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

[Causalien]

I'm pretty confident they're telling the truth. There's several alternative data providers (no I'm not going to tell you which!) that monitor Tesla production very accurately. I've seen a big step up since mid-March.

Perhaps you should get in touch with the teslaq crowd and let them use these services instead of having them run around stalking ppl and causing unnecessary harm.

 

[bdy0627]

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The accounting for the convertible was convoluted. Especially due to the stupid bull call spread Tesla bought in conjunction with the deal. The 10-K says:

In accordance with GAAP relating to embedded conversion features, we initially valued and bifurcated the conversion features associated with these notes. We recorded to stockholders’ equity $188.1 million for the 2019 Notes’ conversion feature and $369.4 million for the 2021 Notes’ conversion feature. The resulting debt discounts are being amortized to interest expense at an effective interest rate of 4.89% and 5.96%, respectively.​

You can think of it as a reversal of the 188.1m of non-cash interest they expensed over the 5 years of the bond's life. It ate away at the 188.1m of equity, but on 3/1 when nobody converted that equity "reappeared" and created a non-cash profit. They subtract that non-cash profit when calculating OCF.

At least that's my first take, I need to spend more time on it to be sure.

Ok, that just makes my head hurt. I need a cliff's notes version when it comes out.

 

[Driver Dave]

Tesla cars are now 'quite old' and the exclusive brand is at risk, analyst says

Should be:

Gas cars are now 'quite old' and all exclusive brands are at risk, Tesla Drivers say.

 

[Nocturnal]

The "tesla cars are old" comment sounds stupid at first, but we should really think about it.

Why do people buy cars? What's the number reason after "it moves"? Style/looks. Even Tesla die-hards are unlikely to upgrade for tech changes. You can say that the ICE cars update their styles very few years to hide lack of technological change and maybe that's accurate, but people either intrinsically want new looks OR they are trained to expect that. Either way it's time for something new.

Can we stop showing India traffic as the problem for FSD to solve? I mean we can just assume that fsd won’t be in India until people start to obey basic traffic laws.

With traffic like that FSD is probably even easier. At that kind of speed I think my Roomba could control a self driving car without crashing.

 

[Cloxxki]

I can imagine some people ask for insurance payout for hit and runs when the car was parked. With TSLA, I suppose the sensors would log certain events, say parking errors. Would Tesla drivers have less of a chance to rip off their insurer if it's Tesla? Insurers are usually allowed to do all kinds of investigation to try and not pay out.

 

[keydiver]

What is this latest insanity from CNBC? Tesla cars are “quite old”?!

Tesla cars are now 'quite old' and the exclusive brand is at risk, analyst says

I saw the article, but decided not to even give them a click. But, I am curious: which dimwitted "ANALyst" did they trot out to make that statement?
I love the body style of the S, and people compliment it all the time for its timeless styling. As others have said, the range and features of the 2019 Model S are far beyond even what I bought in 2015. 370 mile range is just "OMG!". Yes, I have range envy.

 

[Nocturnal]

I can imagine some people ask for insurance payout for hit and runs when the car was parked. With TSLA, I suppose the sensors would log certain events, say parking errors. Would Tesla drivers have less of a chance to rip off their insurer if it's Tesla? Insurers are usually allowed to do all kinds of investigation to try and not pay out.

I suppose it may be more difficult to commit insurance fraud, but that's not a concern for most of us. That's a benefit actually, less fraud in the system means even lower premiums.

 

[KarenRei]

The "tesla cars are old" comment sounds stupid at first, but we should really think about it.

Why do people buy cars? What's the number reason after "it moves"? Style/looks. Even Tesla die-hards are unlikely to upgrade for tech changes. You can say that the ICE cars update their styles very few years to hide lack of technological change and maybe that's accurate, but people either intrinsically want new looks OR they are trained to expect that. Either way it's time for something new.

With traffic like that FSD is probably even easier. At that kind of speed I think my Roomba could control a self driving car without crashing.

The rules of aerodynamics aren't going to change. Tesla vastly outperforms everyone else because they pay so much attention to efficiency.

That said, you can mix up all sorts of aesthetic features without interfering with aero. For example, your aero isn't affected by your headlight and tail light choices, or whether you do a chrome delete, or things like that

 

[Doggydogworld]

I look at it differently: Buffet is clear that the magic of Geico to BH is the premium float. It makes perfect sense for Tesla to source cash in this way as well. If they can ramp it quickly enough they can use premiums to give the finger to Wall Street in terms of needing the Street for incremental capital.

First, car insurance is a short-cycle business with minimal float. Second, use of proceeds is highly regulated. Using premiums to build factories or whatever is a fantasy.

Something that was positive to hear during the call is I think Elon said that April deliveries have been the highest first month of the any quarter in Tesla's history. Bodes well for their guidance.....hopefully

I don't believe this is literally true - i.e. they aren't ahead of October 2018 because they've shipped cars overseas which won't be delivered in April. That said, eliminating the wave would take them from a 10/15/75% monthly pattern to something like 30/30/40. First two months will obviously be higher, last month much lower. That's the whole point - to improve efficiency by smoothing things out.

Doubt SR+ is breaking even only, Model 3 still having 20% margin. Also, Tesla can sell 3 SR for 2 LR worth of battery.

20% gross margin for Model 3 does not mean 20% gross margin for each variant. COGS for a $60k P are only 4-5k higher than COGS for a 40k SR+. (The difference is even less if you believe Musk's $100/kWh). I put COGS at ~40k for SR+ and ~45k for AWD/P. A base SR+ with no options thus has 0% margin, fortunately most people pay up for color, wheels and/or /FSD.

 

[SO16]

I saw the article, but decided not to even give them a click. But, I am curious: which dimwitted "ANALyst" did they trot out to make that statement?
I love the body style of the S, and people compliment it all the time for its timeless styling. As others have said, the range and features of the 2019 Model S are far beyond even what I bought in 2015. 370 mile range is just "OMG!". Yes, I have range envy.

David Reid. Technically he’s right based on gas car thinking. But even when I look at the latest gas vehicle I think,
“Why would I want more noise, maintenance, fumes, buttons all with less tech, performance and no OTA updates for enhancements?”

 

[LytHka]

The "tesla cars are old" comment sounds stupid at first, but we should really think about it.

Why do people buy cars? What's the number reason after "it moves"? Style/looks. Even Tesla die-hards are unlikely to upgrade for tech changes. You can say that the ICE cars update their styles very few years to hide lack of technological change and maybe that's accurate, but people either intrinsically want new looks OR they are trained to expect that. Either way it's time for something new.

With traffic like that FSD is probably even easier. At that kind of speed I think my Roomba could control a self driving car without crashing.

Yes for all the people saying that the design is timeless, do you really think buyers are going to be ok with the current style unchanged going into 2025 and beyond? It has to change at some point. Soon is a good time.

 

[EVDRVN]

The rules of aerodynamics aren't going to change. Tesla vastly outperforms everyone else because they pay so much attention to efficiency.

That said, you can mix up all sorts of aesthetic features without interfering with aero. For example, your aero isn't affected by your headlight and tail light choices, or whether you do a chrome delete, or things like that

What about dimpled door handles?

 

[CyberDutchie]

Very reasonable note from Morgan Stanley after Q1 Earnings Call. For the first time I agree with all the points/observations that Adam Jonas makes in this note:

Strategic Value Still Overshadowed by Demand, Liquidity Concerns

1Q results were not as bad as many expected but likely won’t sway bulls or bears from their perches. We think Tesla’s strategic/technological value will remain largely disregarded as long as concerns over demand and liquidity persist. Addressing these concerns can create a window of opportunity.

 

[Big Earl]

The real question is whether Tesla gains anything from running its own used car business. The aftermarket does handle used car sales pretty well. The only purpose of Tesla handling trade-ins is to attract new car buyers who just won't buy unless the "dealer" does a trade-in. How large is that business, vs. people who will happily buy the new car and then sell their old car to Carmax or Carvana? I don't know!

"Ludicrous" upgrade has a zero production cost so it's an easy giveaway.


OK; that seems reasonable. I was figuring they were probably going to be at a 20% GM, so there we are.

I was surprised by the number of people I know who prefer to trade-in a car when buying a new one, rather than selling it privately, even though it often results in a worse deal for them.

 

[Alphacrux]

Yes for all the people saying that the design is timeless, do you really think buyers are going to be ok with the current style unchanged going into 2025 and beyond? It has to change at some point. Soon is a good time.

Exterior refresh is probably low priority for s/x. I would expect interior refresh in q3 or q4 of this year according to rumor and battery pack/maxwell cell refresh sometime in q2/q3 of next year.

 

[Hock1]

I was surprised by the number of people I know who prefer to trade-in a car when buying a new one, rather than selling it privately, even though it often results in a worse deal for them.

Usually, people prefer the trade-in because they only have to pay sales tax on the difference between the trade-in and the purchase price of the new car. If one sells privately, one has to pay tax on full price of new car. (at least in Florida, it is this way)

 

[ZachF]

But LR cars do come with a higher margin. But selling more cars will look good of course. And they have the intent to put as many on lease as they can to have access to them again in 2-3 years assuming their Level 5 autonomy pans out for some jurisdictions. Those cars may able be cheaply upgraded when taken back to add value at good margin. Say, an extra front motor for mad off the line punch and safety. Should not cost a lot. A small electronics update may make the car satellite connected or whatever. Dead easy to create value on teslas, even used ones.
Imagine an add-on instrument cluster for Model 3. Costs $200 to make, installation $30 in labour. Many, so many would happily pay $1,000 extra to have a Model X style instrument cluster, I have no doubt. Not saying Tesla will do that, because I rarely see them care one iota about what drivers actually want their cars to be. But the potential to extract cash from the market is tremendous if you're Tesla. Level 5 and getting there at least 5 years before others would help as well, but I consider that highly unlikely. 3 years may already ruin it, it's just one brand and premium cars. Someone with a less premium universal offering will price FSD out of the market. There would be infinite resources available to a FSD "killer" especially after FSD happens.

If batteries are a bottleneck, you get more revenue selling SR+s than any LR pack with prices under ~$49,000.

$39,000/62 = $629
$49,000/78 = $628

 

[ZachF]

So is it still Game On for Q2 S&P inclusion, or we missed the train?

edit: Meant Q3

lol

Not likely until Q2 2020 now.

Also, now very unlikely Tesla will make a profit for FY2019.

 

[heltok]

Just want to elaborate on cash position. They ended Q1 with $2.2B. 2weeks earlier, when they had delivered half of the cars for the quarter, ie ~40k cars less delivered cars for an ASP of ~$60k they clearly had even less cash... Do the math... This was cutting it pretty close, not a very comfortable position to be in. I guess they realized this and decided to not do that again. So they will smooth out deliveries to not have as many cars in transit, thus they will not have that bad of a cash position. But if they increase vehicles in transit at end of quarter to smooth out the wave it might get worse at the end of the quarter, but it will not be as bad as it was mid March. However for people only looking at ER it might look bad, as they are not aware of how much worse it was two weeks before ER... Including dilution they intend to be cash flow positive in Q2, as long as that is true it will not get worse.

Imo it seems like bad strategy what Tesla is doing. They are winning, their cars are great, they are improving rapidly, they have a great position to be a major player in autonomous ride sharing race, and many long term bets that could pay off in the future. Why complicate things by having such an aggressive strategy which risks everything and makes everything so much more complicated and extra mess they don’t need. They could have delivered P3D/LR AWD to Europe/China starting in Q4, removed referral program earlier, not cut S/X prices as aggressively in Q1, done the retooling for S/X new battery pack in Q2 etc. No need to do everything in the worst quarter for them...

 

[Cosmacelf]

So I've now read two bullish analysts (in addition to the 4 bear analysts that I mentioned in a previous post in this thread). They both have maintained their approx. $400 price targets. They both see positives in the high reported margins.