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

[SMAlset]

CNBC to interview Robyn Denholm on Friday am 7:45 et (might be 6:45et still not used central time zone)

Do you remember which program she was going to be on? Might help narrow down the time.

 

[PeterJA]

...To answer your question, I didn't know [$180] was the bottom. But it looked like there was a very good chance it wouldn't go much lower, that the FUD has played itself out to the end....

Jonas turned from negative to positive, reversing his own FUD within a day or two (I vaguely recall). I saw that and started buying, but not as much as I wish I did. Next time I'll have more confidence, but alas not at $180, probably.

 

[Fact Checking]

Which broker? On Schwab, I see those up to $500 (but with zero open interest).

Open interest doesn't really matter - you should check the top of the book bid/ask and number of tradeable contracts on the ask during trading, market makers will create at least minimal liquidity.

Should be at least ~10 contracts (50 is typical), which will be refilled if you consume them, but with such wide bid/ask spread you should probably post a limit order into the spread, you'll get a ~10% price improvement that way.

Not that these contracts are particularly likely to end up in the money, at least based on yesterday's price action. Things could change though, for the better or the worse - so not advice.

The January 17 2020 contracts go up to $700, and the expiry time includes the Q4 delivery report on January 3. Those too are unlikely to be ITM, unless shorts get into a lot of trouble.

 

[Fact Checking]

etrade. I think it's only the monthlies, as the weeklies don't have enough volume/ open interest.

It's the timing of the creation of the options chain that defines its ceiling: the LEAPs and monthlies were created in better days when the stock was around $300 - hence the $500-$700 ceiling.

The weeklies were created when the stock was in the $200-$250 range - hence the $300-$400 ceiling.

The options contract chains might be extended if TSLA closes higher - market makers love the (usually...) free money from deep out of the money lottery tickets.

 

[MikeC]

It's the timing of the creation of the options chain that defines its ceiling: the LEAPs and monthlies were created in better days when the stock was around $300 - hence the $500-$700 ceiling.

The weeklies were created when the stock was in the $200-$250 range - hence the $300-$400 ceiling.

The options contract chains might be extended if TSLA closes higher - market makers love the (usually...) free money from deep out of the money lottery tickets.

Yep. Looks like the 2022s go up to 450 now, from 400 before.

 

[kengchang]

latest vid

 

[RobStark]

Actually, trucks have significantly higher single car crash fatality rates: higher mass will plow through other vehicles easier, but will also plow through protective barriers such as guardrails or fences. The higher center of gravity is also a higher rollover risk - although I'd expect Bollinger to do better there. Do they have front and side airbags? They are life savers in side crashes.

Actually, according to IIHS Pickups did better than average with a rate of 26 death per million vehicles registered, SUVs rated 21 and minivans rated 19, which was lowest mark among vehicles classified as light trucks. Passenger cars logged the highest fatality rate with 39.

There are more than one type of crash. In the real world trucks do quite well.

 

[Fact Checking]

Actually, according to IIHS Pickups did better than average with a rate of 26 death per million vehicles registered, SUVs rated 21 and minivans rated 19, which was lowest mark among vehicles classified as light trucks. Passenger cars logged the highest fatality rate with 39.

I was talking about single vehicle fatality rates, which do not depend on relative mass - and where trucks fare significantly worse. Single vehicle crashes are ~40% of all fatal crashes, but can be as high as 60% in rural counties, which I suppose is one of the target driving environments of Bollinger.

Trucks perform better in multi vehicle crash statistics, but mostly due to the higher mass - which doesn't help if the other vehicle is higher mass too - which is a more and more common occurrence in the SUV size arms race.

 

[RobStark]

Lack of airbags ... I wouldn't put my family in it while driving on public urban roads.

Just a SUV running a red light from the left at 40-60 mph and at least one family member is gone in the blink of an eye:

• That easily deformable high density engine block on the SUV? High density kinetic bullet aimed into your car.
• Crumple zone? 10-30 cm only.
  
• That glass window, the door frame and panels? Blocks of concrete that at least one passenger head is hitting at 30-40 mph in a side-whiplash motion. It's similar to falling from a 3-5 story building on a concrete pavement, hitting sideways with hands not extended. Cause of death: broken neck or blunt force trauma.

Side crashes without side airbags are brutal, unless you are in a main battle tank or an APC:

See that big red mark on the side airbag at 0:20? That's the window on a Bollinger, and the red won't be paint ...

It's almost 2020 for heaven's sake ... SMH.

I would put my family in a Bollinger but..........

I haven't gone off road in 25 years.

Feel like such a tool driving a Bollinger strictly on pavement.

 

[RobStark]

I was talking about single vehicle fatality rates, which are mass invariant - and where trucks fare significantly worse. These are ~40% of all crashes, but can be as high as 60% in rural counties, which I suppose is one of the target driving environments of Bollinger.

They perform better in multi vehicle crash statistics, but mostly due to the higher mass - which doesn't help if the other vehicle is higher mass too - which is a more and more common occurrence in the SUV size arms race.

And I was talking about all accidents because you don't get to choose which accidents you will have.

 

[Beltsbear]

I would put my family in a Bollinger but..........

I haven't gone off road in 25 years.

Feel like such a tool driving a Bollinger strictly on pavement.

Your making a lot of assumptions that the Bollinger has similar crash safety to current trucks. I don’t agree. The interior is straight out of the 60’s. And I don’t mean unimportant things like style. The whole thing is metal. No airbags and a metal interior are going to result deadly injuries even at moderate speeds. A modern 1500 class pickup has lots of plastic everywhere and curtain air bags. They are not comparable to the B1.

the B1 will have lower rollover risk and some advantage when unloaded due to its frunk in a front crash but that will mean very little when it gets hit from the side by a Ford Explorer.

 

[CorneliusXX]

S & X tooling has likely exhausted units of production volume basis--which (along with no impairment in 3Q19) could be part of the reason Depreciation, Amortization And Impairment decreased Q over Q from $579 MM to $530 MM while autos produced increased over 10 percent.

From the perspective of "avoiding spin from shorts" I think that's the best possible outcome.

If there are any accounting changes which affect margins there will be plenty of howls from the cheap seats.

 

[CorneliusXX]

As a reminder to all long. The 52 week high is still 379. So hold!!

Not for long!

 

[Fact Checking]

And I was talking about all accidents because you don't get to choose which accidents you will have.

And I was highlighting single car crashes, because it's a major (40%) risk factor, and because I believe a premium family car in the $125,000 price category should be bought to protect against ~99% of fatal collisions, which is:

• with other family cars (60%),
• survivable single vehicle crashes (40%).

You cannot protect against a train or semi truck hitting you from the side, or against you driving off a cliff, but for $125,000 you can protect your family against that 3 ton SUV hitting you from the side at 40-50 mph. Which the Bollinger doesn't.

And for that decision process the "average fatality rate" of light trucks is extremely misleading, for all the reasons I outlined.

 

[Sancho]

Wut up homies?! Are we mooning yet? Where is @SpaceCash and @StealthP3D? Whose house is the party at this weekend?

All right, though seriously, I'm not popping the champagne yet. Nor willing to margin up or by LEAPS. But I have a good sized stock only position (with limited margin) and made some options money on the move up yesterday, which I converted to stock. I have no idea what the stock is going to do. Either I'm jaded or just confused. We've been here many times. It's a big move with a big gap, and we all know TSLA likes to fill the gaps, and there are even gaps below 250. But unlike previous times, I'm not convinced that this will go back down and fill. This was a major gap up, almost like a so-called "break away" gap, which could end up permanently trapping shorts below.

The stock is really behaving unusual IMO. If you look at the multi-year chart, you'll see that it bounced between approx 180-280 for years and then between 280-380 for some more years. It then had a technical break below 280 support this past spring. At this point, I expected it to either continue falling, or go back into its old range of 180-280, or make a V shape recovery. It now doesn't appear to be doing the former two, so the V shape recovery appears to be on the table. I stated previously that it would take either significant time or sig news to get back above the technical break of 280. The market has determined that this was that news. So this is what I'm hoping for, a V shaped rapid recovery with maybe a minor pullback and partial gap fill, and (eventually) new all time highs. With that said, I'm not willing to bet on it in leveraged fashion. Because we all know how TSLA can be. But to each, their own.

The other two possibilities I see are: that it's a head fake and we quickly fade back down back below into the 180-280 range. We will know whether this is true shortly. Or, second, that it forms a completely new pattern than before, where it freely moves between a new wider range between 180-380. That scenario would just royally suck IMO. As if it isn't bad enough that we had to bounce around in a 100 point range multiple times a year. 200 point range would just be hell. An example of this would be that it goes up to 320-340 (or even 380) and then goes all the way back down to 180 again. That would just suck, esp if you got leaps or other options (personally, if I bought Leaps at 180, I would liquidate them now and convert to shares, as it would just hurt too much to see those leaps come back to 180 -- been there, done that.) This is why I'm just holding shares. Yes, it takes longer till we get rewarded, but much less stress. I only give up opportunity cost and maybe minor margin interest expense.

Anyway, just some thoughts on the matter. Not advice. Good luck to all!

Call me a simpleton, but I see a much simpler story: Post M3 announcement, the market assigned Tesla a market cap of about $50-60 billion, based mostly on the intermediate-term potential of Fremont. As soon as the company started guiding lower for Q1, the SP took a dive, which continued precisely until the delivery report in Q2 reassured investors that Q1 was an aberration, and has since climbed back into the $50-60 billion market cap range. End of story.


Where does the story go next? I think three things are likely (but of course anything can happen, so not stock advice!) :

1. If...IF....Musk is right that the company will generate profits and positive cash flow every quarter going forward, the market will probably not reduce the market cap below $50 billion.

2. There are a number of potential developments in the next 12 months that would cause the market to greatly increase the market cap. The biggest one in my view is for China to really take off. FSD could also do the trick, although I believe that’s more likely in 2021. Tesla Energy generating significant profits would be a catalyst. Or it could just be excellent execution that so improves margins that profitability rises.

3. In about two years I predict the market will assign $100 billion to Tesla automotive, $50 billion to the near term potential of Tesla Network (robotaxis) and $50 billion for Tesla Energy.

So over the next 24 months the SP should rise from 300 to at least 1200. The only thing I can guarantee is that it won’t do so in a straight line.

 

[Antares Nebula]

Tesla starts selling China-made Model 3 with autopilot function

Bloomberg - Are you a robot?
Tesla’s China-Made Cars Won’t Be Much Cheaper Than Imported Ones

"Deliveries of the locally made variants with Autopilot will begin in the first quarter of 2020, the company said in a statement in China. The cheapest imported Model 3s, without Autopilot, have been selling for about $51,500 in China, while in the U.S. the model’s starting price is about $39,000...

Tesla could also sell some early versions of China-made Model 3s that don’t have Autopilot, though it hasn’t disclosed the exact timing or pricing for those. The company said it plans to phase out models without Autopilot in China and no longer takes orders for such variants."

 

[Antares Nebula]

Call me a simpleton, but I see a much simpler story: Post M3 announcement, the market assigned Tesla a market cap of about $50-60 billion, based mostly on the intermediate-term potential of Fremont. As soon as the company started guiding lower for Q1, the SP took a dive, which continued precisely until the delivery report in Q2 reassured investors that Q1 was an aberration, and has since climbed back into the $50-60 billion market cap range. End of story.


Where does the story go next? I think three things are likely (but of course anything can happen, so not stock advice!) :

1. If...IF....Musk is right that the company will generate profits and positive cash flow every quarter going forward, the market will probably not reduce the market cap below $50 billion.

2. There are a number of potential developments in the next 12 months that would cause the market to greatly increase the market cap. The biggest one in my view is for China to really take off. FSD could also do the trick, although I believe that’s more likely in 2021. Tesla Energy generating significant profits would be a catalyst. Or it could just be excellent execution that so improves margins that profitability rises.

3. In about two years I predict the market will assign $100 billion to Tesla automotive, $50 billion to the near term potential of Tesla Network (robotaxis) and $50 billion for Tesla Energy.

So over the next 24 months the SP should rise from 300 to at least 1200. The only thing I can guarantee is that it won’t do so in a straight line.

I can buy this story. But you're talking about fundamental analysis and I was talking about technical analysis. I use both, though I know most folks here just rely on FA. Nothing wrong with that. I was just focusing on the movements and levels.

 

[Fact Checking]

2. There are a number of potential developments in the next 12 months that would cause the market to greatly increase the market cap. The biggest one in my view is for China to really take off. FSD could also do the trick, although I believe that’s more likely in 2021. Tesla Energy generating significant profits would be a catalyst. Or it could just be excellent execution that so improves margins that profitability rises.

I believe you missed the biggest "growth story" news in the Q3 call: Model Y mass production got accelerated by 9-12 months (!), to ~June 2020.

This is a significant source of near term growth:

• Model Y initial capacity is 1,000/week, with a ceiling of probably around 3,500/week, maybe as high as 7,000/week.
• Model Y entry price is ~$4,000 higher than the Model 3, for the same cost of goods. This means a massive +10% margin improvement.
• China GF3 has been built with Model Y production from scratch - introducing the Model Y will be faster and low capex.

Note that this is both revenue growth, GAAP income and cash income growth: if the $4,000 margin advantage is realized, then for every 1k/week Model Y production it's +$650m revenue (10% growth on top of the current top line), while 20% margins improve to 30%, which generates $195m of cash and GAAP income for every 1k/week unit of production growth, all other things equal.

There's probably also over a hundred thousand units of pent-up demand for the Model Y, which would further push the order book towards higher trims and higher margins.

Furthermore, Model Y expansion capex is probably half of Model 3 capex, which would give another ~2-3% of GAAP margin advantage in terms of lower per unit depreciation GAAP expenses, at a ~5k/week runrate.

I.e. the Q3 Model Y announcement is a Big Falcon Deal in terms of valuation models: for example Adam Jonas valued 2020 Model Y output at ... $0.

 

[hobbes]

Tesla starts selling China-made Model 3 with autopilot function

Bloomberg - Are you a robot?
Tesla’s China-Made Cars Won’t Be Much Cheaper Than Imported Ones

"Deliveries of the locally made variants with Autopilot will begin in the first quarter of 2020, the company said in a statement in China. The cheapest imported Model 3s, without Autopilot, have been selling for about $51,500 in China, while in the U.S. the model’s starting price is about $39,000...

Tesla could also sell some early versions of China-made Model 3s that don’t have Autopilot, though it hasn’t disclosed the exact timing or pricing for those. The company said it plans to phase out models without Autopilot in China and no longer takes orders for such variants."

Made-in-China Model 3 will have a badge to differentiate it from imported ones, starting price $50,325:
RayTesla️ on Twitter

 

[Fact Checking]

latest vid

Not much new info: basically mostly a photo montage of the GF3 photos from the Q3 update letter.