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

[SteveG3]

To be fair to the NYT, the position of "public editor" was pretty unique in U.S. journalism, you won't find it at the Wall Street Journal or the Washington Post - nor at the big international independent newspapers. When the political right radicalized in the U.S. and went on their current anti-science and anti-fact crusade they started using the public editor's findings against the NYT, which made it pretty predictable that they'd eliminate it.

BTW., Margaret Sullivan, NYT's former public editor, is now writing for the Washington Post.

I believe it's generally a hit-and-miss: John Broder and David Gelles are bad, while many other journalists at the NYT have high journalistic integrity.

Everything I've seen the past few years from the NY Times is profoundly counter to what you've just asserted, but, all I've had large exposure to is their miscoverage of Tesla and politicians I find interesting who are seeking to be the Democratic Candidate for President like Tulsi Gabbard & Bernie Sanders, and their miscoverage of the Democratic Party candidates they so aggressively advocate for in lieu of those candidates. Perhaps their Sports and classified ad sections are still of high journalistic integrity.

 

[Sean Wagner]

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Follow the link - your input appreciated.

 

[Fact Checking]

New Lol 293 premarket on basically no volume. If this drop holds until open then you can safely say the game is rigged by MM

The uptick rule is no longer in effect today - so today we'll again see the 'price discovery' benefits of the shortz.

 

[RobStark]

A bit bigger...on the outside maybe.

I am pretty sure 3rd row will have more head room, leg room and better sight lines to the road (less chance of road sickness).

 

[j6Lpi429@3j]

Its not just mainstream media, the constant outpouring of biased, and factually incorrect bullshit from seeking alpha gets automatically promoted to top TSLA news on the google finance page. What can we ACTIVELY do to counter this. I share (in public) on facebook every unbiased tesla article I tend to encounter, but I wonder if a more coordinated effort, to 'upvote' unbiased reporting on the company is worthwhile?

 

[RobStark]

Interesting information:

• Tesla gives against a small fee a 10 year warranty for the output
• He expects a cost reduction or profit of $1m per anno
• He expects a pay back in 7 years
• Putting this together the cost of that system was about $7m for 4MW
• With an expected live span of 20 years that sums up a profit of $13m
• Main criteria in favor of Tesla has been experience with similar installations

Sounds like a no-brainer to me if you work in that business. Break even is guaranteed and after you just count money depending how long the system lasts.

He also said they bought a warranty. 100% output after 10 years and 80% after 15.

 

[shlokavica22]

The uptick rule is no longer in effect today - so today we'll again see the 'price discovery' benefits of the shortz.

Quite a decent volume already and -1.5%. My speculation is, we haven't seen the bottom in this cycle.

 

[anthonyj]

RBC downgrades TSLA $245

 

[SteveG3]

Its not just mainstream media, the constant outpouring of biased, and factually incorrect bullshit from seeking alpha gets automatically promoted to top TSLA news on the google finance page. What can we ACTIVELY do to counter this. I share (in public) on facebook every unbiased tesla article I tend to encounter, but I wonder if a more coordinated effort, to 'upvote' unbiased reporting on the company is worthwhile?

What's particularly off about this, unless something has changed in the past couple of years, Seeking Alpha is a blog site, not a news outlet. When I became a contributor (I have no background in journalism), their website indicated both that, ~50% of people seeking to be contributors are approved, and most importantly, that their explicit policy is to not fact check the blogs they "publish" from the "contributors." I once even discussed this with Tesla's VP of IR at the time, and he left me with the impression that Tesla's attorneys had looked at the Seeking Alpha phenomena, and had thoughts that the "no editorial review" policy was a device to side step legal responsibility for the ...uh, stuff... we see flowing out of SA in high volume.

Why do Seeking Alpha blogs (again, if nothing has changed in what they "publish") even show up in anything remotely resembling a newsfeed on Google or anywhere?

 

[avoigt]

The email was posted to Tesla’s official public blog. That said, again, it didn’t mention any actual numbers to be “lowball”, and just said that he expects Q4 profits to be less than those in Q3, without saying how much.

Agreed. The mail is written carefully with no binding or solid statements other than they layoff people therefore I can not imagine how the SEC could go after.

If we compare Elons behavior up to Q3 and after then we can say that he had a tendency to overpromise before on timing but always delivered. He admitted not to be good with timing many times and joked about it.

Looking what happening now we have the Q3 surprising all despite he gave a note of caution one day before the quarter ended. IOW he did set expectations purposely low knowing that they will for sure be profitable. No one did call him a liar after because at the end of the day he will not know really until accounting tells him. So even if his "napkin math" tells him to be profitable he can still say "we have to work hard today to make it happen" and its a correct statement.

Today we all experience that the 3 does arrive and will be delivered early in February simply because of cars are on trailers in EU already and we still have a full week in January. Despite the expectation setting end of February/ early in March that we heard for a longer time. They could have adjusted but decided not to. Thats another signal that Tesla as an organization has moved from overpromising to setting expectations low to surprise the market.

Its a well known tactic and a good approach if you want investors themselves to build high expectations and make investment decisions based on that you give them some experiences where they learn you are conservative. There are other examples where they lowball lately.

What we can see is a behavior change versus last year where Elon understood that he needs to temper down expectations and hit or better surprise those to win Wallstreet.

Most people believe the Elon before Q3 2018 is the same we see today but I doubt that. Ellison and other advisors may have helped him to understand.

If and thats an assumption, Q4 will be as good as Q3 all what will happen is that it will be called a positive surprise. If investors based on that experience change their reading of Elon and call him more conservative than an important step has been achieved to move the stock higher and where it belongs.

Right now its unclear what will happen at ER but I would not be surprised to watch a surprise.

 

[Fact Checking]

Quite a decent volume already and -1.5%. My speculation is, we haven't seen the bottom in this cycle.

Pre-market trading is pretty light so far: 10k shares traded so far - yesterday it was already at around 100k shares this early in.

But yeah, still no strong pullback and re-test to define a clear bottom, and macros are sideways, with NASDAQ futures up a bit (+0.15%).

None of the big macro crises has shown a breakthrough towards a resolution yet:

• still no end in sight of the U.S. government shutdown ,
• still no clear path forward for Brexit,
• still unclear whether the China tariffs will go back in effect early March,
• ripple effects of China demand weakening are still unclear,
• The Fed is in a 'wait and see' mode,
  
• as a result U.S. recession fears are still on: any of the previous macro factors could trigger a recession, the combination would guarantee one.

Elon's email also gifted shorts about 1 billion dollars of trading power last Friday. So it would be perfect timing for a bear attack, strategic "downgrades" of $TSLA by investment banks who happen to be short, especially as uncertainty is high prior the earnings report. So I'd suggest buckling up until January 30. Not advice.

 

[anthonyj]

Quite a decent volume already and -1.5%. My speculation is, we haven't seen the bottom in this cycle.

I’m seeing 11k shares in the first 30 minutes. 11k shares for such a move is crazy and shows how market makers are playing the game with bid/ask spread manipulation. Doesn’t matter if the 11k shares are shorted or not

 

[SteveG3]

RBC downgrades TSLA $245

If Q4's increase in cash on hand is even remotely as good as the ~$1.1 billion Luv2b is projecting*, it will have been a very strong quarter as I see it. Any more discussion about the $900 million of debt due in March will be even sillier than it is now.

While the stock price can do anything with next week's earnings, it's not hard to see why anyone looking to moving the stock price down almost 'certainly' has some concerns about a closing window of 6 more trading sessions before the earnings report may make that much more challenging to accomplish. ie, downgrade out today does not surprise me. I think FUD will be at high levels for the next several days.

*edited from incorrectly stating it as $1.2 billion and describing that as cash flow

 

[Fact Checking]

If Q4 cash flow is even remotely as good as the ~$1.2 billion Luv2b is projecting, it will have been a very strong quarter as I see it. Any more discussion about the $900 million of debt due in March will be even sillier than it is now.

luvb2b is in fact projecting 2 billion dollars of cash flow from operations, and there's a couple of upsides that could further improve the cash flow balance.

The $1.2b is the genuine cash generated minus ongoing investments Tesla is doing: ongoing capital expenditures of $700m.

Just to put this into perspective: since Q4 is a 'weak' quarter, sustained $2b of cash flow from operations gives a conservative estimate of $8b of pure cash per year Tesla can spend on growing faster. If we look at the cash multiples it's ridiculous: current market cap is $50b, and $8b TTM cash generation is a price-to-cash ratio of 6.25x... which is very low.

Just a comparison Nvidia ($NVDA) cash flow from operations for the last 5 quarters:

• Q3: $1.2b
• Q4: $1.4b
• Q1: $1.4b
• Q2: $0.9b
• Q3: $0.5b

And NVIDIA's reinvestment cycle is much, much less aggressive than Tesla's: just $0.1b per quarter or so.

See:

quarterly cash flow: NVIDIA Corp.
quarterly cash flow: Tesla Inc.​

NVDA market cap: $90b - after a huge correction from a peak market cap of $175b.

So from a cash generation point of view to say that $TSLA is 'undervalued' at $50b is the understatement of the year.

So ~$2b in cash generated would be phenomenal from pretty much any other company - the question is, can Wall Street lie about this too and put too much emphasis on slower revenue growth and a lower GAAP profits?

Not advice, as usual: markets can be irrational longer than you can stay solvent, etc.

 

[anthonyj]

Amazing how short interest is at a multi year low, yet here we are at the same level as 2016... unbelievable how much money is being made ping ponging this stock in such a wide range

People here are so quick to blame shorts when they are only part of the problem. Go look at the history of large institutional holdings. T Rowe, Fidelity, etc have a history of accumulating and dumping millions of shares. They are making a killing off option premiums too. Why let it break ATH when such few large hands control the SP? They can continue milking the trading range and triggering stop losses.

 

[shlokavica22]

Elon's email also gifted shorts about 1 billion dollars of trading power last Friday. So it would be perfect timing for a bear attack, strategic "downgrades" of $TSLA by investment banks who happen to be short, especially as uncertainty is high prior the earnings report. So I'd suggest buckling up until January 30. Not advice.

The timing was bizarre indeed. It will be interesting to eventually know what prompted the release in that particular day.

 

[SteveG3]

luvb2b is in fact projecting 2 billion dollars of cash flow from operations, and there's a couple of upsides that could further improve the cash flow balance.

The $1.2b is the genuine cash generated minus ongoing investments Tesla is doing: ongoing capital expenditures of $700m.

But yeah, ~$2b in cash generated would be phenomenal - the question is, can Wall Street lie about this too and put too much emphasis on slower revenue growth and a lower GAAP profit?

Last earnings, I think the numbers that were most focused on re cash were free cash flow, and cash and cash equivalents at the end of the quarter.

FCF was $881M last quarter, not sure what his corresponding projection for Q4 is. I see his projection of $4.1 billion of cash & cash equivalents. That was $3.0 billion last quarter.

To your question, I'm sure we'll see spin. Commentary on the call could go either way re reassuring or raising concerns about whether a brief dip in profitability is just a dip while getting the SR Model 3 up and running, or potentially something that can be played as an open ended concern. Still, something like $4 billion in cash, up a billion from prior quarter, will make those trying to trot out the $900 million in debt coming to do easier to recognize as peddling nonsense... maybe to the point they don't even try that one anymore.

 

[anthonyj]

The timing was bizarre indeed. It will be interesting to eventually know what prompted the release in that particular day.

He probably thought that if he announced early ER later that night that it would make the SP bounce back and burn shorts. That didn’t happen, and in fact short interest decreased on Friday.

 

[Fact Checking]

The timing was bizarre indeed. It will be interesting to eventually know what prompted the release in that particular day.

My guess is that either Tesla screwed up (totally possible), or that they were informed that the layoff plan leaked and would be released during the day to create a drop for the January 18 expiries, so on short notice they decided to release it sooner than planned.

The pattern for past layoffs was usually during the week: the 2018 June 12 9% layoffs announcement was given on a Tuesday.

As it happened Elon's email created an even bigger drop than a leak of the layoffs would have created, due to the narrowing of the profitability guidance and the downbeat tone, and the resulting investor uncertainty...

Tesla and execution, still not best friends.

 

[j6Lpi429@3j]

Do we really think Elon cares about the SP? his repeated statements on it suggest that he does not. tesla now makes a profit, he neither cares, or has to care about the day to day or even month to month stock price. And thats a good thing for longs.