Short-Term TSLA Price Movements - 2016

[dreamingof3]

Agreed, also. As a tiny portion of my portfolio, I don't mind picking some up after the ER if it gets nailed. But a lot of people seem to have this as their core holding, which worries me.

The attitude also seems to be that unreasonable increases in stock price are fully accepted as normal. But corrections from overbuying are viewed as unreasonable and caused solely by shorts. That's not how this works.

Until they start announcing daily short settlement numbers this will be impossible to tell how much shorts have to do with these big drops. I'm telling you they do have a lot do with them.

 

[electracity]

I have complete confidence tesla can produce (build) Model 3 at volume without a ton of risk.

1). Tesla's manufacrung VP came from Toyota and his factories produced the Lexus RX350. 100's of thousands of units per year

2). Model 3 will be a simpler car compared to MX/MS

3). Battery and Drive train are completely derisked already. Proven now

4). Body-in-white will be simple to produce (by design)

beyond manufacturing risks, capital requirements could be a challenge. I assume Tesla will start with ONE robotic weld line and human Assembly line for M3. Just like Gigafactory, tesla can choose to scale out the Model3 lines over time. Doesn't have to be a single big CapEx expense in 1 year. Again, just like GF. Could be a 3 year scale-out

I doubt it is probable that Tesla can build a profitable model 3 this decade ($35K list price, competitive with BMW 3 series). They will build some M3, and their financials will show some positive gross margin. But it will be a shell game. If this is true, the release will be as late as possible, and the ramp will be slow.

This strategy will be O.K. as long as they can get to the next decade as an EV leader. Faster than expected cell costs reduction would compress the time frame.

Interesting listening to Amory Lovins, who is pro Tesla, but believes the key is to EV is weight, not cell price.

 

[esk8mw]

Says the the guy with 6 posts. Welcome to the forum shorty.

It's the reincarnation of valuationmatters. He's not very good at hiding it after his banning.

 

[The Blue Owl]

Unfortunately I agree with you. The lack of understanding shown here about the worth of a stock...is surprising. Personally I love the cars. But the stock price is traditionally based on future expectations of profits, and Tesla has shown that as it grows, its expenses (cost of sales, sales expense, overhead expense) always grow faster. That is called negative operating leverage. It seems like a perpetual money losing machine. That is the real reason the stock is dropping. Not an "irrational market" or all these crazy theories. The simplest explanation is usually correct: the market is simply coming to realize that Tesla will never make money.

IOW, valuation matters.

(typos intentional)

 

[aznt1217]

Unfortunately I agree with you. The lack of understanding shown here about the worth of a stock...is surprising. Personally I love the cars. But the stock price is traditionally based on future expectations of profits, and Tesla has shown that as it grows, its expenses (cost of sales, sales expense, overhead expense) always grow faster. That is called negative operating leverage. It seems like a perpetual money losing machine. That is the real reason the stock is dropping. Not an "irrational market" or all these crazy theories. The simplest explanation is usually correct: the market is simply coming to realize that Tesla will never make money.

I hate to tell you this, but your math is wrong and what you wrote is straight up incorrect. My interns can do better than you can. Markets are irrational. You can't write it up as a crazy theory. It's pretty much a given in Finance 101, heck even business 101 for undergrads these days.

I posted my figures in the Q4 thread. Go take a look.

 

[dalalsid]

I doubt it is probable that Tesla can build a profitable model 3 this decade ($35K list price, competitive with BMW 3 series). They will build some M3, and their financials will show some positive gross margin. But it will be a shell game. If this is true, the release will be as late as possible, and the ramp will be slow.

This strategy will be O.K. as long as they can get to the next decade as an EV leader. Faster than expected cell costs reduction would compress the time frame.

Interesting listening to Amory Lovins, who is pro Tesla, but believes the key is to EV is weight, not cell price.

Tesla doesn't need to sell too many $35k cars. They can prioritize well optioned cars and only sell a minimum amount of 0 margin or loss leading $35 barebones models until the battery economics catch up. Just like the ASP of the Model S is not dropping under 100k, the ASP of the Model 3 need not drop under 60k this decade.

 

[Svetlin]

I'm calling bottom at $160 today.

For the record, I've called bottom 9 times in the last 3 months, each time closer to the actual bottom we will eventually hit, so I must be getting good at this. 9th time is the charm.

 

[pnd4pnd]

I'm accumulating shares at $160.60. This is too good to pass up.

Let's see what you say after earnings.

 

[electracity]

Until they start announcing daily short settlement numbers this will be impossible to tell how much shorts have to do with these big drops. I'm telling you they do have a lot do with them.

This thread is literally evidence #1 that professional traders use to short Tesla.

 

[dreamingof3]

This thread is literally evidence #1 that professional traders use to short Tesla.

Explain what you mean please

 

[theschnell]

Anyone have any concern that Q1 guidance may be soft for both X and S? I mean, the rest of 2016 should be great, but I am concerned Q1 may not be so good. Perhaps that's getting priced in now?

 

[aznt1217]

Explain what you mean please

He was implying that "professional traders" use this thread as anecdotal evidence as a sentiment indicator. Basically alluding to when Muskateers are clinging to hope and crying is the best time to short the stock and continue to make money. Little does he know most "professional traders" don't really trade in PA's.

 

[motobaleno]

Unfortunately I agree with you. The lack of understanding shown here about the worth of a stock...is surprising. Personally I love the cars. But the stock price is traditionally based on future expectations of profits, and Tesla has shown that as it grows, its expenses (cost of sales, sales expense, overhead expense) always grow faster. That is called negative operating leverage. It seems like a perpetual money losing machine. That is the real reason the stock is dropping. Not an "irrational market" or all these crazy theories. The simplest explanation is usually correct: the market is simply coming to realize that Tesla will never make money.

There is no need to be so pessimistic. The choice is not between making money or never make money. The problem is how much money you will make...
to substantiate present (or better to say recent past) quotation TSLA should make huge earnings in the future also because it's a product (how much earnings) x (how distant in the future) and we all know that TSLA will not become profitable soon...maybe the market is simply saying that he is coming to realize that TSLA future earnings are not likely to be so huge...is it so strange? the expected earnings to justify recent past quotations are greater than present earnings of the biggest car companies...it's not so strange I would say

 

[sundaymorning]

Anyone have any concern that Q1 guidance may be soft for both X and S? I mean, the rest of 2016 should be great, but I am concerned Q1 may not be so good. Perhaps that's getting priced in now?

Its highly likely that it's already priced in. But it's anyone's guess at this point. My guess is that the lower we go the less ammo shorts will have saved for ER.

 

[dreamingof3]

He was implying that "professional traders" use this thread as anecdotal evidence as a sentiment indicator. Basically alluding to when Muskateers are clinging to hope and crying is the best time to short the stock and continue to make money. Little does he know most "professional traders" don't really trade in PA's.

I use gloating shorts as an indicator myself. A Tesla short is a special breed. They take a beating and keep coming back for more. This is war my Tesla army-do not let the shorts win.

 

[aznt1217]

Anyone have any concern that Q1 guidance may be soft for both X and S? I mean, the rest of 2016 should be great, but I am concerned Q1 may not be so good. Perhaps that's getting priced in now?

It could be? But honestly, the market just is going with the silence that the poop is hitting the fan over at Tesla + macroeconomic conditions are being priced in right now. Hence the amplified movements. Much of the story that's being pinned to Tesla is as follows.

1. Model S demand is waning and if it isn't waning Model X sales will cannibalize it
2. Model X production is slow so therefore sales are low and demand is low (there is so much wrong with this statement)

What we need to do is take a pause and look back and understand why Model X was delayed (this is what many are failing to see or choose not to believe).

1. Original Delay from Summer 15 was due to the redesign of the falcon wing door opening mechanism (going hydraulic to electric)
2. Further delay caused by manufacturing wanting to frontload their investment at the factory for a exponential model X ramp & efficiencies for a ramp.

All the "bad stuff" in 2015 will prove to pay off in 2016. Model 3 is also coming... get your bodies ready.

I debated selling my entire holding of TSLA today for a good 20 minutes, but realize everytime I try to time the market I lose.

 

[sundaymorning]

I debated selling my entire holding of TSLA today for a good 20 minutes, but realize everytime I try to time the market I lose.

Buy low sell high, not the other way around. If you're in it for the long haul you'll be fine. Otherwise, flip a coin from now till ER and let that be your short term indicator. The real technical is and always has been buy on dips. Good luck to you.

 

[chickensevil]

Strong positive catalyst would not be enormous number of gen 3 deposits, that is a statement from potential customers. What we need for TSLA is something like a driveable ready gen 3 beta prototype to assure investors that TSLA is worth what it currently is, otherwise I could imagine some more investors selling some more shares.

I keep seeing reference to the prototype and people wishing for an Alpha or a Beta or whatever... the car doesn't release until late 2017! They are not going to have Alphas until early 2017 and Betas until mid 2017... Please understand, a one off drivable engineering prototype is *not* an Alpha or Beta. It is a concept car that is driveable... I have never seen a car start with the actual production design (especially if the car isn't getting released for almost another 2 years!) from anyone, and especially not Tesla.

To clarify on terms:
Engineering Prototype - Depending on the manufacturer there may be more than one, but generally just one, that shows a concept. It may or may not be drivable. It may or may not have a fleshed out (even partially) interior. I think someone said that in the Model S prototype they had painted up cardboard for parts of the dash!!!
Mule - While not mentioned here, this is the logical next step most (and even Tesla) take which is to throw hardware that you intend to put in your final design into something else and test it out. We saw this more heavily with the Model X as they would mule up a Model S with weight on the top of the roof to simulate the top heavy part of the SUV.
Alpha - These start to show final *design intent*. They will make a mix of drivable and non-drivable cars which are design intent for various parts. A lot of companies will outsource this, It is unclear how much was outsourced for the Model X. It is unclear how much will need to be outsourced for the Model 3.
Beta - These are built with *production intent*. The purpose here is to be building the cars on your own equipment. You know what the car will look like and how it will go together, now it is a matter of making them go together with your own manufacturing equipement. Changes made to the design at this point would be strictly to enable that production capability. Which is an important distinction from the Alphas where the design is still somewhat open as you are still toying with some ideas.

To give some examples of what should have fallen into the different sequences using the Model X (note that while I don't know these to be true, it makes sense that they would have happened here).
Concept: Wings, Windshield, AWD, Fast car, steering wheel with the cool buttons.
Alpha: Nosecone change, Seat design (also likely the point where we lost the ability to fold the second row seats), Transplanting the current steering wheel, AP, AWD decisions, Initial performance figures and tweaks. Finalized that Doors would happen, and how windshield would come together.
Beta: Replace parts supplier for the doors. This is a great example of where something was finally pulled on the Betas, as they just couldn't get production manufacturing to happen and had to change the lift mechanics. The doors work the same in concept, the driving factor is different. Moving the seat manufacturing in house (This might have caused some minor materials changes as well depending).

The key things here is the amount of visible and utility changes to the cars that would have happened. So I said that all to say, that what we see in March is 99.99% likely to be a drivable engineering prototype. This is based on timing of when the car is expected to release and how Tesla has operated in the past with releases. If you are going to be disappointed that they aren't showing a car that is essentially ready to be built tomorrow (which is what you are asking for to see a Beta), then you have *way* too high of expectations.

 

[Fallenone]

Well said. Thanks for the post

I keep seeing reference to the prototype and people wishing for an Alpha or a Beta or whatever... the car doesn't release until late 2017! They are not going to have Alphas until early 2017 and Betas until mid 2017... Please understand, a one off drivable engineering prototype is *not* an Alpha or Beta. It is a concept car that is driveable... I have never seen a car start with the actual production design (especially if the car isn't getting released for almost another 2 years!) from anyone, and especially not Tesla.

To clarify on terms:
Engineering Prototype - Depending on the manufacturer there may be more than one, but generally just one, that shows a concept. It may or may not be drivable. It may or may not have a fleshed out (even partially) interior. I think someone said that in the Model S prototype they had painted up cardboard for parts of the dash!!!
Mule - While not mentioned here, this is the logical next step most (and even Tesla) take which is to throw hardware that you intend to put in your final design into something else and test it out. We saw this more heavily with the Model X as they would mule up a Model S with weight on the top of the roof to simulate the top heavy part of the SUV.
Alpha - These start to show final *design intent*. They will make a mix of drivable and non-drivable cars which are design intent for various parts. A lot of companies will outsource this, It is unclear how much was outsourced for the Model X. It is unclear how much will need to be outsourced for the Model 3.
Beta - These are built with *production intent*. The purpose here is to be building the cars on your own equipment. You know what the car will look like and how it will go together, now it is a matter of making them go together with your own manufacturing equipement. Changes made to the design at this point would be strictly to enable that production capability. Which is an important distinction from the Alphas where the design is still somewhat open as you are still toying with some ideas.

To give some examples of what should have fallen into the different sequences using the Model X (note that while I don't know these to be true, it makes sense that they would have happened here).
Concept: Wings, Windshield, AWD, Fast car, steering wheel with the cool buttons.
Alpha: Nosecone change, Seat design (also likely the point where we lost the ability to fold the second row seats), Transplanting the current steering wheel, AP, AWD decisions, Initial performance figures and tweaks. Finalized that Doors would happen, and how windshield would come together.
Beta: Replace parts supplier for the doors. This is a great example of where something was finally pulled on the Betas, as they just couldn't get production manufacturing to happen and had to change the lift mechanics. The doors work the same in concept, the driving factor is different. Moving the seat manufacturing in house (This might have caused some minor materials changes as well depending).

The key things here is the amount of visible and utility changes to the cars that would have happened. So I said that all to say, that what we see in March is 99.99% likely to be a drivable engineering prototype. This is based on timing of when the car is expected to release and how Tesla has operated in the past with releases. If you are going to be disappointed that they aren't showing a car that is essentially ready to be built tomorrow (which is what you are asking for to see a Beta), then you have *way* too high of expectations.

 

[pGo]

I think something worth taking note is that at $164, the current SP is below literally every firm's price target, except UBS' at $160. Obviously there's a wide range of PTs, three of which now suggest over 100% upside (Stifel, MS, and Doughtery.) Crazy to think that even the most pessimistic and irrationally negative analysts believe it should be trading higher, clearly oversold IMO.

LNKD average PT was $280 until this morning. One should not rely on that.