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

[Pras]

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I’m way down too.

But, I was down after the 420 situation and then recouped the losses had I sold in December. TSLA will rebound. It has done so umpteen times before. I’m just holding.

The thing I’m upset about is that I don’t have a lot more dry powder for this sale. Had I only sold in December to buy in now... ugh!

I am down 30%, pretty much all in at this moment. Last one month has been brutal. No point selling this low. That Andrew left guy had said that he will have a better rentry point.. hope that is not far.

 

[Castor94]

You sound like a gambler that is trying to win his losses back.

 

[anthonyj]

So there it is: Model Y in Fremont confirmed.

Cheers!

So they are prepping factory for Model Y a year and a half before production? Anyone think production could start by end of this year? Maybe they don’t want to say it since it might cannabalize 3 sales. A surprise launch would be very funny

 

[SO16]

You sound like a gambler that is trying to win his losses back.

I suppose. I still look at it as owning something that goes up and down in value. Like gold. I know of a couple people who sounded like you after the 2008 market crash. Let’s just say they are still kicking themselves for cashing out their retirement due to fear. (And these people were in their 30’s)

Sure, Tesla could go bankrupt but I don’t think it will.

Fortunately I own the stock outright and can still retire on time even if I lost my TSLA investment.

 

[Pras]

You sound like a gambler that is trying to win his losses back.

You became the member just today and are already spreading wisdom!! Anyone averaging down can be suggested of what you said.

The point of this forum is to discuss Tesla investment rationale and not gambling. So by that extension be reasonable in suggesting anything. People have entered at different price level because most here believe that fundamentally Tesla will go much higher. So any short term losses are just short term.. painful still.

 

[SO16]

You sound like a gambler that is trying to win his losses back.

You sound like a short who just appeared when the stock price is down. (Like so many have done before over the years. Just like clockwork.)

Trying some attempt to instill fear so people sell their shares?

If so, hopefully you do what most shorts do. Short low and then cover high. Hilarious.

 

[ItsNotAboutTheMoney]

What I don’t understand is that there are so many articles bashing Tesla saying it’s hitting the 2.5 year low. This then triggers all sorts of people (including coworkers and neighbors) thinking that Tesla is going bankrupt.

But when I look at GM, Ford, BMW, VW, they haven’t changed much in over 5 years except go lower. I don’t know of any stock splits.

Well...I do understand. The media wants views.

If car manufacturers are going lower, it's because they're in a tough environment.
They have relatively long product cycles, but due to timing with competitors or if they simply don't deliver they can end up struggling with losses.
They also face a regulatory environment that essentially doesn't really want their core products, and European manufacturers in particular have had to face a significant toughening of their efficiency targets, while at the same time the diesel market they had been planning on using is rapidly shrinking in key markets, and simultaneous economic problems in Europe have shrunk the market there.

Meanwhile economic, technological and demographic shifts are changing the market, with people in developed countries marrying and having children later, increased economic divides between skilled and unskilled workers changing spending power, increased urbanisation, and mobile Internet having significant effects.

Oh, and they'd better be electrifying and working on autonomy or within 10 years maybe they won't have a valuable product at all.

Hmm. Did I mention that the major growth markets are protectionist and interventionist, and trying to build up their own manufacturing?

It's not really surprising that shareholders are on edge and valuations are low. GM is a special case where it's being wrecked by leeches. Ford simply has a product issue. VW has had to pivot from diesel to electric, and was fined billions.

TSLA had such positive sentiment because everything it is trying to do is future-facing: batteries, fast-charging, long-range premium electric vehicles, driver assistance and autonomy, Internet-enabled customer service. The shift in sentiment is about failure to deliver. It always had the Model 3 to look forward to, but it's here and the signals are poor on margin x volume right now, at the same time as it's facing a massive problem with the US-China trade war.

 

[RobStark]

Meanwhile in Australia current conservative government is re-elected, perhaps with a minority.

Morrison beats Shorten in bombshell victory

 

[j6Lpi429@3j]

For people who are worried, and are currently down (and hell, im very very down at the moment monetarily), I re-iterate my earlier contention that the reason the stock is down and the media is so negative is PRECISELY because the companies position is so good. One bad quarter and people forget everything thats gone well, SEC seems no problem, Maxwell merged, Y announced, S/X refreshed, GF3 construction going well, M3 reviews amazing and meanwhile the competition is not only technically inferior (laughably so), they are actually having production problems.
Thats all before even considering the autonomy issue, their own ASIC NN chip and so on.
The competition are truly ****ed and they know it. The very last ditch hope they have is to FUD TSLA into destruction, which for reasons endlessly discussed here (elons friends, leveraging spacex stock, saudis, apple etc), simply cannot happen.

I seriously caution against anyone selling right now.

 

[Pras]

Meanwhile in Australia current conservative government is re-elected, perhaps with a minority.

Morrison beats Shorten in bombshell victory

Not good for Tesla?!

 

[SO16]

Not good for Tesla?!

As you can see in the video of him providing his “wonderful” insight, definitely not great.

 

[Fred42]

Funny thing is - recently I was in San Francisco. I didn't see too many Teslas. I see more in east suburbs of Seattle.

Anyway, EVs have ~ 8% marketshare in CA. Much smaller in other states. TX is < 1%. Some 46% of all US EVs are sold in CA.

EV Market Share by State – EVAdoption

In SF itself it might be more practical to drive a smaller Oldsmobile, Pontiac or Mercury.

 

[Unpilot]

You became the member just today and are already spreading wisdom!! Anyone averaging down can be suggested of what you said.

The point of this forum is to discuss Tesla investment rationale and not gambling. So by that extension be reasonable in suggesting anything. People have entered at different price level because most here believe that fundamentally Tesla will go much higher. So any short term losses are just short term.. painful still.

Plus when the stock rebounds by that very fact many people will be entering at a higher price.

In May 2012 you could have bought Amazon for $212 ......December 2013 for $398 .......December 2014 for $310...
December of 2016 For $675

I could go on but you get the point....(maybe..some people won't)

 

[anthonyj]

Do you want TSLA to confirm that all current battery tech will be obsolete .. and impact all sales like S/X did?

No, but it would be nice if they can confirm the cost savings. They don’t have to pass along the savings to the consumer. They can say that it will increase gross margins by x% by 2021 or whatever

 

[NicoV]

Meanwhile in Australia current conservative government is re-elected, perhaps with a minority.

Morrison beats Shorten in bombshell victory

Conservative=the party that wants to conserve the environment?

 

[Fred42]

So they are prepping factory for Model Y a year and a half before production? Anyone think production could start by end of this year? Maybe they don’t want to say it since it might cannabalize 3 sales. A surprise launch would be very funny

My own suspicion is that Elon was in a rare "under-promise and over-deliver" mode when he said late 2020, and that the Y will be on time and maybe early if they can line up battery cells. On that subject, I don't think we don't know what if anything that unsubstantiated report on Panasonic building 2170's in Japan meant.

 

[Fred42]

OT sorta

Yesterday I went to the Apple Store in a mall in Albuquerque. On a Thursday, 2:30 in the afternoon. There were easily 100 customers in the store. It was packed. I couldn’t believe it. Wish there were a Tesla Store situated right next to it in this ABQ mall. (Of course, the law will have to change to allow Tesla to do business here first.)

Are non-store showrooms allowed in NM?

 

[ReflexFunds]

What would be your first move as Tesla if it turns out that S/X/3 demand is insufficient to hit profitability for Q2-Q4 (and after that unclear)?

I'm curious what the most obvious levers and of what significance. And I mean somewhat dramatic (hundreds of millions $$ in impact not saving coffee filters in the break room, or charging per sheet at the office printer).

This is a good question since it’s clearly on investor’s minds so i think it's worth answering in detail.

To start with, I think it’s important to note that cash flow breakeven is much more important than profit and I think Tesla can get Q2-Q4 to cash flow breakeven even with disappointing demand.

• Cash flow is difficult to adjust into a run rate format, but in Q1 free cash flow was very close to zero excluding 1) working capital movements 2) one off cash/deferred revenue received from FCA and FSD special offer and 3) one off cash exceptional restructuring costs. This is the cash flow Tesla would make if it maintained production & deliveries at 51k Model 3 and 12k S&X on a long term basis (working capital is only a significant cash flow item if production and deliveries do not match and if volume is increasing or decreasing significantly quarter on quarter).
• So this is the baseline we are starting with, and clearly several key variables will change run rate free cash flow from this current level of 0 including: 1) change in car volume (likely to increase from Q1 levels), 2) change in cash gross profit per car, 3) change in opex, 4) change in capex (likely to increase from Q1 levels) and 5) will production and deliveries not match (this will cause a one off inventory change in the cash flow, but Tesla will reduce production rather than continue building inventory indefinitely).
• To build GF3 and start installing Model Y equipment, Tesla Is guiding for capex of $2-2.5bn in 2019. This implies c.$0.6-0.7bn per quarter in Q2-Q4 or c.$0.4bn higher than Q1 capex. So adjusting for the increased pace of growth investment but maintaining deliveries flat with Q1, Tesla is on track to reduce cash balance by $0.4bn per quarter in Q2-Q4.
• In addition to this, Tesla intends to continue to end the wave of deliveries at quarter end – they have already made a significant inventory investment towards this already (partly by accident through delayed Q1 deliveries) but this may require another $0.5-1bn inventory investment over the next two quarters. This does have the benefit of making quarter end cash balance much closer to intra-quarter minimum cash balance – which means Tesla’s quarter end liquidity can potentially reduce to as low at c.$0.5-1bn.
• So in total we have Tesla investing $1.7bn to $2.2bn cash balance over Q2-Q4 2019 if all else is kept equal with Q1. This would leave them with $2.2-2.7bn cash balance at year end together with $1bn undrawn bank lines – so $2.2bn to $3.2bn excess liquidity.
• So even with this worst case of no improvement from Q1 will leave Tesla with enough cash to get GF3 into production and likely also Model Y, at which point positive cash flow and profit becomes extremely easy.

But, is it reasonable to assume Tesla deliveries do not improve from 51k Model 3 and 12k S&X over Q2-Q4? This seems extremely unlikely.

• On Model S/X demand side Q1 was impacted by 1) tax credit demand pull forward, 2) discontinuation of the most popular base models for most of the quarter, 3) Customers waiting for a highly rumoured refresh, 4) unfavourable auto market seasonality. In Q2 none of these are still issues (the limitation is mostly ramping production back up to speed), in addition to benefits from lower pricing.
• On Model 3 side – Now Tesla has 1) SR+ availability increasing affordability, 2) SR+ availability meaning current limited cell supply can produce more cars, 3) lower pricing, 4) faded tax credit demand pull forward impact, 5) much better charging speeds, 6) availability in more countries.
• And higher deliveries will also mean higher cash gross profit for each car due to operating leverage benefits on production staff costs. This will however be offset to some degree by reduced ASP now SR+ is available.
• Cash profit per car is also heavily dependent on FSD take rate. Whether or not you believe in Robotaxis, it seems almost guaranteed that Tesla’s new HW3 and recent pace of progress will lead to significantly upgraded FSD functionality this year which is very likely to lead to a higher FSD take rate.
• So all together, these changes vs Q1 should comfortably take Q2-Q4 cash flow to breakeven, even without tesla getting close to their 360-400k delivery guidance. This is why Tesla Is guiding for positive free cash flow in all remaining quarters this year, even despite the delivery wave unwind.

But this does not mean demand is not an issue at all.

• I think Tesla is most likely going to be able to sell full production this year without any significant actions.
• But it is definitely true that demand is significantly lower than justified by Tesla's product/price superiority due to 1) lacking public awareness of the TCO of EVs, the performance and price of Tesla’s and the huge number of people killed by ICE emissions and 2) heavy PR and FUD attacks against Tesla trying to create a misleading impression of poor quality, fire danger, crash danger, insolvency risk, range anxiety etc.
• Whether Tesla demand would be 1.5x or 5x current production if the whole world was well educated about Tesla vehicles, I don’t know, but to some extent I'm sure Tesla is negatively impacted by this.
• My guess is this is currently impacting Tesla’s pricing power and Tesla would raise prices if people were better educated and demand far outpaced supply.
• But It is also possible that this public ignorance and miseducation will lead to Model 3 demand levels below production capacity. If this scenario plays out Tesla may choose to make some of the more drastic changes you are referring to.

What can Tesla do in the (unlikely given current information in my view) scenario that Model 3 demand does fall below production capacity?

• The first short term move will be to move Model 3 from three to two shifts of production. Most if not all parts of the production line should be able to produce at 4.5k per week on two shifts. This will prevent production outpacing supply and prevent inventory cash outflows.
• Tesla can raise more capital (within 24 hours) if they decide they need more cash to bridge to Model Y production.
• Elon will be forced to finally accept that advertising is a necessary evil for the greater good. If Tesla spends money to better educate people about the benefits of EVs and specs of Teslas Tesla will definitely get incremental demand.
• Tesla could partner with a dealership to open up another new sales channel. FCA in Europe seems an obvious partner given FCA reduces its emissions penalties by $10k for every extra car Tesla sells in Europe next year.
• Tesla could form a JV with an auto company using Tesla’s leading EV powertrain and battery technology. I’m sure many companies would be willing to partner on this given how far ahead Tesla is on technology – it will be Tesla holding out to go it alone at the moment. If Tesla puts its technology into a new brand, it can sell its technology through a new sales channel without comprising on its core Tesla business model.

What about after 2019?

• Tesla’s struggle to get to profitability and positive cash flow is entirely due to operating leverage and lack of scale. Most auto competitors have far lower gross profit per car relative to Tesla, but they need to sell 5 million to 10 million cars per year to leverage their fixed opex costs. Tesla is designing a more efficient business model that is close to breakeven with only c0.25 million cars per year.
• Tesla’s battle gets far easier when they have more factories and more car models. The gross profit from each new factory flows straight through to Tesla’s bottom line and will very rapidly turn Tesla profitable. GF3 will without a doubt increase China demand beyond current levels with lower production costs. Model Y and Semi will without a doubt plug significant new gross profit into Tesla’s largely flat fixed cost base. So in 2020 Tesla’s battle gets far easier, and its very difficult to see a scenario where their current cash balance does not bridge them to Model Y production and positive free cash flow.
• In addition, our best information is that Tesla will get around $0.6bn yoy increase in profit in the EU in 2020 from increased emissions pooling payments.
• Of course, if Tesla does deliver on Robotaxis as Elon expects, all profit and cash flow questions will be answered for good overnight.

 

[tinm]

Are non-store showrooms allowed in NM?

Nope, nothin', it's a wasteland out here. Closest store/service center for me is 427 miles away

 

[tinm]

Tesla semi + route-based autonomy on the Interstate. That's a few hundred billion right there.

Until a Tesla Semi tries to drive under another semi's trailer crossing the road

<ducking>