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

[SteveG3]

this was it. Tesla stock will retest 250 soon. With very hard work... luck... and tesla will hopefully make a profit in Q1... bye bye sp500 inclusion.

bye bye tesla over 400. That stock will go to 250$. Mark my words.

I think it would require a general market major drop for it to go down to $250, but we shall see.

 

[KarenRei]

Estimates for the bottom today?? 298?

I'm not going to try to guess it beforehand. I'm going to watch how the market moves and try to grab a low in the first hour or two.

One doesn't need to act on the absolute bottom. One simply needs to get in at a point that's due for a correction within their timeframe.

 

[CuriousSunbird]

How is Tesla going to keep the SP over $360 for twenty days straight? Not trolling, but it doesn’t seem possible at this point? Unless Elon has something up his sleeve?

Don't remember if they can still change the conversion price. I'll have to look at the indenture again tomorrow.

 

[replicant]

I estimate around 290 for the bottom today. 250 in the coming 2 weeks.

This guy "Analyst007" keeps spouting unfounded speculations and some forum members keep tagging his/her stupid predictions as "informative"

Sometimes I wonder if the short-term longs are like (or worse than) bears in the long rurn... Anyway, I'm glad Elon Musk keeps surprising Analyst007 so he/she can get out the stock ASAP and waste his/her time and money in a casino.

 

[CuriousSunbird]

One thing you have to say for Musk. He never allows Tesla to be dull.

 

[KarenRei]

I should point out: "Profit less than Q3" is the market consensus for Q4. What was the average estimate, something like an EPS of $2,24?

 

[schonelucht]

How is Tesla going to keep the SP over $360 for twenty days straight? Not trolling, but it doesn’t seem possible at this point? Unless Elon has something up his sleeve?

I don't see that happening either. The convertible will end up costing the company.

 

[anthonyj]

He retweeted this yesterday, and he always tweets some cryptic messages (remember OPP?) he’s bluffing

 

[shlokavica22]

In SP polls we've done here on the site before I usually rank about 20-25thth percentile or so (where higher percentiles = more bullish). I'm a bull, but I'm always apprehensive when I hear "It can only go up!" talk (such talk usually encourages me to start selling), and was not part of the crowd that doubled down on the "$420" news. I maintain stock and calls with fairly low strike prices with multi-month expiries (excepting near ER). Always like to have some cash or stock on-hand to take advantage of lows by transferring it to calls. Right now I'm about half in stock and half in calls.

Oh, definitely a bull. I was talking more from the perspective of being more realistic (not getting too overexcited) and more importantly- being risk-averse. With your option plays you are kinda the opposite.

 

[KarenRei]

He retweeted this yesterday, and he always tweets some cryptic messages (remember OPP?) he’s bluffingView attachment 369770

 

[Fact Checking]

In this memo from Elon to Tesla employees he clearly tried to mention the most difficult challenges ahead for Tesla, not sugarcoating it a bit:

Company Update, January 18, 2019​

The good part is that IMHO he disclosed all negative aspects of the Q4 earnings report, which is that GAAP profits are somewhere between $1m and $311m and that (implicitly) Model 3 margins are lower, which is lower than street expectations.

Once the market has digested this information it could provide good entry points based on the following potential upsides:

• Free cash flow should be, approximately, profits plus $500m, plus the $500m-$600m accounts receivable from Q3, minus additional opex increases this month. So free cash flow could actually be at record levels for Q4: $1b+ is still in the cards IMO. So Tesla can keep up their current high intensity and high growth investment cycle. If so then cash valuation metrics based on the last two quarters should be off the charts and should compare favorably to almost every other company in the automotive sector. (@ReflexFunds might concur?)
  
• GAAP profitability, S&P 500 inclusion is still on track if Q4 and Q1 GAAP profits are larger than ~$405m.
• Moody's upgrade of Tesla's corporate debt is still on track if they post good FCF in Q4 and pay back the March 1 convertibles, which I think they will.
• They are going to sell Medium Range Model 3 internationally as well - this will get them faster to customers than waiting for the Standard Range and expands their addressable market.
• Opex reductions from the 7% cuts. This is really bad personally for those laid off, but generally 'good' for the market and makes the other 93% of employees more productive.
• The cutting of the referral program and the elimination of the 75D should improve margins overall.

Today's trading could be wild, with volatility magnified by PUTs expiring today, but once all this is over there could be some solid entry points before the Q4 earnings release.

Generally it should be better to get the bad news out before the good news - the rest of 2019 could still be a series of mostly good news.

 

[replicant]

I estimate around 290 for the bottom today. 250 in the coming 2 weeks.

You're the one losing gambles (and temper) and you keep giving advice?

 

[Fact Checking]

New How is Tesla going to keep the SP over $360 for twenty days straight? Not trolling, but it doesn’t seem possible at this point? Unless Elon has something up his sleeve?

They don't have to: they can pay back the $920m convertibles fully in cash from Q4 cash flow alone - and they have another ~$3b in the bank plus income from Q1.

 

[shlokavica22]

He retweeted this yesterday, and he always tweets some cryptic messages (remember OPP?) he’s bluffingView attachment 369770

Yeah, he is kicking out 7% of his people just for the kicks.

I think it would require a general market major drop for it to go down to $250, but we shall see.

So far it looks like the -10% rule will be triggered, so we are probably going to be above $300 at least till Tue.

 

[anthonyj]

They don't have to: they can pay back the $920m convertibles fully in cash from Q4 cash flow alone - and they have another ~$3b in the bank plus income from Q1.

Thanks for this. Does that hit their profits though? Not good at accounting.

 

[CuriousSunbird]

Thanks for this. Does that hit their profits though? Not good at accounting.

No.

 

[SteveG3]

The target of the update was the workforce. Of course, Tesla/Elon knew they’d make this public, but, they wanted people going through these layoffs to get an empathetic, only because we had to for the mission message... not “thank you for your service & to WS, we’re doing just fine”

now, by Monday or so, some “WS, we’re fine messaging" might be added, but, that update wasn’t the place for it.

we may see some moderation of selling with such a follow up message.

This is a perfect example of where Deepak A. can be given a new role of calling into the CNBCs and Bloomberg’s with his calm, seasoned voice, and cleaning up in a ten minute response the sugar fest that they’ll be airing.

 

[ReflexFunds]

Volatile year for Tesla headcount, this latest cut takes them back to the level prior to the June-18 cut. It looks like 7k net employees were hired in 2H18.

Tesla employees:
Dec31-17: 37.5k
June-18: 46k
June-18 post cut: 42k
Oct-18: 45k
Dec31-18: 49k
Jan-19 post cut: 46k

 

[Right_Said_Fred]

In this memo from Elon to Tesla employees he clearly tried to mention the most difficult challenges ahead for Tesla, not sugarcoating it a bit:

Company Update, January 18, 2019​

The good part is that IMHO he disclosed all negative aspects of the Q4 earnings report, which is that GAAP profits are somewhere between $1m and $311m and that (implicitly) Model 3 margins are lower, which is lower than street expectations.

Once the market has digested this information it could provide good entry points based on the following potential upsides:

• Free cash flow should be, approximately, profits plus $500m, plus the $500m-$600m accounts receivable from Q3, minus additional opex increases this month. So free cash flow could actually be at record levels for Q4: $1b+ is still in the cards IMO. So Tesla can keep up their current high intensity and high growth investment cycle. If so then cash valuation metrics based on the last two quarters should be off the charts and should compare favorably to almost every other company in the automotive sector. (@ReflexFunds might concur?)
  
• GAAP profitability, S&P 500 inclusion is still on track if Q4 and Q1 GAAP profits are larger than ~$405m.
• Moody's upgrade of Tesla's corporate debt is still on track if they post FCF and pay back the March 1 convertibles.
• They are going to sell Medium Range Model 3 internationally as well - this will get them faster to customers than waiting for the Standard Range and expands their addressable market.

Today's trading could be wild, with volatility magnified by expiring PUTs, but once all this is over there could be some solid entry points before the earnings release.

Always nice to have someone with a cool head around here, between those loudly expressing their 'concerns'.

 

[Chocochip]

So in terms of financials, here's the key points from Elon's memo:

Company Update

"In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla."

"In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3."

This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.
​

So Q4 was profitable, but less than expected.

Elon is framing Q1 profits as a cliff-hanger in his usual "only the paranoid survive" style - but I think Q1 profits are going to be more than just tiny, with 100D/P100D sales and high trim units in Europe and China.

Another big question is free cash flow - and that might be quite healthy in Q4 due to the significant receivables boost they get compared to Q3.

You cannot get mad at shorts when they discount the CEOs statements in a negative way, but then freely discount the CEOs statements in a positive way. I happen to agree that it's not advisable for Elon to just say they'll make great profits in Q1 before he actually knows how things turn out, but in this case I believe he isn't just overly cautious. They're letting go of a lot of people as a result of the financials and of what they can see in terms of outlook. This is not great news no matter how you look at it, and it doesn't help to be too positive in these circumstances.

I'll probably still use the discount to increase my holdings, but I am also more worried about the short-term outlook than I was yesterday.