Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[traxila]

That's the only thing in all this that rubs me the wrong way. Wrong about how quickly you could deliver overseas? Had to revert to a fallback plan of focusing on domestic, too late to get your numbers up? Okay. I got that. This sort of geographic expansion is difficult. It's understandable.

But try not to act all happy and distracted if you have bad news coming up.

Wow. Talk about unloading on Musk for not being suicidal. Perspective?

I am sure he forgives you.

 

[Causalien]

Good stuff....only thing that worries me is whether they lowered the sale price so much that GM is lower than we anticipate.

OTOH, there should be an uplift from self driving software sales.

Which part of the software can be recognized as sold under GAAP? Been trying to figure this out. I am assuming margin to be worst due to layoffs happening this quarter.

 

[bhtooefr]

Nobody would have looked at these numbers and thought, "This is good news".

Except for someone who was afraid of worse news.

To put it another way, half of the deliveries were done in 80 of the 90 days of the quarter.

Had that rate continued, we would've been at 35,438 deliveries instead of 63,100.

That is probably why Musk was happy.

 

[KarenRei]

Wow. Talk about unloading on Musk for not being suicidal. Perspective?

I am sure he forgives you.

You know that's not what I said.

I simply expect him not to be publicly acting like life is a joke when he has bad news to break. Same dignity I'd expect from a doctor who had bad news to break. If a doctor had to tell me I had cancer, I'd hope he wouldn't be laughing and joking it up immediately before he turns to me and tells me the bad news.

 

[Artful Dodger]

Given the concerns raised by MS in the above note (I hate Jonas and MS), Tesla would be wise to release their ER as soon as possible, especially if the cash balance is on the order of 2.5 - 3.0B, or at least file an 8k with the latter info. That would stop the panic I think.

Adam Jonas called Tesla "overvalued on fundamentals" and "undervalued strategically".

MorganStanley wants to be the broker in a takeover attempt. Driving the SP down is a prelude to that move.

 

[TheTalkingMule]

But try not to act all happy and distracted if you have bad news coming up.

What if he's legitimately happy and distracted? Tesla has ramped Model 3 production and SpaceX is on it's way to Mars!

Buy low, sell high.

 

[Tslynk67]

Isn't this pretty much what was guided? Are we 10% below delivery expectations?

CNBC of course has it quoted as "deliveries down 31%". Where's that come from? Not 4Q, right?

Yes, they're comparing to Q4 and taking no account of seasonality or anything else.

 

[Singuy]

Except for someone who was afraid of worse news.

To put it another way, half of the deliveries were done in 80 of the 90 days of the quarter.

Had that rate continued, we would've been at 35,438 deliveries instead of 63,100.

That is probably why Musk was happy.

Yeah seems like delivery hell had them ramp down production or else more loss on the balance sheet.

 

[Tslynk67]

Long longs - buy/meh
Weak longs - sell/panic
Day-traders - opportunity/happy
Option-gamblers - despair / elation, depends
Shorts - dancing in the streets

A reminder to those holding common stock - you only lose when you sell.

 

[jbcarioca]

...

You don't have to look far for an example in the automotive industry: Opel.

It's a well-known fact that VW's massive FUD campaign in the 80s and 90s, together with EU-wide help of media – most notably the German car magazine "Auto Bild" and its sister magazines – positioned the formerly well-respected Opel brand in such a way that they became toxic to most. Actually, Opel is still the laughingstock in the German automotive scene. They have yet to recover from this smear campaign.

Were this example valid it would indeed be a powerful analogy. However, it is not valid. During the late 1980’s and early 1990’s GM had high profits from Opel/Vauxhall that the used to offset losses in NA. They then neglected capital investment in Opel. Promptly the vehicles became obsolescent. All this is well documented including the colorful Opel history since 1929. The wiki is informative although it ignores the causes for Opel failures under the flailing GM of the 1980’s and 1990’s. The were totally unprepared for new EU emissions rules so made a gift to PSA, which has made rapid progress. Check SAAB, transformed into a Chevy Malibu, for other GM idiocy of the era. Add Hummer, Saturn, Oldsmobile and Pontiac and the picture of GM forgetting their competences becomes more clear.

FWIW in 1985 I did considerable consulting work with senior GM management. When one of them (nameless here because he is still alive) visited my offices we drove to a meeting in my BMW 5-Series. He asked if he could drive. It was, he said, the first time he had ever driven a non-GM car. He at the time was one if the signatories for GM Europe investments. His shock was palpable. Of course he continued blithely on until the eventual BK.

In sum, exactly zero analogy from Opel to Tesla. Opel was not receiving FUD. They indeed were awful. For reference I was forced to endure an Opel Commodore company car in that era when I also had a BMW personal car at the time. The comparison made the alleged FUD into FUC (Factual Unbelievable Certainty).

We have enough problems with FUD including in Germany. We need not use non-analogous comparisons.

Tesla FUD seems almost completely derived from Tesla challenge to the established order. Thus, indeed, VAG, BMW, DB, most major oil companies and auto dealers are the only conspirators we need.

I apologize if I have seemed rude. I do not intend that.

The wiki, cursory but largely correct:
Opel - Wikipedia

 

[Fact Checking]

Can you please quickly recap or point me to the posts with the rationale for "raising cash now is unnecessary and counterproductive" ?

So this is how I see cash generation and cash constraints: basically starting from somewhere around 3k/week Model 3 production Tesla is cash break-even, and even at 5k/week levels it was generating enough cash from operations to help pay for expansion and debt service. S/X is cash break-even at much lower production levels - even 12k S/X deliveries probably generated ~around 500m of cash.

The next big long term debt repayment isn't due for about two years, and the cash generated is enough for planned capex and some left over for discretionary capex, even at Q1 levels AFAICS. (But Q1 financials will help a lot in quantifying this.)

I.e. basically the costs and risks of being temporarily cash constrained (as correctly predicted by @schonelucht: I made a big mistake in attacking him for that view, mea culpa!) were paid in Q1. There's no $920m drain in Q2 or Q3, and as production picks up for Q2 payables expand again. At the end of Q2 Tesla will again have ~1b more unrestricted cash than at the end of Q1, which allows faster ramp-up in Q3, etc.

As for demand, Model 3 production increased slightly in Q1 and deliveries only dropped by 6% if we compensate for in-transit vehicles and assume 1,000 S/X units in transit:

• Model 3 deliveries Q4'18: 63,150+1,010 = 64,160
• Model 3 deliveries Q1'19: 50,900+9,600 = 60,500

For S/X demand, the Q4 pull-forward was more brutal for the S/X than the Model 3, probably because the customers who can afford an S/X were more likely to have enough federal tax liabilities to take advantage of the full $7,500 tax incentive - so for them Q4 was the real tax cliff.

For many Model 3 customers who are probably closer to the ~$3k median federal tax liability end of Q2 is probably the tax cliff. (I.e. some U.S. demand would be pulled forward from Q3 to Q2.)

Note that a good portion of the S/X drop in deliveries was probably also seasonal: the Q4'2017 => Q1'2018 drop was $28.3k=>$21.8k, a -30% or 6.5k units drop in deliveries.

There was a freakout after Q1 deliveries last year as well, which was followed by an S/X deliveries recovery in Q2 and later quarters.

Anyway, this is just a back of the napkin estimate and could still be overly bullish so it's certainly not advice, and I'm curious about the Q1 financials which should be posted in a couple of weeks, and about how cash generation rate and margins are looking like at these production levels. If cash from operations is still around $1b or slightly below (it was ~$1.4b in Q3 and Q4), then this demonstrates that Tesla is able to scale their production up and down pretty well and they can earn their capex levels without an equity raise even in adverse circumstances.

 

[traxila]

You know that's not what I said.

I simply expect him not to be publicly acting like life is a joke when he has bad news to break. Same dignity I'd expect from a doctor who had bad news to break. If a doctor had to tell me I had cancer, I'd hope he wouldn't be laughing and joking it up immediately before he turns to me and tells me the bad news.

Your analogy had to do with cancer news.

Please don’t take this the wrong way as this applies to me as well, probably more so , and I do love your posts, but you need to get out more.

 

[Webeevdrivers]

The CHAdeMO adaptor is in the Tesla store, but it's under chargers, not under each model.

Yes but it doesn’t work with the model 3 unfortunately. The model 3 is limited to the Supercharger systym. I think for most people that isn’t a problem but in our province the Chademo/CCS locations outnumber Tesla locations 10 to 1 and growing fast. Superchargers are awesome but they don’t cover areas that we have to travel.

 

[Artful Dodger]

Unfortunately, in the near term I think this means that Tesla continues downward in the wedge pattern it has been stuck in...

If there is nothing to break it out of it, you could see $220 by June-July.

There will be a bounce if the judge dismisses the SEC motion for contempt.

I estimate about $30-$40 of the SP decline is due to the Yosemite SEC action. Sidelining institutional investors was a huge coup for the shortz.

The rest is paid/sponsored FUD and the shortsightedness of Wall St.

 

[SO16]

Because they were giving away the 100D. The 3 is too good of a value and is taking sales from the S.

Giving away? How much were they selling the 100D for?

 

[trentbridge]

“ We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019. “

Focus on the future - this is the positive news! Tesla is looking at orders and sees that deliveries will be more than 90,000 per quarter for the rest of the year. If they had lowered guidance then the stock plunge would be justified but Tesla has stuck to its plan for the year. So Q1 is not seen as a harbinger of lowered demand - it is a hiccup in the process of delivering vehicles globally.

 

[Antares Nebula]

Except for someone who was afraid of worse news.

To put it another way, half of the deliveries were done in 80 of the 90 days of the quarter.

Had that rate continued, we would've been at 35,438 deliveries instead of 63,100.

That is probably why Musk was happy.

This is a very good point. If Musk and Tesla did not put in a supposed herculean effort at the end of Q1, it could have been much, much worse. No doubt that this is bad, but you don't really see the big name bull investors (Loup Ventures, Gerber, Ark, etc.) or bull analysts abandoning ship, but you would have if deliveries were 30-40k. Tesla may just sneak by here and survive and prosper the rest of the year. Keep perspective folks 63k vs 75k consensus is bad but not a disaster. Even Dan Ives (Wedbush) pointed out that M3 beat the whisper number.

 

[jerry33]

Yes but it doesn’t work with the model 3 unfortunately. The model 3 is limited to the Supercharger systym. I think for most people that isn’t a problem but in our province the Chademo/CCS locations outnumber Tesla locations 10 to 1 and growing fast. Superchargers are awesome but they don’t cover areas that we have to travel.

I had a number of people, during the last event, say that Tesla had removed them from their store when they were only relocated to the charging section. That's why the post.

 

[Fact Checking]

FUD does cause long-time and often irreversible damage to a brand.

FUD inflicts temporary damage (which is why the FUDsters are active), but I disagree that it's irreversible, because most of the FUD is shallow and self-defeating against just a little bit of exposure to a Tesla product.

This can be seen in yesterday's episode of Tesla trolls descending on Cheryl Crow when her Model 3's screen went dark, to which in the end she responded:

Sheryl Crow on Twitter

"Problem solved! LOVED all of your creative responses. Best one was suggesting my kids take a look... which would have been helpful since my kid was the one who changed the settings / caused it to go black in the first place! I knew I should have interrupted school..."

"Also, for the haters: I love my @tesla, and have very few problems. I got the basic model, nothing overly fancy, and it was cheaper than my minivan!"​

These are powerful testimonials from owners, and while it's slower than buying favorable media treatment, it demonstrates that the FUD is not irreversible.

There were a lot of Apple haters as well when iPhone market share was still small and growing, and media treatment of Apple was dominantly unfair and biased as well - despite Steve Jobs communicating in an almost picture-perfect way. There's just no pleasing of biased observers if attacking a company is in their financial self-interest.

 

[traxila]

“ We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019. “

Focus on the future - this is the positive news! Tesla is looking at orders and sees that deliveries will be more than 90,000 per quarter for the rest of the year. If they had lowered guidance then the stock plunge would be justified but Tesla has stuck to its plan for the year. So Q1 is not seen as a harbinger of lowered demand - it is a hiccup in the process of delivering vehicles globally.

Maybe. I think it is. But of course it has to be proved again and again while the FUD flows relentlessly forever. This is a tough haul. Should be easier, but people....