Short-Term TSLA Price Movements - 2016

[electracity]

The entire premise of scty is to eliminate upfront costs and absorb long term risk for the consumer. The 20 year cycle is their reason for being. It is their business model.

My point was that they needed to bring a high customer renewal rate in year 20 to make the retained value calculation look decent. Justifying your business by predicting a high renewal rate after 2030 is madness. Solarcity only worked as a business when they were selling overpriced PPAs to naive customers prior to 2015. Those days are largely gone. Solarcity's steadily increasing customer acquisition costs are caused by the inability to close adequate business at low cost in face of heavy local competition. As the value of each solar system sale decreases, this problem becomes increasingly worse.

More mature solar markets like Germany and Australia don't have companies like solarcity because the business model doesn't work. Solarcity has many young, capable employees who can be repositioned by Tesla to sell energy and car products that actually have positive margins. Solarcity may actually solve some of Tesla retail growth problems with the model 3. Des Moines needs a Tesla store once the model 3 is released. There are many Des Moines in Tesla's worldwide market.

Store focused retail, as opposed to mostly high cost direct sales, should work.

 

[Foghat]

Have there been any significant numbers of Powerwall installs in the US?? I really think this acquisition is more about fixing the Tesla Energy debacle more than anything else. Solaredge, an Isreali company, has 75% of their sales in the US. Meanwhile, the only Powerwall sales I hear about are in Australia, a tiny market.

I think Elon's talk about product integration really has to do with the frustration of not being to sell enough Powerwalls. I think they've come to the conclusion that they need to have a better Powerwall/inverter/panel integrated product to be able to sell ANY Powerwalls in any volume.

And why do they care so much about selling Powerwalls? Because they've signed supply agreements which obligate them to buy a certain number of Powerwall compatible cells, and they are soon going to be awash in unsold cells (these cells see cells are different from the ones they can use in cars).

I think this is a bombshell hiding in Tesla financials which we will see soon. Elon did say that if anything this purchase offer was too late, rather than too early.

They are going to roll out powerwall 2.0 soon and then most likely we'll see the orders filled.

2.0 is the key here.

 

[CButterK]

Have there been any significant numbers of Powerwall installs in the US?? I really think this acquisition is more about fixing the Tesla Energy debacle more than anything else. Solaredge, an Isreali company, has 75% of their sales in the US. Meanwhile, the only Powerwall sales I hear about are in Australia, a tiny market.

I think Elon's talk about product integration really has to do with the frustration of not being to sell enough Powerwalls. I think they've come to the conclusion that they need to have a better Powerwall/inverter/panel integrated product to be able to sell ANY Powerwalls in any volume.

And why do they care so much about selling Powerwalls? Because they've signed supply agreements which obligate them to buy a certain number of Powerwall compatible cells, and they are soon going to be awash in unsold cells (these cells see cells are different from the ones they can use in cars).

I think this is a bombshell hiding in Tesla financials which we will see soon. Elon did say that if anything this purchase offer was too late, rather than too early.

I don't think having to follow through on their purchase commitment with panasonic is the driver of this merger. Remember, Tesla recently purchased not so small volume of batteries(not for car use) from Samsung? Tesla won't be buying extra batteries from anyone else, if they had excess batteries from panasonic that they were obligated to take first imho...

 

[electracity]

Have there been any significant numbers of Powerwall installs in the US??

I think the gigafactory will have a more automated way to build powerwalls. I think Tesla was unwilling to ramp the current way of building powerwalls, so they aren't making many today.

As I've said in other threads, the pack building aspect of the gigafactory is likely under appreciated. (as opposed to Panasonic's cell making at the gigafactory)

 

[Foghat]

That's not a big shocker. Musk stated a 90/10 split between Powerpack and Powerwalls. The Powerpack side is doing great, the Powerwall doesn't make sense for a very strong majority of consumers until costs drop substantially more whereas Powerpack makes sense now over new peaker plants.

In other words, not surprising at all based on Tesla's very own guidance.

They have massive powerwall numbers on order and this can be referenced in Solarcity-tesla conference call from May of last year. I think the delay has a lot to do with powerwall 2.0 rollout. Correct me if I'm wrong, but I think Elon(or others) have hinted at July-August time frame.

 

[techmaven]

Have there been any significant numbers of Powerwall installs in the US?? I really think this acquisition is more about fixing the Tesla Energy debacle more than anything else. Solaredge, an Isreali company, has 75% of their sales in the US. Meanwhile, the only Powerwall sales I hear about are in Australia, a tiny market.

I think Elon's talk about product integration really has to do with the frustration of not being to sell enough Powerwalls. I think they've come to the conclusion that they need to have a better Powerwall/inverter/panel integrated product to be able to sell ANY Powerwalls in any volume.

And why do they care so much about selling Powerwalls? Because they've signed supply agreements which obligate them to buy a certain number of Powerwall compatible cells, and they are soon going to be awash in unsold cells (these cells see cells are different from the ones they can use in cars).

I think this is a bombshell hiding in Tesla financials which we will see soon. Elon did say that if anything this purchase offer was too late, rather than too early.

Huh???

If they are so awash with cells, why would they be buying cells from Samsung SDI or LG Chem?

PowerWall really isn't a U.S. product outside of some select electricity markets until the Gigafactory cell output comes online. We've known that since day 1. The economics works in many markets outside of the U.S., however. The lack of PowerWall sales appears to be more about supply than demand. Many people haven't gotten a call back on their interest to buy a PowerWall. On top of that, in the U.S., the first inverter available to install PowerWalls, the SolarEdge SE7600-US with StorEdge has had very little available inventory. You can't get a PowerWall installed until this year, and even then, it was limited by the inverter availability, assuming the PowerWall were available to buy.

The 2nd generation PowerWall includes another compatible inverter which is both smaller and cheaper.

 

[MitchJi]

As far as deal repricing goes, yes, that is definitely on the table. Deals get repriced all the time in acquisitions. Will have to wait a while for markets to settle though.

I see it as 8 shares of SCTY will turn into 1 share of TSLA regardless of the price of either stock. So buying SCTY at 21.84 is like buying TSLA at 174.72. As long as TSLA stays above that number, the trade should be profitable, eventually. Am I getting anything wrong here?
Short-Term TSLA Price Movements - 2016

It sounds like the exact price is subject to change? Maybe you have to wait for the final offer before you can safely arbitrage the stock?

Which is exactly why Elon's first principle tangents on factory volumetric utilization is so inane. Valuing any company is way more complicated than assets - liabilities.

Inane?! He was clearly talking about optimizing production, for example the GF is going to produce 2-3x the number of cells with the original footprint (cells coming off the line at a faster rate than the rate of fire of machine guns). That clearly impacts the value of the particular factory.

But when the market realizes that is a core competency of Tesla that will have a big impact on the SP. That will be a huge shift from the current narrative that Tesla can't produce cars to Tesla is the best manufacturer in the world. You might think that it's not realistic to believe Tesla can do that, but I believe it's much easier than building the worlds best car, or the worlds least expensive high quality battery packs, or landing a rocket on a barge in the ocean.

This competency also impacts their decision to buy solar city. How much more will that company be worth when Tesla completes upgrading the silveo panel production process?

And why do they care so much about selling Powerwalls? Because they've signed supply agreements which obligate them to buy a certain number of Powerwall compatible cells, and they are soon going to be awash in unsold cells (these cells see cells are different from the ones they can use in cars).

First, clearly the TE Roadblock is a lack of cells.

Second, cells have the same form factor. They can easily switch production between the formulations. I bet,that Panasonic doesn't really care which type of cells they supply.

 

[Foghat]

Key thought on Tesla and Solarcity

Hundreds of thousands of solar systems on homes today. Most if not all systems stay with the home through 20-30 years of warrantied life. Even if Solarcity makes a cash sale, they have service warranty and production monitoring service through that 20-30 years, so all installs will have Solarcity attached to them for 20-30 years.

Average homeowner sells approx. every 7 years. So potential 3-4 different customers utiltize that system which is 3-4 customers that are exposed to Solarcity ecosystem and products per installed system.

This also exposes 3-4 different customers(and their network of friends/family) to Tesla autos per install.

Last Solarcity projection is they aim to achieve 1 million customers(which doesn't necessarily translate into 1mln installs) by 2018-2019, the next 2-3 years and millions more in 2020's where max production is expected for tesla autos under current Fremont capacity.

So, by 2020, over a million installs near guaranteed exposure of potentially 3-4 customers per install to tesla auto products over the next 20-30 years... This sounds like a mega boon for tesla just marketing and advertising alone given just current 4 year window of Solarcity installs.

 

[techmaven]

They are going to roll out powerwall 2.0 soon and then most likely we'll see the orders filled.

2.0 is the key here.

I do not believe this.

The COGS for PowerWall remain high, as I don't believe that Tesla is using a particularly large amount of Panasonic's Osaka output towards Tesla Energy. I think they have to order up the production mix well in advance, so Tesla ordered up cells for Tesla Motors instead of Tesla Energy. Hence the need to go out and buy Samsung SDI 2200 mAh cells in significant quantity, presumably for the Kauai project.

Even with PowerWall 2.0, that doesn't really change. They'll ship more... maybe a lot more, but it will still be a relative trickle.

Instead, they must be working on the versions of PowerWall and PowerPack using Gigafactory cells. I believe this is part of the reason for the timing of the SCTY offer. They want Solarcity to be a part of the development of the generation of TE product with Gigafactory cells. When I say development, I don't mean just the design and production of the physical hardware, but all the aspects of developing technology into products.

Remember, the economics of the PowerPack and those of the PowerWall are very, very different. And PowerWall is already expected to be a small fraction of the Tesla Energy product mix. Frankly, I don't care about PowerWall at all when looking at the financials. To move gigawatt hours of product in the next year or two, we have to be talking about utility and commercial scale projects. Not residential scale. At some point, residential scale will be a very important part of the portfolio, but I don't think it is a 2017/2018 story in a real way for the financial numbers. Instead, PowerWall is a halo product, something that gets the conversation flowing, something that makes people feel good. And it could be an economic story for specific parts of the world - Hawaii for instance.

 

[colettimj]

They have massive powerwall numbers on order and this can be referenced in Solarcity-tesla conference call from May of last year. I think the delay has a lot to do with powerwall 2.0 rollout. Correct me if I'm wrong, but I think Elon(or others) have hinted at July-August time frame.

They don't have any Powerwalls on order. They don't have any Powerwall deposits. What they have is an mailing list of people that might buy buy a Powerwall. Musk probably didn't help when he referred to "38,000 reservations for the Powerwall"

 

[techmaven]

They don't have any Powerwalls on order. They don't have any Powerwall deposits. What they have is an mailing list of people that might buy buy a Powerwall. Musk probably didn't help when he referred to "38,000 reservations for the Powerwall"

They do have PowerWalls on order... it is possible to order them through various resellers. In addition to that, they have the reservation list, but they have had so little demand that they haven't bothered to contact people on that list yet.

 

[Jayjs20]

Nevermind

 

[techmaven]

The more I think about this, the more things boil down to this conundrum in my mind.

Obviously, Mr. Musk believes that all his various plans for Tesla does not require raising additional capital. One key aspect of this is that they have applied for the building permit to build the 2nd phase of the Gigafactory.

Tesla will add new section (5th) to the Gigafactory by December, Battery cell manufacturing equipment by July 20th

They wouldn't bother to do this at this point in time if they felt that there was an impending cash crunch for Model 3 launch. This represents somewhere between a $300 and $400 million dollar expenditure on Tesla's part. The first phase alone is enough to satisfy the Model 3 launch and more... well into 2018's volume. So to build a 2nd phase, to possibly bring online enough cell production capacity in late 2017/early 2018 to exceed the original 35 GWh of cell production capacity is to build a lot of cells for Tesla Energy.

When Mr. Musk and Mr. Straubel was talking about 50-50, Tesla Energy and Tesla Motors, they weren't talking in 2020. They are talking about possibly 2017 and/or 2018.

Anyone that still believes that Tesla is just an automaker is seriously behind the times.

The problem however, is that while Mr. Musk might know this, and has communicated this on several occasions, very few people believe him. Certainly the street does not. They see the existing sales of the Tesla Energy and the fact that Tesla hasn't really talked about the revenues or margins from Tesla Energy for 2015 or 2016 as a sign that the Tesla Energy side is, basically, worthless.

Of the pro commentary, I have not yet heard anyone talk about the acquisition of Solarcity as a boot strap/scale up maneuver for Tesla Energy as they should be doing. Instead, they're trying to figure out why an automaker wants a solar installer. Are they really this dense?

Further, this indicates that Tesla is confident in the cash for the Model 3 launch. I suspect the street is still thinking that the cash raised thus far is merely #1 of at least 2 or 3 for the Model 3 launch.

Again, the pro commentary seems to indicate that the auto analysts are struggling to comprehend what Tesla is becoming. There is some serious attempts to skate to where the puck was, not where the puck is going.

 

[Foghat]

I do not believe this.

The COGS for PowerWall remain high, as I don't believe that Tesla is using a particularly large amount of Panasonic's Osaka output towards Tesla Energy. I think they have to order up the production mix well in advance, so Tesla ordered up cells for Tesla Motors instead of Tesla Energy. Hence the need to go out and buy Samsung SDI 2200 mAh cells in significant quantity, presumably for the Kauai project.

Even with PowerWall 2.0, that doesn't really change. They'll ship more... maybe a lot more, but it will still be a relative trickle.

Instead, they must be working on the versions of PowerWall and PowerPack using Gigafactory cells. I believe this is part of the reason for the timing of the SCTY offer. They want Solarcity to be a part of the development of the generation of TE product with Gigafactory cells. When I say development, I don't mean just the design and production of the physical hardware, but all the aspects of developing technology into products.

Remember, the economics of the PowerPack and those of the PowerWall are very, very different. And PowerWall is already expected to be a small fraction of the Tesla Energy product mix. Frankly, I don't care about PowerWall at all when looking at the financials. To move gigawatt hours of product in the next year or two, we have to be talking about utility and commercial scale projects. Not residential scale. At some point, residential scale will be a very important part of the portfolio, but I don't think it is a 2017/2018 story in a real way for the financial numbers. Instead, PowerWall is a halo product, something that gets the conversation flowing, something that makes people feel good. And it could be an economic story for specific parts of the world - Hawaii for instance.

Powerwall will be a final piece of Solarcity's ability to fully migrate to a grid services aggregator. I think we have to start examining the current evolution of the grid and how Solarcity-tesla are developing their business model to it.

Solarcity already has access to hundreds of thousands of home systems. They are now installing smart inverters with their systems so some of the grid services can be implemented as those neighborhood networks grow this year. I gather this will be apart of valuing solar under net metering regime already in place right now, but sure what they'll do before large number solar+storage+ smart inverter which is the completed system for maximizing all grid related services Solarcity will offer.

Rooftop solar+storage system thus is extremely valuable for multiple reasons to the grid now... locational firm demand response is something grid has never truely had before and Solarcity's network of thousands of homes in specific areas at the place of need is very attractive. As the aggregator, the one that has contracts woth *all* these customers can now aggregate these resources to act as a virtual peaker plant to meet demand response requirements at specific locations, place of need. Powerwall has value to not just the Solarcity customer for backup and other customer sided values, but now the customer themselves will sell their services to grid through Solarcity as the aggregator of their systems and others together.

Thus powerwall becomes a multi stakeholder asset just by a homeowner having it at their home. The combination of saving on personal energy consumption and also having the capability to sell access to this system reduces the capital investment for the consumer(or Solarcity is lease/ppa).

So, this aggregation of many systems for grid services creates a strong demand very soon, literally as soon as Solarcity can mass enough system in the right location to strike up a contract with a utility for grid services, and this might be able to start at a few hundred homes with solar+storage.

 

[MonroeSS]

There's an article somewhere that recommended that Tesla start financing it's own cars. It said that it would need to wait because it's a capital intensive business, It pointed out that GM makes more money from financing than from selling cars and that Tesla has stated it's intention to do that.

MitchJi - This is like a old wives' tale in the business world that refuses to die. There was old joke that GM is a financial company that also sells cars. If GM made more money from financing then it would have been a long time ago when operations lost billions.
Q4 total net income - $6.3B - Net income from GM financial - $167 million.
Q1 total net income - $2B - Net income from GM financial - $0.2B

 

[techmaven]

Powerwall will be a final piece of Solarcity's ability to fully migrate to a grid services aggregator. I think we have to start examining the current evolution of the grid and how Solarcity-tesla are developing their business model to it.

Solarcity already has access to hundreds of thousands of home systems. They are now installing smart inverters with their systems so some of the grid services can be implemented as those neighborhood networks grow this year. I gather this will be apart of valuing solar under net metering regime already in place right now, but sure what they'll do before large number solar+storage+ smart inverter which is the completed system for maximizing all grid related services Solarcity will offer.

Long term, sure.

The problem is the actual inverters themselves. Only one SolarEdge inverter supports the PowerWall today. That's the SE7600-US. It has extremely limited availability, and the StorEdge parts are even scarcer. The upfit cost to add PowerWall support is somewhere in the $1,000 to $1,500 in parts alone. And it only supports a single PowerWall even though a single PowerWall peaks at 3 kW.

In the context of PowerWall 2.0, the product line is just not particularly optimal as a result, even with the addition of another compatible inverter (it's smaller, and again a single PowerWall). Plus, it is likely economically not beneficial to replace the existing inverters of existing site installs. Instead, it is best to replace them when they die (10 years or so). We'll have PowerWall version 3 before the inverter situation is sorted out. PowerWall 3 will cut out SolarEdge altogether if SolarEdge can't keep up. There are rumors that the SE10000's will get StorEdge support, but honestly, at this point, it seems that SolarEdge can't get their act together. I haven't been impressed and I say that as a sometimes SolarEdge investor and someone that has been eager to buy their PowerWall related products.

There were a bunch of opaque references that Mr. Musk made to this situation during his SCTY call... I don't know for sure that this vague descriptions are exactly this situation, but I strongly suspect so... There are also questions on the commercial side, but I know less about that.

There are also the very real logistical implications of moving even a single GWh of battery storage as PowerWalls. That's almost 143,000 installs of PowerWalls at one each house.

 

[doctoxics]

They do have PowerWalls on order... it is possible to order them through various resellers. In addition to that, they have the reservation list, but they have had so little demand that they haven't bothered to contact people on that list yet.

I am on that list. They did contact me to ask the specifics of my storag/solar/inverter setup (off grid) and said that a local installer would be in contact with me; that was three months ago and still no word. I am not in a hurry now, since waiting for a fully rationalized all-Tesla system appears to be the way to go.

 

[Foghat]

Long term, sure.

The problem is the actual inverters themselves. Only one SolarEdge inverter supports the PowerWall today. That's the SE7600-US. It has extremely limited availability, and the StorEdge parts are even scarcer. The upfit cost to add PowerWall support is somewhere in the $1,000 to $1,500 in parts alone. And it only supports a single PowerWall even though a single PowerWall peaks at 3 kW.

In the context of PowerWall 2.0, the product line is just not particularly optimal as a result, even with the addition of another compatible inverter (it's smaller, and again a single PowerWall). Plus, it is likely economically not beneficial to replace the existing inverters of existing site installs. Instead, it is best to replace them when they die (10 years or so). We'll have PowerWall version 3 before the inverter situation is sorted out. PowerWall 3 will cut out SolarEdge altogether if SolarEdge can't keep up. There are rumors that the SE10000's will get StorEdge support, but honestly, at this point, it seems that SolarEdge can't get their act together. I haven't been impressed and I say that as a sometimes SolarEdge investor and someone that has been eager to buy their PowerWall related products.

There were a bunch of opaque references that Mr. Musk made to this situation during his SCTY call... I don't know for sure that this vague descriptions are exactly this situation, but I strongly suspect so... There are also questions on the commercial side, but I know less about that.

Solarcity is now installing smart inverters with their systems and I think they've been doing so since late last year, so if is safe to say they have amassed thousands of customer installs with smart inverter capabilities right now, today. They actually already have a "pilot" group of solar+storage(joint venture with solaredge and others)in specific areas in California, so the aggregation capability of Solarcity is being run as I write this. I think they will be actually pushing data on this at some point, potentially late this year.

They are much further ahead in this area then most think, certainly well ahead of much of the competition. A key factor is Solarcity already has hundreds of thousands of customers that they can go back to at any point along the 20'year contract and upsell them on powerwall (inverter included).

Again, I suspect Solarcity only needs a few hundred homes with solar+storage installed to begin offering grid services, so powerwall 2.0 initial production roll out might sizable enough to create the first aggregation size necessary to offer these services. I also suspect this will happen first in California in one of the three major utilities service territories, most likely PG&E...

 

[neroden]

Can I ask a question regarding Margins account? Assuming if I bought and sold a stock, and without waiting for cash settlement back to my account, and I proceed to immediately 'Buy' another stock, is this considered as margin trading (or margin is only applicable when I borrow money that I don't have?)

If you didn't wait for cash settlement, and you didn't have additional settled cash in the account to buy stock with, so that you bought stock using funds which *you did not have settled*, then yes, it's considered margin trading.

Once all the funds are settled, your account is no longer considered to be using margin... so I wouldn't worry about the brokerage lending out your shares during those three days!

 

[Cosmacelf]

Look, the bottom line is that Tesla Energy has been a dud so far. They were supposed to have sold a bunch of Powerwalls and Powerpacks starting 3Q last year - that's 9 months ago. Instead there has been no measurable revenues from Tesla Energy. Yeah, I know, they decided to move Powerwall production to the gigafactory for economies and that delayed them. OR they were seeing such anemic sales that they decided they might as well move production to the gigafactory since they weren't selling many anyways and/or compatible inverters have been so slow to reach market that the addressable market is minuscule.

As people have pointed out, there is only one inverter than is compatible with Powerwall, and once you add in extra StorEdge costs, it isn't an easy sell. Solar panels are hard enough to sell since you are essentially competing on price (the electricity that different system produce is the same, a true commodity).

Solarcity was supposed to be their big Powerwall and Powerpack channel. It is very possible that due to product integration issues, Solarcity hasn't been as great a channel as Tesla would like.

And yes, Tesla has very much agreed to buy a certain number of cells from suppliers putting them behind the eight ball.