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The bears are clearly having a more difficult time shoving TSLA down these days. In the past, there's no way TSLA would be holding this well after reversing from a climb. The down days are very mild compared with historical standards. I don't know where we will bottom but TSLA does not seem particularly vulnerable to me, nor should it be. Just because the Nasdaq has been on fire doesn't at all mean that TSLA would follow it up, since it tends to follow its own beat.
LG is threatening an immediate termination of all cell deliveries if VW takes any step to build their own Gigafactories. Auto-translation:
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The plan was there. Volkswagen AG wanted to manufacture battery cells together with the Korean SK Innovation group and invest billions of euros in joint plants. The matter was to be decided before Christmas, and the Supervisory Board was in joyful anticipation.
The works councils were already dreaming of three gigafabriken in Germany alone; Emden perhaps, Salzgitter, and a place somewhere between Zwickau and Ingolstadt, all close to future electric car plants. It was to be the big one - and the only one in Germany so far.
While colleagues Dieter Zetsche (65; Daimler) and Harald Krüger (53; BMW) shy away from multi-billion investments, Volkswagen boss Herbert Diess (60) thinks differently. He wants to secure his spectacular electrification program. Diess wants to build up to three million electric cars in 2025, for which VW alone would need significantly more cells than are currently produced worldwide. And for 2030 VW even calculates a possible doubling to six million electric cars.
It is unthinkable that this will fail because there is a lack of battery cells - or because overpowering suppliers are raising prices. Before it becomes dependent, Diess prefers to produce itself, especially if - so the hope - the state helps with proper subsidies for the construction of the plants.
But however beautiful and big the plan may be, it is unexpectedly hitting reality hard. The existing suppliers want to chain their biggest customers to themselves. They defend themselves.
LG Chem in particular reacted annoyingly to the Wolfsburg independence movement. The Koreans threatened to stop supplying if VW enters production with SK Innovation. And possibly from now on. This is what managers who are familiar with the negotiations say. LG Chem commented that VW is an important customer, "independent of some rumors and other factors".
A delivery stop would be fatal. Over the next few years, the Koreans are to cover almost the entire cell demand of the car manufacturer, at least outside China. There is no readily available alternative.
Now the negotiations are being renegotiated. Every two weeks, Stefan Sommer (56), Chief Purchasing Officer, is currently in Korea. Talk to LG, talk to SK Innovation; appease, discuss alternatives.
The matter is urgent. Critics are already reporting to Volkswagen that cell production is too expensive for them. Sommer must deliver now. At least that's how Herbert Diess sees it.
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Also note that significant drop in volume and volatility. Part of it is that the ridiculously high options open interest dropped in half in January, with the worthless expiry of over 80% of the bankwuptcy puts. This reduced any delta hedging related volatility.
Correct - I think there's several main factors to that price action and overall market sentiment:
Many Tesla-long institutional investors playing volatility have deleveraged after successfully profiting from the dip to $250 just ~4 months ago.
The Q1 "tiny profit" and revenue warning from Elon dropped the price from ~$350 to $300 and it's unclear whether it's all priced in already. The Q1 tiny profits will necessarily bring a quarter-to-quarter decrease in revenue: current estimates are somewhere between $6.0-$6.5b revenue, measurably down from the $7.2b in Q4. The shortz and carebears are going to have a field day projecting gloom-and-doom for Tesla's growth prospects come Q1 earnings report early May.
Tesla investor communications has switched from optimistic hype of a growth startup in the 2016-2017 time-frame, to a fighting-crisis mode of forced-optimistic communications in the first half of 2018, to that of a cautious, conservative, somewhat disinterested communicator of a cash generator company who self-finances its own growth, at the end of 2018. Since there's no more dilutive equity rounds planned, why would Tesla guide for anything but the most conservative baseline figures? This makes it really hard to anchor Tesla guidance for 2019-2020 relative to past guidance, and I'm sure the growth and valuation models of many bullish investors are showing a lower share price target as a result.
I think the easiest way to estimate Tesla growth is through their profit margin guidance: they are sticking to the 25% target. I.e. ~20%-25% from every mature product made is pure cash that will be re-invested into the company immediately. That's a nice exponential growth curve defined in plain sight.
Somewhat ironically, I think what has kept $TSLA in the $300 range was the gradual exit of about half of the shorts, short interest is down from the peak of ~40m shares to ~20m shares. Short interest is still very high, but that was a quite nice 20 million shares gradual support for Tesla's stock price. Not the violent short squeeze I too expected, but no prices below $200 either and a rather big ride from $250 to $370 just two months ago which I'm sure was short squeeze amplified that has hurt many shorts.
So I think Tesla is undervalued even by bullish institutional investors currently, just like Amazon and Apple was undervalued during much of its history, until they eventually catapulted to a trillion dollars of market cap that is.
Firstly, the financial effects of leasing have little to do with 'past experience' - when a car company offers captive financing leasing they provide the capital to make the car (which reduces free cash flow and burdens the balance sheet), and they also distribute the profits from the lease payments and the subsequent used car sale over a period of 2-3 years, which decreases upfront profits. (See @ReflexFunds's posts about this topic.)
This is what absolutely every other carmaker is doing: no external financial institution is willing to do this without a significant haircut to those profits. It's still very much worth doing it, because half of the new car profits come from financing: GM I think generates a third of their profits through GM Finance ...
Secondly, that Q1 deliveries are going to show seasonal weaknesses and tax credit reduction after effects was expected from early 2018, I remember @luvb2b modeling it in mid-2018 Q1'19 estimates.
BTW., here's some new data showing that Model 3 U.S. demand is stronger than expected:
"Given what we’ve observed from delivery data in January, Tesla is seeing strong domestic demand for the Model 3. We think that 30k+ US deliveries for Q1 is a reasonable prediction given what we’ve seen so far."
This is from AlphaHat, who have been correctly estimating Tesla quarterly deliveries for the past 2 years using cell phone GPS data, with a historic accuracy of ~3% and 1% accuracy for Q4 deliveries.
Here's a car company that sold everything they made for 10+ years, with inventory always below 1 month of production. No "special promotion $3,000 off if you buy this week", no write-downs or fire sale of old inventory worth speaking of. A car company that does no mass advertising whatsoever. A car company that regularly engaged in anti-selling of their own products, because they couldn't make enough of them.
All the while none of the much hyped Tesla killer competitors are coming even close to competing effectively with Tesla's latest offerings: neither the E-Tron, the I-Pace, or the Taycan - not to mention that all of these will be made in low unit counts in 2019 and 2020 that are worth maybe one month of Tesla production.
Please check the timestamp of that Wired article, to get a feel for what a real case of missed predictions, missed guidance and failure to ramp up production looks like:
The Wired article is from 2009 (!) and they promised that the E-Tron might start shipping in 2012 (!!).
Meanwhile Tesla is still reaping the benefits of its rapidly growing natural monopoly in the premium and luxury EVs markets.
So the fretting about short term Tesla demand is somewhat ridiculous.
Somewhat ironically, I think what has kept $TSLA in the $300 range was the gradual exit of about half of the shorts, short interest is down from the peak of ~40m shares to ~20m shares. Short interest is still very high, but that was a quite nice 20 million shares gradual support for Tesla's stock price. Not the violent short squeeze I too expected, but no prices below $200 either and a rather big ride from $250 to $370 just two months ago which I'm sure was short squeeze amplified that has hurt many shorts.
Short interest dropped from a high of 34 Million to 27 Million after SEC settlement and Q3 ER (10/22 to 11/26). Interestingly post Q3 run from $330 to $370 didn't change short interest at all - in fact went up a bit in between (11/26 to ~12/10). Quick bounce back from $290s to $330 (~12/24) reduced short interest by 2 Million.
Looks like in Jan, shorts covered when the SP fell below $300 (1/22 to 1/28). It increased a bit after Q4 ER and has stayed flat since.
Clearly The media is out to catch Elon in any way possible.
He should be extremely vigilant , certainly never predict
Production or upcoming breakthroughs. Basically
Never predict anything even vaguely bullish.
Thanks for sharing. She is a sharp thinker and more than held her own in a hostile environment. I was struck by the talking heads’ use of weasel words/vague claims.
Joe Kernan is a absolute dick. He's the exact kind of person who will never get it .....
I live in CA and I can tell you it's a totally different perspective out here with regards to Tesla and how well they are penetrating the market. If I remember correctly someone posted a chart that showed where most of the Tesla's are sold in the U.S. and CA had around 84% of the domestic sales. I see so many Teslas every day that I don't even bother counting anymore and everyone of those cars are reporting driving data, this data is pure gold and will help Tesla leapfrog in autonomous driving.
I've been invested in Apple since 2001 and I've heard the same crap from morons like Kernan ..... it's really simple :
Model 3 = iPhone ...... just give Tesla a few years and let's hear from that meathead Kernan again ...
Until an accident happens. We demand the kind of accuracy from machines that humans can't even dream of and are never asked to prove. We have already seen that with Uber. If a human caused that accident, it wouldn't be news.
We are talking about regulators, right ? If Li ion car battery fire had been anything but very rarey …. atleast one thing Leaf got right. No battery fires - even in the hottest places, with no BMS.
