Short-Term TSLA Price Movements - 2016

[MitchJi]

https://electrek.co/2016/08/04/tesla-energy-unveil-new-products-end-year-pushes-volume-deliveries-q4

During the following conference call, an analyst asked Musk to comment on the stationary storage business and the CEO confirmed that products are currently heavily production constrained.

“We are heavily production constrained. We’ve got our next generation technology and we are trying to get up that production line so it’s gonna be heavily concentrated in Q4 and primarily in November and December.”

The CEO did follow-up with his usual enthusiasm for upcoming products, but as usual, he also doesn’t want to announce anything in a earnings conference call:

I think it’s going to be really exciting when people see it. That’s why I expect exponential growth from there. I think it’s really going to go ballistic.

Musk recently talked about making the Powerwall smaller and the company recently confirmed that it will integrate the inverter to the system, but the biggest change will likely be seen on the energy side.

Tesla reiterated last week that its new 2170 battery cell will enter production “later this year” and that they will first be used in Tesla Energy products. It’s in line with Musk comments that the production will ramp up toward the end of Q4.

Related link:
On building a Tesla Solar inverter/hub: ‘we are probably the best in the world on advanced inverter technologies’ – Elon Musk

 

[dakh]

To look at it another way, people who actually credit Tesla with a good chance of meeting its automotive and other targets, like Ron Baron, project that the company will be worth 20-30X the current valuation. That is not priced into the stock, obviously.

Yes it is. So are the risks of it not happening. You gotta remember, people hate losing money much more than they like making money. Yes the happy scenario has big payoffs but the unhappy one makes for big losses.

yes. very good point. and I do come off at times as if I'm suggesting complete irrationality for the long argument and shouldn't. and you've found one of my weak points in that I haven't taken the time to do DCF on TSLA... but I have reviewed some that have been made available.

regarding price to book. while TSLA currently trades at 12... instead of using that to extrapolate... I instead in the past and just now have reviewed the rest of the industries p/b and unfortunately see this as another extreme outlier for Tesla... on quick review I see that Ford, Toyota, Nissan and GM all have a p/b ranging from 0.9 to 1.2... where as you stated Tesla is 12. in the past I looked at all major auto companies for this and found they were all bound in a similar range... except for Tesla.

do you see the P/S and P/B levels for Tesla being well outside of the range that other auto companies are bound in being something that will have to adjust for Tesla down the road or do you see it reasonable to continue to trade significantly outside this range?

and thanks for bringing up DCFs... this is how the sell-side analysts are making their arguments as well.

Please, check your nomenclature. Tesla is not just an auto company anymore.

Also, due to the current monetary policy, there's a whole lot of crazy money out there chasing the piddly returns that are available. This is a chance to go big, so cash supply is abundant.

 

[schonelucht]

The comparison between GM and Tesla doesn't hold ground for many reasons. The most glaring problem is that shorts are comparing a $100k car to GM's $25k car in terms of volume. A popular argument for shorts is that GM produces million plus cars per year. But if GM's highest volume car sells for less than $25k, then GM would need to sell 4x the amount of cars to match Tesla's average selling price of $100k per vehicle. Thus, when doing the math, if Tesla sells 80k car this year, then that is equivalent to GM selling 320,000 cars.

Have you forgotten master plan 1? Tesla is selling a 100k car out of necessity. Its aspiration is selling 25k cars (well, it's creeped up to $35k over the years, but still). There goes your x4 multiplier. The Model S/X side of the business will still be there (although the roadster got phased out with no replacement in sight except very, very vague hints), but it will be marginal (<10%) wrt the rest of the business.

Now let's move forward to margins. Tesla's margins is about twice as much as GM, which means GM would need to sell 640,000 cars at $25k to match Tesla's annual delivery rate of 80k. I don't think this point has been brought up here yet.

But Tesla needs to pay for the equivalent of a dealer network from that gross margin, which balloons their SG&A. In 2014, 19k/car, in 2015 $18k/car and the first six months up again to $22k/car. Sure some of that are fixed costs and will go down dramatically as Tesla scales production and some of it is building out for future expansion. But there remains a portion of work that Tesla has to do (and pay for) that other manufactures get for free courtesy of their dealer network. It's difficult to estimate how large that portion is, but if we compare 2014 with this year, it looks like the fixed part that goes down as volume goes up isn't large. In between 2014 and 2016 volume is on track to increase 250% but SG&A by 220%. An sales efficiency gain of just 13% on more than double the volume.

Net profit wise, there is a distinct possibility that 10 years from now Tesla will not make much more on a per car basis than traditional car makers make today.

 

[Runarbt]

Tesla is selling a 100k car out of necessity.

..no, they sell 100k a year because the demand is there.

If demand reduces to 60k a year of Model S/X when Model 3 arrives, they will sell that many. 25k was an estimate in masterplan1 of what they expected demand to be (and needed?), before demand turned out to exceed this by a huge margin.

Demand which turn out to be larger than expected - imo is only a huge bonus. Enable them to speed up things. Not a necessity, but an opportunity.

Now with increased demand and sales, they have adapted. Just as a demand of 500k Model 3 makes them adapt and speed up production plans (time and volume). Increased cash-burn in the short term, the future though seem very bright. :-D

 

[schonelucht]

if the 10x ramp were to occur as you've described... then we should start to see headlines of such by mid Q4 regarding deals made for Q1 deliveries in the range of 500MWh to 850MWh... yes/no?

[strike]A fivefold increase would mean a ramp up of about 20% per quarter. So we should see deals adding up to at best 250MWh for Q1. In reality, as the novelty of utility scale orders for Tesla starts to wear off I think we'll see less and less of these press releases being widely circulated. [/strike]

What I am looking forward is seeing somewhere around $30M additional gross profit appearing. That should be visible on their services and other revenue line. Actually, I am hoping that they break out TE revenue and cost of goods completely like they do for automotive revenue but I don't think it that's going to happen this quarter.

Edit: Whoops I really messed up the calculations above. It's 80% increase and we should see deals up to 300MWh in Q1, 540 in Q2, 970 in Q3, an 1750 in Q4.

 

[W84M3]

Another big drop in SP pre-market. Back to 204. What is happening?


edit: 202....

 

[ev-enthusiast]

Another big drop in SP pre-market. Back to 204. What is happening?

Downgrade by GS?

 

[joseph7h]

Downgrade by GS?

Goldman cuts Tesla to neutral from buy TwitLonger — When you talk too much for Twitter

 

[Seesaw]

Goldman Sachs downgrades Tesla Motors $TSLA to Neutral from Buy, PT $185
from Goldman:

We downgrade shares of Tesla Motors to Neutral from Buy and lower our 6-month price target to $185 from
$240. Since we added TSLA to the Buy list on May 18, 2016, shares are up 0.1% vs. the S&P 500 +5.0% and our
coverage +6.0%, as management’s deployment of capital for potential M&A has likely weighed on investor
sentiment on the concept stock. We now see incremental risk to the business related to management’s deployment
of capital for M&A, and further believe that any delay in the company’s timeline to launch its new Model 3 will be
detrimental to shares. However, with solid 3Q16 deliveries and the potential downward catalyst of a missed Model 3
launch timeline out in 2H17, we prefer to be Neutral on shares.
Current view
We see room for downward estimate revision as volume ramps slower and spending grows quicker.
While our 2016E EPS is ahead of the Street (-$0.59 vs. Street at -$0.93), our 2017 through 2019 EPS estimates
are an average 48% below consensus. This is the result of our expectation of a slower ramp to the Model 3
launch and incremental SG&A spend as the company continues its heavy investment period, as well as from
increasing R&D associated with the Model 3 and new products.
Pro-forma FCF and leverage a cause for concern. We believe the proposed combination of Tesla and
SolarCity – two high growth, high cash burn businesses, creates a higher risk entity given the combined ongoing
capital needs and higher net leverage that would potentially result. Our illustrative pro-forma analysis
implies 2017E and 2018E FCF burn ranges of $2.4bn to $2.5bn and $1.3bn to $1.4bn with net leverage
increasing to ranges of 6.6x to 6.9x and 3.5x to 3.6x, respectively, vs. legacy Tesla net leverage of 1.1x and 0.9x.
Why are we not more negative? In the near-term we do see Tesla achieving a positive EPS result in 3Q16,
mainly on strength of vehicle deliveries achieving half of the company’s 2H16 guidance. This puts our updated
3Q16 EPS estimate of $0.28 above consensus of $0.07. Additionally, we raise our estimates to fully incorporate
the Tesla Energy business – driving a net positive increase to our 2016 through 2019 EPS estimates.
Valuation
We lower our 6-month price target for TSLA from $240 to $185 primarily as we increase the company specific
risk premium within our discount rate being applied to both our probability weighted automotive valuation
(which values the automotive company on its long-term potential) as well as our Tesla Energy valuation (see
Exhibits 40 and 41 on pages 29 and 30) given incremental business risk from management’s capital
deployment strategy, as illustrated by the announced Solar City deal.

 

[drinkerofkoolaid]

Goldman Sachs downgrades Tesla Motors $TSLA to Neutral from Buy, PT $185
from Goldman:

We downgrade shares of Tesla Motors to Neutral from Buy and lower our 6-month price target to $185 from
$240. Since we added TSLA to the Buy list on May 18, 2016, shares are up 0.1% vs. the S&P 500 +5.0% and our
coverage +6.0%, as management’s deployment of capital for potential M&A has likely weighed on investor
sentiment on the concept stock. We now see incremental risk to the business related to management’s deployment
of capital for M&A, and further believe that any delay in the company’s timeline to launch its new Model 3 will be
detrimental to shares. However, with solid 3Q16 deliveries and the potential downward catalyst of a missed Model 3
launch timeline out in 2H17, we prefer to be Neutral on shares.
Current view
We see room for downward estimate revision as volume ramps slower and spending grows quicker.
While our 2016E EPS is ahead of the Street (-$0.59 vs. Street at -$0.93), our 2017 through 2019 EPS estimates
are an average 48% below consensus. This is the result of our expectation of a slower ramp to the Model 3
launch and incremental SG&A spend as the company continues its heavy investment period, as well as from
increasing R&D associated with the Model 3 and new products.
Pro-forma FCF and leverage a cause for concern. We believe the proposed combination of Tesla and
SolarCity – two high growth, high cash burn businesses, creates a higher risk entity given the combined ongoing
capital needs and higher net leverage that would potentially result. Our illustrative pro-forma analysis
implies 2017E and 2018E FCF burn ranges of $2.4bn to $2.5bn and $1.3bn to $1.4bn with net leverage
increasing to ranges of 6.6x to 6.9x and 3.5x to 3.6x, respectively, vs. legacy Tesla net leverage of 1.1x and 0.9x.
Why are we not more negative? In the near-term we do see Tesla achieving a positive EPS result in 3Q16,
mainly on strength of vehicle deliveries achieving half of the company’s 2H16 guidance. This puts our updated
3Q16 EPS estimate of $0.28 above consensus of $0.07. Additionally, we raise our estimates to fully incorporate
the Tesla Energy business – driving a net positive increase to our 2016 through 2019 EPS estimates.
Valuation
We lower our 6-month price target for TSLA from $240 to $185 primarily as we increase the company specific
risk premium within our discount rate being applied to both our probability weighted automotive valuation
(which values the automotive company on its long-term potential) as well as our Tesla Energy valuation (see
Exhibits 40 and 41 on pages 29 and 30) given incremental business risk from management’s capital
deployment strategy, as illustrated by the announced Solar City deal.

Goldman Sachs has a horrible track record when it comes to Tesla. Huge buying opportunity IMHO.

 

[Gerardf]

They downgraded to almost exactly the current SCTY price. Current pre-market = 20.30
20.30 / 0,11 = 184,54 Coincidence ?


Some other recent ratings :

 

[Tslynk67]

What a load of nonsense... Everyone knows that predicting TSLA SP is akin to herding cats...

 

[ev-enthusiast]

Let's see how many buyers take this dip as an advantage to step in ahead of Q3ER. Will be telling if this downward spike prevails during today's trading session or not.

 

[joseph7h]

Goldman Sachs downgrades Tesla Motors $TSLA to Neutral from Buy, PT $185
from Goldman:

We downgrade shares of Tesla Motors to Neutral from Buy and lower our 6-month price target to $185 from
$240. Since we added TSLA to the Buy list on May 18, 2016, shares are up 0.1% vs. the S&P 500 +5.0% and our
coverage +6.0%, as management’s deployment of capital for potential M&A has likely weighed on investor
sentiment on the concept stock. We now see incremental risk to the business related to management’s deployment
of capital for M&A, and further believe that any delay in the company’s timeline to launch its new Model 3 will be
detrimental to shares. However, with solid 3Q16 deliveries and the potential downward catalyst of a missed Model 3
launch timeline out in 2H17, we prefer to be Neutral on shares.
Current view
We see room for downward estimate revision as volume ramps slower and spending grows quicker.
While our 2016E EPS is ahead of the Street (-$0.59 vs. Street at -$0.93), our 2017 through 2019 EPS estimates
are an average 48% below consensus. This is the result of our expectation of a slower ramp to the Model 3
launch and incremental SG&A spend as the company continues its heavy investment period, as well as from
increasing R&D associated with the Model 3 and new products.
Pro-forma FCF and leverage a cause for concern. We believe the proposed combination of Tesla and
SolarCity – two high growth, high cash burn businesses, creates a higher risk entity given the combined ongoing
capital needs and higher net leverage that would potentially result. Our illustrative pro-forma analysis
implies 2017E and 2018E FCF burn ranges of $2.4bn to $2.5bn and $1.3bn to $1.4bn with net leverage
increasing to ranges of 6.6x to 6.9x and 3.5x to 3.6x, respectively, vs. legacy Tesla net leverage of 1.1x and 0.9x.
Why are we not more negative? In the near-term we do see Tesla achieving a positive EPS result in 3Q16,
mainly on strength of vehicle deliveries achieving half of the company’s 2H16 guidance. This puts our updated
3Q16 EPS estimate of $0.28 above consensus of $0.07. Additionally, we raise our estimates to fully incorporate
the Tesla Energy business – driving a net positive increase to our 2016 through 2019 EPS estimates.
Valuation
We lower our 6-month price target for TSLA from $240 to $185 primarily as we increase the company specific
risk premium within our discount rate being applied to both our probability weighted automotive valuation
(which values the automotive company on its long-term potential) as well as our Tesla Energy valuation (see
Exhibits 40 and 41 on pages 29 and 30) given incremental business risk from management’s capital
deployment strategy, as illustrated by the announced Solar City deal.

How do they know M3 will be delayed?

 

[Gerardf]

Well, this is an interesting section in that :

In the near-term we do see Tesla achieving a positive EPS result in 3Q16, mainly on strength of vehicle deliveries achieving half of the company’s 2H16 guidance. This puts our updated 3Q16 EPS estimate of $0.28 above consensus of $0.07. Additionally, we raise our estimates to fully incorporate the Tesla Energy business – driving a net positive increase to our 2016 through 2019 EPS estimates.
Valuation.

Positive EPS, TE revenues. And still they downgrade by this much.

 

[RobStark]

According to Tesla's CAEATFA (California Alternative Energy and Advanced Transportation Financing Authority) filing for tax exemption of capital goods (by way cleantechnica ) Model 3 is expected to have a pre-tax profit margin of 11%.

Tesla Model 3 — 10 Facts Gleaned From CAEATFA Application

Tesla opening store and service center in New Zealand as soon as 2Q 2017. Superchargers to follow soon afterward. Tesla Energy products to be available as well.

NZ Tesla dealership coming second quarter 2017

 

[Gerardf]

According to Tesla's CAEATFA (California Alternative Energy and Advanced Transportation Financing Authority) filing for tax exemption of capital goods (by way cleantechnica ) Model 3 is expected to have a pre-tax profit margin of 11%.

Interesting information.
That is the estimated pre-tax profit margin, not the gross margin.

Not sure below is a fair comparison, would welcome feedback


For reference for GM it ranges from 2.48 tot 6 % (See below).

Source : General Motors Company | GM | Capital Employed

 

[Novice]

Looks like downgrades always brings a drop to SP but the reverse does not appear to be true. The SP does not react to upgrades from my observation

 

[myusername]

Well, this is an interesting section in that :

In the near-term we do see Tesla achieving a positive EPS result in 3Q16, mainly on strength of vehicle deliveries achieving half of the company’s 2H16 guidance. This puts our updated 3Q16 EPS estimate of $0.28 above consensus of $0.07. Additionally, we raise our estimates to fully incorporate the Tesla Energy business – driving a net positive increase to our 2016 through 2019 EPS estimates.
Valuation.

Positive EPS, TE revenues. And still they downgrade by this much.

shall we talk about valuation again?

 

[stealthology]

OK, so it would make sense that both Goldman and Morgan Stanley hate Tesla now, correct? Remember, back in May, Goldman upgraded Tesla the same day GS & Morgan Stanley announced they are leading the $2B offering. Right after this, Tesla announced their plans to acquire SCTY, which pissed off Adam Jonas of MS and he reduced his target to $245 from something a lot higher.

Realistically, if just about all analysts are expecting GAAP profitability, including GS on the high end.. I'm starting to question how much Q3 ER will really help the stock. Ugh. Not the time to make jokes, but maybe Elon's the pie in the face to Wall St comment (was that e-mail meant to be leaked by Musk?) pissed them off a bit.

EDIT: Man, when I saw these two tweets from Elon, I had a funny feeling something might be bothering him. He was all chipper before delivery announcement. I just attributed his slight crankiness to an unsustained move.