Short-Term TSLA Price Movements - 2016

[Bet TSLA]

Considering the precipitous decline of Apple's design quality and software quality in the past 2 years, I think that would be a horrible idea.

There has been no such decline. Is this your personal perception or do you have some reputable reference for this claim?

As a regular user of Apple products, I see some great new stuff (e.g. Apple Watch software) and some continued badness (e.g. iTunes) that is not new. I see no decline in design or software quality, never mind a "precipitous" one.

Of course this isn't the place to discuss this, so why bring it up? You're just spreading misinformation. Don't we get enough "This is what will happen because [unsupported erroneous information]." on this thread?

 

[MitchJi]

Smoke and mirrors.
All of the above can be explained by just having a better battery chemistry. Some of the claims are of battery chemistry that have 6x 10x better power density. Let me conjecture that Tesla has worked out how to get just 2x battery performance improvement and possibly lower internal resistance (less heat generated), faster charging. That would mean:

IMHO - I think all the discussion is looking the wrong way. I think Mr Musk has some new battery sauce.

Wow! Talk about smoke and mirrors!

1. He said that they don't.

Musk: Tesla Gigafactory will produce cells with battery technology improvement over current products | Electrek

Musk said that the battery cells the company will produce at the Gigafactory in partnership with Panasonic will feature some “moderate improvements” in technology over those in production today.

During his talk at the AGU meeting, Musk said that the technology improvements at the Gigafactory will not be small nor big, but moderate – without specifying any change in chemistry. He then added that the battery industry is generally seeing a 5 to 8 percent increase in energy density every year.

2. Even if they do have the technology they would spend about 4-5 years on testing (Musk said 5).
3. They don't need that to blow the competition out of the water anyway.

UBS analyst Colin Langan just hosted a conference call with Jon Bereisa, GM's former chief EV engineer and current CEO of Auto Lectrification, and Jeff Evanson, Tesla's head of investor relations, according to Street Insider. Bereisa believes that the Model 3 will be unprofitable at the $35,000 price point in part because of aluminum content and a wider range of sensors, but also because he estimates Tesla's pack costs at $260/kWh (he estimates GM pack costs at $215/kWh).
<snip>
Evanson's response was that Model 3 is not predominantly aluminum like the Model S and Model X, which Tesla had unofficially disclosed at the Model 3 unveiling (a Tesla rep confirmed Model 3 would be over 50% steel). More important, Evanson added that Tesla's pack costs are already below $190/kWh.

Something that I have not seen anyone talk about is Bereisa's estimates (he should have an excellent idea) of $215/kWh. That's $215 - $145 = $60 = 41%!
Some implications of that:
1. I suspected a high number because GM chose to reveal cell costs rather than pack costs but wow! Battery cell costs are a huge percentage of EV costs. How can GM even dream about competing with Tesla with those pack costs?

2. My earlier conservative cost estimates for Tesla's current packs ranged from $190 per kWh to $165 per kWh. Even if you use $190 - 35% (30% GF + 5% due to moderate cell improvements) Tesla's pack costs will be $123.50 per kWh. All of the figures above are conservative. So a 60 kWh pack will cost Tesla under $7,410 and will cost GM about $12,900.

There is no reason to believe Tesla's battery effort is superior until they clearly have superior cells.

You don't think lower pack costs (at least 40% less) count ?

 

[anticitizen13.7]

There has been no such decline. Is this your personal perception or do you have some reputable reference for this claim?

As a regular user of Apple products, I see some great new stuff (e.g. Apple Watch software) and some continued badness (e.g. iTunes) that is not new. I see no decline in design or software quality, never mind a "precipitous" one.

Of course this isn't the place to discuss this, so why bring it up? You're just spreading misinformation. Don't we get enough "This is what will happen because [unsupported erroneous information]." on this thread?

iPhone 6 and 6+ have an ugly rear design (odd antenna lines and camera bump), and the combination of thinness and insufficiently strong aluminum alloy caused many units to bend. I know, because I have seen many iPhone 6/6+ units that are bent near the mute switch. Numerous complaints at Mac Rumors. Apple upgraded the aluminum alloy to 7000-series for the 6S an 6S+ in an implicit admission of the problem. Except now the anodization on the 6S flakes off more easily.

iOS 8 and 9 were both riddled with bugs upon release. One update prevented people from reconnecting to Verizon Wireless service. 9.3 bricked numerous iPhones and iPads before it was temporarily pulled.

OS X El Capitan -- again, a complete mess upon release. This stuff just used to work and was fast in the days of Snow Leopard. What happened?

Others: iPhone battery case (aka bulge), Apple Pencil being charged off the iPad lightning port, Magic Mouse 2 having to be upside down while charging, camera bulges making their way into the iPad.

These little design issues matter.

I criticize Tesla for their oversights too, like lack of rear seat cupholders and other conveniences in Model S. The difference is that Tesla has moved to address those issues, as evidenced in Model X. Apple is moving in the other direction.

 

[SPadival]

EM was incredulous when an analyst informed him that Apple/Google are recruiting manufacturing personnel - why do they need manufacturing people when they don't do any manufacturing?

So it would be pointless.. Apple + Tesla = Design + Design ..What make sense is Design (Tesla) + Manufacturing (?)

 

[tander]

Does anyone think EM will bring forward the Part 2 of Model 3 reveal to 8 weeks from now (If that's when the design will be released for tooling) and then use the bump, both in the stock price and Model 3 bookings, to go for a cash raise?

My take is that they are waiting on the self-driving software to be mature enough (and maybe legislation?) to make a big show of it, not when the physical designs are finalized. I'm not sure how far along the software actually is, my guess is that they will wait a while, but it would be nice to see it sooner than later.

 

[jhm]

Everytime investors get a little nervous about whether Tesla can really succeed on its own, people on this thread start fantasizing about big Apple stepping in and buying up little Tesla so all its dreams really can come true. It's a recurrent and rather telling fantasy. It's also annoying to many of us everytime it infects this thread.

 

[Bet TSLA]

[Long list of complaints]

Same as it ever was. No better, no worse. There are always bugs. They always get fixed. Yes, Snow Leopard was particularly nice as it was a "no new features" release incorporating ten months of cleanup and bug fixing. It made the developers at Apple so happy to be given the chance to do that.

 

[hoang51]

My take is that they are waiting on the self-driving software to be mature enough (and maybe legislation?) to make a big show of it, not when the physical designs are finalized. I'm not sure how far along the software actually is, my guess is that they will wait a while, but it would be nice to see it sooner than later.

I think it's when all the hardware (i.e., 100% done with retail car to make it production) is finalized instead of software. Software can always come later because it's always being updated. If July 1, 2017 is a final deadline for suppliers to start delivering, then I would think next year if not the end of this year time frame.

8 weeks from now is not giving Tesla enough time to finish up the rumored HUD, steering, etc... Also, that would be too soon after the first reveal and there would be a large gap from then until production release. If history is anything, it may be within a quarter or two before releasing Model 3 production would Tesla start revealing a lot more about Model 3.

 

[SuperDragon]

appl share holders are going to eventually drag Tim Cook out of Cupertino its just a matter of time.


tesla will be fine they dont need anyone (except investors)

 

[Johan]

SCTY down 15% after hours on (my interpretation) lowered guidance. Will this affect TSLA negatively tomorrow? Likely, but always hard to know to what extent.

 

[Fallenone]

Fallenone, my hypothetical scenario with 4600 Q1 completed-but-unsold Model X vehicles was not intended to depict the actual condition. Rather, it was intended to show how much additional FCF Model X could have generated if all the planned 7,000 Model X vehicles could have been built.

The important part of the exercise is to demonstrate that costs of the Model X vehicles were being counted twice in the methodology used: once when the labor and parts costs were included in Q1 ER, and again when the revenue from Model X vehicles that could have been sold was discounted by multiplying by 20% (and thus counting the cost of manufacturing a second time).

Here's a simple example: You have a product that sells for $9 and plan to produce 100 of them during the quarter. The gross margin for that product is 20% if all 100 can be built. Unfortunately, due to manufacturing issues, only 40 are built and sold. The company realized 40x $9 = $360 revenue, but how much Free Cash Flow could have been generated if all 100 could have been built and sold?

Let us say that the quarterly earnings report contained the cost for producing all 100 of these products since labor was already hired and on the property, third-party parts companies had already delivered enough parts for 100 products, and the company had already bought enough aluminum and other basic ingredients to build those 100 products. The likely cost reflected in the earnings report would be 100 x $9 x .80 = $720. To figure how much FCF was lost by not producing and delivering the remaining 60 products, you multiply 60 x $9 = $540. That is your answer. You can double-check the figures by adding $540 to $360 = $900, which is the total revenue brought in if 100 products had been built and delivered. You have already accounted for the cost of producing those 100 unites in the Earnings report ($720), which would yield a GM of 20%. The point I'm trying to make is that you don't multiply the revenue from selling those units by 20% GM, because then you would be counting your costs twice.

If you're looking forward at a quarter and no numbers are already included in an earnings report, sure, go ahead and multiply potential products created by the GM to come up with a contribution to FCF, but if you're looking back on an earnings report AND THE COST OF PRODUCING THOSE PRODUCTS HAS ALREADY BEEN BAKED INTO THE ER, don't multiply the potential revenue by the GM because then you will be double-counting the costs.

Yes, if the additional parts and labor were sourced and accounted then you're accounting of the FCF is correct. However, Tesla doesn't do it like that. If they did that, the number of their inventory wouldn't be just $1.3B. Jessie was making calculations from their reported numbers and those numbers won't have the scenario of few thousands cars worth of labor/parts already been spent. So I don't think there's double counting.

 

[Fallenone]

This may sound good in theory, but I doubt it would work. Apple actively works to integrate its acquisitions into the Apple ecosystem, so I doubt that independence would last very long. Tesla would likely face pressure to integrate into iTunes, iCloud, and other Apple services.

Practicalities aside, I can't see a visionary like Elon Musk ever choosing to work for Tim Cook. Cook is good at what he does: supply chain management and related operations stuff, but he doesn't have the same instinct for product that Steve Jobs had.

Instead of selling TSLA to AAPL, TSLA should poach Tim Cook to become the COO of TSLA.

 

[RobStark]

Instead of selling TSLA to AAPL, TSLA should poach Tim Cook to become the COO of TSLA.

Elon should be CEO and Chief Product Architect of AAPL-TSLA while Cook is COO of AAPL-TSLA.

Let Cook worry about mundane boring stuff.

Let Elon imagine us into the future.

IF revenue is not being diverted away from the transition to a sustainable transportation there is no reason why Tesla vehicles should not be fully integrated into the Apple Eco-system.

 

[Hogfighter]

Does anyone think EM will bring forward the Part 2 of Model 3 reveal to 8 weeks from now (If that's when the design will be released for tooling) and then use the bump, both in the stock price and Model 3 bookings, to go for a cash raise?

Nope. EM eluded during the recent CC that he's reluctant to use deposits for anything more than a cushion. They aren't going to release part 2 until much closer to production.

Regarding the recent high-level departures, there aren't many humans that want to burn themselves out for more than a few years. If JB left, that's a different story.

Oh, and Johan, yea....SCTY will drag us down a little tomorrow. Not a lot though, too much support around 200.

 

[Papafox]

Yes, if the additional parts and labor were sourced and accounted then you're accounting of the FCF is correct. However, Tesla doesn't do it like that. If they did that, the number of their inventory wouldn't be just $1.3B. Jessie was making calculations from their reported numbers and those numbers won't have the scenario of few thousands cars worth of labor/parts already been spent. So I don't think there's double counting.

Tesla certainly had enough labor on the property to build 7,000 Model X vehicles if production had moved forward in a positive manner, and so there's no need to double-count the labor cost, which is quite substantial in building a new vehicle.

Help me then understand when parts brought onto the property are considered part of inventory and therefore a cost item. When does a windshield that has been purchased for Model X make its way into an earnings report as a cost item: when the windshield is purchased from the supplier and delivered, when the part is attached to a vehicle under construction, when the vehicle is completed, or when the vehicle is delivered? My understanding is that the term inventory includes not only completed vehicles but also the parts to build them. Maybe this understanding of when a part for a Tesla becomes a cost item is where we disagree. What is your understanding regarding the timing of a part becoming a cost item and thereby being subject to inclusion in an earnings report? Thanks.

 

[Irishjugg]

I thought 210 was the bottom of the day. No telling at this point, it's only been stable for the last few minutes. I hope you got out the other day at 215.

edit: Nevermind. Further down we go.

Getting out now would be even worse than getting it then (if he's in shares, options are a different ball game). If you are in shares, buying more now is the play, definitely not being emotional, selling, and locking in a major loss.

 

[MitchJi]

Getting out now would be even worse than getting it then (if he's in shares, options are a different ball game). If you are in shares, buying more now is the play, definitely not being emotional, selling, and locking in a major loss.

Don't buy LEAPS now? I just rolled 1/3 of our J18 $160's to $280's. Three to one.

 

[Papafox]

Here's a comment made by one Model X customer today in the Model X, May deliveries thread: Model X May Deliveries

"Heard from the sales team that production is back up to full capacity, quality issues resolved and new orders are being quoted 6-8 weeks for delivery."

 

[CButterK]

Help me then understand when parts brought onto the property are considered part of inventory and therefore a cost item. What is your understanding regarding the timing of a part becoming a cost item and thereby being subject to inclusion in an earnings report? Thanks.

In the most simplified scenario, there are Raw Material inventory(parts needed to make the car), WIP(Work In Progress) inventory, and Finished Goods inventory. All of these "inventory" are accounted in the books at any given time, but the value of the parts change as they move across the different buckets due to added labor. For example, The windshield, when tesla receives it into their warehouse, gets assigned into an inventory system location, and is accounted for, at it's purchased cost value. When a work order is cut to build the car, that windshield and it's cost comes out of the warehouse, into the factory as WIP, under the assembly work order. Once all the assembly is completed, the labor cost is added to the parts cost under that work order, then moves into Finished goods inventory with the total rolled up cost.

That said, there are many different materials management strategies that change the timing of when/where the cost moves from one bucket to another, such as Kitting, backflush, Kanban, etc. Also, if Tesla Ops team had leverage with the suppliers, they could have even negotiated supplier kanban strategy, where the suppliers still own the raw material inventory until tesla actually uses the parts on the assembly line, and at the end of an agreed upon period(kanban size), they reconcile inventory/usage and bills Tesla after the fact, which then gets recognized as tesla owned inventory. So we would probably need to be more familiar with Tesla's materials mgmt strategy to understand their accounting.

 

[Fallenone]

Tesla certainly had enough labor on the property to build 7,000 Model X vehicles if production had moved forward in a positive manner, and so there's no need to double-count the labor cost, which is quite substantial in building a new vehicle.

Help me then understand when parts brought onto the property are considered part of inventory and therefore a cost item. When does a windshield that has been purchased for Model X make its way into an earnings report as a cost item: when the windshield is purchased from the supplier and delivered, when the part is attached to a vehicle under construction, when the vehicle is completed, or when the vehicle is delivered? My understanding is that the term inventory includes not only completed vehicles but also the parts to build them. Maybe this understanding of when a part for a Tesla becomes a cost item is where we disagree. What is your understanding regarding the timing of a part becoming a cost item and thereby being subject to inclusion in an earnings report? Thanks.

Yes, as I understand it, the inventory includes completed vehicles like the ones in shipment and in showrooms, and partially completed vehicles (including those undergoing QC inspection), and those that are just lying in crates. To be shown in the COGS for calculating gross profit, it has to happen after delivery takes place, otherwise it just goes into the inventory line.

Same distribution applies to the labor cost. If they spent 500 hours to build one Model X and built 7000 of them but only sold 3000 of them, and assuming the labor cost is $17/hour, than there would be $34M worth of labor going into the inventory.

So back to the original discussion of if they've shipped 7000 Model X would they be FCF+, if they really did build 7000 Model X and only shipped 2400 of them, and recording the labor and parts cost in inventory in their Q1 ER report, then we shouldn't use the (7000-2400)*GM to see how much they are short of. In this case, the number in their inventory line would be huge, something like $350M larger than last quarter. But, they didn't build 7000 Model X, they only built 2659 of them and the increase in inventory is only about $23M. So when speculating how things would have been if they built and delivered 7000 Model X from using their reported numbers of the actual Q1 ER report, we need to use the GM because they simply didn't buy enough parts, didn't used that much labor, didn't assembled that many half-built cars, to be near the 7000 Model X. Thus, no double counting.