Short-Term TSLA Price Movements - 2016

[mmd]

There were quite a few posts here in the last couple of days that said that the Q3 numbers will definitely be great because TM has 5100 vehicles in the pipeline, and they added those vehicles to the average production rate of Q3. But this is wrong, because TM will always have a certain delivery time and thus the higher the production rate, the more vehicles in the pipeline (or they have to invest in their distribution system).

If Tesla wants to achieve their minimum goal of 80.000 vehicles delivered in 2016, they need to deliver 80.000-14.820-14.370 = 50.810 vehicles in Q3 and Q4. They said they were able to achieve an output of 2200 vehicles in Q3 and 2400 in Q4. Imagining linear progress this means that they need to deliver 50.810/(2100+2300)*2100 = 24.250 vehicles in Q3 and 26.560 vehicles in Q4.

Having one week downtime in Q3 and using the same delivery time (about 2,5 weeks), TM could deliver:
Using an average of 2000 vehicles per week: ((13-1)*2000)+5150-(5150/2000*2200) = 23.485

Using an average of 2100 vehicles per week: ((13-1)*2100)+5150-(5150/2000*2200) = 24.685

So to deliver the 24.250 vehicles in Q3 they need to produce an average of (24250-(5150-(5150/2000*2200)))/(13-1) = 2064 vehicles a week.

This means that the 80.000 vehicles delivered in 2016 isn't completely of the table, but it will be tough and they can't afford any more hiccups or other big problems on the production line. I try to stay positive and truly hope that they will be able to make it (no pun intended), but I am very skeptical on this years guidance. (but remain very bullish on the long term)

My take is that Tesla has intentionally shifted many deliveries to Q3 to soften the Q3 miss. Tesla batches production in the quarter to produce local cars at the end of quarters, so they can be delivered in the same quarter. Currently, US sales are nearly 60-70% of global sales, and half of that is in California with truck delay of 1 -2 days. In the past, they have delivered cars here within 10 days of ordering, and sent cars to east coast and Florida within 4 days near the end of quarters.
But this quarter, it seems they did not want to deliver all the cars. I think they will set a goal of 24k for Q3, then miss it by 4k. Without the help of 5150 cars from Q2, they would have delivered 17k against 24k, which would look much worse.

One reason for delaying the X75D cars could be to encourage more customers to upgrade to X90D. Tesla was already producing X at 750 cars a week at the end of Q1. For 12 weeks in Q2, it seems it could have produced 9000 X without increasing that rate any further. Now, some will say that 750 X a week was not optimal. Well, then I think it was not good to mention that in the Q1 delivery nots if that rate is not sustainable for whatever reason.

 

[X Yes?]

Probably because there is an entire separate thread dedicated to that very topic, yet you seem unable to grasp that simple fact.

You don't DEMAND is material to a Short-Term TSLA Price Movements - 2016 thread?

 

[X Yes?]

I already pointed out one valid explanation. My local SC gets trucks coming and going daily. They keep fewer than 50% of the inbound vehicles.
They ship them out to other SCs on the east coast.
So, very possible that many of those cars at Paramus will go to different facilities in the east/northeast.
While this is speculative on my part the theory does have merit based on my experience.

You might be right, but if demand is sufficient to keep the production line rolling, why would ANY cars be labeled Inventory/Marketing?

 

[vgrinshpun]

I am surprised as anyone how well TSLA held up on the news. Not really complaining, it allowed me to liquidate my position with small gain. It may be confirmation bias but I remember TSLA falling only later in the day after having released bad news so may be the case here as well. When the quarterly report comes out there is another possibility of the market punishing the stock because I don't expect the financials to be particularly good this quarter.

I do not believe that financials will be bad at all.

The quantity of cars manufactured, more precisely the quantity of cars delivered plus cars in transit to customers will define revenue, not just quantity of cars delivered. That is why they arranged for the Assetr Backed Line of credit - to ensure that as long as a car is on the way to a customer by the end of the quarter, the revenue is counted within the same quarter.

 

[SBenson]

I do not believe that financials will be bad at all.

The quantity of cars manufactured, more precisely the quantity of cars delivered plus cars in transit to customers will define revenue, not just quantity of cars delivered. That is why they arranged for the Assetr Backed Line of credit - to ensure that as long as a car is on the way to a customer by the end of the quarter, the revenue is counted within the same quarter.

Are you sure about that? I thought ABL will help with cash-flow but not revenue. Do you have a reference that you can point to?

 

[vgrinshpun]

Are you sure about that? I thought ABL will help with cash-flow but not revenue. Do you have a reference that you can point to?

Yes, you are right, ABL indeed will help with cash flow, not revenue.

thanks for keeping me straight

 

[SBenson]

Elon hitting hard

 

[electracity]

You might be right, but if demand is sufficient to keep the production line rolling, why would ANY cars be labeled Inventory/Marketing?

Making and selling slightly used CPO cars is a good strategy. It's a way to offer a discount and have cars immediately available.

They likely want to preserve the current Model S price structure for after the model 3 is released. The Model 3 will likely top out at $60-70K and capture most of the buyers interested in lower priced model S.

 

[SBenson]

Yes, you are right, ABL indeed will help with cash flow, not revenue.

thanks for keeping me straight

The issue I see is, cash-flow positive is effectively rescinded as far as I can tell. It all depends on when and how much Tesla chooses to spend on CapEx and such. Not worth looking at this for a whole while.

The other material positive metric that investors could look forward to is positive (non-gaap) EPS. That's clearly not in the cards for this quarter. If SCTY does NOT go through in Q3 AND Tesla delivers as expected, there is a good chance of that happening in Q3. But I'm not sure anymore as both issues are shaky.

 

[schonelucht]

The quantity of cars manufactured, more precisely the quantity of cars delivered plus cars in transit to customers will define revenue, not just quantity of cars delivered. That is why they arranged for the Assetr Backed Line of credit - to ensure that as long as a car is on the way to a customer by the end of the quarter, the revenue is counted within the same quarter.

Are you saying they will be able to record a loan received as revenue?!? I really don't think that's allowed but I must admit I don't know enough about accounting to be sure.

 

[tander]

I do not believe that financials will be bad at all.

The quantity of cars manufactured, more precisely the quantity of cars delivered plus cars in transit to customers will define revenue, not just quantity of cars delivered. That is why they arranged for the Assetr Backed Line of credit - to ensure that as long as a car is on the way to a customer by the end of the quarter, the revenue is counted within the same quarter.

Yeah my understanding is that it doesn't count for the quarter until it's delivered, but I'm not sure. Either way, that 5k delivery miss is going to go into July deliveries for the monthly tally, which means they will delilver 11-13k just for the month of July. If you assume they do another 16k for the rest of the quarter that's going to be 27-29 for Q3, twice Q2 if they end up counting those 5k in transit for Q3.

 

[geneclean55]

Elon hitting hard

View attachment 184069

And some people say Elon doesn't pay attention to TSLA price movements in the near-term

 

[MitchJi]

The issue I see is, cash-flow positive is effectively rescinded as far as I can tell. It all depends on when and how much Tesla chooses to spend on CapEx and such. Not worth looking at this for a whole while.

1. It has always depended on how much and when Tesla decides to spend on capex.

2. More capex spending has always been better for long term than positive cash flow.

3. When they make positive cash flow the impact on the SP will still be huge.

 

[FredTMC]

Although if you read the article, they incorrectly suggest that MX deliveries in q2 were down on MX deliveries in q1.

Sigh

Yeah my understanding is that it doesn't count for the quarter until it's delivered, but I'm not sure. Either way, that 5k delivery miss is going to go into July deliveries for the monthly tally, which means they will delilver 11-13k just for the month of July. If you assume they do another 16k for the rest of the quarter that's going to be 27-29 for Q3, twice Q2 if they end up counting those 5k in transit for Q3.

Yep. I'd by fine with Elon reporting July Deliveries (just this once) at end of July.

They don't announce monthly numbers each month as a continual practice because deliveries are geographically "lumpy".

That being said, Elon CAN choose to reveal July deliveries if he wants.

 

[vgrinshpun]

Are you saying they will be able to record a loan received as revenue?!? I really don't think that's allowed but I must admit I don't know enough about accounting to be sure.

I misspoke, as was pointed out by SBenson, ABL will help with cash flow, not revenue...

 

[tander]

Yep. I'd by fine with Elon reporting July Deliveries (just this once) at end of July.

They don't announce monthly numbers each month as a continual practice because deliveries are geographically "lumpy".

That being said, Elon CAN choose to reveal July deliveries if he wants.

Yeah I checked and the in transit cars go into accounts receivable instead of revenue, so they are definitely going to Q3.

They do sort of announce monthly sales numbers now in Greencareports? at least for the U.S., not sure if there is a European or Asian equivalent. But yeah I could see them just announcing the numbers too.

 

[Drax7]

Deliveries of 2000 cars per week generates about $200,000,000 per week.
That covers variable and fixed costs. Now if capex goes way up, thats another matter.

 

[schonelucht]

The other material positive metric that investors could look forward to is positive (non-gaap) EPS. That's clearly not in the cards for this quarter. If SCTY does NOT go through in Q3 AND Tesla delivers as expected, there is a good chance of that happening in Q3. But I'm not sure anymore as both issues are shaky.

I am not so sure. In Q1 they delivered 15k cars with automotive revenue of $1.5B and automotive cost of revenue $1.1M for an automative profit of $400M. Let's say they grow sales by 70% in Q3 compared with Q1 and that automotive profit scales the same way. That means an additional profit of $280M, enough to offset their net loss of $230M in Q1. But that's a best case because

1) The Model X mix will contain a lot more lower optioned cars, possible dropping average profit by $10M easily
2) The Model S mix will contain probably somewhere around 3k of 60kWh models, meaning $25M less automotive revenue versus the scaled estimate above
3) Even a very modest 10% increase in general expenses means another $30M charge

Given the above I think it is more likely than not non-GAAP EPS will also be negative in Q3. Maybe they can play the ZEV credit game if they're close?

EDIT : disregard! I took the Q1 loss numbers from the GAAP column. Yes, they have a good chance to be non-GAAP profitable.

 

[SBenson]

1. It has always depended on how much and when Tesla decides to spend on capex.

2. More capex spending has always been better for long term than positive cash flow.

3. When they make positive cash flow the impact on the SP will still be huge.

Yes, yes, and yes.

The point is your item-3 is many quarters away. It will take volume production of model-3 to get there.

So I was just saying you might as well tune out of that metric for now.

 

[MitchJi]

Tesla: Oh No. Not Again.
Brief Excerpts:

Tesla Motors (TSLA) missed its delivery target…again. Global Equities Research’s Trip Chowdhry explains why it’s not a big deal:
<Snip>
First three weeks of 2Q’2016 (April’2016) Production Line at Tesla was almost halted:
• Previously 4 workers were required to install the Falcon Wing on Model X…
• Tesla made some adjustments, so now only 2 workers are required to install the Falcon Wing on Model X
• Probably Model X production line is getting efficient and hence Tesla was able to almost double the production of Model X.
o In 1Q, Tesla produced 2,659 Model X, and in 2Q, Tesla produced 4,625 Model X
• The build quality of the Model X’s coming out of the factory now is vast improvement over the previous builds.

The DB note said that suppliers said that:

“That said, suppliers continue to suggest Tesla has had difficulty maintaining steady production of Model X, with some estimating “up time” is as low as 50%. This is highly unusual for an automaker… so we are not sure whether Tesla has overcome production challenges.

Does that mean that the X line is only producing at 50% capacity? That is a pretty close match to the production numbers.

If that's correct it means that they are still not completely out of the woods with the X production but it might also mean that they plan to get to 2.2k-2.4k by continuing to improve the X production. If that's correct it seems like a fairly conservative projection to me.