Short-Term TSLA Price Movements - 2016

[dakh]

..also one thing that so far wasn't mentioned, and I get to puff my chest up a bit on this one since I mentioned it here a couple times before, is the discussion about autopilot and Tesla's advantage in the ability to prove with hard numbers that their system is indeed safer than humans and by how much. I think this is a major advantage and even if someone else can claim full autopilot ability earlier than Tesla, Tesla will likely still have an upper hand in making it commercially available.

 

[vgrinshpun]

Stop it. I know you're excited but you also need to sit down and think this through carefully. Q1 letter wipes out FCF positive Q3 and Q4, Q3 Non-GAAP, and Q4 non-GAAP and GAAP Profit guidance. The revenue line on the DCF goes up with upgraded 2018-2020 guidance, but so does the capital intensity and implied risk of getting there in the immediate. TSLA is the traded predominantly by shorts and this will not scare shorts one little bit. Yes Tesla is great but this is not a picture of you having a competitive advantage over squat, this is a picture of you suffering from hubris and confirmation bias.

I think that they have a good chance to be Non-GAAP profitable overall in last three quarters of 2016.

Minimum vehicle delivery per guidance is 80K - 14.81K = 65.19K MS/MX
Revenue using conservative ASP of $100K is 65.19K x $100K = $6.519B

Gross margin in Q1 (Non-GAAP) - 20%, Target EOY gross margin: MS - 30%, MX - 25%. Blended margin for Q2-Q4 is 23.75%

Income: $6.51B x 0.2375 = $1.546B

Projected operating expenses for 2016 (non-GAAP, 25% increase over 2015): $1.461B x 1.25 =1.827B
Operating expenses in Q1 201: $417M
Balance of operating expenses in Q2-Q4: $1.827B - $0.417B = $1.410B

Q2-Q4 Profit: $1.546B - $1.410B = $136M

Above estimate is conservative as it does not account for the following up-side cases:

• Delivering more than 80K cars - if 90K are delivered add $237M to profit
• ZEV - assuming the same as in Q1: $57M x 3 = $171M
• TE, per my previous post, $44-$94M in revenue with positive GM
• Tesla actually beat their operating expenses projection for Q1. They guided for slightly more than $429M in Q4 2015, but beat it by at least $15M, actually spending $417M in Q1. This is consistent with the new company-wide emphasis on efficient use of cash, so we the Q2-Q4 Opex can be lower than projected $1.410B

 

[Julian Cox]

I would have to disagree. Waiting for cash flow positive could be months away, the time to strike iron is asap. Tesla still has all the competitive advantages right now, they need to accelerate production plans in order to keep that advantage. Also having intellectual property and maintaining a lead on that property gives them advantages, waiting for cash flow positive would mean putting M3 on the back burner for who knows how long. All things considered, I'll take the path drawn out by our leader, Elon. Excitement is what drives the stock. There's no room for pessimism.

I think you are mixing up two separate concepts here.

Thinking this through what I think I can see here is that Elon has identified a faster path to bringing on the Model 3 and hence a larger and sooner eventual win. However make no mistake, he has done that by trading the short term for the long term as far as TSLA is concerned. Failing to appreciate this and encouraging a gung ho short-term long trade here is probably not following the path drawn out "by our leader, Elon" as you put it (or even very friendly advice). I don't operate on optimism and pessimism and neither does Elon and I don't understand the meaning of following, I suspect that he would concur with that too.

Read it yourself at the foot of the shareholder's letter he wrote you and signed, highlights, mine:

"
Given our plans to advance our 500,000 total unit build plan, essentially doubling the prior growth plan, we are re-evaluating our level of capital expenditures, but expect it will be about 50% higher than our previous guidance of $1.5 billion for 2016. Naturally, this will impact our ability to be net cash flow positive for the year, but given the demand for Model 3, investing to meet that demand is the best long-term decision for Tesla.

The overwhelming demand for Model 3 and our improving financial results in Q1 represent a strong start to 2016. We are looking forward to bringing Model 3 to market as together we advance the world’s transition to sustainable transportation.
"

EDIT - Look. If you bought TSLA at IPO you just got massively richer two years sooner than you dreamed of and if you care as much as I do about the environment and the future of humanity things are looking up by the same two years compounded for the rest of time - Accelerating the Transition - that's Tesla's mission, mission accelerated!

This on the other hand is the short term thread!!! All bets off for a rethink. Otherwise if you prefer just ignore me and - party on.

 

[AlMc]

As a cautious bull I believe we have to let the dust settle before we get too excited. This fight between bull and bear is not over and there will still be ups and downs.

I heard (and liked) a lot of sizzle today......now let us see the steak.

EM appears to always get us there but the history over the last two years is that the sizzle does not always yield the steak we thought we were getting.

I am not trying to suggest that these ambitious plans can't be accomplished on time and in budget. I just need to see us meet or.beat expectations before I totally 'buy in'....figuratively (emotionally) and literally (large stock purchase).

 

[vgrinshpun]

1. Not sure. From the original news it just say it's one of the largest industrial development. It could be almost done, could be a couple of months. Strictly speaking, it's still a leak as neither side of the deal made official comments yet.
2. Yes I think the job fair is more for X ramp.

The additional hiring is for increasing overall production to above 2000 MS/MX per week. This, I believe, is widely overlooked in the shareholders letter, but if you do the math it is clear that they plan sustained production in H2 at above 2000 cars/week. They also stated so explicitly.

Given that BIW line #1 (currently MS) and BIW line #2 (currently MX) are highly automated and have combined nominal capacity of 3700 cars/week, increasing production rate in H2 above earlier projections of max of 2000 cars/week will require additional personnel for the general assembly line.

 

[sundaymorning]

I think you are mixing up two separate concepts here.

Thinking this through what I think I can see here is that Elon has identified a faster path to bringing on the Model 3 and hence a larger and sooner eventual win. However make no mistake, he has done that by trading the short term for the long term as far as TSLA is concerned. Failing to appreciate this and encouraging a gung ho short-term long trade here is probably not following the path drawn out "by our leader, Elon" as you put it (or even very friendly advice). I don't operate on optimism and pessimism and neither does Elon and I don't understand the meaning of following, I suspect that would concur with that too.

Read it yourself at the foot of the shareholder's letter he wrote you and signed, highlights, mine:

"
Given our plans to advance our 500,000 total unit build plan, essentially doubling the prior growth plan, we are re-evaluating our level of capital expenditures, but expect it will be about 50% higher than our previous guidance of $1.5 billion for 2016. Naturally, this will impact our ability to be net cash flow positive for the year, but given the demand for Model 3, investing to meet that demand is the best long-term decision for Tesla.

The overwhelming demand for Model 3 and our improving financial results in Q1 represent a strong start to 2016. We are looking forward to bringing Model 3 to market as together we advance the world’s transition to sustainable transportation.
"

Julian, I see where you're coming from in terms of being cash flow positive and causing a possible massive squeeze. Although this event is highly probable under said scenario, I would like to see Tesla raise money ASAP. I don't care about $10-20 dilution to the stock as M3 sales will more than make up for it.

Under your squeeze scenario I don't see Q2 being the trigger, but rather Q3. Which pushes us back about 4-6 months. If tesla were able to set up a M3 line capable of 350k-400 by 2018 were talking about the possibility of billions in revenue that those months "in waiting" could have been. This is not to say that a squeeze isn't going to happen within the next 4-6 months, quite frankly I'll happy happy with a mini squeeze setting us up for a raise.

As far as the "leader" comment is concerned, Elon has insight that we may not be seeing here. We're all working with theoreticals, whereas he's working with facts.

 

[erha]

Can anyone tell me why Tesla wouldn't be able to tap into the Norwegian Sovereign Wealth Fund to help the new production speed up?

They have $800,000,000,000, they are allowed to invest in corporate stocks and bonds, they have an ethical investment clause in their charter, and the country is pushing hard to get its people into EV's.

Seems like a win, win, win situation unless I'm missing something.

RT

Not going to happen. Yes, there is an ethical council. They decide what sectors (tobacco, nuclear weapons...) and what companies (Phillip Morris, Boing, Walmart) the fund is prohibited from investing in. The managers of the funds job is to maximize the return while keeping the risk low/moderate. 60 % is invested in the stock market, but it is extremely diversified. I think it would be extremely hard for the fund to directly invest in Tesla.

The fund owns about $200 mill of TSLA or about 0.63 % of Tesla. (nbim.no)


I think the stock market is the best way to raise capital when the company is already listed. If direct investment is preferred I would rather try to raise from some California tech people who don't have to answer to a government for their decisions.

 

[Julian Cox]

I think that they have a good chance to be Non-GAAP profitable overall in last three quarters of 2016.

Minimum vehicle delivery per guidance is 80K - 14.81K = 65.19K MS/MX
Revenue using conservative ASP of $100K is 65.19K x $100K = $6.519B

Gross margin in Q1 (Non-GAAP) - 20%, Target EOY gross margin: MS - 30%, MX - 25%. Blended margin for Q2-Q4 is 23.75%

Income: $6.51B x 0.2375 = $1.546B

Projected operating expenses for 2016 (non-GAAP, 25% increase over 2015): $1.461B x 1.25 =1.827B
Operating expenses in Q1 201: $417M
Balance of operating expenses in Q2-Q4: $1.827B - $0.417B = $1.410B

Q2-Q4 Profit: $1.546B - $1.410B = $136M

Above estimate is conservative as it does not account for the following up-side cases:

• Delivering more than 80K cars - if 90K are delivered add $237M to profit
• ZEV - assuming the same as in Q1: $57M x 3 = $171M
• TE, per my previous post, $44-$94M in revenue with positive GM
• Tesla actually beat their operating expenses projection for Q1. They guided for slightly more than $429M in Q4 2015, but beat it by at least $15M, actually spending $417M in Q1. This is consistent with the new company-wide emphasis on efficient use of cash, so we the Q2-Q4 Opex can be lower than projected $1.410B

I am definitely impressed with their focus on running a tight ship. Wheeler and Elon seems to be doing a great job. Nevertheless they are on a hiring and spending spree from June - which is also terrific - but pretty much replaces Q4 guidance except where reaffirmed.

I need to stop this. It is not my desire to become the freaking TSLA bear around here. It was a lot of fun plotting and scheming for an entry for a silly scale short squeeze but this is not so fun any more.

 

[Xpert]

So today ER M3 guidance indeed saved the day. Now that all the excitement died down, let's look at how realistic that would be.

there is absolutely no doubt that the biggest question of all is: can Tesla meet their model 3 production guidance?

First target, by end of 2017: 100k-200k model 3 produced. Elon said they won't be able to produce volume several months after 7/1, let's say 3 months. that means October-December time frame. Let's assume it's 120k, so that's 40k/month, or 10k/week. that's 10k model 3 per week plus at least 2k S+X/week, about 17 months from now. can they achieve this? Sure. what would be needed?
-3 more model 3 production lines completed built at Fremont by 10/17, each line producing 3k/line/week initially, then ramping up.
-A ramped up gigafactory
-that means they need to do a capital raise very soon and start tooling. how much do they need to raise/dillution? no idea but at least additional gigafactory capital, cost of 3 production lines, workers, sales rep, service centers, and inventories for 120k cars, and more.

Second target, assuming 400k model 3 + 100k S+X in 2018. that's 33k model 3/month on 3 lines, or 7k/week, or 2.5k/line/week. But wait, this is less than in 2017, how is this possible?

one of the targets above must be off. let's revise 2017 M3 target rate with 2018 production rate of 33k M3/month x 3 = 99k M3 for 2017. close enough but realistically proably lower.

So what's the chance of meeting the middle of their guidance 100k-200k M3 for 2017? not very high. unless they hire some real production experts to run the show.

Go ahead and pick these assumptions apart, let's see a better estimate!

as for the next few days, I'm expecting 2 camps of analysts both upgrading and downgrading, pretty far apart in their views. the bulls likely to win I think, but not by a lot, until after cap raise and near part 2 of the M3 reveal.

 

[vgrinshpun]

I am definitely impressed with their focus on running a tight ship. Wheeler and Elon seems to be doing a great job. Nevertheless they are on a hiring and spending spree from June - which is also terrific - but pretty much replaces Q4 guidance except where reaffirmed.

I need to stop this. It is not my desire to become the freaking TSLA bear around here. It was a lot of fun plotting and scheming for an entry for a silly scale short squeeze but this is not so fun any more.

All of the numbers in my post were reaffirmed by Tesla in shareholders letter. If they deliver on them, they will be non-GAAP profitable in Q2-Q4, and the 2016 overall. The FCF is clearly off the table.

I agree that your particular scheming for the mother of all squeezes is off, but the "non-spectacular" rolling squeezing similar to 2013 is a clear possibility.

 

[BobSk]

That's it, I'm digging up funds tomorrow to buy more. I won't need anyone here to caution me to be careful. Elon just gave the "all in" signal, I'm following him. This pop is coming, I just don't know when. The other side to this trade is a negative macro event, but it's alright I have lots of time, 2025 is ideally short term for me hah.

I was thinking the same. I will accelerate my trading purchase and hold onto them. I have several accounts that have been loaded with TSLA for several years, never touched them, will not touch for another 10 years. I will keep adding with new cash.

When I select companies for long term investment, my top six questions are:
1. Is the management competent and trust worthy? Elon - I give 105 out of 100. Shorts will say things different, I don't care what they say, I know lots of them are paid to say those things.
2. Is the company in the right (booming) sectors? EV, energy storage, and autonomous bus, I give 100 out of 100.
3. Is this company the market leader? I give 100 out of 100.
4. Is the future potential earnings large enough to justify current price? I give 100 out of 100.
5. Can another company come in and displace this company as the market leader? The chance is near zero given how determined and capable this company is.
6. Can I compete successfully against this company if I were given 50 billion dollars? -Zero chance.
I can not find another company that rates better.

This method worked well on Google, Apple, Amazon in the past.

 

[Intl Professor]

So, we were told that the Fremont site could produce up to 900,000 vehicles per year. We were shocked......now, not so.

Toyota/GM rated it at 500,000 per year. With manufacturing innovation since then I would guess that is not impossible for a much higher figure. However, I think Tesla makes more parts in house than did the previous owners, which would argue against increased capacity. Just guesses. Some of you smart people may have direct knowledge that would be interesting. Do robots require more space than people plus other machines, for example? There must be a lot of data on this.

 

[Julian Cox]

All of the numbers in my post were reaffirmed by Tesla in shareholders letter. If they deliver on them, they will be non-GAAP profitable in Q2-Q4, and the 2016 overall. The FCF is clearly off the table.

I agree that your particular scheming for the mother of all squeezes is off, but the "non-spectacular" rolling squeezing similar to 2013 is a clear possibility.

Basically what I expect to happen now (off the cuff) is that they will raise whatever they need probably for the most part if not exclusively in convertible bonds even if the SP is under the $242 mark at the time. Everyone sensible will have to agree that the entire Tesla business plan is de-risked and there is nothing stopping them becoming the default mode of transport and everyone gets really happy - all except Jim Chanos unless he covers and Tim Cook who thought he might be able to set the transportation industry standards around whatever he's up to in the 2019-2020 time frame by which time Tesla could probably buy Apple and then change their minds at the last minute for a prank.

There I feel all better now.

 

[BobSk]

I think you are mixing up two separate concepts here.

Thinking this through what I think I can see here is that Elon has identified a faster path to bringing on the Model 3 and hence a larger and sooner eventual win. However make no mistake, he has done that by trading the short term for the long term as far as TSLA is concerned. Failing to appreciate this and encouraging a gung ho short-term long trade here is probably not following the path drawn out "by our leader, Elon" as you put it (or even very friendly advice). I don't operate on optimism and pessimism and neither does Elon and I don't understand the meaning of following, I suspect that he would concur with that too.

Read it yourself at the foot of the shareholder's letter he wrote you and signed, highlights, mine:

"
Given our plans to advance our 500,000 total unit build plan, essentially doubling the prior growth plan, we are re-evaluating our level of capital expenditures, but expect it will be about 50% higher than our previous guidance of $1.5 billion for 2016. Naturally, this will impact our ability to be net cash flow positive for the year, but given the demand for Model 3, investing to meet that demand is the best long-term decision for Tesla.

The overwhelming demand for Model 3 and our improving financial results in Q1 represent a strong start to 2016. We are looking forward to bringing Model 3 to market as together we advance the world’s transition to sustainable transportation.
"

EDIT - Look. If you bought TSLA at IPO you just got massively richer two years sooner than you dreamed of and if you care as much as I do about the environment and the future of humanity things are looking up by the same two years compounded for the rest of time - Accelerating the Transition - that's Tesla's mission, mission accelerated!

This on the other hand is the short term thread!!! All bets off for a rethink. Otherwise if you prefer just ignore me and - party on.

My original plan was to see the company becoming the largest company by 2026. Now it seems everything got pulled in by 2 years. Even autonomous driving is 2 years faster than I thought. I can't complain.

 

[Julian Cox]

My original plan was to see the company becoming the largest company by 2026. Now it seems everything got pulled in by 2 years. Even autonomous driving is 2 years faster than I thought. I can't complain.

Neither can I. All is well in the world.

 

[dakh]

Toyota/GM rated it at 500,000 per year. With manufacturing innovation since then I would guess that is not impossible for a much higher figure. However, I think Tesla makes more parts in house than did the previous owners, which would argue against increased capacity. Just guesses. Some of you smart people may have direct knowledge that would be interesting. Do robots require more space than people plus other machines, for example? There must be a lot of data on this.

Don't forget it's electric cars they're making, much simpler assembly. No big shafts and heavy engines to maneuver around. My understanding is budget cars are all front wheel drive because the whole front eigine/transmission/etc. can be assembled separately as a unit and stuffed into a car this way. That doesn't work with RWD/AWD cars so assembling them is more complicated. I'd venture a guess that electric drivetrain offers possibilities for a much simpler and more automated assembly line and Tesla is now pursuing those.

 

[mrdoubleb]

So while, understandably, much of the focus is on the M3 ramp in your comments, I just wanted to raise attention to 3 other gems in the ER/CC.

1, Most of our discussion in the past weeks and months was on X quality issues. While I obviously wouldn't say there will never be a single X again with any QC issues, the biggest non-M3 bombshell was Elon sharing that last Friday was the first day when every X off the line was flawless. After all the quality reports of the past months, this is a huge win.

2, Previously Tesla has guided, that while the max limit of the line is 2k/week, they expect 1600-1800 cars on average. The shareholder letter implies 2k will be their normal run rate exiting Q2. That's an annual run-rate of 100k S/X!

3, They expect 1200 S and 800 X per week going forward. That's a 40k run rate for X 9 months after production start, meaning we should have 30k+ of the "unbuildable" X on the road by the end of this year.

 

[Julian Cox]

All of the numbers in my post were reaffirmed by Tesla in shareholders letter. If they deliver on them, they will be non-GAAP profitable in Q2-Q4, and the 2016 overall. The FCF is clearly off the table.

I agree that your particular scheming for the mother of all squeezes is off, but the "non-spectacular" rolling squeezing similar to 2013 is a clear possibility.

No need to make it a "my particular" I can assure you it was perfectly objective. FYI they did a guidance 2-step in 2013 that killed the shorts and set up TSLA as frightening stock to short. Like great news, great news, funding round, would have been a huge hole that same quarter - but now there isn't because we did a funding round. But yes post financing I think an incremental run up is on the table.

 

[Fallenone]

So here's my theory of what will happen till next Aug.

Part A, straight from the Q1 letter
1. They said opex will increase slightly in Q2 and "ramp" it up in H2.
2. They guided for 17k deliveries in Q2.
3. 2.5k Powerwall = 16 MWh, total was 25 MWh, making Powerpack 9 MWh. Using ASP $470/kWh and $350/kWh for Wall and Pack, revenue would be 10.7M. Assuming 15% gross margin (TE pack cost, especially for the Powerwall at this early stage could be quite higher than the $190 number), that's 1.6M gross profit.
4. They recorded a loss from operations of 75M.
5. Model X likely to have about -3.9% gross margin in Q1 based on the following:

a) 12420 S and 2400 X
b) Assuming Model S ASP 100k
c) Model X ASP then would be 130k
d) Model S had a gross margin of 26%, which is the average of 2015 excluding Q4 when they added X to the mix
e) Overall gross margin was 20%​

Part B, not so wild assumptions
1. Q2 OpEx increases 5%-10%, so 20.9M to 43.8M increase, taking the average 32.3M here.
2. Personally I think they may have even low balled this one. Especially if they are saying Model S orders increasing, and X ramp issues decreasing. But assume they delivered 12k S and 5k X in Q2.
3. Assuming TE rev grows at 70% ("faster than cars"), gross margin increases to 20%, Then gross profit increases to 3.6 M.
4. That brings the gap to 75+[20.9, 43.8]-3.6=[92.3, 115.2]M.
5. Holding the ASP for S and X, and the gross margin for S the same, the Model X needs 14%~17.5% gross margin to bridge that gap. Considering 2013 Q1 (third quarter of first delivery) gross margin for the Model S was 17%, this 14%~17.5% may not be far fetched.

Part C, personal speculations
1. Powertrain for Model 3 completed, design needs another 6-8 weeks, that puts us roughly at the end of Q2.
2. That means test productions will likely to happen in Q3.
3. They are still meeting with suppliers.
4. They are looking for talents in the manufacturing area.
5. They don't direly need to spend big on CapEx in Q2 since there's still a lot of design/planning now.

Part D, my theory
Given the easiness of swinging for a positive EPS in Q2, and they don't need to (or even can't) buy tons of robots because the design still needs time, they may be holding off the capital raise in August, after they release a great ER to minimize the doubts to maximize the share price to minimize the cost of the raise. Between these three months, they would still need to gradually release good news to maintain the stock price. In fact, I think announcing such a radical advance in Model 3 production is effectively a way to defend the stock price. So, I wouldn't really expect a big climb in stock price until August, but neither will it go down a lot.

 

[Ulmo]

Michael Ramsey's piece in WSJ is just a lie: "Tesla's losses widen on lower than expected volume" is the title, implying that the losses are a result of a lack of demand or ability to manufacture. That is a PURE LIE. And, the same broken record can be played over and over all the way until they are pumping out 1 million cars a year (2 per minute) in ~4 years. This is Amazon all over again, but more blatantly just PURE lies. Actual intentional lies. People like Michael Ramsey hate USA, hate successful companies, hate growth, hate good products. Not only is he a complete liar, evil, and bad for this country, but I surmise he's in bed with enemy communists.