Short-Term TSLA Price Movements - 2016

[Tslynk67]

Elon owning $8 Billion worth of SpaceX is huge. Does it give you any ideas how he could raise $1 billion for Tesla if Tesla ever got in a crunch?

If it came to it, Elon could float Space X as an IPO and raise at least $20B cash very quickly indeed. I know he doesn't want to IPO SX, but if he did they'd be queing up (me too!!!)

Tesla will NEVER go broke.

 

[NOLA_Mike]

I doubt that. It would be a waste of talent to hire the crème de la crème of the chip design world, an then let them do something anybody with a reasonably good brain could do.

To add to your thought - I don't think Elon and Company like to be held hostage by suppliers. When suppliers hold up Tesla, Tesla has a history of taking it vertical (in house).

I think MobilEye may have threatened to hold Tesla hostage with their AP hardware. If so, I think Tesla will do everything in its power to see that doesn't happen again.

 

[Irishjugg]

I dumped all my shares at 184 today. Looking forward to tomorrow's volatility. I hope we run into our good friend 'sub-180' again for a brief moment. I'm counting on you, bears.

Anyways, what are people's thoughts on what will happen to the SP post-merger? Bumps and dips aside, it's been surprisingly horizontal since Monday. I still hold fast to the idea that there are a substantial amount of people waiting on the sidelines until the uncertainty of the merger passes before jumping back in. TSLA is still one of the most watched stocks and I imagine people with large amounts of spare change are aware of the 16B~ in preorders and what that will do to the stock price come next year.

Booked another loss? Man, you really should just invest in index tracking, passive mutual funds. I don't mean this to be impolite, but I don't think I've seen you make a profitable trade and report it here yet.
The way you are trading on emotion is almost guaranteed to lose you money over time. Just another day to be careful and learn a bit more before you jump back in.

Good luck

 

[CALGARYARSENAL]

If it came to it, Elon could float Space X as an IPO and raise at least $20B cash very quickly indeed. I know he doesn't want to IPO SX, but if he did they'd be queing up (me too!!!)

Tesla will NEVER go broke.

Chanos said in an interview yesterday he expects Tesla to survive but not be as large as GM.

 

[Irishjugg]

I doubt that. It would be a waste of talent to hire the crème de la crème of the chip design world, an then let them do something anybody with a reasonably good brain could do.

I just read that SpaceX will build a massive internet in the sky sattellite network. No doubt the main customer will be Tesla. Somebody will need to build the chips for that too. (Elon Musk’s stake in SpaceX is actually worth more than his Tesla shares)

You may be right, I just find the deliberacy and choice of example to mean something deeper. It's not like it's one of his stock, repeatable examples it was a one off.
I also take exception to the anyone with a good mind can do it part. Certainly not as well given that there have been many smart people designing manufacturing lines for many years and the efficiency is still so low.
Agree to disagree here of course, but this is my personal theory on this and I actually have high confidence in it. Elon likes to use people in new roles that tangentially related to their past in order to change thinking and get different results. Lastly, maybe Keller was bored with chips after such a long career doing it. "Would you like to design a new kind of factory using principals and optimizations of cup design to massively increase volumetric efficiency and throughput" may have been a very exciting change up.

Not sure how I'll ever verify any of this though

 

[Tslynk67]

Chanos said in an interview yesterday he expects Tesla to survive but not be as large as GM.

Well that's pretty positive, coming from him...

 

[Tslynk67]

Booked another loss? Man, you really should just invest in index tracking, passive mutual funds. I don't mean this to be impolite, but I don't think I've seen you make a profitable trade and report it here yet.
The way you are trading on emotion is almost guaranteed to lose you money over time. Just another day to be careful and learn a bit more before you jump back in.

Good luck

Right now I don't know why you'd sell TSLA, makes no sense to me. Hold at least until M3 starts rolling, SP will head north at this time, almost certainly.

 

[larmor]

Well that's pretty positive, coming from him...

Agreed, that's like he raised a white flag and is capitulating in the most subtle way...

 

[EinSV]

<snip>

I definitely agree this is important and it does look like Tesla has really turned a corner with Q3 earnings, especially with free cash flow.

Would love to hear your thoughts on why you think cash generated by S/X will likely grow over coming quarters.

Thanks for taking a second look at this -- it also took a while for it to sink in with me that S/X had the potential to provide such a significant source of cash for Model 3.

I would caution that we have only seen one quarter of results with S/X both running at something close to full production, so there is potential for significant variability, down or up.

In terms of potential for upcoming quarters, let me start with a little back of the envelope calculation showing a very rough estimate of changes from Q3 to Q4. Please take this with a large grain of salt since it is early in the quarter, we don't have much visibility into production rates (although the signs seem positive so far), and there are a lot of variables.

Assuming that Tesla meets its 2H delivery target of 50,000 vehicles, I estimate the following for Q4 cash generation starting with Q3 as a baseline:

Tesla Q4 Earnings/Cash Flow Estimate

4.5% increase in ASP:

P100D 0.5%
X60 phase-out 1.0%
Higher option pricing/limited inventory S60s/less discounting 1.5%
AP2/FSDC 3%*0.5 (1/2 Q4 deliveries)=1.5%
​

4% higher non-GAAP gross margin:

P100D 0.25%
X60 phase out 1.0%
Higher option pricing/limited inventory S60s/less discounting 1.5%
AP2/FSDC 1.5%*0.5=.75%
Production efficiency/sourcing gains: 0.5%
​

$2.28B automotive revenue ($2.15B *25.2/24.8*1.045)

Non-GAAP automotive GP $2.28B*.29=$661M
GAAP automotive GP=$571M plus ZEV

Services and other $250M*8% GAAP GM=$20M GP GAAP/$22M Non-GAAP

Non-GAAP total GP $683M; GAAP $591M plus ZEV

OpEx -- assume Q3-Q4 has about same rate of increase as Q2-Q3=$590M

Non-GAAP earnings $93M

Cash generation before capital expenditures: $597M (Q3 cash flow plus cash from vehicle sales to lease partners) -$139M (ZEV) + $60M guesstimate more D&A + ($93M-$111M) (Q4-Q3 Non-GAAP earnings) = $500M plus ZEV

+$50M from 100K Powerwall 2 reservations (conservative)=$550M plus ZEV increased cash position before CapEx.

Q4 CapEx Guidance $1.04B
12/31/2016 Cash: $3.1B-1.04B+.5B=$2.6B (not including adjustments up or down due to ABL etc.)

Again, these are very rough calculations and I think the absolute numbers are less important than the possibility that S/X will continue to generate significant and likely increasing amounts of cash for Model 3.

Incidentally, I recognize the 29% GM estimate seems very high at first blush. But based on the changes outlined above that Tesla has made this quarter with an eye toward generating more cash, I think 29% is a reasonable number. It is a "best guess" rather than conservative figure and if you pushed me I would be more comfortable with a non-GAAP GM estimate of 27-29%. But if the actual GM number is lower it should not have much impact on cash flow -- about $23M per GM percentage point out of $500M+ in cash generation. In any case, I think we are trending toward a beat on deliveries so it is likely to be a wash.

I expect actual CapEx to be lower than guidance as that has been the trend so far under Jason's leadership. So, overall I think this calculation ends up being slightly on the conservative side in terms of cash position exiting 2016, even if not all the elements are conservative.

Accounts Payable has gotten a lot of attention. Jason acknowledged in the earnings call that there may be some unwinding of AP but he and Elon suggested that it would not be material, especially given increased AR counterbalancing it. I treat that as a wash but it is worth keeping an eye on.

I think Q1 2017 should be even better with TE ramping and S/X business likely to be even stronger but this is already way too much for one post so I'll save that for another day.

 

[MitchJi]

Booked another loss? Man, you really should just invest in index tracking, passive mutual funds. I don't mean this to be impolite, but I don't think I've seen you make a profitable trade and report it here yet.
The way you are trading on emotion is almost guaranteed to lose you money over time. Just another day to be careful and learn a bit more before you jump back in.

Good luck

My advice to Jay is to make a vow to never sell another share of Tesla for a loss.

SpaceX seeks U.S. approval for internet-via-satellite network

Thu Nov 17, 2016 | 5:21am EST
Private rocket launch service SpaceX is requesting government approval to operate a massive satellite network that would provide high-speed, global internet coverage, according to newly filed documents with the U.S. Federal Communications Commission.

The California-based company, owned and operated by technology entrepreneur Elon Musk, has proposed an orbiting digital communications array that would eventually consist of 4,425 satellites, the documents filed on Tuesday show.

The project, which Musk previously said would cost at least $10 billion, was first announced in January 2015.

The latest documents, which include technical details of the proposed network, did not mention cost estimates or financing plans.

Financial backers of the company, whose full name is Space Exploration Technologies Corp, include Alphabet's Google Inc and Fidelity Investments, which together have contributed $1 billion to Musk's space launch firm.

The proposed SpaceX network would begin with the launch of about 800 satellites to expand internet access in the United States, including Puerto Rico and the U.S. Virgin Islands, the FCC filings showed.

"The system is designed to provide a wide range of broadband and communications services for residential, commercial, institutional, government and professional users worldwide," SpaceX said in technical documents accompanying its filing.

Similar internet-via-satellite networks are under development by privately owned OneWeb and by Boeing Co.

Such a system would provide a space-based alternative to cable, fiber-optics and other terrestrial internet access currently available.

SpaceX did not say when its launches would occur.

The satellites would be launched into orbits ranging from 714 miles to 823 miles (1,150-1,325 km) above Earth.

Each satellite, about the size of an average car, not including solar panels, would weigh 850 pounds (386 kg), SpaceX said.

SpaceX's primary business is launching satellites into orbit for government and commercial customers. It also flies cargo supply ships to the International Space Station for NASA.

SpaceX rocket launches have been on hold since a Sept. 1 launch pad accident that destroyed a $62 million Falcon 9 booster and a $200 million Israeli communications satellite. The company hopes to resume flights next month.

 

[Gerardf]

Chanos said in an interview yesterday he expects Tesla to survive but not be as large as GM.

Here is the interview :

@ 22.20 : part about Tesla
@ 24:00 : Tesla story -- The problem is I do not get it.
@ 27.00 : Statement that "Tesla will become a large niche player"


Indeed quite a turn for him .
Maybe he will be covering his short position (or just covered).

 

[CALGARYARSENAL]

Here is the interview :

@ 22.20 : part about Tesla
@ 24:00 : Tesla story -- The problem is I do not get it.
@ 27.00 : Statement that "Tesla will become a large niche player"


Indeed quite a turn for him .
Maybe he will be covering (or just covered).

Least bearish I have ever seen him.

 

[schonelucht]

Assuming that Tesla meets its 2H delivery target of 50,000 vehicles, I estimate the following for Q4 cash generation starting with Q3 as a baseline:

Solid work. We need more of this! One question, I am not immediately seeing interest expense/income in your overview.

 

[Krugerrand]

I also take exception to the anyone with a good mind can do it part. Certainly not as well given that there have been many smart people designing manufacturing lines for many years and the efficiency is still so low.

Define 'smart'. If you've been designing manufacturing lines for many years and the efficiency is still so low, were you really that smart in that field in the first place? Seriously, how can one guy spend a few nights at the end of a production line and have such an enormous epiphany about manufacturing (not his field) when all those that preceded him couldn't come up with anything significantly different for all those many years?

Smart: having or showing a quick-witted intelligence
Intelligence: the ability to acquire AND apply knowledge and skills

 

[MitchJi]

I believe that there will be a presentation and that they will announce whatever catalysts that they can. I don't believe that they will need to do that for the vote. Elon has been in a boost the SP mode, I believe that they will announce whatever they can to try to accomplish that. Next stop for me is to buy a few,more lottery tickets.

I don't believe that they will just ask for a vote on on the merger and thank everyone for their vote.

I think if it's possible they will announce the results.

 

[Krugerrand]

@ 22.20 : part about Tesla
@ 24:00 : Tesla story -- The problem is I do not get it.
@ 27.00 : Statement that "Tesla will become a large niche player"

OMG! "The problem is I do not get it." BUT, you can come to the conclusion that "Tesla will become a large niche player."

Okay, here goes. I'm going to channel my inner Chanos. I do not get why my cheese soufflés' fall. *Here comes that Chanos lightbulb moment* Cheese soufflés are suppose to fall and anyone who's making a cheese soufflé that doesn't fall is doing it wrong and will never be a baker. Nailed it!

 

[StapleGun]

+$50M from 100K Powerwall 2 reservations (conservative)

Excellent post EinSV! I haven't seen much discussion of Powerwall reservations but 100,000 seems optimistic to me. I have no doubt the demand will be there over time, but I've seen very little reporting on this by the media at large. Personally I would guess there are only about 10,000 to 20,000 Powerwall reservations right now.

 

[vgrinshpun]

Thanks for taking a second look at this -- it also took a while for it to sink in with me that S/X had the potential to provide such a significant source of cash for Model 3.

I would caution that we have only seen one quarter of results with S/X both running at something close to full production, so there is potential for significant variability, down or up.

In terms of potential for upcoming quarters, let me start with a little back of the envelope calculation showing a very rough estimate of changes from Q3 to Q4. Please take this with a large grain of salt since it is early in the quarter, we don't have much visibility into production rates (although the signs seem positive so far), and there are a lot of variables.

Assuming that Tesla meets its 2H delivery target of 50,000 vehicles, I estimate the following for Q4 cash generation starting with Q3 as a baseline:

Tesla Q4 Earnings/Cash Flow Estimate

4.5% increase in ASP:

P100D 0.5%
X60 phase-out 1.0%
Higher option pricing/limited inventory S60s/less discounting 1.5%
AP2/FSDC 3%*0.5 (1/2 Q4 deliveries)=1.5%
​

4% higher non-GAAP gross margin:

P100D 0.25%
X60 phase out 1.0%
Higher option pricing/limited inventory S60s/less discounting 1.5%
AP2/FSDC 1.5%*0.5=.75%
Production efficiency/sourcing gains: 0.5%
​

$2.28B automotive revenue ($2.15B *25.2/24.8*1.045)

Non-GAAP automotive GP $2.28B*.29=$661M
GAAP automotive GP=$571M plus ZEV

Services and other $250M*8% GAAP GM=$20M GP GAAP/$22M Non-GAAP

Non-GAAP total GP $683M; GAAP $591M plus ZEV

OpEx -- assume Q3-Q4 has about same rate of increase as Q2-Q3=$590M

Non-GAAP earnings $93M

Cash generation before capital expenditures: $597M (Q3 cash flow plus cash from vehicle sales to lease partners) -$139M (ZEV) + $60M guesstimate more D&A + ($93M-$111M) (Q4-Q3 Non-GAAP earnings) = $500M plus ZEV

+$50M from 100K Powerwall 2 reservations (conservative)=$550M plus ZEV increased cash position before CapEx.

Q4 CapEx Guidance $1.04B
12/31/2016 Cash: $3.1B-1.04B+.5B=$2.6B (not including adjustments up or down due to ABL etc.)

Again, these are very rough calculations and I think the absolute numbers are less important than the possibility that S/X will continue to generate significant and likely increasing amounts of cash for Model 3.

Incidentally, I recognize the 29% GM estimate seems very high at first blush. But based on the changes outlined above that Tesla has made this quarter with an eye toward generating more cash, I think 29% is a reasonable number. It is a "best guess" rather than conservative figure and if you pushed me I would be more comfortable with a non-GAAP GM estimate of 27-29%. But if the actual GM number is lower it should not have much impact on cash flow -- about $23M per GM percentage point out of $500M+ in cash generation. In any case, I think we are trending toward a beat on deliveries so it is likely to be a wash.

I expect actual CapEx to be lower than guidance as that has been the trend so far under Jason's leadership. So, overall I think this calculation ends up being slightly on the conservative side in terms of cash position exiting 2016, even if not all the elements are conservative.

Accounts Payable has gotten a lot of attention. Jason acknowledged in the earnings call that there may be some unwinding of AP but he and Elon suggested that it would not be material, especially given increased AR counterbalancing it. I treat that as a wash but it is worth keeping an eye on.

I think Q1 2017 should be even better with TE ramping and S/X business likely to be even stronger but this is already way too much for one post so I'll save that for another day.

Thanks for a very good analysis done in the right framework.

My comments:

• speculative: given that production seem to be batched geographically to an extreme, it is likely that in Q4 Tesla will deliver 2 - 3K cars more than they produce, I would say 27 - 28K cars delivered in Q4
• speculative: 29% GM in my view is a stretch. The guidance is 24% - 25%, with Elon mentioning on ER call that he believes they got a shot at 28%. I personally would be surprised if the GM will be higher than 25%, but as I said this is speculative
• factual: Tesla guided for the non-GAAP OpEx to be 30% higher than in 2015. This works out to $1,900M. So far they spent $1,340M, so Q4 OpEx should be less than $560M (vs.$590 assumed in your estimate). The reason I say less than $560M is that, although this was not acknowledged often enough, Jason steered Tesla to improve on their projected OpEX in two of the two last quarters

All in all, on top of maintaining good cash balance due to significant cash generated by MS/MX and emerging TE, I believe they also have a real shot at GAAP profitability in Q4.

 

[Drax7]

Did Chanos not say he bought a tesla model S.

 

[FredTMC]

Why is TSLA shooting up just now?