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What exactly caused this drop? I just woke up and can't figure it out from this forum... And some of us expect lower SP?? Just because Elon says he needs to lower the production cost??

1) Q4 is weaker then Q3 according to Elon.
2) Q1 2019 will only have a very tiny profit (and this only with very hard work & luck, "hopefully". That is what Elon said.
 
I do not see any reason why Tesla should go over 350 again in the coming 6 months. This was it. This one letter killed it.
How many times will you have to repeat that to accept your gamble loss? Why could you forecast anything when you don't listen to the many warnings by the company's CEO regarding short term bets?
 
BTW., I see this a change in strategy: in the past Elon was willing to use leveraged debt to bridge opex costs, to keep the reinvestment cycle and to keep employees on.

I believe the near-death experience with Tesla taught him that the answer to opex overruns is to cut opex - and labor costs are a big part of that, because not doing that risks a 100% workforce reduction... Even with the cuts Tesla's workforce has still grown over 20% over the last 12 months.

I see another change of strategy in addition to this: I think the letter is slightly "bullish" since it is CLEARLY targeted at the employees not at he investors. Indicating to me that a capital raise is still not in the books at all. And also indicating to me that the convertible bonds etc. is not worth a consideration at this point.

Yes, the letter was published by Tesla (better this way than it getting leaked) but it is clearly an internal communication not a communication to dress-up TSLA and raise more funds.

To the extent they fail to meet this challenge, there is still a risk they will need to raise capital next year. To me this new letter immaterially change the likelihood of that risk. And I believe that when the Q4 numbers are released, that show the extent of the cash flow, the bears who are exaggerating the risk are going to need to adjust.
[...]
Today’s letter causes me to very slightly increase the risk discount of dilution this year. It’s not a meaningful change to the overall outlook.

I fear I don't follow on this one. I draw the opposite conclusion - if you want to raise funds you do it on the "expansion to China & Europe takes longer / is more capital extensive plus - do you see all the new shiny products we announce today? Model 3 SR, new Powerwall, Model S/X refresh! Longer ranges! Expansion of Gigafactory! More factory in China! - annnnnd we need to have more cash to finance that" line, not on the "we cut all our expenses, we still couldn't do it - pls. give us more money" line. Or am I missing something?

What is everyone’s play today? Buy the dip, or anyone think it will bleed into ER? I will slowly nibble at $30x

Waiting with some pop-corn and watching this epic battle to unfold... If we drop below 31X I have some standing order for some leverage. Unless we drop all the way down to 250 today (which I think is unlikely), I'm all good and fine :)
 
1) Q4 is weaker then Q3 according to Elon.

As Wall Street analyst estimates already anticipated (EPS estimate = $2,26, vs. Q3's $2,90).

Q1 2019 will only have a very tiny profit (and this only with very hard work & luck, "hopefully". That is what Elon said.

Profit in Q1 was always going to be difficult because of shipping. I'm not sure what Wall Street estimates were for Q1, but surely not great. That said, this is awfully reminiscent of Musk's statements about scraping by in Q3, immediately before they announced a stellar quarter.

This market reaction is mostly just to Elon's pessimistic tone. But exactly how do you expect him to sound in a letter announcing layoffs? "WOW, everything is going swimmingly. Great job, everyone! Oh, and by the way, 7% of you are fired."
 
‘My business had 100 employees...I added 30 to scale up to a greater sustained production rate...we learned a lot...we are smarter and better now...we’re letting 9 of those employees go to pursue other things since we don’t need that level of staffing anymore...we can handle our business with 121 employees now...challenges remain of course but we’re smarter, leaner and sustaining production...with leaner sustained production we’ll achieve even better margins and make lower cost products possible.’

Said any growing business ever...
 
Lets sum up all the facts:

- Q4 will have less profit than Q3.
- With a lot of luck, hard work, Tesla will hopefully have some tiny porfit in Q1 2019.
- They are still miles away from being able to make the cheap model 3 version.
- Demand (outlook) is weak as the tax credit expired. Demand in China is weak as well.
- Tesla is laying off thousands of employees to cut down costs.
- There was no word about production figures - they likely will fall as demand is met with less than 4'000 M3 weekly.
Only half of these bullets points are facts. The rest is pure speculation presented as facts. You keep spouting unfounded statements because you can't take your loss on a short term gamble.

Go take a walk outside, do some exercise, talk to friends and family. Just don't post the same bullshit again and again. Mods, is it possible to have these posts moved to a new "gamblers' rambles and disillusion" thread or something?
 
‘My business had 100 employees...I added 30 to scale up to a greater sustained production rate...we learned a lot...we are smarter and better now...we’re letting 9 of those employees go to pursue other things since we don’t need that level of staffing anymore...we can handle our business with 121 employees now...challenges remain of course but we’re smarter, leaner and sustaining production...with leaner sustained production we’ll achieve even better margins and make lower cost products possible.’

Said any growing business ever...


As automation improves, a lot of employees are going to be let go.

Basically 3 months ago they needed those 130 employee to produce X amount of cars. Now they only need 121 employees to produce that same amount because of improvement in automation.And still grow.
 
Given there is a big ship full of cars heading to Europe, and that takes TIME, and given tesla don't consider a car delivered until the customer has it, is that not a good reason for a reduced income and thus profit in Q1? At what point do they book the revenue from those sales?
 
Given there is a big ship full of cars heading to Europe, and that takes TIME, and given tesla don't consider a car delivered until the customer has it, is that not a good reason for a reduced income and thus profit in Q1? At what point do they book the revenue from those sales?

when customer takes delivery.

to your point, the with some luck bit of Elon’s letter, may well have at least been in part about the limited ability Tesla has to ensure Q1 production for Europe and China all gets produced and through the transport & delivery channels before the end of the quarter. I have some recollection of Elon discussing the unpredictability of this process in the past.
 
As automation improves, a lot of employees are going to be let go.

That is unlikely:
  • In recent conference calls Elon characterized the number of extra manual labor due to lower than expected Model 3 automation as an about -5% effect on Model 3 margins.
  • As Tesla is growing they'll need more employees even with increased levels of automation.
 
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One big takeaway from these and the SpaceX layoffs is it seems Elon's hyper focus has turned to building profitable and sustainable companies that don't need to go begging for capital.

Also, I have a feeling I'm still not getting a service center.

Also, it sounds like Tesla won't turn a profit in Q2 without serious focus on cost reduction. I think that is the last thing Elon wants to happen.

Haha I love the point that they are obviously not in the least concerned if the stock stays below $360 and they have to pay off the convertibles in 100% cash.
 
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.
Good information and interpretation in this post, but unless there is something that I’m completely misunderstanding, the fatal problem of your concluding paragraph is that, within most states in the US, Tesla very likely would be prohibited from so acting unless they restructured themselves as a utility...with all the very unfortunate baggage that entails.
I haven’t a clue as to whether your proposal could occur in non-US markets.
 
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Bear hypothesis: Q3 profit was a one time event.
Letter: Q4 profitable

Bear hypothesis: Going bankrupt over Q1 debt repayment
Letter: Possibly positive Q1 earnings even with debt repayment and >$3B in cash and funding GF3 expansion

Bear hypothesis: Will never sell $35k Model 3
Letter: Cutting referals, 7% contract/temp workers to lower costs to make $35k possible

Sure the bull case took a hit with the lowered expectations, but this isn’t a slam dunk for the bear case either.