Short-Term TSLA Price Movements - 2016

[dc_h]

Still no evidence Sig's are done shipping and production Model X is ready to go until mid February. This is they key for Q1 approaching FCF. Without Model X in volume, there is no FCF. If there are only 1000 or 2000 Model X in Q1, they won't be profitable. If they aren't ramping up by earnings, then forward guidance will be discounted. Communications for X customers still seems spotty, so getting news about Model X production getting locked down and scaling up is THE key short term issue.

 

[electracity]

TM is tailoring their expenses. They might well be (should be) freezing/delaying any expenses they can to produce profits in Q1 and/or Q2 to remind the market they are fundamentally profitable. I welcome this pause in SC buildout, if indeed that is happening.

I agree, but I wonder about Q1 sales after pushing hard to replace missing model X sales with model S in Q4 2015.

The 2016 supercharger build map looks extensive. Perhaps they are planning a supercharger building surge in the second half of the year. I assume they will seek more capital this year after proving they can show a positive cash flow.

 

[ZenMan]

is there any news behind TSLA sell-off right from the open?

Check the NFLX chart. Almost the same drop as TSLA. So maybe a risk off trade?

 

[Muaddid]

Look at the map - this is a large country and people in flyover country are going to want to be able to get their cars fixed too without having to drive 300 miles.

As someone mentionned in one of the Model 3 thread, maybe part of the solution is autopilot: an autonomous car drives to your house in the morning for the duration of the repair while your car is being towed to the service center. When they are done with your car they send it back by itself. Then you just have to send the other car back by itself

 

[dreamingof3]

WTH is going on with this stock?!!! Anytime a stock tanks on no news I get nervous-like who knows something. Technically this stock is in the dog-house and wanting to touch the 52 week low. I am losing my rear end and it isn't fun with the market going up. So let's see oil up should equal tesla up-false! Market up tesla up- false!

 

[ggr]

I am shocked that people here (not just your comment, but others) don't follow the supercharger network build-out with great intensity. I have been able to predict so many things going on with Tesla just from the Supercharger build-out. It also gives an indication of just where Tesla thinks they will be selling cars (and not). Also, I had a feeling that one of the major reasons the X was delayed was to allow for more superchargers to be finished (note the strong surge Oct-Dec of last year). Being that a great concentration of Tesla's sales are in California, it would be devastating to the company's reputation for customer service to start producing a car that there simply is not enough infrastructure to support. People were already complaining about waiting in lines to charge (in California).

But, if you are not intensely following the build-out, then you for sure couldn't tell that things have slowed (basically stopped) in the last month in the U.S. I have NEVER seen, in the last 2 years, Tesla have less than 10 superchargers under construction at any given time in the U.S. As we are right now, there are 6 under construction, but 4 of those have no work being done (2 are completed and waiting final inspection). Only 2 are actually being constructed - Buttonwillow and Slidell, La. That means that 8-12 contracting crews that were steady working for Tesla the last 18-24 months have had to find other work. How many will be readily available when Tesla is ready to ramp back up, IF this is just a short slow-down to cut expenses for a while. That thought (about the contractors) and the fact that the supercharger build-out is such a small part of the CAPEX spending leads me to believe that this is not just a money-saving move, but rather an indication that something BIG is on the horizon.

Again, if you aren't paying attention to the build-out, then this slow down is nothing you will notice. However, if you have intensely followed the build-out over the last 2+ years, you will know that this is 100% out of the ordinary. WHY IN GOD's EARTH WOULD TESLA SLOW DOWN THE SUPERCHARGER BUILD-OUT WHEN THEY PLAN TO DOUBLE THE NUMBER OF CARS ON THE ROAD IN THE U.S. THIS YEAR? But, to ask that question, you first have to realize that there actually IS a slow-down.

Tesla doesn't tell us about what they're working on in advance. These are only the ones that we know about. Remember Redondo Beach, which no-one noticed until a couple of days before it opened (and after it was complete except for inspections)? In a couple of months, with hindsight, you will be able to say "Look, they stopped building superchargers!". But I don't think you can say it now.

 

[flankspeed8]

They won't be selling 500,000 in 2017 or 2018. It will take awhile for production to ramp which gives them time to expand the service centers. Right now I suspect tesla wants to show it can operate at cash flow break even if they need to, and then they can get back to investing in growth.

hopefully we are also looking at a Model 3 that isn't breaking new ground on components and with many of the existing components already having many issues worked out (12V, motor whine for example). I don't see any reason to think that the 3 will be as complex as either the S or X, however volume may quickly double so of course service center expansion is needed or some sort of partnership model to expand repair options.

I I don't ever expect to get the same footprint as traditional automakers. There really isn't a need to have 3 dealers in a 25 Nie radius anyways.

Fair point. But I am guessing most of us would agree that it will be much more difficult and expensive to scale up the service center network compared to building out the Super Charger network. And I see you are in SF were I have no doubt you have several service centers within a 100 mile radius. Once Tesla starts building out centers in more remote areas I guess that will be a tacit sign that they are starting to take more seriously the need to serve a wider spectrum of customers, not limited to where they happen to live geographically. The Ranger service changes have seemed to leave many early adopters in the lurch and it seems the only counter to this is to build build build so that no one is faced with having to tow their car 100 miles, let alone 300 miles because of something as simple as a 12v battery issue.

 

[aznt1217]

I haven't decided for myself if FCF is hard or easy.
I simply don't understand the FCF calculation yet as it relates to Tesla.

I certainly agree that Capex is the real variable to achieving FCF.

Correct, this is why Deepak and Elon pinned the getting to positive FCF to efficiency on the production line/logistics and it is heavily tied to Model X. The sooner the X's ship the sooner they can recoup and add to gross margin. ASP's for vehicles will go up significantly.

Looking at QoQ data, I think R&D is going to trickle down to a bout 15% of revenues at a constant rate and I believe SG&A is going to float around 21-22% of revenues. Note that when there was a surprise profit SG&A and R&D were at its absolute lowest in Q1 2013 because Tesla was weighted more towards the deliveries and efficiency and less so on breakthrough product development. Shortly after that in the quarters following, R&D stepped up and we got things such as dual motor AWD and such. I firmly believe that Tesla front loaded the development of Model 3 in pieces in the S and the X so that R&D funds could be focused on the breakthrough tech like autonomous driving and energy which we will see in the upper echelon of vehicles.

Between buying more factories (casting and tooling in Michigan), upgrading the paint shop, creating a smaller more efficient motor, upgrading cell tech, faster charging, and lightweight processes/parts we have what we need for Model 3. It's just a matter of putting it together in a cohesive shape which we are about 2 months away form seeing.

 

[Buddyroe]

Hey this is great, but where are you getting the information on the "slow down"? I could've sworn I got some e-mails telling me about new stations being opened on the east coast.

Again, it's just a basic understanding of how the build-out works. When you see a station open, on average, construction on that site started 46 days previously. So, what you need to look at to gauge whether it is slowing (or not) is how many sites currently in construction and new construction starts in the last month or so. As I pointed out, there has been ONE new construction start in 2016. And, as I also pointed out, this is the lowest number of sites currently being constructed (6) in the last 2+ years. Again, I am only talking about the U.S.

As someone else pointed out, these sites are fairly cheap to build (more then $150k on average though - actual cost is $150k to $500k). I can't see WHY in the world they would slow down on something that is fairly inexpensive, yet so vital to the ownership experience for Tesla owners. Take a look at the 2016 projection map, Tesla has plans to build a TON of superchargers this year. Will $8-12 million this qrtr REALLY make a lot of difference in earnings compared to significantly delaying the SupCh network? I really don't think Musk would delay the immensely needed SupCh network just to show a few million on the bottom line. The long term effect would be much greater. To the everyday car buyer (ie, people who will be buying the M3), 250 or even 500 supercharger stations across the US is not impressive. To be able to go anywhere, and feel reasonably comfortable doing it, that number needs to be in the 2000-2500 range. But, if you don't follow the supercharger threads very closely, then you probably don't get a good feel for just important EVERY SINGLE STATION is - people make tons of posts like, "I need this site for a trip I am doing in Feb" or "I need this site to be able to use my MS on a trip I take every month." So, if we are seeing these kind of comments with 60k MS's on the road in the U.S., what will it be like when there are 500,000 Tesla cars on the road (in the U.S.)?

People are GREATLY undervaluing the supercharger network. Range concerns are still the #1 reason people won't even entertain the thought of buying an EV.

 

[tinm]

JP Morgan's downgrade is getting some press and attention... could be the triggr for the drop.

http://www.valuewalk.com/2016/01/tesla-stock-lows-analysts-cut-estimates/


Then again it might be because the group of Tesla owners who were planning to show up at the Senate Gallery of the State Capitol in Santa Fe, NM this morning to educate the legislature about the NM laws that ban Tesla owners from getting service, and ban Tesla from opening stores here, had to cancel the event due to snow. As soon as the word got out of the cancellation, stock plummeted. Coincidence?

(We're gonna try again on Friday. So stock should recover then )

 

[flankspeed8]

TM is tailoring their expenses. They might well be (should be) freezing/delaying any expenses they can to produce profits in Q1 and/or Q2 to remind the market they are fundamentally profitable. I welcome this pause in SC buildout, if indeed that is happening.

Then this is playing right into Wall Street's hands and not what is best for the customer. I have heard many people say that Tesla is not worried about the market, just making a good car and quality experience. This would contradict that, to scale back long term growth for a short term share price pop because of a somewhat manipulated quarter. I know many companies do this, but this is why they become slaves to the market and let SP dictate what they do, rather than what they should do. In the long run is it really worth it for a short lived stock pop?

 

[ggr]

Re: the stock price drop, I think Elon put his foot in his mouth again. He basically said that low oil prices will hurt EV sales. He continued on to say "not so much for Tesla", but the media has picked up on only the first part of the quote. Politicians are trained to phrase things so it will be hard to misquote them, not so much for Elon.

 

[flankspeed8]

As someone mentionned in one of the Model 3 thread, maybe part of the solution is autopilot: an autonomous car drives to your house in the morning for the duration of the repair while your car is being towed to the service center. When they are done with your car they send it back by itself. Then you just have to send the other car back by itself

Now that would be something! I like the thought.

 

[austinEV]

Julian, then please speak to the question asked. Who is going to be servicing a Model 3(or S or X) for that matter in Duluth MN? How about Winona or Rochester MN? Danbury WI? This is a valid concern of the masses of people who are willing to take the leap of going with a more unconventional car in their mind. We know that Tesla is not immune to break down and qc problems. Seems like some of the existing SC are getting bogged down with X rework. This is a legitimate question and by you dismissing it as a fallacy with a lot of philosophical speak isn't answering the questions. The paradigm shift of ordering a car online is something that IMO will not be a huge barrier, but if there is no reasonable brick and mortar repair facility, this will cause people a lot of angst. Look at the map - this is a large country and people in flyover country are going to want to be able to get their cars fixed too without having to drive 300 miles. Although this certainly is more of a long term price effect factor, but since the question was asked (and answered by some) I would like to know the rationale of being dismissive.

After re-reading your post again is your answer essentially: nothing to see here, they will build them when they need them because somehow their business structure will make it easier, or are you saying that lack of Service Centers is really not important because somehow Tesla has the vision and the magical ability to make them unnecessary?

Let's not confuse inconvenience for customers in Duluth with a problem for the company. TM can simply sell M3 to customers that *are* within range of a SC, and can do this for years. They don't have to forbid buyers, just have gallery staff say "you are 300 miles from a SC. We have no plans to build one closer to you. You would be looking at these options..." and the customer can decide if it is acceptable. They might not. But that buyer is replaced by one that is within range. This is not a problem for TM until such time as they are demand constrained on the M3.

As for the economics of service centers, I think the point Julian is trying to make is that there is no inherent benefit in using a dealer network to build out service centers. Ford "paid" for all those dealerships in lost profit. The inititial buildout, 80-90 years ago was essentially financed by individual franchisees but once the buildout is done it is a financial drag. The ICE buildout was paid for by they car buying public and the same economic reality that drove that will drive it again assuming that EV's do replace ICE volume. This time however TM will keep the service center's internal preventing conflict of interest and controlling quality (eventually....). This isn't a problem that needs fixing-- if TM vehicles sell briskly with good profit margins the service centers will be built out in time.

 

[Fallenone]

Yes, a few million for Q1 really makes a lot of difference for the company. Putting it in context, model X has been delayed three times and in the process, Elon broke his promise three times. FCF is also delayed from Q4 2015 to a promise of Q1 2016. If they still can't keep the FCF Q1 2016 promise, Elon and the company will further lose credibility, making the task of raising capital to accelerate their growth a lot harder, particularly in the current macro market environment. We are comparing a dozen or two of Supercharger and a few billion dollars for model 3 production and GF investment here. It's a no brainier to halt the construction of superchargers for now.

Again, it's just a basic understanding of how the build-out works. When you see a station open, on average, construction on that site started 46 days previously. So, what you need to look at to gauge whether it is slowing (or not) is how many sites currently in construction and new construction starts in the last month or so. As I pointed out, there has been ONE new construction start in 2016. And, as I also pointed out, this is the lowest number of sites currently being constructed (6) in the last 2+ years. Again, I am only talking about the U.S.

As someone else pointed out, these sites are fairly cheap to build (more then $150k on average though - actual cost is $150k to $500k). I can't see WHY in the world they would slow down on something that is fairly inexpensive, yet so vital to the ownership experience for Tesla owners. Take a look at the 2016 projection map, Tesla has plans to build a TON of superchargers this year. Will $8-12 million this qrtr REALLY make a lot of difference in earnings compared to significantly delaying the SupCh network? I really don't think Musk would delay the immensely needed SupCh network just to show a few million on the bottom line. The long term effect would be much greater. To the everyday car buyer (ie, people who will be buying the M3), 250 or even 500 supercharger stations across the US is not impressive. To be able to go anywhere, and feel reasonably comfortable doing it, that number needs to be in the 2000-2500 range. But, if you don't follow the supercharger threads very closely, then you probably don't get a good feel for just important EVERY SINGLE STATION is - people make tons of posts like, "I need this site for a trip I am doing in Feb" or "I need this site to be able to use my MS on a trip I take every month." So, if we are seeing these kind of comments with 60k MS's on the road in the U.S., what will it be like when there are 500,000 Tesla cars on the road (in the U.S.)?

People are GREATLY undervaluing the supercharger network. Range concerns are still the #1 reason people won't even entertain the thought of buying an EV.

 

[FredTMC]

JPM has always been a Debbie Downer on Tesla. As far as I know they dont have any underwriting revenue from Tesla. Sour grapes..

 

[dreamingof3]

JPM has always been a Debbie Downer on Tesla. As far as I know they dont have any underwriting revenue from Tesla. Sour grapes..

They have a 180 price target for Dec 2016 yeah I'd say that is horribly pessimistic. As far as the market is concerned, I'm on record as saying nothing Tesla can do will please the market at this point. Incredibly frustrating and something is up.

 

[FredTMC]

Check the NFLX chart. Almost the same drop as TSLA. So maybe a risk off trade?

Yep, I did notice that FANG was lower too. Agreed. Market bounced at 10am, hopefully TSLA can rally

 

[Buddyroe]

Tesla doesn't tell us about what they're working on in advance. These are only the ones that we know about. Remember Redondo Beach, which no-one noticed until a couple of days before it opened (and after it was complete except for inspections)? In a couple of months, with hindsight, you will be able to say "Look, they stopped building superchargers!". But I don't think you can say it now.

I agree that it really is too soon right now to say for sure that it is a slow-down - heck, if 6 superchargers have construction started in the next week or so, we'd be pretty much back on pace. It's something to keep an eye on right now - but the timing is pretty strange.

Oh, and as far as superchargers being built that people don't know about - that is a VERY rare occurrence. There are now hobbyists (for lack of a better name) that review county websites for any mention of a Tesla permit for a charging station. Rarely does even a permit get by these days. And, construction starts are normally found within hours of the site being started. In fact, many are found when the construction equipment is dropped at the site (before any actual work begins). There may have been 2 or 3 sites that were missed last year - not a significant amount to make up for this slow number currently in construction. There are simply WAY too many people watching for these things now for too many to slip through unnoticed.

 

[SBenson]

I know this guy has been off a few times in the past on Tesla. But this one sounds like a reasonable negative argument.

http://www.forbes.com/sites/bertelschmitt/2016/01/26/no-there-wont-be-a-made-in-china-tesla-car-anytime-soon/

Any thoughts?