Short-Term TSLA Price Movements - 2015

[Krugerrand]

Are you meaning the Redmond, Washington project or is there something in Oregon I don't know about?

As I typed that I was asking myself, was it in Oregon or Washington? Thanks for the correction.

 

[maoing]

I didn't say that and post ER drop is just one of the indirect consequences of demand constraints. Think about this way, TM enters 2015 with 1k/week model S production rate, there should have absolutely no doubt that TM can deliver 50K model S without any stretch even NO model X in the picture. But why market chose not to believe Elon's 50-52K Q4 guidance post Q3 ER. Figure out by yourself. Note, I don't buy any production and supply constraints excuses. I held demand constaints thesis from April (check "website wait time thread") and I prepared well to see big SP drop in Q4.

Btw, my post is just to express my opinion per request by papafox. It's not intended to convince anyone and it's not my obligation. you should always choose whatever you feel comfortable to believe and live on it.

Hi maoing,
You are saying that Model S production is demand constrained, and you believe that explains the drop in the post ER SP.

 

[MitchJi]

I disagree. With both of you. But it's not worth my time to even bother saying hardly anything. You both have your right to have an opinion, which some of us may feel is ridiculous, but that's our opinion.

:smile:

So it's worth your time to make a post stating that our opinions are ridiculous, but it's not worth your time to explain why?

IMO that is a textbook example of destructive behavior.

 

[Drax7]

Hi maoing,

You are saying that Model S production is demand constrained, and you believe that explains the drop in the post ER SP.

It's surprising to me that you believe that the drop in the post ER SP has anything to with MS demand and equally surprising that nobody disagreed with that point of view. I believe (respectfully) almost the exact opposite. I believe the primary reason for the SP drop is due to doubts about Tesla's ability to ramp MX production and secondarily to produce MS's. I believe that a another reason is that the market is underestimating the response to the MX.

I don't believe that there is any need to discuss this further. I believe that my opinion will be vindicated when Tesla succeeds in ramping MX production to 400-800 per week. I hope that happens in Q4 2015, but I would not be shocked if it slips to Q1 2016.

On the topic of demand constraint, the amazingly high prices that Tesla charges for CPO's contradicts that. I don't have a clear understanding of that issue. I hope that Scott will add some expert comments on that topic.

Nice insight on the pre owned car pricing, if demand were to be flaccid , it would be reflected there very quickly.
Agree with your views, however if the facts change, then I must change too.

I was among the first to react negatively about the X being unnecessarily complex, creating the delays
in production we are experiencing. However the SUV is an amazing machine and will be worth it when it hits the market,
and that is my opinion based on photographs and performance expectations, and on Elons enthusiasm .

Though there is always room for doubt, we are not naive either.
As Elon said recently, at the beginning all of our decisions turned
out to be wrong. That is a wake up call.

The referral program promotion certainly made me wonder about demand,
and it could be a straw in the wind indicating a slow down . However
given that over 90,000 model S are out there, tesla might as well motivate
all the owners to sell the car, given that 97% would buy it again. That's
a huge sales force engaged at very low cost. Once sequential quarterly
Sales fail to increase, then it will be clear we are approaching saturation
and the stock price may drop.


Let me repeat the 2 old trading / investing rules .

Rule 1. Don't lose money, and

Rule 2. Make sure you follow rule number 1

 

[JRP3]

The US delivery delay could be well explained that TM is prioritizing EU/China production to meet delivery goal. If US delivery pushed out to Q1, then it's a real question.

According to you Tesla has excess production capacity, so why would they need to prioritize anything if they can make all the cars they need at any time? Demand constrained means excess production capacity. Delays in deliveries can only mean one thing, production constraints, not demand constraints.

 

[MitchJi]

Hi maoing,

Btw, my post is just to express my opinion per request by papafox. It's not intended to convince anyone and it's not my obligation. you should always choose whatever you feel comfortable to believe and live on it.

Thanks for expressing your opinion. I found both the opinion, and many of the replies interesting and useful.

I didn't say that and post ER drop is just one of the indirect consequences of demand constraints. Think about this way, TM enters 2015 with 1k/week model S production rate, there should have absolutely no doubt that TM can deliver 50K model S without any stretch even NO model X in the picture. But why market chose not to believe Elon's 50-52K Q4 guidance post Q3 ER...

I just (respectfully) disagree. I believe the market chose not to believe that Tesla can produce several hundred MX's per week and to a lesser extent has doubts that Tesla can produce about 17k MS's in Q4.

Thanks Again!

Best Wishes,

Mitch

 

[Papafox]

Btw, my post is just to express my opinion per request by papafox. It's not intended to convince anyone and it's not my obligation. you should always choose whatever you feel comfortable to believe and live on it.

Just a clarification. I encourage Maoing and everyone else to provide some evidence or logic with any predictions. That way, we can better understand the reasoning. I also suggest explaining why you are doing something with your own money (buying, selling, moving from short-term calls to long-term calls, etc.) at the time you do it if you feel that others can benefit from your thought process.

Edit: Please use discretion and don't use my suggestion as a reason for putting forth a continuous stream of opinions, particularly recycled opinions. Respect the reader's time.

 

[JRP3]

It's surprising to me that you believe that the drop in the post ER SP has anything to with MS demand and equally surprising that nobody disagreed with that point of view.

I've been arguing all along that there is no evidence of dropping MS demand.

 

[maoing]

It could be TM intentionally slowed down production ramp up to match slow demand growth. This is long known theory brought up many times before. IMO production ramp up would be simplest thing to do to make TM thrive given there is enough demand.
1) start 3rd shift of model S production to boost production rate 50% immediately
2) invest $ on tooling and workers for 2nd model S line, boost production rate by 100%
3) model S production ramp up can give TM much needed positive cash flow to support future growth, model X even becomes an unnecessary part in TSLA story

Compared to the billions $ loss of market cap, those $ investment to get production boosted is really nothing. But TM didn't do that and we obviously see TM accelerates cash burning without more cash flow.

According to you Tesla has excess production capacity, so why would they need to prioritize anything if they can make all the cars they need at any time? Demand constrained means excess production capacity. Delays in deliveries can only mean one thing, production constraints, not demand constraints.

 

[anticitizen13.7]

Again, it's not just about the factory capacity. Supply chain, vehicle delivery, and service & support all have to scale with production.

 

[maoing]

Among all the factors, demand stimulation would be the hardest. Everything else is not rock science and can be well resolved by $.

Again, it's not just about the factory capacity. Supply chain, vehicle delivery, and service & support all have to scale with production.

 

[phigment]

Among all the factors, demand stimulation would be the hardest. Everything else is not rock science and can be well resolved by $.

I'm sure some advertising would help with demand stimulation.

 

[JRP3]

It could be TM intentionally slowed down production ramp up to match slow demand growth. This is long known theory brought up many times before. IMO production ramp up would be simplest thing to do to make TM thrive given there is enough demand.
1) start 3rd shift of model S production to boost production rate 50% immediately
2) invest $ on tooling and workers for 2nd model S line, boost production rate by 100%
3) model S production ramp up can give TM much needed positive cash flow to support future growth, model X even becomes an unnecessary part in TSLA story

Compared to the billions $ loss of market cap, those $ investment to get production boosted is really nothing. But TM didn't do that and we obviously see TM accelerates cash burning without more cash flow.

Or, it could be, simple short term production constraint that they will take care of over time, since they probably don't care too much about temporary fluctuations in the stock price. Hiring and training another shift of new workers for third shift is a sure way to make profit margins worse in the short term.

 

[anticitizen13.7]

Among all the factors, demand stimulation would be the hardest. Everything else is not rock science and can be well resolved by $.

Why do you believe that increasing demand is so difficult? The USDM medium to large luxury sedan market (BMW 5, 7 series and competition) is somewhere around 18-20k units/month IIRC. Tesla has produced about 1k vehicle a month for Worldwide markets. The target market still has a lot of potential customers. Model S has plenty of unique selling points, and people who test drive them are almost always very impressed.

Supply chain problems cannot always be solved by $ alone. Throwing money at a supplier does no good if the supplier is itself constrained by lack of raw materials, insufficient facilities, or problems in manufacturing process. There may be substantial lead time between request for more components and actual delivery.

The same goes for service centers and Superchargers. Superchargers are relatively cheap to build, and Elon even told the Supercharger team at one point to spend as much as possible. The Supercharger network has grown, but not nearly as quickly as Tesla projected. Acquiring property, dealing with red tape (zoning laws, local opposition, etc.) takes time -- sometimes a lot of time. Red tape is not something that $ can dispense with easily, at least if one wants to avoid bribery and other illegal actions.

 

[stealthology]

Hey maoing,

For me personally, it's hard for me to believe you don't have a financial interest in Tesla stock tanking. Anyone else, feel free to chime in.

First, let's start from Tesla Q2 ER in 2014, it's guided to achieve 2000/week production rate by end of 2015 saying "Provided that we execute well and there are no serious macroeconomic shocks,
Tesla’s annualized delivery rate should exceed 100,000 units by the end of next year";

You're right, they did. They didn't mean they're going to deliver 100,000 cars in 2015, they meant they'd be capable of doing so by end of year. In that same conference call, Musk also said "..certainly more than 60,000 I would think" for 2015 deliveries. This was in August 2014. Also, in the most recent CC, Elon said we should be in the 1,600-1,800/wk range in Q1Y16, maybe exceed it toward the end of 2016. He also said some weeks they could go to 2,000/wk.

In my thesis, production would be the least issue for Model S, as soon as TM has money to invest tooling and hiring workers, the production rate can't be flat in such long period, essentially Q4Q1Q2Q3 four quarters in a row.

So Tesla delivered 11,603 cars this past quarter. You're right, it doesn't seem like they're increasing the Model S production much quarter after quarter. Per the shareholder letter, Tesla plans to deliver 17,000 - 19,000 vehicles in the current quarter. That's quite a bit jump if you ask me.

With approaching end of 2015, every investor should ask what prevents Tesla to achieve 2000/week production rate? Even Elon excluded the possibility to achieve such rate by end of 2016.

Did he? As I already mentioned above, Elon stated that some weeks they could go to 2,000/wk, and that towards the end of the year they could possibly exceed the 1,600-1,800 average range for 2016.

The model X execution issue will only last a few quarters.

I like the way you phrase this, like this is a good thing. In the last conference call earlier this month, Elon said he feels very confident to be producing several hundred X's per week by the end of the year, and achieve steady state production capacity during Q1.

TSLA stock price was based on the projection for exponential growth and Elon's optimism. Once the real demand growth can't meet the expectation, then stock price doomed.

You don't think Tesla is poised for exponential growth? If you want to talk about Model S demand, Elon said earlier this month that during Q3, global Model S orders increased by more than 50% y/y. If you want to bank on demand growth having some serious issues coming up, go ahead and short it. It seems like China is just starting to gradually catch on, btw. That has potential to be big.

Now with China in the picture which at least contributes 4K model S, why can't TM simply beat the 55K guidance by model S only?

Because of the Model X, and because they'd rather miss a deadline as opposed to coming out with a product which they feel to be subpar.

TM doesn't lack demand growth, the trouble is the growth can't meet super high expectation back to 2013/2014, so you see the SP back to almost 2 years ago.

I think Tesla has done a pretty good job with communicating growth on a yearly basis. Growing 50% per year indefinitely is nothing to sneeze at, especially for a car company.

In the meantime, current demand even can't sustain the bottomline of TM guidance which is very bad we see the price action right now.

Sigh. Capital investments. It will absolutely pay off in the long run. You don't think so?

 

[maoing]

Hey maoing,

For me personally, it's hard for me to believe you don't have a financial interest in Tesla stock tanking. Anyone else, feel free to chime in.

Yes, I do as everybody does here. Remember I just rephrased my opinions back to April per response to papafox and it's nothing new at this point. I had been expecting TM fail to meet 2000/week production guidance and fall short of 2015 annual delivery guidance from my analysis. You could search my posts in "Website wait time" thread in April time frame.

You don't think Tesla is poised for exponential growth? If you want to talk about Model S demand, Elon said earlier this month that during Q3, global Model S orders increased by more than 50% y/y. If you want to bank on demand growth having some serious issues coming up, go ahead and short it. It seems like China is just starting to gradually catch on, btw. That has potential to be big.

50% YoY is a decent number. But it's certainly not good enough to move the stock in big way. And it's still questionable to see if TM can meet its reduced guidance at this point.

Because of the Model X, and because they'd rather miss a deadline as opposed to coming out with a product which they feel to be subpar.

NO. Any model X shortfall should be well compensated by model S production if model S demand is really strong, otherwise market has doubt on model S demand which not rosy as Elon claimed many many times. There is no execuse not to meet 55K annaul guidance even without model X.

 

[stealthology]

On another note, don't you think we'd see Tesla spending some money on advertising, endorsements etc.? If they were really concerned about upcoming demand so much? (Love this quote by Musk: "We do not pay anyone (inc celebrities) to pretend they like our car.") Back in August 2014, Musk said Tesla can drive up demand at will. He said they are hardly building any sales locations now. He also inserted Apple is normally the leader in sales/sq ft, and now they're double Apple. Earlier this month, Musk noted that China is their newest major market, and that Q3 Model S orders increased substantially from Q2, due in part to opening two new retail locations. He expects order growth in China to remain strong with more store openings and recent policy changes in Beijing and other major cities which allow buyers to bypass license plate restrictions. Final Musk quote, going way back to Aug 2014: "China is genuinely committed to EV's".

Switching gears again, keep in mind that this past August, Musk said that stationary storage sales "could be a few billion in 2017", and should "just keep growing at a nutty level", and Musk "doesn't think there's a problem with 15% margin", and that it will improve as production goes up. Musk also said that long term, demand for batteries will be about double the car business.

Earlier this month, on the conference call Deepak said he doesn't see any fundamental issues with X demand. In May 2015, Musk said they don't see any demand issue, and that you can see that by the delivery times on their website, and that they are "seeing a steady climb for S demand".

 

[Causalien]

Short-Term TSLA Price Movements - 2015 - Page 1612
Agree, difficult to find even for me :smile: Quoted. Post #16116. I don't know if it's that important. I got it right this time, could be wrong next time :smile:

It's kinda important as I am taking stock of people's accuracy in prediction. Especially if they pre-announce a move before events.

 

[MitchJi]

Switching gears again, keep in mind that this past August, Musk said that stationary storage sales "could be a few billion in 2017", and should "just keep growing at a nutty level"... Musk also said that long term, demand for batteries will be about double the car business.

Would you please provide a link or the source for those quotes?

Thank You .

 

[FredTMC]

TSLA up today from the start. No news.

Wonder if Elon is buying more shares. Wouldn't surprise me