Short-Term TSLA Price Movements - 2016

[McMuggets]

This guy just got his X:

Jaden Smith shows off his Tesla Model X and gets kiss from Sarah Snyder | Daily Mail Online

 

[FluxCap]

Hey guys. Been away for a while. I heard there was a sale so came back to load up.

A few words before I step back into the shadows, I get that people are upset about the X ramp; but, the assumption that a simpler design would have allowed for us to ramp production 2 years earlier ignores the history. Tesla was battery constrained during that time period. Every additional X built would have taken away a S delivery and that would actually hurt not help (more S is financially better than mixed S and X if the total is the same). Many of us discussed this at length during that time, as the first signs of delay were coming out. We were pleased with the delay.

When the X was first debuted, they thought that the limits of S demand were 20k per year. They needed a second car ready in time to pick up the growth when S sales leveled off. TM delivered on the order of 20k in Q4 alone, so clearly this assumption was dead wrong. An "on-time" delivery of the X from a shareholder point of view was NOT desirable. The decision to shift resources to ramping up the S was the right one. Furthermore, the decision to decompose certain features of the X (like dual motor AWD) and create even higher margin S variants was the right one (more profit for each available battery).

Now, I'm not going to say that the X isn't late, and everything is just fine. Personally, I pegged the beginning of this past summer as the optimum time for X deliveries to start. I was a little bummed by the delay to Sept. and annoyed at how the year closed out, but at this point I'm only worried about 6 months worth of lost sales, not years. If they can get their act together and get ramped up, 6 months of delay/slow deliveries will make no material difference.

Also, all stocks that I own are getting slaughtered. I think if you take that into account, along with TSLA's high beta, and tack on some added red for recent poor execution, and analysts piling on, the price action isn't ridiculous. Oh, it sucks, but it isn't completely looney.

The question is what to do now. I feel for those of you trapped in calls without much time to wait for resolution. I've been there, I know that sucks. I also understand that it is hard to view this decline as a sale when you have no more cash to spend. That sucks too. But, for me, I agree with comments made recently by another member: Elon often misses his projected dates, but he always does what he says he is going to do. I think the X situation is a point in time problem. They'll fix it and we'll get this train back on the rails and headed in the right direction.

So, if you accept that as your thesis too, and you have cash you are able and willing to risk, then this is nothing but a chance to accumulate. I bought some today, and I'll buy more and more if the decline continues.

Really good to see you post, and great synthesis. Agreed on accumulation strategy. There is obviously risk, but time feels right to strike.

 

[sub]

@sub: I was wrong and you were right about the last ER/CC. Any predictions this time? I got 'nothin' (prediction wise),




BUT...I do plan to stay at a Holiday Inn Express next Tuesday to see if it helps:wink:

I was cautiously optimistic last time, but I don't really have the ability to be pessimistic. Today was the first time in 4-5 months I actually looked at my cash act that is all TSLA leaps/calls. I've got to roll one March call out but after that is done I probably won't look again until the end of the year. Like I said recently, having already cashed in a lot of TSLA profits this recent downturn doesn't hurt me much financially.

i tend to believe that those that are running Tesla are extremely intelligent. I find it laughable that anyone here, short or long, thinks they can judge the quality of the decision making happening at Tesla. They have all the facts and data, we have little to none. I believe X ramp will begin to progress shortly and most of the issues will be behind us because Elon said so. If the issues were major we would not already have 100's of X's on the road, we would have zero,, simple logic.

i think the X was difficult to engineer, but will not be an issue to produce once issues are worked out. I'm planning to get a test drive as soon as possible, may have to get in line for an X near the end of the year. I expect ER/CC to be neutral to positive and for TSLA to start heading north again.

 

[larmor]

To add to this: I find it interesting that the market has to 'price in' minor issues for a new car company which is changing the paradigm of the automobile at all levels, as we all currently know and use. Isn't this what kept nflx down even when they wanted to split subscriptions for dvd and streaming. Market tried to price in this paradigm shift, but alas the market doesn't have kids who need to watch daniel tiger at all hours and all locations.

I wonder if the market has priced in emissions fraud--oops that would be VW (porsche) and mbz...

A lot of these things have already been priced in for some time.


Another aside, from HK talk, question was asked why not sliding doors for MX, and answer was that forces (predetermines) the shape of the car. Hence FWD...

 

[Fallenone]

I have a question for you guys. Based on data provided by Yahoo Finance, analyst has consensus of 2016 revenue 8.62B with EPS $1.71. The current float is about 130m. Assuming TM is going to have a secondary offering for about 15% for 20m and then have a total float about 150m. Then we get 0.26 b of net profit, which is 3% of the total revenue. Is this for real?

 

[ludicrousspeed]

I have a question for you guys. Based on data provided by Yahoo Finance, analyst has consensus of 2016 revenue 8.62B with EPS $1.71. The current float is about 130m. Assuming TM is going to have a secondary offering for about 15% for 20m and then have a total float about 150m. Then we get 0.26 b of net profit, which is 3% of the total revenue. Is this for real?

What leads you to believe that they will dilute 15% of their equity? They have raised equity multiple times and have never come close to issuing that many shares at once, normally selling between 2-7 million shares per offering (6.9M being the most that I'm aware of, also at lower prices per share.) At $200 per share, issuing 20M shares would raise ~$4billion which is just not going to happen at once. Also, forward Tesla earnings estimates have historically been positive then revised/lowered as the reporting date closes. The market doesn't penalize companies like Tesla with a solid plan who post losses as long as they're spending their money efficiently to spur innovation and future growth.

 

[Fallenone]

The point is not how much of dilution of current share, its the net profit % (If no dilution at all, then this ratio will go down even further to 2.5%). I'm neither interested in how analysts revise their estimate nor how market react to how Tesla spends the money. My question is how is this, the super low net profit %, gonna happen?

What leads you to believe that they will dilute 15% of their equity? They have raised equity multiple times and have never come close to issuing that many shares at once, normally selling between 2-7 million shares per offering (6.9M being the most that I'm aware of, also at lower prices per share.) At $200 per share, issuing 20M shares would raise ~$4billion which is just not going to happen at once. Also, forward Tesla earnings estimates have historically been positive then revised/lowered as the reporting date closes. The market doesn't penalize companies like Tesla with a solid plan who post losses as long as they're spending their money efficiently to spur innovation and future growth.

 

[pGo]

I believe market is alarmed over the X ramp knowing that Tesla has to spend billions in the next few years. If Tesla doesn't show FCF clearly in q1, and going forward, it is playing with dangerously shallow cash availability which essentially stops most future investment. Doing secondary in such situations yields negative response. X must ramp fast soon and FCF must happen in q1 to get back the breathing room.

 

[jhm]

Not according to Elon Musk. In his view the end game is that world total energy production which is roughly split in three equal parts: heating, transportation, and electricity can be replaced by solar, with about third of total required solar generation being grid connected. This leaves current requirement for power grid capacity roughly intact. Grid will require modernization, but grid infrastructure will not be stranded. Fossil generation infrastructure eventually will be.

I did not say that the transmission grid becomes stranded. It will be used. But it's utilization will be much smaller. Moreover, 1.2 billion people currently live without access to a power grid. Electrification will come to these people, distributed energy will leapfrog the grid. Thus, the grid is nonessential. It may be nice to have where it is already paid for, but it is nonessential to the expansion of eletrification.

Another way to look at this is that virtually all power flowing through transmission lines is coming from remote utility scale .generators. We call them centralized, but in actuality they are remote to where the load is. What happens as Utility scale generation declines, say, by a third? The transmission lines get used a third less as well. So the transmission system has 50% more capacity than needed. The question of who pays to maintain this surplus capacity becomes really contentious. The current business model for most utilities is that the cost gets recaptured from ratepayers whether the capacity is needed or not. This model breaks down as ratepayers defect from the grid to avoid paying for things they actually use quite little of. So the utilities need to be very careful to down scale capacity. They definitely should not be making the assumption that ratepayers can be counted upon to willingly pay for excess infrastructure.

 

[dalalsid]

I believe market is alarmed over the X ramp knowing that Tesla has to spend billions in the next few years. If Tesla doesn't show FCF clearly in q1, and going forward, it is playing with dangerously shallow cash availability which essentially stops most future investment. Doing secondary in such situations yields negative response. X must ramp fast soon and FCF must happen in q1 to get back the breathing room.

What the market doesn't know is that the Model S was the fastest ramped alternative fuel vehicle in history, faster than the Prius, Leaf and Volt. And even with the slow ramp, the X is on target to beat that.

 

[Buddyroe]

I believe this is incorrect, due to first principles theory. Yes, the doors were probably a headache to design, and also involved a costly design process. Manufacturing is an entirely different thing.

Elon would say, "Boil it down to its fundamental elements. It consists of iron, aluminum, steel, copper wiring, electronic sensors, glass. How do we get those things, and assemble them into this design we so painstakingly developed?"

The door is not fundamentally expensive. It's not made of gold or titanium. It's hinges, drive motor, posts, wiring, sensors and some stamped panels. These things probably cost $1,000 in finished parts, and much less as raw materials. Elon will then focus on assembling those molecules for less and less cost over time.

What I think you're experiencing is actually a result of their appeal. They are WORTH $10,000-$15,000, but don't cost nearly that much. Bingo, margin boost.

They have to recoup the cost of designing the doors also. Or, looked at the other way, the total cost of designing the car would have been several million less, so the car could have been priced cheaper. I agree though - it's difficult to say for sure how much they've added to the to the price of the car.

 

[madodel]

Man, you guys just don't get it. The point is, Tesla has designed a VERY nice car. I never said that people wouldn't want to buy it. The problem is, TESLA CAN'T BUILD IT! And it caused the car to be 2 years late. And it cost probably $200M more than it would have. None of which Tesla could afford to have happen at such a young age of the company.

My impossible to build Tesla Model X Signature

 

[techmaven]

There was a publication of a revision to the SAE J1772 standard yesterday - J1772_201602. Does anyone know what it contains? I can't seem to download it from SAE right now.

 

[Chickenlittle]

cNBC is having Lutz (the putz) on this morning for a fair unbiased discussion. Why don't they ever point out how wrong he has been in the past?

 

[Johan]

My impossible to build Tesla Model X Signature

Nice! Congratulations! Did it cost you $200 million or slightly less?

Makes me think of No Church in the Wild lyrics: "Cocaine seats. All white like I got the whole thing bleached"

 

[JRP3]

They have to recoup the cost of designing the doors also. Or, looked at the other way, the total cost of designing the car would have been several million less, so the car could have been priced cheaper.

The X is a larger more complicated SUV version of the S and is only priced $5K more than a similarly optioned S. I don't see evidence of a huge price premium for the doors.

 

[dreamingof3]

cNBC is having Lutz (the putz) on this morning for a fair unbiased discussion. Why don't they ever point out how wrong he has been in the past?

I seriously cannot stand that guy. Why is everyone running a smear campaign against Tesla? Lutz needs a hobby other than bashing Tesla on CNBC and to anyone else who will listen. Maybe his comments will knock us down another 10 points. Ridiculous.

 

[Drax7]

Model X Arrived in Dubai
Vin 346 Delivery
Picked up my Model X Sig today
Production VIN 25x on its way to Florida

Some recently delivery activities in model X forum. One of the key reasons for the severe drop in 2016 is the fear of model X production failure. If TM can prove it can ramp up even slowly plus resolve all major issues, then SP should hold the ground.

Agree, and very likely that stock will not sustain a rally until it's clear production issues are resolved.
Thats my working hypothesis.

 

[CorneliusXX]

Pre market already down another 1.5%. looks like it´s going to be another one of those days. I´ll be happy if we finish over $160 today.

 

[pGo]

What the market doesn't know is that the Model S was the fastest ramped alternative fuel vehicle in history, faster than the Prius, Leaf and Volt. And even with the slow ramp, the X is on target to beat that.

Market doesn't care if its alternative fuel vehicle. It sees immediate liquidity problem looking at Tesla's history of investments and not enough cash coming in from operations if the ramp doesn't improve drastically.