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

Prunesquallor

His cardinal virtue? An undamaged brain.
Dec 19, 2018
3,064
31,775
Houston/Galveston
the X-plane program was USAF, not NASA. I still have some books about this from the 1950s :) Now perhaps the program was merged later on, but it certainly started out as USAF.
It was mixed. Many were joint NASA/USAF (even shared logos). The key ones that influenced Space Shuttle Orbiter design were:
X-15 NASA/USAF
X-20 USAF
X-23 USAF
X-24 A,B, NASA/USAF


Edit: Actually, even the X-1 was joint USAF/NACA. NACA was the precursor to NASA.
 

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InstiTes

Member
Apr 13, 2019
20
786
East Coast
Quarter was as bad as expected. Cash balance is actually a touch better in a nasty quarter with a lot of vehicles in transit and the quarter ending on a Sunday again. Today is likely the point of max bearishness, but I'm pretty optimistic on the go forward.

The supply bottlenecks have been resolved, the full product portfolio is refreshed and rolled out globally. I would argue that no consumer product company in the world has the product vitality / freshness of Tesla. I see Q2 being a far better quarter than Q1 and then the true earnings power beginning to show through in Q3 this year.

Importantly too, deliveries should grow QoQ for quite literally the next two years between Shanghai coming online, Model Y launching (likely ahead of schedule), the semi ramping, and probably a European factory next year.

Cash flow should be positive from here on so they don't need capital (though I wish they'd raise but they won't do it here).

Q1 was terrible, but that should have been known post delivery results. I think you should quite literally throw it out. In no way is it indicative of the future earnings power of the business. Between supply bottlenecks, logistics challenges, and the Model S / X transition there's just not much of meaning to take away.

People are wayyyy too bearish. Next datapoint is going to be InsideEVs estimate for April deliveries, which I think will surprise people to the upside and confirm that demand has rebounded.

Beyond the quarter, I was at the analyst day and had a long conversation with Elon after the presentation. If Tesla achieves its autonomuos vision, the Company will be quite literally the most valuable business in the world. People are ascribing a 0% probability that Tesla can achieve their autonomous vision. I would argue that a 0% probability on anything Elon Musk is a very bad assumption. Maybe he'll be late but he almost always gets the job done. Cornell paper which came out supporting vision is very interesting validation from a third party.
 

scaesare

Well-Known Member
Mar 14, 2013
8,280
13,365
NoVA
...needlessly long range cars.
You keep using this phrase, despite:

- You not being the sole arbiter of what's needed

- Ignoring issues pointed out to you previously, such as:

- Cold weather reducing range by 1/3rd or more

- People living in areas more geographically spread out than you may

- Fast charging is not yet ubiquitous nor spaced such that cars with 28kWh pack can drive in a significant number of areas

- Etc...

You continue to ignore these issues.

(Didn't I earlier say I was justified in ignoring these responses? Character flaw of mine...)
 

Chocochip

Supporting Member
Nov 17, 2017
787
8,093
UK
Tesla and Elon should be congratulated for their achievement, not micro-managed by Thursday-morning Quarterbacks. Elon also this has long-standing guidance for investors: "If you don't like volatility, sell our stock".

I get your point, but it's more complex than that. If the investors get fed up with the volatility (read: unwarranted SP drops) of the company, they start selling, dropping the price lower. Workers compensation is partly in stock equity, and for them seeing the stock price drop when they're busting their asses is demoralising, and that's again bad for the company. Severe SP drops can ultimately lead to the company becoming insolvent, artificially so but still. And so the way operations are run is just as important as the cutting-edge technology employed by the company, the level of talent and the drive of the man in charge. It's a package deal, and all parts are important.
 

neroden

Model S Owner and Frustrated Tesla Fan
Apr 25, 2011
14,676
62,627
Ithaca, NY, USA
My view on the things that I think really matter:
  • Gross margins: looked quite ok, given price cuts, start of SR+ deliveries in the US and the lack of GHG credits on the international deliveries. Sounds like they have worked to get the lines running efficiently, which gives them continued market edge. China production costs will get a double whammy boost - lower labour costs and lower depreciation given the claimed capex efficiency.
Agree

  • Cell production constraint: I'm not left with a warm and fuzzy feeling here, I wanted far more detail than they were prepared to give. All we've got to go on is some warm words about supplier issues being worked out, and the aggressive guidance for Q2. Quite hard to take this on trust given how many broken promises on Model 3 production we have seen.
Agree. This one actually worries me. Are we going to hear about another Model 3 production bottleneck in Q2? That's the thing which could really hurt financials.

  • Demand for S (&X?): people can hide under the comfort blanket of the demand pull-forward and retooling impact on production all they want. Something went very wrong in Q1.
Disagree. I do think they're flying by the seat of their pants and have poor projections, but if I could model it in advance (which I did), it wasn't "very wrong".

  • The v3 supercharger brag seems mind-blowingly stupid given even after this week's refresh, S&X still have a lower charge rate than the 3. Careful listeners will have noted the (impressive) new CFO trying to moderate Elon slightly in terms of guidance for Q2. The crystal ball comments on when Model S&X will stabilise translated mean "we don't know, stop asking". Don't expect a "normal" run-rate until Q3. To those that wonder how 90k Q2 deliveries can co-exist with a net loss, consider the gross profit impact from losing the higher margin, high ASP S&X sales and replacing with thinner margin, lower ASP sales of SR+. Is 4x the gross profit from an S to a SR+3 too much?
Mmmm, not sure -- Model 3 really does have higher gross margin than Model S even after retooling, but the ASP is a lot lower.

Speculation: While S&X have always had great margins, at low volumes there's a heck of an opportunity cost to the space they're using at Fremont. This talk about building Y at Fremont and Elon's focus this week on cheap "robo taxis" does make me wonder how long they'll still be around.
What has not been revealed, and I'm curious, is whether they've reduced from an S body line and an X body line to one shared line (as planned long ago); this would have relased a very large amount of space.
 

Cloxxki

Active Member
Aug 20, 2016
1,362
147
Rotterdam
battery shortage
But LR cars do come with a higher margin. But selling more cars will look good of course. And they have the intent to put as many on lease as they can to have access to them again in 2-3 years assuming their Level 5 autonomy pans out for some jurisdictions. Those cars may able be cheaply upgraded when taken back to add value at good margin. Say, an extra front motor for mad off the line punch and safety. Should not cost a lot. A small electronics update may make the car satellite connected or whatever. Dead easy to create value on teslas, even used ones.
Imagine an add-on instrument cluster for Model 3. Costs $200 to make, installation $30 in labour. Many, so many would happily pay $1,000 extra to have a Model X style instrument cluster, I have no doubt. Not saying Tesla will do that, because I rarely see them care one iota about what drivers actually want their cars to be. But the potential to extract cash from the market is tremendous if you're Tesla. Level 5 and getting there at least 5 years before others would help as well, but I consider that highly unlikely. 3 years may already ruin it, it's just one brand and premium cars. Someone with a less premium universal offering will price FSD out of the market. There would be infinite resources available to a FSD "killer" especially after FSD happens.
 
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neroden

Model S Owner and Frustrated Tesla Fan
Apr 25, 2011
14,676
62,627
Ithaca, NY, USA
So, any interesting observations in the chat last night? No way I can catch up with all this now, lol ;)

After-hours trading was amazingly flat after such a terrible report. Apparently you can price the apocalypse in ;)

So, I've come to the acceptance that while I'm pretty good at predicting what's going to happen at Tesla, I'm simultaneously pretty freakin' terrible at predicting how the market is going to react in the short term, and it's cost me a ton of money :Þ. So I'm going purely to longer-term investments at this point. Will be switching completely to buying Jan '20 $300-$360 call spreads and selling stock-and-cash-backed Jan '20 $150-200 PUT spreads. Will roll at any point that the stock hits $310-ish in the good case, or if theta starts becoming relevant in the bad case.

Only question is to how to time entering into the above.

My big advice which I learned from Jonathan Hewitt here: Sell options on high volatility, buy options on low volatility. :) You may not be able to predict the near-term stock price, but you may be better at predicting volatility reversion.

It's hard to envision the stock rising on the day after such an awful report, but given the after-hours trading, that might well happen. I'm thinking about starting the buys/sells immediately after market open, and staggering them over the course of the next couple hours. Thoughts?

(As a side note, I'm very excited about Q2. Starting right off the bat :) )
 

brian45011

Active Member
Apr 28, 2011
2,016
6,284
Quarter was as bad as expected. Cash balance is actually a touch better in a nasty quarter with a lot of vehicles in transit and the quarter ending on a Sunday again. Today is likely the point of max bearishness, but I'm pretty optimistic on the go forward.

The supply bottlenecks have been resolved, the full product portfolio is refreshed and rolled out globally. I would argue that no consumer product company in the world has the product vitality / freshness of Tesla. I see Q2 being a far better quarter than Q1 and then the true earnings power beginning to show through in Q3 this year.

Importantly too, deliveries should grow QoQ for quite literally the next two years between Shanghai coming online, Model Y launching (likely ahead of schedule), the semi ramping, and probably a European factory next year.

Cash flow should be positive from here on so they don't need capital (though I wish they'd raise but they won't do it here).

Q1 was terrible, but that should have been known post delivery results. I think you should quite literally throw it out. In no way is it indicative of the future earnings power of the business. Between supply bottlenecks, logistics challenges, and the Model S / X transition there's just not much of meaning to take away.

People are wayyyy too bearish. Next datapoint is going to be InsideEVs estimate for April deliveries, which I think will surprise people to the upside and confirm that demand has rebounded.

Beyond the quarter, I was at the analyst day and had a long conversation with Elon after the presentation. If Tesla achieves its autonomuos vision, the Company will be quite literally the most valuable business in the world. People are ascribing a 0% probability that Tesla can achieve their autonomous vision. I would argue that a 0% probability on anything Elon Musk is a very bad assumption. Maybe he'll be late but he almost always gets the job done. Cornell paper which came out supporting vision is very interesting validation from a third party.
Why is Cash from Operations adversely affected by repaying the principal of a convertible note?:
"Our cash position decreased from $3.7 billion to $2.2 billion mainly due to a $920 million repayment of convertible notes, of which $188 million negatively impacted operating cash flow."
 
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kyzhk

Member
Oct 4, 2018
301
1,993
US
I think now that the bad quarter is behind us, institutional money should be pouring back in soon for a bump.

The guidance on likely best monthly delivery ever means in april they have already delivered at least 32k cars in this month (dec 18 40k car in one month.)
 

tinm

2020 Model S LR+ Owner
May 3, 2015
2,463
11,890
New Mexico, USA
Jobs also spend tremendous money on Lisa. And next, So what?

Whoa there... NeXT was one of the greatest developments in personal computer history. It essentially took over Apple in ‘96 and NeXTStep’s Mach-kernel Unix OS and Dock-based desktop GUI became the basis of MacOS X and then iOS. Its influence lives on. Just sayin’...
 

Remus

Active Member
Apr 14, 2016
1,381
6,326
California
Quarter was as bad as expected. Cash balance is actually a touch better in a nasty quarter with a lot of vehicles in transit and the quarter ending on a Sunday again. Today is likely the point of max bearishness, but I'm pretty optimistic on the go forward.

The supply bottlenecks have been resolved, the full product portfolio is refreshed and rolled out globally. I would argue that no consumer product company in the world has the product vitality / freshness of Tesla. I see Q2 being a far better quarter than Q1 and then the true earnings power beginning to show through in Q3 this year.

Importantly too, deliveries should grow QoQ for quite literally the next two years between Shanghai coming online, Model Y launching (likely ahead of schedule), the semi ramping, and probably a European factory next year.

Cash flow should be positive from here on so they don't need capital (though I wish they'd raise but they won't do it here).

Q1 was terrible, but that should have been known post delivery results. I think you should quite literally throw it out. In no way is it indicative of the future earnings power of the business. Between supply bottlenecks, logistics challenges, and the Model S / X transition there's just not much of meaning to take away.

People are wayyyy too bearish. Next datapoint is going to be InsideEVs estimate for April deliveries, which I think will surprise people to the upside and confirm that demand has rebounded.

Beyond the quarter, I was at the analyst day and had a long conversation with Elon after the presentation. If Tesla achieves its autonomuos vision, the Company will be quite literally the most valuable business in the world. People are ascribing a 0% probability that Tesla can achieve their autonomous vision. I would argue that a 0% probability on anything Elon Musk is a very bad assumption. Maybe he'll be late but he almost always gets the job done. Cornell paper which came out supporting vision is very interesting validation from a third party.

I am happy that you hold such an optimist view. While I believe in long term potential of this company, I don't know about the next several months. As the "profit every quarter" suddenly change to two quarter losses, Q folks have lots to spin. I understand Elon said that as an aspirational goal. But that doesn't matter in the eyes of skeptics. Now they have numbers to back it up. And the numbers are bad.

Before another two quarter of solid profit, I don't see this thing recovers.
 
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Cloxxki

Active Member
Aug 20, 2016
1,362
147
Rotterdam
In hindsight, the impact of delaying deliveries from 2Q18 to 3Q18 in order to surpass the 200,000 limit at the very beginning of a quarter may not have been fully appreciated.
That is if you are in the US. All that time, the world was dying for higher margin Model 3s to be shipped already. To have Uncle Sam sponsor USA's 1% a bit more than usual, Tesla artificially focused on local deliveries when really it's not the only country with diminishing incentives. And really, those buying Mid Range Model 3's could have swung it with half the credit, surely. European LR AWD demand in 19Q1 was already ripe in 18Q2.
 

neroden

Model S Owner and Frustrated Tesla Fan
Apr 25, 2011
14,676
62,627
Ithaca, NY, USA
Service and maintenance continues to be a very sore spot. Last year, the excuse was that the infrastructure was built out for larger volumes of cars. Which is strange, because one of the biggest customer complaints is a lack of timely service. This quarter, Tesla finally acknowledges that the real issue is losses on sales of used cars. Both by taking a one time penalty on the resale value guarantees and secondly by a direct write down on inventory of used cars. While these one time measures are helpful, the only structural solution is to offer lower prices on Tesla trade-ins.
The real question is whether Tesla gains anything from running its own used car business. The aftermarket does handle used car sales pretty well. The only purpose of Tesla handling trade-ins is to attract new car buyers who just won't buy unless the "dealer" does a trade-in. How large is that business, vs. people who will happily buy the new car and then sell their old car to Carmax or Carvana? I don't know!

"Ludicrous" upgrade has a zero production cost so it's an easy giveaway.

I tried a very rought draft to see how we get to a loss in Q2 with the information we have. Let's assume profits on leasing and energy (stable at around $100M and $50M) cancel out losses on service ($150M) so we ignore these completely on our loss/profit. R&D is $350M, SG&A $700M, interest expense $150M and nci $35M. Total : $1235M. Then 20k S/X + 70k 3 delivered. At ASPs of 100k and 50k respectively, that's 5.5B in revenue. To run a loss our gross margin cannot exceed 22.5%.
OK; that seems reasonable. I was figuring they were probably going to be at a 20% GM, so there we are.
 

kyzhk

Member
Oct 4, 2018
301
1,993
US
I am happy that you hold such an optimist view. While I believe in long term potential of this company, I don't know about the next several months. As the "profit every quarter" suddenly change to two quarter losses, Q folks have lots to spin. I understand Elon said that as an aspirational goal. But that doesn't matter in the eyes of skeptics. Now they have numbers to back it up. And the numbers are bad.

Before another two quarter of solid profit, I don't see this thing recovers.
Q folks already lost. Tesla can be roughly cash flow neutral even in such a bad quarter (minus one time hit of ~1B debt payment by cash + inventory). This means its highly unlikely Tesla will ever go bankrupt in the near future.

We are very close to green already - I can see why TSLAQ folks would be losing their *sugar*. If TSLA is so resilient after a bad quarter, they have no hope ever seeing their $50 - $100 puts in the money.
 

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