Short-Term TSLA Price Movements - 2016

[dennis]

Growth is not linear. Growth requires:
- once Fremont is at capacity, another one is needed. Big CapEx for small incremental gain for a while.
- once GF1 is at capacity, another one is needed.
- as more units are sold, more company-owed sale and service centers and lots more people needed.

- Does one wait for full capacity or do you build secondary gigafactory and Fremont-style plants once the originals hit 70% capacity while within a growth curve? Doing it early costs more because capital must be borrowed ahead of time (ie. the GF1 Bonds in early 2014 are generally gone already even though GF1 is only 1/4 its target size and without its renewable energy sources)
Growth requires a step-up approach. Growth is never linear in most economics-based firms.

I have to say that Elon has "said a lot" and many times, they are not backed up by actual business facts but possibly "long stretches" of hopefulness leading to an agreement among the flock of followers. All the while, the CFO and other company leaders within have to run around and try to make what he said actually happen.

When Tesla's production reaches a level where another Fremont and a GigaFactory 2 are needed banks will be jumping at the chance to loan Tesla all the capital they need for these endeavors.

 

[neroden]

There is serious attempt to push SP below $180...

That will be hard. I made a pretty simplistic model 3 years ago which said that Tesla was a strong buy below $180 and I'm sure I'm not the only one. When Tesla drops below $180, long-term investors typically pour in.

 

[Krugerrand]

Yeah. We're probably just too conservative on our capital projections, but it's turned out to be that we can do this with less capital than anticipated."

Right or wrong, it's pretty clear to me that they are pretty much making educated guesses on capex as they go, as they've adjusted the guidance like 3 times in 2016. From Elon's words, they are clearly guessing on the conservative side. If they end up telling us that they only needed $600 million in Q4 because things are cheaper than they anticipated, I won't be mad.

If you reread the transcript you will see it's full of talk about capital efficientcy, changing the way things are done traditionally, benefits of scaling, etc. They tend to run with themes. I expect this to get used again. If bears (not you, to be clear) want to tell me it's a bad thing when Tesla can arrive at the same result with less money I'm happy to take their money when they get proven wrong in Q3 2017.

This is an excellent point. Call it playing fast and loose if you want, doesn't matter. They are in unknown territory, doing things at breakneck speed, and changing directions at that breakneck speed when they see a better way. Analysts are chasing their tails and the market hasn't got a clue how to deal with it.

 

[neroden]

There might be year end tax loss re-balancing by both institutions and retail investors.

Certainly, but what effect would that actually *have*? I don't quite understand how that would raise or lower the stock price.

 

[Krugerrand]

I love this!
Tesla pushes boundaries of Michigan’s direct sales law and opens showroom in the state

Clearly I love it too since I gave you the heart option.

Another amazingly ingenious move by Tesla. You have to admire the in-your-face chutzpah.

 

[dmckinstry]

Yeah, Superchargers and the Gigafactory are well in hand.

Service Centers are a massive weak point and are *definitely* not expanding fast enough, so I think that's an obvious location of deferred CapEx.

As I've noted before, full blown service centers are not needed everywhere. Spokane has a "permanently" assigned service tech that handles most of the needs for this area. In other words, service bays, lifts, etc. aren't needed everywhere.

 

[Krugerrand]

It is interesting that before tesla had the supercharger network built out many claimed it was limiting Tesla's ability to sell cars. Now you're claiming the lack of a DCFC for the Bolt is "something of a straw-man".

And you know who was part of those many?

 

[neroden]

As I've noted before, full blown service centers are not needed everywhere. Spokane has a "permanently" assigned service tech that handles most of the needs for this area. In other words, service bays, lifts, etc. aren't needed everywhere.

Sure, but Spokane is tiny and *isolated*.

For a very obvious example, we need a service center in upstate NY. Syracuse preferably. Probably need a "permanent" service tech in Buffalo in addition to that. Syracuse metro area has the population of Spokane metro area, but there's a lot of additional population within an hour or two drive -- which is not the case in Spokane.

And we've needed an upstate NY service center for, oh, about 3 years now. Tesla is *behind* on service center consruction.

We're not even the most pressing case. Pittsburgh Service hasn't opened yet, and neither has New Orleans, and neither has Albuquerque -- but at least they're on the "coming soon" list (thouigh "soon" apparently means "infinity years away").

Of the cities not on the "coming soon list", Memphis is probably the most urgent, based on population and distance from other service centers. (That's in the US. Worldwide, the top priorities probably include Perth, Australia and Wuhan, China.)

Obviously, if you live in Montana, forget it, Tesla is not a reasonable option right now.

 

[Turing]

When Tesla's production reaches a level where another Fremont and a GigaFactory 2 are needed banks will be jumping at the chance to loan Tesla all the capital they need for these endeavors.

They should put whoever was in charge of working out the buffalo factory incentives with local government on this.

 

[Green Pete]

Is it just me, or does anyone feel like while Tesla got its name from awesome acceleration EV cars with a great charging network, that as it is now, the real driving force behind Teslas future is self driving. There's still a massive moat in the EV market that Tesla has, but I think in 2 weeks when AP2 features start rolling out on a monthly basis Tesla's main point of interest is the car that can drive itself. The fact that its an EV, or that it can accelerate way better than anything else, seems to be drifting into second place.

All that being said, is is not possible that with monthly releases that in the short term, AP2 updates might be pretty bigger catalysts for the stock? I mean, how many updates can you have from what we think were getting in 2 weeks to full autonomous? Seems like the first update will make all highway driving automated. After that it seems like the next jump would be to city streets, there's not much middle ground between full highway and full self driving IMO.

 

[Irishjugg]

Even assuming the bolt is excellent all around, what's the point of having a 240 mi range EV with no fast charging network along the interstate? I'd rather have a plugin prius or a volt.

I mean, it's 35k the right now that's a much better value than a model S. I'm a model 3 res holder and I expect it to blow away the Bolts value proposition, but for now the argument is pretty strong.

Long distance charging isn't worth 35k to me.

Furthermore, even when the model 3 is selling the combination of wait times and inability to test drive in like 20 States will definitely good it below is full potential. The Bolt is the best alternative so it will continue to do quite well as gm makes enough.

 

[MitchJi]

All that being said, is is not possible that with monthly releases that in the short term, AP2 updates might be pretty bigger catalysts for the stock? I mean, how many updates can you have from what we think were getting in 2 weeks to full autonomous? Seems like the first update will make all highway driving automated. After that it seems like the next jump would be to city streets, there's not much middle ground between full highway and full self driving IMO.

I agree that the AP updates could be a minor SP catalyst.

That doesn't match what they said. First update about December, and future updates about once every three or four weeks for about a year.

 

[Patrick0101]

Does anyone here know what becomes of fractional shares in the SCTY buyout? In the deal, each SCTY share was with 11% of a TSLA share. So unless you had a multiple of 100 shares, you are going to have a fractional share of TSLA (I did).

Just to complete the story: my broker finally gave me the cash in lieu of my fractional share. They were just slow to do it.

 

[Green Pete]

I agree that the AP updates could be a minor SP catalyst.

That doesn't match what they said. First update about December, and future updates about once every three or four weeks for about a year.

I know it doesn't match. I'm just trying to figure out what the second update could possibly be if not the ability to get around town.

 

[vgrinshpun]

This is sheer brilliance. They can't ignore you when you and your product is Right. In. Front. Of. Their. Faces. It starts with a raised eyebrow. Then the thought, 'Hmm...what is that it? It looks interesting.' The realization you're on the wrong side of the fence won't come to everyone, but the lightbulb will click for a few. That's all it takes to get the ball rolling. Keep your friends close, but your enemies closer. Or if you prefer, make friends of your enemies.

It is an example of Elon's "first principles" approach.

I am debating which version was used here: "(horse)power tends to corrupt" or "absolute (horse)power corrupts absolutely"

 

[MP3Mike]

.

All that being said, is is not possible that with monthly releases that in the short term, AP2 updates might be pretty bigger catalysts for the stock? I mean, how many updates can you have from what we think were getting in 2 weeks to full autonomous? Seems like the first update will make all highway driving automated. After that it seems like the next jump would be to city streets, there's not much middle ground between full highway and full self driving IMO.

It depends, they could release things one at a time:

• Automatic headlights
• Automatic wipers
• AEB
• FCW
• SCW
• TACC
• Summon
• Auto parallel parking
• Auto perpendicular parking
• AutoSteer
• Smart Summon
• Auto De-summon (automatic parking somewhere in the lot)
• AutoSteer+
• Auto pass/takeover
• Auto exchange
• Auto exit
• etc.
• And finally: FSDC.

We have no idea how those features will be grouped and released.

 

[Turing]

I mean, it's 35k the right now that's a much better value than a model S. I'm a model 3 res holder and I expect it to blow away the Bolts value proposition, but for now the argument is pretty strong.

35k cars are always a better economic value than 80k cars. You ignored my whole point, which was why pay a premium for a long range EV if it doesn't have much fast charging options compared to other better value BEV and hybrid options?

Long distance charging isn't worth 35k to me.

I would only consider a BEV if it had access to a decent fast charging network, too many similarly priced hybrids with a ton more utility. I am considering stretching and trading in my JGC for a model X next year, but that will be based on how good the AP 2.0 driver assist system is. I bought the JGC primarily because it had one of the best driver assist safety system for a suv at that price range. If my jeeps driver assist system came with regular OTA updates and got better every few months, i would be less inclined to switch to an MX. But only time i got a software update on my car was when they sent me a usb in the mail to patch some security bug thing, and that was several months after the the security issue was publicly known.

 

[Oil4AsphaultOnly]

Right or wrong, it's pretty clear to me that they are pretty much making educated guesses on capex as they go, as they've adjusted the guidance like 3 times in 2016. From Elon's words, they are clearly guessing on the conservative side. If they end up telling us that they only needed $600 million in Q4 because things are cheaper than they anticipated, I won't be mad.

If you reread the transcript you will see it's full of talk about capital efficientcy, changing the way things are done traditionally, benefits of scaling, etc. They tend to run with themes. I expect this to get used again. If bears (not you, to be clear) want to tell me it's a bad thing when Tesla can arrive at the same result with less money I'm happy to take their money when they get proven wrong in Q3 2017.

I hear what you're saying, but things being cheaper would have visible results that they can point to (construction costs were lower; got bigger than normal equipment discounts, etc). if they have something to show that they're making progress, then this is opposite of what you had originally speculated:

Question - do we have any evidence that Tesla has massively increased capex this quarter? If they were, I feel like we would be hearing certain reports:

- factory tour folks saying how everything looks totally different or there's a bunch of new equipment or half the factory was sealed off from view, etc.
- suppliers bragging about massive orders from Tesla to fill

I don't recall hearing stuff like this in Q4, but let me know if I've missed something.

My hypothesis is that Tesla is quietly putting together another excellent (financially) quarter by deferring major capex into 2017. Basically, a repeat of Q3. This would be quite unexpected and would have a major positive effect on the stock if they can pull it off.

Which is why "deferring major capex into 2017" won't look convincing. If you want to convince a skeptic, it has to be within their field of understanding.

Aside from the hole in the floor for a potential new press line, I haven't seen anything either. I'm hoping that we'll get more "steak" before the end of the quarter. We need new longs for the SP to rise, because many of us here are tapped out. Visible progress on the factory line and gigafactory will be what draws them in, a story about deferred capex spending won't.

*off-topic* ValuEv, please don't like my comments, it makes my skin crawl.

Edit: edited to clear up the quotes.

 

[brian45011]

Certainly, but what effect would that actually *have*? I don't quite understand how that would raise or lower the stock price.

Conventional wisdom is to defer gains until early in the following year and harvest losses late in the current year. (See January effect). IMO the time-frame for influencing deferring gains or harvesting losses is share price movements in the most recent 18 months or less. "Tax loss harvesting is the practice of selling a security that has experienced a loss. By realizing, or "harvesting" a loss, investors are able to offset taxes on both gains and income" --Tesla is down 23+% in the last 52 weeks. There are multiple factors that will affect the share price between now and 12/31/16; my conjecture is tax loss harvesting will be one that exerts downward pressure on the share price between now and year-end. Substantive, fundamental news could render tax-related effects immaterial.

IMO, part of the decline in the share price in the first six weeks of 2016 was attributable to recognizing (deferring) gains from purchases in the second half of 2014 and throughout 2015. That phenomenon coincided with publicity about the Norwegian f*** and the downward trend fed on itself until news about 2016 guidance reversed it.

YMMV

 

[Green Pete]

.


It depends, they could release things one at a time:

• Automatic headlights
• Automatic wipers
• AEB
• FCW
• SCW
• TACC
• Summon
• Auto parallel parking
• Auto perpendicular parking
• AutoSteer
• Smart Summon
• Auto De-summon (automatic parking somewhere in the lot)
• AutoSteer+
• Auto pass/takeover
• Auto exchange
• Auto exit
• etc.
• And finally: FSDC.

We have no idea how those features will be grouped and released.

Many of those in my mind were either coming out this month (wipers/headlights/pass/takeover/exit) OR would require level 5 autonomy approval (like de-summon/auto park). Do Teslas not auto park (both parallel and perpendicular) already?