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

[anthonyj]

For pretty much any other company a cut in the workforce to improve profitability would result in the share price to rise.

$TSLA is dropping in pre-market trading, because the market is apparently misinterpreting this: Elon wants to introduce the $35k Standard Range model in March and tries to further reduce opex for that. I don't think these cuts are representative of Q4 results being a loss.

Q4 profits will be less than Q3 according to a memo

 

[CuriousSunbird]

That's why they all end up bloated, unable to move and eventually die.

Sell more cars & make less profit is not a healthy combination.

I thought Q1 was going to be the tough quarter.

 

[Fact Checking]

Q4 profits will be less than Q3 according to a memo

Any link to the memo? This indicates a profit, right?

Edit: here's the Tesla memo:

Company Update
​

Edit #2:

"In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3."​

 

[CuriousSunbird]

Any link to the memo? This indicates a profit, right?

The WSJ does not link to the memo - they just say they've seen it.

 

[SteveG3]

Company Update

 

[lklundin]

OT/humor



After much deliberation and careful thought , I think I will choose not to do that with my shares.

I you are turned off by the blank part, I can provide you with my full name.

 

[shlokavica22]

Company Update

Even better- straight from the source- Company Update

This morning, the following email was sent to all Tesla employees:

As we all experienced first-hand, last year was the most challenging in Tesla’s history. However, thanks to your efforts, 2018 was also the most successful year in Tesla’s history: we delivered almost as many cars as we did in all of 2017 in the last quarter alone and nearly as many cars last year as we did in all the prior years of Tesla’s existence combined! Model 3 also became the best-selling premium vehicle of 2018 in the US. This is truly remarkable and something that few thought possible just a short time ago.

Looking ahead at our mission of accelerating the advent of sustainable transport and energy, which is important for all life on Earth, we face an extremely difficult challenge: making our cars, batteries and solar products cost-competitive with fossil fuels. While we have made great progress, our products are still too expensive for most people. Tesla has only been producing cars for about a decade and we’re up against massive, entrenched competitors. The net effect is that Tesla must work much harder than other manufacturers to survive while building affordable, sustainable products.

In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla. However, that was in part the result of preferentially selling higher priced Model 3 variants in North America. In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3. This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.

However, starting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles. Moreover, we need to continue making progress towards lower priced variants of Model 3. Right now, our most affordable offering is the mid-range (264 mile) Model 3 with premium sound and interior at $44k. The need for a lower priced variants of Model 3 becomes even greater on July 1, when the US tax credit again drops in half, making our car $1,875 more expensive, and again at the end of the year when it goes away entirely.

Sorry for all these numbers, but I want to make sure that you know all the facts and figures and understand that the road ahead is very difficult. This is not new for us – we have always faced significant challenges – but it is the reality we face. There are many companies that can offer a better work-life balance, because they are larger and more mature or in industries that are not so voraciously competitive. Attempting to build affordable clean energy products at scale necessarily requires extreme effort and relentless creativity, but succeeding in our mission is essential to ensure that the future is good, so we must do everything we can to advance the cause.

As a result of the above, we unfortunately have no choice but to reduce full-time employee headcount by approximately 7% (we grew by 30% last year, which is more than we can support) and retain only the most critical temps and contractors. Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months. Higher volume and manufacturing design improvements are crucial for Tesla to achieve the economies of scale required to manufacture the standard range (220 mile), standard interior Model 3 at $35k and still be a viable company. There isn't any other way.

To those departing, thank you for everything you have done to advance our mission. I am deeply grateful for your contributions to Tesla. We would not be where we are today without you.

For those remaining, although there are many challenges ahead, I believe we have the most exciting product roadmap of any consumer product company in the world. Full self-driving, Model Y, Semi, Truck and Roadster on the vehicle side and Powerwall/pack and Solar Roof on the energy side are only the start.

I am honored to work alongside you.

Thanks for everything,
Elon

 

[CuriousSunbird]

Company Update

Wow. That will dispel any irrational exuberance.

 

[mutle]

Why would Tesla release this information on a day of option expiration? (Not an option holder, so it doesn't affect me, but seems to me like it could have been forced by a leak for example)

 

[Analyst007]

What the ****.... my options worthless. Thanks Elon for your shitty words.

 

[mutle]

Don't gamble. Options are gambling, holding stock for a long time is actual investment.

 

[lklundin]

What the ****.... my options worthless. Thanks Elon for your shitty words.

What's that smell ?

- buying opportunity...

 

[anthonyj]

Okay... this settles it. Q3 should’ve pushed us to ATH. If we hit $300 again today, this is the ultimate swing stock.

 

[KarenRei]

Looks like today will be the day for converting some stock into options! Hmm, should I sell the stock at open maybe and then try to wait for a decent low to buy the options? Or wait and do the selling and buying at basically the same time?

Glad I got my 15 Feb $300s rolled 22 Febs. Shame I didn't get a chance to roll my $330s and $360s. Then again... if Elon is looking at preliminary unaudited results, perhaps we'll have an announcement soon and a pre-15-Feb ER?

Question: "This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit." -- That would mean profitable desipite paying off the convertibles, no?

 

[shlokavica22]

What's that smell ?

- buying opportunity...

Did you read that:

In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla. However, that was in part the result of preferentially selling higher priced Model 3 variants in North America. In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3. This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.

The short gang will have a field day with that.

 

[Fact Checking]

So in terms of financials, here's the key points from Elon's memo:

Company Update

"In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla."

"In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3."

This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.
​

So Q4 was profitable, but less than expected.

Elon is framing Q1 profits as a cliff-hanger in his usual "only the paranoid survive" style - but I think Q1 profits are going to be more than just tiny, with 100D/P100D sales and high trim units in Europe and China.

Another big question is free cash flow - and that might be quite healthy in Q4 due to the significant receivables boost they get compared to Q3.

 

[Analyst007]

In Q3 last year, we were able to make a 4% profit. While small by most standards, I would still consider this our first meaningful profit in the 15 years since we created Tesla. However, that was in part the result of preferentially selling higher priced Model 3 variants in North America. In Q4, preliminary, unaudited results indicate that we again made a GAAP profit, but less than Q3. This quarter, as with Q3, shipment of higher priced Model 3 variants (this time to Europe and Asia) will hopefully allow us, with great difficulty, effort and some luck, to target a tiny profit.


Elon, you are really an idiot with words like "hopefully", "great difficulty", "luck", "tiny profit". fuuck off

 

[KarenRei]

What the ****.... my options worthless. Thanks Elon for your shitty words.

I know people with options expiry today would have preferred he wait until Monday, but if you're laying off employees, you have to make an announcement. And justify your case.

 

[Zaxxon]

What the ****.... my options worthless. Thanks Elon for your shitty words.

No offense, but I'll reserve my sympathy for the 7% of Tesla employees losing their jobs today rather than gamblers on the sidelines.

That letter will make for a rough trading day, but those of us with the disposable income to be trading a volatile stock like TSLA can put on the big boy/girl pants and weather the storm.

 

[jbcarioca]

So I'm far from expert on this (maybe @tsunamiofhurt can help out), but I believe that industrial power connections are not really priced per kWh, but mainly per peak capacity allocation...


I believe Supercharger V3 might change this dramatically: if every V3 site gets enough battery/storage capacity to fully cover peak hours, then the utility connection can use much cheaper power. These savings could then be passed down to customers.

Using Hornsdale as the prototype, V3 may well have extra storage capacity that could serve a grid stabilization function, thus absorbing power at times when the cost is negligible/negative and delivering power during peaks. The only limitations on that approach, I think, are first, Supercharger demand may sometimes coincide with peak utility demand and second, the ultra-quick responsiveness of grid services supplied by battery packs is far faster than the fastest tarrif structures for grid services, normally, that is.

For more detail and factual backup:
Hornsdale Power Reserve

This is the major prototype that shows how Tesla and others are having monumental impact transforming grid services, specifically by rendering peaked plants redundant and overpriced, regardless of location or alternatives, and with zero need for subsidy. Part of that is the ability of these installations to take power when utilities are overproducing, being paid to take the excess and also be paid large prices for supplying the same electricity when the utility has a deficit of production. That, by the way, is precisely why so many utilities are rushing to install battery storage facilities.

Net: Tesla can and almost certainly will, use future Supercharger installations as grid services supplements, thus reducing their costs and also generating potentially large revenues.