Short-Term TSLA Price Movements - 2016

[lango]

No, it was projected just three months ago in their Q3 CC

"Elon Reeve Musk - Chairman & Chief Executive Officer
Yeah, I think it's likely that we could be in that 1,600 vehicles to 1,800 vehicles range, per week range, in Q1. I mean, I'm guessing we'll probably be towards the lower-end of that range, but then maybe exceed that, the high-end of that range, towards the end of next year if things go well. I mean, there are some caveats there, depends on what macroeconomic conditions are like around the world next year. But right now, we do see that 1,600 vehicles to 1,800 vehicles per week on average as occurring in Q1."

What I am saying here is, if they guided their production to be at least 16k a week, and they only delivered less than 80k, wouldn't this be them overestimating demand? Of course, less than 80k delivered could be caused by a number of factors like a possible global economy recession that limits people's purchasing power ("some caveats"). But still, based on their latest forecast of their own business, less than 80k deliveries this year is not a win for them.

Oh and for the other stuff (powerpack/wall, M3, etc.), I replied in the other thread... Sorry for the mess up as I thought I answered it. I do think those are all positive news.

1600 a week for Q1 on average... for that to happen X needs to start doing 800 a week before mid February. I think that is unlikely. We need to see an explosion in VIN assignment and delivery updates first.

As for the total year production number. I don't think it matters that much, what will matter is per quarter throughout the year and the guidance for the next quarter. So if they reach 1800 a week in Q4 2016 and have a good guidance for 2017 then it does not matter if the first half is not that good and they miss the total number for the year. That is the good side with short sightedness . In the end we will be fine if X gets moving. The problem in Q1 will be a thing in the past and won't be a significant liability even if it means missed full year forecast. Now how this effects the cash balance is another matter.

 

[Fallenone]

Yes the actual X ramp threw EM's comments here (16k-18k in Q1) out of the window and I think it's pretty much priced in the current share price now. But the poor execution spilled over to market's expectation for the 3, suspecting they are behind schedule and won't be able to get their in time. So as for the short term, the reveal of the 3 must exceed market's expectation. Actually I think the expectation has been set quite low as some people are really thinking there will be only pictures of the 3 this March... A drive-able (don't need to go 60 mph in a 3 seconds, just with the battery and motors that can make it move) prototype with nothing too fancy (falcon wing door, cough, cough) and easy on the eye with all their specs checked will do just the job I think. And I believe that's what they will deliver in less than two months without any delays. EM can't afford to miss the ball on this one.

I certainly agree when it comes to valuing/projecting/understanding Tesla, there are MANY perspectives:smile:

It depends on how you interpret this bit of data as it was mentioned 3rd Q when X ramp difficulties may not have materialized. With X ramp being slower than expected I don't think we can reasonably assume what Elon stated during Q3 could stick in 2016 full year guidance. But I can see why you are stuck on that number. Tesla has dropped 23% so far, this most likely is indicative of lowered expectations that would yield 40-50% growth, my now lowered expectation. I cannot reasonably expect more than that. However, your model of 80k for 2016 equates to 60% based on 2015 sales.. but I now understand what you mean. Thanks for taking the time to pull up the info instead of calling a bull "cheerleading". It's a matter of perspective here and I can see why some may be disappointed if it's under 80k or 60% growth.

 

[mrdoubleb]

What I am saying here is, if they guided their production to be at least 16k a week, and they only delivered less than 80k, wouldn't this be them overestimating demand?

I understand where you are coming from, I am too concerned about market reaction to anything below 80k, but I think you may be making the mistake of equating production with demand. Not that low demand would not cause low production - it would -, but so far we have seen zero credible evidence of falling demand. (And remember, Tesla is a luxury brand and luxury was usually doing relatively well even in the 2008 crisis).

If we get lower than expected production for Q1, it would seem that would be because of Tesla deliberately slowing down production of X to fix quality issues before ramping up.

By the latest indications from the X forums and Tesla engineers at the "meet the X" event, I think it is still possible for Tesla to be at 1600 cars per week by March so 80k is still possible. Problem is, I have seen at least 1 analyst note this past week lowering their own guidance from 88k to 84k so even 80 may underwhelm Wall Street. Tesla Energy may be a positive surprise though.

On the log term, this is still just a minor bump on the road, because nothing has changed materially about Tesla. So I am sitting on my shares and certainly not trying to catch the falling knife (cut myself way too many times).

 

[mmd]

Now, having said that. What could cause this ER/CC to be significant and cause a short term surge?

1. Free cash flow positive (unlikely, but possible...I'd say 20%)..WAG
2. GF is producing significant batteries for Powerwalls AND delivering them ( about 50:50 WAG)
3. Combination X and S production for the week ending today of 1,400+ with 400+ being model X ( possible: WAG 40%)
4. A partnership or agreement in principle with a European or US automaker to build a common Supercharger system (Volvo?) ( I actually put this at 50:50)
5. Agreement (in principle) with a Chinese partner to establish a manufacturing facility in China ( WAG I put this at 60%)

IMO, 4 & 5 are not really positive, and Tesla never announces new partnerships in ER. Building superchargers are not that expensive, and Tesla will lose the marketing opportunity they now have using those. Here is what I'm thinking could move the SP either way:
Positives:
1. Q4 2015 cash burn below $250M will be good. Reiterating FCF positive for Q1 & Q2 great, though unlikely IMO.
2. A breakdown of X and S delivery for Q1 will show that Tesla is now confident building X, and can ramp up as they need.
3. Anything above 75K delivery guidance for 2016 is pretty good in the face of low oil and macro turmoil.
4. Guidance on Powerwall and Powerpack revenue, say $50M to $100M a quarter (I'm being realistic.)
5. Confirming Model 3 progress, and announcing details of reveal.

Negatives:
1. Q4 cash burn above $400M; FCF pushed beyond Q2 or no mention.
2. X delivery guide down; 2016 total below 75K
3. No real numbers for Tesla Energy for Q1 or Q2.
4. Q1 delivery guidance below 14k.

 

[Fallenone]

Not saying demand already started to fall (although I do think demand for S was stretched out a bit from what it naturally would be last quarter with all the referral and push for inventory). I brought this 80k up purely on discussing how the market might react. Personally I'm happy to see the company grows its revenue anything above 30% considering the uncertainty of the general economy but do think they have good chances to go for 50%. Just don't think the stock price would agree with me on this one.

I understand where you are coming from, I am too concerned about market reaction to anything below 80k, but I think you may be making the mistake of equating production with demand. Not that low demand would not cause low production - it would -, but so far we have seen zero credible evidence of falling demand. (And remember, Tesla is a luxury brand and luxury was usually doing relatively well even in the 2008 crisis).

If we get lower than expected production for Q1, it would seem that would be because of Tesla deliberately slowing down production of X to fix quality issues before ramping up.

By the latest indications from the X forums and Tesla engineers at the "meet the X" event, I think it is still possible for Tesla to be at 1600 cars per week by March so 80k is still possible. Problem is, I have seen at least 1 analyst note this past week lowering their own guidance from 88k to 84k so even 80 may underwhelm Wall Street. Tesla Energy may be a positive surprise though.

On the log term, this is still just a minor bump on the road, because nothing has changed materially about Tesla. So I am sitting on my shares and certainly not trying to catch the falling knife (cut myself way too many times).

 

[sundaymorning]

I wouldnt expect Tesla to be that specific about numbers. The market certainly doesn't expect this type of specifics from the likes of Apple, just ask them about their iwatch and see what they'll give ya.. guidance, EPS, M3 and gigafactory progress is enough. If they do mention about Powerpack/Wall, simply mentioning "shipping in q1" is also positive. FCF is icing on the cake at this point and is imo neutral if they don't mention it in this macro conditions and X slowdown.

IMO, 4 & 5 are not really positive, and Tesla never announces new partnerships in ER. Building superchargers are not that expensive, and Tesla will lose the marketing opportunity they now have using those. Here is what I'm thinking could move the SP either way:
Positives:
1. Q4 2015 cash burn below $250M will be good. Reiterating FCF positive for Q1 & Q2 great, though unlikely IMO.
2. A breakdown of X and S delivery for Q1 will show that Tesla is now confident building X, and can ramp up as they need.
3. Anything above 75K delivery guidance for 2016 is pretty good in the face of low oil and macro turmoil.
4. Guidance on Powerwall and Powerpack revenue, say $50M to $100M a quarter (I'm being realistic.)
5. Confirming Model 3 progress, and announcing details of reveal.

Negatives:
1. Q4 cash burn above $400M; FCF pushed beyond Q2 or no mention.
2. X delivery guide down; 2016 total below 75K
3. No real numbers for Tesla Energy for Q1 or Q2.
4. Q1 delivery guidance below 14k.

 

[Causalien]

I think it might be a good time to get into the process of pumping this stock back up.
Personally, I think the stock price at $150 reflects a TESLA with no prospect of X, no powerwall and no Model 3. Which is a fair valuation currently since. X delivery is slower than usual. It takes approximately 2 years from concept car reveal to actual non-sig ramped delivery barring any major re-engineering like the falcon wing doors and the fact that no large utility contract has been announced for powerpack.

So $150 is if TSLA manages to keep last year's Model S order numbers... this number will depend on the economy. So essentially, we are, again, back to startup mode and one failed launch away from being wiped out.

I believe back in 2012 2013, the share price was around $120 to $150 and that's accounting for successful continued Model S sale of around 30k cars per year and the possibility of Model 3 being on time in 2017. Nowadays, we have better than expected sale at 50k per year and a potential Model 3 delayed to 2018. I'd say the valuation is fair. If model X can ramp, then we can add the $50 back to the stock price. My fear is that Model X will forever be unrampable.

What probably adds to the pressure is the coming realization that Tesla will need to raise capital for the Model 3 ramp up. We've blown everything we've raised so far on the X, so the new money will come from new fund raising. My guess is, it'll be sometimes after the Model 3 reveal. I don't know if it'll be any favorable terms this time, but if it can be a higher than normal stock price with some under the table trigger conditions, it'll help with investor confidence.

As for investor composition. It is probably safe to say that anyone who joined after 2013 have left. So those of us die hard believers of Model 3 with our initial investment is here. The new investors will be from those who liked the Model 3 enough, which are usually the young adults who live in cities and mostly HFT. Expect HFT to do most of the trading so TA will be more accurate. In the short term, I'd check out the fibonacci retracement levels and trade around those levels.


Take heart people. The end of the pain is coming. The next part is numbness.

 

[Yggdrasill]

As an engineer, I don't understand how anyone can worry about the Model X being "forever unrampable". We're talking about cars here, not warp drives or anything!

A ramp-up may take time to get the tolerances right, it might even need some redesign of various parts, but Tesla will get there. The only question is how many months it takes.

 

[Stretch2727]

As an engineer, I don't understand how anyone can worry about the Model X being "forever unrampable". We're talking about cars here, not warp drives or anything!

A ramp-up may take time to get the tolerances right, it might even need some redesign of various parts, but Tesla will get there. The only question is how many months it takes.

As a manufacturing engineer with 20+ years experience and 10 years in automotive with Ford, I could not agree more. The X will get fixed. Nothing impossible here, just takes time. Every auto manufacturer goes through these issues with new models it is just not as visible as Tesla.

In general I take comfort in that most of the stock price drop is due to general market conditions multiplied by the high beta for a growth stock like Tesla. I don't give any creditability to analysts. They are just speculating on stock price like everyone else here and are only human. They have no more information than you and I and in most cases they are mis-interpreting the information they do have. Tesla is a high risk stock and the out come is not going to be certain for several more years. This is why you see such a large variation in their targets.

Tesla has achieved a remarkable amount in the past 3 years. Who would of thought they would sell 50K model S 3 years ago? The X addresses a larger market and will sell more than the S once it is mature.

The demand for the S and X is there not because this is an electric car. The demand there because this is the best car you can buy with performance and efficiency specs unmatched by an ICE car.

I am certain the 3 will also be "compelling" (EM words.) with better specs than a 3 series BMW at the same cost.

To me the biggest risks are the macro economic conditions. If we have a recession around the world this could hurt sales and Tesla would then use up the available cash it has and it would have a hard time getting more.

I also worry about some technical issue that would cause a massive recall. So far for a start up Tesla has managed quality well so hopefully there is no surprises here.

In the end if you are long on this stock I believe you will be rewarded. Just requires patience through the ups and downs.

 

[lango]

Yeah, it is not unrampable. If it is a question of tolerances for doors those can be improved if needed but at a cost. Compare with aluminium cylinder heads and pistons. Same with rubber for the seals and plastics. And you can make stronger electric motors and more reliable sensors.

 

[Renaud]

So we could accept the whole plunge is due to macros and the perception of the implication of the X issues. Some think those X issues are that severe they will make the X unbuildable (worst case scenario) and that it will have a snowball effect on Model 3.
As mentionner above by Stretch and Yggdrasil, I don't think there is an issue that will definitely make the X unbuildable, unsellable, unattractive.
The bottomline is:
- how much will it cost in R&D to find a fix for the issue
- how much will it cost in retooling if needed
- what will be the price difference between the first solution and the fix and its impact on either margin or price of the X
- what will be the impact on contracts with suppliers (legal, etc)
- how long will it take to implement the required changes and ramp-up to the desired factory output
- what will be the impact of all this on the development of the next Model

and the bad press around it,

Yes, all this requires a price adjustment in SP, and I'm afraid until we can give definite answers (or better said definite answers are given by TM) to all those questions (and many more questions I guess) there can only be speculation and there is definitely exaggeration. Just another couple of days before we know more.

 

[Ingenieur]

My understanding is that the doors are the main problem, the risk is that you will have to get into SeC to realign / readjust the doors every few months, Tesla doesnt want this to happen.
The risk not that they cant ramp the production, the risk is that they deliver cars that have chronic defect requiring permanent service, this is what they want to avoid.
Elon thinks software and more sensors can solve this, i am not sure, but i am short Tesla anyway, so whatever.

 

[optimus]

We all know that Elon has publicly stated 1 week ago that Model X deliveries will be at 1000 units per week by Q2. He volunteered this information. So there clearly is no fundamental problem.

 

[pGo]

We all know that Elon has publicly stated 1 week ago that Model X deliveries will be at 1000 units per week by Q2. He volunteered this information. So there clearly is no fundamental problem.

I have been trying to find the source for this info. All I've seen is a mention in a Teslarati article. The video of the event in HK didn't capture this info. Since no major news picked it up, I feel it may not be correct.

 

[optimus]

Elon Musk in Paris 2016 - YouTube

Fastforward to 4:20

Video is from Jan 29, 2016. In my opinion, it is very unlikely that there will be some material change in Elon's assessment of the situation between this video and earnings. My belief is that he will reiterate this guidance on the CC. Just a heads up...

 

[Causalien]

IMO if it is a sensor calibration issue that requires overpaid engineer's time to calibrate each car. It is unrampable. This should've been done by machines and will increase the cost while reducing demand which brings about failure. We are supposed to be switching to Model 3 now and cash running out is becoming a question on everyone's mind. It's true that nothing is unrampable in engineering terms. But you can ramp something into bankruptcy due to cost. (There are plenty of dead corpses in silicon startup valley as examples)

Right now I am thinking, the current line produces 80k cars per year. A model 3 line can get to 500k car capacity at year 2023 at a ramp of 60k per year for 8 years. About 1.5x of the total current capex per year. (worst case. I know I onow Modelx is more complex)

 

[JRP3]

From a longer term perspective, if Tesla doesn't make the non 80K+ Model 3 compelling... they need to, if they want to sell a lot of cars.

The base model will be around $35K, there is a lot of room between that and $80K to sell a lot of vehicles. I assume most people will add at least a few options to the car.

 

[Chickenlittle]

My understanding is that the doors are the main problem, the risk is that you will have to get into SeC to realign / readjust the doors every few months, Tesla doesnt want this to happen.
The risk not that they cant ramp the production, the risk is that they deliver cars that have chronic defect requiring permanent service, this is what they want to avoid.
Elon thinks software and more sensors can solve this, i am not sure, but i am short Tesla anyway, so whatever.

Such nonsense here. Your understanding based on what? All speculation. The model S has been out since 2012 yet they continue to make improvements (not just new options) while producing the car. The company makes these changes to improve the car and manufacturing process. This will occur with the model X as well

 

[Drax7]

Such nonsense here. Your understanding based on what? All speculation. The model S has been out since 2012 yet they continue to make improvements (not just new options) while producing the car. The company makes these changes to improve the car and manufacturing process. This will occur with the model X as well

Agree, so much nonsense is being spewed.
Elon should clarify this issue asap.
And all the model X ramping issues.

Lutz the putz mentioned the doors are not ok,
because it's been tried before and failed. Elon
should negate that and ridicule him with impunity.

 

[uselesslogin]

So we could accept the whole plunge is due to macros and the perception of the implication of the X issues.

The thing is if we accept the whole plunge is due to macros that puts as at risk as the market begins to recognize and worry about the slow X ramp. TSLA is only down about 5% more than NFLX and AMZN. So we might argue that TSLA is effectively only down 5% due to things like a slow Model X ramp and guidance coming in on the low end. If that is the case the next earnings call could still cause a drop. It all depends on the content. Now, that doesn't mean the lower price doesn't lower the risk in owning the company, but I think we should be prepared for anything.