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TSLA Investor Discussions
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Norbert
TSLA will win
New number: As of 12/14/2012, short interest was still 29,091,311, not very far from its peak.
In hindsight, this is always good to know, as it means the share price remained at its current level *in spite of* that many shorts.
In hindsight, this is always good to know, as it means the share price remained at its current level *in spite of* that many shorts.
CapitalistOppressor
Active Member
That was essentially the basis for my cashing out of TSLA @$35. Heck, I did a major rebalance of everything I own.
Except for the Republicans failing to pass their middle class tax cut (and thus confirming that their conference is even more FUBAR than I feared) everything seems to be playing out as expected. We are now flirting with 90% probabilities that we are going over the cliff with no mitigation. But its also clear that whatever (if any) small fixes are attempted, whether its the middle class tax cut, a modification of the sequester, or both, it is now almost inevitable that we are facing a debt ceiling fight in February or March just like the one we saw in July 2011.
Only this time I *think* I believe Obama when he says he wont negotiate. I don't know what will happen with those discussions, or whether someone will back away from the brink, but even talking about it tanked the economy last time around, and this time it will happen while the economy is experiencing a severe fiscal drag. If we breach the debt ceiling we will be deep in La La Land and facing a self imposed crisis that has the potential to make 2008 look like a minor blip.
It is beyond bizarre to me that the only credible path forward that I see, other than a balanced agreement like the ones that have already failed to come together, or total capitulation by one side or the other, is to mint trillion dollar platinum coins and purchase debt back from the Fed to allow the government to issue new debt without breaching the debt ceiling.
That is just silly. But I can easily see that happening in March if a deal doesn't come together which causes the Republicans to withdraw their debt ceiling threat. And as of right now, the demands that they are making have united the Dems in opposition even, apparently, in the face of a potential default.
CapitalistOppressor
Active Member
In my case I bought at ~$28, sold at $35 and have not repurchased because I am making a bet that the market potentially faces a period of tremendous turmoil in the context of congressional dysfunction and a fiscally induced recession and potential for a politically induced default on U.S. obligations.
Under current law, capital gains in 2013 will be 20% + a 3.8% surtax for a total rate of 23.8%.
I'm not expecting my strategy to be a money maker for me unless these risks manifest themselves, but I think that I am ahead at current prices even if capital gains stay at 15% ie. (35-28)*0.15=1.05tax which should mean I can repurchase at ~$34 and be fine.
TSLA seems to have established a nice floor for itself in that range but I am skeptical that it will rise much in the face of politically driven uncertainty that is starting to put downward pressure on the market as a whole. I'm hopeful that this limits my potential losses when I buy back in while leaving me in a position to bargain hunt if there is a sharp move downwards.
Frankly, Tesla is an awesome company and IMHO folks who are actively shorting it are foolish. It would not surprise me in the least if it rises to $40 next week. But the situation in Washington has me seriously concerned to the point that I am ignoring the fundamentals of the company and instead am looking hard at what the latest word is from the Washington Post.
We will go over cliff. Too many see benefit, at least for some goals in doing so. Only way for republicans to get spending cuts and to broaden tax base. I personally don't mind paying more if everyone else does too. Dems see immediate political benefit of assessing blame, and have republicans vote against tax cut for those making less than 250k. They also get defense cuts and again watch the other side have to approve or go on record voting against social programs.
Funny that this was all created by congress that now can't deal with it. Truth is that all will get hurt. We should get innovative and do a value added tax. Consumption based, hidden to consumer, broadens base. Claims that it is regressive not true. Those with less buy less and therefore pay less. Don't like paying tax dont consume as much
Funny that this was all created by congress that now can't deal with it. Truth is that all will get hurt. We should get innovative and do a value added tax. Consumption based, hidden to consumer, broadens base. Claims that it is regressive not true. Those with less buy less and therefore pay less. Don't like paying tax dont consume as much
smorgasbord
Active Member
The Bear Case Against Tesla
Thought it would be a good exercise to try to argue the Bear case against TSLA:
1) Model S reservations are growing nicely, but there's no telling when pent-up demand will be satisfied. The Leaf, for instance, also had reservations and pent-up demand, but that pretty quickly dissipated. With Model S, that's obviously going to take a longer time, but you can't prove that there's a sustainable 25K/year demand for Model S over multiple years.
2) Model X reservations suck. Something like 2K at this point in time I think. Yeah, we don't have real specs nor pricing and they're not pushing it in the stores, but considering the additional base model complexity (eg, falcon doors), added items (3rd row seat), increased weight, increased use of materials (it's a lot taller), it's hard to see the base model not costing $10K-$15K more than Model S's new pricing. That means it starts at $70K. So, it's a high-end premium SUV, which means it doesn't compete with X3 or Q5, etc. It ain't gonna capture any mini-Van sales unless people are willing to spend more. A lot more.
3) Gen-3 is a tall order. The highest price it can come in at is $47,400 which the Fed rebate brings to $39,900. This isn't a mainstream car. Even so, it's $20K cheaper than the base Model S, yet I don't see how they get there. It needs a 150 mile range minimum, and needs to compete performance-wise and luxury-wise with BMW 3-series and Audi A4, etc. Luxury-wise, Model S is about there (little better in some things, little worse in others), but they're not going save that much money just shrinking things down size-wise. For 150 mile range, they'll need a 45-50kWh battery, which at today's prices is something like $22K. Let's say battery technology improves 25% in 3 years, that means the battery will save about $5500, which means they need another $14,500 in car itself savings. Motor can be smaller, but getting that kind of savings from the mundane car aspects is impossible. Even a 50% battery price per kWh savings saves $11K, which means there's still $9K in savings due to size and quality needed. Pretty steep. Gross margins are going to suffer, and the car is going to need a cheaper to build design, while at the same time compete with the best in the world in terms of appointments/comfort, etc.
4) If battery technology does vastly improve to make Gen-3 a reality, then BMW and Audi and Lexus could arguably more easily throw it into their best in class cars than Tesla can build a best in class car to surround its drivetrain. The Model S's borderline OK interior shows us just how hard it is to compete with the established car companies in those areas.
5) Model X production line will probably require an additional capital raise. Gen-3 will definitely require a large capital raise. Those are going to impact the stock price. Other companies can do what Ford does and build different powertrain versions of the same car on the same assembly line, thus reducing their start-up investment costs, and keep risk down. Tesla doesn't have that cost nor risk reduction. And, they still have to pay off their existing loans, which is money they can't invest in new assembly lines.
6) At today's price (around $34), Tesla needs a lot of profit to get to a reasonable P/E ratio - more profit than they can get from Model S alone. Despite super high short interest, the stock price has already priced in Model S success and Model X successful kickoff at least.Compare Tesla's numbers with a full 20K/year Model S delivery in 2013 to any other successful car company and you'll see that Model S success is already priced in. There's a limit as to how much future potential the stock market will support and Tesla is already testing it.
7) If the Fed tax rebate goes away, the high end Model S/X sales won't be much impacted, but Gen-3 sales would likely be heavily impacted. That's an uncontrollable future risk for Tesla.
Again, I'm bullish on Tesla, but I'm trying to build rational bear arguments. What have I missed? Please do not give me grid constraints, coal-power, or other such Petersen-esque items, I want to keep this reasonable as a check against overlooking the real risks and concerns.
Thought it would be a good exercise to try to argue the Bear case against TSLA:
1) Model S reservations are growing nicely, but there's no telling when pent-up demand will be satisfied. The Leaf, for instance, also had reservations and pent-up demand, but that pretty quickly dissipated. With Model S, that's obviously going to take a longer time, but you can't prove that there's a sustainable 25K/year demand for Model S over multiple years.
2) Model X reservations suck. Something like 2K at this point in time I think. Yeah, we don't have real specs nor pricing and they're not pushing it in the stores, but considering the additional base model complexity (eg, falcon doors), added items (3rd row seat), increased weight, increased use of materials (it's a lot taller), it's hard to see the base model not costing $10K-$15K more than Model S's new pricing. That means it starts at $70K. So, it's a high-end premium SUV, which means it doesn't compete with X3 or Q5, etc. It ain't gonna capture any mini-Van sales unless people are willing to spend more. A lot more.
3) Gen-3 is a tall order. The highest price it can come in at is $47,400 which the Fed rebate brings to $39,900. This isn't a mainstream car. Even so, it's $20K cheaper than the base Model S, yet I don't see how they get there. It needs a 150 mile range minimum, and needs to compete performance-wise and luxury-wise with BMW 3-series and Audi A4, etc. Luxury-wise, Model S is about there (little better in some things, little worse in others), but they're not going save that much money just shrinking things down size-wise. For 150 mile range, they'll need a 45-50kWh battery, which at today's prices is something like $22K. Let's say battery technology improves 25% in 3 years, that means the battery will save about $5500, which means they need another $14,500 in car itself savings. Motor can be smaller, but getting that kind of savings from the mundane car aspects is impossible. Even a 50% battery price per kWh savings saves $11K, which means there's still $9K in savings due to size and quality needed. Pretty steep. Gross margins are going to suffer, and the car is going to need a cheaper to build design, while at the same time compete with the best in the world in terms of appointments/comfort, etc.
4) If battery technology does vastly improve to make Gen-3 a reality, then BMW and Audi and Lexus could arguably more easily throw it into their best in class cars than Tesla can build a best in class car to surround its drivetrain. The Model S's borderline OK interior shows us just how hard it is to compete with the established car companies in those areas.
5) Model X production line will probably require an additional capital raise. Gen-3 will definitely require a large capital raise. Those are going to impact the stock price. Other companies can do what Ford does and build different powertrain versions of the same car on the same assembly line, thus reducing their start-up investment costs, and keep risk down. Tesla doesn't have that cost nor risk reduction. And, they still have to pay off their existing loans, which is money they can't invest in new assembly lines.
6) At today's price (around $34), Tesla needs a lot of profit to get to a reasonable P/E ratio - more profit than they can get from Model S alone. Despite super high short interest, the stock price has already priced in Model S success and Model X successful kickoff at least.Compare Tesla's numbers with a full 20K/year Model S delivery in 2013 to any other successful car company and you'll see that Model S success is already priced in. There's a limit as to how much future potential the stock market will support and Tesla is already testing it.
7) If the Fed tax rebate goes away, the high end Model S/X sales won't be much impacted, but Gen-3 sales would likely be heavily impacted. That's an uncontrollable future risk for Tesla.
Again, I'm bullish on Tesla, but I'm trying to build rational bear arguments. What have I missed? Please do not give me grid constraints, coal-power, or other such Petersen-esque items, I want to keep this reasonable as a check against overlooking the real risks and concerns.
The other bearish issue, in my mind, at least....
Trouble transitioning over to the European / World stage due to charging / battery issues (already having some US reports of excessive battery charge loss in the cold - would make it difficult if one lived in Norway, where we are seeing the greatest number of European reservations).
Would any of the bug/defect or winter driving issues being noted have any impact on the stock or is that all sort of irrelevant relative to cars delivered?
Norbert
TSLA will win
Missed the surtax. With your buy price, and a total rate 23.8%, the threshold moves up to about $71 (when re-buying at the same price). I do expect to sell above $70 eventually (perhaps in a few years), so I am better off keeping the shares until then.
Yes, selling at $35 and re-buying at $34 seems fine even if capital gains stay at 15%. But the difference in share price between $35 and $34 has a large effect, compared to any potential tax-related savings from this sell/re-buy maneuver even when taxes go up to 23.8%. For example, if you have to buy back at $2 higher (at $37), you already lose all the tax-related savings regardless of the final selling price (unless it is somewhere below $30).
When re-buying at the same price, in your case, the threshold would be around $73.
In other words, if one expects to eventually sell (after a longer time of owning the shares, perhaps a few years) at around $70-75, or higher, then one should do this sell/re-buy maneuver only if one expects to be able to buy back at a lower price. (Depending on your original purchase price, though.)
This is also the time when news from Tesla (about becoming profitable, reaching a high production rate, and continued reservations) may drive the price up. So I guess any "downward pressure on the market" will have to come at the right time, and you'd have to be sure not to miss that time.
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Potentially, but in general, the Model S is doing far better than the naysayers predicted.
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Norbert
TSLA will win
Responses to "The bear case ..."
In general, I think, much of these arguments are existing skepticism, and they are already baked into the share price. But it might be an equally good exercise to respond to each.
The bears predicted all kinds of problems and impossibilities, which Tesla has meanwhile resolved (assuming production rate will be good soon, or already is).
Continued demand is the last remaining major "question". Model S will improve, sinking battery prices will give Tesla the option to reduce the price, and variations of the platform will address additional market segments, and the SuperCharger network will be extended extensively within the next two years. But even without those, demand currently appears to continue in a healthy manner.
I think Model X reservations are mostly impacted by it being far away, while the Model S is starting to be available (and having a large cargo room as well). The falcon doors are too new for people to trust them from the distance. If implemented solidly, they will turn into something attracting buyers who would otherwise not consider an EV. Not everyone will like them, but their functionality is (currently) not available on any other car, electric or not. And a top acceleration of 4.4 sec with electrically controlled AWD will of course be another selling point.
Compared to the Model S, aside from the smaller size and for example lower cost interior materials, significant savings will of course come from mass-production and lower high-volume prices from suppliers. It appears battery technology in the next 3 years may have a larger than average decline in costs. Also, with the Model S, Tesla will have gained relevant experience in reducing cost and efficiency in production. A major advantage should be that Tesla can easily offer great performance without much higher cost.
The Gen III doesn't seem to need a better interior than Tesla already knows how to make, and in any case that is an expertise which should be available on the market.
However, building a cost-efficient first-class electric drive train, hardware and software, is non-trivial, involves lots of patents, and is an expertise that can't be bought easily on the market. Other companies have not shown that it would be easy to do something similar, on the contrary. Leaf and Volt each required many years of development, without really achieving the same 'wow' result for the electric drivetrain.
I don't think Model X will necessarily require an additional capital raise, and haven't seen anyone (who would be knowledgable enough) saying so. Once Tesla is profitable, the need for the recent capital raise as a "cushion" will go away, and since the Model X will be produced mostly on the same production line, the necessary investment won't be that high.
The skepticism of the bearish position is also already priced in, the existing short interest can't be put aside. So the argument goes both ways. In so far as Tesla will address many concerns about production and profitability in the next months, many risks which are in fact still baked into the share price, will fall away within a few months.
I don't see that happening. Tesla is in the midst of proving that electric cars are *the* technology worth supporting, that a valid business model for them exists, and that they contribute to a working economy. This will increase a very positive context for government support. Also, for example, one city recently decided to have most of their fleet be electric.
In general, I think, much of these arguments are existing skepticism, and they are already baked into the share price. But it might be an equally good exercise to respond to each.
The bears predicted all kinds of problems and impossibilities, which Tesla has meanwhile resolved (assuming production rate will be good soon, or already is).
Continued demand is the last remaining major "question". Model S will improve, sinking battery prices will give Tesla the option to reduce the price, and variations of the platform will address additional market segments, and the SuperCharger network will be extended extensively within the next two years. But even without those, demand currently appears to continue in a healthy manner.
I think Model X reservations are mostly impacted by it being far away, while the Model S is starting to be available (and having a large cargo room as well). The falcon doors are too new for people to trust them from the distance. If implemented solidly, they will turn into something attracting buyers who would otherwise not consider an EV. Not everyone will like them, but their functionality is (currently) not available on any other car, electric or not. And a top acceleration of 4.4 sec with electrically controlled AWD will of course be another selling point.
Compared to the Model S, aside from the smaller size and for example lower cost interior materials, significant savings will of course come from mass-production and lower high-volume prices from suppliers. It appears battery technology in the next 3 years may have a larger than average decline in costs. Also, with the Model S, Tesla will have gained relevant experience in reducing cost and efficiency in production. A major advantage should be that Tesla can easily offer great performance without much higher cost.
The Gen III doesn't seem to need a better interior than Tesla already knows how to make, and in any case that is an expertise which should be available on the market.
However, building a cost-efficient first-class electric drive train, hardware and software, is non-trivial, involves lots of patents, and is an expertise that can't be bought easily on the market. Other companies have not shown that it would be easy to do something similar, on the contrary. Leaf and Volt each required many years of development, without really achieving the same 'wow' result for the electric drivetrain.
I don't think Model X will necessarily require an additional capital raise, and haven't seen anyone (who would be knowledgable enough) saying so. Once Tesla is profitable, the need for the recent capital raise as a "cushion" will go away, and since the Model X will be produced mostly on the same production line, the necessary investment won't be that high.
The skepticism of the bearish position is also already priced in, the existing short interest can't be put aside. So the argument goes both ways. In so far as Tesla will address many concerns about production and profitability in the next months, many risks which are in fact still baked into the share price, will fall away within a few months.
I don't see that happening. Tesla is in the midst of proving that electric cars are *the* technology worth supporting, that a valid business model for them exists, and that they contribute to a working economy. This will increase a very positive context for government support. Also, for example, one city recently decided to have most of their fleet be electric.
I have been watching the reservation numbers closely. The Model S been running at about 70 a day 25,550 a year. Model X been running about 10 a day 3,650 a year similar to what the Model S was at this stage of the X. Once they start releasing more info on the X reservations will increase. They are taking in roughly $400,000 daily in reservations. I have been thinking of selling my profit alone but have not done so yet instead I keep buying on a weekly basis (You read correctly "buying on a weekly basis")
I think we are past the danger phase. Production has ramped up nicely. Tesla has shown all of us that they can make these cars. In September, when there was a danger that production would not ramp up at the proper pace was when Elon said they were in the critical phase. They did a secondary offering to bring in enough cash to get them over the hump. Elon is not a man to pull punches and we all saw the stress and nervousness when he spoke of the six month pitfall. There is plenty of evidence of his not holding back and everyone might remember the moment on 60 Minutes when they mentioned how astronauts thought SpaceX was reckless and dangerous. Elon was very choked up that his heroes didn't believe in him. Elon is now confident that Tesla will succeed.
So that is my reasoning for why Tesla is going to seriously kick @ss. If Elon is confident, then I am confident.
So that is my reasoning for why Tesla is going to seriously kick @ss. If Elon is confident, then I am confident.
smorgasbord
Active Member
The idea here is not to defend against the bear arguments, but to find the best bear arguments you can.
Then you can decide if you're being overly optimistic.
Then you can decide if you're being overly optimistic.
Norbert
TSLA will win
To me it seems to make more sense to put any arguments in their proper context, *before* using them to check your optimism.BTW, if you are looking for more risks, you could also check Tesla's own SEC filings, usually at the end they contain a (somewhat) scary risk section. It is actually quite easy to come up with negative what-if scenarios.
There is actually a bunch of arguments that I can think of, which raise the question of whether I should be even more optimistic, long-term. But I think it would be 2-3 months too early for that discussion.
Right now, the question for me is if Tesla will use the first profits to cover areas that have been perhaps underfunded so far, and hire staff to get on top of things. However this point in time hasn't really come yet.
Huh, you know the production rate? Can you tell me and what your source is? Company very quiet. Getting me scared. There would seem no reason to keep it a secret. I am long on company but have to wonder if I can continue that if they are not willing to announce production rate after new year. Unless lower than expected no reason to keep secret until conference call. Remember this is CEO who broadcast cash positive as soon as it happened. Criticism was only in his choice of media he chose to announce it in.
adiggs
Well-Known Member
I would be shocked if Tesla doesn't talk about the production rate at their next quarterly earnings call / announcement.
I would be equally shocked if Tesla says anything official and public about the production rate before the next quarterly earnings call / announcement. Between now and that quarterly earnings call / announcement, we'll be speculating about the production rate because its such an important indicator of Tesla's financial status, but again - I would be shocked if we have anything but speculation.
I would be equally shocked if Tesla says anything official and public about the production rate before the next quarterly earnings call / announcement. Between now and that quarterly earnings call / announcement, we'll be speculating about the production rate because its such an important indicator of Tesla's financial status, but again - I would be shocked if we have anything but speculation.
I do find it odd. He can't wait to tweet cash positive but suddenly develops restraint not to tell of another milestone. I know we will hear at cc but what about next week. Not asking minute to minute mundane updates but production rate was huge miss last qtr. by the way it's hear not here or hair
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