Short-Term TSLA Price Movements - 2016

[Irishjugg]

There seems to be two competing Bull theories for 2016. The "down then up" theory and the "just up, don't know when" theory.

"Down Then Up": This theory holds that the reaction to the Q1 ER will be negative, owing to the fact that we know that deliveries were off. Based on that we can reasonably guess that earnings and cash burn were also bad. TM can pull levers to try to save the quarter, by selling ZEV's or announcing amazing things about the GF or TE products, assuming they do have substantive good news. It is a long summer between the Q1 ER and the Q2 ER and doldrums might well set in, retesting the low 200's. Then in Q2, costs are reduced and model X/S are in full swing. They sell lots of cars and ZEV credits and provide a blowout quarter. Wheeler said that was basically the plan, no reason to doubt it. Based on that excellent financial result the stock surges in August. So the theory goes.

"Just Up, Don't Know When": This theory holds that the financials are partially baked in and the market is in the mood to look to TM's future. The model 3 interest is still being digested, new investors are still coming in. Sometime in the next few weeks we could have a positive breakout due to the TE pieces falling into place. With the new pricing and cost information we know that the margins are very high. If the ER shows real volume, and they share guidance and order book info, analysts could be scrambling to revalue their models. The great Q2 financials are still coming, and Aug is still going to be great, but there is no unnaturally good and obvious summer entry point.

I have been a card-carrying member of the "down then up" crowd, but I am wavering now. The main reason to suspect DTU is that it makes it more likely to light the fuse on a short squeeze. If, for instance, the stock retested 180 in the summer, Bears would be ascendant and cocky. If they announced huge deliveries in July and great financials in Aug then the high, surprising density of good news in late summer would cause a squeeze which would propel the stock higher than the same news would more spread out. The (sort of) conspiracy theory is that Elon and Wheeler are engineering this situation specifically to raise capital at a >300 price.

That is why indications of a surprisingly bad Q1 ER would seem to confirm the theory. But any bit of voluntary good news weakens DTU and strengthens JUDKW. The news of very low pack cost, while perhaps accidental, weakens DTU.

I figure Q1 ER will either be "financials are bad BUT LOOK AT THIS SHINY THING", or "financials are bad mumble mumble". The latter is ironically very bullish.

You basically voiced my recent feelings/concerns on my current DTU focused trade.

May need to alter my strategy and buy back half of the sold shares with an after hours limit order at 5-8% below closing price of the day of the ER to try and catch algo bots and alpha flash as a hedge.

Then if it does go down like I was expecting with DTU I'd only be missing a little value and would still capture some extra run-up if it doesn't fall. Hmm. What are you planning Austin?

 

[techmaven]

Ha Ha Ha! Wasn't it exactly a year ago, that Elon tweeted $200/kwh pricing for power packs? I am waiting to see his tweet, announcing the new $470/kwh pricing.
A few hundred dollars on the total pack won't make any difference. Tesla will still lose a ton of money on each Model 3.

So Tesla found out that the market will pay a much higher price, therefore Tesla can make higher margins. How is that a negative?

Of course, you have nothing to back up the reasons why you think Tesla can't make positive gross margin on the Model 3.

 

[Irishjugg]

Ha Ha Ha! Wasn't it exactly a year ago, that Elon tweeted $200/kwh pricing for power packs? I am waiting to see his tweet, announcing the new $470/kwh pricing.
A few hundred dollars on the total pack won't make any difference. Tesla will still lose a ton of money on each Model 3.

Well that post was a whole lot of incorrect nothing.

Best to ignore the troll here folks, if his money is where his mouth is we will eat his cash eventually anyway.

 

[maoing]

wrt. $190/kwh pack cost report, could some folks here contact Tesla IR to confirm? I know somebody did such before

 

[Johan]

wrt. $190/kwh pack cost report, could some folks here contact Tesla IR to confirm? I know somebody did such before

@FredTMC did (posted up thread) and I'm sure he'll report back.

 

[Irishjugg]

wrt. $190/kwh pack cost report, could some folks here contact Tesla IR to confirm? I know somebody did such before

FredTMC is on it

 

[austinEV]

You basically voiced my recent feelings/concerns on my current DTU focused trade.

May need to alter my strategy and buy back half of the sold shares with an after hours limit order at 5-8% below closing price of the day of the ER to try and catch algo bots and alpha flash as a hedge.

Then if it does go down like I was expecting with DTU I'd only be missing a little value and would still capture some extra run-up if it doesn't fall. Hmm. What are you planning Austin?

I was planning on just sitting in cash through the Q1 ER. Then spending the summer playing knife-catching trying to find a bottom, but being all-in by late June, stock and options.

I just bought some stock, so I have mostly cash and some stock. I think I need to hedge enough that I won't kick myself if things take off not according to schedule. As always, buy and hold stock is probably the right move and I will never do that

 

[lango]

There seems to be two competing Bull theories for 2016. The "down then up" theory and the "just up, don't know when" theory.

"Down Then Up": This theory holds that the reaction to the Q1 ER will be negative, owing to the fact that we know that deliveries were off. Based on that we can reasonably guess that earnings and cash burn were also bad. TM can pull levers to try to save the quarter, by selling ZEV's or announcing amazing things about the GF or TE products, assuming they do have substantive good news. It is a long summer between the Q1 ER and the Q2 ER and doldrums might well set in, retesting the low 200's. Then in Q2, costs are reduced and model X/S are in full swing. They sell lots of cars and ZEV credits and provide a blowout quarter. Wheeler said that was basically the plan, no reason to doubt it. Based on that excellent financial result the stock surges in August. So the theory goes.

"Just Up, Don't Know When": This theory holds that the financials are partially baked in and the market is in the mood to look to TM's future. The model 3 interest is still being digested, new investors are still coming in. Sometime in the next few weeks we could have a positive breakout due to the TE pieces falling into place. With the new pricing and cost information we know that the margins are very high. If the ER shows real volume, and they share guidance and order book info, analysts could be scrambling to revalue their models. The great Q2 financials are still coming, and Aug is still going to be great, but there is no unnaturally good and obvious summer entry point.

I have been a card-carrying member of the "down then up" crowd, but I am wavering now. The main reason to suspect DTU is that it makes it more likely to light the fuse on a short squeeze. If, for instance, the stock retested 180 in the summer, Bears would be ascendant and cocky. If they announced huge deliveries in July and great financials in Aug then the high, surprising density of good news in late summer would cause a squeeze which would propel the stock higher than the same news would more spread out. The (sort of) conspiracy theory is that Elon and Wheeler are engineering this situation specifically to raise capital at a >300 price.

That is why indications of a surprisingly bad Q1 ER would seem to confirm the theory. But any bit of voluntary good news weakens DTU and strengthens JUDKW. The news of very low pack cost, while perhaps accidental, weakens DTU.

I figure Q1 ER will either be "financials are bad BUT LOOK AT THIS SHINY THING", or "financials are bad mumble mumble". The latter is ironically very bullish.

I am personally not a believer in short squeeze setups from management and other types of tricks and schemes. I think so far what we have seen is them really wanting to get the SP as high as possible, for example by disclosing Model 3 reservation numbers, shipping Model X before it was ready to not miss targets, clear inventory in Q4 to not miss targets and so on. Assuming this will continue they will try to get good news in Q1 ER as much as possible and then continue with that for Q2 ER.

 

[Julian Cox]

wrt. $190/kwh pack cost report, could some folks here contact Tesla IR to confirm? I know somebody did such before

It would be unsurprising if it turned out to be less than that in reality. Musk and Straubel were openly wishing anyone luck in catching them on cell cost a couple of ERs ago. I think at $190 they are low-balling their advantage and the chance of them confirming an exact price is nill. Lower than $190 can mean anything lower than $190.

 

[Julian Cox]

I am personally not a believer in short squeeze setups from management and other types of tricks and schemes..

Why not when they have done it twice already and re-wrote the text book on the subject?

 

[MitchJi]

Also: GM's $145 KWh/Kg battery cost from LG already 23.6% cheaper than Tesla, only 6% to be gained from Gigafactory by 2020 if Musk can pull off 30% which experts have long disagreed is possible. Also GM Bolt beats Model 3 on battery capacity due to lower cell cost.

It's fabulous news for anyone that understands power density and energy density both volumetric and per Kg...

You are confusing the fact that GM's $145 is cell cost and Tesla's cost is pack cost.

What experts?! Panasonic agreed with Tesla that the 30% figure is conservative and it doesn't include cell improvements.

The only technical fact that can be determined from this information is energy density per $. This information is only indirectly related to energy density and absolutely nothing to do with power density.

These are probably facts that the market won't understand but GM pays LG for building their packs, and Tesla does it in house. And I'm confident that Tesla can do this for less than LG.

It would be unsurprising if it turned out to be less than that in reality. Musk and Straubel were openly wishing anyone luck in catching them on cell cost a couple of ERs ago. I think at $190 they are low-balling their advantage and the chance of them confirming an exact price is nill. Lower than $190 can mean anything lower than $190.

Agreed. You nailed it (almost). It would be shocking if it is not less than $190.

 

[Julian Cox]

I'm sorry but this:

"The analyst, hosted a call with Jon Bereisa, President & CEO of Auto Lectrification. Jon spent 35 years at GM and was the chief engineer responsible for the Chevy Volt. He highlighted slow progress in li-ion chemistry since 2014; limited cost/density improvements have come from scaling up the cell size (less cells = less thermal components, interconnects, and weight), not breakthroughs in cell chemistry. He continues to see $133-$155/kWh as best case for pack costs by 2025."

and

"Jon is skeptical about the <$190/kWh cost, as the raw material floor on current chemistries is ~$160 assuming 40% supplier margins. He also sees 55 kWh min. necessary to get to just 200 mile range."

This is so amateur and so pathetic that it makes me want to puke. It is impossible to call yourself a professional in this field in 2016 and hold these opinions that have been proven fundamentally false with the results to prove it by Tesla for at least 10 years and Tesla figured out were false much earlier than that.

No opinion to change on media reaction surrounding this but for anyone long term here, trust me this is a complete joke as though Tesla's competitors are lying directly in-the shadow of the approaching steamroller screaming that getting crushed by a steamroller is very doubtful indeed for at least another decade owing to the slow approach of steamrollers.

 

[StapleGun]

Ha Ha Ha! Wasn't it exactly a year ago, that Elon tweeted $200/kwh pricing for power packs? I am waiting to see his tweet, announcing the new $470/kwh pricing.
A few hundred dollars on the total pack won't make any difference. Tesla will still lose a ton of money on each Model 3.

We have one signal that Tesla can produce battery packs for $190/kWh, and another signal that they believe the market can support a $470/kWh price for battery packs. I feel that investors would like 60% margins, do you think differently?

 

[lango]

Why not when they have done it twice already and re-wrote the text book on the subject?

Heh, well maybe I am wrong about it this time. I just think it is too important for them to keep the share price high and artificially lower it with less bullish news is a risk and share price management is also a distraction.

 

[Johan]

I'm sorry but this:

"The analyst, hosted a call with Jon Bereisa, President & CEO of Auto Lectrification. Jon spent 35 years at GM and was the chief engineer responsible for the Chevy Volt. He highlighted slow progress in li-ion chemistry since 2014; limited cost/density improvements have come from scaling up the cell size (less cells = less thermal components, interconnects, and weight), not breakthroughs in cell chemistry. He continues to see $133-$155/kWh as best case for pack costs by 2025."

and

"Jon is skeptical about the <$190/kWh cost, as the raw material floor on current chemistries is ~$160 assuming 40% supplier margins. He also sees 55 kWh min. necessary to get to just 200 mile range."

This is so amateur and so pathetic that it makes me want to puke. It is impossible to call yourself a professional in this field in 2016 and hold these opinions that have been proven fundamentally false with the results to prove it by Tesla for at least 10 years and Tesla figured out were false much earlier than that.

No opinion to change on media reaction surrounding this but for anyone long term here, trust me this is a complete joke as though Tesla's competitors are lying directly in-the shadow of the approaching steamroller screaming that getting crushed by a steamroller is very doubtful indeed for at least another decade owing to the slow approach of steamrollers.

Agreed the whole discussion is of such low quality that it's laughable. And the steamroller analogy is apt.

Look, if this article was published and the UBS analyst came out with these views than maybe we would have a laugh about it here, maybe dissect some of the most blatant lies and erroneous assumptions in the "Fact or Fiction" thread and then promptly move on. We've gotten so used to bearFUD by now that we quickly filter it out, like noise. The only thing worthy of attention here is the statement from Jeff Evanson. Now, I feel like I'm repeating myself, but please check my logic:

- The market as a whole values TSLA based on a whole lot of assumptions about current situations and future growth opportunities, all of it in accordance with basic economic theory resulting in a stock valuation that represents all future value that can be extracted from TSLA. In addtion to this comes all kinds of assumptions about market psychology - in your own words "second guessing the second guessers".

- One not unimportant variable is the cost of goods to TSLA. And of all the costs of goods the cost of the battery is the most interesting one.

- All valuation models, however elaborate (10 pages of intricate Excel) or however simple ("Tesla will fail because no one will want them newfangled electric cars anyway") somehow takes in to account Tesla's cost of battery. Up until this statement all these models must have had some kind of probability distribution as to what their cost was. I know most here would readily agree that we already assigned near 100% probability to cost being at least below $225/kWh on a pack level, and significant probability to it being below $200/kWh. Other models may have had much wider distributions and probability assigments.

- Jeff Evanson's statement, assuming you don't think he is lying, now puts a hard upper bound on this variable: now everyone in the market knows that with 100% probability Tesla's cost of battery at the pack level is below $190/kWh as of today.

- This has to influence any valuation model, some of course much more than others (because in some models this variable is weighted more heavily while in others it is given little significance, such as bearish models with assumptions about lack of demand at any price point etc). Now I have a hard time seeing how this statement could be put in to any model and yield a poorer valuation than before the upper bound was known?

 

[AlMc]

I think *most* of us agree that TM will do a cap raise sooner than later. So, IMO one of two scenarios is at play here. Either they already have it lined up and announce at the CC or just after OR Wheeler has done a great job of Q1 cost containment and 'T energy' is pushing in enough cash to get to FCF+ and they get a bump up in TSLA and do a cap raise then.

Also, I am uncertain about what can or can't be disclosed during a 'quiet period' before an ER. Would the reported information from Evanston 'violate' the quiet period? Thanks

 

[TNEVol]

On the GM cell cost. I seem to recall that the GM contract with LG was for almost all electronics including battery and drive train and there was some speculation that LG lowballed the cell cost to get the rest. That speculation was supported by apparent alarm by LG at GM's announcement of the cell cost. I'm not sure that we have apples and oranges here to compare.

 

[Julian Cox]

You are confusing the fact that GM's $145 is cell cost and Tesla's cost is pack cost.

What experts?! Panasonic agreed with Tesla that the 30% figure is conservative and it doesn't include cell improvements.

The only technical fact that can be determined from this information is energy density per $. This information is only indirectly related to energy density and absolutely nothing to do with power density.

These are probably facts that the market won't understand but GM pays LG for building their packs, and Tesla does it in house. And I'm confident that Tesla can do this for less than LG.

Agreed. You nailed it (almost). It would be shocking if it is not less than $190.

No Mitch I am not confusing anything and nothing I wrote requires you to correct it. You misread my comment. I clearly stated this is how the media will spin this and I maintain that my statements on that subject (the one that I was addressing) were as close to full prediction accuracy as I know how on the available data which clearly incorporates everything you know about this.

"Jeff stated that the Model S's all-in pack cost today is already <$190/kWh"

I read that too and it is a mixture of stunning - and also misleading to GM as a competitor. The dumb auto industry thinks of packs and cars as two separate items on a mass fraction basis going even so far as to outsource entire pack structures when these belong in the structural integrity program with the vehicle engineers. They are wrong and long may they stay confused - Tesla is just pulling their chain by even talking in this language. Inclined to disagree: Please point to a GM car with no firewall and no floor pan and tell me why they can't both be on the floor in the Tesla costing no or negligible net vehicle curb weight adjustment between the two locations. Now take a look at the Bolt or a Leaf. How many firewalls and floor pans does that have? All of them right? Plus the battery pack.

 

[MitchJi]

I have been a card-carrying member of the "down then up" crowd, but I am wavering now. The main reason to suspect DTU is that it makes it more likely to light the fuse on a short squeeze. If, for instance, the stock retested 180 in the summer, Bears would be ascendant and cocky. If they announced huge deliveries in July and great financials in Aug then the high, surprising density of good news in late summer would cause a squeeze which would propel the stock higher than the same news would more spread out. The (sort of) conspiracy theory is that Elon and Wheeler are engineering this situation specifically to raise capital at a >300 price.

Unless Tesla believes like Jesse (I think he made an excellent case) that the current shorts want out. If they believe that's correct they'll try to keep the price high and push it directly up to trying to get a squeeze ASAP.

Heh, well maybe I am wrong about it this time. I just think it is too important for them to keep the share price high and artificially lower it with less bullish news is a risk and share price management is also a distraction.

Agreed. And the under $190 information tends to confirm that.​

 

[Julian Cox]

I think *most* of us agree that TM will do a cap raise sooner than later.

I hope not because then *most* people here are living with an unforced error.