Short-Term TSLA Price Movements - 2016

[tander]

Here is my attempt at an answer to Tander:

I keep tabs on only a few of my former investment management colleagues - for those of you new here, I've been (very) Deep In The Wilderness for many, many years now.

However, the sense that I get from that small sampling is that, disregarding any effects directly attributable to the upcoming US elections, the forces weighing AGAINST a short- and medium-term upward movement by TSLA include:

* Categorization. For better or for worse, institutional investors have an inherent dislike of conglomerates, and industrial conglomerates are easier to dislike than hi-tech or service conglomerates. It is not far-fetched to envision the following hypothetical conversation or mindset at CapServicesRUs: "Is Tesla an automotive company? Nah, not really. Is it an power distribution company? Naah, not really. Is it a solar energy company? Well, no, not really. So can I put it on the Ignore Shelf over there and spend my time considering something that is a car/widget/whatever company? Yeah - that's the easy way out."

* Why wait for Jam tomorrow when I can have Jam today? Profits are good. Profits are neat. Profits are what fund managers like to see in the companies they choose for their portfolios. For all the talk about Searching for the Next Big Enron errr...Chiptole err...FedEx/Microsoft/Apple/Netflix, what an institutional investor really wants to see is some demonstration of continued profits - and growing ones, too. Risk Aversion is a very, very important parameter on Wall St: your job may DOES depend on it. The number of true investor iconoclasts, like Ron Baron, are very few.
Once Tesla does have a consistent string of quarterly profits there should follow a wave of investors who no longer have a built-in reason to ignore the company. In that same regard, if I recall correctly such a string is the remaining requirement for TSLA to join the S&P500, upon which entry many, many hundreds of billions of dollars of index funds will be required to hold positions in TSLA.

* Where's the Big Mo? I haven't a firm handle on how many institutional investors have as a key parameter "momentum", but I do know there are a lot of Momentum Investors out there. With TSLA being stuck in the $200-or-so channel for two years now, that fraction of fund managers will not - CAN not - invest in Tesla. Until it changes.

So: those fund managers, and those of us individual investors, who CAN invest for the long or really long term can use this lull to our benefit. I always will hearken back to my mentor (and one of TSLA's Angel Investors, coming in at the Dark Days of year-end 2008) who did remind me "I'm willing to wait for the long term....just not for the hereafter". Tesla does need to come through with its promise of changing the world - eventually. What does that mean for what ostensibly is a Short-term thread? Well, I did invite - by showing all what I had done - others to come in late last month at $154.35 (I "cheat": bought a big hunk of SCTY at $16.97...so you bet I want that merger to go through!)

Thanks. As much as "the shorts" and stuff get mentioned on here, the "Big Mo" as you say seems most relevant. Most of them won't make big moves with the analysts sitting on the sidelines with Hold recommendations. On the one hand I'd like to see them say "whoops we were overly cautious regarding SCTY because we didn't have enough info yet but now we do" etc. and go back to the BUY BUY BUY type of ratings, but I could also see them saying something more like "well things are looking up for TSLA and the merger but we want to wait and hear more about xyz before jumping head first".

 

[TMSE]

It is obvious that the power generation live demo of solar roof didn't happen due to last minute glitches. To remedy that, they should do or have a permanent setup for live demo. It shouldn't be too hard.

 

[sdtslafan]

More like 120k Gen II vehicles.
~30k Model 3's.
Energy Storage.
Solar City. It has revenue as well as cost.




Elon, IMO, doesn't want to do another down round at 200 when last one was at ~215.

Wall Street thinks Tesla desperately needs cash so offers it only on bad terms. Elon is trying to convince Wall Street it does not need new capital so Wall Street will offer it on good terms.

My guess is Tesla can stagger to the Model 3 launch without new capital but drain cash on hand to ~500M. One very bad unforeseen event could really cripple Tesla. So, yes, better to do capital raise as soon as terms are favorable.

Thank you , extremely helpful...

When you say favorable terms, are you thinking more about a higher stock price for a stock offering, lower interest rate for debt, or both. Which do you suspect is more likely?

 

[Matias]

A comprehensive report on the solar roof unveil from Green Tech Media

Elon Musk Unveiled A Solar Roof and Didn’t Address Any Pressing Questions

"If shareholders were looking for a business strategy or a product launch timeline, they came away with less confidence than they started with."

I think that sums it. We did not see functioning product, don't know what the product costs, when it is available, exact specs, who installs it..

This was more a demo of an idea.

 

[dennis]

Looking forward to Q4 earnings and the potential for Tesla to remain profitable, I'd like some clarification on the GAAP treatment of Tesla sales that are not outright purchases. Here is what I believe I know and some questions:

1. Cars that were sold with RVG's that expire unexercised in Q4 have the portion of revenue that was reserved moved off the balance sheet to automotive revenues. Since the full COGS of those cars was already recognized under GAAP when the car was originally purchased this has the benefit of improving GAAP gross margins.

2. Cars that are bought with a loan are equivalent to outright purchases, i.e. full revenue and COGS are recognized immediately.

3. Cars leased directly from Tesla have their revenue and COGS recognized ratably through the term of the lease. Is this just portion that is in excess of the residual value or the entire purchase price?

4. Car leased through a bank partner. Is this the same as a direct lease or somehow different?

Any answers much appreciated.

 

[racer26]

"If shareholders were looking for a business strategy or a product launch timeline, they came away with less confidence than they started with."

I think that sums it. We did not see functioning product, don't know what the product costs, when it is available, exact specs, who installs it..

This was more a demo of an idea.

You're sort of right for the roof (though we did get a date, mid-2017). For the powerwall, its here, you can order it today, and get it in January, and its a world better than any competitive product (because of course it is, that's Tesla's whole MO)

 

[Value Ev]

It is obvious that the power generation live demo of solar roof didn't happen due to last minute glitches. To remedy that, they should do or have a permanent setup for live demo. It shouldn't be too hard.

Why is that obvious?

In another thread here someone who was there spoke to a Tesla person who said none of the panels were even wired up which is just the second step.

 

[Intl Professor]

Because people are self-centered, myopic, box-stranded, money grubbing, ugly inside creatures.

I resemble that. I even reuse kleenex until they are soggy. Drives my wife bats!

 

[Fallenone]

Looking forward to Q4 earnings and the potential for Tesla to remain profitable, I'd like some clarification on the GAAP treatment of Tesla sales that are not outright purchases. Here is what I believe I know and some questions:

1. Cars that were sold with RVG's that expire unexercised in Q4 have the portion of revenue that was reserved moved off the balance sheet to automotive revenues. Since the full COGS of those cars was already recognized under GAAP when the car was originally purchased this has the benefit of improving GAAP gross margins.

2. Cars that are bought with a loan are equivalent to outright purchases, i.e. full revenue and COGS are recognized immediately.

3. Cars leased directly from Tesla have their revenue and COGS recognized ratably through the term of the lease. Is this just portion that is in excess of the residual value or the entire purchase price?

4. Car leased through a bank partner. Is this the same as a direct lease or somehow different?

Any answers much appreciated.

I think maybe we can just use the total automotive GAAP revenue/cars sold as a proxy of the ASP for all these factors you've listed. And then fine tune it (basically increase it, with the P100Ds, maybe something like 300 per week on average or ~3300 for Q4). Q4's RVG and other leasing etc. impact should be similar to this one, I think.

 

[BobSk]

"If shareholders were looking for a business strategy or a product launch timeline, they came away with less confidence than they started with."

I think that sums it. We did not see functioning product, don't know what the product costs, when it is available, exact specs, who installs it..

This was more a demo of an idea.

To me the strategy is quite clear.
High level: solar + storage + car. Fossils fuel is out of the picture.
Approach: make the solar products beautiful and cost competitive. (solar roof costs less than traditional roof + electricity cost). The solar roof is stronger and last longer, tempered glass can last more than 100 years.

Products: 4 styles to choose from. Pricing information will come later. Production starts in mid 2017 (SolarCity website).

Solar roof is a trillion dollar potential market globally. (30 million new roofs each year times $40k price - my estimate). If Tesla gets 10% of the market, it's $100B sales. 8% profit will be a large number. People can challenge Elon, in the end, this guy tends to get things done.

On the Powerwall and Powerpack side, the market is even larger than solar roof. The current pricing on Powerwall is very attractive. The margin seems good (selling at $390 per kWh). Order now, delivery starts very soon.

Basically Tesla is sitting on $5 trillion market (solar roof, home storage, utility storage, vehicle, ride sharing).
Tesla is the indisputable leader in all 5 segments (except ride sharing is waiting for full autonomous in a year or 2), they also have the vertical integration advantage and large scale advantage. I am amazed some analysts still can not see the business strategy clearly.

 

[Intl Professor]

Utilities are not going away. Quick guess based on Quick Facts: Resident Demographics| NMHC.org is that about half the population of the US lives in some kind of medium-to-high density buildings where there is no chance that rooftop solar would make much difference to them. I'm going to start trying to figure out which utilities are going to be part of the solution. Nevada is not on that list...

We are blessed in Sacramento with the Sacramento Municipal Utility District after we wrested control of the board from too many PG&E puppets. (Probably behind our nuclear power plant which had to be decommissioned later as a Babcock and Wilcox clone after the Three Mile Island incident.)

 

[mejojo]

High level: solar + storage + car. Fossils fuel is out of the picture.

The problem here is that a regular home can generate nearly enough electricity to run the house, but NOT charge a car. My pretty modest commute of 75 miles round trip takes somewhere around 25+kwh to recharge. Fossil fuels will be in the picture for most people for as long as power companies use them, even after going solar/powerwall/EV.

 

[eloder]

The problem here is that a regular home can generate nearly enough electricity to run the house, but NOT charge a car. My pretty modest commute of 75 miles round trip takes somewhere around 25+kwh to recharge. Fossil fuels will be in the picture for most people for as long as power companies use them, even after going solar/powerwall/EV.

You're talking about a commute that's a good bit more than the average American commute.

My home, even with my EV, averages about 13-14 kwh per day.

 

[kenliles]

The problem here is that a regular home can generate nearly enough electricity to run the house, but NOT charge a car...
Fossil fuels will be in the picture for most people for as long as power companies use them...

That's true... Unfortunately the Utility has the same Photonics energy delivered to it. So does your place of work. And virtually every per square inch of your existence, including the roof of your EV, unless it's sitting in the parking lot of your workplace covered by photonics receptors.
Fossil fuels are living their last days over the next 20 years-
deader than the fossils that create them...
just my opinion of course...

 

[Value Ev]

"If shareholders were looking for a business strategy or a product launch timeline, they came away with less confidence than they started with."

I think that sums it. We did not see functioning product, don't know what the product costs, when it is available, exact specs, who installs it..

This was more a demo of an idea.

But this should be no surprise since it is tesla.

 

[larmor]

thx. i want to emphasize that i am just a student who worked for a short period of time for this fund as an intern.(and i know some people) those are only early (for me unexpected and a little bit frustrating) observations. another reason for all this BS out there is in my opinion that some shorts lie, to promote opinions that exercise pressure on the SP. actually i think some also lie when they already plan to cover their positions.

my original statement and questions about share dilution and big sellers seems a bit of topic right now, because everyone talks about the friday event. but this is actually the Short Term SP section. is there anyone who knows more? the post is at the end of page 2094. thx a lot

I get the same feeling when talking to financial advisors etc, they are all very focused on tried and true. This is a good thing for most large scale investments and a good strategy. If an upcoming industry leader can be identified that is even better. Take aapl ten years ago, or nflx three years ago, just examples. The reason this post is in the short term thread, because the market does not see value in tesla, and many benchmarks for an industry leader have been met by TM. The market may appear irrational in the short term, but over the long term months to years, will get it right.

 

[RobStark]

Thank you , extremely helpful...

When you say favorable terms, are you thinking more about a higher stock price for a stock offering, lower interest rate for debt, or both. Which do you suspect is more likely?

I think Elon strongly prefers equity and/or combo in convertible notes. So Tesla needs a stock price of 220 or higher.

If not short term corporate bonds for ~36 months if there is enough buyers in Tesla on Wall Street just not enough to raise the SP past 220.

 

[FredTMC]

I think if the solar roofs were operational that Elon would have mentioned that and even showed the power generation. As is though, it seems these were early proof-of-concept roofs that show that solar roofs can look amazing. I think there's still a lot of work to get done.

Btw, I was at the event last night. Hanging with @FredTMC and his wife. Fun time. Great event with great food and not too crowded.

The roofs looked amazing! Even better in person. I couldn't tell that they were solar roofs before the presentation. Out of the 4 houses I speculated that maybe one or two of the houses might have solar roofs but "for sure" not all of them. When Elon said they were all solar roofs, people around me were in shock and disbelief. Guy next to me kept saying "holy sh**, they look amazing." He couldn't stop repeating himself.

The roofs looked better than normal roofs. Everyone at the event was impressed at how good the roofs looked.

I spent a lot of time talking to a Tesla engineer who was answering questions about the new powerwall. The Powerwall 2.0 looks like a hugely improved product over Powerwall 1.0. Looks like the inverter is a 5000 way DC to AC inverter so that battery power can be fed into house (or grid). However, of installing solar you'll still need an inverter for your solar panel system, I was told.

The Tesla engineer said that Powerwall 1.0 install costs we're roughly $7-8k, largely due to the need to install another inverter. So with the new Powerwall, install costs go down dramatically since the inverter is built-in the the Powerwall.

I was also told the solar roof was largely a Solarcity product, meaning development was largely done at Solarcity.

Yes, great event. Thanks Dave.

Solar Roof amazing in person. Beautiful. Disappointed with lack of details but blown away by it's potential.

Powerwalls are amazing. Super price. I put in a reservation.

I wonder if tesla will reveal reservation counts soon... thoughts?

 

[electracity]

I think it is possible, that the product (solar roof) is not ready and this was rushed for merger proposal.

Maybe Musk is pushing too hard to try and make the stock move. What if he had said "let me show you what we are working on for later next year"? Tesla needs to differentiate their solar offer, and he showed a good upcoming product that meets that need. But the way it was presented as a finished product has even overshadowed the new powerwall, which is likely much closer to production.

Same with AP hardware 2.0. Pushing too hard with claims of full autonomy. IMO talking a more reserved presentation right now probably would have produced better results.

 

[brian45011]

We are blessed in Sacramento with the Sacramento Municipal Utility District after we wrested control of the board from too many PG&E puppets. (Probably behind our nuclear power plant which had to be decommissioned later as a Babcock and Wilcox clone after the Three Mile Island incident.)

TMI 2 Operator error. TMI 1 is not scheduled to be de-commissioned until 2034.

Three Mile Island: 35 years later