Short-Term TSLA Price Movements - 2016

[Drax7]

To feel more comfortable with the company and stock, I would like to see less liquidity risk.
Execution risk can be overcome, loss of liquidity confidence is a trickier matter and
can lead to a death spiral.

I would like to see production reach 2000 per week for the combined s+x, as that amounts to
about $200 million in revenues and about $50 million in gross profits to offset all other expenses .

Last year total other expenses were $1.730 billion, thats from the combined SGA plus R&D.

Hence 50 weeks at $50 million gross profit, or $2.5 bln yearly will offset 1.730 bln with room to spare.

Revenues cover up for all the past mistakes and execution issues that may arise. Execution
issues will always be there, just accept it, though with substantial revenues there is a margin of safety.

I am not at full investment position yet until it seems we are close to that target.

What are the best estimates we can gather now on the production ramp.

 

[skljsd329832]

Meanwhile everyone is missing the apparent buying opportunity this morning...

Precisely. Playtime over. Game on.

There appears to be a vaccuum to the upside from here to $250 and beyond.

 

[Johan]

To feel more comfortable with the company and stock, I would like to see less liquidity risk. Execution risk can be overcome, loss of liquidity confidence is a trickier matter and can lead to a death spiral.

Well stated. This is in essence why it was so smart to do the capital raise now, sooner rather than later, and before the election in the US and before any interest rate hikes etc.

What are the best estimates can gather now on the production ramp.

The most important question short- to mid term. I have a friend who reserved his Model X at the same time that I did, he got EU production reservation #2 and has gone ahead with his order, I met him yesterday, he talked a few days ago with his delivery specialist who didn't have any other info that that early EU builds will be delivered "summer of 2016" which I guess most likely means late August. So for now we just have to keep a close eye on Model X delivery reports, both with regard to quantities of deliveries, wait times (yes vgrinshpun: weighted average, not plain averge) and of course quality coming off the line.

 

[Perfectlogic]

Last year total other expenses were $1.730 billion, thats from the combined SGA plus R&D.

Hence 50 weeks at $50 million gross profit, or $2.5 bln yearly will offset 1.730 bln with room to spare.

So Tesla will have $1.7B in net profits when they reach 100k X+S per year? That's great! So in 2018 when Tesla will sell 400k Model 3 on top they will make 400k*$42k*25% = $4.2B extra, that is $6B in net profits in just 2 years from now. With Tesla's growth I think a 50 p/e is pretty reasonable so that would make them a $300B company, which would make the stock hit more than $2000! Glad we got back on topic guys, this is great.

 

[esk8mw]

Traditionally the shareholders meeting hasn't brought on any important or substantial news or catalysts. This doesn't mean however that this year's meeting can't do that. Is there not some kind of agenda beforehand, especially with regard to petitions that are to be discussed/voted on? Anyone attendig have acces to such an agenda?

Shareholder meeting are generally boilerplate. The things being voted on are enumerated in the proxy (haven't checked but it's almost always Say on Pay vote, confirming auditor and not much else). Other business can be raised but there are strict rules on bringing things to a vote - i.e., a shareholder proposal. Proposals need to be brought between 120-150 days prior to the anniversary of the previous year's annual meeting, so pretty strict requirements and would be known well in advance.

Annual meetings do permit questions from attendees after the voting is done, so don't expect anything more than a mini earnings call. There's always the chance they will release some interesting news while responding to a question but I definitely wouldn't count on it. This most likely is not the catalyst you are looking for.

 

[skljsd329832]

So Tesla will have $1.7B in net profits when they reach 100k X+S per year? That's great! So in 2018 when Tesla will sell 400k Model 3 on top they will make 400k*$42k*25% = $4.2B extra, that is $6B in net profits in just 2 years from now. With Tesla's growth I think a 50 p/e is pretty reasonable so that would make them a $300B company, which would make the stock hit more than $2000! Glad we got back on topic guys, this is great.

Note: The above is a form of false-flag financial disinformation snark. (Obviously Net Earnings as a component of P:E do not function as stated).

This Is of the more dangerously misleading forms of trolling.

 

[skljsd329832]

Shareholder meeting are generally boilerplate. The things being voted on are enumerated in the proxy (haven't checked but it's almost always Say on Pay vote, confirming auditor and not much else). Other business can be raised but there are strict rules on bringing things to a vote - i.e., a shareholder proposal. Proposals need to be brought between 120-150 days prior to the anniversary of the previous year's annual meeting, so pretty strict requirements and would be known well in advance.

Annual meetings do permit questions from attendees after the voting is done, so don't expect anything more than a mini earnings call. There's always the chance they will release some interesting news while responding to a question but I definitely wouldn't count on it. This most likely is not the catalyst you are looking for.

It's Musk's Model 3 State Of The Union address and Tesla is not on the back foot when it comes to addressing it.

This is not business as usual. Recommend not underestimating it.

 

[brian45011]

Common stock outstanding post raise: "145,881,312 shares (or 147,276,660 shares if the underwriters exercise their option to purchase additional shares from us in full)"

Common stock outstanding prior to raise: 133,857,684

That would appear to confirm that Elon's un-exercised options in the Proxy's footnote were not subsumed in the shares outstanding.

 

[techmaven]

Shareholder meetings are not usually trading events. However, anytime one can ask Musk questions, especially raw, informed questions is a great opportunity and risk. Which is precisely why it has been so frustrating in previous years when people got up with stupid personal agendas and asked the most inane questions.

 

[skljsd329832]

I used the exact same method of calculating future profits as Drax did, how am I trolling and not him? Also there is nothing wrong with how I used P/E. If the net income is $6B and the P/E is 50 then the mkt cap is $300B, even you should know that.

Exploiting known errors amongst retail investors is actual malice.

 

[esk8mw]

It's Musk's Model 3 State Of The Union address and Tesla is not on the back foot when it comes to addressing it.

This is not business as usual. Recommend not underestimating it.

I'm 100% long as always (shares + short 300 strike Sept puts), so no worries about underestimating. I'm just cautioning against expecting big news because I know how these things go. Source - I just ran our company's Annual Meeting a couple days ago (S&P 500 company).

Looking into crystal ball: Elon will give his opening remarks and will basically repeat the highlights from the equity offering filing and some bits from the Q1 conf call. These are pretty recent speeches and CEOs don't have time to prepare much new stuff for this meeting (generally there's a private Board meeting right after the meeting and that's what everyone is focused on). I think he will mention the reservations number, reiterate expansion plans, mention recent/upcoming mfg hires and explain how the equity raise allows them to accelerate the launch plans. The best chance for a stock bump would be if he releases a date for part II of the reveal or says something cryptic about "exciting news" coming soon. Q&A will be limited and probably spend too much time on unintelligent questions. Would love to be wrong here, btw, I hope you are 100% right Julian.

 

[Perfectlogic]

Exploiting known errors amongst retail investors is actual malice.

It is exploitation to extrapolate his method of expecting costs to stay the same while the sales double further into the future to show how unrealistic it is? How am I gaining anything from that (besides entertainment)? All I did was helping Drax understand his mistake.

 

[Thumper]

I am stunned by the ability of PL and Julian to sit at the keyboard and peck away all day and night. Please rest.

 

[neroden]

To feel more comfortable with the company and stock, I would like to see less liquidity risk.
Execution risk can be overcome, loss of liquidity confidence is a trickier matter and
can lead to a death spiral.

This isn't a short-term question, this is a *long-term* question. We're suffering the problem of everyone posting everything in the short-term thread again. FWIW, I think liquidity isn't a problem since Tesla has enormous sources of both equity and secured debt; dilution is more the issue. Execution problems, on the other hand, are either overcome or they aren't: if they aren't, nothing in the entire world can fix the resulting problem for the company.

 

[FredTMC]

Big price swings so far today.

That was a fast run up to $222 from $217.

Nice to see some continued strength today after last week

 

[Curt Renz]

...dilution is more the issue...

Again I remind TMC members that issuing new shares around the current price for the purpose of investing the money received in growth opportunities is not harmful "dilution"? The new money received becomes the shared property of all shareholders; it's not burnt and turned into smoke. It's used to generate far more income than can be earned from fixed income investments. It does not need to be paid back as is the case with debt instruments. An equity raise is a sound strategy for any company seeking to meet known demand by growing its production capabilities.

 

[neroden]

Again I remind TMC members that issuing new shares around the current price for the purpose of investing the money received in growth opportunities is not harmful "dilution"? The new money received becomes the shared property of all shareholders; it's not burnt and turned into smoke. It's used to generate far more income than can be earned from fixed income investments.

Oh yeah. Current equity issuances are small and the dilution effect is minimal compared to the value of having the needed capital. But if Tesla issued, *for example*, a $30 billion dollar capital raise entirely in the form of equity, it would certainly cause you to calculate a lower value for the stock *per share* than if they funded their capital needs entirely from internal profits.

 

[FredTMC]

Again I remind TMC members that issuing new shares around the current price for the purpose of investing the money received in growth opportunities is not harmful "dilution"? The new money received becomes the shared property of all shareholders; it's not burnt and turned into smoke. It's used to generate far more income than can be earned from fixed income investments.

Yep. Here's TWO distinct types of "Dilution"

#1 Company isn't growing and needs more cash to fund existing operations or try to figure out some new direction. Company on "life support"

#2 Company IS growing quickly. Tons of demand for products. Needs capital to fund a production expansion to grow faster.

 

[Drax7]

This isn't a short-term question, this is a *long-term* question. We're suffering the problem of everyone posting everything in the short-term thread again. FWIW, I think liquidity isn't a problem since Tesla has enormous sources of both equity and secured debt; dilution is more the issue. Execution problems, on the other hand, are either overcome or they aren't: if they aren't, nothing in the entire world can fix the resulting problem for the company.

Meeting weekly payroll on 10,000 plus employees is a very short term issue, fortunately production is above 1500 cars per
week from what I can tell to cover it.

 

[neroden]

Oh yeah. Current equity issuances are small and the dilution effect is minimal compared to the value of having the needed capital. But if Tesla issued, *for example*, a $30 billion dollar capital raise entirely in the form of equity, it would certainly cause you to calculate a lower value for the stock *per share* than if they funded their capital needs entirely from internal profits.

Here's another way to put this. Don't you think the insiders in Tesla wish that they hadn't had to dilute the stock by making the IPO back at $16/share? If they could have raised that capital through a low-interest loan, they could have eventually paid for it by issuing stock at $250/share... obviously they needed the capital and that was the best way to raise it, though.

Dilution is a real issue, it's just massively outweighed by the value of *having the capital you need*.