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

[Tslynk67]

Yes, there are factors that will no doubt increase the number. But, I doubt to the 90-100k as projected for this quarter. They even said on the call that their ASP is rising to $50K. That’s not possible if so many 3’s sold is SR+.
I’ve accepted that with even a very forward-thinking Tesla, “in theory” means “unrealistic”. Tesla will reach its goals, and I believe in them, just not within their stated timeframes.

I'm an eternal optimist - maybe not the safest approach when investing, but gets me through the day better and for holding long I think it's OK

 

[Anstandswauwau]

Battery aside, Tesla is also making money on everything else in the car and AP/FSD (Software has huge margin)

... especially if you bundle it in

"Customers wanted it that way."

 

[dqd88]

This, and the fact that a bad quarter is fully priced in. $tsla went straight down from $300+ since deliveries came out. Price barely moved with $2M+ after hour volume is pretty telling. I fully expect short attacks tomorrow though so hard to say how far down it will go, but i also expect longs get get back in since most seem to have deleveraged or out prior to the call.

Yeah, in a sense this can be seen as a very good time to buy. The bad news is priced in as you said, and it's mostly behind us. Q2 should be good. Q3 better.
2020 should be better than 2019. 2021 should be better than 2020. In 5 years there will likely be a gigafactory in Europe complete and several new models in full production, not to mention big increases on the energy side. And probably still no real competition. And who knows, maybe the rideshare model will be a boon (that one is hard to get a good read on imo, sounds too good to be true).

 

[Causalien]

Yeah, in a sense this can be seen as a very good time to buy. The bad news is priced in as you said, and it's mostly behind us. Q2 should be good. Q3 better.
2020 should be better than 2019. 2021 should be better than 2020. In 5 years there will likely be a gigafactory in Europe complete and several new models in full production, not to mention big increases on the energy side. And probably still no real competition. And who knows, maybe the rideshare model will be a boon (that one is hard to get a good read on imo, sounds too good to be true).

It's good.

Shareholders should think about it for a long time. Can you hold this for 5 years with the stock price remaining the same? Because it seems like that is the path as we are pivoting to robotaxi as the way to make a profit while everything else that makes profit will be poured into robotaxi. When Elon first came out with the timeline. I was one of the first who said the real time line will take longer. 5 years from 2016 for testing prototype and 10 years for actually having the vision to come to reality. I am guessing we see it in 2026.

 

[dqd88]

Audi is having problems with etron, going from 50,000 to below 10,000 on future productions. For this reason I think the struggle is real. We’re not dealing with iPhones is my excuse

My second excuse is the tax credit thing.

Third excuse is that the oil companies didn’t spend millions on campaigning against iPhones per year.

From now till Model Y I expect more hiccups.

Let’s switch this question around, what’s apple’s excuse for the failure and very slow pace of project titan development? It’s been years and apple is still a no show here. In the past 20 years there’s been dozens of new phone companies popping up, in the last 100 years there’s been 1 new car company in America, the difficulty scale is way beyond apple’s iPhone league here.

Very sound points!

 

[dqd88]

It's hard to reconcile dichotomy of 1. technical expertise I see in Tesla products vs. 2. massive screwup that this quarter is, and implications of incompetent execution. And lack of 'mea culpa'.

For the first time ever, I feel (likely irrational) fear Tesla won't succeed; as I don't know how much to trust Tesla management.

It's time for Elon to let someone else lead.

Did you listen to the call? I felt down and shocked when I saw the -2.90 eps number. But then after hearing the call I felt back to normal. Things sounded fine on the call. I think we need to give them a quarter or two to get into the swing of shipping high quantities overseas. That is very difficult. This is why I hate that they are public; in the long run this doesn't matter much. I did not see any major red flags. Did you? What were they specifically?

 

[Zhelko Dimic]

Did you listen to the call? I felt down and shocked when I saw the -2.90 eps number. But then after hearing the call I felt back to normal. Things sounded fine on the call. I think we need to give them a quarter or two to get into the swing of shipping high quantities overseas. That is very difficult. This is why I hate that they are public; in the long run this doesn't matter much. I did not see any major red flags. Did you? What were they specifically?

Lack of ownership.
You don't go from 'maybe profit' to $700M loss in a month or two without: raising hand, acknowledging that you screwed up, why you screwed up, and what are you going to do to not screw up again.
If you think you heard that, we live in different worlds. What I heard was spin and excuses, and excuses don't matter at their level. Explanation is useful, but explanation is not an excuse.

 

[Singer3000]

My view on the things that I think really matter:

• Gross margins: looked quite ok, given price cuts, start of SR+ deliveries in the US and the lack of GHG credits on the international deliveries. Sounds like they have worked to get the lines running efficiently, which gives them continued market edge. China production costs will get a double whammy boost - lower labour costs and lower depreciation given the claimed capex efficiency.

• Cell production constraint: I'm not left with a warm and fuzzy feeling here, I wanted far more detail than they were prepared to give. All we've got to go on is some warm words about supplier issues being worked out, and the aggressive guidance for Q2. Quite hard to take this on trust given how many broken promises on Model 3 production we have seen.

• Demand for S (&X?): people can hide under the comfort blanket of the demand pull-forward and retooling impact on production all they want. Something went very wrong in Q1. The v3 supercharger brag seems mind-blowingly stupid given even after this week's refresh, S&X still have a lower charge rate than the 3. Careful listeners will have noted the (impressive) new CFO trying to moderate Elon slightly in terms of guidance for Q2. The crystal ball comments on when Model S&X will stabilise translated mean "we don't know, stop asking". Don't expect a "normal" run-rate until Q3. To those that wonder how 90k Q2 deliveries can co-exist with a net loss, consider the gross profit impact from losing the higher margin, high ASP S&X sales and replacing with thinner margin, lower ASP sales of SR+. Is 4x the gross profit from an S to a SR+3 too much?

List of other positives:

• Shanghai plant project is looking good, lot's can still go wrong to delay the ramp though
• Model Y tooling order shows confidence in the timeline and cash position
• Maxwell looks like it will get done,
• Insurance if done right will solidify demand (though could be a major distraction for management time if not executed well)
• It sounds like no FCA cashflows were included in the Q1 numbers. If the full report shows they were, I'll need to review my view on gross margins above.

Negatives that I can live with for now:

• Continued yadayada about Solar Roof and build out of Energy business
• Highly negative and worsening Service margins

Cap raise: Meh. It's a bit late for that now guys. Those nasty greedy Wall St bankers tried to warn you it's better to raise from a position of strength and you refused to listen.

Speculation: While S&X have always had great margins, at low volumes there's a heck of an opportunity cost to the space they're using at Fremont. This talk about building Y at Fremont and Elon's focus this week on cheap "robo taxis" does make me wonder how long they'll still be around.

 

[CorneliusXX]

Luckily

The federal government allows each state to make their own rules regarding the licensing of insurance carriers. As a general rule, states will require insurers to set aside adequate reserves to pay future claims. That means a portion of the funds must be in cash or highly rated securities, US bonds, etc. Many states also have restrictions on insurers cherry picking their customers. Massachusetts, for example, requires each insurer to participate in the state's Assigned Risk Pool, which consists of high risk customers. With respect to auto insurance that would mean drivers with multiple accidents, driving violations, DUI, etc.

Insurance can be a highly lucrative enterprise, as Warren Buffet would attest. But navigating the regulatory schemes of dozens of states, in addition to tieing up a substantial amount of capital in the form of reserves until premiums build, will be quite the challenge. He is Elon, of course, so he probably figured it all out before breakfast. I'll be interested in seeing the details next month.

Tesla is issuing a lot of AAA ABS bonds these days

 

[Prunesquallor]

... especially if you bundle it in

"Customers wanted it that way."

I wonder if they can bundle in the insurance, too?

 

[schonelucht]

According to Ross Gerber. Tesla will work with an existing big name insurer as the underwriter and will provide big data to possibly help premiums. That makes it more likely the whole insurance thing isn't a big deal for Tesla investors.

 

[dqd88]

Lack of ownership.
You don't go from 'maybe profit' to $700M loss in a month or two without: raising hand, acknowledging that you screwed up, why you screwed up, and what are you going to do to not screw up again.
If you think you heard that, we live in different worlds. What I heard was spin and excuses, and excuses don't matter at their level. Explanation is useful, but explanation is not an excuse.

I don't disagree necessarily, but I think they did take ownership. They admitted that it was a very difficult logistics challenge. But I think Elon just sees it the way I do, which is, it's not that relevant. If a ship that was supposed to ship March 31, is a day late and lands April 1, doesn't change anything but will drastically change short term reporting and people will read all kinds of things into it.

What they should get better at is subtle sandbagging so as to be more likely not to disappoint to the downside. Elon is, as he has admitted, usually overly optimistic.

 

[KarenRei]

So, any interesting observations in the chat last night? No way I can catch up with all this now, lol

After-hours trading was amazingly flat after such a terrible report. Apparently you can price the apocalypse in

So, I've come to the acceptance that while I'm pretty good at predicting what's going to happen at Tesla, I'm simultaneously pretty freakin' terrible at predicting how the market is going to react in the short term, and it's cost me a ton of money :Þ. So I'm going purely to longer-term investments at this point. Will be switching completely to buying Jan '20 $300-$360 call spreads and selling stock-and-cash-backed Jan '20 $150-200 PUT spreads. Will roll at any point that the stock hits $310-ish in the good case, or if theta starts becoming relevant in the bad case.

Only question is to how to time entering into the above. It's hard to envision the stock rising on the day after such an awful report, but given the after-hours trading, that might well happen. I'm thinking about starting the buys/sells immediately after market open, and staggering them over the course of the next couple hours. Thoughts?

(As a side note, I'm very excited about Q2. Starting right off the bat )

 

[schonelucht]

Service and maintenance continues to be a very sore spot. Last year, the excuse was that the infrastructure was built out for larger volumes of cars. Which is strange, because one of the biggest customer complaints is a lack of timely service. This quarter, Tesla finally acknowledges that the real issue is losses on sales of used cars. Both by taking a one time penalty on the resale value guarantees and secondly by a direct write down on inventory of used cars. While these one time measures are helpful, the only structural solution is to offer lower prices on Tesla trade-ins. That's obviously not a good thing in terms of extracting demand out of your existing customer base. Which explains the $20k free ludicrous upgrade for existing customers on a new purchase. But that's essentially trading the loss on service for a lower margin. Ultimately, the reality is that gross margins were always inflated by the subsidies provided as losses on the service&maintenance line. Going forward, I think it is prudent to model a continued lower gross margin.

I tried a very rought draft to see how we get to a loss in Q2 with the information we have. Let's assume profits on leasing and energy (stable at around $100M and $50M) cancel out losses on service ($150M) so we ignore these completely on our loss/profit. R&D is $350M, SG&A $700M, interest expense $150M and nci $35M. Total : $1235M. Then 20k S/X + 70k 3 delivered. At ASPs of 100k and 50k respectively, that's 5.5B in revenue. To run a loss our gross margin cannot exceed 22.5%.

 

[Causalien]

So, any interesting observations in the chat last night? No way I can catch up with all this now, lol

After-hours trading was amazingly flat after such a terrible report. Apparently you can price the apocalypse in

So, I've come to the acceptance that while I'm pretty good at predicting what's going to happen at Tesla, I'm simultaneously pretty freakin' terrible at predicting how the market is going to react in the short term, and it's cost me a ton of money :Þ. So I'm going purely to longer-term investments at this point. Will be switching completely to buying Jan '20 $300-$360 call spreads and selling stock-and-cash-backed Jan '20 $150-200 PUT spreads. Will roll at any point that the stock hits $310-ish in the good case, or if theta starts becoming relevant in the bad case.

Only question is to how to time entering into the above. It's hard to envision the stock rising on the day after such an awful report, but given the after-hours trading, that might well happen. I'm thinking about starting the buys/sells immediately after market open, and staggering them over the course of the next couple hours. Thoughts?

(As a side note, I'm very excited about Q2. Starting right off the bat )

Do it tomorrow at maximum damage. Maybe at 9 to 10 am. THen do the second batch at q2 earnings.

 

[Dan Detweiler]

So, any interesting observations in the chat last night? No way I can catch up with all this now, lol

After-hours trading was amazingly flat after such a terrible report. Apparently you can price the apocalypse in

So, I've come to the acceptance that while I'm pretty good at predicting what's going to happen at Tesla, I'm simultaneously pretty freakin' terrible at predicting how the market is going to react in the short term, and it's cost me a ton of money :Þ. So I'm going purely to longer-term investments at this point. Will be switching completely to buying Jan '20 $300-$360 call spreads and selling stock-and-cash-backed Jan '20 $150-200 PUT spreads. Will roll at any point that the stock hits $310-ish in the good case, or if theta starts becoming relevant in the bad case.

Only question is to how to time entering into the above. It's hard to envision the stock rising on the day after such an awful report, but given the after-hours trading, that might well happen. I'm thinking about starting the buys/sells immediately after market open, and staggering them over the course of the next couple hours. Thoughts?

(As a side note, I'm very excited about Q2. Starting right off the bat )

I would say if you're going to get in long then it really doesn't matter when you jump in. As you said, trying to predict where it will bottom is a fool's errand. If I had the money (which I don't right now) I would be getting in now. In another 2 months when I do have a bit to burn I will buy in at that point. I am now looking at this as a 7 year minimum project. In 7 years I will be eligible for Social Security and at that point I will be in a position to move more money into the stock...or not. But, I will be in the position to make further long term decisions at that point. So, I will put what I can lose into it when I can and then wait it out. As they say, you only lose money if you sell for a loss, so if I am ok losing that money from the start then I can only be pleasantly surprised. Hedging this stock has proven to be disastrous. There is no pattern to how the market reacts to news on Tesla. The only constant is it's inconsistency.

So, in my case I will pony up, jump in and then get a really good hobby and forget about the daily/monthly/quarterly ups and downs. I'll see where it is in 2027! In the mean time I will have Patience (my car) to enjoy and probably make some money off of when the Network opens up!

Just my take...and we all know what THAT'S worth! lol

Dan

 

[KarenRei]

Oh, and as for the person who expressed frustration as to how much tooling downtime it took, and worrying about that for the interior refresh: that's an entirely different case. Suspension and motor changes involve large, heavy objects that exert serious forces on the vehicle and have a major impact on many other aspects of the vehicle. Replacing screens on some future interior refresh is a far simpler task on the GA side. It's more of a headache for their suppliers than for them, and potentially some headaches for their programmers. But UI programmers don't cause line downtimes

On the other hand, if 1-2 years from now they do a battery refresh - not just a new cell chemistry (they're always upgrading that), but a whole new pack architecture - that'll be another big headache for Tesla with line implications. They're heavy items with major structural and safety implications and with lots of impact to the overall vehicle's systems - not to mention the cell and pack production challenges involved in making them in the first place.

 

[KarenRei]

Service and maintenance continues to be a very sore spot. Last year, the excuse was that the infrastructure was built out for larger volumes of cars. Which is strange, because one of the biggest customer complaints is a lack of timely service. This quarter, Tesla finally acknowledges that the real issue is losses on sales of used cars. Both by taking a one time penalty on the resale value guarantees and secondly by a direct write down on inventory of used cars. While these one time measures are helpful, the only structural solution is to offer lower prices on Tesla trade-ins. That's obviously not a good thing in terms of extracting demand out of your existing customer base. Which explains the $20k free ludicrous upgrade for existing customers on a new purchase. But that's essentially trading the loss on service for a lower margin. Ultimately, the reality is that gross margins were always inflated by the subsidies provided as losses on the service&maintenance line. Going forward, I think it is prudent to model a continued lower gross margin.

I tried a very rought draft to see how we get to a loss in Q2 with the information we have. Let's assume profits on leasing and energy (stable at around $100M and $50M) cancel out losses on service ($150M) so we ignore these completely on our loss/profit. R&D is $350M, SG&A $700M, interest expense $150M and nci $35M. Total : $1235M. Then 20k S/X + 70k 3 delivered. At ASPs of 100k and 50k respectively, that's 5.5B in revenue. To run a loss our gross margin cannot exceed 22.5%.

Adverse factors for Q2:
* Model Y tooling (they just said that they've ordered a ton of tooling)
* Leasing
* Ending the "end of quarter" delivery cycle.

These are all pretty hefty things that have a negative effect on the balance sheet. Although the latter two are mostly cosmetic.

 

[Xpert]

It's good.

Shareholders should think about it for a long time. Can you hold this for 5 years with the stock price remaining the same? Because it seems like that is the path as we are pivoting to robotaxi as the way to make a profit while everything else that makes profit will be poured into robotaxi. When Elon first came out with the timeline. I was one of the first who said the real time line will take longer. 5 years from 2016 for testing prototype and 10 years for actually having the vision to come to reality. I am guessing we see it in 2026.

Totally agreed. At this point $tsla became mainly a robotaxi play which might take anywhere between 2-6 years to play out. When it does it would be a trillion dollars company, and today’s stock price would be a joke then.

With the FSD path they laid out, massively automatic daily learning, human-trained NN (via 500k drivers’ interventions and increasing as more cars sold)+ focused training from tesla team, achieving FSD is absolutely only a matter of time. NoA is hard proof of the success of this method, it will only get better and faster from here.

I think the hedge funds will be buying $tsla hands over fists on dips from here. The long term funds do not want to miss out this opportunity.

 

[dqd88]

My view on the things that I think really matter:

• Gross margins: looked quite ok, given price cuts, start of SR+ deliveries in the US and the lack of GHG credits on the international deliveries. Sounds like they have worked to get the lines running efficiently, which gives them continued market edge. China production costs will get a double whammy boost - lower labour costs and lower depreciation given the claimed capex efficiency.

• Cell production constraint: I'm not left with a warm and fuzzy feeling here, I wanted far more detail than they were prepared to give. All we've got to go on is some warm words about supplier issues being worked out, and the aggressive guidance for Q2. Quite hard to take this on trust given how many broken promises on Model 3 production we have seen.

• Demand for S (&X?): people can hide under the comfort blanket of the demand pull-forward and retooling impact on production all they want. Something went very wrong in Q1. The v3 supercharger brag seems mind-blowingly stupid given even after this week's refresh, S&X still have a lower charge rate than the 3. Careful listeners will have noted the (impressive) new CFO trying to moderate Elon slightly in terms of guidance for Q2. The crystal ball comments on when Model S&X will stabilise translated mean "we don't know, stop asking". Don't expect a "normal" run-rate until Q3. To those that wonder how 90k Q2 deliveries can co-exist with a net loss, consider the gross profit impact from losing the higher margin, high ASP S&X sales and replacing with thinner margin, lower ASP sales of SR+. Is 4x the gross profit from an S to a SR+3 too much?

List of other positives:

• Shanghai plant project is looking good, lot's can still go wrong to delay the ramp though
• Model Y tooling order shows confidence in the timeline and cash position
• Maxwell looks like it will get done,
• Insurance if done right will solidify demand (though could be a major distraction for management time if not executed well)
• It sounds like no FCA cashflows were included in the Q1 numbers. If the full report shows they were, I'll need to review my view on gross margins above.

Negatives that I can live with for now:

• Continued yadayada about Solar Roof and build out of Energy business
• Highly negative and worsening Service margins

Cap raise: Meh. It's a bit late for that now guys. Those nasty greedy Wall St bankers tried to warn you it's better to raise from a position of strength and you refused to listen.

Speculation: While S&X have always had great margins, at low volumes there's a heck of an opportunity cost to the space they're using at Fremont. This talk about building Y at Fremont and Elon's focus this week on cheap "robo taxis" does make me wonder how long they'll still be around.

Model Y, Semi, Roadster, Pickup, powerwall, energy, Insurance, rideshare, services, Giga China, Giga Europe, Giga Ohio, Giga Brazil, Giga Saudi Arabia, Giga Nigeria, airplanes, helicopters, RV, van, delivery trucks, excavators, boats, submarines, tractors, buses, motorcycle, scooters, lawnmowers, leafblowers, weedwackers, air conditioners, furnaces, hot water heaters, vacuum cleaners, coffee... ok maybe not coffee... c'mon man get pumped!!!!!!