Short-Term TSLA Price Movements - 2016

[techmaven]

View attachment 110193

if not slightly green, it certainly is unlikely to be continuing down the negative trend line. After all, they did deliver 50,517 vehicles last year and 17,400 in Q4. They did that with very few, lower margin Model X's, as the initial production of X's is likely to be lower margin. So if they expected to be near cash flow positive with a few thousand X's, then getting that volume with S's instead should be positive for the quarter, even adjusting for a significant difference in ASP. Of course, they probably continued to incur higher X ramp up costs, but most of that cost was probably spent in Q3. It also appears they're selling a crap ton of CPO's that don't count towards that deliver number.

 

[phigment]

Yeah, this downturn is a little sickening. Just took my dose of buying more shares though and now feel a bit better.

Picked up a few more shares at $172. Would have gotten more at a lower price if my CDN -> USD transfer went quicker.

Ah well... still a great deal.

 

[jesselivenomore]

Indeed. Question is will this ER erase the no-news drop of the last week, or somehow confirm implied negative movement. I have trouble believing we are lower than this after next week's call if we are even remotely close to consensus numbers. A beat of any kind with sentiment this depressed could mean a 20% overnight gain.

I mean, what if they came within striking distance of cashflow positive with the massive Q4 sales push? I was gaming whether it was possible last night, and it's not out of the question. But I'm not even sure we need that to see 220+ again.

Reaffirming 1600-1800 production for 2016 should give it some relief, but even that may get faded after a few days given the current negative price action. Where we close this week is important. If we can somehow get back above 190 then perhaps this is just a temporary flash crash caused by some analyst downgrades. If we close down here then it is real selling that represents a multi-month/year break down. For the latter, there will need to be significant news to reverse that trend.

Getting close to cash flow positive would be a big shock to the markets, although I don't quite see a path to that in Q4. To achieve that, they will need to make up $600M between increased gross profit and/or decreased expenses/cap ex. From guidance we already know that expenses will be roughly in line with Q3 so no decrease there. And even with the 50% QoQ increase in revenue and gross profit, that won't be enough to make up $600M.

 

[Julian Cox]

lol. One can dream

You're kidding right?

No. One KNOWS. No dreaming required.

This is precisely what happens coming out of net development spend to net selling of what has been developed.

 

[uselesslogin]

You're kidding right?

No. One KNOWS. No dreaming required.

This is precisely what happens coming out of net development spend to net selling of what has been developed.

Tesla said $500 million of CapEx in Q4. I won't say Q1 is impossible but Q4 is laughably difficult. Short of them lying to us on the Q3 letter.

 

[v12 to 12v]

I feel like this is a Q1 2013 flashback.

 

[FluxCap]

Reaffirming 1600-1800 production for 2016 should give it some relief, but even that may get faded after a few days given the current negative price action. Where we close this week is important. If we can somehow get back above 190 then perhaps this is just a temporary flash crash caused by some analyst downgrades. If we close down here then it is real selling that represents a multi-month/year break down. For the latter, there will need to be significant news to reverse that trend.

Getting close to cash flow positive would be a big shock to the markets, although I don't quite see a path to that in Q4. To achieve that, they will need to make up $600M between increased gross profit and/or decreased expenses/cap ex. From guidance we already know that expenses will be roughly in line with Q3 so no decrease there. And even with the 50% QoQ increase in revenue and gross profit, that won't be enough to make up $600M.

Agree cashflow positive is a longshot to be sure. But I think even real progress in that direction/guidance would be a surprise at this point.

Also agree this week's close could be significant from a technicals standpoint (and I still expect a bounce).

Have you seen the spread on consensus street estimates for this call? For a relatively mature and known company, this seems like a really broad spread. Seems ripe for arbitrage.

 

[MitchJi]

Picked up some Jan2018's for $49.50 :biggrin::
Filled Buy to Open x TSLA Jan 19 2018 160.0 Call Limit 49.50
Filled Buy to Open x TSLA Jan 19 2018 160.0 Call Limit 49.50

Finally made it one limit order filled in two orders about 10 minutes apart, when the SP hit $171.xx. I set the limit based on the theory that I didn't think the SP will go below 170 today. Still have about 20% cash in the account.

Many thanks to Jesse, FluxCap, maoing for urging caution earlier :smile:.

And thanks to Julian for helping me make the decision to go 80% all in.

I think that the SP will stay flat, or go down until the ER-CC (I didn't have the nerve to continue waiting).


I also expect an ER-CC bounce, no idea of the magnitude or duration.

Have you seen the spread on consensus street estimates for this call? For a relatively mature and known company, this seems like a really broad spread. Seems ripe for arbitrage.

ER-CC straddle or strangle?

 

[FredTMC]

if not slightly green, it certainly is unlikely to be continuing down the negative trend line. After all, they did deliver 50,517 vehicles last year and 17,400 in Q4. They did that with very few, lower margin Model X's, as the initial production of X's is likely to be lower margin. So if they expected to be near cash flow positive with a few thousand X's, then getting that volume with S's instead should be positive for the quarter, even adjusting for a significant difference in ASP. Of course, they probably continued to incur higher X ramp up costs, but most of that cost was probably spent in Q3. It also appears they're selling a crap ton of CPO's that don't count towards that deliver number.

Yep. agreed.

Another point: I've seen a couple folks say Tesla hired a ton of workers in the factory for MX (in Q4'15 and into Q1 now)

I don't think that's true.

Basically, vast majority of factory workers are trained for MS. Then, The GOOD ones were also cross-trained for MX. From there Tesla trains more workers on MX "assembly stations".

heres another way to think about it:

Stamping: Same workers as MS produce MX panels
Robotic Weld Line: MX line IS separate but it's robotic. Couple workers per shift.
Paint Shop: Same workers as MS
Conveyour-based Assembly Line: MS is assembled on the same line. Largely same workers as MS at scale

 

[Julian Cox]

Getting close to cash flow positive would be a big shock to the markets, although I don't quite see a path to that in Q4. To achieve that, they will need to make up $600M between increased gross profit and/or decreased expenses/cap ex. From guidance we already know that expenses will be roughly in line with Q3 so no decrease there. And even with the 50% QoQ increase in revenue and gross profit, that won't be enough to make up $600M.

I don't think they can only look to gross profit for positive Q4 cash flows.

Gross profit is disconnected from cash flows in time. For example, 2000 vehicle pull-ins from Q3 are 100% cash flow positive in Q4. Like an extra $200 million of cash. Not just the 25% GM on $200 million - because the 75% cash outlay to make them was booked in Q3, not in Q4.

The bears are adamant that Q4 also benefited from selling off aged China inventory. All Q4 cash flow positive if true and could add another 1000 to 2000 units.

Sales of loaners. All cash flow positive assuming these were built prior to Q4. Probably true in nearly 100% of those cases.

Balance of CPO trade if managed for cash. Cash flow positive.

Tesla Energy utility scale installations. All cash flow positive (IMO) - and there are some documented examples.

Slow down in SC installations. Exceptional cash savings.

Use of the $750 million revolving credit line. Sure it adds to debt. Cash flow positive.

Use of Lease Financing houses instead of internally cash-flowing (real) leases. Cash flow positive.

Transferring $180+ million of previously internally cash-flowed lease vehicles to a lease finance house. Cash flow positive.

If they had a desire to hit it out of the park on cash flows in Q4 here is a non-exhaustive list of ways to achieve it that blow past $600 million, not to mention the fact that cash outlay was guided flat and overall sales were up approximately 50% vs Q3.

 

[aznt1217]

You're kidding right?

No. One KNOWS. No dreaming required.

This is precisely what happens coming out of net development spend to net selling of what has been developed.

There's very little chance it would happen in Q4 15. Especially with the lowered guidance. They'd have to basically cap their spending which I don't think Tesla would do. They want to get the GF up as quickly as possible. I can see it happening in Q1, when management assess their funding and where to channel funds (obviously Model 3-- I think this will be significantly less spend on r&d than expected due to learning from Model S and X).

 

[Renaud]

Here is what has made this drop starting 1/4/16 disturbing IMO. It was sudden, and to me unexpected. It's tenacity has been overall extremely disturbing. Think about this for a moment-242 to 171 in just over 1 trading month on the heels of????? Zero news officially verified from the company except 4q deliveries. I'd like to know what someone knows, honestly. Because IMO a 28% drop in a month isn't "normal" or just "macro" related. On the heels of the spike in short interest I'm even more curious to what is really going on. And BTW I am now wondering the likelihood of something else happening that is equally spectacular to the UPSIDE. I'm just saying I've seen a lot of things while studying the stock market over the years and this seems super odd. Wondering if this is a setup for a "superspike" in share price because not many can see it coming.

The drop is indeed spectacular. A whole month, and the last two days are very hard to swallow: form 199 ID on monday to as low as 170 today, breaking all floors easily.
Reminds me that someone was saying 170 was in sight just a few weeks ago when it all started to go bananas. Not everybody laughed, but few really believed it. I didn't believe him either.
But here we are, and we see every little green candle (even ID) as hope it recovers, but everyday brings its share of bad news and I just wonder how low it can go before ER and CC.

I personally think there is nothing intrinsically so wrong with the company that warrants such a correction, but the perception is so important: people can't believe the demand is strong for the S only (look at the stats posted above, sales of S vs other luxury cars), people worry (and I can't blame them) about X execution and ramp-up, people forget there is backlog for the X, people expect 3 to be late, people have no clue about Tesla energy, people see oil at 30$ and think no good for Tesla. People forget the growth from 2014 to 2015.

We have a growth company in a tough environment in a high capex sector encountering headwinds: what can we expect? Throw a few analysts at it and there we are: 30% gone in a month.

Long term, if we finally see a ramp-up in X deliveries, no problem, but with this "the sky is falling" feeling everywhere, the correction might not be over yet...

By the way Max-pain dropped from 185 to 180 for this week, and still 160 for next week.

 

[jesselivenomore]

The same guy who congratulated people for buying the "bottom" at 200 is now saying one KNOWS Q4 cashflow WILL be positive.

This is flat out fraudulent behavior.

There is no math that can show Q4 positive cash flow.

 

[FredTMC]

Yeah, I think Tesla gave up on Q4 FCF last year. I think they ramped up spending CapEx in Q4 with intentions to cut CapEx in Q1

CFO said CapEx will be less in 2016 per last ER

 

[aznt1217]

The same guy who congratulated people for buying the "bottom" at 200 is now saying one KNOWS Q4 cashflow WILL be positive.

This is flat out fraudulent behavior.

There is no math that can show Q4 positive cash flow.

I guess we'll know in a week LOL. Are you positioned for anything? (If you don't mind me asking)

 

[30seconds]

I agree that tesla showing control of their cash flows will be critical to perception on share price as it directly impacts the company's need and timing for capital raises needed to fund GF and Model3. The issue is that tesla has not shown that 1. They have the ability or desire to move all the levers that Julian outlined and 2. The slow ramp of the X may have significantly upset their plans to get to cash flow neutral/positive in Q1. Question becomes - does the company need to raise cash before they show this control?

 

[austinEV]

Here is what has made this drop starting 1/4/16 disturbing IMO. It was sudden, and to me unexpected. It's tenacity has been overall extremely disturbing. Think about this for a moment-242 to 171 in just over 1 trading month on the heels of????? Zero news officially verified from the company except 4q deliveries. I'd like to know what someone knows, honestly. Because IMO a 28% drop in a month isn't "normal" or just "macro" related. On the heels of the spike in short interest I'm even more curious to what is really going on. And BTW I am now wondering the likelihood of something else happening that is equally spectacular to the UPSIDE. I'm just saying I've seen a lot of things while studying the stock market over the years and this seems super odd. Wondering if this is a setup for a "superspike" in share price because not many can see it coming.

I think it is sufficient to say that the model X slow ramp is the explanation. That slow ramp is neither unexpected nor particularly harmful even in the medium term. The narrative of TSLA has shifted to the X like it's existence depends on it. But, when they turn things around a *normal* *expected* model X ramp will look like a positive catalyst, to add to the list of mid 2016 positives.

 

[FredTMC]

Julian and Jesse.... Please leave each other alone. Please

i want you both to continue posting.

 

[austinEV]

I don't think they can only look to gross profit for positive Q4 cash flows.

Gross profit is disconnected from cash flows in time. For example, 2000 vehicle pull-ins from Q3 are 100% cash flow positive in Q4. Like an extra $200 million of cash. Not just the 25% GM on $200 million - because the 75% cash outlay to make them was booked in Q3, not in Q4.

The bears are adamant that Q4 also benefited from selling off aged China inventory. All Q4 cash flow positive if true and could add another 1000 to 2000 units.

Sales of loaners. All cash flow positive assuming these were built prior to Q4. Probably true in nearly 100% of those cases.

Balance of CPO trade if managed for cash. Cash flow positive.

Tesla Energy utility scale installations. All cash flow positive (IMO) - and there are some documented examples.

Slow down in SC installations. Exceptional cash savings.

Use of the $750 million revolving credit line. Sure it adds to debt. Cash flow positive.

Use of Lease Financing houses instead of internally cash-flowing (real) leases. Cash flow positive.

Transferring $180+ million of previously internally cash-flowed lease vehicles to a lease finance house. Cash flow positive.

If they had a desire to hit it out of the park on cash flows in Q4 here is a non-exhaustive list of ways to achieve it that blow past $600 million, not to mention the fact that cash outlay was guided flat and overall sales were up approximately 50% vs Q3.

Add Sale of ZEV credits? Doesn't TM have the option to sell down their inventory if they wanted to?

 

[aznt1217]

Yeah, I think Tesla gave up on Q4 FCF last year. I think they ramped up spending CapEx in Q4 with intentions to cut CapEx in Q1

CFO said CapEx will be less in 2016 per last ER

I think the rate of spend is actually controlled, but both Deepak and Elon pegged going CF + based on X ramp... which would help recoup the spend.