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

[scaesare]

Tesla HW3 and FSD will be a literal goldmine...

 

[Off Shore]

in my opinion there is no explanation.

In my opinion there is a clear explanation: significant money being spent by Chuck, Dave and others to keep the stock price low. It's working. NB the biggest shorts are not in it for a profit, but simply to impede Tesla's progress.

 

[Fact Checking]

Looking ahead - how do we avoid the “fact sheet” analyst scheme when it comes to q4 earnings? Won’t they play the same game again?

They tried that in Q3 as well: Goldman Sachs for example 'predicted' an unrealistic revenue figure to try to engineer a 'miss' on revenue forecasts.

But it's much harder: income and cash flow based metrics are standardized and Tesla was undervalued at $350 already, with Q3 metrics. If Tesla doubles profit and increases gross profit to above $2b then there's not much they can do.

The main thing holding back Tesla right now are lousy macros and uncertainties, which create low liquidity environment where many investors don't have all that much dry powder left. That created the setup for the P&D bear raid yesterday.

It's unclear to me how long the lousy macro will continue:

• Trump seems to enjoy the dystopian government shutdown and how it diverts attention from the literally one dozen criminal investigations against him and his family. Any news that isn't about his Russia treason or his corruption is good news. So the government shutdown could continue for some time in principle.
• Most of Britain is still in denial about BRexit: they don't seem to be able to accept the fact that the EU has written Britain off and will do a BRExit, be it soft or hard. The only way the UK can remain in the EU at this stage is by withdrawing Article 50 - for which there seems little political support in the UK. So BRExit it is on March 29, and the headlines could be ugly for a few weeks. It's also unclear how the City of London is going to react to being shut out of European financial markets within a couple of months after BRexit.
• China is still a big unknown. The tariffs have an obvious negative effect on the Chinese economy, which might make China more willing to pay off make a deal with the Trump clan.

 

[bhtooefr]

Just remember, uptick does not apply to derivatives. enough option sellers (or put buyers) can produce enough similar pressure to the underlying equity and will simply produce SELLERs of the equity if not shorts.

However, wouldn't it make options more expensive, as a market maker can't as easily go to a net short position to hedge, and therefore assumes higher risk?

 

[mrdoubleb]

The problem is that you can't sell something you don't have.

Tesla can make about 100k S+X per year, and that's it. End of story. If they want more, they have to either build a new 18650 plant - which neither they nor Panasonic have any interest in - or redesign the vehicle to use 2170s, and increase the 2170 supply (which would mean throwing away the capital invested in 18650 production as a sunk cost). And beyond batteries, they then would need to build new lines (that they don't have room for at Fremont) for increasing the production volumes of everything else needed.

S&X are a big sunk cost that now earns them cash. They don't want to sink any more unnecessary capital into them; their focus is elsewhere. When S&X no longer earn them cash (and low-cost updates won't do the trick), they'll only then kill them off and either replace them with a newer, more profitable S/X platform, or just not replace them. Only then, and not before.

Also of note - and I have very limited understanding of battery design - is that just because Tesla isn`t using the 2170 form factor for S/X it doesn`t mean those models are not on the latest chemistry. Sure the 2170 design probably has a bunch of advantages, but the better chemistry may still allow them to increase range if they need to pull a demand lever and, more importantly, increase DC charging speed to whatever the Model 3 can do. I am expecting an announcement on that when SC V3 goes live - don`t be surprised if they say something like "all Model 3s and all the S/X produced since [date] can do 240 kw charging".

 

[SebastianR]

In my opinion there is a clear explanation: significant money being spent by Chuck, Dave and others to keep the stock price low. It's working. NB the biggest shorts are not in it for a profit, but simply to impede Tesla's progress.

I agree its working. However, does it have the desired effect? Yes, longs are frustrated. More importantly employees (stock options) are not as happy as they could be.

But since Tesla does not need Wall St. any longer for either bonds or equity the impact of this on Tesla is diminishing. And as the financials of Q4 come out I expect large portions of the bear thesis to collapse (also see the post of @Fact Checking and the GS example).

If you are optimistic, this was the last chance of the shorts to really have an impact on share prices: with 2019 guidance and Q4 results it will become quite clear that Tesla won't need Wall St. in the future and I expect this all to die down a bit. Note that much of the other FUD (all to create a crisis of confidence so that people don't give money to Tesla and thus the short-thesis becomes a self-fulfilling prophecy) was too weak to harm delivery numbers etc.

In reality, I suspect what will happen is, that in Q1 we will have another and another and another FUD story for instance: Q4 was with the old pricing, the US market is done and Europe won't pick-up; the 2k reduction will eat all profits; the Tesla killers are coming etc. etc. etc. I'm also sure we will get a lot of concern trolling about China, then we will get more FUD around why Model Y will be a failure...

 

[ReflexFunds]

BTW., while I agree with most of your post, I don't think that's true:

• Tesla has at least one GWh scale storage contract.
• Adding battery storage that has 10+ years of expected life time is a no-brainer upgrade and investment for wind farms: wind peaks in the night when power use is the lowest, so a lot of that power can only be sold at very low prices. With battery storage that peak nightly energy can be transformed into a peaker plant in essence, selling the energy for 10-20 times as much money ... Also there will be a gold rush effect: the first ones to do this will earn a lot from this.
  
• If only there was a company selling GWhs worth of battery capacity at reasonable prices.
• Note that Big Oil will have limited ability to run interference: power companies are strategic long term allies of Tesla, not of the Big Oil/Coal price cartel. Tesla will free power companies from Big Oil and give them energy independence and self-determination. That's a well established, several trillion dollars worth industry to transform, right there, available to the first mover.

The Australian battery project created quite a stir in the power industry. I agree with @KarenRei that Tesla Energy is one of this year's dark horses. (The other one is FSD.)

With the containerized "Megapack" Tesla is well positioned to push out as many of them as there's excess cell capacity at the Gigafactory:

But yeah, no way to model this, yet, but I agree with Elon and JB that Tesla Energy is going to outgrow the Tesla automotive side within a couple of years.

I agree on long term potential for storage.

In the Q2 call, 2018 guidance was for c.1GWh, up from c.0.35GWh in 2017. JB said it should grow 3-4x in 2019.
So I think 2019 should be at 3-4GWh, and should continue 100%+ grow rates for years to come.

I still think 35GWh run-rate as early as March 2019 looks too high for 3 and storage though. Will be interesting to see if Tesla moves all storage projects to GF1/Panasonic in future.

 

[Fact Checking]

Just remember, uptick does not apply to derivatives. enough option sellers (or put buyers) can produce enough similar pressure to the underlying equity and will simply produce SELLERs of the equity if not shorts.

Remember, shorts want to mark down $TSLA cheaply.

They cannot do that via derivatives: market makers delta-hedge options smartly, they don't go to the underlying and immediately sell the stock. Shorts would have to buy significant amounts of contracts at much higher spreads than the underlying - and they couldn't get rid of them by the end of the day...

Marking down the price by shorts relies primarily on 'market' orders, which are immediate sell orders that punch through the order book at strategic price levels to trigger weak-long stop orders and opportunistic shorts. This creates the 'icicles' that @Papafox pointed out so many times in the past. These short positions are then closed by the end of the day - in much less dramatic fashion, via well spread out limit orders.

The 'uptick rule' takes away that key tool from shorts: the ability to use 'market' orders and engineer fake bearish pressure at key levels.

This is why in every single 'uptick rule' day of the past year, and there were about 10 such trading days, we've seen calm trading with no significant downwards pressure other than genuine bearish investors selling real shares.

 

[uselesslogin]

Also of note on - and I have very limited understanding of battery design - is that just because Tesla isn`t using the 2170 form factor for S/X it doesn`t mean those models are not on the latest chemistry either. Sure the 2170 design probably has a bunch of advantages, but the better chemistry may still allow them to increase range if they need to pull a demand lever and, more importantly, increase DC charging speed to whatever the Model 3 can do. I am expecting an announcement on that when SC V3 goes live - don`t be surprised if they say something like "all Model 3s and all the S/X produced since [date] can do 240 kw charging".

Don't forget that it is possible the 18650 format is easier to keep cool since it is smaller. So if the chemistry is updated in the same format it could perform better than the 2170 packs. The use of 2170 was primarily motivated by cost.

 

[Zaxxon]

And in for 20 more @ $304 in my IRA. Thanks, shorts!

 

[EVNow]

Apple trading is crazy today. More than 25% of NASDAQ by volume.

 

[AlexS]

when we will get such articles on the yahoo finance news boards? next week?

Tesla Is Now America's Number One Premium Automotive Company, Outsells BMW, Lexus In Q4

edit: just noticed: actually article is wrong, it says Tesla sold over 90 000 in 4Q in US, but in US it was 77 525 and expected BMW sales are 80 000.

 

[Artful Dodger]

Remember folks, up tick rule in effect, shorts can't drive TSLA down today, only longs can. AAPL may also hit the 10% trigger.

I expect accumulation based levelness until any capping volume is overwhelmed (but I'm an optimist)

Not yet, at least so far this morning:

Yesterday's close 157.92 * 0.9 = $142.12 SP to trigger uptick rule

Today's min. SP for AAPL: $142.81​

So no uptick rule in effect for AAPL yet. But they're holding up at $143.79 at 09:45 so may yet trigger the uptick rule.

Cheers!

 

[tivoboy]

However, wouldn't it make options more expensive, as a market maker can't as easily go to a net short position to hedge, and therefore assumes higher risk?

Buying up puts at higher prices will simply pull down the stock. Selling a long position in volume at the same time will have the same effect. If I'm trying to be short, both moves will have the same impact in the short term.

 

[JRP3]

I will buy 200 shares @ 270

There will be 20 million shares traded at 270 soon

Pass some of that stuff this way, cause you high as F bro.

 

[scaesare]

there's a lot of conflicting information on what's going on in december 2018. At times they've been high, but they've also outputted far lower from some reports.

Even if they outputted 24k for december, that doesn't exactly sell a great story. Once you subtract out that assumption of 6k a week December high, then it significantly lowers the average for October and November. Basically making those months even less productive on average. That isn't a great story either that they were basically making a little over 4k a week for the first two months of the quarter on average.

The whole thing indicates ongoing production problems for Q4. The hope is that they are at least outputting 5k entering the current quarter, but i'm skeptical they will run january 2019 at 6k a week for the full month. I hope they surprise me.

You seem to be moving the goalpost. You said:

"They're not even averaging 5k a week anywhere in the quarter based on these Model 3 production number"

They sold > 61K Model 3's. There's 12 production weeks in a typical quarter (and this one probably had additional holiday shutdown). So not only did they average 5K anywhere in the quarter, they did it for the entire production quarter.


Now you don't like the fact they may have been averaging 6K/wk in a good chunk of Dec.?

 

[EVNow]

It's also unclear how the City of London is going to react to being shut out of European financial markets within a couple of months after BRexit.

Couldn't happen to a finer bunch of folks. You thought Wall St was bad ? They have been ruining the world for centuries.

 

[M3Rider]

Is this really like this or just an early version of Apple Maps ?

It is real and very recent - the aftermath of the earthquake in Alaska. Should be very applicable to California too. What I'm saying is that it's super cool that a lot of Beta testers are driving tons of miles to test the FSD, but some scenarios like this they are not going to see. But they do need to be identified and tested before FSD is released to a mass consumer. Because sooner or later one of these rare things will happen and you want to make sure you've prepared for it.

 

[Artful Dodger]

Finally got my IRA funds available. MMD, don't fail me now!

Better wait until tomorrow, when the uptick rule isn't in effect.

 

[EinSV]

Question for @Fact Checking and anyone else who wants to chime in:

Given the huge number of puts about to expire on January 18 (FC's estimates from December 29 below), does anyone want to take a stab at a rough estimate of the number of short shares currently open as hedges that will be closed between now and January 18 when the puts expire?

I am wondering if closing of short hedges on all these puts may provide some tailwinds for the SP over the next couple weeks.

• "The 2019 January 18 expiry week is absolutely fricking huge: it was the LEAP expiry date for two years and has accumulated a lot of 'bankwuptcy bets' - over 830,000 options contracts, which is 83 million $TSLA share-equivalent derivatives positions ..."

• "The PUT/CALL ratio is still 2.3, which is very high compared to the <1.0 ratios of recent expiries. 18th of January is the last big bet of short sellers to earn a lot of money through options on $TSLA."