Short-Term TSLA Price Movements - 2016

[MitchJi]

For those interested in the Semi analysis I did back in July

Thanks!

 

[larmor]

Let me throw out an investor question. Is the Model 3 now under priced? It is likely a nicer car than Tesla envisioned when musk came up with the $35K promise. Hardware 2.0, is successfully transitioned without much drama, will likely ensure Tesla will sell every M3 it can make well into the next decade (I say this assuming no level 4/5 approved by regulators).

I think the M3 is about $10K too low. That is $5B of revenue for every 500,000 cars sold.

Over the next five years $140K is probably too much for a well appointed electric sedan. But $50-60K may be too little.

I think really depends on size and output of GF. Battery in large volume will allow TM to make money on baseline M3, and then with large volumes, profit margin on options increases also.

 

[Fallenone]

Let me throw out an investor question. Is the Model 3 now under priced? It is likely a nicer car than Tesla envisioned when musk came up with the $35K promise. Hardware 2.0, is successfully transitioned without much drama, will likely ensure Tesla will sell every M3 it can make well into the next decade (I say this assuming no level 4/5 approved by regulators).

I think the M3 is about $10K too low. That is $5B of revenue for every 500,000 cars sold.

Over the next five years $140K is probably too much for a well appointed electric sedan. But $50-60K may be too little.

Well the autonomous driving feature does cost $8k on Model S/X and still won't be dirt cheap for Model 3 buyers.

By raising the price of Model 3, Tesla faces the risk of losing market share for the car. If the customer pays several $k for the autonomous feature, Tesla is still earning that part of the money. Barebone $35k Model 3 does not have this function.

Also if the Tesla Network takes off, $10k on the car is really nothing compared to the service Tesla may monetize on. So I would prefer they sell the car at a price as low as they can with healthy margin, encourage buyers join the Tesla Network, then rake in the value of ride-sharing.

 

[Johan]

interesting article on new California requirements on autonomous vehicles. basically the DMV wants to see a year of test data first. Something Tesla will not have a problem in collecting, but still may be overkill

Google, automakers object to California rules for self-driving cars

A year. What a worthless metric. So sad that the regulators have such poor understanding of the field they have in their power to regulate.

They should be asking for a certain number of miles of test data, over a wide range of conditions.

 

[mrdoubleb]

Well the autonomous driving feature does cost $8k on Model S/X and still won't be dirt cheap for Model 3 buyers.

By raising the price of Model 3, Tesla faces the risk of losing market share for the car. If the customer pays several $k for the autonomous feature, Tesla is still earning that part of the money. Barebone $35k Model 3 does not have this function.

Also if the Tesla Network takes off, $10k on the car is really nothing compared to the service Tesla may monetize on. So I would prefer they sell the car at a price as low as they can with healthy margin, encourage buyers join the Tesla Network, then rake in the value of ride-sharing.

I was thinking about this recently. So for your avg M3 buyer shelling out another 8k for this may be too big of a stretch. But what if Tesla offered a deal like this:
Assuming Tesla would get a cut of the revenue generated by cars joining the Tesla Network as they would be operating the billing system. You could get Full Autopilot for free, pending you deferred the first 8k of your revenue to Tesla completely.

 

[esk8mw]

Remember when Elon predicted 25% gross margins on Model 3 and bears et al lost their sugar over the quote? Well, now we see how they get to 25% - the AP2 option. Even at 7k for Model 3, that's probably $6000-$6500 pure profit on a 35k base car. Given the likely very high take rate on this "must have" option, the declining costs of batteries with the GGF and the M3 being built from the ground up to be easy to manufacture (as Elon pours massive resources into improving manufacturing) - the 25% starts to look conservative.

 

[electracity]

They have one of the best systems but are taking a much more conservative and cautious approach.

[/MEDIA]

Looks like too many hot women around to worry about rushing projects. I assume Musk insists on celibacy for Tesla employees of both genders.

 

[BobSk]

Possibly, but then again TM's official mission statement is not to make money but to accelerate the advent of electric vehicles... selling Model 3s for less than they are "worth" is a good way to ensure more people buy it no ? Plus it hurts the competition (ICE) even more as they have to compete on functionality AND cost.

On the surface, selling at low margin sounds good. But good profit will give Tesla a chance to build more factories at a faster pace, and accomplish the mission faster.

 

[schonelucht]

Right, that's where I come out on the thing. Still, a 2k increase (and about 1.5% in margin I'd expect) is a significant boost in revenue/profit on an option that will probably have a 90%+ take rate.

There is also an increased cost of goods to go along with it though.

 

[Fallenone]

I was thinking about this recently. So for your avg M3 buyer shelling out another 8k for this may be too big of a stretch. But what if Tesla offered a deal like this:
Assuming Tesla would get a cut of the revenue generated by cars joining the Tesla Network as they would be operating the billing system. You could get Full Autopilot for free, pending you deferred the first 8k of your revenue to Tesla completely.

Yes, worries about the price was one of the main reactions I see in Model 3 reservation holders I know. Also the Model 3 sub forum right here at TMC you can also find people not liking it that much. Tesla needs to lay out the details about Tesla Network to convince them to join.

While we're at this topic, I did a quick search on some numbers for Uber, the most comparable thing for Tesla Network.

By the end of 2014 there were about 160k drivers in US (Princeton economist explains why we should all stop worrying and learn to love Uber). Assuming Uber grew at the rate of 100% per year. At mid 2016 it would then have 565k drivers with a $66B valuation (The most obvious reason to doubt Uber's $66 billion valuation) that's $117k/driver.

Suppose all the 370k reservations (I think it's much higher now but 370k is the only official number so far) all turned out to be actual sales. And Tesla persuaded half of them joining the Tesla Network (after all, some people just don't like the idea of sharing their cars with strangers). That would be $21.7B of valuation if Tesla Network only keeps 20% of the fare as Uber does. But why would they just keep 20% when the owner doesn't need to be driving?

 

[esk8mw]

There is also an increased cost of goods to go along with it though.

Right, it's implied in my numbers (2k higher price/revenue, but only 1.5% margin bump due to extra hardware costs).

 

[TMSE]

interesting article on new California requirements on autonomous vehicles. basically the DMV wants to see a year of test data first. Something Tesla will not have a problem in collecting, but still may be overkill

Google, automakers object to California rules for self-driving cars

It is indeed great news for Tesla! A year of test data perfectly aligns with late 2017/ early 2018 release of self-driving Tesla. No one else can do that! California regulators are effectively strengthening the moat around Tesla.

 

[dakh]

An only somewhat related note -- speech recognition was mentioned here lately in comparison with driving AI. Well, here you go: MSR matched professional transcriptionists error rate in speech recognition.

Especially relevant quote:

Zweig attributed the accomplishment to the systematic use of the latest neural network technology in all aspects of the system.

(highlight mine) They're using a GPU as well to run the network.

 

[esk8mw]

Yes, worries about the price was one of the main reactions I see in Model 3 reservation holders I know. Also the Model 3 sub forum right here at TMC you can also find people not liking it that much. Tesla needs to lay out the details about Tesla Network to convince them to join.

While we're at this topic, I did a quick search on some numbers for Uber, the most comparable thing for Tesla Network.

By the end of 2014 there were about 160k drivers in US (Princeton economist explains why we should all stop worrying and learn to love Uber). Assuming Uber grew at the rate of 100% per year. At mid 2016 it would then have 565k drivers with a $66B valuation (The most obvious reason to doubt Uber's $66 billion valuation) that's $117k/driver.

Suppose all the 370k reservations (I think it's much higher now but 370k is the only official number so far) all turned out to be actual sales. And Tesla persuaded half of them joining the Tesla Network (after all, some people just don't like the idea of sharing their cars with strangers). That would be $21.7B of valuation if Tesla Network only keeps 20% of the fare as Uber does. But why would they just keep 20% when the owner doesn't need to be driving?

This is a good exercise and good way to start thinking about what this line of business can be worth. Tesla can also charge a monthly fee to join the network in addition to keeping x% of the fare. And the fun doesn't stop there! Tesla will keep on making S, X, 3, Y, Truck etc etc and every car has an opportunity to join TN. The valuation and cash flow will keep growing.

 

[Papafox]

As there are likely big bets placed upon the closing price today (puts and calls), expect some manipulation in SP towards close (could be up or down). Manipulation is possible right now because we have lots of ambiguity in the minds of longs and shorts. Shorts are dreaming about massive cash burn in 2017 and lower gross margins in Q3, which likely won't happen, and longs are impatiently waiting for all the good news (24,500 Q3 deliveries, AP 2 hardware now shipping, etc.) to raise the stock price. Since we won't have clarity on these issues until after the 10/26 ER and the 11/1 SCTY-TSLA financial presentation, ambiguity rules. I think most longs are firmly cemented in their holdings until ER. The ambiguity right now mostly determines if the approx 26 million shares sold short are going to grow in number or reduce in number as the afternoon progresses.

Many longs are disappointed with yesterday's trading because the AP 2 announcement seems like such a no-brainer positive. I mean, we see these ugly google cars roaming with huge lidar systems on top that make them look like 1950s police cruisers and then TSLA shows a 40X increase in computation power and an elegant way to hide camera and sensors. To these longs I say, "Our time will come soon enough."

 

[Johan]

I was thinking about this recently. So for your avg M3 buyer shelling out another 8k for this may be too big of a stretch. But what if Tesla offered a deal like this:
Assuming Tesla would get a cut of the revenue generated by cars joining the Tesla Network as they would be operating the billing system. You could get Full Autopilot for free, pending you deferred the first 8k of your revenue to Tesla completely.

A barátom! This, or some slight variation of it, is absolutely brilliant.

 

[Papafox]

As there are likely big bets placed upon the closing price today (puts and calls), expect some manipulation in SP towards close (could be up or down). Manipulation is possible right now because we have lots of ambiguity in the minds of longs and shorts. Shorts are dreaming about massive cash burn in 2017 and lower gross margins in Q3, which likely won't happen, and longs are impatiently waiting for all the good news (24,500 Q3 deliveries, AP 2 hardware now shipping, etc.) to raise the stock price. Since we won't have clarity on these issues until after the 10/26 ER and the 11/1 SCTY-TSLA financial presentation, ambiguity rules. I think most longs are firmly cemented in their holdings until ER. The ambiguity right now mostly determines if the approx 26 million shares sold short are going to grow in number or reduce in number as the afternoon progresses.

Many longs are disappointed with yesterday's trading because the AP 2 announcement seems like such a no-brainer positive. I mean, we see these ugly google cars roaming with huge lidar systems on top that make them look like 1950s police cruisers and then TSLA shows a 40X increase in computation power and an elegant way to hide camera and sensors. To these longs I say, "Our time will come soon enough."

Edit: Personally, I think the 201+ price we saw during busy trading time today was more indicative of where longs would bring the SP. Currently, we're seeing a repeat of yesterday's trading, where shorts are trying to keep TSLA from closing above 200 and ideally would show a small decline for the day. Red is their favorite color, after all.

 

[Turing]

Some people were wondering why MBLY stock went up yesterday after the Tesla-vision news. Let me attempt an explanation:

The loss of Tesla as a customer to Mobileye was already known fact, so it had no negative impact.
On the other hand, MBLY investors may have feared that AP2 system of Tesla may be offered to other manufacturers, creating a superior competitor to Mobileye. The Oct.19 reveal from Tesla did not state or even imply any intention of Tesla productizing the Tesla-Vision system outside of their own cars, so this news puts MBLY investors at ease that Mobileye can continue its near-monopoly status for all other manufacturers.

The problem with this is that if Tesla can show that they can partner with nvidia and use other commodity parts (camera, radar) to make a system superior to anything mobileye has to offer, then other autos are going to start thinking about going that route too. Many of them already have self driving R&D, so why not just bridge the gap and come out with your own driver assist systems?

 

[sunhelm]

Thank you Forbes for summing up all my ranting:

“To choose now you’re saying that today’s technology will be the solution five years from now,” said Nidhi Kalra, a senior information scientist at RAND Corp. and co-director of its Center for Decision Making Under Uncertainty. ”The package of sensors you might want five years from is probably going to be very different.”

Tesla's Self-Driving Hardware Gamble: Is 2016 Tech Good Enough For Next Decade?

As a corollary, It didn't prevent early cell phone adopters even if it meant heaving suitcases sized devices SO LONG AS IT WORKED. Tech always evolves and is improved upon. Tesla is doing pioneering work here.

 

[EnzoXYZ]

Remember when Elon predicted 25% gross margins on Model 3 and bears et al lost their sugar over the quote? Well, now we see how they get to 25% - the AP2 option. Even at 7k for Model 3, that's probably $6000-$6500 pure profit on a 35k base car. Given the likely very high take rate on this "must have" option, the declining costs of batteries with the GGF and the M3 being built from the ground up to be easy to manufacture (as Elon pours massive resources into improving manufacturing) - the 25% starts to look conservative.

Who does Elon think he is telling the professional/ experts how much M3 GM will be!?!?