that a lot of members here were burned several times (and I am not an exception), but let's get real, there is no way that we will be flat tomorrow, not if the theory of efficient markets has even 1% of truth to it. I am holding this week $235-$240 spread and May 22 $260 calls, and am expecting both to be money makers.

I wouldn't be surprised if we are not in the green tomorrow, even though this was an incredible ER. I honestly think the point hasn't sunk in for most external observers. Hope I'm wrong, but in the long term it doesn't matter regardless.

 

[techmaven]

I wouldn't be surprised if we are not in the green tomorrow, even though this was an incredible ER. I honestly think the point hasn't sunk in for most external observers. Hope I'm wrong, but in the long term it doesn't matter regardless.

I agree it was an incredible ER. It also will be easily misunderstood by many and intentionally misunderstood by some.

 

[hobbes]

Tesla buys Grand Rapids auto supplier, its first presence in Michigan

Acquisition in Motor City! Cool stuff, I'd like to know more.

Another article on that on WSJ:
Tesla Buys Michigan Auto-Parts Maker - WSJ

The Grand Rapids, Mich. company makes stamping-die systems used to create body panels. Tesla confirmed the agreement to buy the company after a report in the Detroit Free Press. The company has about 100 workers, which Tesla intends to keep, according to the newspaper’s report.[...]
The acquisition is a sign of Tesla’s growing scale and ambition. Tesla makes its Model S and forthcoming Model X out of aluminum, which is difficult to stamp and requires special expertise. Tesla brings that know-how and the ability to make its own dies in-house with the move.

 

[Renaud]

I agree it was an incredible ER. It also will be easily misunderstood by many and intentionally misunderstood by some.

I happened to read a piece an SA (terrible mistake, I'm sorry) and indeed numbers are already twisted and everything is spun negatively...
Tesla is meticulously positioning itself for an amazing future. Too bad for those who don't see it.

As for SP, I find it so difficult for the moment...Do we have all the catalysts for a rise? We for sure have everything to annihilate all the (silly) arguments from the bears on websites like SA, but those people are so meaningless that it does not really matter, but what about "the market"?
Before market trading starts in 45 minutes, guess we'll have an idea then...

 

[mrdoubleb]

I'd just like to note what a great next couple of months we should have for TSLA in terms of positive catalysts.

I am sure much of May and June will be about the energy business with lots of analysis and news on companies signing up. However the real fun starts after that.

By July 3 we will get the Q2 delivery numbers.
We will have an X event and launch of the configuration site later in July.
August will be the next ER where they should confirm imminent production start up for X.
September will be all about X deliveries and the first reviews.

 

[ev-enthusiast]

Currently only very few shares available to short at IB (link).

 

[vgrinshpun]

Hey, Vladimir, I did do the math, but missed the notion of 1.5 Pw unit per reservation. So I get 3 GWh too, but I would add that this is about $810M in revenue. So for future rule of thumb perhaps 1 GWh of stationary is worth about $270M revenue and perhaps $54M gross profit.

So one gets the feeling that Tesla Energy revenue can grow just as fast as GF capacity can roll out. So at 50 GWh, we're looking at $13.5B in revenue and $2.7B in gross profit. How long will this take, 2019 perhaps? Meanwhile revenue from autos is about $30B, gross profit $7.5B using about 23.3 GWh of batteries. This is why we need to kick off GF2 this year; otherwise there is no capacity for growth in 2020. Stationary capacity could be sacrificed for auto capacity, but no one really wants to make such a sacrifice.

In any case, note that growing from $6B in revenue this year to $43.5B in 2019 is 64% annualized growth. We might need to revisit the Blind Faith Price Target assumption of 50% annual growth in revenue.

One other point, with this kind of opportunity for explosive growth it would be reasonable to raise capital to seize the day, but I see another opportunity that may even be better. Tesla can sell off-take agreements to finance GF expansion. I posted on this in the stationary thread yeaterday morning. Cut to the point, if Oncor wanted to lock in the option to buy 3 GWh of Powerpacks each year for 5 years at a price of $210/kWh, they could buy such a contract for about $252M upfront. This upfront money for the off take agreement essentially finances a portion of the GF expansion. Big utilities like Oncor can finance this at less cost of capital that Tesla's own cash flow, and it locks all parties into a mutually beneficial deal. A sufficient volume of OTA financing like this could avoid the need for Tesla to raise capital by issuing debt or stocks.

Yes, I did see your post in another thread after I posted here.

BTW, I am a big fan of your Blind Faith estimate approach, please keep these updates coming...

regarding the the financing of the growth, I would not be surprised at all if Tesla is entertaining the concept of the off-take agreements - this could be a fantastic strategy for them.

I see that you are using 20% gross profit for the stationary storage - the estimate that was squeezed out of reluctant Elon during the ER. This number has actually puzzled me.

Elon said that margin would be small while the stationary packs are manufacturing at the Fremont factory, but then grow up to 20% after production of them is scaled up at the GF. On another hand, we know that GF will bring greater than 30% reduction in cost for the packs. So the question is how do we reconcile these three numbers?? The math does not work for me. Could it be that 20% margin number given by Elon is off? Given widely accepted premise that GF will bring pack cost to $150/kWh, the gross margin should be around 40%?

 

[Jonathan Hewitt]

Elon said that margin would be small while the stationary packs are manufacturing at the Fremont factory, but then grow up to 20% after production of them is scaled up at the GF. On another hand, we know that GF will bring greater than 30% reduction in cost for the packs. So the question is how do we reconcile these three numbers?? The math does not work for me. Could it be that 20% margin number given by Elon is off? Given widely accepted premise that GF will bring pack cost to $150/kWh, the gross margin should be around 40%?

I think you are assuming that they won't lower the asking price of the batteries as costs come down. I think Elon was assuming he was going to lower the price?

 

[vgrinshpun]

I think you are assuming that they won't lower the asking price of the batteries as costs come down. I think Elon was assuming he was going to lower the price?

I thought about lowering of the price, but it just seem bizarre thing to do given that in all likelihood they will be scrambling to meet stationary storage demand for many years to come. I think that maintaining 40% plus gross margin is very reasonable given the circumstances.

 

[Jonathan Hewitt]

I thought about lowering of the price, but it just seem bizarre thing to do given that in all likelihood they will be scrambling to meet stationary storage demand for many years to come. I think that maintaining 40% plus gross margin is very reasonable given the circumstances.

I agree there. I could see Elon lowering the price though just because that's who he is or what is more likely he expects everyone else to enter the market once they see how much $$$ Tesla is making and they might have to lower price to stay competitive? We all know the chances of someone getting competitive with Tesla on battery costs probably isn't very high but Elon is taking the conservative route?

I really have no idea but thought I would help your brainstorm out if possible

 

[vgrinshpun]

Given it another thought, in the context, it would be misleading to give an estimate of gross margin without mentioning that it is based on a lower than currently given price. After all question was about helping analysts to build a model for stationary storage part of the business. Since the pricing was released during/after the event, the margins got to be based on these prices. Otherwise the modeling would not be correct.

I mi am really puzzled by this...