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

[CHGolferJim]

Either you have a crystal ball or your methods and metrics seem pretty darn accurate.

Would you mind sharing how you were able to give us this valuable information?

Asking for a friend who wants to put his life savings into Nikola.

When SP has been plodding along at $178 most of the day, making this call at 1:30?

 

[FSDtester#1]

This is a monthly options expiration day, implyiing more interest than in an ordinary weekly, but less than for a quarterly (Triple Witching).

A survey of today’s open interest and trading volume in TSLA options, suggests that $180 would be the most profitable target for big option writers (hedge funds & market makers) with the ability to temporarily influence the share price.

He posted above at 1:15 today

Max Pain today was 195….

Then how did @Curt Renz get this number? Was $195 max pain last night and it changed throughout today?

 

[M|S|M MYP]

For what it's worth, I ordered a Model Y on July 28th, after it seemed that the new tax credit was a sure thing. At the time estimated delivery was April 2023. Now Tesla's expected delivery is showing December of this year. Today's price is the same as what my original order is. So there is a large incentive to cancel my order and re-order after the turn of the year. I would only be out my $250 deposit. But... I really could use the car now.

In the words of Russell Peters..."Be a man, Do the right thing!"

 

[unk45]

Lol, so much fear, so much misunderstanding:

1. Tesla does not have $20B in cash/equivalents, it was over $21B after Q3 and likely to add over $5 in FCF during Q4 (Tesla already knows how much they'll make in Q4; we won't find up for 2 more months)
2. $20B is not their emergency fund; that's like 3 fully-equipped Gigafactories worth of cash (that's not an emergency, that's a global wipeout, which BTW cash will not fix)
3. Investing in TSLA treasury stock IS NOT SPENDING. It is the purchase of an asset, not an expense. The asset is highly liquid, and extremely good value right now
4. $20B might not be much if you waste money like GM Ford VW or Toyota, but Tesla can go a LONG, LONG way on a dollar (100 workers achieve better results than 350 at companies like Toyota).

TL;dr Relax. It'll be okay.

Cheers to the Longs!

With all due respect you are completely wrong on point 3. Buying your own shares speeded money be reducing your capital base. IT IS spending money.
Next you're correct that Tesla has huge cash reserves. However, you totally misunderstand what happens if sales do cease to happen prior to due date of account payable. That famous and wonderful positive cash flow happens largely from a very fast cash conversion cycle, almost never seen in industrial company. If Tesla suddenly begins to have, say, 30 days inventory on hand, still ow ny industry standards, the magical cash conversion cycle rapidly diminishes

You're correct about smooch misunderstanding. The people who forget how quickly that cash conversion cycle can deteriorate are coping with serious myopia.

You're incorrect also about the fear. It's not fear, but prudence. Where it fear people like me would be selling, which we are not. We will have fear if Tesla begins destroying the very liquidity that protects itself from known existing risks.

Relax? No chance while Europe is in recession, China and EU/NA are quibbling rather pointedly, and so on. This is no time to be imprudent. No panic, but be prepared.

 

[StarFoxisDown!]

Yea I'm referring to both combined being GM neutral, slightly positive. The fact that that two ginormous factories ramping wasn't backed out of a relatively lower GM in Q3 is mind boggling. What Tesla have achieved by ramping up Berlin and Texas while still having positive FCF and only slightly degraded margins is quite simply stunning. Meanwhile VW are cancelling plans for a single factory as it would be too onerous from a cash flow perspective.

Actually, Zach did comment on the earnings call that if Berlin/Austin were factored out, gross margins would have been over 30%.

 

[Max Plaid]

This is a monthly options expiration day, implyiing more interest than in an ordinary weekly, but less than for a quarterly (Triple Witching).

A survey of today’s open interest and trading volume in TSLA options, suggests that $180 would be the most profitable target for big option writers (hedge funds & market makers) with the ability to temporarily influence the share price.

So we've been upgraded from a "cursory glance" to a "survey", honoured, sir!

 

[StealthP3D]

I agree. Think market is betting that Tesla will be stuck with production it cannot sell. What happens to your growth rate then? Doesn’t exist.

This is a lock for every OEM come a recession. They will have oversupply overhangs and bad losses. Market is incapable of digesting a simultaneous S curve and recession for a car manufacturer.

Not sure I blame them. When was the last time a S curve and recession overlapped in the car industry?

I don't blame people for thinking a recession is going to stop or reverse Tesla's sales growth, I just think they don't have a clue as to what is really going on in the auto market.

Even a strong and long-lasting recession is not going to stop Tesla from continually ramping production and sales. The impact will be that margins, which are currently rising, would level off or reverse course, while production and efficiencies continued to increase. Yes, Tesla would continue to improve volumes and the cost to manufacture, but they would have to lower prices to continue to sell all they could make. A really long recession could cause Tesla to slow growth of new factory construction if it were a serious enough of a recession, but that will not slow Tesla in the next three years. Even that impact would not be a given as recessions are the best time to expand production capacity.

ICE manufacturers and other EV manufacturers would be the ones who saw steep sales declines because they cannot lower prices far enough to maintain volumes. There is no point in lowering prices below the cost to produce. Tesla is still a small enough percentage of total auto sales that they can easily continue to expand sales even as total car sales drop sharply. The net effect of this would be to provide Tesla with better access to raw materials, finished cells and chips, and potentially lower prices on those items (than would otherwise exist). Because car sales do decline in recessions, but not evenly across the board. Prices for Tesla's cars are artificially high now because they have no true competition.

It would take a depression and massive loss of jobs like we haven't seen since 1930 to prevent Tesla from continuing to grow production and sales. This is not the path the Fed is on (whether you think they have gone too far or not). And this is the strength of Tesla compared to every other high-volume manufacturer out there.

 

[jerry33]

It would take a depression and massive loss of jobs like we haven't seen since 1930 to prevent Tesla from continuing to grow production and sales. This is not the path the Fed is on

We hope.

 

[Artful Dodger]

Are we sure he doesn't have a crystal ball??

@Curt Renz literally wrote the book on T/A (other's have linked it in this forum). It's not a crystal ball, but Curt does live in Florida now, so maybe some Lucille Ball?

Cheers!

 

[MC3OZ]

With all due respect you are completely wrong on point 3. Buying your own shares speeded money be reducing your capital base. IT IS spending money.
Next you're correct that Tesla has huge cash reserves. However, you totally misunderstand what happens if sales do cease to happen prior to due date of account payable. That famous and wonderful positive cash flow happens largely from a very fast cash conversion cycle, almost never seen in industrial company. If Tesla suddenly begins to have, say, 30 days inventory on hand, still ow ny industry standards, the magical cash conversion cycle rapidly diminishes

You're correct about smooch misunderstanding. The people who forget how quickly that cash conversion cycle can deteriorate are coping with serious myopia.

You're incorrect also about the fear. It's not fear, but prudence. Where it fear people like me would be selling, which we are not. We will have fear if Tesla begins destroying the very liquidity that protects itself from known existing risks.

Relax? No chance while Europe is in recession, China and EU/NA are quibbling rather pointedly, and so on. This is no time to be imprudent. No panic, but be prepared.

Elon is well aware of the recession risk.

At this stage it is likely the factory expansions and buyback can happen even with s substantial recession.

With high margins there is some scope to cut prices and increase demand.

A buy back isn't essential, so I agree prudence is warranted.

I always thought that inflation was likely to be temporary, early signs that inflation is moderating are a good thing. If inflation is reducing, that is further scope to cut prices.

 

[GrimRe]

Actually, Zach did comment on the earnings call that if Berlin/Austin were factored out, gross margins would have been over 30%.

THANK YOU! This should have been the KEY message from the Q3 earnings call. It's honestly quite staggering how well TSLA are doing compared to legacy OEMs and other EV startups like Rivian, Lucid etc. GM have said their EVs will only be profitable in 2025 and until then need the IRA to stop hemorrhaging money. VW have said that their Tesla competitor platform has been delayed to 2027+ Can you imagine the state of Tesla vehicles in 2027?

 

[StarFoxisDown!]

We hope.

The latest CPI/PPI print pretty much confirms that we are not in a repeat of out-of-control inflation ala 1980's and in fact might be about to enter a period of deflation (fear narrative dead) and the real time data across a big spread of the economy is showing we're not in a Great Financial Crisis situation (fear narrative dead).

Could there be a mild recession in the next couple of quarters? Sure.

There was technically a recession already this year. But if the Fed pivots in the next couple of months, then it will just be a mild recession. We finally got the CPI/PPI print that showed the drop in inflation that we were seeing in real-time back in May/June. Since June, prices of commodities, food, shipping costs, energy, rent, housing, etc...have all continued to decline. Some have declined all the way back down to mid 2021 levels. Some of the laggards such as rent and housing are entering the steepest part of their decline right now and thus will continue to impact future CPI/PPI prints for a good part of 2023.....even if rents/housing rebounds somewhat in Q1.

 

[jerry33]

The latest CPI/PPI print pretty much confirms that we are not in a repeat of out-of-control inflation ala 1980's (fear narrative dead) and the real time data across a big spread of the economy is showing we're not in a Great Financial Crisis situation (fear narrative dead).

Could there be a mild recession in the next couple of quarters? Sure.

There was technically a recession already this year. But if the Fed pivots in the next couple of months, then it will just be a mild recession. We finally got the CPI/PPI print that showed the drop in inflation that we were seeing in real-time back in May/June. Since June, prices of commodities, food, shipping costs, energy, rent, housing, etc...have all continued to decline. Some have declined all the way back down to mid 2021 levels. Some of the laggards such as rent and housing are entering the steepest part of their decline right now and thus will continue to impact future CPI/PPI prints for a good part of 2023.....even if rents/housing rebounds somewhat in Q1.

Agreed. Unless the goal of certain people is to discredit the Administration.

 

[Drax7]

This is how buybacks work. Responsible companies only rarely drop huge amounts of money in short periods of time. Apple did so only when they had literally 100s of billions sitting in the bank and even then it was metered out. For a rapidly growing company, Tesla doesn't have a massive cash horde and we're in the middle of a recession.

A billion dollar buyback would be what I call a nice start to a long term buyback policy. As their cash reserves grow, they can expand the program. Apple's goal was to be cashflow neutral with $100b or so in liquid assets. I don't think Tesla needs $100b, but they should keep a reserve. As much as we like to think their demand is bulletproof, a deep recession can be unpredictable.

When their debt is rated triple A, they should start a buyback with no worries
about financing costs.

 

[Stretch2727]

GM stating pretty clearly when they expect the tax credits to kick in for them both for cells and modules and for the vehicle. This is from their investor day presentation.

My guess is Tesla will have the same but hoping they can somehow get the critical mineral component for the additional consumer incentive.

The production tax credit is approx $3600 for Model 3 or Y for any vehicle with battery and cells made in North America. This alone is a about a 6% margin improvement. The imported LFP batteries would be excluded and one reason I think they will just drop the Standard Range Model 3 or reconfigure with a smaller 2170 pack. I think this credit also applies to Model S/X as well.

To think Tesla will get this for most all their production and see a huge margin boost next year is just quite unbelievable. The crazy thing is Tesla will see the margin bump like a step function where as the legacy OEM's will only see the margin improvement for a small percentage of their production due to the low % mix of EV's.

 

[Max Plaid]

Max Pain today was 195….

Yeah, but that was a) at close yesterday and b) for the moment, MM's/Hedgies/Wedgies are adverse to selling shares for calls, less so for acquiring cheap shares with puts, which skews to the downside (and I wonder why that might be, eh?)

 

[Artful Dodger]

Fed's Collins says she see pathway to cutting inflation without big hit to labor market | CNBC Televison (4 hrs ago)

- sees a reasonable path to bringing down inflation w/o a large increase in unemployment.

 

[kbM3]

About 275K free shares if Tesla does a $5B share buyback at these prices in 2022 (before the US Federal 1% tax on share buybacks kicks in on Jan 2nd, 2023).

Speaking of the petition/buyback

• act before the 1% tax on share buybacks becomes applicable on Jan 1, 2023

So if they did a buyback of 5B, they save 1% - 50M, 10B and they save 100M vs doing it in say 2023 ... cheers!!

The 1% tax will only apply to the shares bought back over and above those created for employee bonuses. There has to be a net reduction in shares outstanding before the buyback tax begins to apply. I know Tesla has discussed replacing stock options with cash bonuses, but I don’t know how far along that path they are.

 

[StarFoxisDown!]

GM stating pretty clearly when they expect the tax credits to kick in for them both for cells and modules and for the vehicle. This is from their investor day presentation.

My guess is Tesla will have the same but hoping they can somehow get the critical mineral component for the additional consumer incentive.

The production tax credit is approx $3600 for Model 3 or Y for any vehicle with battery and cells made in North America. This alone is a about a 6% margin improvement. The imported LFP batteries would be excluded and one reason I think they will just drop the Standard Range Model 3 or reconfigure with a smaller 2170 pack. I think this credit also applies to Model S/X as well.

To think Tesla will get this for most all their production and see a huge margin boost next year is just quite unbelievable. The crazy thing is Tesla will see the margin bump like a step function where as the legacy OEM's will only see the margin improvement for a small percentage of their production due to the low % mix of EV's.



View attachment 875995

Did something change and GM is making their own battery cells and modules? I thought they were buying them from LG?

But yeah, the point is that there's a massive jump in margins just sitting there for Tesla......just one quarter away. 5-6% margin guaranteed with additional margin coming in from the combination of people buying higher trim models with the savings they're getting from the ev tax credit and/or Tesla not having to drop prices in the US as supplies costs drop.

It's truly surreal that this is just a month and a half away from actually happening and just a little over one quarter away from it showing up in earnings.

 

[Ogre]

GM stating pretty clearly when they expect the tax credits to kick in for them both for cells and modules and for the vehicle. This is from their investor day presentation.

My guess is Tesla will have the same but hoping they can somehow get the critical mineral component for the additional consumer incentive.

The production tax credit is approx $3600 for Model 3 or Y for any vehicle with battery and cells made in North America. This alone is a about a 6% margin improvement. The imported LFP batteries would be excluded and one reason I think they will just drop the Standard Range Model 3 or reconfigure with a smaller 2170 pack. I think this credit also applies to Model S/X as well.

To think Tesla will get this for most all their production and see a huge margin boost next year is just quite unbelievable. The crazy thing is Tesla will see the margin bump like a step function where as the legacy OEM's will only see the margin improvement for a small percentage of their production due to the low % mix of EV's.



View attachment 875995

Interesting that GM expects to start receiving the production tax credits in 2023. I wonder if that is "In part" or all of their production. I thought most of their cells came from China and wouldn't qualify.