Short-Term TSLA Price Movements - 2016

[replicant]

Sure Elon owns a big part of SCTY, but imagine Tesla wanted to enter the solar market now anyway? Would it start from scratch or would it consider an acquisition? Why not consider SolarCity since it's the leading installer and it's investing in the mass production of high-efficiency panels? Also, what if Tesla wanted to get a large workforce of qualified installers to deploy 100,000+ Powerwall per year? SolarCity can switch to loans (instead of PPAs) under the Tesla management, can't it?

 

[3mp_kwh]

With that act, the only damage to TSLA is dilution of equity.

Right, and what damage can you do to a P/E that is undefined? Just about no impact at all, then. /sarc

 

[EinSV]

I am still digesting all this, but it may be worth factoring into the mix the fairly robust 2013 survey of California BEV owners that showed that 56% had rooftop solar or were considering installing it in the next year (39% and 17%, respectively).

39% Of California EV Owners Have Solar Panels (Infographic)

This suggests that (1) the massive growth of BEVs over the next decade will further accelerate the adoption of solar and (2) there is a very substantial overlap in customers. The concept of one-stop shopping that takes care of all of your energy and transportation needs is very interesting.

The combined size of what are now three markets (auto, gasoline, electricity) is massive. If done right (which I have every reason Tesla can do), the solar/battery/car package could be a compelling option for many customers.

My reaction (and I believe many people's reactions) when TE was first announced was that it had little potential, was an awkward fit with a car company and a distraction from what I thought should be the focus of Tesla on execution on the car business. Seems like many investors are having the same reaction here (plus some SCTY-specific factors). I was dead wrong on TE, and I think I had a lot of company. Elon has great insight into where the market is going and how to put together compelling products to grow those markets.

I trust Elon's judgment and vision. Absent something dramatic coming out during due diligence I will vote in favor.

 

[Gerardf]

We might see a short attack at opening from some hedge funds that seem very upset by this deal and want to break / prevent it, as they are heavily short on SCTY and have a big interest to spread FUD around this aquisition of SCTY.

I feel they were / are betting against Elon, and are about to loose big because of that


This would be an 'interesting' moment for large institutional holders to request the shares back that were borrowed by shorts.

 

[electracity]

I am still digesting all this, but it may be worth factoring into the mix the fairly robust 2013 survey of California BEV owners that showed that 56% had rooftop solar or were considering installing it in the next year (39% and 17%, respectively).

39% Of California EV Owners Have Solar Panels (Infographic)

This suggests that (1) the massive growth of BEVs over the next decade will further accelerate the adoption of solar and (2) there is a very substantial overlap in customers. The concept of one stop shopping that takes care of all of your energy and transportation needs is very interesting.

The combined size of what are now three markets (auto, gasoline, electricity) is massive, and if done right which I have every reason the Tesla can do, the solar/battery/car package could be a compelling option for many customers.

Will EV buyers pay a premium for a Tesla home solar system? Solarcity is a loser because their model is inefficient. Tesla can reduce sales cost for store sales, but that is not likely nearly enough volume to remain the largest residential solar providers.

Solarcity was not founded under the principle of providing superior customer value. They were founded on a fundamentally deceptive sales practice. The market has rejected the deception, but that doesn't mean that Tesla has an effective replacement business plan.

 

[snellenr]

Also, what if Tesla wanted to get a large workforce of qualified installers to deploy 100,000+ Powerwall per year?

What if Tesla *also* wanted to get a large workforce of qualified *electrical* installers to assist 300,000 new Model 3 owners with their EV charging solutions in the next two years?

 

[CALGARYARSENAL]

Solar City getting pounded. It will obviously be a no vote if we can pick it up for pennies on the dollar - if it's trading 10 bucks a few weeks from now.

 

[cluster]

Giving Musk spent little time on Solarcity, it is possible he does not fully understand the company and/or he is fooled by his cousins.

For those who want to vote against the deal, we should write an open letter to Musk and hope that he will withdraw the proposal.

 

[techmaven]

Will EV buyers pay a premium for a Tesla home solar system? Solarcity is a loser because their model is inefficient. Tesla can reduce sales cost for store sales, but that is not likely nearly enough volume to remain the largest residential solar providers.

Solarcity was not founded under the principle of providing superior customer value. They were founded on a fundamentally deceptive sales practice. The market has rejected the deception, but that doesn't mean that Tesla has an effective replacement business plan.

While I am not a fan of SCTY stock, I'm pretty sure your statements on this are pretty hyperbolic. Further, Solarcity doesn't have to live off residential PPA. And utility level PPA is pretty standard fare. On top of that, it is pretty well acknowledged that Solarcity has one of the lowest costs for installation in the business. So when you talk about inefficient model, you are really just talking about the finances behind the residential PPA product, right?

 

[Gerardf]

Will EV buyers pay a premium for a Tesla home solar system? Solarcity is a loser because their model is inefficient. Tesla can reduce sales cost for store sales, but that is not likely nearly enough volume to remain the largest residential solar providers.
Solarcity was not founded under the principle of providing superior customer value. They were founded on a fundamentally deceptive sales practice. The market has rejected the deception, but that doesn't mean that Tesla has an effective replacement business plan.

Maybe you are angy. OK. Frustrated. Several here are. But we now all had a good nights sleep.


I feel you use some pretty strong words that do not help in communicating your point.

'Deception" It is clear you do not like them, and that is fine.. but to call SolarCity 'deceptive' ??? Such statement needs proof.

'Rejected" Hmm, also before the aquisition offer was announced Solar City had a 2B+ Market cap. And IPO price was US$ 8,-- in December 2012 and is now 21,-- (with offer from buyer of 26,-- )
IIRC they are the largest Solar installer in the USA.

Maybe reconsider first before posting such strong words.
(IMHO some other posters qualify for that as well)

 

[tftf]

Better, irony more clear

The real irony is MS raising the price target of TSLA sky-high back in February 2014 in view of green energy utility/storage and autonomous vehicle potential (the "utopia note") - and lower the price target in June 2016 now that Tesla is executing on that very strategy:

Tesla's Next Trillion-Dollar Industry

 

[Krugerrand]

Oh, my! Interesting how you suggested stopping after having the last word in yet another discussion

Not interesting at all; I like the other poster more. If you'd been a bit more patient, you'd have seen he responded back to me so I didn't actually have the last word in that discussion and I'm totally okay with that despite what you think. I am open to continuing this discussion with you as long as you want, but since it's now gone off thread topic please take it to conversation if you wish to carry on.

 

[Papafox]

More from Morgan Stanley's research note:

At a high level, we view Tesla’s share price as influenced by 3 main factors: (1) The quality and appeal of its cars, (2) the pace of cash consumption, and (3) the company’s ability to access capital markets to fund ambitious investment and growth objectives. Let’s examine each of these while contextualizing SCTY within our views of Tesla’s business fundamentals and share price outlook:

1. Does buying SCTY help TSLA make better cars? No. We do not believe so. In our view, the success of the Model 3 will be due to factors not related to the ownership of a solar company. Over the long term, could we envision a confluence of clean transportation and clean energy where Tesla offers services and the use of its ecosystem to consumers as a bundle? Sure. Could Tesla achieve even higher economies of scale in storage from serving the energy market that could enhance the economics of batteries for cars? Possibly. We believe such benefits are theoretical and very long term.

2. Does buying SCTY improve the pace of TSLA’s cash burn? No. Based on our electric utility/clean energy team’s forecasts, it appears SCTY would exacerbate the cash burn of TSLA even when allowing for cost synergies and initial commercial opportunities. On our current forecasts without an acquisition, Tesla already consumes significant amounts of cash on an annual basis. Following nearly $2bn of free cash burn in 2015, we forecast FY16 cash burn of $1.8bn followed by $400mm in 2017. We don't forecast Tesla to achieve positive free cash flow before the middle of 2018. Our N.A. Power Utility and Clean Tech team estimate SCTY cash burn of $364mm in 2017 and $116mm in 2018. Exhibit 5

3. Does buying SCTY improve Tesla’s access to the capital markets to help fund the mission? No. We think it raises a number of questions around governance that may test the bond of trust with investors who, to this point, have funded Tesla’s early accomplishments. Even if Tesla shareholders do not approve of the deal, the questions surrounding governance could have a lasting impact on the investment debate. In the event that a deal is rejected, would SCTY face increased difficulty in accessing capital from other sources? What impact would this have on investor perceptions of Tesla? On yesterday's analyst conference call Elon Musk stated: "If SolarCity is constrained in the short term from going out and raising equity, Tesla would provide a bridge loan if needed. I don't think it is going to be needed." What are the precedents for an acquiror lending money to an acquiree, particularly with conflicts of interest related to family and cross ownership? Would such a bridge-loan require shareholder approval?

Assuming SCTY turns out to be a success, is it big enough to move the needle significantly? Discussions with our N.A. Power Utility & Clean Tech team have led us to agree with CEO Elon Musk on some of the potential benefits that could be derived from a combination of TSLA/SCTY. Among those, we'd highlight (1) Lower sales costs for solar/storage; (2) Lower installation costs; and (3) Advantages from integrating solar and storage especially as net metering rules change at the state level. However, these potential benefits appear to be relatively small over the next few years even under rosy scenarios. Exhibit 4 From our perspective, we believe Tesla’s valuation is dominated by the significant opportunities it faces in the areas of shared, electric and autonomous mobility. Our core thesis for the long term direction of the automotive industry lends itself to many of the skills and attributes that Tesla possesses. We forecast Tesla's revenues to exceed $9bn in 2017 vs. SolarCity revenues of a bit more than $600m this year.

Thanks Mulder, that note will likely have an influence. Waiting to see what happens.

 

[Drax7]

TFTF has been bashing Tesla and Elon for years, and now he wants to provoke us
with bullish comments. One cannot take him at his word, the guy hates
tesla and Elon with a passion. Its best to ignore him completely.

 

[ggies07]

Discussions with our N.A. Power Utility & Clean Tech team have led us to agree with CEO Elon Musk on some of the potential benefits that could be derived from a combination of TSLA/SCTY. Among those, we'd highlight (1) Lower sales costs for solar/storage; (2) Lower installation costs;

This right here is the most expensive part of solar, the "soft costs". Therefore, if this merger can get these to go down, then solar installations could expand even more rapidly and would be a great result for TSLA.

 

[MitchJi]

3Gwh by Q4? Wow! That's a lot. Where did you get that number?

Thanks! When I checked my calculations I realized I made a mistake. I should have posted 2.2 GWh.

Elon talked about seeing the cells come off the line, and said to an analyst he should attend the party and see for himself. Those statements imply that the GF is ready to start producing cells. First phase, out of eight, means about 35 GWh (the original plans cell capacity) divided by eight equals 4.37 X 2 for the 2-3x production means 8.7 annually divided by four is about 2.2 GWh. My intention was to use 2x, instead of 3x to be conservative but I made the mistake of using 50 GWh for annual cell production instead of 35 GWh. So I believe there's an excellent chance of at least 2-3 GWh in Q3 of 2016.

Elon said 3x so it could be over 3.

person ever but everyone has a flaw. His might be that he doesn't know his own limits. Those who wish for Tesla to fail would love for us to divide our focus and dilute our strength. So I'll be voting no on this merger.

Your vote won't really count. In California if someone votes for trump it doesn't count because trump has zero chance of winning in California. The large institutions votes will decide this.

After one day of research. I am more pissed off at the fact that in the middle of repaxation for everyone, I have to analyze this *sugar*. I had other things in motion that was already past due for my attention.

Then I dig into scty financials and realize that this will take a lot more effort than I orignally anticipated. At the end of the day when adrenaline has been keeping me awake for two nights I am tempted to just give up and not do the analysis at all.

Please take care of your health!

 

[MitchJi]

This right here is the most expensive part of solar, the "soft costs". Therefore, if this merger can get these to go down, then solar installations could expand even more rapidly and would be a great result for TSLA.

And the planet.

 

[The Froq]

Almost free panels with the Model 3. That's the plan I should do. ROI in 5 years.

 

[Krugerrand]

I gather that TM/EM has yet to conduct full Due Dilligence on this potential acquisition. That 'DD' will take weeks/months..thus delaying the vote.

I'd have to go and either reread the transcript or relisten to the conference call, which I don't have time for right now, but I'm pretty sure Elon made a comment about this with the expectation it wouldn't take very long based on the fact he and the rest of the board (some who are involved in both companies) are already familiar with Solar City's financials. He further went on to say that is unless something has been hidden from them/they aren't aware of some sort of aspect of the financials.

 

[uselesslogin]

Just realized,
TE - Tesla Energy
SL - SoLar
A - Autos

It's so obvious

I'll play,

Transportation
Energy
Solar
Lasers
Autonomy

So besides trains, planes, and boats we can expect frickin' lasers. Obvious. The laser industry is so ripe for disruption. But I think Elon is missing that if they don't buy Solar City they can have Sharks too. Oh well.

My position is analysis paralysis but also comfortable with leaving my (long) TSLA position as is to see what happens.