Short-Term TSLA Price Movements - 2016

[DrJohnM]

Smoke and mirrors.

• How do you build a second gigafactory for next to nothing?
• How do you build out the M3 with a minimum capital injection?
• How do you provide at least 215 miles for M3
• How do you build a cheaper M4 car?
• How do you have TE making more money than the car side of the business?
• Why not talk about the pack price at the earnings call?
• Why not want to talk about the gigafactory?

All of the above can be explained by just having a better battery chemistry. Some of the claims are of battery chemistry that have 6x 10x better power density. Let me conjecture that Tesla has worked out how to get just 2x battery performance improvement and possibly lower internal resistance (less heat generated), faster charging. That would mean:

• 1x gigafactory produces 2x gWh than designed. Add in the other line improvements and it could be more like 3x.
• Pack costs come down to sub $100 and margins go substantially up - now, not in 3 years time.
• TE (who have sold 2016 and probably 2017 output) make a bucket of money of the back of packs that sell for 4x the cost to make and use that to pay for M3 build.
• M3 produced with 250 miles with same pack size, just half the weight, improved regen (internal resistance, faster charging), so overall improved performance for the car. No one can compete on range and cost.
• M4 can be produced $5k to $10k less than a M3 just because of the simpler and cheaper pack.
• MS P150DXL becomes available.

Mr Musk would have to be very careful with how this information was released, because it is going to destroy:

• The established ICE industry
• The power generators
• The oil based regimes
• Tax income for governments
• Other battery suppliers

Basically, Mr Musk becomes The Man in the White Suit.

IMHO - I think all the discussion is looking the wrong way. I think Mr Musk has some new battery sauce.

The greatest trick the devil ever pulled was convincing the world he did not exist.

 

[WarpedOne]

I am not ready to bet is about the new battery sauce. Not impossible, just not the most probable thing to bet on.
But there is something not talked about going on, there were to many topics not discussed at ER.

Remember, only 30% of the message is conveyed by words. 70% is outside of words.

 

[Papafox]

... Q1 deliveries: 2400 model X
avg Model S $91,629
avg Model X $119,117

Had it been a nominal X ramp and this GM was 20%, on 7,000 units, it would've added $183M to cash flow. That would have cut the $466M in negative FCF down, but still not close to breakeven.
...

I think your methodology is counting costs twice if assuming 7,000 Model X vehicles could have been produced, which is the reason your number is coming out lower than what Tesla would come up with. The costs are counted twice because labor and inventory costs to make this many vehicles are already included in the Q1 numbers, and then you count the costs a second time when you multiply revenue x the GM of 20% and come up with a much lower number than sales revenue.

Do you believe it is possible that Tesla had enough parts and labor available to produce 7,000 Model X vehicles in Q1? If so, the cost for producing those 7,000 vehicles has already been accounted for in the Q1 ER. Consider, for example, if 7,000 Model Xs had been built in Q1 and only 2400 of them were delivered. The other 4600 Model Xs (7,000 - 2400) could have hypothetically been sitting completed but not delivered and the numbers would not have changed in the Q1 ER because the parts and labor costs had already been accounted for. Now, let's say on the last day of the quarter 4600 future owners showed up at the factory and paid for their cars. On that day they would have paid $119,117 x 4600 = $548 million. I believe the $548 million is the difference in Q1 we would have seen if all 7,000 Model X vehicles had been successfully built and delivered that quarter if all parts and labor necessary for producing 7,000 Model X vehicles had been accounted for in the Q1 numbers.

In reality, maybe there weren't 4600 additional windshields sitting in the factory, ready to be installed, and so some of the costs of producing 7,000 Model X vehicles were not accounted for in the Q1 ER. I'd be willing to bet, though, if you looked at labor and materials that were included in the Q1 ER, the majority of the costs to produce 7,000 Model X vehicles were there, and so I think a number closer to $548 million is closer to the potential for the quarter than a mere addition of $183 million, if the other 4600 Model Xs had somehow managed to be completed and delivered.

 

[motobaleno]

Smoke and mirrors.

• How do you build a second gigafactory for next to nothing?
• How do you build out the M3 with a minimum capital injection?
• How do you provide at least 215 miles for M3
• How do you build a cheaper M4 car?
• How do you have TE making more money than the car side of the business?
• Why not talk about the pack price at the earnings call?
• Why not want to talk about the gigafactory?

All of the above can be explained by just having a better battery chemistry. Some of the claims are of battery chemistry that have 6x 10x better power density. Let me conjecture that Tesla has worked out how to get just 2x battery performance improvement and possibly lower internal resistance (less heat generated), faster charging. That would mean:

• 1x gigafactory produces 2x gWh than designed. Add in the other line improvements and it could be more like 3x.
• Pack costs come down to sub $100 and margins go substantially up - now, not in 3 years time.
• TE (who have sold 2016 and probably 2017 output) make a bucket of money of the back of packs that sell for 4x the cost to make and use that to pay for M3 build.
• M3 produced with 250 miles with same pack size, just half the weight, improved regen (internal resistance, faster charging), so overall improved performance for the car. No one can compete on range and cost.
• M4 can be produced $5k to $10k less than a M3 just because of the simpler and cheaper pack.
• MS P150DXL becomes available.

Mr Musk would have to be very careful with how this information was released, because it is going to destroy:

• The established ICE industry
• The power generators
• The oil based regimes
• Tax income for governments
• Other battery suppliers

Basically, Mr Musk becomes The Man in the White Suit.

IMHO - I think all the discussion is looking the wrong way. I think Mr Musk has some new battery sauce.

The greatest trick the devil ever pulled was convincing the world he did not exist.

I found this post really interesting since, from a Tesla bullish point of view and after, I guess, a certain amount of evaluating all the possible scenarios, you conclude that the only way for Tesla to reach its goals is to have a breackthrough and secret innovation on battery chemistry...OK, maybe they have it as you say... but WHAT IF they don't?

 

[vgrinshpun]

They are indistinguishable from real shares. In fact, for the last purchaser in the chain, they ARE real shares... it's the lenders, brokers, and short sellers who are putting up capital assets to guarantee the delivery of the shares when the time comes.

If there are 3.3 x of outstanding shares in circulation, the 2.3 x of outstanding shares have been sold short.

Requirement for puting collateral is intended to protect market stability by guaranteeing that recalled shares can be actually returned.

I do not understand how much collateral one would need to require to guarantee that recalled shares can be returned in a situation when quantity of short sold shares exceed quantity of outstanding shares by factor of 2.3, and ... 70% of all shares in circulation are sold short. This would seem to be a recepie for de-stabilizing the market.

Do you have a reference to actual SEC regulation, that deals with the overall limitations on short selling? I did spent some time researching this, but could not find any explaining limitation that we are discussing.

 

[ggr]

If there are 3.3 x of outstanding shares in circulation, the 2.3 x of outstanding shares have been sold short.

Requirement for puting collateral is intended to protect market stability by guaranteeing that recalled shares can be actually returned.

I do not understand how much collateral one would need to require to guarantee that recalled shares can be returned in a situation when quantity of short sold shares exceed quantity of outstanding shares by factor of 2.3, and ... 70% of all shares in circulation are sold short. This would seem to be a recepie for de-stabilizing the market.

Do you have a reference to actual SEC regulation, that deals with the overall limitations on short selling? I did spent some time researching this, but could not find any explaining limitation that we are discussing.

I don't have such a reference, I was replying to someone else's message saying that there was, and assuming that they were correct.

The necessary collateral is based on the current share price, and adjusts as time goes on. This is the essence of the short squeeze phenomenon. For example, the original short seller who borrowed the shares not only has to pay the interest to borrow them, but he effectively has to post the collateral to be able to buy them back. This may be his own money, or he may be trading on margin and some of it comes from the broker, but that doesn't matter. If the stock price goes up, he will run out of collateral and/or get a margin call, and be forced to buy back the stock at current market rates, which of course tends to force the stock price even higher.

If there are more shares than the outstanding float, there must be more than 1 short seller in the chains. Each of those shorts just has to have enough collateral to cover his own part of the trade. But the fact that there might be more than one such short seller does contribute to the instability you mention.

Yes, short selling can destabilize the market. That's why there are situations where shorting is disallowed, the so-called "circuit breaker".

 

[Johan]

Smoke and mirrors.

• How do you build a second gigafactory for next to nothing?
• How do you build out the M3 with a minimum capital injection?
• How do you provide at least 215 miles for M3
• How do you build a cheaper M4 car?
• How do you have TE making more money than the car side of the business?
• Why not talk about the pack price at the earnings call?
• Why not want to talk about the gigafactory?

All of the above can be explained by just having a better battery chemistry. Some of the claims are of battery chemistry that have 6x 10x better power density. Let me conjecture that Tesla has worked out how to get just 2x battery performance improvement and possibly lower internal resistance (less heat generated), faster charging. That would mean:

• 1x gigafactory produces 2x gWh than designed. Add in the other line improvements and it could be more like 3x.
• Pack costs come down to sub $100 and margins go substantially up - now, not in 3 years time.
• TE (who have sold 2016 and probably 2017 output) make a bucket of money of the back of packs that sell for 4x the cost to make and use that to pay for M3 build.
• M3 produced with 250 miles with same pack size, just half the weight, improved regen (internal resistance, faster charging), so overall improved performance for the car. No one can compete on range and cost.
• M4 can be produced $5k to $10k less than a M3 just because of the simpler and cheaper pack.
• MS P150DXL becomes available.

Mr Musk would have to be very careful with how this information was released, because it is going to destroy:

• The established ICE industry
• The power generators
• The oil based regimes
• Tax income for governments
• Other battery suppliers

Basically, Mr Musk becomes The Man in the White Suit.

IMHO - I think all the discussion is looking the wrong way. I think Mr Musk has some new battery sauce.

The greatest trick the devil ever pulled was convincing the world he did not exist.

Very interesting. Check out this quote and what DaveT wrote in his "megapost" thread:

Thanks, Mark. Your post allowed me to re-read my 8/31/14 post. In retrospect, I realized that in 2015 and early 2016, Tesla showed very little, if at all any, signs of Tesla 3.0. In fact, they were mostly between Tesla 1.0 and 1.5. But the Model 3 reveal and reservations changed everything, and it was the first major sign that Tesla could possibly pull of a Tesla 3.0 long-term. I don't think I've ever been as excited about Tesla's prospects as a company as I am now.

I also have a few other reasons why I'm very bullish on Tesla long-term (5-10 years out). One of them, I can't really share about because I don't think it's in the best interests of Tesla for me to share (I actually wrote a megapost on it last year but decided not to post it) but it has to do with Tesla's battery tech advantage long-term. Basically, I think Tesla's advantage in battery/energy storage will only grow over time, giving them an increased competitive advantage. Second, I'm becoming convinced that Tesla can disrupt the trucking/transport industry, which alone is 5% of the U.S. GDP. I'm calling this Tesla Logistics and I think it has potential to add hundreds of billions of dollars to Tesla's market cap. Then, there's the Gen4 which I think will be the dagger in the auto industry.

I do acknowledge that the past year or more of X delays and missed guidance has hurt Tesla's credibility. And I think this is going to take some time for investors to get over. Tesla will just need to execute to win investor sentiment.

 

[JBRR]

Speaking of progress of Gigafactory:
"Panasonic doubled its investment in the Tesla Gigafactory during the last quarter [Q1 2016 Activity Report]"
Panasonic doubled its investment in the Tesla Gigafactory during the last quarter [Q1 2016 Activity Report]

 

[vgrinshpun]

We already knew there is a cash gap. We knew it the moment the $2.2 billion was raised. We just didn't know if it would be closed organically or if we had to raise money for it. We did have to raise for it last year due to Model X delay. We might have been able to make it organically after that if the Model 3 reservations weren't so high. Damn you all for being so excited by Tesla's future product. Now Tesla will have to raise money to build it faster.

To re-iterate, the agreement has a Minimum Capital Investment through June 30, 2024. The state is smart enough to allow some leeway here.

As for the size of the building... we actually don't know what the final manufacturing floor square footage is anymore. So talking about "full size" is a bit difficult, I think Tesla is sandbagging us somewhat. They are not revising their 35 GWh cell production estimate yet with any real numbers.

Look at it another way. The original construction schedule has the last module finishing in Dec, 2017. That's about $375 million dollars that would have had to be spent in Q3 and Q4 of 2017. Then it sits dormant until roughly Q1 or Q2, 2020 when Panasonic starts to install the equipment in there. If Tesla spends that $375 million in 2019 instead, it doesn't change Panasonic's schedule at all. But Tesla gets to hold off for 1.5-2 years before dropping that $375 million. You want to criticize the company for being more cash efficient?

"Nevada Governor’s Office of Economic Development (GOED) published its Q1 2016 Quarterly Activity Report for the Tesla Gigafactory and judged the company’s progress to be satisfactory"

Panasonic doubled its investment in the Tesla Gigafactory during the last quarter [Q1 2016 Activity Report]

 

[Bgarret]

Smoke and mirrors.

• How do you build a second gigafactory for next to nothing?
• How do you build out the M3 with a minimum capital injection?
• How do you provide at least 215 miles for M3
• How do you build a cheaper M4 car?
• How do you have TE making more money than the car side of the business?
• Why not talk about the pack price at the earnings call?
• Why not want to talk about the gigafactory?

All of the above can be explained by just having a better battery chemistry. Some of the claims are of battery chemistry that have 6x 10x better power density. Let me conjecture that Tesla has worked out how to get just 2x battery performance improvement and possibly lower internal resistance (less heat generated), faster charging. That would mean:

• 1x gigafactory produces 2x gWh than designed. Add in the other line improvements and it could be more like 3x.
• Pack costs come down to sub $100 and margins go substantially up - now, not in 3 years time.
• TE (who have sold 2016 and probably 2017 output) make a bucket of money of the back of packs that sell for 4x the cost to make and use that to pay for M3 build.
• M3 produced with 250 miles with same pack size, just half the weight, improved regen (internal resistance, faster charging), so overall improved performance for the car. No one can compete on range and cost.
• M4 can be produced $5k to $10k less than a M3 just because of the simpler and cheaper pack.
• MS P150DXL becomes available.

Mr Musk would have to be very careful with how this information was released, because it is going to destroy:

• The established ICE industry
• The power generators
• The oil based regimes
• Tax income for governments
• Other battery suppliers

Basically, Mr Musk becomes The Man in the White Suit.

IMHO - I think all the discussion is looking the wrong way. I think Mr Musk has some new battery sauce.

The greatest trick the devil ever pulled was convincing the world he did not exist.

Jeff Dahn, a leading battery tech researcher from Dalhousie Univ. in fair Canada, who Tesla signed to a 5yr exclusive deal last June, finishes his commitment to 3M and starts with Tesla in June 2016. It is likely one of the "announcements" coming up in the next couple weeks....not that I'm trying to buttress the conspiracy theory listed above...

 

[Cattledog]

This guy seems to get the Elon Musk we've all come to understand. A willingness to try (and perhaps fail) very publicly on targets that are unapproachable for others allows Elon to move the goalposts for his team, abd for our benefit.

Elon Musk's Tesla Strategy: Win Big by Falling Short

 

[Bgarret]

Taken from Seeking Alpha, because I couldn't find a link to the source:

Morgan Stanley cuts 2016 EPS estimates for Tesla (NASDAQ:TSLA) to -$0.02 vs. $0.68 prior. Cuts 2017 estimates to $0.35 vs. $1.14 prior.

Delivery estimates are largely unchanged; ~70k units in 2016 (vs. the reiterated guidance of 80-90k shipments), composed of ~16k Model X and ~54k Model S units. By 2018, ~108k units, vs. the updated target of 500k.

Target price of $333 remains unchanged. Implied upside 55%.

Interestingly, their price target didn't change.

Which would mean 108k units in 2018 and 250k units in 2020 - with such lowball numbers, I would assume then the bulk of Adam Jonas' valuation at $333/share comes from the potential for autonomous Uber competitor, as these Tesla production numbers wouldn't support valuation based on auto sales.

At what point does this become an ego-thing with him - he sees the Uber opportunity better than anyone, even Elon, and Adam Jonas' belief in all things, well...Adam Jonas, continues to distort his abilities as an analyst. Think we are already there and can discount anything Adam says that is not autonomous car related.

 

[Johan]

Tesla never reaches its goals. The most likely explanation today is that Musk knows they will not reach the accelerated M3 production goal either.

Musk just saying stuff works O.K. so far. Look at the mass amnesia in this thread with regard to Tesla needing a capital raise this year.

Perhaps not in the very optimistic time frame they've presented, but "never" and "not" are very strong words.

 

[Gerardf]

Very interesting. Check out this quote and what DaveT wrote in his "megapost" thread:

Well, it would be relatively easy to make trucks driving fully autonomous compared to normal cars, as most is highway traffic, and already charted / learned by the current MS fleet. Basically Tesla autopilot is there already. Such much larger battery would allow charging rates of 500 kW to (multiple ?) 1 MW (HyperChargers ??). Such HyperCharger will need to be able to supply high peak load for a relative short time, that will need some energy buffer (PowerPacks). Even if these chargers can only be a few 100 km apart, the charge time is easily compensated for by the 24/7 driving.

The weight of such battery would not be to big an issue, as trucks can drive constant speeds most of the time, no fast acceleration needed. Using regenerative breaking completes the picture in optimizing energy usage combined with offering very powerful brakes. Even the automated charging was already shown in concept (the Snake). Costs saved for the truck driver and the diesel fuel combined with 24/7 driving will pay for a BIG battery quickly.

The 'only' thing missing would be the (automated) production means for a crazy amount of Li-ION cells. Guess who will have these soon.

 

[electracity]

This guy seems to get the Elon Musk we've all come to understand. A willingness to try (and perhaps fail) very publicly on targets that are unapproachable for others allows Elon to move the goalposts for his team, abd for our benefit.

Elon Musk's Tesla Strategy: Win Big by Falling Short

I think this article is close to the truth. But Tesla isn't great at building things. They are great at building the right things and the broad strategy to make those things competitive.

 

[DrJohnM]

I found this post really interesting since, from a Tesla bullish point of view and after, I guess, a certain amount of evaluating all the possible scenarios, you conclude that the only way for Tesla to reach its goals is to have a breackthrough and secret innovation on battery chemistry...OK, maybe they have it as you say... but WHAT IF they don't?

Elon has noted that he had a constant stream of people knocking at his door with new battery tech. If anyone has found a better battery tech, then they are likely going to go to Tesla. Some are going to be snake oil, some moon shots, but it only needs one that works to make a fundamental difference to the game. IMO - I see a better battery as the one thing that connects all of the things that Tesla has been saying and makes them workable.

 

[Vitold]

I'm rooting for Tesla to make Model 3 as soon as possible because I don't want them to sell a lot of falcon wing doors. I believe that they could be liability in the long run and could overshadow Model 3 if it was delayed.

Smoke and mirrors.

• How do you build a second gigafactory for next to nothing?
• How do you build out the M3 with a minimum capital injection?
• How do you provide at least 215 miles for M3
• How do you build a cheaper M4 car?
• How do you have TE making more money than the car side of the business?
• Why not talk about the pack price at the earnings call?
• Why not want to talk about the gigafactory?

All of the above can be explained by just having a better battery chemistry. Some of the claims are of battery chemistry that have 6x 10x better power density. Let me conjecture that Tesla has worked out how to get just 2x battery performance improvement and possibly lower internal resistance (less heat generated), faster charging. That would mean:

• 1x gigafactory produces 2x gWh than designed. Add in the other line improvements and it could be more like 3x.
• Pack costs come down to sub $100 and margins go substantially up - now, not in 3 years time.
• TE (who have sold 2016 and probably 2017 output) make a bucket of money of the back of packs that sell for 4x the cost to make and use that to pay for M3 build.
• M3 produced with 250 miles with same pack size, just half the weight, improved regen (internal resistance, faster charging), so overall improved performance for the car. No one can compete on range and cost.
• M4 can be produced $5k to $10k less than a M3 just because of the simpler and cheaper pack.
• MS P150DXL becomes available.

Mr Musk would have to be very careful with how this information was released, because it is going to destroy:

• The established ICE industry
• The power generators
• The oil based regimes
• Tax income for governments
• Other battery suppliers

Basically, Mr Musk becomes The Man in the White Suit.

IMHO - I think all the discussion is looking the wrong way. I think Mr Musk has some new battery sauce.

The greatest trick the devil ever pulled was convincing the world he did not exist.

TSLA stock does not need this type of wishful thinking. All we need is GF1 to start producing batteries and Tesla Motors making 2000 copies of Model 3 per week at the end of 2017.

 

[vgrinshpun]

Which would mean 108k units in 2018 and 250k units in 2020 - with such lowball numbers, I would assume then the bulk of Adam Jonas' valuation at $333/share comes from the potential for autonomous Uber competitor, as these Tesla production numbers wouldn't support valuation based on auto sales.

At what point does this become an ego-thing with him - he sees the Uber opportunity better than anyone, even Elon, and Adam Jonas' belief in all things, well...Adam Jonas, continues to distort his abilities as an analyst. Think we are already there and can discount anything Adam says that is not autonomous car related.

I think that you've used wrong tense here...

 

[electracity]

I think that you've used wrong tense here...

Not to mention that there will not be an Uber-like autonomous car from Tesla for many years.

There is likely a future Uber-like fleet sale (black car model x with driver) to allow continuous ramping of S/X production. GM announced a mini version of this kind of strategy with Lyft and the Bolt.

 

[Bgarret]

Dahn is a battery TESTING expert.

Wow...awfully quick to correct with incorrect data. From CleanTechnica:

"For a bit of background here, Jeff Dahn’s lab is home to 25 researchers (graduate students, postdoctoral researchers, and technical staff), and is focused on energy storage materials chemistry; and specifically, in relation to lithium-ion batteries. The primary aim of research at the lab is apparently to increase battery energy density; lower costs; and increase working lifetime.

So, no surprise why Tesla has decided to support its work.

Professor Dahn’s commented on the new agreement (which as stated before doesn’t enter into effect until June of next year): “Our research group’s goal is to increase the energy density and lifetime of Li-ion batteries, so we can drive down costs in automotive and grid energy storage applications.”

Commenting on the end of his research agreement with 3M and NSERC, Dahn also stated: “I’m so thankful for 3M Canada and NSERC’s support over the years. We’ve had many successes together that have created products for 3M, which are key milestones in my career and in my students’ careers.”

Amongst those successes, Dahn made specific note of the creation of nickel-manganese-cobalt (NMC) positive electrode material."

Tesla & Dahn Lab Sign Exclusive 5-Year Research Agreement

My post said Dahn was a battery tech researcher. There are dozens of articles on the internet that support his position as one of the best if not the best in the world. If you have different info that is supported by anything except your checkered reputation on the thread, please post.