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TSLA Market Action: 2018 Investor Roundtable

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I'm not Phil, but I'll try. This is a trap that many companies fall into, particularly publicly traded ones (like Tesla is, and SpaceX isn't). Back in... well I went to check but am having trouble getting to ir.tesla.com at the moment... I think it was q4 2014(? or Q1 2015?), Tesla was about to start the real hard work on Model X and were shipping internationally and Elon basically said "we have one chance to make a profit before we start spending again". So they shipped everything going to Europe early enough in the quarter to actually get there and be delivered in that quarter, and then shipped as many as possible to the East Coast, and then shipped everything else to West Coast, so that they could actually show cash flow positive. Many companies pre-book orders, or give discounts to deliver before end of quarter, and so on. The trouble is that once you've done it, it is hard to unwind, because somewhere/somehow something will look bad temporarily when you do. Elon has mentioned that before, too, that he'd like to get production running on a more even keel.

It was explained in the 2Q14 conference call as:
“Part of the reason why we don’t release the monthly deliveries number is just because it varies quite a lot by region and the media tends to read all sorts of nonsense into the deliveries. So, we’ll have 1,000 cars reach a country one month and none the next month or 100 the next month trickle in because those are the numbers that were registered one month versus the next. People will say, ‘oh, wow, Tesla sales drop by a factor of 10. Well, no, the boat arrived in January and not all the cars got registered in January and some got registered in February and in March it’s back up again.”

“People assume deliveries are a proxy for demand, and that’s not the case. It is the case for other car companies but in our case, it really needs to be parsed into orders and deliveries. And bear in mind, there are a lot of things we could do to amplify orders. Orders is not a true measure of demand, it’s just a measure of what we need to do to meet our production and deliver number.”

Tesla CEO Elon Musk: Here's Why We Don't Report Monthly Sales Figures
 
Are we even the standard 6 months behind schedule yet? From my understanding the significant setbacks were a module line slowdown likely due to the German automation supplier's wage demands. Now Elon's shifted to that domestic acquisition to supply GF automation and we're back on track.

2,500 and 5,000 per week in short order. What's the problem?

I think you got some things mixed up here. Tesla has not named the subcontractor but I don’t think they would have asked Grohmann to design a new line if they messed it up the first time. Elon also said on the call that everything they delivered has been up to spec. No need to blame the workers or unions for this.
 
I'm not following, how are you going to get cells that act like final cells, without final cells? 3 high potential small format Ni-MH in one can? Or pack a 18650 inside a 2170 can?

Yeah, for construction you care about physical clearance (perhaps in an electrolyte, but it is still spacing). So I think you need an electrical test akin to hi potential... or maybe medium potential to see if you got the spacing right. Don't think you need chemical energy storage. Maybe capacitors could model the fragility...
 
Awesome post! We should all be BTFDing on Monday now.

If JHM's post went over anyone's head here's the cliff notes version in my post from July last year ;)
"TSLA is going to fail again and again and again all the way to a $1 Trillion market cap. If they stop failing they will never get there."

Yep, you captured it perfectly. That must have been rolling around in the back of my head.
 
Having two threads is really starting to suck, IMO. Over the last week the "market action" thread has devolved into a discussion thread (albeit an interesting one). And zero moderation or pushback. What's the point of two threads?

Good point. Let's see if we can get back on track. What's everyone think about market action? The market appears to be finally moving away from momentum stocks to value. The shorts will likely be out in force Monday, Do we hit $280 this week? (or lower)

Mod: Hey, moderation takes time. I just spent an hour trying to clean up the Market Action thread. Note: we're all volunteers. It would be easier if some people weren't being argumentative and others didn't rise to the bait. --ggr.
 
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Having two threads is really starting to suck, IMO. Over the last week the "market action" thread has devolved into a discussion thread (albeit an interesting one). And zero moderation or pushback. What's the point of two threads?
In one you can complain about people not staying focused on price movements, but in the other you cannot.
 
So to get there, Musk is going to keep pressing limits and risking spectacular failure at every try. So am I worried about the M3 launch taking more than a year to hit 5k/week? Not at all, in fact, failure is the best way to train the team to perform at a much higher level. If Tesla is not failing on near-term targets, Musk is not driving hard enough to become a $1T company in ten years.

I don’t agree with this on many levels. I don’t think Tesla needs to “fail” more often, especially on mission critical things like Model 3 production ramp.

When designing a product, you don’t want the product to “fail”. Rather, you iterate and make mistakes in the design process and try to correct them internally so that when you release the product it’s a success.

When producing a product, you don’t want your production goals to “fail”. Rather, you need to have strenuous internal testing and validation procedures to ensure production is on time. In other words, you work out the mistakes internally so that when you launch publicly, you don’t fail.

Tesla can make all the mistakes they want internally during the development and testing processes. That’s fine and good. But when they go public with a product or even production goals, they should meet or exceed them. We shouldn’t expect nothing less.
 
I don’t agree with this on many levels. I don’t think Tesla needs to “fail” more often, especially on mission critical things like Model 3 production ramp.

When designing a product, you don’t want the product to “fail”. Rather, you iterate and make mistakes in the design process and try to correct them internally so that when you release the product it’s a success.

When producing a product, you don’t want your production goals to “fail”. Rather, you need to have strenuous internal testing and validation procedures to ensure production is on time. In other words, you work out the mistakes internally so that when you launch publicly, you don’t fail.

Tesla can make all the mistakes they want internally during the development and testing processes. That’s fine and good. But when they go public with a product or even production goals, they should meet or exceed them. We shouldn’t expect nothing less.

I think the issues is that if Tesla did as you suggested, the model X would just be debuting and the model 3 would still be a pencil drawing on franz's desk.
 
I think the issues is that if Tesla did as you suggested, the model X would just be debuting and the model 3 would still be a pencil drawing on franz's desk.
I’ll disagree on this. Tesla’s Model 3 production ramp fiasco could have been avoided. And should have been avoided. All without delaying its launch.
 
There’s no need to glorify Tesla’s failures. We should call the failures for what they are.

But in the bigger picture, all will be forgiven when people take delivery of the Model 3 and they realize this car is beyond amazing.

In other words, the quality of the product itself is far more important than the production ramp. And Tesla has nailed the product. So I’m tolerant with their production failures since they will overcome them in time. I’m tolerant of their failures but I don’t glorify them or justify them. They really need to be better with production and all that goes into it.

But since the Model 3 really is stellar beyond belief, they’ve afforded themselves a lot of wiggle room when it comes down to other issues.
 
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I’ll disagree on this. Tesla’s Model 3 production ramp fiasco could have been avoided. And should have been avoided. All without delaying its launch.

I think they strapped a rocket to the model 3 program in general and it's kinda worked out how you would expect given the complexity of a new vehicle program. Hind sight is almost always 20/20. They shoulda, woulda, coulda caught this or that, but they didn't and it but then in the arse. If it wasn't that it was going to be something else. If this stuff was easy, any one could do it. It's not for the squeamish. Adam Jonas seems to be one of the only guys who gets it. He is both bullish and realistic. I'm certainly going to pay more attention to what he says going forward.
 
Btw, if you hold significant TSLA shares you really need to drop everything and drive a Model 3 for a day. This is more important than reading this thread or anything else.
Only if you have questions about the vehicle. I believe it is/will be as great as most people say, Tesla doesn't really disappoint in that respect. If long term reliability is good everything will be fine, but we have to wait to find that out.
 
In particular I would probably be extremely careful with moving your j20 $400’s to WOTM (way out of the money) j19’s without considering the fact that one way that high strike prices work is similar to a reduction in time value I’d run some comparisons here Long call calculator: Purchase call options, before making a decision (look before you leap).
I decided to check the results for Jun $320's, J19 $350's J19 $400's, and J20 A$400's (pay attention to the difference between the J19 $350's and the J19 $400's):

Jun15-Strike-$320-SP_$310.42.jpg Jan2019-$350-SP_$310.42.jpg Jan2019-Strike$400-SP_$310.42.jpg Jan2020-$400-SP_$310.42.jpg
 
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Going into tomorrow morning, I am going to reiterate what I wrote Wednesday night after the call. Only change for me, the 8-K has clarified a couple points in a more bullish light than what I wrote last week (will be very easy to spot what no longer applies if you do read the post again). As far as a long-term investment, this clarification and the lower stock price make TSLA more attractive today than Wednesday- the shares are on sale after a quite positive report in my view. As to those looking to trade, that first phrase in the post below still applies. That said, I did pick up some trading shares from $326 down to $298 Thursday and Friday, but, I do have some concerns about the risk of a near term steep drop in the market as a whole... who knows, TSLA might get silly cheap.



"Though I have no idea how the market will react short-term, I thought this was quite an encouraging call. My takeaways from the call and the shareholder letter,

New Positives

- Semi goals ambitious near term... 4 years out 100,000 per year, possibly more (IIRC, total US market, roughly 250K per year... so, perhaps something like 20% US market share in just 4 years, balance shipping to ROW) While, we could envision such a large opportunity for the Tesla Semi, this is the first explicit indication of how quickly Tesla thinks the industry will be ready to go from testing to wide adoption (and how quickly they see their capacity to ramp production).

- Model Y may aim for as much as 1 million per year (sounded as though meant 1 million at initial production plant), Model 3 at Fremont, could be 600K, total with S/X 700K, and, reiterated 1 million by 2020 still in their sights

- Model Y goal of roughly 1/2 capex spend per unit of production capacity

- Energy storage revenues expected to triple year-over-year

- on developing autonomous driving from the letter, "an extensive overhaul of the underlying architecture of our software has now been completed, which has enabled a step-change improvement in the collection and analysis of data and fundamentally enhanced its machine learning capabilities."

Bear Rebuttals

- Cash flow far far better than street expectations, only about 1/3 the size of outflow as expected. Further reduces the likelihood of a cap raise to get through the ramp to 5K/week that the bears often pound the table about.

- Clarification on bottlenecks... only two currently known material ones, only one holding back from 2.5K/week rate. The first, module assembly, that the company is now on record saying replacement machines are working in Germany (and 3-4 times as efficient as machines they are replacing), and it's simply about timing re having them shipped and assembled in Nevada. The second not being fundamental to the design of the Model 3 (i.e., supports the case that Tesla did, in fact, design a simpler vehicle), but, relating to their automated process of moving stored parts to their appropriate spot in the assembly process, i.e., "conveyance system"). days are numbered for bear concern trolling that Tesla cannot mass manufacture

- Expect to generate positive quarterly operating income on a sustained basis this year, and, cautiously optimistic re positive earnings without any asterisks Q3 (I might not have the wording on the latter quite right), this is a near term path to demonstratively rebut the most persistent bear gibberish thesis

- Implicit rebuttal by JB of FUD from CNBC last week suggesting the human involvement of temporary patch to battery module issue is resulting in flawed products shipped to customers (JB said something to the effect that, machines are doing what machine precision is needed, humans are just moving works in process from machine to machine)

- First explanation of any detail I've ever heard from Tesla as to why they believe their path to autonomy vs. LIDAR is the clear choice, despite nearly all the rest of the industry going with LIDAR. This comes amid concerns from Adam Jonas re other players in the space, and a consulting report claiming Tesla was last of about 20 competitors in the autonomy race. While, it's beyond my field of view to evaluate whether what Elon offered to back his emphatic assertion that Tesla is on the right path & the LIDAR crowd misguided, I take the coast-coast drive coming at any point in the next year or so as a positive... I see a coast to coast demo is vastly more meaningful than the consulting report a few weeks back (I do realize people heard 3-6 months and saw that as a big negative... I just see a demo period as a positive. fwiw, the Falcon Heavy launch yesterday was roughly 5 years after its originally targeted debut).

Substantial reiteration of overlooked Tesla moat goal

- current auto manufacturing, movement of vehicle along the line slower than grandma with a walker, how do we not target at least a jog, even 20-30 mph, and, paraphrasing, ~it's as though no one else in the industry is even thinking about how much it can be improved~

Downside

- Departure of John McNeill, head of sales and service announced

- Implicit in discussion of resolving bottlenecks, until the new machinery from Germany arrives and is installed, there will not be much of any improvement in 3 production volumes. This may get considerable attention from bears, but, unless one is making a short-term market play, it's not material.

- Some will hear coast-coast drive 3-6 months out as a negative... as I described above, in my view, it's still a net positive, even if it happens beyond 6 months out (I doubt there will be a parade of competing programs achieving this before Tesla does, whether in 6 months or 10 months)."
 
Good point. Let's see if we can get back on track. What's everyone think about market action? The market appears to be finally moving away from momentum stocks to value. The shorts will likely be out in force Monday, Do we hit $280 this week? (or lower)

Mod: Hey, moderation takes time. I just spent an hour trying to clean up the Market Action thread. Note: we're all volunteers. It would be easier if some people weren't being argumentative and others didn't rise to the bait. --ggr.
Huh? We are about a week into a 10% correction. I don't think you can say anything more at this point. You certainly can't say that the market is moving towards value rather than momentum stocks. It's too soon to make that kind of call. I would guess no on $280, but it's all wild guessing in this environment. Tesla released the clarification/correction statement. That may calm some nerves. Macros will obviously be the biggest driver. Much of the time, shorts like to take TSLA into a dip right off the bat. I wouldn't be surprised by that at all. But if macros are ok, and at this point futures look good, then the stock could rally off of a dip. I think there are a lot of buyers on the sidelines wanting in but are looking for a clearer signal from the market first. If the market starts to show that it is stabilizing, which will take more than a day, then FOMO will likely weigh on the minds of those who want a larger piece of TSLA. We all know this stock is going up as the ramp progresses, it's just a guessing game about the ramp, as well as macros, at this point.
 
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