I'm thinking the same thing. I was planning on buying more after the call but now I'm thinking I should at least buy half of what I planned on Wednesday before the call.
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jhm
Well-Known Member
Indeed. If ICE makers need to cut prices on new gasmobiles to make them competitive with emerging EV products, this could send ICE residual values plummeting. And this is self-reinforcing. If new car buyers pick up on how residual values are likely to decline, they will not be willing to pay much of a premium for new ICE. Meanwhile, the OEMs are nowhere close to being able field enough EVs to keep their unit sales up. So the pressure to keep cranking out ICE in large volume in the face of declining revenue will be enormous. So I would expect for a good number of years the narrative will be that EVs can't compete because ICE cars are incredibly cheap. We already witness a variation on that when the price of oil tanked a few years ago, and this may re-emerge as EV soften up oil demand growth at the same time. So ICE could become cheaper to buy new and cheaper to fuel. But a decline the price of gasmobiles or gasoline is not competitive strength, but a symptom of waning demand. There is a very strong possibility that ICE prices will decline before production numbers decline, and such a scenario would likely entail rapidly declining resale values for ICE.
So we seem to be in "everything in the market is dropping" mode today.
I am unable to judge their chances, since i don't know if and what kind of information Mr. Tripp has taken, how the SEC is working or how much Tesla tries to avoid more negative headlines. But if i was the client, i would probably consider a settlement a win, depending on the outcome, the numbers involved and what happens to the other case.
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Regarding price action: I liked the price action during the last few months. Since around mid june we've seen lower highs, a negative sentiment (which is a highly subjective point to make, i know) and a down trend. All that, while the NASDAQ achieved new ATHs and performed nicely until some days ago. Currently i'm hoping for another dip into or right after the earnings call and increased my position a tiny bit today. I also keep some money aside, to have the ability to add some more for the very short term (days) after the earnings call. Should it look, as if it is worth a try, i'll add and will preferably be able to put stops in there almost immediately. I'm going on a holiday trip soon want to sleep well during that time.
Depending on the actual numbers, media coverage and price trend after that, i may decide to sell the majority of my position, since i suspect we may see a new temporary upward-trend going forward in Q3/Q4. But right now it's to early to tell.
jelloslug
Active Member
There was also another hit piece from an "automotive analyst" that has a -18% return on TSLA predictions.
Yes, this seems to be what might happen given the current share price activity. Buy today if you have steel balls
Reciprocity
Active Member
Find me the Chinese cars shipped to the US and/or Europe. Or any that can justify a $40k ASP. Tesla will allow others to take market share below that Target, Tesla will own everything above. Think iPhone vs Android.
jhm
Well-Known Member
No, you can use robots that can withstand fire. Putting humans in there to do the fueling is much more dangerous.
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Anyone wanna play devils advocate with me on some actual market action related stuff?
With the current prices so low, I'm not sure if I want to continue holding a short position until after ER announcement.
I'm gonna list pros and cons of maintaining short on ER announcement:
Pro
- Q2 results will be bad (we all know that). Zacks consensus estimate is -2.70 EPS while luvb2b's conservative model shows -3.86, so more likely than not it'll likely be an earnings miss, and probably a big one.
- Peak FUD
- Poor macros
- What positive surprise Musk can say during the conference call to boost stock price? Tesla already maintained positive net profit guidance for Q3. What else can it be?
Con
- Current stock price ($287 as of writing) is already outrageously depressed. Is it seriously gonna get even lower?
- IV is currently very, very high
- Never doubt Elon?
With the current prices so low, I'm not sure if I want to continue holding a short position until after ER announcement.
I'm gonna list pros and cons of maintaining short on ER announcement:
Pro
- Q2 results will be bad (we all know that). Zacks consensus estimate is -2.70 EPS while luvb2b's conservative model shows -3.86, so more likely than not it'll likely be an earnings miss, and probably a big one.
- Peak FUD
- Poor macros
- What positive surprise Musk can say during the conference call to boost stock price? Tesla already maintained positive net profit guidance for Q3. What else can it be?
Con
- Current stock price ($287 as of writing) is already outrageously depressed. Is it seriously gonna get even lower?
- IV is currently very, very high
- Never doubt Elon?
Tesla, in terms of run rate (and therefore the annual capacity of the plants) is at about 30 GWh of cell/pack production of advanced LIBs today. They are scaling to about 40 GWh this year. Musk never claimed that Tesla was making more cells/packs than everyone else combined. Just that in 2017, that GF1 became the biggest battery plant in the world, making Suminoe #2. Most of the other manufacturer's capacity is spread around with multiple plants, so GF1 becoming the biggest in itself is not particularly remarkable.
But fundamentally, your thesis has a few flaws and tends to mix things up. One thing to sort out is the demand for automotive packs in China over the next few years and the ability to supply that demand. Furthermore, what is then left over for the rest of the world. As it turns out, the demand to meet Chinese incentives is quite high. The vast majority of the announced capacity increases are to satisfy those mandates, leaving not as much for the rest of the world. Therefore, the thesis about Tesla has to be adjusted for that. You can't take the thirst to make cars like this one for the Chinese market:
BAIC EC180, top selling EV in China, 22 kWh battery, ~$23,000 list price, ~$8,500 after incentives, 48 hp motor, ~70 miles of EPA range.
And confuse it as Tesla's competition. Also, lots of the Chinese capacity is still switching from non-competitive LiFePO4 chemistry to NMC. You also can't make the assumption that any capacity is competitive. There are still differences in the output.
Instead, it is more interesting to look at the production of cells and packs that are competitive with Tesla's products. Much of the purchase obligations taken on by BMW, VW Group and others recently mostly just meet Chinese mandates, giving very little for the rest of the world. While China is a very important market for Tesla, it was only 17% of revenues in 2017. It will be an even smaller percentage in 2018 across the year because the Model 3 isn't shipping to China yet.
In the coming years, the amount of battery cell production available to Tesla is still a massive percentage of the market, even counting China. Outside of China, it looks absolutely dominant. And we can see this with the upcoming "competition" in the form of the Hyundai Kona EV or the Jaguar I-Pace. Both will ship in relatively dismal volume, both under 20,000/year. Both demonstrate how far ahead Tesla is with their EV technologies as well as manufacturing volume. While Tesla is far behind their own projections in terms of volume, they are far ahead of the competition which is still dabbling in the low tens of thousands in terms of BEV volume. The highest volume will come from the Nissan/Renault alliance, with the Leaf slated for about 100,000 unit volume in 2018. But that is a tragically flawed car. And the upcoming variant for 2019 has to share LG's limited cell production in 2019.
I find it common that BNEF, Benchmark Intelligence, and others show current capacity for Tesla/Panasonic (and sometimes not even that) and future capacity at various times for CATL and others. It is almost as if they have an agenda. Can't really talk about LG's 2nd China plant with 32 GWh in possibly 2023 and compare against Tesla's 2018 or 2019 capacity. BNEF has been particularly egregious about this, putting all sorts of nonsense on various charts. They'll put a barely funded Northvolt plant on a chart and won't bother with South Korea or Japan's gigafactories at all. Most of this was in support of CATL's IPO which turned out to provide far less funds than expected, with merely $853 million. In comparison, Panasonic committed $1.6 billion to Tesla's Gigafactory. Panasonic's Suminoe plant was about $1.1 billion in costs. That $853 million doesn't go all that far, so they have some up front capital from BMW and the like.. BMW can invest $426 million as part of their deal.
It is also funny that Tesla's large purchase obligations were cast as boondoggles, a weight around Tesla's neck. And on the other hand, these purchase obligations by VW Group, BMW and others are seen as nails in the coffin for Tesla by these same folks. Let's look at some numbers. For a 100,000 BEVs with 60 kWh packs and at $110/kWh, that's $660 million dollars. So BMW's $4.7 billion dollar deal is only for just under 500,000 cars. That's not a lot given the time scales and the likely back loading of the deal. Even 10x that number which is the VW Group deal is not a lot for 2025-2026. How this pans out in the next 3 years still shows Tesla at a massive marketshare outside of China. We already know the maximum capacity coming on line in 2019 through 2021. Talking about what is coming online in 2023 is too far out mainly because the major automakers still have to deal with their own transitions.
It isn't merely about how many EVs these automakers can make. They have to manage the transition from ICE/hybrids through to EVs with mostly BEVs by the middle of next decade. Tesla can merely execute their plans. All the majors have to figure out how much R&D and production goes into ICE, mild hybrid, light PHEVs, big battery PHEVs, neighborhood BEV, long range BEV, and hydrogen fuel cell vehicles. Transition too early and run into financial problems. Transition too late and have financial problems. All while oil may very well be spiking in price.
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- Q2 results will be bad (we all know that). Zacks consensus estimate is -2.70 EPS while luvb2b's conservative model shows -3.86, so more likely than not it'll likely be an earnings miss, and probably a big one.
I don't think the stock price is influenced by the second quarter results as much as you imagine - the guidance in terms of production, and gross margins, in both automobiles and energy products going forward are going to be far more influential. Q2 deliveries were suppressed by the need to keep US deliveries below 200,000 so Tesla clearly wasn't operating at full throttle in Q2. As long as Tesla is positive about Q3 and beyond the stock price will recover very quickly.
I don't think the stock price is influenced by the second quarter results as much as you imagine - the guidance in terms of production, and gross margins, in both automobiles and energy products going forward are going to be far more influential. Q2 deliveries were suppressed by the need to keep US deliveries below 200,000 so Tesla clearly wasn't operating at full throttle in Q2. As long as Tesla is positive about Q3 and beyond the stock price will recover very quickly.
The rate is easier to predict than the total volume. Mainly because there are lots of factors that affect total volume in a year. They are at roughly 325,000/year production rate today. Furthermore, it isn't an issue of confidence that Tesla will increase their volume, it is about timing which is notoriously difficult to ascertain especially right now. We clearly expect they will still look to achieve 10k/week rates for the Model 3. I suspect you chose 600k on purpose as a difficult bar to predict since that requires both 10k/week for the Model 3 and 2.5k/week Model S/X. That production rate should be achieved sometime in 2019. As for actually delivering that number for a 12 month look back period, I think that is achievable sometime in 2020.
But volume in of itself is not all that interesting. Instead, Tesla doesn't sell in the high volume segments anyways. They are taking high volume in the priciest of segments and that is remarkable. Selling 1,000,000 widgets at $10 gross profit versus 100,000 widgets at $100 gross profit yields the same gross profit. There are parallels to Apple here as they don't have a dominant marketshare but they do have a dominant profit share. Right now, the Tesla in the middle of transitioning to positive gross margin on their higher volume vehicle. Something that required massive investment relative to their size. And we will see if all the pieces fall into place. This is well ahead of your prediction of Model 3 launch of late 2018-2020 and well behind most bull's prediction of how this will go. At this point, Tesla is still ahead of the competition and the long term bull investment thesis is intact.
No Model III until 2019?
Most of your life savings? I hope you are young. Good luck!
I suspect most of the TSLA bulls are waiting out the earnings report because most TSLA bulls have decent analysis and can tell that the Q2 numbers will, on the surface, look horrible.
Whether the market will react by dropping the stock price after the earnings report or whether that's *already happened* and the bulls rushing in *after* the earnings report will bring the price up -- that is a good question.
Either way, anyone who actually understands how to analyze companies can multiply (cars delivered over last quarter's) * (average selling price) * (true gross margin) and see that Tesla will be showing operating profits and positive operating cash flow in Q3. Even the simplest analysis shows that they get positive operating cash flow (profits require a little more analysis). It is interesting how few people on Wall Street know how to analyze companies.
Someone else (wish I could remember who) pointed out that it's possible to trade the product cycle for a company like Tesla -- the short-sighted "analysts" make the stock price low right around the point when the new product is starting to be delivered in large numbers, and of course it goes up after that.
Whether the market will react by dropping the stock price after the earnings report or whether that's *already happened* and the bulls rushing in *after* the earnings report will bring the price up -- that is a good question.
Either way, anyone who actually understands how to analyze companies can multiply (cars delivered over last quarter's) * (average selling price) * (true gross margin) and see that Tesla will be showing operating profits and positive operating cash flow in Q3. Even the simplest analysis shows that they get positive operating cash flow (profits require a little more analysis). It is interesting how few people on Wall Street know how to analyze companies.
Someone else (wish I could remember who) pointed out that it's possible to trade the product cycle for a company like Tesla -- the short-sighted "analysts" make the stock price low right around the point when the new product is starting to be delivered in large numbers, and of course it goes up after that.
Todd Burch
14-Year Member
It's called putting my money where my mouth is. (Plus TSLA would have to drop to below $100 for me to have lost a dime on my TSLA investment).
There was this bear thesis that Tesla was underfunding the Gigafactory, that it really just a fake project to bring in investment dollars. At this juncture, it is worth revisiting.
The original Gigafactory project plan revealed in 2014 is here:
https://www.tesla.com/sites/default/files/blog_attachments/gigafactory.pdf
That's 35 GWh of production capacity sometime in 2020. Investment was expected to be $4 billion to $5 billion through 2020. I am assuming these dates mean end of 2020, not beginning of 2020.
A favorite target of the bears is that Tesla is under-building relative to this plan. For example, this article in 2016:
Tesla Gigafactory Not So Giga Yet
Our esteemed colleague, @tftf writes in the comments:
and we have this from tftf:
Well, the rest of world hasn't quite slept, but they certainly haven't kept up. Today, in 2018, Tesla has 20 GWh of cell production and pack production capacity online. That's almost 60% of the original's 2020 capacity online. If there wasn't the slip up with cell module production, they would be looking at near 100% of the original capacity online this year. And we are still looking at 100% of the original slated capacity being online in the next year. That places it around 1.5 years ahead of the original schedule of end of 2020. We also know now that the expected capacity is going to 105 GWh, at least that is the new stated plan.
As for the investment amount, we can see from the Nevada GEOD reports, as of Sept 30, 2017, nearly a year ago, the project has had a capital investment of $2.07 billion:
http://www.diversifynevada.com/uploads/reports/20180302_Tesla_Compliance_Audit.pdf
That's about 40-45% of the original plan, not 14% even though the actual property footprint in active use right now is closer to 14%. For quite a while there throughout 2016 and 2017, there bear FUD surrounding the progress of the Gigafactory was thick and continuous. And this doesn't include all the investments made since then. As of that report, Panasonic North America already invested $1.1 billion, all of that in "Personal Property" and none of it in "Real Property." Note that the Suminoe plant in Osaka cost roughly that much, but that was for all parts of it. So the investment in battery cell production through Q3 2017 by Panasonic into GF1 exceeded all of the CATL IPO proceeds by 35% - $1.1 billion versus $832 million.
The difference right now is that Tesla and its partners have already committed these levels of funds and are already transitioning to profit for EVs in the most competitive of markets and the most advanced of vehicles. It's still in the future for most everyone else to achieve these marks and they have their own headwinds to battle in the next few years.
The original Gigafactory project plan revealed in 2014 is here:
https://www.tesla.com/sites/default/files/blog_attachments/gigafactory.pdf
That's 35 GWh of production capacity sometime in 2020. Investment was expected to be $4 billion to $5 billion through 2020. I am assuming these dates mean end of 2020, not beginning of 2020.
A favorite target of the bears is that Tesla is under-building relative to this plan. For example, this article in 2016:
Tesla Gigafactory Not So Giga Yet
Our esteemed colleague, @tftf writes in the comments:
and we have this from tftf:
Well, the rest of world hasn't quite slept, but they certainly haven't kept up. Today, in 2018, Tesla has 20 GWh of cell production and pack production capacity online. That's almost 60% of the original's 2020 capacity online. If there wasn't the slip up with cell module production, they would be looking at near 100% of the original capacity online this year. And we are still looking at 100% of the original slated capacity being online in the next year. That places it around 1.5 years ahead of the original schedule of end of 2020. We also know now that the expected capacity is going to 105 GWh, at least that is the new stated plan.
As for the investment amount, we can see from the Nevada GEOD reports, as of Sept 30, 2017, nearly a year ago, the project has had a capital investment of $2.07 billion:
http://www.diversifynevada.com/uploads/reports/20180302_Tesla_Compliance_Audit.pdf
That's about 40-45% of the original plan, not 14% even though the actual property footprint in active use right now is closer to 14%. For quite a while there throughout 2016 and 2017, there bear FUD surrounding the progress of the Gigafactory was thick and continuous. And this doesn't include all the investments made since then. As of that report, Panasonic North America already invested $1.1 billion, all of that in "Personal Property" and none of it in "Real Property." Note that the Suminoe plant in Osaka cost roughly that much, but that was for all parts of it. So the investment in battery cell production through Q3 2017 by Panasonic into GF1 exceeded all of the CATL IPO proceeds by 35% - $1.1 billion versus $832 million.
The difference right now is that Tesla and its partners have already committed these levels of funds and are already transitioning to profit for EVs in the most competitive of markets and the most advanced of vehicles. It's still in the future for most everyone else to achieve these marks and they have their own headwinds to battle in the next few years.
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A common short thesis is that SG&A will just grow linearly with sales volume.
It's an easily debunked thesis, but it's important to know that it's widely believed.
Yes, this seems to be what might happen given the current share price activity. Buy today if you have steel balls
Haha. I actually snagged two (2) shares at 286.13, the low of today (so far ... ) with an order put in during the morning fluctuations. Didn't actually expect it to close, but OK. I was also waiting for either a lower SP closer to ER or to maybe crop a little profit in case of a pre-ER rush and buy back after.
But I don't really need more and I shouldn't gamble. It is fun though.
jkirkwood001
Active Member
At the risk of drawing lots of personal attacks (this is meant to be a sober financial discussion - why such anger?), I'll jump in on this point.
The US contributes only 18% of global auto sales, yet clearly Tesla aims to be a global EV manufacturer. Since this thread is about the financial health of Tesla, and no major auto manufacturer has survived in only one market, basing a financial forecast on their US sales alone is short-sighted and incomplete. The Chinese market is the biggest in the world. It DOES matter, as does EU, india and others.
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