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

[CyberDutchie]

Remember this guy?

RBC Capital Markets analyst Joseph Spak, who was cut off by Elon Musk during an earnings call, says he will “hold Tesla accountable” for performance.

Yesterday he upped his forecast for Q3 deliveries from 86,300 to 97,200.

Why? Same old trick, we’ve seen this over and over again, a week before the release all predictions go up to make sure there is never a wall street surprise.

If Tesla doesn’t deliver 100,000+ the stock will tank next week to below $200, I’m on record for this prediction.

It’s playing out exactly as I predicted...

Mr Joseph Spak will “hold Tesla accountable” and issue a downgrade based on Tesla missing his forecast.

 

[PaulRocket]

Quick note regarding the Model Y prototype that was spotted in the wild today.

The first time we saw a Model X prototype was in February of 2015. Model X entered production 7 months later.
The first time we saw a Model 3 prototype was in April of 2017. Model 3 entered production 3 months later.

I think it is reasonable to assume that we are about 5 months away from the start of Model Y production. The official production start that Tesla has given is fall 2020. Elon has said that internal targets are more aggressive. My estimate is production will start in February/March of 2020. Volume production by the end of summer.

 

[KSilver2000]

Can we all agree on:
1. Tesla had another record quarter with unanticipated higher S/X sales.
2. Had the Elon email not gone out, everyone would have seen that Tesla beat original q3 estimates.


P.S. This is just for kicks as I know many here hate the guy. But, he basically nailed the sales numbers from one month ago.
August Numbers Are In For Tesla: Here's A Path To A Disappointing 97,000 For Q3 - Tesla, Inc. (NASDAQ:TSLA) | Seeking Alpha

Edit: Given the numbers, I’m not feeling optimistic about positive GAAP net income for q3 as Tesla has guided from q2.

 

[Doggydogworld]

It becomes relevant when the CEO writes,
“We have a shot at achieving our first 100,000 vehicle delivery quarter, which is an incredibly exciting milestone for our company!” and has been continually guiding 360K-400K for the year.

So, should we just be ignoring all guidances?

We don't know he wrote that. At best it was a leak, not guidance. At worst it was fabricated.

In terms of Musk giving accurate guidance, he is very much on track. He either exceeds the 360k guidance or comes within 1% or so of doing it.

Guidance was 360-400k, so 380k would be "on track". And that was company guidance. Musk himself only gave production numbers. He tweeted 500k (way off) and later told analysts 420-600k.

And very few analysts gave him a prayer of hitting that guidance when it was first made.

To the contrary, analysts did not understand why guidance was so low. Emmanuel Rosner with Deutsche Bank asked:

"...what drives the cautious outlook that's in your letter? Because it feels like it's the - it's just basically four times the fourth quarter run rate, which would imply sort of 50% for the full year but not really a lot of growth versus what you just accomplished. So, I guess, how do we think about the total demand for 2019, especially if you introduced this - the cheaper version?"
​

To be honest, I would much rather have 17K S/X with 97K deliveries than 14K S/X with 100K deliveries. The latter would have destroyed any possibility of a profit in Q3 and would indicated a very severe weakness in S/X in future quarters.

I agree these results are preferable to 100k with a poor 14/86 mix. But I see no chance of profit barring crazy-high emissions credits and deferred revenue recognition. Deliveries are up ~2000 from Q2, but S/X sales are down ~6% and Model 3 sales roughly flat due to higher lease percentages. That will hurt results.

 

[traxila]

Market seems to be thinking a little more more rationally about the report now. Big point swings.

Guess it does not matter until the big people come out to play tomorrow. But that this should be something to punish the SP over - ridiculous. TSLA severely undervalued based on its leads in tech and the car market of the future.

Five years from now the BEV market will be huge. Who will be the dominant player?

 

[Fact Checking]

They've never really explained exactly why Q1 is supposed to be bad. I'd love more clarity on that. My operating assumption had been tooling costs for MY hitting, but I really don't know.

Here's the exact context of those remarks, Elon made them this summer in the Q2 ER conference call:

Toni Sacconaghi:

"Yes, thank you. I was wondering if you can comment about whether you felt that Q2 benefited from consumers in the U.S. sort of rushing out to buy Model 3 in advance of the declining federal tax credit, a phenomenon that you sort of saw in Q4. And part of the reason I ask is, at least by my analysis it looks like maybe 70% of the Model 3 sold in the quarter were in the U.S., which is sort of higher than your normalized percentage of U. S. sales. And so, do you feel that that phenomena may have occurred in Q2? And are you still confident that Q3 deliveries can improve sequentially? And beyond the data point that you provided on the call that the orders quarter data are better than last quarter, is there anything else you can point to that provides that confidence?"

Elon Musk:

"Yeah, I think we'll -- demand in Q3 will exceed Q2. It has thus far, and I think we'll see some acceleration of that. So -- and then, I think Q4 will be, I think very strong. So, we expect that quarter-over-quarter improvements. I think Q1 next year will be tough. I think Q3 or Q4 will be good, Q1 will be tough. Q2 will be not as bad, but still tough. And then I see like Q3 and Q4 next year will be incredible."

Zachary Kirkhorn:

"Yeah, just to add on the tax credit step down, so the step down from Q2 to Q3 was significantly lower than the step down from Q4 to Q1. It's also important to keep in mind that there's seasonality in the auto business in Q1, which also is part of the impact. But generally speaking, our order rates so far this quarter is higher than where we were at this point in Q2, and we haven't seen a significant impact on U.S. based orders as a result of the step down."
​

So the exact context was quarter over quarter growth, Elon said that after a good Q4'2019 quarter the next Q1'2020 quarter will be "tough".

I agree, I believe Q1'2020 will be weaker than Q4 due to:

• Netherlands pull forward into Q4, which will come to a sudden stop for January-February of 2020, and will only start recovering by March or so.
• Final federal tax credit of $1,875 in the U.S. is lost - step-downs always cause at least a bit of demand pull-forward into Q4.
• Seasonally the winter months are the weakest in Europe and the U.S. as well. The only reason traditional OEM's are able to have strong Q4 results is because they are discounting "previous year models" in that time frame. But Tesla has no model years ...
  
• There might be anticipation of Model Y causing deferred purchases across the product palette.

Maybe China will ramp up in that time-frame, but ramp-ups are an uncertain science ...

 

[X Fan]

Very happy that LR S/X sales came in 17K+. This will benefit cash flow and EBITDA.

 

[Wooloomooloo]

Five years from now the BEV market will be huge. Who will be the dominant player?

Volkswagen?

 

[Doggydogworld]

The first time we saw a Model X prototype was in February of 2015. Model X entered production 7 months later.
The first time we saw a Model 3 prototype was in April of 2017. Model 3 entered production 3 months later.

When did we first see Roadster 2 prototype?

 

[Fact Checking]

Very happy that LR S/X sales came in 17K+. This will benefit cash flow and EBITDA.

Note that 15% of them are leased (2,600 units), which means less revenue recognized straight away. On the plus side it will result in significantly more profits on those units (50% vs. the usual ~20%) - but the income is spread out over ~3 years.

 

[StealthP3D]

Good god, this is ****ing exhausting....now I will have to bat down all the naysayers here at work because of the FUD that is about to take place.

It should be easy. Tesla just announced all-time record production and deliveries. Show them a graph of production history. Ask them what other new car company has come close to this kind of success.

If they are still skeptical, let them drive your Tesla!

 

[Cyrusis]

 

[Thekiwi]

The best part for me about the P&D report is Tesla achieved what they said they would do when giving guidance at Q2 earnings (increased production & deliveries quarter on quarter). For institutional investors I think that is an important attribute for the company to continue with, helping to erase the fears of another negative surprise like what occurred in Q1.

I think there is a good chance at earnings that tesla will narrow the full year guidance of 360k-400k to something closer to 360k-375k. A lot depends on China ramp and current demand for S&X. I think easy to see 2nd half of year S&X demand being perhaps 10k less than Tesla expected a few months ago. But I think people might be underestimating the ability for Shanghai to quickly get to the 500-1000 per week rate, with a virtually limitless supply of very cheap labour to counter any initial hiccups in automation. As long as the cant-be-replaced-by-humans machinery is up and running (eg the stamping presses), then the ramp should be fairly swift.

 

[Fact Checking]

BTW., the current after-hours volume of 500k shares traded is significant, but not the kind of huge after-hours moves of the past with millions of shares traded.

 

[M3Rider]

That's only 105k. 7k more. Even with no improvements at Fremont - and remember, production increased over the course of this quarter, so it's already at a higher baseline - that'd be a bit over 500/wk average at GF3. I don't think they'll have any trouble at all.

500/week is 5k over 10 weeks. You are forgetting that FC put a cap of 3k by EOY on GF3 due to glass contracts.

So, +4k from Fremont is needed.

It seems their ramp goes slower than Elon suggested, didn't he say something like 8.5k/w goal of M3 by EOY 2019? Lazy to search for this, but not seeing this kind of growth in the remaining 3mo.

 

[StealthP3D]

there are better ways to motivate your employees!!!!

Maybe you could tell us:

1) How many employees do you have under your wings
2) What kind of amazing accomplishments they have
3) Your most productive motivational techniques that have produced these outstanding achievements.

When you have answered, I'll be sure to forward it to Musk. Because I'm sure he would love to learn directly from such a master.

 

[Thekiwi]

Lots of instances of this. It is largely based on how the performance is based on the expectations. They missed the 99,000 expectation and therefore the stock dropped. If only the stock market was rational...

Apple was forever hit with instant stock sell offs if they missed iPhone unit sales expectations by a million or two. And this started happening a decade ago when they were selling a small fraction of the amount of iPhones that they sell today.

I agree with most other posters here with the sentiment that a few thousand units above or below Wall Street quarterly expectations are actually meaningless in the long run when annual sales are ramping towards millions of units per year.

 

[Antares Nebula]

So approximate 104K in Q4 to hit 360K annual.

I think this is definitely doable, and would guess it will come in a bit higher at approx 105-110k, excluding GF3.

 

[traxila]

Volkswagen?

Only one that has a shot. Bet. We shall see. VW still has to destroy its ICE business. That is one problem Tesla definitely does not have.

 

[jerry33]

But they conveniently leave out the fact that our bodies are wonderfully designed specifically to be able to resist diseases and that the body will naturally heal itself.

Umm. Tell that to a victim of malaria, polio, tuberculoses, rabies, smallpox, etc. The body has some capacity for self healing.