Short-Term TSLA Price Movements - 2016

[esk8mw]

Let's not talk about soft X demand, at least until I get the 75D I am patiently waiting for. The first 75Ds are not expected until July, so they are still on North American P90D/90D cars for the next two months. Any talk of weak X demand is unfounded when they are still so early in the process of catching up with the waiting list.

S demand is around 50k/year as that has been the production rate for a while. Growing slightly from a bit less than 50k at the beginning of last year to a bit more than 50k yearly runrate now. The total demand for the X has been around 12k (deliveries + backlog), this one is ofcourse harder to predict as it is a new product but so far it doesn't look great. The data shows a negative demand of 12k X orders over the last 9 months, perhaps Tesla will have to be net buyers of the X soon.

Sorry about your short position.

You can't even attempt to measure demand for X yet, it's not fully ramped yet and they don't even have cars available for test drives at most locations. All we can be certain of is that demand/production will increase from where we are today. There's more people than you think that require an opportunity to touch and drive a car before spending 90-150k on it. There's even more people that are watching and waiting for production issues to be sorted out before jumping in. You can throw whatever numbers you want at this...I'll just go ahead and use basic...logic, instead.

 

[EinSV]

Curt, earlier this morning I was just thinking about how you called $206 the bottom a few days ago. Thank you, I added to my substantial "for fun" trading shares. My core shares still untouched since 2012.

This was very impressive -- also a shout-out to Papafox for a similar call.

So much knowledge and insight on this forum (when it is not, um, distracted).

 

[SBenson]

Panasonic can speed up Tesla plant investment if needed

 

[Irishjugg]

With the fresh cash Tesla can afford to finally start advertising. Tesla is relatively unknown here in Illinois compared with California. Its competitors are massive advertisers, and they are already quite well known. An initial burst of advertising would greatly accelerate demand for the great products from a rather young company.

And Tesla could finally start placing inventory in store lots. That would inspire many potential buyers who don't want to wait for new cars when problems develop with their current ones. They may be the most common type of car buyers.

Curt, I think both of these things are very unlikely based on following statements musk makes over time. His views on advertising are pretty straightforward and negative and he has only ever even begrudgingly admitted that they may one day have to when they are at very high volume. I don't see much benefit to inventory cars as it would raise costs and introduce the potential for sunk and never sold inventory, but my feelings are less strong on that one.

Also, you often mention that Chicago just doesn't have many S's or that Tesla is more unknown here and I have to disagree. I'm not sure where in the city you are but I can't think of a single day that I haven't seen at least one Tesla in the whole of 2016. This morning on the way to work I saw three, driving to the city from Lombard last night I saw 2, my brother and I have now collectively seen X's in 4 colors. From my vantage point, Tesla penetration in Chicago may be second only to California.

 

[Curt Renz]

Why won't 500k M3 drivers accomplish the same thing?

If demand becomes an issue I think that Tesla will do another referral program before they start advertising.

You may be right about referrals. But I have been responding this morning to Perfectlogic's analysis of demand for Models S & X, which he appears to base entirely on the current marketing and custom ordering situations. Therefore the appearance on the road of 500,000 Model 3's in a couple of years would not apply to my current discussion with him. Meanwhile, millions of Fords on the roads for a century do not prevent Ford from feeling it needs to heavily advertise. Both you and I have raised considerations that Perfectlogic appears to have overlooked.

 

[Perfectlogic]

Well, you are cherry picking data a bit. There was a reason I included three pieces of information in my post: current wait times as compared to a year ago, deposits, and Tesla statement - they all are consistent with my conclusion and not consistent with yours.

Regarding the time when the snapshot is taken, it is very important indeed. The importance of the snap shot now is due to the fact that Tesla is ramping production. That is exactly why they included the 45% YoY figure. Just read the shareholder's letter:

"Q1 Model S net orders rose 45% compared to a year ago, and grew at a faster pace than last quarter. The more rapid pace of growth was driven by increased order growth in North America and Europe, and a more than 160% increase in orders from Asia compared to a year ago. Model S continues to be the market share leader in North America and Europe among all comparably priced four-door sedans Model 3.

The growth in Model S orders and the Model X reservation conversion rate support our plan of 80,000 to 90,000 deliveries in 2016. Notably, this demand level was reached ahead of the Model S refresh, before Model X could be seen in stores, and prior to the unveiling of Model 3, which we believe is stimulating demand for all of our vehicles."

I just do not see how you can dismiss Tesla statements without providing real data to support your conclusion. The data that I provided, on other hand, do not contradict Tesla statement regarding the demand being sufficient to support the 80-90K guideline, and, in fact, support it.

I'm curious what you think the current demand is if not around 50k yearly runrate for the S. If you do believe it to be much higher then why is the waiting time going down and not up when production is 50k yearly? I would say that the data is clearly on my side, the argument for demand being higher seems to be Elon said it's increasing and you just can't know anything for certain. Demand increasing does not go against what I have said, I too acknowledge that demand is going up as production has been going up, but just not by a whole lot lately. How much demand has increased compared to more than a year ago isn't as relevant as how much demand is increasing right now.

 

[techmaven]

Lets say we have an apple shop that sells apples, we have a production of 10 apples per day from our apple supply tree. The waiting time for apples is 1 day (10 apples backlog). From this point if the demand is 10 apples the waiting time of 1 day will stay 1 day there is absolutely no way around this, it is simple logic. If the demand rises to 11 apples, the waiting time will rise by 0.1 day per day so after 10 days the backlog would have grown to 20 apples as they are 1 short of demand each day thereby increasing the wait to 2 days. If the demand falls to 9 apples per day then after 10 days you will be able to purchase apples without any wait. Come on guys this is some 2nd grade math.

Seems so perfectly reasonable, right?

You actually don't know the waiting time. It's a simple as that. You think you know... and that's dangerous. You don't know.

Then, you talk about if demand rises to some number. You don't know that either. And then, you go back to waiting time... which you don't know. Then, you talk about backlog... well, we know customer deposits, but we don't know the backlog directly.

Do you even understand that the backlog for the west coast and for the rest of the U.S. is different? At some point, Tesla concentrates production for overseas. At some point in the quarter, they concentrate on North America. Then on U.S., and then on the west coast, and then finally in the bay area.

S demand is around 50k/year as that has been the production rate for a while. Growing slightly from a bit less than 50k at the beginning of last year to a bit more than 50k yearly runrate now. The total demand for the X has been around 12k (deliveries + backlog), this one is ofcourse harder to predict as it is a new product but so far it doesn't look great. The data shows a negative demand of 12k X orders over the last 9 months, perhaps Tesla will have to be net buyers of the X soon.

Wow, you really don't get it... are you sure you've been watching Tesla for a while? Either you are a myopic bear, or you really don't understand the difference with a custom order direct sales model that is perpetually production constrained and rapidly growing.

 

[Irishjugg]

Initial Tesla advertisements would likely educate the public about electric cars. Most people are woefully uninformed about them, and learning about the advantages would be eye opening.

I admit this would be very useful.

Just don't think Tesla would do it while production constrained. Other car companies will spend more and more on that in the next year or two also. Tesla gets by pretty well with the younger generation with their viral YouTube videos I think.

 

[MitchJi]

Great question, Mitch. $1B+ seems about right based on my back of the envelope EBITDA calculation:

5GWh * ($400/KWh-$135/KWh (conservative)) * 1M KW/GW = $1.325B gross profits

Not sure how to estimate OpEx but I assume the R&D investment should continue to be substantial to maintain edge over other suppliers and reduce costs. On the other hand, compared to the automotive side of the business, the rest of OpEx should much smaller -- less need for service, no supercharger network/less impact on stores and service/ordering over the internet. Am I missing anything?

Also, any bets on when the full Phase I GF is online, assuming cell production begins late 2016?

I believe that R&D is almost exactly the same as their car R&D. Great synergy, negligible additional R&D investment.

I believe that as soon as they start producing cells in volume the full phase 1 GF will be online as well.

 

[FredTMC]

Sagging here mid-day.. $217.

Lagging Naz (up 1.3%)

Hmmmm.

 

[Curt Renz]

Curt, I think both of these things are very unlikely based on following statements musk makes over time. His views on advertising are pretty straightforward and negative and he has only ever even begrudgingly admitted that they may one day have to when they are at very high volume. I don't see much benefit to inventory cars as it would raise costs and introduce the potential for sunk and never sold inventory, but my feelings are less strong on that one.

Also, you often mention that Chicago just doesn't have many S's or that Tesla is more unknown here and I have to disagree. I'm not sure where in the city you are but I can't think of a single day that I haven't seen at least one Tesla in the whole of 2016. This morning on the way to work I saw three, driving to the city from Lombard last night I saw 2, my brother and I have now collectively seen X's in 4 colors. From my vantage point, Tesla penetration in Chicago may be second only to California.

Indeed, advertising or inventory cars may not be necessary for a long time. Again, I was simply pointing out to Perfectlogic possibilities he may not be considering in his analysis of the current demand situation.

I still don't see Teslas often, but admittedly I don't drive very much. During the eighties I lived in Palo Alto, California, and my friends there say they see them in driveways on every block. That's certainly not the case where I am now. In any event, I remain amazed by how many people here in Illinois have not heard of Tesla Motors or know very little about it. Almost everyday I have to educate people here about not only Tesla but also electric cars in general. If demand under the current marketing program ever slackens, advertising certainly would help to educate a larger portion of the public.

 

[esk8mw]

Sagging here mid-day.. $217.

Lagging Naz (up 1.3%)

Hmmmm.

When it behaves like this I just look at the volume. When there's heavy volume the stock is generally moving up (today, at least). If it drifts back down on lighter volume I'm not as worried because, more often than not, once the volume returns the stock will be headed in the same direction (up). Macro can trump all this, obviously.

Total guess time! I say we run up to $223 at some point today and close at $220. We should have a pool every Friday.

 

[AudubonB]

About my suggestion not long back that perhaps the timing and size of the secondary was a function of one large investor being responsible for essentially the entire $1.4bn of new issue -

I had prefaced it by saying that was on the far-fetched end of the scale. Reasonable proof of same is that we now see that, as is normal, there was a consortium of underwriters: Morgan, Goldman, DB, Citi, ML and so forth. Compelling evidence that the underwriters also were spreading their own exposure/risk - ie, that there had not been one Mr. Big on the phone to Goldman saying "Get me a Big Hunk of TSLA". So the far-fetched now recedes to the truly improbable.

As far as the question of "will we ever know who bought....?" - there are enough services checking funds' 13-Fs that yes, after another quarter, one can get a modest approximation of who the new, or augmented, players are.

 

[Perfectlogic]

Seems so perfectly reasonable, right?

You actually don't know the waiting time. It's a simple as that. You think you know... and that's dangerous. You don't know.

Then, you talk about if demand rises to some number. You don't know that either. And then, you go back to waiting time... which you don't know. Then, you talk about backlog... well, we know customer deposits, but we don't know the backlog directly.

Do you even understand that the backlog for the west coast and for the rest of the U.S. is different? At some point, Tesla concentrates production for overseas. At some point in the quarter, they concentrate on North America. Then on U.S., and then on the west coast, and then finally in the bay area.



Wow, you really don't get it... are you sure you've been watching Tesla for a while? Either you are a myopic bear, or you really don't understand the difference with a custom order direct sales model that is perpetually production constrained and rapidly growing.

We do know the waiting time, there is a whole thread dedicated to it. When you order a car you get a waiting time, lets not obfuscate things unnecessarily.

I have been following Tesla for something like 2.5 years. I was very bullish until around 9 months ago when it seemed clear to me that demand increase was slowing, the margins did not go as high as I had hoped and the X dissapointed me. I wasn't a bear right out of the gate letting my confirmation bias twist everything to fit my original perspective, the data has turned me short/medium term bearish (no short position though).

 

[tander]

Thx

Ok, here's two questions. One is stupid. You decide which...

1). Since the offering is priced at $215 now, does that mean all the shares have been sold? (All order books filled at the underwriters).

2). Who are the biggest investors in this offering? Will we ever know?

TIA

Correct me if I'm wrong, but my understanding is that the shares have essentially been sold to the underwriters, now it's their job to sell them to folks down market. As for who the biggest investors are, I guess you could keep tabs on the institutional ownership rankings or keep an eye out for any announcements buy the buyers or hedge fund notifications?

 

[Drax7]

Seems so perfectly reasonable, right?

You actually don't know the waiting time. It's a simple as that. You think you know... and that's dangerous. You don't know.

Then, you talk about if demand rises to some number. You don't know that either. And then, you go back to waiting time... which you don't know. Then, you talk about backlog... well, we know customer deposits, but we don't know the backlog directly.

Do you even understand that the backlog for the west coast and for the rest of the U.S. is different? At some point, Tesla concentrates production for overseas. At some point in the quarter, they concentrate on North America. Then on U.S., and then on the west coast, and then finally in the bay area.



Wow, you really don't get it... are you sure you've been watching Tesla for a while? Either you are a myopic bear, or you really don't understand the difference with a custom order direct sales model that is perpetually production constrained and rapidly growing.

"don't answer the foolish arguments of fools, or you will become as foolish as they are" proverbs 23.9 , bible

 

[theschnell]

They have been giving out production numbers for a while now.

For the previous quarter. Those numbers cannot be projected into the future, because they are always changing.

Projected wait times are always changing as well. See X thread. This is at least in some part due to the fact that production is also fluctuating...

 

[EinSV]

I believe that R&D is almost exactly the same as their car R&D. Great synergy, negligible additional R&D investment.

I believe that as soon as they start producing cells in volume the full phase 1 GF will be online as well.

Right. Shouldn't post before I finish my coffee!

Let's see now, a business with $1B+/year in earnings, growing faster than 50%. Bet that would be worth a little something.

 

[tander]

We do know the waiting time, there is a whole thread dedicated to it. When you order a car you get a waiting time, lets not obfuscate things unnecessarily.

I have been following Tesla for something like 2.5 years. I was very bullish until around 9 months ago when it seemed clear to me that demand increase was slowing, the margins did not go as high as I had hoped and the X dissapointed me. I wasn't a bear right out of the gate letting my confirmation bias twist everything to fit my original perspective, the data has turned me short/medium term bearish (no short position though).

As someone who's been following Tesla for probably a decade now, I think it's too early to really pass judgement on the X. Their MO is to make stuff slow until the quality is sufficient to make it fast. While it doesn't sound great at first, I would much rather see that than the alternative of massive recalls later down the road, and remember they are building an assembly lines not just cars. Moreover, on demand, yes it's going to ebb and flow a bit. For example there are only so many people who want an early x (presumably with problems) bad enough not to wait until the quality is up to par. For the majority of buyers, they will wait until the quality is consistent before buying. So unless they just plain never get the quality up to par (which is sounds like has already happened), there isn't really a legitimate concern over demand. As I see it the only reason to worry about demand would be if China blocks all imports or something like that.

 

[schonelucht]

Actually, the Schonelucht's post does not demonstrate that my conclusion is not correct, neither it validates yours. I'll explain in details tonight (just do not have time right now). The key is that the average waiting time that both you and Schonelucht are apparently using as an indicator of the backlog/demand is not actually indicative of it.

Really looking forward to that argument because I can't see it any other way. Will be interesting to hear your take on it. Also would be interesting to hear exactly what your position is and how it differs from mine.