Short-Term TSLA Price Movements - 2016

[Noble Ninja]

Tesla is crashing back to earth like every massively unprofitable bubble stock. Delude yourselves at your own risk. All stocks ultimately return to their fundamental valuation. The value of an auto company that makes money is maybe 1.0x revenue. The value of an auto company losing tons of money is...

Oh look everybody, a new user account "valuation matters" just open last month.

Your vocabulary leads me to think you're heavily shorting the stock. One quick look at your previous comments confirms this and all of them are exaggerated and one-sided in nature.

The overall market has been down for the last month or so, and not much fundamentally has changed about the Tesla story recently.

 

[The Blue Owl]

Your vocabulary leads me to think you're heavily shorting the stock. One quick look at your previous comments confirms this and all of them are exaggerated and one-sided in nature.

The overall market has been down for the last month or so, and not much fundamentally has changed about the Tesla story recently.

Nah. Maybe his posts emanate this putrid smell of bile, which at first may seem inexplicable, but only to the biased reader. He's not angry and contemptuous of others; his actual motivation is love for his fellow man! He just doesn't want us to get hurt in the market, that's all.

Deep down, he just cares too much. He's not an angry bear with a superiority complex. He's a rational, loving teddy bear. I'm sure of it.

 

[Fallenone]

Do you think the CPOs and energy products can stream in 500+m gross profit to cover RND and SG&A and the rest of CapEx? All in all, their expense of OpEx and CapEx is around 900m to 1b in Q4. New car gross profit only brings in about 470m in gross profit that can only cover half of that expense. Good luck with CPO+powerpack/wall to cover the other half.

We know hos many New cars, but not how many CPO cars. And neither how many powerpacks and powerwalls they sold.

 

[AnOutsider]

Again guys. Discuss the stock and not each other personally.

 

[Julian Cox]

Breaking down 180 is depressing, but can we stop become delusional about a surprise positive eps in Q4? Q3 letter estimated 500m of CapEx in Q4. Even with 0 RND and SG&A, 0, they need to sell over 18k cars with GM of 27% to reach break even on non-GAAP. How many they sold?

As demonstrated previously, Tesla has a lot of options to pull in cash to Q4. It is not constructive to dismiss that fact as delusion.

A 'previous poster' sought to insinuate that use of the revolving credit line (just one of may options to go FCF positive in Q4) should be classified as fundraising activity. This is flawed and short sighted.

The primary purpose of Tesla's $750 million revolving credit line is for bridge funding overseas shipments, specifically for the purpose of achieving cash flow positive sales. As I mentioned previously, a valid use of that facility in Q4 would have been shipping circa 2000 units to Denmark. Nobody would confuse that aspect of the operations with financing activity any more than the ongoing use of a Lease Financing house to process lease vehicles.

Tesla is capable of both of these things in addition to the many others I mentioned.

An investing win comes from understanding something the herd is going to be surprised by. It is going to be contrarian or it isn't a valid source of a win. If everybody gets it on the first pass, then it's old news and not actionable.

I would ask anyone that is unnerved by fact and deduction based contrarian analysis to remember that emotions in investing are frequently unhelpful.

Everything that has upset a certain individual to the point of getting personal has been stated with (to the best of my ability) suitable probabalistic language. I am not certain of anything that I am not certain of and whenever that is the case I will generally if not inevitably say so.

Nothing in investing is ever 100% certain and rarely much better than 60%, especially not with limited information and short timescales. Anyone that needs significantly better than 50% probability of getting paid for doing something should probably do something else altogether. My opinion is that if you can ever get close to 90% logical certainty of anything actionable in advance of the broad market then you're in really great shape as an investor.

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Regards GF spending. They have closed off Module One in Nevada and my opinion is that they can perfect it at that scale before duplicating it for serious volume capacity. That can wait until M3 reservation numbers are in evidence. I don't think they will go heavy on GF spend much sooner than Q3.

 

[jesselivenomore]

Tesla is crashing back to earth like every massively unprofitable bubble stock. Delude yourselves at your own risk. All stocks ultimately return to their fundamental valuation. The value of an auto company that makes money is maybe 1.0x revenue. The value of an auto company losing tons of money is...

At least get your numbers straight if you are going to short. The value of most auto companies are 0.3-0.5x revenue. Not 1.0x.

The value of an auto company growing 5 times faster than most auto companies should be valued 5x that, so 1.5-2.5x revenue.

Every ICE auto maker operates in a 100 year old 100% saturated market with cutthroat margins. An EV auto maker operates in a nascent market that can eventually grow into 100% of the ICE market. That commands a further premium in valuation.

2.0-4.0x seems reasonable to me as a range depending on market sentiment. The low end of that still offers plenty of potential for you as a short, no need to make up numbers to try to prove your case when in the end it lessens your credibility.

 

[techmaven]

Breaking down 180 is depressing, but can we stop become delusional about a surprise positive eps in Q4? Q3 letter estimated 500m of CapEx in Q4. Even with 0 RND and SG&A, 0, they need to sell over 18k cars with GM of 27% to reach break even on non-GAAP. How many they sold?

The main issue for Q4 is breaking the trend line - free cash flow as reported by Tesla for the past 3 quarters:

Q1: $ -312 million
Q2: $ -565 million
Q3: $ -596 million

We know that the additional Model S's, 5,589 of them, should provide about $19k each additional gross profit. That's $106 million. The additional 208 Model X's have a substantially higher ASP, almost double. So if we assume half the gross profit but on double the ASP, that should wash out. So that's another $4 million, for a total of $110 million that would roughly cover the expected additional capex spend.

However.

They did end Q3 with $692 million in finished goods inventory. If the production was only 15,000 vehicles, but they delivered 17,400 vehicles, that's 2,400 vehicles that were made in prior quarters and didn't get delivered until Q4. That in itself is a trend reversal that is significant. If that's the case, then using 15,000 production, that's then 3,189 additional @ $19k each = $61 million. Using an ASP of $80,000, then 2,400 additional vehicles = $192 million in gross profit, bringing down the finished goods inventory to $500 million, or roughly 6,000 vehicles or 5-6 production weeks which is about right. In that scenario, the additional gross profit is $253 million.

Of course, CPO sales is not factored into many scenarios and I get the feeling that Tesla sold a lot of CPOs. The problem is figuring out the actual profit levels, as Tesla does spend significant amounts in some cases to refurbish the vehicles. I don't think anyone has reliable views with sufficient breadth to even hazard a guess on this. But part of the $692 million in finished goods inventory was CPOs.

BTW, the expected Gigafactory spend in Q4 was $141 million.
I don't think Supercharger spend is significant enough to make or break the numbers. If it were really close to something, then Tesla can change that.

 

[Fallenone]

Yeh I don't disagree we might see a turn around in net loss. But FCF positive in Q4? Stock shooting up to 300 next week has a better chance than that.

The main issue for Q4 is breaking the trend line - free cash flow as reported by Tesla for the past 3 quarters:

Q1: $ -312 million
Q2: $ -565 million
Q3: $ -596 million

We know that the additional Model S's, 5,589 of them, should provide about $19k each additional gross profit. That's $106 million. The additional 208 Model X's have a substantially higher ASP, almost double. So if we assume half the gross profit but on double the ASP, that should wash out. So that's another $4 million, for a total of $110 million that would roughly cover the expected additional capex spend.

However.

They did end Q3 with $692 million in finished goods inventory. If the production was only 15,000 vehicles, but they delivered 17,400 vehicles, that's 2,400 vehicles that were made in prior quarters and didn't get delivered until Q4. That in itself is a trend reversal that is significant. If that's the case, then using 15,000 production, that's then 3,189 additional @ $19k each = $61 million. Using an ASP of $80,000, then 2,400 additional vehicles = $192 million in gross profit, bringing down the finished goods inventory to $500 million, or roughly 6,000 vehicles or 5-6 production weeks which is about right. In that scenario, the additional gross profit is $253 million.

 

[dreamingof3]

Anyone share in my opinion that new short players entered TSLA in 2016? this drop seems too pronounced to not have some help of those shorting.

 

[aznt1217]

Yeh I don't disagree we might see a turn around in net loss. But FCF positive in Q4? Stock shooting up to 300 next week has a better chance than that.

I believe we'll see the trend slow down due to spending and such. I was finagling with my model and I can't find a reasonable way to make the P&L break even. I'm completely ignoring cash flows at the moment. The only reasonable topline revenue figure I can come up with is about $1.04B for the quarter and I extrapolated that using a QoQ % Growth rate from 2014 and factored in about $21M from the Model X sales.

I also kept COGS % the same as Q315 which I think is reasonable and used an R&D figure from Q414 and held SG&A constant to Q315. I get a -15M loss. The whole purpose of my exercise was to see if I can somehow get something remotely close to a Julian figure but I can't swing it. I highly doubt Tesla would bring R&D to a screeching halt and if they did the question I would ask is why?

Either way, it'll just be a question of timing for FCF and I suspect it will be in Q1 with Model X volume deliveries.

 

[jhm]

BFPT Update Available

Blind Faith Price Targets - Page 15

Today I offer eschatological hope to beleaguered Tesla longs. Imagine a world in which 25 million EVs are sold in a year, and 30 million are expected in the next year. What will be Tesla's share is such a world? What will be your share in this world? The present world does not believe in that world. The present world measures value in barrels of oil. But in the age to come, barrels of oil will be economically irrelevant. So it is, the present world does not know how to measure the value of Tesla. But the age of oil is coming to an end. Hold on to your share in the world to come.

 

[Svetlin]

No. One KNOWS. No dreaming required.

Everything that has upset a certain individual to the point of getting personal has been stated with (to the best of my ability) suitable probabalistic language. I am not certain of anything that I am not certain of and whenever that is the case I will generally if not inevitably say so.

I'm sure you can do better than "One KNOWS" with the probabilistic language. Anyway, thanks for bringing the valid additional ways Tesla can help cash flow in Q4. I think most of us agree Q4 will break the negative trend in FCF.

 

[techmaven]

I believe we'll see the trend slow down due to spending and such. I was finagling with my model and I can't find a reasonable way to make the P&L break even. I'm completely ignoring cash flows at the moment. The only reasonable topline revenue figure I can come up with is about $1.04B for the quarter and I extrapolated that using a QoQ % Growth rate from 2014 and factored in about $21M from the Model X sales.

I also kept COGS % the same as Q315 which I think is reasonable and used an R&D figure from Q414 and held SG&A constant to Q315. I get a -15M loss. The whole purpose of my exercise was to see if I can somehow get something remotely close to a Julian figure but I can't swing it. I highly doubt Tesla would bring R&D to a screeching halt and if they did the question I would ask is why?

Either way, it'll just be a question of timing for FCF and I suspect it will be in Q1 with Model X volume deliveries.

The only way to swing it is for them to not spend as much as they had forecast... $500 million in capex and to have significantly lowered the amount of finished goods inventory. With $692 million in finished goods inventory, a significant sell out of CPOs and new Model S's could do it. But unlikely. As a long term investor, I wouldn't want them to do it for Q4, as it would mean under-investing in the business. They might have been tempted to pull various strings if they had't already raised capital and if the Model X ramp was further along.

The original estimate was for possibly free cash flow positive in Q1, 2016. I'm assuming that's with a decent Model X ramp, which has a much higher ASP and bringing quarterly production up yet another 2,000 to about 16,800 for the quarter.

 

[jesselivenomore]

The main issue for Q4 is breaking the trend line - free cash flow as reported by Tesla for the past 3 quarters:

Q1: $ -312 million
Q2: $ -565 million
Q3: $ -596 million

We know that the additional Model S's, 5,589 of them, should provide about $19k each additional gross profit. That's $106 million. The additional 208 Model X's have a substantially higher ASP, almost double. So if we assume half the gross profit but on double the ASP, that should wash out. So that's another $4 million, for a total of $110 million that would roughly cover the expected additional capex spend.

However.

They did end Q3 with $692 million in finished goods inventory. If the production was only 15,000 vehicles, but they delivered 17,400 vehicles, that's 2,400 vehicles that were made in prior quarters and didn't get delivered until Q4. That in itself is a trend reversal that is significant. If that's the case, then using 15,000 production, that's then 3,189 additional @ $19k each = $61 million. Using an ASP of $80,000, then 2,400 additional vehicles = $192 million in gross profit, bringing down the finished goods inventory to $500 million, or roughly 6,000 vehicles or 5-6 production weeks which is about right. In that scenario, the additional gross profit is $253 million.

Bingo. Actual math, as opposed to make-believe. Cutting negative FCF in half is far more reasonable and exactly what I expect. This will not be any surprise for the market since we already have the delivery numbers. The question is what it will take to get Q1 to positive FCF. Yes it is only an "aspiration" but I am pretty sure the market will be disappointed if we don't get there. Capx should come down from $400M and R&D might decline marginally as well in Q1, but to what extent? Even if we cut capx by half, my very rough back of the envelope math say we still need well over 20k in Q1 deliveries to achieve FCF+. If that is even remotely the case, it is not looking good. Insideev just came out yesterday, NA deliveries at 850 Model S and 370 Model X. For comparison, to achieve 17k in Q4, Tesla delivered 1900 for NA in Oct.

 

[dreamingof3]

The only way to swing it is for them to not spend as much as they had forecast... $500 million in capex and to have significantly lowered the amount of finished goods inventory. With $692 million in finished goods inventory, a significant sell out of CPOs and new Model S's could do it. But unlikely. As a long term investor, I wouldn't want them to do it for Q4, as it would mean under-investing in the business. They might have been tempted to pull various strings if they had't already raised capital and if the Model X ramp was further along.

The original estimate was for possibly free cash flow positive in Q1, 2016. I'm assuming that's with a decent Model X ramp, which has a much higher ASP and bringing quarterly production up yet another 2,000 to about 16,800 for the quarter.

As a long term investor, when do we get back to $249 so I can have my money back. Pass the nexium :scared:

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Bingo. Actual math, as opposed to make-believe. Cutting negative FCF in half is far more reasonable and exactly what I expect. This will not be any surprise for the market since we already have the delivery numbers. The question is what it will take to get Q1 to positive FCF. Yes it is only an "aspiration" but I am pretty sure the market will be disappointed if we don't get there. Capx should come down from $400M and R&D might decline marginally as well in Q1, but to what extent? Even if we cut capx by half, my very rough back of the envelope math say we still need well over 20k in Q1 deliveries to achieve FCF+. If that is even remotely the case, it is not looking good. Insideev just came out yesterday, NA deliveries at 850 Model S and 370 Model X. For comparison, to achieve 17k in Q4, Tesla delivered 1900 for NA in Oct.

I think anything Tesla does outside of perfection is viewed as a disappointment/negative by the market.

 

[hershey101]

Bingo. Actual math, as opposed to make-believe. Cutting negative FCF in half is far more reasonable and exactly what I expect. This will not be any surprise for the market since we already have the delivery numbers. The question is what it will take to get Q1 to positive FCF. Yes it is only an "aspiration" but I am pretty sure the market will be disappointed if we don't get there. Capx should come down from $400M and R&D might decline marginally as well in Q1, but to what extent? Even if we cut capx by half, my very rough back of the envelope math say we still need well over 20k in Q1 deliveries to achieve FCF+. If that is even remotely the case, it is not looking good. Insideev just came out yesterday, NA deliveries at 850 Model S and 370 Model X. For comparison, to achieve 17k in Q4, Tesla delivered 1900 for NA in Oct.

Thanks to both of you guys... About time someone posted something useful besides the crap that Julian is trying to sell.

 

[Fallenone]

My own calculations give me 17k deliveries in Q1 to be positive FCF. But I also assumed CapEx being only 100m which is quite a stretch. I also factored in 100m ZEV sales since they saved up ZEV in Q4.

Bingo. Actual math, as opposed to make-believe. Cutting negative FCF in half is far more reasonable and exactly what I expect. This will not be any surprise for the market since we already have the delivery numbers. The question is what it will take to get Q1 to positive FCF. Yes it is only an "aspiration" but I am pretty sure the market will be disappointed if we don't get there. Capx should come down from $400M and R&D might decline marginally as well in Q1, but to what extent? Even if we cut capx by half, my very rough back of the envelope math say we still need well over 20k in Q1 deliveries to achieve FCF+. If that is even remotely the case, it is not looking good. Insideev just came out yesterday, NA deliveries at 850 Model S and 370 Model X. For comparison, to achieve 17k in Q4, Tesla delivered 1900 in Oct.

 

[ev-enthusiast]

I would really like to know the reason for this decline since beginning of this year and who is selling that many shares, a bunch of retail investors?

 

[techmaven]

Bingo. Actual math, as opposed to make-believe. Cutting negative FCF in half is far more reasonable and exactly what I expect. This will not be any surprise for the market since we already have the delivery numbers. The question is what it will take to get Q1 to positive FCF. Yes it is only an "aspiration" but I am pretty sure the market will be disappointed if we don't get there. Capx should come down from $400M and R&D might decline marginally as well in Q1, but to what extent? Even if we cut capx by half, my very rough back of the envelope math say we still need well over 20k in Q1 deliveries to achieve FCF+. If that is even remotely the case, it is not looking good. Insideev just came out yesterday, NA deliveries at 850 Model S and 370 Model X. For comparison, to achieve 17k in Q4, Tesla delivered 1900 in Oct.

I don't think TSLA is priced for even close to free cash flow even for Q1, so I don't there's disappointment if they don't achieve it. Matter of fact, I think the price is currently for much worse than even halving FCF in Q4, so a break in the trend line is significant.

For Q1 specifically, the capex spend is primarily about Gigafactory. The Model X ramp spend should be mostly over and hopefully Model X is cash flow positive in Q1 overall. Model 3 capex spend is obviously ongoing, but most of that should be captured in R&D costs still... I don't think Tesla is spending that much in Q1 on Model 3 production equipment. Basically, the quarter or two after Model X ramp should have reduced capex spending, combined with much higher product revenue. Q4 might get boosted just because of a particularly high finished goods inventory that gets pared down and that might land somewhat in Q1, but that's not a long term trend.

I would caution about using anyone's intra-quarter numbers, even InsideEVs. Especially 1st month of a quarter numbers. We should all know by now how misleading that usually ends up being and there really isn't anything reliable about anyone's intra-quarter numbers for the U.S. as a whole.

 

[Buddyroe]

We are now on day 36 with only 1 new supercharger construction start in the U.S. I'm REALLY hoping there's a good reason for this sudden stop in the supercharger build-out (like a partnership announcement), otherwise, it's just a weak attempt to make the numbers look better this quarter. It will be REALLY disappointing to learn that the very features that are causing such an issue in the ramp up of the Model X, were also so expensive to design and build that they caused Tesla to have to stop construction of the very lifeblood of its infrastructure growth - the supercharger network.

Man, when the Model X was revealed, I commented here that I pray that the Model X is not the mistake that kills Tesla. I still don't think it will be, but it has definitely been a decision that has set the company back a LONG way. I pray Musk and Co get a chance to learn from this huge mistake. But, the car industry is not one that usually allows for mistakes - especially when everything else seems to be stacked against you (like - what were the chances that oil would crash 3 years after Tesla started making cars!!!).

Oh, and start being big boy auto-makers and stop paying attention to what people say in articles. 99% of people never saw that guy's article, but almost everyone that pays attention at all to Tesla is hearing about this ban. Doesn't Musk have much bigger and better things to worry about?