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

[Tslynk67]

So.... now the sources of profit matters
Tesla’s earnings quality could pose dilemma for S&P overseers - BNN Bloomberg

«
Specifically, Tesla would not have made money on a generally accepted accounting principles basis the last several quarters without the sale of regulatory credits to carmakers that need help complying with toughening emissions standards around the world. In the first half of this year, the company booked US$782 million of revenue from the sale of those credits, which are pretty much all profit, according to Nicholas Colas, DataTrek’s co-founder. That compares with US$220 million posted in GAAP net income.

“This puts the S&P committee in charge of adding names to the 500 in a real bind, because while to the letter of their ‘law’ Tesla qualifies for inclusion this is purely due to regulatory arbitrage -- not fundamental profitability from designing, manufacturing and selling cars,” wrote Colas, who in the 1990s spent nearly a decade as an equity auto analyst at First Boston. »

Income is income - this is FUD.

 

[Oveeus]

I was reading earlier on my Twitter feed and someone commented that Tesla would change the real estate market by introducing million mile batteries where one could potentially live on a Tesla car, lil to no maintenance, solar powered... etc.

At first, I didn't fully agree with that idea because it's just hard to live in a car for a prolonged period.

But then it hit me... Tesla won't do it by itself... but with SpaceX added into the mix, everything seems quite feasible. First, assuming the Covid19 pushes our work habit far enough (not having to come to office unless necessary), one could live in the middle of nowhere, have enough solar panels to collect electricity with enough powerwall to store it, and live truly off the grid. Any supplies can be purchased/delivered by self-driving car. And fast and reliable internet anywhere one chooses to live keep them connected to work/communication.

I think the idea of buying myself an island somewhere remote with TSLA earnings suddenly makes a lot of sense.

 

[FrankSG]

Edit: to be clear, these are what FrankSG is predicting as ultimate production capacity, not next years production.

My take on production next year is this:

Bear case (no increase in production)

• 600k Fremont (Includes S&X)
• 200k Shanghai

Assuming 570k production this year, this is a growth rate of 40%, about the historical average

Edit: most people seem to be predicting between 800k and 900k production next year

Base case
This assumes that production starts ~10 months after construction start, and that production ramp up is similar to MIC model 3.

• 600k Fremont (Includes S&X)
• 400k Shanghai (250k Model 3, 150k Model Y)
• 150k Berlin (Model Y)
  
• 100k Austin (Model Y)

Assuming 570k production this year, this is a growth rate of 120%

Bull case
Aggressive ramp up in all locations enabled by simpler production (e.g. casting) of Model 3/Y and model S/X refresh

• 700k Fremont (Includes S&X) - further efficiencies due to simpler production process, plaid a success
• 500k Shanghai (250k Model 3, 250k Model Y) - still ramping up to 750k per year total production
• 250k Berlin (Model Y)
  
• 250k Austin (200k Model Y, 50k Cybertruck )

Assuming 570k production this year, this is a growth rate of 200%

Hyper-Bull case
Aggressive ramp up in all locations enabled by simpler production (e.g. casting) of Model 3/Y and model S/X refresh

• 750k Fremont (Includes S&X) - further efficiencies due to simpler production process, plaid a success (second shift)
• 550k Shanghai (300k Model 3, 250k Model Y) - still ramping up to 750k per year total production
• 350k Berlin (Model 3/Y) - phase 2 start soon for second production area (tree clearance September)
  
• 400k Austin (280k Model Y, 100k Cybertruck, 20k semi ) - multiple production areas built over the next 10 months
  
• 50k GF6 (ground breaking this year)
• 50k GF7 (ground breaking this year)

Assuming 570k production this year, this is a growth rate of 277%

Edit: my prediction for next year is the base case, although I see considerable up-side. The hyper-bull case would probably need a major capital raise and perfect execution, so very unlikely.

Thanks for sharing, but some further clarification on reasoning would be helpful:

• How do you get to that bear case? I could think of some reasons why Berlin/Austin don't contribute significantly until 2022, but I believe Shanghai Phase 1 is already at 250k after a recent stress test in July, so considering that and the status of Phase 2 based on drone videos, I'm struggling to come up with any scenario where Shanghai would only output 200k vehicles.
• Why do you have Berlin and Shanghai Phase 2 producing the same number in your base case? Drone videos clearly show Shanghai Phase 2 is much further along, and the entire supply chain is already up and running for Phase 1, whereas Berlin has to start from scratch. I think Shanghai Phase 2 will both come online faster and ramp faster compared to Berlin.

Personally, I think your hyper-bull case is fiction. Your bull case, I think is theoretically possible, but <5% chance. Your base case is higher than my bull case. And your bear case, I think, is also extremely unlikely, and would require something really unexpected to happen.

My guess is 1,000,000 total, give or take ~10%:

• 550-600k Fremont
• 350-450k Shanghai
• ~50k Berlin
• ~50k Austin

 

[Tslynk67]

I actually think he may be right (although 80% lower is ridiculous), at least about a post-split pullback. If he is, you don't have to sit on your hands. You could buy a few shares for each ___% drop. Think of it this way, you'll get 5X as many shares for each buy order.

Erm, he didn't say 80% pull-back, he's referring to the split there...

Gary's previous: Former CEO Aegon Asset Mgmt US, Co-CIO Calamos, CIO Equities Goldman Sachs Asset Mgmt, CEO/CIO Janus. My views are my own and don’t represent investment advice.

We sure have no idea how $TSLA will trade on Monday, but just be aware that with the previous four splits, $AAPL traded higher until the split, then lower for 6-7 weeks, after which is regained and started to climb higher than pre-split.

Doesn't mean the same will happen with $TSLA, but just don't assume Robin Hooders are going to bump it up to $500 on the Monday, no doubt there'll be a lot of shorties eyeing this as an opportunity too.

 

[LN1_Casey]

6-7 weeks, after which is regained and started to climb higher than pre-split.

6-7 weeks? Daimler, that’s a lot longer than expected. Thought they’d have downward until maybe 4 weeks.

Even still, I don’t think Tesla will do that. For one, battery day is 3 weeks ish away. Then shortly after is Q3 P&D. 7 weeks would be about when Q3 Earnings comes out. I think we’ll be either stable or on an upward slope after P&D if nothing else.

 

[Tslynk67]

Rob Maurer's latest is out:

.

He interview's David Trainer about his recent analysis: Tesla: The Most Dangerous Stock for Fiduciaries - New Constructs.

It's sad. Trainer knows pretty much nothing about Tesla. He's brought a noodle to a knife fight.

About an hour:
Timestamps: 0:00 Introduction 1:58 Why do you think Tesla is overvalued? 4:04 Tesla's market cap per vehicle sold 9:17 Influence of regulatory credits on Tesla's business 11:46 Tesla's market share, growth, and competitive outlook 17:26 Modeling Tesla's valuation 25:42 Counterpoints to the valuation models 37:05 Risk vs. reward when investing in TSLA 40:46 Tesla insurance bull case 42:16 Scaling up and Tesla's competitive position 48:44 Are other automakers finally catching up? 55:09 Wrapping up

Seriously, how the feck am I supposed to get anything done around here - what with Steve MR putting out three videos every day too

I've almost no time to sit there staring at the ticker!!

 

[CorneliusXX]

The creator of the meme is very active on r/teslainvestorsclub, so it’s not really representive (sp?) for WSB. Definitely worth the 11 mins though

I was surprised the memes had such deep Tesla knowledge (naming all the various shorts and fud themes over the last few years). Usually it's just the Tesla nerds that go that far into the weeds. makes sense now.

 

[Boomer19]

Solid point. Guess I am being greedy. Want to know how to do something other than just ride the roller coaster.

So the only way in the end is to trade in and out expertly and somehow do better after paying half in taxes. Or trade expertly into the puts as the temporary slide occurs. And actually exit in timely fashion. Either way not very likely.

Maybe I should buy more? Funny, 1000 was my cutoff for buying but now that just looks remarkably dumb. Gotta love the stock market....

All is good. Thanks for response.

we’re all together

 

[NicoV]

It was very observant, I thought, and interesting that the WSB crowd identify with the same baddies as we do.

Always fun reading WSB, it's a bit like this place on acid.

How's your liver, BTW?

Looking forward to Monday, when it will be much harder for TSLA to achieve ATH with 50 dollar delta

 

[Boomer19]

Nothing, really

Yeah. False alarm. Sounds like no Amprius collaboration.

Twitter

so all the crap that came out and spread like wildfire minutes after the picture of shrhold and batt day meeting slide was nonsense?

who’d have thought?

even tho experts refuted their claims from the get go...shirley meng whoever and others
and these are people pro tesla mind you.

and it took days and tweet from the almighty himself to finally put the rumors to rest

 

[CaliBear1]

Nice!

But I return to Deep Purple's "Burn."

Added bonus. Substitute "Elon" for "woman" into the lyrics. Very fitting for shorts, Elon's flamethrower, AGW...and Mars!

The sky is red, I don't understand
Past midnight I still see the land
People are sayin' Elon is damned
he makes you burn with a wave of his hand
The city's a blaze, the town's on fire
Elon's flames are reaching higher
We were fools, we called him liar
All I hear is "Burn!"

I didn't believe he was devil's sperm
He said, "Curse you all, you'll never learn!
When I leave there's no return "
The people laughed till he said, "Burn!"
Warning came, no one cared
Earth was shakin', we stood and stared
When it came no one was spared
Still I hear "Burn!"

You know we had no time
We could not even try
You know we had no time
You know we had no time
We could not even try
You know we had no time
The sky is red, I don't understand
Past midnight I still see the land
People are sayin' Elon is damned
He makes you burn with a wave of his hand
Warning came, no one cared
Earth was shakin, we stood and stared
When it came no one was spared
Still I hear "Burn!"

Fire Make it Burn Dem fits both the short burn jokes and the 420 jokes
BTW

 

[MikeAtkinson]

Thanks for sharing, but some further clarification on reasoning would be helpful:

• How do you get to that bear case? I could think of some reasons why Berlin/Austin don't contribute significantly until 2022, but I believe Shanghai Phase 1 is already at 250k after a recent stress test in July, so considering that and the status of Phase 2 based on drone videos, I'm struggling to come up with any scenario where Shanghai would only output 200k vehicles.

Bear case assumes some more disruption from COVID-19, production not rising, and/or significant down-time for retooling, holidays, etc. It is quite difficult to get such a low bear case, but various commentators / analysts seem to be saying 800k next year, including people on this forum in the last few weeks.

Also 40% increase is the historical growth rate so a bear could just assume it continues.

 

[kanweg]

Oh.. and It's good that Elon killed the nano nonsense before Battery day. It was getting a little annoying.

Expectation management is quite important.
With inflated expectations a great event could leave a bad aftertaste.

 

[jerry33]

Again drawing from Apple, the iPhone was revolutionary, and unique — for about a year before the copycats started. And they were good copies. I’m sure a lot of you unfortunates have Android phones (that have collectively outsold iPhones).

Mainly because they were cheaper, and good copies ignore the malware and update issues that they have to this day.The majority of the profits still went to Apple. I don't believe smartphones are a particularly good comparison because the barrier to entry for BEV is much higher than it is for smartphones. There is both the difference in manufacturing costs and the charging network required to make them practical (unless you are just using them for local driving, and don't live in an apartment or condo).

 

[MikeAtkinson]

• Why do you have Berlin and Shanghai Phase 2 producing the same number in your base case? Drone videos clearly show Shanghai Phase 2 is much further along, and the entire supply chain is already up and running for Phase 1, whereas Berlin has to start from scratch. I think Shanghai Phase 2 will both come online faster and ramp faster compared to Berlin.

Although Shanghai is further along with an up and running supply chain, it is not that much further along. Berlin phase 1 seems larger than Shanghai phase 2 and is progressing faster (at least it seems that way to me). Being the 3rd site to ramp Model Y will be an advantage, as will being one generation further in the machine to make the machine.

If anything 150k Model Y from Shanghai is low in the base case, if they start a few weeks less than a year after Model 3 and ramp up quicker due to already in place supply chain then they should beat the Model 3 production this year by a considerable margin.

 

[Christine69420]

Max Pain currently $2000 for Friday. Up from $1945 yesterday:

Stock Option Max Pain

 

[charlesgres]

So if I'm not all the way there (but today definitely helped!) does that mean I'm a Semi-Teslanaire or a fractional Teslanaire?

A pre-teslanaire..

 

[MikeAtkinson]

Personally, I think your hyper-bull case is fiction. Your bull case, I think is theoretically possible, but <5% chance. Your base case is higher than my bull case. And your bear case, I think, is also extremely unlikely, and would require something really unexpected to happen.

My guess is 1,000,000 total, give or take ~10%:

• 550-600k Fremont
• 350-450k Shanghai
• ~50k Berlin
• ~50k Austin

A few days ago I would have agreed with you, but I think that Elon has recently decided to go for growth above everything else.

Elon's recent tweets: "The Big Bang started very, very smōl" and "Only so many days" seem to indicate a new urgency (not that he was dragging his heals before).

It looks like Austin is moving along extremely quickly, the central south area is being worked on at present and is going to be an extremely large factory. But they are also doing some work in the south east, central north and south west. The south west area looks like it will be the next phase, they have started clearance over the last couple of weeks and added construction shacks yesterday.


Time will tell, in 16 months we will know next years production numbers, but an early indication will be new gigafactory announcements.

 

[Singuy]

Expectation management is quite important.
With inflated expectations a great event could leave a bad aftertaste.

Yup, except it's the "most important day for Tesla ever" and "i know what it is and it's still mind blowing".

 

[generalenthu]

Uh- that wasn't from an S&P rep.

It was just some rando finance guy who used to be an auto analyst in the 90s.

The only reference in the story to an actual S&P guy is:

There is definitely something off about the open interest numbers. I don’t know what is going on with the OI Updates but the 2100 weekly strike has been pretty much stuck at 27K for the past 3 days and also the same for most of the contracts I’m tracking through a third part website. I also just reviewed @generalenthu ‘s delta hedging report for Aug 26th and the delta hedging requirement went up quite a bit as compared to Aug 25th.

@generalenthu : I assume you use the OI numbers to calculate the delta hedging requirements. How can we explain the fact that OI has not changed for any of the contracts but the delta hedging requirements are telling a different story? Thanks.

I think what's happening here is there is a huge butterfly trade that was put on at 2090/2100/2110. This entails buying the body at 2100 strike (2x) and selling the wings at 2110 and 2090 (x each)

This is a classic way to bet on a pin at 2100, and it's a cheap bet. My guess is about $1 per contract or less on about ~12000 contracts, which makes this about $1 million bet on a pin there.

Now this in itself doesn't cause the stock to pin there, but if it does, you'd get a theoretical $10 per contract. Realistically, my guess would be $7-8 if you want to avoid assignment and close out position on Friday.

This is just a hypothesis though, as the data can't tell apart long from short option trades. So my table defaults all these to long trades and shows a high base delta from options and high sensitivity, both of which are incorrect.

Anyways, here is the chain when I looked it up:

And here is the typical p&l on a fly trade from Wikipedia