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

[Foghat]

OT, just a little aside about the power of FUD, CNBC, etc.

Earlier this week I visited some franchise auto dealerships in New Mexico. One meeting, with a general manager of a huge Ford dealership, a long-time, old-time car guy, been in the business his whole adult life, going back into the 1970s, I heard the most amazing FUD about Tesla.

I hear this kind of FUD a lot, interviewing auto dealers. They really have the act down well. They're born liars, and they can't help themselves once they're on a roll. They actively scoop up what they read and hear about Tesla in the media, and, my theory anyway: they amplify the fearmongering to reassure themselves that everything's fine and the status quo that is their little ICE franchise dealership bubble will continue happily into the distant future.

From memory the conversation started out something like this, upon my asking him about Tesla.

The general manager leaned forward from his fancy leather chair behind his fancy wood desk. "Listen," he said in a hushed tone to me, like he was letting me in on a secret, "Tesla announced their fourth-quarter earnings yesterday [sic] [as in, yes, that is really what he told me], and it's all over. Sales are down, demand is gone, and they're in massive debt."

I just sat there, I mean, to interrupt him, to correct him while he's on such a roll? that would just spoil things.

"You know who Phil Lebeau is?" he then asked me.

"Sure."

"Now well HE is an expert -- you oughta interview him! I was watching CNBC this morning--I watch it every day!--and they had Phil Lebeau on and Tesla's finished! They're going down the tubes! They had another guy on, big firm, real expert, can't remember the firm name---"

"--Adam Jonas of Morgan Stanley probably," I said.

"Yeah, Morgan Stanley! Right! And he was saying the stock is going to $10 a share. Tesla makes nice cars, I never been in one but they're nice cars, but they're finished. They'll be gone soon. It's all over for Tesla."

On and on it went for the next ten minutes about how convinced he was that Tesla is toast--and his source for this information is what he hears on CNBC.

I tell ya, it was like this general manager had suddenly turned into Gordon Gekko. I imagined myself sitting there with him prancing around his office, telling me:

"The point is, ladies and gentleman, that FUD--for lack of a better word--is good. FUD is right. FUD works. FUD clarifies, cuts through, and captures the essence of the evolutionary spirit. FUD, in all of its forms--FUD for life, for money, for love, knowledge--has marked the upward surge of mankind. And FUD--you mark my words--will not only save Ford Motor Company, but that other malfunctioning corporation called the USA."

Adam Jonas put out a call on Tesla in 2012 of $50. Now he’s at $10 WCS? So 7 years later he thinks Tesla is worth less... he’s a joke.

Have you ever wondered all the same characters with all their non sense never get fired or leave the TV networks? Always the same cast getting called in as “experts” and “analyst?”

If they get it wrong, they just change the subject or it’s radio silence on the airwaves.

That’s called a financial media propaganda system that hopes we are dumb enough to think it’s really trying to give us valuable investment info. They call us “muppets” for a reason.

 

[ZachF]

If I understand correctly, they basically started this quarter with 10K units that were in transit. So to reach 90K, they just need to deliver an extra 80K. So if that leaked email is correct, they would be closer to 100K this quarter than 90K.

They're unwinding the wave, so production will likely be larger than deliveries.

 

[ZachF]

Lots of capping at around 197 this morning so far.

Yep, someone dumped 840k shares at 11:27 but failed to halt the rise.

 

[anon]

The number 5,300 China Q1 deliveries is from a post on Apr 25 by RobStark, showing a link to China March and Q1 registrations. The numbers of ships to China are listed on Tesla Carrier tracking sheet.

Thanks, I appreciate the response.

I can be blamed for 7-8k confusion but @Artful Dodger clarified, that the std capacity listed on carriers are for 1966 Toyota Corolla, and model 3 being bigger will fit in lesser number. So I am guessing a 5300 number seems right.

Thanks for the comment, but I was thinking of a different post - somebody posted a screenshot of a TSLAQ Twitter post with data from a Citi analyst report showing something like 7500 Model 3s delivered in China in Q1. I'm not sure how they compiled that data though.

 

[TradingInvest]

FOLKS: Unless you are prepared to buy the underlying shares at the indicated strike price, NEVER, EVER SELL PUTS. It's a recipe for financial disaster.

Follow that advice. Make sure you have enough free cash to convert those Puts to shares. Otherwise Puts could send your account into margin calls at the worst time and wipe out your account. Also, don't use margin.

 

[Singuy]

I don't think that one explicitly violated the settlement though. It didn't really have any figures - it was just math and extrapolation.

SEC settlement specifically calls out ANY written communication about order or production volume.

This email, if not approved by Tesla's counsel, violates that agreement.

Lol. It's a leaked company email. Not meant for the public therefore it's not material information.

Based on what you are saying, any internal email must be reviewed which is hilarious and stupid.

 

[Drumheller]

On it. (Added another share to the pot on your behalf. Thank you ever so much.)

And I can answer your question: Tesla is lowering prices (and will continue to do so) as they become more production efficient, can lower costs anywhere and every where while maintaining a healthy gross margin so they can pump that into growing the business.

Why? Because the goal has always been to get every driving human into an EV asap. That is the goal. The Goal. The whole enchilada. The motivation. The Mission.

There are a few ways to do that. One big way is to make a stellar product. Another significant way is to make the stellar product as affordable as possible for as many people (eventually for all driving humans) as possible.

The latter is why pricing keeps going down as Tesla can afford to do it. I realize it’s a foreign concept to money hungry/money centric/money motivated people to pass cost /production efficiencies onto the customer. Most companies are going to keep that extra money for themselves because that’s how so many people roll.

As a person who is not motivated by money, I can fully grasp and accept without question that Elon Musk is the same. I recognize it in his actions.

If you’re ever to truly understand what motivates people, what causes their reactions and behaviors, you first need to accept that not everyone thinks as you do. That everyone has their own reality. Elon Musk is not average people. It’s why so many people don’t get him, don’t understand why he does and says the things he does, and why there’s such love and hate for him. Love is from the people who appreciate his uniqueness and admire his chutzpah. Hate is from the people who don’t understand him, don’t want to understand him and fear him.

My post wasnt made out of concern for me making money.

We need Tesla to succeed. Q1 posted a massive loss. Then Elon sends the email about cutting costs. A company needs to pull in enough revenue to survive. So why cut prices when you're trying to get the company in a stable financial position?

Twice you've replied and neither time did you answer that. Instead, I got your usual assumptions about another poster (me) and your condescension.

 

[MarcusMaximus]

I don't think that one explicitly violated the settlement though. It didn't really have any figures - it was just math and extrapolation.

SEC settlement specifically calls out ANY written communication about order or production volume.

This email, if not approved by Tesla's counsel, violates that agreement.

I could be wrong, but wasn’t that specifically about *public* communication? This email was not public. Sure, employees have been leaking every single email he sends out, but so long as they have an active policy against such leaks(they do) and he isn’t secretly pulling the strings to make leaks happen(no evidence that he is), I don’t think he could reasonably be held responsible for some employee somewhere breaking the terms of their employment.

 

[Doggydogworld]

Not that much.

Tesla, TSLA & the Investment World: the 2019 Investors' Roundtable

If we use the numbers from that post, moving from 63k to 78k production nets us $380 less in allocated fixed cost. That is good for 0.7% margin on an ASP of $52k. So, if the margin goes up from 20.3% to 21%, it makes a difference of about $50m in p&l. So, still a loss of $200M.

We are ignoring here the whole FCA payment that went into the margin in Q1. We don't expect a repeat in Q2, right ? Obviously that makes a bigger difference than this 0.7% and we get a margin of less than 20%.

$2.1b from FCA over three years is 175m/quarter, so only a bit less than Q1's 200m. The $2.1b number is disputed, of course, and it's not all new money since FCA has been paying Tesla for years (300m+ in 2018). I expect non-ZEV of 100m++ per quarter going forward, possibly 175m. It will have less impact on percentage margin as auto revs grow, however.

Another way to look at the 63k to 78k is to allocate fixed costs over the first 63k Model 3s then evaluate the incremental profit (aka contribution margin) of those extra 15k cars. My post which you linked estimated fixed Model 3 depreciation at 125m, or 2k per car in Q1. Let's say Model 3 labor (including GF) was 250m and also treat that as fixed from Q1 to Q2. So:

Q1 COGS/car = 46k = 40k variable + 2k PP&E depreciation + 4k labor

Those 15k additional cars in Q2 only incur the 40k variable cost. At Q1's ~57k ASP (including emissions credits) that's a whopping 17k contribution margin. It isn't actually that high, because ASP will fall. It's also overly simple. In the real world Tesla also factors in incremental SG&A and other factors. But it gives a sense as to why they settled on 39.9k + 1.2k SR+ as their effective base price for the Model 3.

 

[Remus]

I don't think that one explicitly violated the settlement though. It didn't really have any figures - it was just math and extrapolation.

SEC settlement specifically calls out ANY written communication about order or production volume.

This email, if not approved by Tesla's counsel, violates that agreement.

Funny you don't think "projected burn rate", as most bears interpreted, which was also market moving, was no "figure" but this is.

Wall street cares for profit and loss, they couldn't care less for production/delivery/order numbers if they are not indicator of future profit or loss. So you are saying giving direct number is ok, indirect number is not.

Great logic, learnt a lot today.

 

[Remus]

I could be wrong, but wasn’t that specifically about *public* communication? This email was not public. Sure, employees have been leaking every single email he sends out, but so long as they have an active policy against such leaks(they do) and he isn’t secretly pulling the strings to make leaks happen(no evidence that he is), I don’t think he could reasonably be held responsible for some employee somewhere breaking the terms of their employment.

haven't you heard the new rule? if your wallet is stolen it's your fault. you are wrong to have a wallet in the first place, apparently you are asking for trouble to carry money at all, knowing there are thieves in the world. By carrying a wallet you are encouraging criminal activities, that makes you a criminal.

 

[colettimj]

Elon needs to offer Tim Cook 5% of TSLA to join as CEO. Elon can then demote himself officially to CNO (Chief Nothing Officer).

Yes, then all future Teslas will need to be flipped upside down in order to charge.

 

[KarenRei]

My post wasnt made out of concern for me making money.

We need Tesla to succeed. Q1 posted a massive loss. Then Elon sends the email about cutting costs. A company needs to pull in enough revenue to survive. So why cut prices when you're trying to get the company in a stable financial position?

Twice you've replied and neither time did you answer that. Instead, I got your usual assumptions about another poster (me) and your condescension.

Increased volume with lower margin vs. lower volume with increased margin. The optimum ratio constantly fluctuates, due to changes in both demand (incl. mix) and production costs (generally downward, which pushes margin upwards in a no-price-changed situation).

Seriously, this is economics 101....

 

[MarcusMaximus]

Lol. It's a leaked company email. Not meant for the public therefore it's not material information.

Based on what you are saying, any internal email must be reviewed which is hilarious and stupid.

Based on that idea, asking the counsel to review information would violate the agreement, since it hasn’t been reviewed yet

 

[mongo]

I am thinking of buying several land receivers as soon as they are toon sale and bring them to China before it gets on to the government black list. Will make a small fortune.

That only works if Starlink chooses to support China. You need the sat to talk to the ground station, and they know exactly where they are pointing.

 

[JohnDinger]

Lol. It's a leaked company email. Not meant for the public therefore it's not material information.

Internal emails can contain material information.

I could be wrong, but wasn’t that specifically about *public* communication? This email was not public.

The SEC settlement says ANY written communication. Doesn't specify public vs private.

Funny you don't think "projected burn rate", as most bears interpreted, which was also market moving, was no "figure" but this is.

Read that email again. It reveals nothing new.

"If we have the same cash burn rate as Q1, we will blow through the 2.5B we just got in 10 months."

There's no real information in that statement.

The market's reaction was ridiculous.

 

[Tslynk67]

The Apple stock app took all the Elon email headlines off the story stack under the stock symbol.

Again, if you don’t think there is manipulation of Tesla information to the public on Apple app, you’re living in FUD cave. (I’m looking at you Gerber)

Word of advice to Apple:

Stay out of the manipulation of information business.

Delete stocks app and News app. Bad for the brand and future outlook real quick...

I sill see the news on Apple - not that I use their stock app, well just on the Watch as there's no other available.

 

[KarenRei]

You can interpret any change through either a bearish or bullish lens, depending on your preference.

Price increase:
Bear: A) Can't produce, B) Insufficient margin; sacrificing volume to try to restore it
Bull: A) Too much demand; can't meet it

Price decrease:
Bear: A) Too little demand; sacrificing margin to try to overcome it
Bull: A) Capacity increase, B) margin increase justifies sacrificing the increase to gain higher volumes

 

[Boomer19]

dow -1.57%
comp -1.98%
spx -1.58%

tsla looking like heading back to red

 

[MarcusMaximus]

Internal emails can contain material information.



The SEC settlement says ANY written communication. Doesn't specify public vs private.



Read that email again. It reveals nothing new.

"If we have the same cash burn rate as Q1, we will blow through the 2.5B we just got in 10 months."

There's no real information in that statement.

The market's reaction was ridiculous.

So, to be clear, if he sends a written request to the counsel giving material information to be approved, he’s violating the agreement, since that communication has not yet been approved? Or if he discussed production rate with those in charge of production? Or finances with the CFO?

That would essentially ban him from acting as an officer in the company.