Short-Term TSLA Price Movements - 2015

[virtuesoft]

UBS have released a very bearish report on Tesla, and have downgraded them from neutral to sell with a price target of $210.

https://twitter.com/germantrader71/status/623411309351174148/photo/1

https://twitter.com/germantrader71/status/623411101439524864/photo/1

https://twitter.com/germantrader71/status/623410989875228672/photo/1

 

[yngwie_2012]

buying opportunity

 

[justthateasy]

There went all of yesterday's gains, and then some. Very well timed UBS.

 

[anon]

I can't see the figures that they are talking about, but it sounds from the text as though they are considering battery storage demand primarily only from consumers and not utilities. That's a big omission!

 

[CALGARYARSENAL]

There went all of yesterday's gains, and then some. Very well timed UBS.

This is the second firm who has put either a short or sell on the stock THE EXACT DAY it is to make an ALL TIME HIGH. Complete ********. Not falling for it this time. I will be holding on until earnings. If it wants to drop after earnings, so be it. I suggest there will be a spike after earnings.

 

[Renaud]

Oh my, perfect timing indeed I was about to take some profit of the calls 270 18th September I had and that were super green, guess I'll have to wait...
Anyway, not impressed by what I read in the report: forgetting the utility part as mentioned above by tentonine, and the "selling 1,5 million vehicle pa" is a bit light...

I guess, it's a TSLA tuesday and by friday we'll be back again at these levels?!

 

[FANGO]

Responses to UBS, sort of in order of the points they make...which btw lowered their PT from 220 to 210, which is not really all that significant:

1) Their estimates suggest that >1.5m cars in 2025 is priced in to the current price, and they don't think Tesla will be able to sell that many cars. Honestly, I don't know if Tesla can sell that many cars in 2025 either. But I certainly don't think it's "priced in." If it is, and they're downgrading to 210, which is 75% of today's price, then they must think Tesla will sell 75% of 1.5m cars in 2025 - that's ~1.1m. That's quite a lot of sales.

1a) And they think Tesla's stationary storage production will be greater than the entire market in 2020. This is very unlikely. That market will grow much faster than they think it will.

2) Yes, the much-publicized "$800m in orders" is a ridiculous number. These were not deposits, just expressions of interest. It's silly to count that as real money, current or future. Luckily, nobody is.

2a) Though they estimate that sales will *decrease* over time after "early adopters" run out, not increase. They are wrong on this.

2b) They suggest that new entrants will erode Tesla's early mover advantage on storage. Other entrants will certainly be able to "catch up" quite easily, and surely they will take "share" away from Tesla. But share doesn't matter if the market expands rapidly to accommodate new entrants, which I think is likely to happen.

3) They think Tesla is facing "new competitors." lol. Please, UBS, tell me who these competitors are, and how they're going to negatively affect sales. Even if they existed (they don't), they would aid Tesla, not hurt it. EVs are still not considered "legitimate" and are considered abnormal by much of the populace. The more manufacturers involved, the more normal they get, the higher sales are. And guess who gets the benefit of those sales? The company whose name is synonymous with EVs. More about this point below.

3a) They expect dilution for Tesla to finance new plants to build the 1.5m units that they think Tesla won't be able to sell. So they're trying to use this point against Tesla twice, doesn't make a lot of sense. You either expect dilution or you expect them not to reach that capacity, not both.

4) Getting back to the "competition" point, they elaborate on the challenges of 1.5m vehicles by talking about the "competition" which is coming: there is an "expected" i5 and i7 (hybrids); Audi is "reportedly planning" plug-in Q7 / A8 / CUV and Q6 BEV (apparently they don't know that Audi has "planned" to make an EV for about 8 years now and has made zero progress, I do not believe a single thing that company says about EVs, and nobody should pay them any heed until they actually execute, because so far they're showing themselves to be a bunch of incompetent liars); Mercedes is "reportedly working on" a few models; and Porsche is "weighing" some models. Note that none of these are even close to real cars or real plans. If the only competition for Tesla is imaginary, then I'm not too concerned about it.

4a) They also think these other manufacturers "won't cede share easily." Interesting, given that Tesla has taken share in the large luxury segment quite easily. Tesla currently sells a bit more large luxury cars than most brands, in the US anyway. UBS picks Porsche (a brand Tesla is currently outselling in the large luxury market) as an example of a brand Tesla can't outsell, but also recall that Porsche does not have a 35k model. They also pick Lexus (another brand Tesla is outselling in the large luxury market) as a brand Tesla can't outsell. Interestingly, you can actually add up Panamera and LS sales and Tesla *still* outsells them. Put together.

In fact, Tesla sells more than the BMW 7 series right now in the US, so if we take a full Tesla luxury product line and compare it to BMW's, and suggest that a full Tesla product line could sell similar numbers to BMW, who sell 2m annually worldwide across all models (1.7m excluding MINI), then 1.5m actually looks within reach for Tesla. Again, I'm not sure this will happen, and I do think that 1.5m will be a challenge to reach, but UBS picked manufacturers on the low end of sales rather than the high end. This smacks more of cheerleading than of analysis.

 

[ev-enthusiast]

UBS have released a very bearish report on Tesla, and have downgraded them from neutral to sell with a price target of $210.

Thanks virtuesoft for the info on the UBS downgrade.

Found the same info about the UBS report on twitter (e.g. @trader_53 and others).

My first read tells me that this reports contains a lot of asumptions, malinformation and twisted information as well as open questions to create the feeling that Tesla is smoke and mirrors.

The only weapon to this is true facts.

Lets get this report right and correct it here right before the opening bell.

I have some little cash sitting here and I do want to know if this is a BTFD (like we have seen with the last two downgrades).

Any help appreciated!

 

[MartinAustin]

buying opportunity

Totally. At least we won't have to wait long for real data, since the Earnings Report is coming up soon.

 

[Chickenlittle]

Oh my, perfect timing indeed I was about to take some profit of the calls 270 18th September I had and that were super green, guess I'll have to wait...
Anyway, not impressed by what I read in the report: forgetting the utility part as mentioned above by tentonine, and the "selling 1,5 million vehicle pa" is a bit light...

I guess, it's a TSLA tuesday and by friday we'll be back again at these levels?!

In March last year they claimed production by 2020 would be 275,000 units. They cited the bmw launch of i3 as a strong competitor.

 

[ev-enthusiast]

Here is an article on "We also expect other luxury OEMs to launch competing EV products.":
Do BMW, Mercedes, Volvo Plug-In Hybrid SUVs Compete With Tesla Model X?

For one, not every vehicle with a plug is interchangeable - and the Model X is the sole battery-electric vehicle of the bunch.
[...]
Audi, BMW, and Mercedes-Benz are all planning pure battery-electric vehicles - sedans, SUV, or both - with ranges of 250-plus miles, but those won't arrive for another few years.
[...]
But we think the 15,000 or so buyers that Tesla says have put down deposits for the Model X aren't interested in electric ranges of just 10 to 25 miles, plus a gasoline engine.
[...]
In fact, we're not entirely sure what does compete with it, aside from its Model S sibling beside it in Tesla Stores.
More than three years after its launch, the Model S remains the sole electric car on the market with a range of 200-plus miles.
Beat that, BMW.

(link)

 

[Renaud]

In March last year they claimed production by 2020 would be 275,000 units. They cited the bmw launch of i3 as a strong competitor.

thanks for the reminder of 2020 production expectations by UBS

As far as strategy is involved, they must have had that report ready for a while waiting for this "perfect" moment to release it. Since the information contained is so partial and so weak, its effect will be limited in time and will only allow the shorts that started shorting at ATH last year to escape limiting some losses. As we get closer and closer to ATH, those that went short in august/september at ATH are seeing their gains eroded and will get close to be underwater, while plenty of others are, of course, well underwater . This report is only there to delay a break out to 300 and above. Tactically, shorts will wait until weak longs escape, dropping the price further down, and then will start covering. Some perma bears will not cover and will have to do so at higher price, but they've been warned...ER is on its way, Model X reveal, UBS just bought them some time...

 

[Hogfighter]

That UBS analysis is hilarious. Really....if a company sells 1.5 million higher-end vehicles and has been growing by 50% per year with 28% gross margins, it will only be worth $35 billion???

1.5 mil vehicles with an ASP of $60,000 is $90 billion in revenue.

 

[Yggdrasill]

That UBS analysis is hilarious. Really....if a company sells 1.5 million higher-end vehicles and has been growing by 50% per year with 28% gross margins, it will only be worth $35 billion???

1.5 mil vehicles with an ASP of $60,000 is $90 billion in revenue.

Plus Tesla Energy. Plus they'll probably be selling drivetrains to Toyota after the hydrogen bubble bursts.

 

[FANGO]

That UBS analysis is hilarious. Really....if a company sells 1.5 million higher-end vehicles and has been growing by 50% per year with 28% gross margins, it will only be worth $35 billion???

1.5 mil vehicles with an ASP of $60,000 is $90 billion in revenue.

You can't project out 50% growth in perpetuity. It will slow down (on a percentage basis) sometime. I bet that time is before 1.5 million.

Gross margins will go down, as well, as has been stated by Tesla repeatedly. It's hard to make 28% on cars, even harder to make 28% on a car you're calling "affordable."

I wouldn't count on 60k ASP either. Keep in mind that base 35k cars will make up 75-90% of that, and I think their ASP will probably be 50k or less (more price-sensitive customers, particularly in the longer-term, and a max price of probly 60-70k). And of course UBS wouldn't multiply that by 1.5mil either, because they don't think Tesla will get to 1.5mil.

All these things said, their expectations are still too low.

 

[ev-enthusiast]

Ok, this is funny.
Do these analysts get paid by UBS for their text production or do they just write satire?

UBS slamming TSLA like there is no tomorrow.

Buying first batch of Sept $280 calls.

Update:
Done.

 

[Hogfighter]

You can't project out 50% growth in perpetuity. It will slow down (on a percentage basis) sometime. I bet that time is before 1.5 million.

Gross margins will go down, as well, as has been stated by Tesla repeatedly. It's hard to make 28% on cars, even harder to make 28% on a car you're calling "affordable."

ASP probably won't be 60k either. Keep in mind that base 35k cars will make up 75-90% of that, and their ASP will probably be 50k or less. And of course UBS wouldn't multiply that by 1.5mil either, because they don't think Tesla will get to 1.5mil.

All these things said, their expectations are still too low.

I stated 'has been growing by 50% per year', which is what you need to get to 1.5mil cars. I didn't say 50% in perpetuity.

Tesla has stated several times that they will target 25% gross margins for several years.

ASP will always be slightly higher than the average ICE vehicle due to lower overall cost of ownership.

 

[Bobbyducati]

looks like a great buying opportunity!

 

[aznt1217]

I didn't realize we had a time machine. These are the same arguments that bears have been using since the Roadster. Not enough demand, early adopters, won't ramp production successfully, etc.

Good buying opp. No question about it!

 

[Drax7]

That UBS analysis is hilarious. Really....if a company sells 1.5 million higher-end vehicles and has been growing by 50% per year with 28% gross margins, it will only be worth $35 billion???

1.5 mil vehicles with an ASP of $60,000 is $90 billion in revenue.

Ok, this is funny.
Do these analysts get paid by UBS for their text production or do they just write satire?

UBS slamming TSLA like there is no tomorrow.

Buying first batch of Sept $280 calls.

Update:
Done.

UBS has clients that explicitly demand this sort of report, whether they are hedge funds or European car manufacturerrs
that do investment banking with UBS.

The analyst calculation and extrapolations of the future are so officiously precise that he can even lower his target price by a perfect 10 dollars. Very impressive if you are a high school student.