I've written several articles with that data. Model s was the fastest ramped alternative fuel vehicle ever. Faster than the Prius, faster than the leaf and faster than the volt.
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Yes, I think the opportunity shorts are out of the game at the moment and the shorts with malice are in. They'd love to scuttle the SCTY deal or the 4th quarter equity raise by keeping TSLA low. Nonetheless, 3Victoria has a valid point that this is an attractive price point for longs to enter and a dangerous price point for shorts to enter.
Tesla's plan is to go for cash flow positive in Q3 and profitability in Q3 and Q4, I believe. The company can still spend furiously on capex in Q4 and still show a profit, but it won't be showing cash flow positive in Q4 unless the inflow from the equity raise is considered.
Edit: Vgrinshpun beat me to it.
larmor
Active Member
The problem is, as you highlighted on many occasions, that short selling is optimized and timed to drive the price down, while buying by retail investors like 3Victoria is not timed / optimized for driving the SP up...
Ideally we need large institutional investors to defend SP from short selling attacks.
O
Their current discount rate is 25%/20% (high/low growth rate). I think 12.5% to 15% discount rate is appropriate as it is the highest discount rate used in other valuation reports that I came across. All things being equal, at 13% discount rate, the valuation almost doubles; instead of $185, it becomes almost $370!
Their current discount rate is 25%/20% (high/low growth rate). I think 12.5% to 15% discount rate is appropriate as it is the highest discount rate used in other valuation reports that I came across. All things being equal, at 13% discount rate, the valuation almost doubles; instead of $185, it becomes almost $370!
Exactly, this is something that puzzles me. So who are these short sellers who always seem to flawlessly orchestrate their attack to synergistically bring down the SP. Are they retail buyers or institutions? On the other hand the longs don't seem to receive protection from short attacks, as seen in the main institutions which are the largest shareholders allowing their shares to be borrowed for short selling. In the short term it can be seen as earning profit from the interest, but in the long run, the SP is suppressed and will result in further repercussions like merger failure or equity raise, to their own detriment. Would be nice to see a champion of the longs leading a defense committed to protecting the SP and allowing it to blossom based on the true progress of the company
I understand in this case you're making a distinction, but I don't think any bull investor has ever doubted that selling Teslas were a profitable endeavor. So when you speculated that Elon might guide for Q4 profitability, it can only be assumed to be about cash flow. So if you're point was only about Q4 being profitable minus capex, then that's not really saying anything that would help move the SP.
From their Q2 conference call:
"
Rod Lache - Deutsche Bank Securities, Inc.
Sounds like a lot of innovation there. One last just housekeeping thing for Elon or Jason. You'd previously talked about the objective of profitability in the fourth quarter, but I know a lot's changing with the mix and also with the direct leasing. So is that also something that we should think as being pushed out a quarter?
Elon Reeve Musk - Chairman, Product Architect and CEO
Well, if you exclude Model 3 CapEx ramp, then – well in fact, really for Q3 and for Q4, Tesla would be profitable excluding the Model 3 CapEx ramp.
"
That to me reads like them guiding for net negative due to model 3 capex.
From their Q2 conference call:
"
Rod Lache - Deutsche Bank Securities, Inc.
Sounds like a lot of innovation there. One last just housekeeping thing for Elon or Jason. You'd previously talked about the objective of profitability in the fourth quarter, but I know a lot's changing with the mix and also with the direct leasing. So is that also something that we should think as being pushed out a quarter?
Elon Reeve Musk - Chairman, Product Architect and CEO
Well, if you exclude Model 3 CapEx ramp, then – well in fact, really for Q3 and for Q4, Tesla would be profitable excluding the Model 3 CapEx ramp.
"
That to me reads like them guiding for net negative due to model 3 capex.
Phil Seastrand
Member
Tesla does testing in some very unique ways. Check out this video of Marc Tarpenning at 31:10 where he discusses how Tesla was able to quickly turn around suspension testing on a frozen lake:
This entire video is very enlightening if you haven't seen it.
Except that by definition capex has only a relatively minor impact on profitability since capital items are depreciated over many years. Seems hard to imagine that one quarter of additional m3 related depreciation could move them from profitable to a loss.
I look at institutional investors as being like somebody's rich uncle: they own lots of different stocks, have lots of dry powder lying around, and don't get too worked up about things. The rich uncle would regard shorts selling into new positions just weeks prior to what is most likely going to be an excellent earnings call as being just plain dumb, but if they're willing to throw their money away he's happy to buy a fair chunk of shares at discounted prices when the momentum turns upward. The rich uncle assumes the market will correct the misappropriate stock price quickly after the ER.
On the other hand, I see Musk as sharing our situation more closely. He's heavily invested in TSLA, he wants to see both the merger and the equity raise succeed at the best possible terms, and for this reason he's more likely to help us (by releasing some good news) than the rich uncle would.
This was a controversial quote from Musk because it didn't really make sense. He was correcting Jason, who had just said that Tesla would be profitable. I think they didn't want to let the cat out of the bag back then, and so Elon tagged something onto the statement of profitability (excluding the Model 3 CapEx ramp) that didn't make sense because CapEx spending doesn't figure directly into profitability (CapEx directly affects cash flow, however). Jason was smart enough not to correct his boss on this one. From that day on, I expected profitability (period) because Jason had spoken something that he wasn't supposed to say at that point and Elon's correction didn't make sense.
I now understand where your confusion came from. The CEO of Tesla said something that was illogical, which is something we seldom hear from Musk.
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Off Shore
Off Topic Member
In the light of recent events , we can see that a resounding delivery number has a limited punch in delivering the SP up, which in turn is easily brought down by shorts and analysts with vested interest. It remains to be seen if GAAP profitability also has its limitations. Perhaps something more drastic with an added element of surprise, like a breakthrough update in TE is needs to deliver the final killing blow.
Any idea why Elon didn't wanted to let the cat out of the bag back then? With the employee memo, he let more cats out of the bag, arguably premature. His actions are puzzling and contradictory. Could it be to confuse shorts?
Care to make a wager? ;-)
Note: I'm willing to bet primarily because I want an emotional hedge. I hope you're right, if so, I'll happily take a picture of something silly while I profit. If I continue to lose truckloads of money via options, I'd like to see you bald, eating a sock or some such thing to ease the blow. No pressure.
I'll make this a bit fun.
How does this sound for a wager? If I'm right, you film yourself eating a bowl of ghost peppers and drinking a full glass of WULIANG CHUN 五粮春酒. If I'm wrong I film myself eating a bowl of ghost peppers and drinking a full glass of WULIANG CHUN 五粮春酒. Sound good?
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ev-enthusiast
Active Member
Looks like the max pain web page has some issues:
Max Pain | Maximum-Pain.com
Last time I checked max pain was at $210.
Will be interesting if today we move up towards max pain or max pain is coming down significantly to where the SP is currently trading.
Max Pain | Maximum-Pain.com
Last time I checked max pain was at $210.
Will be interesting if today we move up towards max pain or max pain is coming down significantly to where the SP is currently trading.
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Gerardf
Active Member
Indeed, the max-pain site does wierd things.
I found this one : Strike Pegger for TSLA
215 seems high, but I will take it
(but the slope is not very steep,and I would not be surprised to see the shorts giving it another try today)
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That appeared as clear as mud to me. I'm an engineer and am pretty good with numbers, but this stuff seems to be deep in accounting territory. Both you and vgrinshpun said the same thing about capex, so I guess that must be the case.
But just for my edification, are you saying that whatever is spent for capital expenses (like factory equipment, airstream trailers, and buildings) doesn't get deducted (even though the full dollar amount was already spent) from revenue in exactly the same way as COGS? Instead, only the depreciation of those capital goods are what's deducted? If that's the case, then doesn't this undermine one of the pillars of support of Tesla's financials? How can we claim last year that if it weren't for all the spending on growing the business (expanding the production line, opening new stores and service centers, and building out the supercharger network), Tesla would've been a profitable company. All those growth items should've been treated as CapEx, and amortized over a long period of time? right? Or am I missing a fundamental detail?
Johann Koeber
Happy Owner
You got it right with your basic understanding. But sometimes it gets a bit more complicated.
You buy a machine to expand your capacity of the factory. Or you build a new factory. These costs will be change your cash flow, but not your expenses. When the machine is placed in service you start monthly depreciation of the machine. Destribute the cost of the machine over the estimated number of months it will be of service.
But, there are other examples:
You also hire people to work the machine. You train them. You will incur labor costs even before the machine is placed into service. These will not be in your balance sheet, but in you P/L statement.
Bottom line: Not all costs of expanding capacity are CapEx, some go right to P/L.
Stretch2727
Engineer and Car Nut
Three reasons growth companies may as profitable during a growth phase.
1. Capital expense items are not immediately utilized. Example - depreciation starts for Model 3 equipment which will only bring revenue a year from now.
2. Not everything gets capitalized. This varies but generally you will have expenses for small items which can add up. Also, generally travel and employees costs for people managing the setup are not capitalized.
3. Labor will be hired to be trained etc before they are needed. Also, during a ramp the per unit labor costs will be higher as unit you get to full capacity.
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