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

[Mike Smith]

So what's going on with the Solar Roof V.3 reveal tomorrow Elon mentioned? I assume it will be a media / important investors only event?

 

[EVNow]

Going back to Tesla recognizing ~$30 million from autopilot/FSD with ~$500 million still deferred.
To those more knowledgeable with accounting: Is Tesla able to freely decide how much they want to recognize every quarter (within reasonable limits of not going beyond how much of FSD they have pushed out)? Or is Tesla recognizing an amount equal to how much they believe they have actually achieved towards releasing autopilot/FSD features?

The recognition needs to be based on delivery.

Tesla May have already established a rule on how much to recognize for each feature to be delivered. Then there’s the HW3 upgrade that they need to do. That might be worth $2k but comes with a cost. Rest would be things like recognition of signs and taking action on them. Finally, City auto driving or City NOA. That completes the delivery of FSD.

I think the big recognition might be in Q1, which would also help the seasonally low quarter. That is when we can expect some aspects of City NOA to be released and HW3 upgrades to happen in volume.

 

[Mike Smith]

I don't think that is the case, because they can't buy more TSLA once it goes past 10%. (But the new contributions go into their other holdings which would start to lower the percent of their portfolio that is TSLA.)

If TSLA is 10% of holdings and they invest 10% of new contributions in TSLA, TSLA remains 10% of holdings.

 

[sundaymorning]

View attachment 469358

WSJ Coverage of Q3 They heavily steer the narrative towards falling sales and demand:

Tesla Delivers a Surprising Profit

• Electric car maker’s results spur 20% rise in stock price; new products pose threat to margins
• But even as Tesla gets closer to showing it can consistently produce large volumes of cars, it faces the prospect that market dynamics might be shifting as demand slows.
• Tesla faces the elimination next year of a federal tax credit to its customers, a change that analysts say could affect demand.
• What’s more, industry experts fear overall demand for new vehicles might be about to slump after a prolonged growth period. Demand in China and Europe already is showing signs of weakness and the appetite for new vehicles in the U.S. could be in jeopardy, analysts have said.

Tesla Stock Charge Will Have Limited Range

• Shares surge on surprise profit, but falling sales mean debate over long-run viability is far from finished
• The top line was far less impressive, however. Total sales of $6.3 billion were slightly below analyst expectations, despite the recognition of deferred revenue. More important, they fell 8% from a year earlier. That is Tesla’s first annual sales decline since 2012.
• That decline won’t trouble bulls, who point to a new factory in Shanghai and a coming new crossover vehicle known as the Model Y. Those bets are no sure thing, however. China’s auto market is showing increasing signs of stress, and Tesla already revealed the Model Y earlier this year to minimal enthusiasm

No mention of energy products or next month's pickup reveal (but did mention limited production of semi next year, new factory coming in Europe, model 3 trial production in China, and model Y ahead of schedule).

Isn’t the WSJ owned by Bezos, the guy who invested in Rivion?

 

[brian45011]

Is a new all time high next month in the cards after the stellar Earnings report?

It's depends on how the buy side analysts at institutional funds assess TSLA's growth prospects. Net Income was $143 MM or annualized at $572 MM. With 179 MM shares outstanding and a share price of $305 that's a P/E of about 95 (worse for TTM.) Try computing a PEG ratio based on your earnings' growth projections.

 

[Causalien]

I doubt there were any material leaks as Tesla runs a pretty tight ship (except when it comes to employee e-mails ). But I think it was obvious things were coming together on many fronts. I actually expected the cost savings to show up last quarter more strongly but I was anticipating them too soon. I would have been more vocal on my bullishness but the overall negativity here makes it easy to temper my speculation. Still, even the short-sellers had an inkling if you see the decline in short interest recently. I don't attribute any of this to material leaks.

I think this is actually good that this place is no longer a bull echo chamber that nudge each other on to bet too much on the bullish case and then lose it all.

 

[Dwdnjck]

Tried to find a place in San Diego that serves bear meat for tomorrow. No luck.

 

[sparcs]

Am I doing the math right that if this ~$50 move holds that it increases Elon's networth by ~$1.9 Billion?

Gives me flashbacks to all the discussions by shorts about Elon getting margin called.

 

[Antares Nebula]

Posting here too (from the quarterly financials thread): Thoughts?

In a (perhaps vain) effort to understand how all the analysts and models got it wrong, I did a quick compare (please advice if any errors) (all numbers in Millions):

Q2
-408 GAPP

back out one-time 117 restructuring and 41 other loss =

-250

Q3
143 GAPP

back out 85 other income, extra 23 for regulatory credits vs Q2, and 30 for smart summon deferred revenue* =

5

*Was there any other deferred revenue in Q3 (or even Q2)? Need an accurate comparison of differences in deferred revenue (w/ respect to FSD), if the the above is not accurate.

So roughly 255M *real* GAPP difference vs 551M *seeming* difference.

This real difference, based on the Q3 financials, appear to be attributed to improvements in gross profit (improved production efficiency, COGS, etc.) and improvements in operating expenses (SG&A, etc.). This seems very reasonable to me. *But* this approx 250M also can be within the level of fluctuations QoQ and YoY as Tesla grows. Expenses and efficiencies are not going to be smooth but rather uneven, especially as new products and new facilities (factories, sales and service centers, etc.) are introduced. Yes? Maybe we have a 250M GAPP loss in some future quarters? This is all very rough, and I understand Tesla is growing and continuously trying to improve. Trying to determine if one-time thing or improvements with lumpiness. Hopefully the latter and with less lumpiness. Just thinking out loud here...

Also, regulatory credits and deferred revenue are going to be a part of Tesla's financial landscape for the near future, with regulatory credits eventually (maybe years) disappearing and deferred revenue eventually moving to actual present revenue (as FSD nears completion). So these inputs will also fluctuate in the future.

 

[CorneliusXX]

The market for horses "is showing increasing signs of stress," so cars "are no sure thing."

"Tesla already revealed the Model Y earlier this year to minimal enthusiasm" from WSJ.

The only possible outcome is that people have decided they no longer need transportation.

 

[EVNow]

Especially with a stock like Tesla, margin callers will force sell/cover in a heartbeat.

Do shorts have stricter margin call rules ? A lot of us survived 50% SP drop without margin calls.

 

[Oveeus]

I expect that a Model 3 in China will be sold at a cheaper price than a Model 3 in the US.
.

Chinese car market is a bit different. Their cars (especially premium ones) are sold at nearly twice the price of NA, even domestic made Audi/BMW are sold at higher price than NA equivalents. Tesla could actually charge more money for its products in China but decided not to do so, which to me is a very strategic one.

Tesla's Chinese M3 pricing is going to make it to dominate the premium EV sector (profit-wise at least). It's the only "premium" EV brand in China that has local production. Domestic Chinese EV brands can't price their equivalent cars (if there's any) to the price of Tesla as they are perceived to be inferior or less valued brand. Foreign premium brands such as VAG, Jaguar, and Volvo... etc don't have domestic production, hence they'd have to import everything, and at the pricing that Tesla is charging in China, the others will be losing big time for every EV sold if they try to match Tesla's offering.

Tesla welcomes competition... sure, but it doesn't want THAT much competition yet. Especially for the largest EV market in the world. So it priced accordingly to suppress any potential competitor growth.

I see Tesla becoming the Apple in EVs once EV becomes the norm, where it doesn't dominate the market share, but takes pretty much all the profit there is in the market.

 

[MP3Mike]

If TSLA is 10% of holdings and they invest 10% of new contributions in TSLA, TSLA remains 10% of holdings.

But it isn't at 10% it is over 10%. i.e they can't buy more TSLA until enough new money comes into other holdings to bring TSLA to under 10%, or TSLA drops or the other assets increase.

 

[Steve m]

The market for horses "is showing increasing signs of stress," so cars "are no sure thing."

"Tesla already revealed the Model Y earlier this year to minimal enthusiasm" from WSJ.

Ah feel the same level of enthusiasm for the wsj and wapo.

 

[Remus]

The issue you fail to grasp is that the majors have huge amounts of capital, money and experience building lots and lots of cars. Tesla had to learn how to build EVs, now they are learning how to build mass market cars, something the majors have been doing for a long, long time.

But the real limitation Tesla is facing is they can only come out with one new model every year... if they are lucky. The majors can put into production half a dozen new cars each year if they want to. That's what GM is doing. Tesla will have maybe four or five models in 2022 while the majors will have that many each and more in the pipeline.

The real mass buyers will be swayed to buy EVs when nearly every automaker has them on the lot to test drive and kick tires. I used to think it would be the presence of chargers all over the place that would do the job. But I think it will be more important just to see EVs on the roads and in showrooms. People will figure out they can charge at home.

The issue you failed to grasp is that there are significant baggage attached to those capital. Usually the old times heroes of those companies, the people who worked hard achieved great financial success for the company in the old way, they're the backbone of the management, for a good reason.

They're, unfortunately, the overwhelming force against big changes. Even very innovative companies such as Intel fell in this trap. How they missed the mobile train completely?

There are, throughout history, only two once successful companies ever turned around their ship, Apple and Microsoft. Both cases lots of head rolled from top level management team.

The car companies have a even bigger problem, not only they have to fight with their entire management team whose members have ICE background, they also have to fight with their distribution channel.

Try understand the case with Intel first before coming back here peddling the nonsense about "competition"

 

[EVNow]

Posting here too (from the quarterly financials thread): Thoughts?

Apart from 85m other income
- big cost improvement in manufacturing, which translates to about 4% better margin I.e. 200M.
- big decrease in SGA. Tesla continues to reduce about $50m in SGA a quarter even when improving volume. Very impressive.
- improvement in energy margin, services margin

I don’t think any of the above are one time I.e. they are likely to be carried forward to Q4.

I’ll post a detailed comparison of the model and the actual over the weekend- but this looks like a solid quarter. I think we’ll see about $100m more in profits in Q4.

 

[M3Rider]

Still, even the short-sellers had an inkling if you see the decline in short interest recently. I don't attribute any of this to material leaks.

This is an interesting statement. I was wondering if a substantial covering before the ER (to the tune of at least 5-8M shares out of 40M), the number is more of a gut feeling than a fact, could be explained by someone leaking something.
Shorties telling each other to hold to their beliefs while covering is a pretty screwed up thing to do.

 

[Oveeus]

Tried to find a place in San Diego that serves bear meat for tomorrow. No luck.

Have some common sense please... bears are hibernating this time of the year.

 

[Fact Checking]

Do shorts have stricter margin call rules ? A lot of us survived 50% SP drop without margin calls.

Remember that short interest peaked when TSLA was at $180 - there was a lot of new shorting below $200. The rise to $250 already squeezed out about 5 million shares worth of shorts - the rise to $300 levels is a +65% rise from $180 levels.

Also, while many (most?) longs own TSLA shares without margin and your losses are capped at the capital you invested, you can only short by using margin, and the losses are unlimited. So the psychology of shorts reacting to a rising stock is very different.

There's no doubt in my mind that a lot of shorts are going to exit - and it doesn't really matter whether it's triggered by margin calls or by loss limits.

 

[trayloader]

The Southerner in me wants so badly to kick the living *sugar* out of him right now!

I'll just have to be satisfied with the markets doing it.

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