Short-Term TSLA Price Movements - 2016

[Seesaw]

Yeah last release was on a Sunday around noon from memory

Would this link be the first place the numbers show up? Press Releases | Tesla Motors

 

[larmor]

The whole point of openai is thst their discoveries will be open source

I thought open source so we humans will know when skynet will become self aware...

 

[PaulRocket]

Yeah last release was on a Sunday around noon from memory

Would this link be the first place the numbers show up? Press Releases | Tesla Motors

Yes, thats were the release would show up. What are peoples guesses? Today or tomorrow? I'm thinking today but the release might have a bigger effect on the stock price if they announce the delivery number at market opening tomorrow...

 

[TrendTrader007]

TSLA chart is like a coiled spring
Ready to jump up big time on Q3 #s

 

[bdy0627]

I think the consensus is tomorrow if it's good for the increased market effect, and today if it's not so good to possibly dampen the effect. That's probably why it was on a non-market day last time. Given Elon's enthusiasm for the quarter's results, the announcement this time should come on a market day.

 

[EinSV]

Thanks for digging that up. I really gotta read Electrek more often. Do note that Elon's estimate of 25% GM was after full production of 500,000 vehicles which he estimates by the end of the decade. So maybe by 2021, or five years from now, it'll get there. Unless things change, like they realize they need to make 1,000,000 cars a year.

If they do what they've done at all other product launches, ship highly optioned cars first, that will help mitigate early low margin numbers.

I agree that margins will be lower initially -- at least through 2018 -- until Model 3 production v.1.0 or 2.0 is up and running. But I believe "full production" of 500,000 Model 3s is planned by 2019. In fact, I believe they are targeting 500,000 run rate at the end of 2018 (that is my inference from a number of things) in order to hit a total Model 3 output of 350,000-400,000 in 2018. Time will tell whether they approach 25% GMs in 2019 or whether that will require further production refinements.

Side note, but I think "full production" in this context means the same thing as the original 20,000 per year estimate for full production of the Model S -- i.e. an "initial" full production. The number will very likely be much higher than 500,000 by 2020 IMO.

I suspect the market really isn't going to care too much about the margins, they will be much more focused on demand and ability to deliver quickly. Many people think 500,000 Model 3s in a year is a pie in the sky demand figure. If that number turns out to be accurate, margins won't matter.

You are probably right about many people thinking 500,000 Model 3s in the year is a "pie in the sky demand figure." Personally, I find disbelief on Model 3 demand somewhat bizarre given 373,000 people already made pre-orders without even stepping foot in the car or seeing it in person. But I am thankful for the skeptics who have kept the TSLA share "sale" alive all year so I can keep going back to buy more. FWIW, my sense is that there is more skepticism on the production than demand side, but I suppose that doubts on the production side are more of a short-term issue with long-term skepticism focusing on demand and profitability.

If that number turns out to be accurate, margins won't matter. I keep going back to Amazon as an example. They had near zero margins for many, many years, all while gobbling up market share, raising equity, and turning themselves into a retail monopoly (not yet, but you can see a path there) AND creating whole new industries out of thin air (they dominate in the huge cloud processing space, and watch out for Twitch).

I agree that given how much the market seems to discount Tesla's ability to meet their Model 3 projections, just hitting the sales numbers will likely be a huge win, as long as they can do so at a modest margin. But if Tesla can ultimately achieve anywhere close to the 25% gross margins Elon has predicted for the Model 3, that should also be a very powerful upward force for the share price.

Tesla is very similar. Tesla Energy is poised to dominate in storage - we are finally seeing real progress here with the latest two Powerpack installations, and the Gigafactory isn't even producing yet. And obviously Elon has a plan for SolarCity.

I totally agree re TE, and it looks like TE's potential will become increasingly visible in the near future.

 

[dennis]

Since the RVG program ended in time for Q3, they can now recognize the full value of the lease proceeds right away for GAAP purposes, but it only applies to 'direct leases' and not partner leases. Partner leases are treated as non-GAAP revenue.

Isn't it the opposite, i.e. revenue for partner leases can be fully recognized for both GAAP and non-GAAP since Tesla is selling the car to the leasing partner and getting paid in full. In the case of direct leases, for GAAP purposes Tesla can only recognize the revenue for the principal portion of the monthly payments as those payments are received. They recognize the full amount of the direct lease upfront for non-GAAP accounting.

This means that the higher the percentage of direct leases, the bigger the difference between the GAAP and non-GAAP revenue line. Getting the new leasing partner in Q3 should have a positive effect on GAAP revenues vs. increasing direct leases in Q3 from 8% to 15% which was forecast in the Q2 earnings call.

 

[sdtslafan]

I agree that margins will be lower initially -- at least through 2018 -- until Model 3 production v.1.0 or 2.0 is up and running. But I believe "full production" of 500,000 vehicles is planned by 2019. In fact, I believe they are targeting 500,000 run rate at the end of 2018 (that is my inference from a number of things) in order to hit a total Model 3 output of 350,000-400,000 in 2018. Time will tell whether they approach 25% GMs in 2019 or whether that will require further production refinements.

Side note, but I think "full production" in this context means the same thing as the original 20,000 per year estimate for full production of the Model S -- i.e. an "initial" full production. The number will very likely be much higher than 500,000 by 2020 IMO.



You are probably right about many people thinking 500,000 Model 3s in the year is a "pie in the sky demand figure." Personally, I find disbelief on Model 3 demand somewhat bizarre given 373,000 people already made pre-orders without ever seeing the car. But I am thankful for the skeptics who have kept the TSLA share "sale" alive all year so I can keep going back to buy more. FWIW, my sense is that there is more skepticism on the production than demand side, but I suppose that doubts on the production side are more of a short-term issue with long-term skepticism focusing on demand and profitability.



I agree that given how much the market seems to discount Tesla's ability to meet their Model 3 projections, just hitting the sales numbers will likely be a huge win, as long as they can do so at a modest margin. But if Tesla can ultimately achieve anywhere close to the 25% gross margins Elon has predicted for the Model 3, that should also be a very powerful upward force on the share price.



I totally agree re TE, and it looks like TE's potential will become increasingly visible in the near future.

For me the bigger question is how they will service these cars and provided unimpeded supercharger access for a cumulative set of cars that is increasing in number by 500,000 year.

I know Tesla is very good at thinking outside the box. Perhaps they will increase the scope of the ranger service to help with this or maybe they will partner with another company. I know personally I will feel much more confident in my investment when I see a plan to tackle these issues. Anecdotally, I recently called service on a Monday because my front vanity mirror broke. A ranger was able to come the next day and replace it. Could most work be done with rangers? I asked the ranger who came to my house and he said that a lot of the work (including annual service) must be done in the service center because they have to raise the car.

Of course we know that Elon and company and doing their best to continuously improve car design so that service / repairs are less frequent. But a fleet growing at 500K per year is no joke. Chanos has on more than one occasion discussed this in his criticism of Tesla.

I would love to hear from John McNeil how he plans to grow the service program and supercharger network to meet ever increasing demands in a cost effective way. Best way of course is "preventative medicine" where issues don't arise in the first place.
Could we be moving toward a partnership with say Pepboys or MIdas with their employees getting certified for working on Tesla cars?

I don't know but look forwarding to finding out...

 

[EinSV]

For me the bigger question is how they will service these cars and provided unimpeded supercharger access for a cumulative set of cars that is increasing in number by 500,000 year.

I know Tesla is very good at thinking outside the box. Perhaps they will increase the scope of the ranger service to help with this or maybe they will partner with another company. I know personally I will feel much more confident in my investment when I see a plan to tackle these issues. Anecdotally, I recently called service on a Monday because my front vanity mirror broke. A ranger was able to come the next day and replace it. Could most work be done with rangers? I asked the ranger who came to my house and he said that a lot of the work (including annual service) must be done in the service center because they have to raise the car.

Of course we know that Elon and company and doing their best to continuously improve car design so that service / repairs are less frequent. But a fleet growing at 500K per year is no joke. Chanos has on more than one occasion discussed this in his criticism of Tesla.

I would love to hear from John McNeil how he plans to grow the service program and supercharger network to meet ever increasing demands in a cost effective way. Best way of course is "preventative medicine" where issues don't arise in the first place.
Could we be moving toward a partnership with say Pepboys or MIdas with their employees ygetting certified for working on Tesla cars?

I don't know but look forwarding to finding out...

An adequate number of Superchargers is an important issue but IMO it is a much lesser challenge than creating and implementing the Supercharger network was to begin with. It seems to me it is primarily a matter of timing -- balancing cash flow management with ensuring an adequate number of Superchargers for Tesla owners. Same with service centers. Again, important to get the timing right to not spend too much too soon or wait too long and have a bunch of angry customers. But Tesla hired a bunch of planning geniuses to handle these sorts of issues so hopefully they'll do a reasonably good job at it.

FWIW, I personally would rather see Tesla err on the side of installing more Superchargers and service centers sooner rather than later, but investors who focus on quarterly reports may have a different perspective and in any case Tesla needs to continue managing its cash as efficiently as possible.

Chanos and other shorts will always find something to complain about. If not service centers, then air pollution permits. I don't find this particular argument very compelling as an investor.

Having said all that, I agree with you that learning more details on the plan to build out service centers and Superchargers in the coming months would be helpful to investors and current and future car owners.

 

[winfield100]

For me the bigger question is how they will service these cars and provided unimpeded supercharger access for a cumulative set of cars that is increasing in number by 500,000 year.

A ranger was able to come the next day and replace it. ........and he said that a lot of the work (including annual service) must be done in the service center because they have to raise the car.

The size of the Service Center in Rockville, Maryland has doubled in size over the last few years

I would love to hear from John McNeil how he plans to grow the service program and supercharger network to meet ever increasing demands in a cost effective way.

I suspect the "road trippers" will point out that "frankenplug" Chademo and others are max 50Kw and superchargers are at least 2.5 times faster.
When 1 automaker uses the Tesla standards and starts partnering with installing, the "gates will open"

I also suspect Tesla Energy will be much bigger than Tesla vehicles, it will take a lot of coin to finance SpaceX and Mars

 

[Krugerrand]

Excellent, except for the huge number of drivers who aren't pilots, and don't know that; in my mind, a thorough education campaign by Tesla to all the drivers describing what autopilot means to pilots would be very pertinent and fix this issue...

Except that as adults we're responsible for our own education. At some point we all need to grow up and stop blaming others for our inadequacies, mistakes, laziness etc... If you don't know what auto pilot means, look it up; Google and Websters are both your friends.

Tesla already takes the time to educate its customers and has always shown a willingness to answer whatever questions a current or potential owner may have.

And no, putting together some elaborate educating campaign won't fix the issue as there will always people who think they know better, don't care to know or learn, or otherwise are incapable of comprehending or accepting their responsibility in it all.

 

[Novice]

TSLA chart is like a coiled spring
Ready to jump up big time on Q3 #s

Where do you expect the spring to propel the SP to ? Say in the span of days to weeks ?

 

[Cosmacelf]

WRT CA disallowing the AP label, note that this is just a proposed law, and Tesla will provide input and/or get ready for it. I don't anticipate any significant negative fallout from it.

OT, but a car AutoPilot is significantly different from a plane Autopilot and for this and other reasons I agree with CA that the name might have to change. Airplanes do not have to worry about other airplanes driving right beside them and cutting them off. Air traffic controllers try to ensure that planes close to each are flying at different altitudes. Even small single engines planes can now have local warning systems that alert them to approaching planes and the big jets that have Autopilot certainly have this technology. The point being that pilots can and do take their eyes and attention off the controls for significant periods of time when flying while using Autopilot. They can do this because avoidable events develop slowly over time with warnings, while sudden events weren't avoidable anyways. Unlike a car, where sudden avoidable events occur frequently enough. So, no, both types of Autopilot (plane and Tesla) are not the same, so using different labeling is probably appropriate.

 

[brian45011]

Isn't it the opposite, i.e. revenue for partner leases can be fully recognized for both GAAP and non-GAAP since Tesla is selling the car to the leasing partner and getting paid in full.

As long as Tesla guarantees the residual value to a bank leasing partner, the transaction is treated as a lease under GAAP, ie revenue is deferred with about half recognized over the term of the lease while COGS is depreciated down to the residual value guaranteed.


I

In the case of direct leases, for GAAP purposes Tesla can only recognize the revenue for the principal portion of the monthly payments as those payments are received. They recognize the full amount of the direct lease upfront for non-GAAP accounting.

"We anticipate that direct leasing will rise from 8% of deliveries in Q2 to about 15% of deliveries in Q3, as we have reached our funding limit with a banking partner. We anticipate adding new partners that will allow us to fund our planned growth in the future. We recognize revenue on directly leased deliveries as cash is received over the lease term of typically three years, on both a GAAP and non-GAAP basis."

Deutsche Bank apparently is one of the anticipated new partners:

"According to a filing with the SEC, Tesla can draw from the loan until August 31, 2017, and it has to pay back the full amount by September 20, 2018. The interest rate adds up to approximately 2.0%."

The 2 year leases apparently used a money factor of 0.0018 (which equates to an interest rate of ~4.3%) so Tesla is making a little on the arbitrage but the critical issue is the residual value. Tesla apparently adds the federal tax credit to the residual value of direct leases thus reducing monthly lease payments. However, if the leasee returns the vehicle at the end of the two year term it is questionable whether the residual value will be above or even close to market value. Since Tesla as the direct lessor is the initial entity to title the vehicle, it's unlikely anyone receives any financial benefit from the credit since Tesla has over a billion of tax losses to carry forward.

Two year leases are doubtlessly beneficial to allow the company to make the transition to the mass market M3, by allowing those potential customers to drive a Tesla in the interim. The issue with residual value on the 2 year leases is whether the depression in their market value because of the ready availability of the M3 is offset by the profits from the high volume of those cars that will be sold.

 

[MitchJi]

There's a different method to estimate delivery numbers. When Elon sent the email I think what he meant is that he knew that Tesla is going to be gaap profitable and he wants to maximize that as much as possible. So a different method than multiplying a guess at weekly production by 12 or 13 would be to try to figure out how many cars are required for gaap profits and add 100-2000 cars. So if 24,950 is required for gaap profits then Fred will need to shave his head.

I'm not a good person to do that though.

Someone posted that if there is a 10% or more bump in the SP they will sell. I think that Elon is trying to bump the SP prior to a raise, and I think he has more bullets. So unless he announces a capital raise in the interim I don't plan to sell anything before the TE V2 and the November ER-CC. I might take some steps to protect large gains though.

Edit Addition:
I believe that the number of shares available to puris abnormally low now.

 

[doctoxics]

This data shows that Tesla has likely (we'll know for sure tomorrow) quadrupled both deliveries and GAAP revenue in 11 quarters while peak stock price and market cap have not changed. Also of note, is that Tesla has not reported a GAAP profit in any of these quarters, except for that possibility in Q3 2016.

The numbers for Q3 2016 are my guestimate for deliveries (based on Tesla guidance) and the ratio of deliveries to GAAP revenue from Q2 2016 to guestimate GAAP revenue for Q3 2016. Shares for Q3 2016 are a guestimate from current shares and share increase trend line.

So, from all of this, what should we expect the stock price to be? If the Q3 GAAP profit is anywhere near even (no worse than 11 quarters ago), the stock price should be four times the current price, based on the stock price 11 quarters ago and a four-fold increase in deliveries and revenue. The outstanding near-term prospects for Tesla Energy, Model 3, autopilot, etc should be additional reasons for the stock price to appreciate in proportion to deliveries and revenue. From the table, it is clear that this has not happened. Are we about to catch up?

 

[doctoxics]

 

[Quesder]

View attachment 197150

for real? 27K
We all regret that we didn't buy more last week. Well, maybe only I do.

 

[dennis]

As long as Tesla guarantees the residual value to a bank leasing partner, the transaction is treated as a lease under GAAP, ie revenue is deferred with about half recognized over the term of the lease while COGS is depreciated down to the residual value guaranteed.

So while Tesla no longer offers RVG's to individuals, does it still offer RVGs to all bank leasing partners? If so, does that mean there is no difference in GAAP revenue recognition for direct leases and third party leases?

 

[KLC13]

Long time lurker here, this forum is a great place for info but sometimes tends to be too positive I think. I started my job after university in June 2014 and first bought some stock in Q3 2014 (peak stock price quarter). Since then I've seen my investments fluctuate (mostly downward), and I tend to buy whenever the price is below $200 (and if I have some free cash).
I think Q3 deliveries will be around 26k (24k produced, 20k delivered + 5k from Q2 pipeline +1k from inventory sale). I've already faced the wrath of TSLA bears like Mark Spiegel on Twitter, good to see he is gradually inching towards this 26k number (his latest tweet says 23k, it was 22k last week).

What bothers me is that this still leaves around 24k deliveries for Q4, which seems difficult with 2 weeks of production downtime + end of year customer vacations etc. Do you guys really think we can meet 50k H2 guidance even with 26k deliveries in Q3?
Thanks!