Short-Term TSLA Price Movements - 2016

[drinkerofkoolaid]

Pure speculation:

When Elon said "The Model X was the most difficult car in the world to build" he was making a slight nod to the company that Tesla is currently suing. At the time, Tesla was forced to wait for the company to produce on its obligations, with Tesla ultimately being forced to re-tool the Model X, locate a new supplier.

"Tesla incurred millions of dollars in damages, including, but not limited to costs of re-tooling the entire vehicle in order to support a different engineering solution,” the lawsuit said. In addition, Tesla had to pay the new supplier a premium to rush out a workable solution.

1) The main reason the Model X was delayed was because of Hoerbiger, not Tesla.

2) When I was in China, I saw a number of stores that had recently opened. The people I spoke to mentioned a number of times that Tesla had recruited a lot of employees from Apple, and from the tone of the conversation, it sounded like Apple and Tesla had a friendly relationship.

* The positive coverage about Tesla in Chinese newspapers, is a very good sign.

3) It's possible Analysts overestimated the cost to ramp up production of the Model X.

4) Low gas prices, the methane leak in California, and the scarcity of Model X vehicles, have likely encouraged more people in the market for a $50,000 - $100,000 vehicle to buy a Tesla.

5) It is more important than it was 6 months ago for the world to stop using gasoline vehicles. The methane leak is the greenhouse gas equivalent of driving 7 million cars each day. Cheap gasoline prices have "persuaded" more people than ever before to buy "GAS GUZZLERS". THIS IS A VERY BAD THING!

6) Obama should host a press conference, in which he emphasizes why it is essential for the USA to stop incentivizing gas guzzlers. The "hummer tax break" didn't help American manufacturing, and was a horrible thing for the environment. There should be a tax incentive, mirroring the hummer incentive, that applies to "heavy" battery powered vehicles. I think a number of states have already done this?

1) Politicians and Celebrities need to make it clear that it is very politically and morally wrong to drive an SUV.
2) Anyone in the market for a $50,000 + sedan or SUV who isn't considering buying a Tesla, should be ashamed of themselves.
Celebrities should be very vocal that Electric, and Efficient Vehicles = Good and GAS GUZZLER = BAD.

I think the USA is the only developed country that incentivizes inefficient vehicles, and doesn't tax inefficient vehicles.

Could Obama use an executive order to stop all incentives for big oil? Does Obama need the "blessing" from the "evangelical right" to remove a subsidy?

 

[SBenson]

The question was truth and trust. They claim 692hp and deliver 470hp. They claim 85kWh and deliver about 81kWh. They sell AP in fall 2014 and deliver in winter 2015. It doesn't matter how you excuse each of these, the fact is that the words they are saying don't appear to match the reality that people perceive. Which leads to truth and trust issues.
As for Model X - I have seen six by now. Every single one with massive issues. From mechanical defects to electronics and sensor issues to simply horrible fit and finish with ludicrous body panel gaps. I canceled my Model X reservation in response and ordered a second Model S.
So no, I'm not short TSLA (actually, I'm long and am hoping to buy more below $120) and I believe in their cars. I'm just trying to add some perspective here. Always a mistake

Dirkhh, I read your posts regularly. Your input/perspective is very much appreciated. Please keep posting.

 

[AmpedRealtor]

1) The main reason the Model X was delayed was because of Hoerbiger.

Sure it was. First it was the doors. Then, most recently, it was the seats. Elon can't seem to decide, but apparently there is so much from which to choose that he has an embarrassment of riches in this regard. Is Tesla going to sue it's seat supplier next?

 

[dc_h]

I read the margin article and the ensuing comments. While I'm frustrated with Tesla's communications and operational controls, I think they have done amazing things. It is an American company, building products in a high cost location and selling on quality and innovation. I am familiar with NAMBY people who don't want a new house next door, or a new business or any number of things that might change their lives. I don't understand why people would hate an American company, producing jobs, great products, exporting, and even reducing the chance of sending young American's to the middle east to protect oil deposits. I realize Tesla on one level is an environmental, stop global warming company, which is probably the main source of antipathy, but the logic to demonize a successful company is disheartening. The largest newspaper in California has likened Elon to a crony capitalist for saving NASA and the military hundreds of millions of dollars at a profit, and getting sales tax relief for major capex spending that benefits his employees and many secondary manufacturers.
I know I tend to want to push back against some of the fantastical enthusiasm for saint Elon, but love him or hate him, he is bending the needle in several industries. Many can call him a circus crier, but the astronauts who thought he was a fraud have stopped hammering in front of congress or in print. Hopefully we'll have a good ER and a good Model 3 rollout and maybe some of the haters will fade into the shadows and find some new cause to fight.

Tesla's achievements to date include building the top selling high performance luxury car in the world.
Building an infrastructure to support the top selling luxury car with charging stations covering most of N. America's and Europe's highways.
Driving down battery costs by 30% beyond the industries existing 8% trend. Creating the safest production car ever made.
Exporting 30-50% of American made cars from one of the highest labor rate regions in the world.
Created the first new American car company in almost 100 years.
Developing a cost effective (in some markets) battery backup system for homeowners and commercial energy users and producers.

I agree that Tesla\Elon has been overly optimistic. Maybe FWD will prove to be a mistake, but that is not known yet. The big mistake we know at this point, is that Tesla has done a bad job communicating a major production issue that is impacting their customers who are waiting for cars and their stockholders who have funded the company. Hopefully Elon and Tesla will reward the patient this week and slam the haters.

Sorry for the rambling message, but I do think the haters and more than a few paid professionals are part of the perception and pricing. I think a lot of this will wash out with a good report and guidance based on solid forward looking numbers and underlining expectations for the Model 3 reveal.

ER news that is needed:
Model S production at or above 1200 per week.
Model X production at or above 300 per week and on track for 1000 in Q2 -- 2500 in Q1 deliered.
More sales from stock to reduce inventory.
Tesla Energy status. They may not break out numbers, but Apple and Amazon who don't break out numbers are dealing from strength.
Cash flow management, not just free cash flow, but long term plan to control costs.
Jason Wheeler steps up as number 2 to provide finance and operations controls to improve corporate perception.

 

[Martin VanB]

For What it's Worth, I think people are too negative on this stock. There must be some collusion going on to drop the stock price because the fundamentals of a heavy R and D company allow for a high cash burn rate. Yet when theses stocks hit they hit large. Nothing has changed about Tesla except for the following 1- another vehicle to sell that seems to all observation very good if not excellent 2- sales of a new product, power wall have begun 3- wider acceptance of automation in driving 4- It has executed on all large deliverables albeit with delays, yet the delays seem reasonable given the variables in the industry for production.

It makes me question what is going on. Yet people probably questioned why the stock rose so quickly in the past so all is fair in love and stocks.

Tesla products have significant margins and eventually they will probably create a division called Tesla Energy Inc. There seems to be a lot going for the company.

I also would imagine many developing areas will bypass electrical grids and go directly to Tesla Power, much like cell phones leapfrogged home phones.

Just my thoughts.

 

[willbo]

TSLA/SCTY

Made an account just to show you this as I was looking for what to do with TSLA, so I apologize if the image doesn't appear correctly.This is since about Jan. 27 to now with TSLA and SCTY. Not saying it is, but could be more of an attack/drop on Musk than just Tesla.

Have a good one

Perhaps someone on this thread has already expressed this viewpoint; I don't read all the posts. My thesis is that the current decline in the share price is far beyond normal market dynamics or the fundamentals of Tesla Motors. Perhaps it is time to entertain a conspiracy theory to explain the rate and extent of the share price decline. If there is any truth to this idea, a discussion may help us to understand the dynamic and most importantly, where we might expect a bottom.

We know that Tesla Motors faces very large and very wealth forces that would like to see Tesla fail or at least to slow down Tesla's rate of growth. For example, the recent ascension of the Model S to the best selling luxury sedan in the US is a clear economic threat to ICE manufacturers of luxury sedans. The model X poses the same threat to the ICE luxury SUV manufacturers. Electric cars and lithium ion storage batteries (with Tesla leading the way) are a direct threat to carbon-based energy and transportation fuels.

Considering the relatively small number of Tesla shares in play, these big players have the resources to manipulate the stock. Maybe they have decided that Tesla is now a real threat and that their best course of action is to drive down the price of the stock. Of course, I have no evidence of this, only the rate and extent of decline in the stock price in light of the continued growth and success of Tesla Motors.

I suspect that if the stock is being manipulated by big players, the price could easily go below $100.

 

[anticitizen13.7]

i must say i was shocked how quickly things can change in the stock market, even for a great stock like tesla. 2 weeks ago sp was doing fine, and i was thinking, when the model 3 is being shown in march, we will be headed too $300 in a short period of time. Then comes China again, and spits in to the soup.
The lessons of the story i learned: Never trust a stock (at least short or midterm) too much, no matter how good the prospects are (from the prospect of holding call options)
My only consolation is that 50% of my total investion was core shares, so they didnt get burn

Market sentiment on a stock like TSLA can change direction very quickly, because nobody really knows what will happen in the long term. All of the financial models (positive and negative) I've seen here and elsewhere are necessarily built upon numerous assumptions and factors that may or may not turn out to be accurate, which makes determining the value of the stock impossible.

No risk, no reward.

I've seen this game play out several times before. The people who will make money in the long run are those who can resist the herd panic. In 2008/9 when the Dow Jones was crashing hundreds of points a day, I was holding on to my shares and stuffing my 401(k) with the max contribution while my co-workers were cashing out near the bottom. People called me the "Suicide King" but I was able to take full advantage of the 2009-15 run up, while many of my peers ended up with pennies on the dollar pushed in bonds and money market funds (which have had dismal yields). Don't invest in TSLA what you can't afford to lose, but also don't follow the people who flood the threads with "Doom and Gloom" posts. The drama is interesting to watch, but after a point I want to tell people to stop moaning like Moaning Myrtle from Harry Potter. Maybe that's mean, but I'm not a nice person:frown:

 

[maoing]

Agreed. I can't exclude the possibility of pop up post ER, but TSLA fundamentals will get most strict scrutiny in this ER (shareholder letter and CC), the bold prediction, wild guidance and simple hype might not work anymore. Three BIG things to watch from this ER:
1) model X: need solid status report, need solid timeline to fix all sorts of issues, need solid projection for ramp up. Based on the history, I have big doubt on this part;
2) cash burn and reserve: w/o successful model X ramp up and difficult market situation, TM will get tough question of how to survive in next economy downturn. TM needs to convince investors that model X is in good shape (difficult as stated in #1) or dial down spending (gigafactory, model 3 etc.);
3) growth: with the stock market tumble recently, TM can't assume market could recover in the rest of 2016, so it needs to prepare wealthy folks have less desire to buy model S/X (we already see some TMC folks canceling X order because of TSLA down). Combined with model X production issue, if TM gives less than 50% or even 40% YoY guidance, then it won't be received well

Btw, TSLA is not valuation based stock. It's driven by momentum, credibility and sentiments. Once those factors go negative, the multiples can be deteriorated quickly as we just evidenced in past several weeks.

Since I don't expect any meaningful upside news from the earnings call (talking about "summon in beta" really isn't going to cut it when the numbers for Model X aren't there) my guess is that we'll see Tesla continue to slide and try to find a bottom. Maybe $120? Or, if their forecast for 2016 shipments is below 75k, likely closer to $100.

 

[Zhelko Dimic]

Agreed. I can't exclude the possibility of pop up post ER, but TSLA fundamentals will get most strict scrutiny in this ER (shareholder letter and CC), the bold prediction, wild guidance and simple hype might not work anymore. Three BIG things to watch from this ER:
1) model X: need solid status report, need solid timeline to fix all sorts of issues, need solid projection for ramp up. Based on the history, I have big doubt on this part;
2) cash burn and reserve: w/o successful model X ramp up and difficult market situation, TM will get tough question of how to survive in next economy downturn. TM needs to convince investors that model X is in good shape (difficult as stated in #1) or dial down spending (gigafactory, model 3 etc.);
3) growth: with the stock market tumble recently, TM can't assume market could recover in the rest of 2016, so it needs to prepare wealthy folks have less desire to buy model S/X (we already see some TMC folks canceling X order because of TSLA down). Combined with model X production issue, if TM gives less than 50% or even 40% YoY guidance, then it won't be received well

Btw, TSLA is not valuation based stock. It's driven by momentum, credibility and sentiments. Once those factors go negative, the multiples can be deteriorated quickly as we just evidenced in past several weeks.

I absolutely agree with what you say.

And yet, if X problems are not terminal, and I can't imagine they are, I expect situation can change dramatically and very quickly. What's needed is 'mea culpa', full transparency and regular updates to show progress of X rollout. If they show all dirty laundry at CC, people will stop imagining there are other things going on. They may be rewarded with a rally immediately, but if not, update stream will lead to more trust and results shortly afterwards.

Though pissed with communication so far, I remain buyer in this environment.

 

[lango]

Agreed. I can't exclude the possibility of pop up post ER, but TSLA fundamentals will get most strict scrutiny in this ER (shareholder letter and CC), the bold prediction, wild guidance and simple hype might not work anymore. Three BIG things to watch from this ER:
1) model X: need solid status report, need solid timeline to fix all sorts of issues, need solid projection for ramp up. Based on the history, I have big doubt on this part;
2) cash burn and reserve: w/o successful model X ramp up and difficult market situation, TM will get tough question of how to survive in next economy downturn. TM needs to convince investors that model X is in good shape (difficult as stated in #1) or dial down spending (gigafactory, model 3 etc.);
3) growth: with the stock market tumble recently, TM can't assume market could recover in the rest of 2016, so it needs to prepare wealthy folks have less desire to buy model S/X (we already see some TMC folks canceling X order because of TSLA down). Combined with model X production issue, if TM gives less than 50% or even 40% YoY guidance, then it won't be received well

Btw, TSLA is not valuation based stock. It's driven by momentum, credibility and sentiments. Once those factors go negative, the multiples can be deteriorated quickly as we just evidenced in past several weeks.

You are not going to get your solid timeline because they don't know. They know more and more for each passing week but there is a degree of uncertainty. Even if they hit full production there could be problems a couple of months later that they have to address. They have never promised full ramp-up until Q1 has ended. I re-read the transcripts of the last calls. However, the weekly accuracy they tried to imply I think made people think that it would happen before end of Q4.

They do have a problem with too optimistic projections and that is definitely hurting the SP now. I don't expect that to change either as it seems the company is in a perpetual mode of impossible deadlines.

For the long term view we are looking at three+ years of great X sales so quarter delay should not matter. But it does because their execution is much easier with a high SP so they can get equity cheaper.

Would be great to know how they are building those X now and if the parts are different from the Founders and early Sigs, and if they really are going to change parts as one rumor indicated.

 

[dirkhh]

What's needed is 'mea culpa', full transparency and regular updates to show progress of X rollout. If they show all dirty laundry at CC, people will stop imagining there are other things going on.

*giggle* *snort*

We are still talking about Tesla and Elon Musk, correct?

Likelihood of "'mea culpa', full transparency and regular updates to show progress of X rollout" is in the low zero percent range...

 

[drinkerofkoolaid]

Sure it was. First it was the doors. Then, most recently, it was the seats. Elon can't seem to decide, but apparently there is so much from which to choose that he has an embarrassment of riches in this regard. Is Tesla going to sue it's seat supplier next?

Maybe Tesla is? Or maybe the company paid a fee for being behind schedule? As many journalists have pointed out, it's very common for the suppliers automobile manufacturers to have to pay a fee for being behind schedule or for being unable to produce the desired yield. My guess is most of this is typically settled out of court to prevent it from becoming a public matter.

As Elon has consistently emphasized, it is not possible to begin producing a vehicle if even one part is missing. He has mentioned a few instances when Tesla had to change suppliers for some reason, without naming the companies involved.

 

[hockeythug]

They brought the seat supplier in house.

 

[dc_h]

Guidance for the Model S should be at or close to 60,000, assuming they can sustain demand at that level. Elon says the X will hit 1000 a week in Q2, can they maintain that rate for both cars. If so, then they should approach 90,000 cars, which would be very bullish with anything over 80,000 should be bullish. The big question with Elon's 1000 a week for Model X in Q2, will it be 1000 rate on June 30th and averaging 500 for the quarter, or 500 in April first with a steady ramp to 1000 in June. They need steady incremental progress. Can they reach 500 a week by the end of Q1 and eliminate the service center finishing. If they are delivering about 1000 of each car by the end of Q2 and are not redesigning the X now, the cash flow will be solved. Do they get this done with discipline and manage the cash burn.

Secondary issues are GF status and Tesla Energy guidance and pre-owned resales. Will TE be on track for 1 billion sales rate by the end of 2016? Pre-owned should be growing at about 50%. Does pre-owned have a decent margin?

Lastly, does Elon have any surprises the market will like. Window dressing (plaid mode upgrade to ludicrous) could be interpreted as weakness with a lack of focus on resolving critical production issues. Eliminating the 85 to streamline production and increase output, might be positive and signal strong demand.

Agreed. I can't exclude the possibility of pop up post ER, but TSLA fundamentals will get most strict scrutiny in this ER (shareholder letter and CC), the bold prediction, wild guidance and simple hype might not work anymore. Three BIG things to watch from this ER:
1) model X: need solid status report, need solid timeline to fix all sorts of issues, need solid projection for ramp up. Based on the history, I have big doubt on this part;
2) cash burn and reserve: w/o successful model X ramp up and difficult market situation, TM will get tough question of how to survive in next economy downturn. TM needs to have convince investors that model X is in good shape (difficult as stated in #1) or dial down spending (gigafactory, model 3 etc.);
3) growth: with the stock market tumble recently, TM can't assume market could recover in the rest of 2016, so it needs to prepare wealthy folks have less desire to buy model S/X (we already see some TMC folks canceling X order because of TSLA down). Combined with model X production issue, if TM gives less than 50% or even 40% YoY guidance, then it won't be received well

 

[dakh]

To set the record straight: the message has always been that the X ramp up depends on if there are any issues found that need to be addressed, and that they will not compromise product quality to meet some artificial timelines. There's no way to predict these kind of things. It's hard because it's hard, not because someone's incompetent. Blame shifting from folks not paying attention to what is said to Tesla not communicating right isn't called analysis and is not something to base investment/trading decisions on. So stock fell and folks now cry for Elon to come rescue investors, given that they're in communication curfew before ER? What are they supposed to do?

But if that's how people tend to perceive the situation, then that's right there is an explanation for part of the stock price action.

On the economic downturn and Tesla's story: even if we assume X is not going to ramp up as described (which I don't see any evidence for, just rumor and speculation), who's to say they won't be able to sell every Model S they make? We know the production line can produce any mix of the two, at a ~1600-1800/wk rate.

On the conspiracy idea, personally I think there might be some merit to that. If a few hundred million dollars can slow down TSLA/SCTY growth for a year or two due to difficulty in raising capital, that's not a bad deal for folks who stand to get displaced out of some very big markets. So it would make sense to spook investors by taking advantage of the overall down momentum and reset the meter of what is "normal" trading range. That way when the company actually delivers results the price action will only go back to what used to be the normal trading range.

To put it shortly: let's assume that what Julian was talking about is actually correct (good results in a series of quarters plus Model 3 reveal/reservations, share price going steeply up on good news). Now if someone decided to prevent that from happening, what would be a good way to do that? I think what is happening now would be a pretty direct way to undermine Tesla's ability to execute on the master plan. So if the stock was setting up to go to $300+, we now are at less than half that and even if all the good news happen as planned, it's going to be very difficult to get to $300 any time soon. Mission accomplished.

 

[drinkerofkoolaid]

Is it possible Tesla is being paid in advance for utility Powerwall projects? It costs Tesla something to prioritize certain orders. Is it possible those making large orders are paying Tesla to increase capacity to produce the desired orders.

 

[electracity]

.............

Lastly, does Elon have any surprises the market will like. Window dressing (plaid mode upgrade to ludicrous) could be interpreted as weakness with a lack of focus on resolving critical production issues. Eliminating the 85 to streamline production and increase output, might be positive and signal strong demand.

I sold when Elon said that Summons could work cross country in two years.

 

[pGo]

To set the record straight: the message has always been that the X ramp up depends on if there are any issues found that need to be addressed, and that they will not compromise product quality to meet some artificial timelines. There's no way to predict these kind of things. It's hard because it's hard, not because someone's incompetent. Blame shifting from folks not paying attention to what is said to Tesla not communicating right isn't called analysis and is not something to base investment/trading decisions on. So stock fell and folks now cry for Elon to come rescue investors, given that they're in communication curfew before ER? What are they supposed to do?

But if that's how people tend to perceive the situation, then that's right there is an explanation for part of the stock price action.

On the economic downturn and Tesla's story: even if we assume X is not going to ramp up as described (which I don't see any evidence for, just rumor and speculation), who's to say they won't be able to sell every Model S they make? We know the production line can produce any mix of the two, at a ~1600-1800/wk rate.

On the conspiracy idea, personally I think there might be some merit to that. If a few hundred million dollars can slow down TSLA/SCTY growth for a year or two due to difficulty in raising capital, that's not a bad deal for folks who stand to get displaced out of some very big markets. So it would make sense to spook investors by taking advantage of the overall down momentum and reset the meter of what is "normal" trading range. That way when the company actually delivers results the price action will only go back to what used to be the normal trading range.

To put it shortly: let's assume that what Julian was talking about is actually correct (good results in a series of quarters plus Model 3 reveal/reservations, share price going steeply up on good news). Now if someone decided to prevent that from happening, what would be a good way to do that? I think what is happening now would be a pretty direct way to undermine Tesla's ability to execute on the master plan. So if the stock was setting up to go to $300+, we now are at less than half that and even if all the good news happen as planned, it's going to be very difficult to get to $300 any time soon. Mission accomplished.

Too much conspiracy in the last paragraph there.

 

[stealthology]

Super long here, and battered pretty hard, but I think instead of folks saying "it's cheap", "things are on track", etc., we actually do some analysis and compare Tesla's valuation to other high growth companies, current & past (ie. Jesse comparing TSLA's P/S to Apple's during the 2008 recession).

 

[lango]

There are two things that have happened that no one really can object to:

1. Confidence in their execution with respect to cost and time has gone down because of Model X problems.
2. Macro makes a recession more likely (still not likely but way more likely than six months ago).

These two factors should drive down the stock, all else equal. How much no one can say.
For Tesla this creates a one iteration feedback loop. Lower share price makes it harder to raise cash which means risk goes up and there will be more dilution if they need equity pushing the stock down further.

The only band aid for this are results in future earnings releases. Future promises and projections will not work, bottom line results are needed. Delivering on Non GAAP will be enough, even though some people say it won't but they are wrong.

I think this will happen in August at the earliest, for Q2 results.
The other potential savior would be through the roof Model 3 reservations.