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

[traxila]

I am calling BS. This stock needs to blow up to 250 tomorrow and put the fear of God into these shorts. Absolutely everything is clicking except customer service (which is a big deal, but I am optimistic they will continue to address this and improve). I see a roadmap and a timeline to where Tesla is destroying everyone in the market with the best cars, best batteries and the lowest costs and I know anyone who is paying attention and is not vested in the old world sees the same.

By the end of this year, the naysayers will have officially been labeled stupid by everyone listening. I think the biggest risk Tesla faces now is a natural disaster.

 

[ReflexFunds]

I would give this way less chance than 50-90%. Inventories ran down this quarter and production remained far under what the line is capable of. If there were plans to shut down S/X for more weeks (that'd be a minimum for a merged S/X line) then I would have expected the factory to prepare inventory to cover that sales period.

That’s true, however maybe it’s better to clear inventory before launching orders for the upgrade rather than clear old cars at a discount again.
After the line upgrade they can move back to double shift and even possibly overtime to clear the order backlog built while the lines are down. Tesla has plenty of cash now so a timing gap in S/X revenues shouldn’t matter much to them. And I think most customers will be fine with a 4-12 week wait on new S/X orders.

 

[Fact Checking]

I think the pundits talk about profit is way over rated,

It is: GAAP expenses are artificially elevated in growth companies.

The best way to visualize it is through the "Amazon story":

Amazon's annual "Net Income" GAAP profits were well below 1 billion dollars in most years during the first 20 years, and then Amazon became a trillion dollar company.

The cumulative GAAP income during the first 20 years was less than 10 billion dollars - yet how did did Amazon become a 1,000 billion dollars company, 100 times the value of the GAAP profits generated?

What mattered to growth and what was key to reach 1 trillion dollars valuation was not GAAP income but cash generated by operations.

There's several reasons why GAAP expenses are artificially elevated for Tesla (and other growth companies), which means that GAAP profits are artificially lower:

• Stock-based compensation: this is mostly new TSLA shares issued to employees for stock options, ESPP plans, awards and incentives, etc. - in 2018 this was an over -$800m GAAP expense. Since growth of the company is much higher this is not a problem to shareholders.
  
• Depreciation and amortization: Tesla's mostly new equipment gets amortized and depreciated not because it's in danger of being obsolete, but because this is how capex gets recognized in the GAAP space. In 2018 alone this was a -$1.9b GAAP expense (!) - while the real "maintenance capex" that is required to maintain the lifetime of equipment indefinitely is likely around ~$450m. I.e. the GAAP D&A expense is a factor 4 higher than it would be if Tesla wasn't growing so rapidly and there was an extra -$1,450m D&A expense in 2018.
  
• Interest expense: while this is a real cash expense, Tesla's debt financed growth model is an artifact of fast expansion as well. In 2018 alone interest payments were around -$675m.
• R&D investments: this too is a real cash expense, it's not a running cost of the business, but an expense invested into future growth products: Autopilot, AI, FSD chip, Tesla Semi, etc. In 2018 alone R&D expenses were -$1,460m.
  
• Higher than optimal cost of goods and SG&A expenses: a rapidly growing company is not executing as optimally as a company that is in steady-state. It's hard to estimate how much of a factor this is, but with a YoY growth rate in the dozens of percentage point, it could easily be as high as 10-20% of CoGs+SG&A. (!) I'm not putting a specific figure to this effect though.

In 2018 GAAP income of Tesla was -$976m, and that was the year that carried most of the costs of the delayed Model 3 expansion. But even in 2018 if we sum up the factors above, there were -$4,385m of GAAP expenses due to Tesla's (self selected) hyper-growth model.

Tesla's underlying business model was wildly profitable, even in 2018, despite the delayed Model 3 ramp-up, and the reported "GAAP loss" was mostly an artifact of very rapid growth.

This is why anti-Tesla pundits try to cast doubt on the growth story, on demand, and try to exaggerate the importance of GAAP profits.

 

[larmor]

I haven't been able to follow this thread so closely recently, so apologies if this has been discussed to death, but given latest information what do people think Tesla's cell supply/manufacturing plans are for the next 12-24 months?

One possibility:

• August/September 2019 - Shut down S/X manufacturing lines. Prepare for interior refresh (90%?). Possibly remove S body line, upgrade X line for both S&X production (50%?). Potentially also prepare to switch S/X to 2170 cells/packs produced in GF1 (50%?) (depending if Panasonic's June fixes can get output to the 35gwh capacity). If S/X is switching to 2170, also shut down the S/X Panasonic cell factory in Japan to refit equipment for 2170 format. Use this Japan factory to supply GF3 in China (maybe easier now China has removed its local battery supply list? This may have been what Tesla was waiting on for finalising GF3 cell supply?).
• Summer/Autumn 2019 - Launch new repair parts supply operation from new lathrop facility. Shut down warehouses in Fremont to move some Fremont parts supply to Lathrop for just in time manufacturing.
• 2020 - Use space from removed S line, S/X battery lines and parts warehouses, together with other unused space, to build manufacturing for Y at Fremont.
  
• 2020 - Build in-house cell manufacturing for Y and Semi, either at GF1 or at Maxwell's Arizona ultra-capacitor factory. It feels optimistic that Tesla could get new cell technology to mass manufacture so quickly, but the timing of the cell/powertrain investor day this year, plus holding back on new Panasonic supply expansion seems to point this way.
• 2020 - Build Semi manufacturing at GF1
• 2020 - Start building GF4 in Europe.

Or Tesla battery supply gets severely depleted as people finally have batteries to replace in their tv remotes— an analyst told me this would happen..,

 

[Stars aligned]

I am calling BS. This stock needs to blow up to 250 tomorrow and put the fear of God into these shorts. Absolutely everything is clicking except customer service (which is a big deal, but I am optimistic they will continue to address this and improve). I see a roadmap and a timeline to where Tesla is destroying everyone in the market with the best cars, best batteries and the lowest costs and I know anyone who is paying attention and is not vested in the old world sees the same.

By the end of this year, the naysayers will have officially been labeled stupid by everyone listening. I think the biggest risk Tesla faces now is a natural disaster.

Don't think it necessarily SP absolutely needs and will blow thru 250 tomorrow. Best case touch 250 briefly, imo and not as advice.

The SP has halved in about 5 1/2 months. If shorts are clever and sense a trend reversal, they will cover by buying and exercising calls rather than shares. This will put a slow upwards pressure on the SP, with temporary pullbacks.

If reversal is as fast as the downtrend we will see 380 again only in January 2020.

S&P inclusion could accelerate the price recovery. Also early availability of Maxwell battery packs in Q3 2019 or some other major positive surprise. Fund managers and shorts will probably hedge a potential inclusion to a certain extend. Therefore, run-up before results may occur. If Q2 results don't support the thesis, SP will most likely suffer but not too much.

 

[Navin]

Today Elon Musk called out wsj reporter Charley Grant for potential ties to Jim Chanos.

Everyone who tracks Tesla closely knows the history of Charley and his negative narrative on TSLA. What was interesting to see if there was some truth to being linked to Jim Chanos and serving as his mouthpiece to the financial community.

Let’s go down the rabbit hole....

——

Check out this article:
How Jim Chanos Uses Cynicism, Chutzpah — and a Secret Twitter Account — to Take on Markets (and Elon Musk)

Chanos can appear world-weary and somewhat guarded — but, as the saying goes, in every cynic beats the bleeding heart of an idealist. “There’s more than a little of the crusader in him,” says longtime friend Jim Grant, founder and editor of Grant’s Interest Rate Observer. “He would like to clean up Wall Street. He would like to improve the quality of corporate reporting. He would like to rid Wall Street of the scoundrels and clean up corporate management.”

Charley’s Dad’s BFF - a little sloppy quote they probably regret

——
Jim Chanos has been short other very specific stocks:

—-
Caterpillar

Charley writes about it - helps out
Why Caterpillar Rolled Over

——

Valeant

No way - guess whose back caddying for Mr chanos on the back nine:
Valeant assets good, but debt burden an issue: Grant

——-
Jimbo shorts Mallinckrodt

Charley lends a hand
These Drug Companies Are Too Frail to Cure

——-

Jim calls out Uber
Legendary short vendor Jim Chanos: Uber and Lyft went public because they’d to, now not because they wished to – BrowseDesk

Charley calls out Uber and Jim responds via Twitter handle
Charley Grant on Twitter


Could go on and on...

Going back to my popular post (linked above) wrt Chanos using Charley from the WSJ as a mouthpiece - here is another good one that just happened. Looking at the two photos attached below of Twitter posts each of them rushed to make separately and shortly after Tesla issued their production and delivery report - ask yourself this question: what are the chances that they DID NOT interact and communicate with each other somehow via some sort of TSLAq emergency defensive huddle? Or did both just happen to come up with this very obscure and unique thought independent of each other.
Draw your own conclusions.

 

[Fred42]

This only has 6400 views, but it was posted only yesterday. Maybe people can help with getting links out there.

(Simone Giertz's two Truckla videos are up to 14.4 million combined.)

 

[RobStark]

it's just a tiny town in a part of the state with an airstrip big enough to land his plane and surrounded by beautiful mountain scenery, good elk hunting, good trout fishing, and lots of public lands with hiking unencumbered by crowds. Think Jackson WY but without millionaires or billionaires milling about and a local populace consisting heavily of local rednecks. Hopefully he's just there to hang out with his boys, celebrate the 4th, and get a few days of well earned rest. There'd be about a 100% chance that no one in town would know who he is so he could chill and operate in full on dad mode.

If Elon and his boyz are there then there are billionaires and millionaires milling about.

 

[StealthP3D]

If Elon and his boyz are there then there are billionaires and millionaires milling about.

I don't understand your point or it's relevance.

 

[RobStark]

Well, current MS/X was code-named "Raven" - I wonder if there's any significance to that.

Having recently been watching the X-Men franchise (for the 1st time!!) I wonder if it's a geek reference to the shape-shifting character Mystique (Raven Darkholme) = several changes over time.

Happy 4th July, you yankees - heard that you've got some tanks on parade, getting more like Red Square every day

Trump was inspired by France's Bastille Day

 

[Freder Reeve]

If Elon and his boyz are there then there are billionaires and millionaires milling about.

that put a funny picture in my head.. (in Far Side fashion of course)

 

[Mokuzai]

Updated the charts to include the June 2019 InsideEVs data. Enjoy!

Mase Goslin on Twitter
Mase Goslin on Twitter

And YouTube versions that allow speed controls and pausing.

 

[EVNow]

While @EVNow and @luvb2b are probably right that the baseline Q2 GAAP profit scenario is probably a "small loss" in the -$200m range, there's a few wildcards such as:

• deferred revenue recognition,
• FCA deal and other ZEV credit sales,
• uptick in Tesla Energy income perhaps, due to them reducing their PowerWall/PowerPack backlog,
• cost savings and layoffs will eventually reduce opex and CoGs as well,
• depreciation and amortization (a non-cash GAAP expense) has been on a steady downwards trend as well,
  
• plus 'stock compensation', which is usually a $100m-$200m GAAP expense, might have been significantly lower in Q2 due to the very low TSLA price levels. (Note the irony here...)

... one or more of these wildcard items could push GAAP income into slightly positive territory.

• deferred revenue recognition : May be some of FCA money, but not EAP/FSD. If they had released enhanced summon to fleet, they could have recognized EAP money.
• FCA deal and other ZEV credit sales, : ZEV credit is the true wild card. FCA probably tied to deliveries.
• uptick in Tesla Energy income perhaps, due to them reducing their PowerWall/PowerPack backlog : Possible, but low margin.
• cost savings and layoffs will eventually reduce opex and CoGs as well, : Service cost is increasing
• depreciation and amortization (a non-cash GAAP expense) has been on a steady downwards trend as well, : Should inch up because of higher production
  
• plus 'stock compensation', which is usually a $100m-$200m GAAP expense, might have been significantly lower in Q2 due to the very low TSLA price levels. (Note the irony here...) : Shows no correlation to SP. Possibly because a lot of companies give stock comp based on $ value, that gets converted to # of shares depending on SP.

 

[RobStark]

Norway June 2019 YTD PEV Sales

June 2019 Automotive Sales (Including ICEv)

EV Sales: Norway June 2019

 

[1101011]

...Or did both just happen to come up with this very obscure and unique thought independent of each other....

Within ten minutes of each other!

 

[mongo]

Within ten minutes of each other!

Or Plagerisim?
Ohhh that looks like a thought, i will.copy it, yes i will.
Now ize luk inteligent 2.
Tsla fans r dum

 

[AZRI11]

@Fact Checking : in an escalating spiral of responses Tesla PR might have withdrawn Dana Hull's access to Tesla executives, factories and exclusive information - which didn't improve the tone of her Tesla reporting. But I'm really just guessing there.

Correct

IMO.......Dana is, to a certain extent, beholden to her Bloomberg masters. The pivot I saw was when she left Mercury and went to Bloomberg. Everything snowballed from there.

Market mover bonuses. Dana needs to eat.

 

[Antares Nebula]

There is some ambiguity about whether TSLA broke above the downtrend line; depends on normal or log scale. See my post:

@Navin and others re longterm Downtrend Line break:

Curious, I saw on many charts that it broke the downtrend, but I did see one chart where it didn't. So I went to tradeview and drew the lines myself. Turns out on the normal scale, it broke; but on the log scale, it hadn't (just touched the top). See pics attached. So, hmm...

I actually expected it to climb higher Wed, but we can write it off to 4th of July mischief. The test will be next week. But seems like the analysts and media are pushing the narrative that earnings will be bad and this is a fade into earnings. Being a news vacuum from now until earnings, the stock may in fact fade. I don't have a strong opinion here. I think it could go either way, but I'm leaning slightly toward it going down into earnings, and then going up afterwards. Not going to trade it either way, but I will add shares if it goes lower.

(Bear in mind that if it does in fact fade, it can still stay above the channel/downtrend line (on the normal scale), if it fades slowly enough -- see chart/pics.)

View attachment 426421 View attachment 426422

 

[KSilver2000]

Anyone have an idea about how many sales and delivery employees there are at Tesla? Trying to figure out what the total cost of the bonuses would be from reaching those target delivery numbers ($1,200 for sales and $500 for delivery at 66,000 deliveries, and $2,400 for sales and $1,000 for delivery at 69,000 deliveries in North America).

 

[MarcusMaximus]

How did they get the body shop and Tesla to go along with this plan? How did they know ahead of time that the repair would go poorly?

From what I understand, none of this requires Tesla to have gone along with it. They just kept breaking things while it was in the shop, causing further delays. Ordering the wrong glass didn’t help either.