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

[schonelucht]

I doubt they have that much flexibility as they set these redemptions up far in advance if you read the fine print they're on a set schedule. For insider trading reasons they have a set redemption schedule and are administered by an attorney it seems...

This trading plan was adopting November 19th last year. In the context of options expiring only in 2024 that's not really a 'far in advance'.

 

[gora321]

ReflexFunds‏ @ReflexFunds
The EV transition is accelerating & ICE car sales are collapsing. Jan-19 Norway: Pure EV sales +60%, PHEVs –17%, ICEs -23%. EVs 52% market share. Sweden: EVs +53%, ICEs -16%. 13% share. Germany: Pure EVs +68%, PHEV -26%, ICE -8%. 2.5% share. Spain: EVs +52%. 1.1% share. $TSLA

3:58 AM - 6 Feb 2019

 

[AndyH]

The EV transition is accelerating & ICE car sales are collapsing.

Jan-19

• Norway: Pure EV sales +60%, PHEVs -17%, ICEs -23%. EVs 52% market share.
• Sweden: EVs +53%, ICEs -16%. EVs 13% share.
• Germany: Pure EVs +68%, PHEV -26%, ICE -8%. EVs 2.5% share.
• Spain: EVs +52%. EVs 1.1% share.

These numbers should soon improve even more. A lot of people are waiting on their ordered EVs in Europe. There's Model 3, Kona, Niro, E-tron and others soon to be delivered and counted as sales.

 

[EinSV]

Why would they care about stock price? Tesla has no obligation to option traders or short term traders. They only care about long term stock holders (real investors and employees) and for them it only matters what SP will be in, say, 2025 or 2028. If a price reduction helps Tesla in the long run, then that should be their only consideration.

Since Tesla is very likely able to self fund for the foreseeable future through internal cash flow generation, the short term share price becomes even less important. It is still relevant (including for employee morale), but easier than ever for Tesla to focus on long-term results.

Which I think is fantastic.

 

[gora321]

I was waiting for that day!

Model 3 Guy‏ @Model3Guy
Tesla up 2.3% on the day Jonas issues his price target cut. What does this mean? Adam Jonas is irreverent.

10:37 AM - 5 Feb 2019

 

[shootformoon]

Just a random thought. Tsla's pricing practice is very dynamic and mostly is lowering the price. Imagine one day EVs in every car buyer's mind and tesla is sold out everyday, they have to INCREASE a thousand bucks from time to time. That would be fun for the SP.

I do get frustrated with Tesla/Elon in situations like these. As you said, there should be no reason to reduce the price during Q1 when most production is going to orders overseas. There shouldn't be any issues selling a month's worth of cars in the US(for March). They're giving away 20-30 million in profit this quarter for seemingly no reason after they stated that they'll have to execute well and be lucky to post a profit for Q1. It's frustrating as an investor. The other aspect as I mentioned is that we all know how this is going to be played in the media tomorrow and I would not be surprised to see the stock down anywhere from 2-5%

 

[KarenRei]

I can't believe that after wading through half a dozen pages, nobody has mentioned the obvious about the price cut (which I should reiterate, was for US/Canada, *not* EU/China).

Let's pick Germany as an EU country for comparison.

Model 3 LR AWD: €55400 = $63125, / (1,19 VAT + 0,1 tariffs) = $48934, minus (large) international shipping costs

Now, the US before the cut:

Model 3 LR AWD: $51000, minus (small) domestic shipping costs

And the US after the cut:

Model 3 LR AWD: $49900, minus (small) domestic shipping costs

Got that? Even after the price cut, Tesla earns significantly more money on its domestic sales than its international sales. It wants to sell more at home. A US/Canadian price cut says not a bloody thing about EU and China demand.

So what's the argument - Tesla can't sustain 5+k/wk in just the US and Canada with no non-pup SR? Well no freaking duh. Who was arguing that they ever would? That said, the closer they get to non-PUP SR, the larger the percentage of their sales they'll move in the US and Canada, and thus the less international shipping and tariffs they have to pay to sell their production.

 

[kangarookid]

Anybody know how model 3s are transported to Norway? I still haven’t seen a ship heading for Drammen, Norway? Do they import them through Zeebrugge?

My guess is the ships continue onto Norway and unload more cars. Elon on the last earnings call - "our whole focus is, okay, how do we get those cars made, get them on a ship as fast as possible, get the ship as fast as possible to Zeebrugge in Belgium then get them over to Drammen in Norway and get those cars to customers as fast as possible."

 

[bonaire]

I can't believe that after wading through half a dozen pages, nobody has mentioned the obvious about the price cut (which I should reiterate, was for US/Canada, *not* EU/China).

Let's pick Germany as an EU country for comparison.

Model 3 LR AWD: €55400 = $63125, / (1,19 VAT + 0,1 tariffs) = $48934, minus (large) international shipping costs

Now, the US before the cut:

Model 3 LR AWD: $51000, minus (small) domestic shipping costs

And the US after the cut:

Model 3 LR AWD: $49900, minus (small) domestic shipping costs

Got that? Even after the price cut, Tesla earns significantly more money on its domestic sales than its international sales. It wants to sell more at home. A US/Canadian price cut says not a bloody thing about EU and China demand.

So what's the argument - Tesla can't sustain 5+k/wk in just the US and Canada with no non-pup SR? Well no freaking duh. Who was arguing that they ever would? That said, the closer they get to non-PUP SR, the larger the percentage of their sales they'll move in the US and Canada, and thus the less international shipping and tariffs they have to pay to sell their production.

But is the current financial structure capable of doing high-volume non-PUP SR? It seems they are still shying away from that.

 

[KarenRei]

But is the current financial structure capable of doing high-volume non-PUP SR? It seems they are still shying away from that.

No. Which is why they're not doing it yet.

 

[shlokavica22]

Daimler’s quarterly profit falls 22% as investment costs, tariffs hit Mercedes

STUTTGART -- Daimler's fourth-quarter operating profit fell 22 percent as trade wars and ballooning costs for developing electric and self-driving cars hit profits at the Mercedes-Benz Cars, the company said on Wednesday.

Mercedes emerged as the biggest selling luxury brand globally last year with 2.31 million new vehicle registrations, followed by BMW brand's 2.12 million and Audi which posted registrations of 1.81 million.

"With our guidance for Mercedes-Benz Cars and Mercedes-Benz Vans we are below our long-term target margins. We cannot be satisfied with this. Our goal is to return to our target margin corridor of 8 percent to 10 percent by 2021," Daimler CEO Dieter Zetsche

So their target two years from now is to get to less than half of TSLA's current margin?! Oh, boy.

The EV transition is accelerating & ICE car sales are collapsing.

Jan-19

• Norway: Pure EV sales +60%, PHEVs -17%, ICEs -23%. EVs 52% market share.
• Sweden: EVs +53%, ICEs -16%. EVs 13% share.
• Germany: Pure EVs +68%, PHEV -26%, ICE -8%. EVs 2.5% share.
• Spain: EVs +52%. EVs 1.1% share.

Dec-18

• China: EV sales +62%, ICEs -22%. EVs 7.2% market share.
• Europe: Pure EVs +70%, PHEVs -20%. EVs 3.9% share.
• US: EVs +90%. EVs 3.1% share.
• Holland: EVs 31% share.

Source:
Germany - https://www.kba.de/
Norway - Bilsalget 2019
China - China’s new energy PV wholesale volume in 2018 shoots up 83% year on year
Sweden, Spain, Europe, US from Jose Pontes here - http://ev-sales.blogspot.com

The fact that PHEVs drop (in some cases) more than ICEs is just wow. There is no exit strategy for the Legacy guys, is there?

 

[mrdoubleb]

So this price cut got me thinking. The MR probably only makes (financial) sense with PUP right now, but in theory, a $43k PUP-MR means a 38k standard interior MR. If Tesla can pull that off in a few months, does a 35k SR still makes sense? The MR is so much of a better deal on the range/$ scale.

So should they release a 35k SR so close to a 38k MR? Or would that be the end of MR? Or should they try and go for an even lower cost SR even at the cost of lower range?

 

[humbaba]

Why is anyone surprised by this small M3 price cut? Tesla’s long standing business plan is to reduce the base price to $35k. To do that and sustain margins requires a long slog of cost cutting and efficiency improvements and scale. Rather than waiting to make a big jump down to $35k, Tesla is gradually reducing the lowest price version as it continues to lower its costs. They achieve the gradual price floor reduction by periodically reconfiguring the car offering (e.g. introducing MR) and small periodic price cuts. I expect over the course of this year the lowest price M3 will drop every few months until it finally hits 35k.

And it was this trend that got me to wondering if the MR could become the SR. Okay, I'll admit it makes no sense to do the SR as a merely reduced cell-count battery pack (the MR). But if there is any trend to these price cuts the MR would easily be down to $35k (no premium) by mid-year. I've never felt that the MR had legs, it was just so clearly a stop gap.

But the Bolt and Leaf have ranges similar to what the SR is projected to have. It would be a serious kick in the pants if the MR took over the role of $35k SR. Its not like the Bolt is competitive even now, that would just clinch it.

Another take, again assuming there will be (even modest) continued price cuts, would be that Tesla instead introduce the SR at $30k. That would place it directly against the Leaf and completely undercut the Bolt while maintaining a semblance of pricing differential between the SR, MR and LR. Of course, Tesla isn't trying to compete with any EV -- their competition is with ICE -- but such comparisons are inevitable.

Do I really think Tesla will do either of these? Not really. I think its more probable that the MR will be retired when the SR is introduced. But then again, in November I didn't think that Tesla would be knocking $3.1k off their US prices by February. There's nothing stopping Tesla from introducing the SR at less than the announced $35k price point, or making $35k SR with premium option. Alternatively, in terms of moving goal posts, keeping the predicted pricing intact while setting their standard range as something greater than ~220 miles advances EVs as well.

Naturally the most recent $1.1k reduction may be the last one seen this year. We are told that it was allowed by eliminating the referral program and maybe that is true. But the $2k reduction came with the halving of the tax break which suggests another significant reduction when the tax break expires. And that strongly suggests some shakeup to the lineup.

 

[Vad42]

So this price cut got me thinking. The MR probably only makes (financial) sense with PUP right now, but in theory, a $43k PUP-MR means a 38k standard interior MR. If Tesla can pull that off in a few months, does a 35k SR still makes sense? The MR is so much of a better deal on the range/$ scale.

So should they release a 35k SR so close to a 38k MR? Or would that be the end of MR? Or should they try and go for an even lower cost SR even at the cost of lower range?

What would makes sense to me is to take the above $38k MR-PUP down to $35K with software locked range-reduction. As soon as margins allow. Don't bother with a different battery pack. Keep the battery and production the same. Just like they just did with S.

 

[KarenRei]

And it was this trend that got me to wondering if the MR could become the SR. Okay, I'll admit it makes no sense to do the SR as a merely reduced cell-count battery pack (the MR). But if there is any trend to these price cuts the MR would easily be down to $35k (no premium) by mid-year. I've never felt that the MR had legs, it was just so clearly a stop gap.

But the Bolt and Leaf have ranges similar to what the SR is projected to have. It would be a serious kick in the pants if the MR took over the role of $35k SR. Its not like the Bolt is competitive even now, that would just clinch it.

Another take, again assuming there will be (even modest) continued price cuts, would be that Tesla instead introduce the SR at $30k. That would place it directly against the Leaf and completely undercut the Bolt while maintaining a semblance of pricing differential between the SR, MR and LR. Of course, Tesla isn't trying to compete with any EV -- their competition is with ICE -- but such comparisons are inevitable.

Do I really think Tesla will do either of these? Not really. I think its more probable that the MR will be retired when the SR is introduced. But then again, in November I didn't think that Tesla would be knocking $3.1k off their US prices by February. There's nothing stopping Tesla from introducing the SR at less than the announced $35k price point, or making $35k SR with premium option. Alternatively, in terms of moving goal posts, keeping the predicted pricing intact while setting their standard range as something greater than ~220 miles advances EVs as well.

Naturally the most recent $1.1k reduction may be the last one seen this year. We are told that it was allowed by eliminating the referral program and maybe that is true. But the $2k reduction came with the halving of the tax break which suggests another significant reduction when the tax break expires. And that strongly suggests some shakeup to the lineup.

I've occasionally pondered that. The difference in cell costs between MR and SR really aren't that great. And if they make the MR their new "minimum range" Model 3, then it makes everyone else's ranges look subpar.

 

[mrdoubleb]

"With our guidance for Mercedes-Benz Cars and Mercedes-Benz Vans we are below our long-term target margins. We cannot be satisfied with this. Our goal is to return to our target margin corridor of 8 percent to 10 percent by 2021," Daimler CEO Dieter Zetsche

So their target two years from now is to get to less than half of TSLA's current margin?! Oh, boy.

The fact that PHEVs drop (in some cases) more than ICEs is just wow. There is no exit strategy for the Legacy guys, is there?

Haven`t read the Daimler ER, but they could be talking about a different metric. Tesla`s gross profit on the cars is 20%+, but their net profits after SG&A and other items factored in was around 4% in Q3.

 

[UncaNed]

I can't believe that after wading through half a dozen pages, nobody has mentioned the obvious about the price cut (which I should reiterate, was for US/Canada, *not* EU/China).

Let's pick Germany as an EU country for comparison.

Model 3 LR AWD: €55400 = $63125, / (1,19 VAT + 0,1 tariffs) = $48934, minus (large) international shipping costs

Now, the US before the cut:

Model 3 LR AWD: $51000, minus (small) domestic shipping costs

And the US after the cut:

Model 3 LR AWD: $49900, minus (small) domestic shipping costs

Got that? Even after the price cut, Tesla earns significantly more money on its domestic sales than its international sales. It wants to sell more at home. A US/Canadian price cut says not a bloody thing about EU and China demand.

So what's the argument - Tesla can't sustain 5+k/wk in just the US and Canada with no non-pup SR? Well no freaking duh. Who was arguing that they ever would? That said, the closer they get to non-PUP SR, the larger the percentage of their sales they'll move in the US and Canada, and thus the less international shipping and tariffs they have to pay to sell their production.

Perhaps the referrals actually cost way more than $1,100 and Elon is only sharing part of the savings. That's what I'd like to think.

 

[Buckminster]

The problem is making money at $35k. For that, they need to strip out everything. Small battery as planned and no PUP. Then they need to hope not too may take this option and go for options - PUP, Dual etc.

 

[DurandalAI]

How long I hold onto them - and how long anyone should - is entirely dependent on the situation. The leverage on a given call will change over time, even if the stock doesn't. And your assessment of the potential movement for TSLA will change over time. I may hold onto a call for just days, or many months. Depends entirely on the situation.

The main thing I'd recommend is just keep in mind: add leverage when the stock is cheap, decrease leverage when it's expensive. Which of course seems simple and patently obvious, but it's easy to mess up if you're not thinking things through. For example, I proved good at calling the highs late last year, even though I wasn't very confident about the lows. So I'd sell some stock at the highs, let the SP drop by $20 or so, and buy slightly OTM calls - knowing I wasn't buying at the bottom, but hey, the SP was a lot lower than when I sold the stock, so great, right? No, not at all. I was effectively leveraging up at SPs that I wasn't confident were near the bottom. It wasn't the highs that mattered in that situation, it was the lows. A more reasonable strategy - for a person who wasn't confident in the lows - would have been to only add mild leverage (e.g. deep ITM calls), and only leverage up closer to events you feel are likely to move the market. Keeping in mind that if other people think said events will move the market, that'll raise IV and you'll pay a premium for those options, so you may want to leverage up somewhat in advance.

I'd also add: facing a choice between buying $1000 of OTM calls at a SP $X, or $500 of said call at a SP of $(X+20) and $500 at an SP of $(X-20).... go with the latter. You'll end up with a lot more calls if you spread your buys out across a volatile period rather than buying all at once, unless you happen to time the bottom just right.

Thanks for the input. I plan on only making use of a portion of my portfolio and only use ITM calls. Right now I'm only using existing "profit" money, I wouldn't buy call options with my original principal. Thanks again.

 

[Words of HABIT]

Just a random thought. Tsla's pricing practice is very dynamic and mostly is lowering the price. Imagine one day EVs in every car buyer's mind and tesla is sold out everyday, they have to INCREASE a thousand bucks from time to time. That would be fun for the SP.

That day is here and now my friend, as well as for many years in the future.