Short-Term TSLA Price Movements - 2016

[Julian Cox]

I feel like the anti-John Peterson has arrived. I bought every time he posted. Now what to do?

Personally I feel that low oil prices and market risk will hurt short term TSLA. It may have no effect on Tesla, but many in the market are not sure. Inevitably, we will see, one way or another.

What to do?

Unless you are a technical chartwork genius. Accumulate a long position with a time horizon of no less than two months and hold firm.

Way back I pointed out that we are in no-man's land regards upside catalysts until the Model X delivery tally for January is known with reasonable credibility and it won't surprise me if the SP slides as a result of macro garbage. TSLA will emerge as a hedge against it but only on fundamentals, not narrative. Hence taking the opportunity to hog this thread with big picture stuff while we wait for material news. The material news will be good.

 

[jhm]

Ford Steps Up Its Game on Smart Mobility and Electric Vehicles | Greentech Media

Today, the global auto industry totals about $2.3 trillion per year. Ford’s share of that is about 6 percent. The transportation services industry, which includes taxis, transit and rideshare, totals about $5.4 trillion and is expected to grow rapidly. And yet automakers like Ford receive almost no revenue from that sector.

So is this the new game for automakers: break out of the $2.3T auto market and enter the $5.4T transportation service market? If traditional automakers made autonomous EVs solely for transportation services, they could make a huge premium on each car and not disrupt their traditional auto sales. The discussion Julian and I have been having indicates how vehicles fit for this sort of purpose are actually worth much more than conventional vehicles. So it makes little sense to sell them at below their opportunity value until the transport service market is saturated. (And at the rate the world is building out battery capacity, this could take a while.)

 

[dalalsid]

Are you going to gather samples CSI style and run DNA test to make sure nobody is having sex in your car?

There is no way to make sure.

In car cameras go a long way. Then there is losing your privacy for the client.

Clients won't be able to pick their noses?

All those other companies are limited exposure or very limited clientele.

What Julian is proposing is ubiquitous and exposing most people's second biggest purchase/asset their car.

I'm hoping for a future where it won't be "my car". I dont want to own a car. I want to pay a fixed monthly fee to have a car show up for my daily commute and cost much less than ownership as it goes around being a taxi or whatever the rest of the day. And I'm willing to pay 50% of my Leaf lease for that service. And I'm not sure why it is necessary for people to do this with their own cars. If 4 people who commute at different times pay 50% of the lease price of a new vehicle for this service, a business can make money providing this service.

 

[Julian Cox]

The discussion Julian and I have been having indicates how vehicles fit for this sort of purpose are actually worth much more than conventional vehicles. So it makes little sense to sell them at below their opportunity value until the transport service market is saturated. (And at the rate the world is building out battery capacity, this could take a while.)

This is true until you consider the the way excessive profits attract capital. The rate of building out battery capacity will definitely be affected recursively by the emergence of 1667% profit margins up for grabs - or call it 500% profit margins while guaranteeing price points that ensures companies like Ford never stand a chance of gaining market entry.

The only option Ford has to stave off Tesla in this space is to lobby for regulatory impediments while Tesla accumulates data that it can take to the Supreme Court that demonstrates that such impediments are unjustifiable.

Meanwhile Ford and the rest have another much more immediate existential risk. Model 3 unveiling in a month and a half's time and reservations for it going live. The automotive industry seems only to be concerned about Model 3 in the late 2018-2020 time frame. This is a huge mistake.

Not only can Tesla launch Model 3 in 2017 ready to switch on to full autonomy at any time but as at March 2016 Tesla will start removing customers from the automotive industry's dealer lots and storing them in Tesla's server racks in a database. Model 3 will exceed the average American's new car in performance, sophistication and overall desirability, improve upon it in terms of cost of ownership and match it on price to within about $1500 USD. The rational self-interested consumer will reserve one instead of committing to purchase all but the budget-end of the Ford lineup and those consumers that must replace an old car sooner than late 2017 will exert margin pressure on Ford by pointing to the published option to reserve a car that is better value for money than anything Ford sells. Ford is not ready for this and it is out of time to do anything about it. Worse that that, Ford most likely imagines 2016 will be a boom year and if Ford's high-end customers defect in significant numbers to Tesla's server racks, and they probably will, Ford will have a crisis of inventory overstock because they build cars months in advance of demand.

The very fact that they admit to having a business model problem in 2016 ought to sound alarm bells. The time for Ford to wake up was 2009 at the latest.

 

[Causalien]

A short-term dilemma

I wish to convert a few more TSLA shares to leaps soon and like everyone else I'm looking for the bottom. Obviously, there's no way for sure to tell if we're there or not. TSLA seems to pretty closely be tracking broader markets today, so the question really revolves around whether we think the downturn has pretty much played itself out. Your thoughts? Also, does anyone see any negative catalysts for TSLA around the corner? Obviously, CES turned out to be a negative catalyst with Bolt and other announcements. Any thoughts about Detroit Auto Show effects? Seems there is not much room for new info because CES stole the thunder this year.

The negatives I am worried about are delays. X still hasn't been able to ramp up. Cash flow positive pushed back by total of 2 quarters will mean that model 3r&D ramp up into 2017 will blow away any chance of cash flow positive. Yes, TSLA can just stop innovating and go cash flow positive, but we are the few enthusiasts who believes in it. The rest if the market will need prooff.
I'd like to see at least 1 qtr of profitability before TSLA goes into another big spending spree.

 

[ZachShahan]

A short-term dilemma

I wish to convert a few more TSLA shares to leaps soon and like everyone else I'm looking for the bottom. Obviously, there's no way for sure to tell if we're there or not. TSLA seems to pretty closely be tracking broader markets today, so the question really revolves around whether we think the downturn has pretty much played itself out. Your thoughts? Also, does anyone see any negative catalysts for TSLA around the corner? Obviously, CES turned out to be a negative catalyst with Bolt and other announcements. Any thoughts about Detroit Auto Show effects? Seems there is not much room for new info because CES stole the thunder this year.

Don't think anyone has a clue what's happening in the short term (next day or two). It's not even settled what's causing the downtrend -- oil, China, put rigging, Tesla's slow X ramp, some combination of these factors.

As other have said, though, I don't think we'll see a big bounce unless 1) we get some strong numbers on X production/deliveries (combined with still strong S numbers, of course), or 2) TSLA hits 200 and triggers big buys by big players.

As far as possibilities in the coming weeks that I'm watching closely...

• is X production really ramping up fast? (sure seems like it, given the # of reservation holders who have been invited to configure and are getting deliveries or delivery estimates)
• are there issues with the early X deliveries that are going to slow the ramp or cause problems for Tesla? (obviously, some buyers are having a lot of issues. how that is possible on such an expensive vehicle where you'd assume Tesla was being very careful to make sure everything was great is a bit confusing, but this is what happens with new products, and let's just hope there are no big, widespread problems.)
• is S demand keeping up with Tesla's targets? (i'm assuming so.)
• are there any problems with the Gigafactory moving forward? (SA writers keep hyping that there are, but no solid evidence has been offered, and Elon has said a few times that it is ahead of schedule.)
• will Tesla report FCF soon? (hoping/expecting so.)

and a bit further out -- will Tesla report a profit in one of the quarters this year? i think it could, and if it did, would expect to see a big jump in TSLA.

but in the end, i think it's going to come down to Tesla reporting greater production/deliveries than had been guided or than the market is expecting. could happen on the next quarterly call... or the one after. or, of course, it might not, and we'll all be downers here.

[Edit: and then there's also the macro market, which is really anyone's guess... and i think guess is the best term there.]

 

[hobbes]

Back in the green: TSLA 1% up, at 210 - would be great if this would hold until close. NASDAQ up .75%, too. What a wild ride.

 

[Lump]

This is true until you consider the the way excessive profits attract capital. The rate of building out battery capacity will definitely be affected recursively by the emergence of 1667% profit margins up for grabs - or call it 500% profit margins while guaranteeing price points that ensures companies like Ford never stand a chance of gaining market entry.

^^^^
Trip Chowdhry on steriods.

 

[Julian Cox]

^^^^
Trip Chowdhry on steriods.

Kindly review the logic that leads to that outcome. If the logic stands, so does the outcome. I'm not a fan of Trip Chowdhry, I am a fan of building logical conclusions from first principles.

I would also point out I am also fully aware of the role of denial and incredulity when a market is presented with counter-intuitive statements too much too soon. I don't expect the market to respond to this information in the short term. I expect the market to respond to much more banal things like Model X delivery numbers in January and progress towards a FCF positive Q1 and the return to ending a quarter with a minor non-GAAP profit.

 

[dakh]

As you say (and as I said) the economics of this will give rise to novel leasing schemes. The bottom line is that a $40K EV (a fully autonomous Model 3) that costs Tesla $30K to build costs $0.03 cents per mile in amortized value over a million mile lifespan LESS scrap value at 1 million miles. Net about $0.025 (2.5 cents) per mile. The energy, maintenance and finance costs are also trivial. I estimate $0.06 cents all in before overheads of running the service. You can't buy gasoline for $0.06 per mile let alone build an ICE car as well.

30mpg x $0.06 = $1.80 per gallon. If gasoline costs $2.00 then you have a $20 cents shortfall to divide by 30 miles multiplied by 300,000 miles nominal ICE service life = NEGATIVE $2000 to build an Autonomous ICE vehicle with if you want to compete on price per mile with the $40,000 Tesla EV. It is economically impossible to compete with gasoline and ICE the instant the AI EV fleet service hits the roads.

There's no battery that'll last 1M miles, you have to count replacing it every X00K miles. If the biggest saving is not having to pay the driver, ICE will be able to compete until there's enough EV's out there. Whoever makes and operates those EVs will just have higher profit margins.

 

[Lump]

Kindly review the logic that leads to that outcome. If the logic stands, so does the outcome. I'm not a fan of Trip Chowdhry, I am a fan of building logical conclusions from first principles.

I would also point out I am also fully aware of the role of denial and incredulity when a market is presented with counter-intuitive statements too much too soon. I don't expect the market to respond to this information in the short term. I expect the market to respond to much more banal things like Model X delivery numbers in January and progress towards a FCF positive Q1 and the return to ending a quarter with a minor non-GAAP profit.

You have been asked to post in appropriate threads & completely ignored them, DaveT, JHM & others at least had the decency to take their opinions & start dedicated threads, you choose to stay here & bombard this thread, why is it so difficult for you to post in the correct thread?

 

[Julian Cox]

There's no battery that'll last 1M miles, you have to count replacing it every X00K miles. If the biggest saving is not having to pay the driver, ICE will be able to compete until there's enough EV's out there. Whoever makes and operates those EVs will just have higher profit margins.

Million mile battery electric drive train. Yes there is according to Tesla. You can also back check that statement by looking at the degradation curves. Even the 2011 NCA tech would deliver at least 600,000 miles over 3,000 cycles with only 20% degradation and then if cycled from full to empty repeatedly and those curves go on to 20,000 cycles with 40% degradation at the end. With proper battery cycle management a million miles is current Tesla tech and there is no issue with calendar life in an AI EV role. The curves I am referring to were produced by Prof. Jeff Dahn of Dalhousie University (more recently hired by Tesla). His PhD student has been running Tesla's cycle test lab for years having designed the accelerated cycle test equipment.

You're right that the EVs in a driverless vehicle service will enjoy better margins. As demonstrated, the better margins are absolutely profound. Nobody in the business of allocating capital or labor can ignore margins like that hence the use of the term Gold Rush.

Tesla has a philosophical mission to accelerate adoption to EVs. Do you think they will be greedy for insane margins and leave room for ICE to invade their space or do you think they will go for accelerated mass adoption? The choice will be theirs to make owing to their huge first mover advantage to shape the market as they see fit. The reference to the sentimental value of horses would be a clue there.

P.S. Ford is boasting of a 30-car autonomous fleet as the biggest research fleet there is. What a joke! Tesla has a learning fleet in the real world of more than 60,000 network-connected vehicles.

 

[SBenson]

Julian, Thanks for all the posts. I have read your writings since early 2013 and benefited immensely. You were one of the very few people who comprehended and explained the magnitude of what is happening way early. What is consensus bull thesis now was utterly controversial back then (even among the bulls) but you stood for it and helped folks like me understand.

Interestingly we are yet again at the same cross roads. Even bulls are having a hard time fully comprehending what is in game here even though you are saying it so eloquently well. Everyone can call me crazy but I am going to dump out all other non-critical investments and shove it all into TSLA. This is really back-up-the-truck kind of times.

- - - Updated - - -

Remember this fellas - the guy who wants to colonise mars wouldn't do something small on Earth.

 

[ZachShahan]

Julian, Thanks for all the posts. I have read your writings since early 2013 and benefited immensely. You were one of the very few people who comprehended and explained the magnitude of what is happening way early. What is consensus bull thesis now was utterly controversial back then (even among the bulls) but you stood for it and helped folks like me understand.

Interestingly we are yet again at the same cross roads. Even bulls are having a hard time fully comprehending what is in game here even though you are saying it so eloquently well. Everyone can call me crazy but I am going to dump out all other non-critical investments and shove it all into TSLA. This is really back-up-the-truck kind of times.

- - - Updated - - -

Remember this fellas - the guy who wants to colonise mars wouldn't do something small on Earth.

Ha, yeah, that's a good thing to remember.

And I agree this is a "back-up-the-truck kind of times." Call me crazy, but I think now (within the next couple of weeks) is really the time to get in or go in bigger. If Tesla announces good production/sales numbers (seems likely within the next few months, and maybe next month) and hits FCF (seems possible or even likely in Q2 at the latest) and perhaps even a profitable quarter, the price will fly. Once people catch up on how much better the Model 3 is than the Bolt or anything else on the table (incl. Supercharger capability), and Tesla's AI EV and HAAS potential, why would the price ever drop to 210 again?

Just my thoughts. And given history, there's a decent chance they are completely wrong and I lose a load of invisible cash as a result.

 

[maoing]

http://www.teslamotorsclub.com/show...being-issued?p=1320266&viewfull=1#post1320266

non-signature Model X enters production.

 

[dakh]

Julian, Thanks for all the posts. I have read your writings since early 2013 and benefited immensely. You were one of the very few people who comprehended and explained the magnitude of what is happening way early. What is consensus bull thesis now was utterly controversial back then (even among the bulls) but you stood for it and helped folks like me understand.

Interestingly we are yet again at the same cross roads. Even bulls are having a hard time fully comprehending what is in game here even though you are saying it so eloquently well. Everyone can call me crazy but I am going to dump out all other non-critical investments and shove it all into TSLA. This is really back-up-the-truck kind of times..

This is quite funny, what we're arguing about really is if this is short-term thread material. Hard to tell, personally I think it's a bit ways out, even though the story line itself is solid. And not even for factual reasons, but for enough investors grasping what's going on. That seems to take time.

 

[jhm]

You have been asked to post in appropriate threads & completely ignored them, DaveT, JHM & others at least had the decency to take their opinions & start dedicated threads, you choose to stay here & bombard this thread, why is it so difficult for you to post in the correct thread?

I'm not sure if this is a complement. We all stray from the theme of short term price changes. I happen to think Julian writes very interesting stuff. Moreover, it is very important to understand what the market is and is not yet taking into consideration. Especially when the market is so down on a stock, it is important to clarify the dynamic potential that exists within the company. I am happy to have these discussions in other threads or to have our mild mannered moderator move them elsewhere, but there is not need to attack any of us personally for engaging in spirited, good natured conversation, even when it slides away from consideration of immediate price movements.

 

[FredTMC]

I would just like Elon to address the AI EV ride sharing question more on the Feb Call. Doesn't have to be tons of detail. Just put it out there that it will happen and its being planned by tesla. It would be a new third rev stream. 1). Car sales, 2) storage. 3) ride share

On November call Elon said it was only half baked. Hopefully by now it's becoming closer to baked.

 

[aznt1217]

I would just like Elon to address the AI EV ride sharing question more on the Feb Call. Doesn't have to be tons of detail. Just put it out there that it will happen and its being planned by tesla. It would be a new third rev stream. 1). Car sales, 2) storage. 3) ride share

On November call Elon said it was only half baked. Hopefully by now it's becoming closer to baked.

I fully expect Adam Jonas to turn up the heat.

 

[roblab]

I would just like Elon to address the AI EV ride sharing question more on the Feb Call. Doesn't have to be tons of detail. Just put it out there that it will happen and its being planned by tesla. It would be a new third rev stream. 1). Car sales, 2) storage. 3) ride share

On November call Elon said it was only half baked. Hopefully by now it's becoming closer to baked.

I'm getting my car repaired. The parts alone cost over $10,000. I am sure that's another stream there, that might be bigger than ride share right now, and continues for the life of the car.