Dave, if you believe what you're saying you do, shouldn't you sell all your TSLA and alternative energy holdings altogether? Have you done so?
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Dave, if you believe what you're saying you do, shouldn't you sell all your TSLA and alternative energy holdings altogether? Have you done so?
MitchJi
Trying to learn kindness, patience & forgiveness
You Really Don't Want to Make 150 Percent? Huh.
When you think about it the second reason makes a lot of sense for understanding the markets response to the merger. Two highly shorted companies.
If Q3 is profitable, the chances that the SCTY acquisition goes through is higher (since TSLA stock price would likely be higher and appease institutional holders). So, if Tesla is able to book this Edison project revenue for Q3, then that would probably assure a profitable Q3... and much better odds that SCTY acquisition goes through.
These recent interviews of George Hotz and the CEO of Cruise are helpful for understanding the current competitive landscape of self-driving cars.
George “Geohot” Hotz Presents the Comma One
Cruise has around 30 self-driving test cars on roads right now
My opinion on Mobileye:
- Short to medium term, they may do OK. Their systems are selling and their financials look good to Wall St.
- Long term, I can count on them losing. "Geohot" described their business quite accurately - they force car manufacturers to buy their chip by working with regulators to penalize safety ratings of cars that don't have their chip. This company does not push the envelope. They are content to be an OEM for car manufacturers, with 3+ years per product cycle. If it wasn't for Tesla, all that Mobileye's chips would be used for is emergency braking and lane keep assist, nothing advanced that can be classified as "autonomous driving" tech.
- They incorporate machine learning (as does everyone working on self-driving tech), but they have no means of collecting data from customer cars. Their training set is from their own limited testing. This is a problem they have yet to solve.
- Partnerships with other companies like Delphi and BMW is basically saying "we're not capable of developing this ourselves". If they were capable, they would just build it in-house and sell the system to car manufacturers.
General thoughts:
- To me, the fact that Cruise sold to GM and Otto sold to Uber is a sign that L4 autonomy is not close. Those companies have prototypes working on test tracks, but are not close to having a real world product that can be sold, hence it's best to sell for a billion dollars and continue working in a lab for several more years.
- Those other companies making announcements like "we will have driverless cars by 2020" are showing fear of the competition and are just setting wishful targets that they have no means of achieving.
To bring this back to TSLA, Tesla and Comma are basically taking the same approach of launching L3 autonomy products and using machine learning on the miles driven to constantly improve the system. I know many people don't think very highly of George Hotz, but I like how he is a straight shooter and I actually buy what he says. Autonomous driving is a machine learning problem, and so far only Tesla (and now Comma with what they're trying) have a means of collecting real world driving data from customers. The difference is huge between having to spend engineer hours in a test vehicle vs. having thousands of customers pay you to provide you with data. Tesla is in a very good position to continue leading in autonomous driving. I'm very glad they cut ties with Mobileye.
I would say probably not since my understanding is it won't be completed this quarter. But it's hard to say without knowing more details. I'm not sure but I read it was a 20M deal, which is only like 200 cars to put it perspective.
This sounds great and I have a similar sentiment. However, I have noticed in the past a relatively muted immediate response to delivery numbers, whether good or bad. The stock does react, but over time into the ER, rather than a big reaction immediately. So I will probably cover myself with a few calls the week of the delivery announcement, but I intend to make a big bet only if the deliveries announcement turns out as big as we hope.
A lot of what I'm saying is just trying to give another perspective.
For example, it's easy to rant against Comma.ai since it appears it's like mainly one hacker doing it. But if one does deeper research, it's much more involved. Andreessen Horowitz is a well-known VC firm and they've backed Comma.ai with Series A funding. Andreessen Horowitz is known to be one of the best "full-service" VC firms. In other words they have a lot of staff who's purpose is solely to help small companies get huge. So, Comma.ai has a lot of resources at the moment. They basically have all the money they need, and they've got some of the best in Silicon Valley helping them grow. Am I saying they are going to beat Tesla? No. I think Tesla is way ahead. All I'm saying is I don't think it's wise to dismiss Comma.ai. I think they've got a very good chance at being bought by Ford, BMW, Mercedes, or another company for over $1B+ in the next 1-3 years.
For the Bolt, I think the main thing is it shows competition is coming to Tesla. Is the Bolt competition to the Model 3? No. It's in a different class. But the Bolt shows that other manufacturers can make long-distance EVs at competitive costs. LG Chem is the difference maker here. Selling their cells at $145/kWh is impressive. And pack costs are probably not that much higher than Tesla's pack costs (ie., $190/kwh or less for Tesla and maybe $210/kWh for Bolt... but that's a guess, but nevertheless the difference isn't huge). And pack costs are the major cost going into long-distance EVs. Once LG Chem tech and low cell costs go into other luxury cars, then we're going to see come interesting competition to Tesla. Does that mean those cars will be better than Tesla's? No, I think Tesla has the advantage. But I think the days when there were no competitive long-distance EVs competing against Tesla's cars are numbered. And this is something we as investors need to think deeply about.
Regarding Solarcity, I don't like SCTY management and I don't like how they've run their company over the past 4 years. I've emailed Elon and the SCTY management multiple times about it. My hope was that Elon was going to be able to turn around the company. But the situation has deteriorated at SCTY, in my opinion (again that's debatable), and I'm getting a stronger sense that SCTY acquisition will cause more risk than reward for TSLA. Does that mean that I exit all my TSLA? No, all it means is there is greater risk on TSLA w/SCTY acquisition, in my opinion. Of course, this factors into my investment decisions, but it doesn't necessarily mean that I'm bearish on TSLA or that I sell all my TSLA holdings. I still see immense potential for TSLA, the Model 3, and future cars. But as an investor, I need to collect all the risk/reward factors and bring them into my own decision making grid.
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dennis
Model S Plaid
IANAA but they can only recognize the revenue in the quarter where they ship the products.
Dave, based on Elon e-mail it is almost certain that Q3 will be non-GAAP profitable, and, if the efforts Elon requested from the team are successful, Q3, in addition to being non-GAAP profitable will also be GAAP profitable and cash flow positive. See this post for detailed reasoning. IMO it is very unlikely that Mira Loma BES project revenue will be booked in Q3, but this revenue will not make of break Q3.
Yeah it does seem there is an underwhelming response sometimes, but I think this quarter will be different. They have a good shot at doubling sales from last quarter, and more importantly they might post profits. Quarterly gyrations love that, especially amid all the uncertainty.
It's a great buyout target for an automaker who is lagging in this area. Fiat, Honda, Nissan etc
Not an accounting type nor a CFO but my guess is that if they do any billable work they can claim that revenue (even if they haven't yet received it). They can't claim it just because they won the contract for $xxx amount.
Regarding SCTY, if you're looking at typical financial metrics it's pretty sensible to look at those and immediately point the finger at management. But like TSLA, they aren't aiming for good looking typical metrics. Up until the net metering thing they've been going for all out no holds barred growth, which I think they've done a really good job of. And this is all up against the semi-monopolies of energy providers, so I guess it depends on what your criteria is for judgement. Moreover, I think that SCTY's status has been drastically exaggerated and for merger purposes that has been a good thing since they wanted to eschew any other bids.
Another factor beyond profits is that if they manage to deliver 24K to 25K cars in Q3, it will virtually guarantee that Tesla will at least meet lower range of their guidance, i.e. will deliver 80K+ cars in 2016. Given widely held skepticism regarding this, it will be very important feat, as it will demonstrate once again that company guidance can be counted on,
FredTMC
Model S VIN #4925
Has the 2-year lease option expired yet? I wouldn't be surprised to see tesla extend the offer thru Sep 30th. Maybe even just for Inventory cars since they can be delivered by end of month
I generally agree and held this exact view until someone on this board (vgrin?) let me know that Tesla pre-announced profitability with Q1 2013 deliveries numbers. Now, I think there's a decent chance that Tesla pre-announces some good news in early October if deliveries are as solid as I think they can be.
My strategy will be to buy some (more) ATM December calls at the end of September. If the numbers are good I'll double the position (unless there's some irrationally huge upward surge) as I'd expect price action to improve through October and earnings in November like they did the last time they had profitability. If the numbers aren't as good as I hope then I'll hold and wait for more data.
FredTMC
Model S VIN #4925
I agree completely with the bolded part. It seems to me those that are long tesla but want the deal to fail are underestimating the collateral damage and FUD that goes along with solarcity going bankrupt. I also don't really get Dave's criticism of solarcity. He admits that the business works pretty well if they can get access to cheap financing otherwise they face a death spiral of loss of confidence > higher borrowing cost > increased loss of confidence > even higher borrowing costs = death spiral. So knowing this, of course Solarcity management puts a rosy spin on it, priority #1 is avoiding death spiral. This is also why an engineer like Elon thinks Solarcity is a no brainer, there are relatively easy fixes, e.g. reduce costs and gain access to cheaper borrowing and then of course, TE.
Yeah that's a good point, especially since they didn't give quarterly guidance for q3.
The SCTY financials suffer from being largely unreadable. This is mostly the fault of Congress; the unreadablity is mostly due to attempts to monetize the federal tax credit for solar panel installations, which can only go to the panel *owner* but is useless unless the panel owner has a large income. The result has been outrageously complicated structures designed to assign ownership to someone with profits. This obscures *everything*.
The thing I really dislike about the old SCTY business model is that they got themselves into banking in a big way, and they don't have the Federal Reserve backstop against a credit market freezeup. I believe I've seen enough statements and indications that they recognize this, and that they are trying to exit this and go to "fully prefinanced", but maybe I'm overly optimistic. The second thing I dislike about the old SCTY business model is that they were price-uncompetitive *and* had an undifferentiated product, but I think they have a clear path to address that... if the merger goes through certainly, and probably if the merger doesn't go through. The thing I really *like* about SolarCity is the Buffalo factory, which of course hasn't opened yet. I also like their optimized panel installation procedure; they have said that they've gotten it down to a faster process than most installers (time-and-motion!), and I can believe that.
I think Elon knows what he's doing. I did have a brainstorm last night about this: if he can execute enough of the monetization transactions for the old SolarCity leases & PPAs fast enough, he can probably realize 2 billion in cash. Suppose he's shrinking SolarCity down to breakeven by firing sales staff and selling panels in Tesla stores. What is he gonna do with that money? Some will go to repay short-term debt, but there isn't that much short-term debt. The excess is financing, which he can use to avoid a financing round for Tesla....
The thing I really dislike about the old SCTY business model is that they got themselves into banking in a big way, and they don't have the Federal Reserve backstop against a credit market freezeup. I believe I've seen enough statements and indications that they recognize this, and that they are trying to exit this and go to "fully prefinanced", but maybe I'm overly optimistic. The second thing I dislike about the old SCTY business model is that they were price-uncompetitive *and* had an undifferentiated product, but I think they have a clear path to address that... if the merger goes through certainly, and probably if the merger doesn't go through. The thing I really *like* about SolarCity is the Buffalo factory, which of course hasn't opened yet. I also like their optimized panel installation procedure; they have said that they've gotten it down to a faster process than most installers (time-and-motion!), and I can believe that.
I think Elon knows what he's doing. I did have a brainstorm last night about this: if he can execute enough of the monetization transactions for the old SolarCity leases & PPAs fast enough, he can probably realize 2 billion in cash. Suppose he's shrinking SolarCity down to breakeven by firing sales staff and selling panels in Tesla stores. What is he gonna do with that money? Some will go to repay short-term debt, but there isn't that much short-term debt. The excess is financing, which he can use to avoid a financing round for Tesla....
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