Short-Term TSLA Price Movements - 2016

[Causalien]

You're right. I think maybe it might hinge on what "part 2" is.

From the lingo you are using, you are trading purely on candlesticks. Which originated for trading rice harvest in Japan I believe.

If you are trading purely technically, You'd have bought on the runup after merger announcement when an island reversal formed.

Since the current formation is not a flag, you know it is a short term downard channel and is a mini 3 death knoght. The most logical and short term conclusion is sell.

 

[msnow]

That's a very interesting analysis of price action and a very optimistic prediction on production, sales and delivery.

I think you are minimizing the Autopilot story. This has only just begun. You've got CR on their case, Senate hearings, owners concerned that they will have to keep both hands on the wheel, etc. These problems stay in the news and effect stock prices for a long time. See GM and Chipoltle.

Don't forget the *rumored* SEC stories on materiality disclosures.

 

[lango]

I generally agree with you except for the need for CAPEX. I believe that Ron Baron is correct, that Tesla has reached the point where they are "capital light ". I'm thinking that the combination of MS-MX production and a substantial TE ramp will make that clear, but I might be incorrect on that.

I don't disagree with your $240-$250 SP, based on 2.4k weekly production, but for my portfolio that's enough for anytime between now and about March for me to sell my J17's and J18's, and to look for a good entry point for buying J19 LEAPS. I fully expect that by mid 2018 (probably earlier) that the M3 ramp will cause a big bump in the SP. I think earlier but it's to risky to count on that. So my challenge is to sell my current leaps at a profit and get a good entry point for the J19's.

A spike to >$400 due to a squeeze would be a huge help .

The main point I want to make is that for the market there is not a whole lot of difference between 2000 or 2400 S and X per week if Tesla still spend it all and also need capital infusion and if S and X is the only substantial revenue they have. So there needs to be another source of revenue that is substantial, and that will be TE and Model 3. Until then I don't think we will see over $260, but hey it would be great if it happened.

Another way to think about it is that 3 P/S I think is fair in terms of valuation and we are over that now, so 2400 per week will mean around 3: 2400 * 50 * 80000 is about $10B.

 

[tanner]

From the lingo you are using, you are trading purely on candlesticks. Which originated for trading rice harvest in Japan I believe.

If you are trading purely technically, You'd have bought on the runup after merger announcement when an island reversal formed.

Since the current formation is not a flag, you know it is a short term downard channel and is a mini 3 death knoght. The most logical and short term conclusion is sell.

Honestly didn't even give the candlestick analysis much thought until the past couple of days (the old methods I used weren't working - just trading based on intraday volume/resistance and support). So I just looked back at some of the candles using candlestick analysis and that's what I saw... Was simply asking for clarification from those more familiar with that specific form and maybe how it applies to TSLA. Thanks.

 

[CALGARYARSENAL]

Are we on track for one of the lowest volume days of the year? Never short a dull tape.

 

[SteveG3]

Very interesting post. IMHO underlines the fact, that Tesla is hard to valuate. I would say, that if someone claims to know Tesla's right value, he or she doesn't understand the problem.

actually Damodaran's previous blog in March 2014 was exposed for baking in absurd capital requirements that tanked his valuation to about $115 at the time (after his first thoroughly flawed analysis set valuation at about $60 about six months earlier).

it seems that having learned that Tesla longs will find and call out unjustifiable assumptions baked into his attempts to low ball Tesla, Damodaran has walked away from focusing on valuation and instead is now singing a more sophisticated version of the "cult stock... you just can't value the darn thing. I wouldn't touch it long or short" tune that Jim Cramer has been singing for years now. I don't know their specific motivations, but in my view all this gibberish is nothing more than an attempt to discourage buying or holding Tesla (of course, Cramer is on video talking about pushing false narratives into the megaphone of the media to try to manipulate stock prices). Damodaran has taken further measures to protect his gibberish from being called out by longs... he now screens comments to his blog under the guise of filtering out spamming in the comments.

 

[Causalien]

Honestly didn't even give the candlestick analysis much thought until the past couple of days (the old methods I used weren't working - just trading based on intraday volume/resistance and support). So I just looked back at some of the candles using candlestick analysis and that's what I saw... Was simply asking for clarification from those more familiar with that specific form and maybe how it applies to TSLA. Thanks.

Candles are a part of the bigger story with Tesla. I do not believe I can make money off of candlestick with Tesla.

Pure candlestick based trading is better used on. technical stock like life insurance sectir where you can steer clear of material events by having no position during fed meetings. In a story driven stock like Tesla it's best used to see if today's event is significant or not.

So only hard indicators like island reversal and 3white/death knitghts are useful in my own Tesla trading. Also, flag into tops as an indecision indicator and maybe, sometimes hammer and shooting stars.

 

[yesla]

I feel like I just got stood up by someone way out of my league.
the servers are cleaning up now and all I had were a couple drinks.
not hungry. bit bored and dunno whether to laugh or to cry.

 

[RobStark]

Be careful about buying into that statement--if the SCTY deal goes through, Tesla will be raising ~2x as much as they did for the accelerated Model 3 ramp just to buy SCTY. And on top of it SCTY's business model in of itself is far more capital intensive than Tesla Motors/Energy.

SCTY acquisition is an all stock deal. No need to raise a single $ to acquire SCTY.

SCTY has very little CapEx requirements. Its GF was paid for by the State of New York.

SCTY does require cash to finance its retail customers.

But it can securitize these leases/loans and sell them to investors. And it can also ease of growth and cherry pick the cheapest to acquire customers once it is inside Tesla energy by acquiring customers inside Tesla stores.

IF Tesla Energy does acquire a solar inverter or solar controller company that is a deal for another day.

 

[lango]

SCTY acquisition is an all stock deal. No need to raise a single $ to acquire SCTY.

SCTY has very little CapEx requirements. Its GF was paid for by the State of New York.

SCTY does require cash to finance its retail customers.

But it can securitize these leases/loans and sell them to investors. And it can also ease of growth and cherry pick the cheapest to acquire customers once it is inside Tesla energy by acquiring customers inside Tesla stores.

IF Tesla Energy does acquire a solar inverter or solar controller company that is a deal for another day.

This assumes SCTY will not change business model or how they operate. I think that might happen or is likely to happen.

 

[MitchJi]

Now I think we have "hockey stick up", or as I have called it before "the great lurch". There will have to be a big revaluation at least when M3 is in production and hitting the bottom line, but more likely before that. Figure it will be mid 2018 at the latest with only modest schedule slips. If TM hits there internal goals for the most part, there is no way we are still trading in the same range as now.

The problem is when. Who knows what the spark will be that lights it. The dry fuel has been accumulating for a long time.

Holding shares is wise. Even J18 leaps are not a sure thing, so option play is tough. J19 calls will be golden and priced accordingly.

I agree. I'm betting on my belief that there will be some bumps, both up and down on the stick handle

Be careful about buying into that statement--if the SCTY deal goes through, Tesla will be raising ~2x as much as they did for the accelerated Model 3 ramp just to buy SCTY. And on top of it SCTY's business model in of itself is far more capital intensive than Tesla Motors/Energy.

They won't spend a dime on the SCTY acquisition. They're will issue shares. The only cost is dilution. I believe Elon when he said that SCTY will be cash flow positive by the end of the year. Plus TE is profitable now. How much will they make with 35%-45% cheaper cells, multiplied by 3-4 GWh?

I'm really glad, when I typed the word dilution that I'm ignoring the known trolls.

 

[TMSE]

This assumes SCTY will not change business model or how they operate. I think that might happen or is likely to happen.

There will definitely be changes to how they operate, otherwise where do you get synergy? SolarCity's has the largest SG&A among all competitors, at around $1.5/watt installed. Many of those star salesmen must be taking in 7 figure commissions each year. When you replace most of them with 'museum curator' type Tesla sales folks, who get paid like $15-20 an hour, you save over $1 billion each year (2016 guidance is around 1.25Gw?)

 

[Papafox]

Congratulations Longs, it has been a good week.

We began the week at last Friday's close price of 216.78 and closed normal trading today at 220.40, up more than $3.50 for the week. All the gains came on Monday, when news of a Musk "Secret Plan 2" reveal gave just enough excitement to cause a runup in the SP as nervous shorts started leaping off the bus. For the remainder of the week, Tesla suffered through one of the most relentless weeks of FUD you have ever seen, with emphasis on the autopilot accident and swordplay between Musk and Fortune magazine regarding whether Tesla's knowledge of the autopilot accident was materially important to share with buyers in its equity offering.

Throughout the week, we have seen significant large sales of TSLA stock, sometimes as high as 110,000+ shares sold in a 4 second time period, but the longs have for the most part not been rattled enough to sell. Those selling spurts came at a price, which involved short sellers jumping back in and using up some of the few available shares for shorting. Their ammunition at the end of the week is low. Meanwhile, the cost of borrowing TSLA for shorting continues to climb and shorts must indeed be getting nervous about the possibility of another Monday, particularly if Musk offers a compelling Top Secret Plan 2 over the weekend. Looking forward to next week.

 

[jhm]

So the price of SCTY jumped in final hour to $25.04. TSLA declined to $220.40. So the closing spread is $15.15 down from $19.48 at close yesterday.

I'd like to see SCTY get up to $26.5, then I think TSLA and SCTY can start moving upward in parallel. When TSLA is at $220 and SCTY at $26.5, the spread is about $2.79. The spread needs to get small enough that the arbitrage opportunity is not worth the hassle or risk.

An interesting scenario here is that as the price of SolarCity converges to parity with Tesla this could trigger a short squeezed in SCTY. If this happens it could drive the price of SCTY well above parity with TSLA, in which case the spread becomes substantially negative. If that were to happen, one could sell shares of SCTY at a premium to TSLA and buy back TSLA shares. One may need to be a quick trader to make good on this. Even so, such trading would then transfer the rise in SCTY to TSLA. It could even become a spectacular double supernova.

 

[MitchJi]

I agree with Mark Cuban, that diversification is not the best strategy:

Cuban on Investing: Diversification Is for Idiots

 

[sunhelm]

SCTY acquisition is an all stock deal. No need to raise a single $ to acquire SCTY.

Wouldn't the premium above the current SCTY stock price at time of acquisition need to be financed somehow? If not, where would that funding come from?

 

[MitchJi]

Wouldn't the premium above the current SCTY stock price at time of acquisition need to be financed somehow? If not, where would that funding come from?

Higher number of shares.

IF Tesla Energy does acquire a solar inverter or solar controller company that is a deal for another day.

You can count on Tesla building their own inverters:
They already have the technology in their cars.

When has Elon ever passed up the opportunity for vertical integration, if it makes financial and strategic sense?

 

[sunhelm]

Since it's the start of the weekend, thought you'd all like what I found on the Tesla subreddit - wk057's new website: Blame Autopilot!

We have discrete data when an accident occurs but sadly, we do not have anything when AP or the various active safety systems are engaged to avoid one. Looks like this is just a start and hope to get more happy accident avoidance instances!

 

[eloder]

SCTY acquisition is an all stock deal. No need to raise a single $ to acquire SCTY.

Shoot, in that case Tesla should do an all-stock deal to buy Apple, since an all stock deal is totally different from raising cash. They could acquire the billions in Apple's war chest for free!

SCTY has very little CapEx requirements. Its GF was paid for by the State of New York.

SCTY does require cash to finance its retail customers.

But it can securitize these leases/loans and sell them to investors. And it can also ease of growth and cherry pick the cheapest to acquire customers once it is inside Tesla energy by acquiring customers inside Tesla stores.

IF Tesla Energy does acquire a solar inverter or solar controller company that is a deal for another day.

True, they definitely can revamp their business strategy to be significantly less capital intensive--but that is not their current business model, at all. Significant changes would need to come (i.e., pass all risk of raising money and financing off to banks who'll finance solar panels, rather than PPAs and the horrid self-financing they do now).

Their factory isn't at all a concern for their capital requirements. It's the very real risk of re-financing current debt obligations, and needing new debt obligations for most new customers pending a full revamp of their business model. Not to mention the bridge loan which Tesla will most likely need to provide, given Musk's earlier words on the subject.

Just things to consider whenever this SCTY deal goes through. The risks vary substantially on what Musk actually plans to do with SCTY. Keeping SCTY business as usual may be extremely dangerous in the short term.

 

[tander]

Thank you for your detailed analysis, I really appreciate it.

One thing that I could see pushing it down to a near $215 support level is if the "'master plan part 2" news is just an utter dud (since the rumor caused the runup in the first place, the whole buy the rumor/sell the news thing). I agree about Q3 and the reason few longs appear to be selling right now, but do you agree that underwhelming news from Elon concerning his plan could cause a sell off from weak longs?

Also, that certainly explains the weak selling volume, but what about weak buying volume? If it's true that it's holding due to anticipation of good Q3 results, wouldn't there be more buying/price action on the up side?

Not trying to contradict (remember I'm long too), just trying to figure things out the best I can. Thank you!

I was kind of thinking that too, except that I remembered that the merger info/vote plans will probably come out in conjunction with the master plan. So that reduces the likelihood of it being a total dud. Hopefully that's the case, it seems like there have been times when they have announced really big stuff only to get drowned out or not live up to previous sizzle.

Also, it seems like in terms of buying/selling volume, it seems sort of like the line has been drawn in the sand, both sides are staying pretty much the same and sort of trying to do what they can to strengthen their position for when a catalyst gets people crossing the line. Normally all the autopilot/safety stuff should have caused much more of a dent in the stock. It will be interesting if after reviewing the data a total 180 is done and they come out saying, oh actually that whole autopilot thing saves lives.