TSLA Market Action: 2018 Investor Roundtable

[Fact Checking]

Note that I'm not disagreeing with the ultimate point that Fred's take-away--that Tesla is behind their guidance--is wrong

Note that Fred's conclusion was a lot milder than that:

That means that Tesla is on pace to end up just below the lower end of its goal to produce between 50,000 to 55,000 Model 3 vehicles in the third quarter – though they could easily hit it by trending just a bit up over the next month, which is highly likely.
​

That is very close to my opinion as well, which I had without having access to "reliable" inside info, and I'm neither click-baiting nor am I a shill for Tesla shorts!

Really, people who expected 60k+ production for Q3 were being too optimistic, and it's time to correct those expectations before they turn into a negative surprise come Q3.

Deliveries could still be robustly in the 55k-60k range, and that is what will matter to cash flow and profitability the most.

 

[Artful Dodger]

Wow that was fast: Tesla wins against Ontario gov

Now Tesla has just 15 days to deliver all those Model 3s and for the Owners to get them registered and plated. If they don't make it in time, they miss out on the $14K CAD rebate.

Ontario ran 6 weeks off the clock. That's not cricket. I hope the Judge also grants them remedy for the missed/delayed time. Otherwise this is justice denied.

 

[omarsultan]

Because 30K vehicles at the end of week 8 is a single data point which lacks meaning until you understand the rate of change wrapped around that point. Fred's estimate is a straight linear extrapolation and does not take into account any improvements in production rate at the factory.

 

[Zaxxon]

Note that Fred's conclusion was a lot milder than that:

​

​

I would argue that even stating that they're behind the goal at all, is misleading (and therefore wrong). We all know Tesla produces more at the end of a quarter than the beginning, yet Fred assumes that not to be the case in calling them 'behind.' He knows better.

This, coming hours after an Electrek headline--before market open!--claiming the stock 'tumbles', does not earn the benefit of the doubt. Of course, that headline wound up aging poorly, as well, with the stock ending the day down around 1% and well within the typical daily TSLA change.

 

[Ugliest1]

View attachment 329578

@RobStark gonna keep bending the knee to House Fred? Go right ahead. Hearing from a 'reliable' source is not THE verified source.

I don't like fake news whether its bull or bear. In this case, whatever it is , it is food for the Bears.

It's the last line that caught my attention:

"Members... get exclusive access to ideas like this one -- start your free trial today"

Ohhhh, booooyyy, where can I sign up? I'm thinking better ideas would be available in a cow pasture.

 

[dmunjal]

Spent 6 minutes listening to our good friend Mark the mirror on Yahoo finance. It's good sometimes to get the bear narrative straight from a horse's mouth. Now that I wasted 6 minutes of my life none of you have to (one for the team): there's nothing new. He did say though that "any sentient being clearly must understand" that Elon committed securities fraud with his tweets and likely the SEC is building "a huge case" as we speak. Next he said S and X sales are declining, that the new Jaguar has gotten better reviews than any Tesla car ever had, that soon there will be 4 competitors (Jaguar, Porsche, Audi and Mercedes) that will all be better than any Tesla and outsell them. In summation he's still waiting on Tesla to go bankwupt (could happen "any day now") but if that doesn't happen he expects "stunted growth" next year thanks to competition. As I said in my exchange with Donn Beachbum; you can disguise it any way you want but the failing demand argument is always going to be at the core of a short's narrative.

Also look at this one if you want a laugh, skip to 3:40:

(He's bearish, says the cars are of poor quality, admits to never having driven one but has read reviews and says that it doesn't matter because he's seen the financials and they tell the whole story)

Tesla: Bull and Bear investors debate

He should read the I-Pace reviews.

I don't see how anyone can claim the I-Pace as a competitor. It won't sell in volume and has several issues.

According to Bjorn, it's cramped inside and has horrible efficiency.

 

[omarsultan]

The storage space requires is not even comparable: early Model X's counted in the dozens, while a rate difference between 4k/week and 5k/week would require the storage of 4,000 extra half finished Model 3's. They'd also have to store them inside the factory, where there's simply not enough space beyond the already existing 'overflow lines' that can buffer perhaps a few dozen cars at a time.

This sub-thread was all conjecture on my part and I think its reached its reached it EoL. However, bear in mind, they don't store cars at Fremont, so that is not a limit--after production, they buffer/stage cars in other locations and bring them back to Fremont for shipping.

 

[Fact Checking]

We all know Tesla produces more at the end of a quarter than the beginning,

I expect end of Q3 to be different: having too many cars in transit at the end of the quarter creates a lot of cars in inventory with no matching inflow of owner payments yet, which is a drain on cash flow.

They want to be cash flow positive - they already demonstrated a 5k weekly rate.

I.e. I expect them to have less than 11k M3's in transit at the end of Q3. Which is also consistent with the guidance they gave, that Q3 deliveries will be higher than production.

Which is totally fine and expected: to become profitable and cash flow positive they have to perform end of quarter inventory reduction, like other carmakers.

 

[Zaxxon]

You're nuts if you think they will produce fewer cars in 2HQ3 than 1HQ3.

 

[Fact Checking]

This sub-thread was all conjecture on my part and I think its reached its reached it EoL. However, bear in mind, they don't store cars at Fremont, so that is not a limit--after production, they buffer/stage cars in other locations and bring them back to Fremont for shipping.

I don't think there's a single photo of a single half finished Model 3 being shipped out of Fremont - let alone thousands of them.

If this was a thing it would be all over Twitter already.

It would also be horrible inventory and cash flow management, as I mentioned - and it's not very good QA either: buffering delays the finding and fixing of production flaws, most testing is performed on finished, working cars.

 

[madodel]

Was the camera shaky or was M.Spiegel shaky? Is that the early symptoms of Parkinson's I am seeing?

Short seizure?

 

[Joe F]

So our favorite coal hedge fund manager short Tesla just admitted on CNBC he’s never driven a Tesla before.

My goodness. Now I know why he’s sweating hard in this interview. He really has no clue what a Tesla consumer experiences.

The downfall will be hard.

I saw that. You forgot the best part: He saw pictures on the internet of Tesla’s in lots. Time to sell I tell you! Get out while you still can!

Not an advise.

 

[Fact Checking]

You're nuts if you think they will produce fewer cars in 2HQ3 than 1HQ3.

Tesla's guidance is that Q3 deliveries will be higher than production of 50-55k.

That can only be done if the last two weeks of Q3 production is slowed down a bit, to fall below the end-of-Q2 rate of production, to have fewer M3's in transit than 11k.

It's close to a mathematical necessity.

Note that an end of quarter burst of production is working against their goal of improving cash flow, because most of those cars will be "unsold".

 

[neroden]

skabooshka on Twitter

If this is true I assume that this can fixed and production here can be temporarily increased to catch up with the backlog. Assuming GF1 is still pumping out batteries they will have a backlog of batteries. As soon as they get the new batch of MOSFETs they can increase the production to 6000-8000cars per week until they run out of batteries. So last week GA got to take some rest, they did some upgrades and once they get the MOSFETs it is back to the tent to clear up the battery backlog and Tesla will finish the quarter with 8000cars per week for one week. Then back to 6000 per week at the start of Q4 scaling up to 10k at the last week of Q4.

Yeah, if it's something as simple as a MOSFET supply chain bottleneck, it'll be cleared by the end of the year. Worst case they need a second supplier, but if true, most likely the supplier just didn't ramp up enough, and probably can do so just by throwing extra money and manpower at it. If true, they will be cleaning out other bottlenecks (delivery delivery delivery) and there will be a sharp jump when the bottleneck is resolved.

 

[sundaymorning]

Note that Fred's conclusion was a lot milder than that:

That means that Tesla is on pace to end up just below the lower end of its goal to produce between 50,000 to 55,000 Model 3 vehicles in the third quarter – though they could easily hit it by trending just a bit up over the next month, which is highly likely.
​

That is very close to my opinion as well, which I had without having access to "reliable" inside info, and I'm neither click-baiting nor am I a shill for Tesla shorts!

Really, people who expected 60k+ production for Q3 were being too optimistic, and it's time to correct those expectations before they turn into a negative surprise come Q3.

Deliveries could still be robustly in the 55k-60k range, and that is what will matter to cash flow and profitability the most.

I’m going to give Fred the benefit of the doubt since he’s a trustworthy source. He’s never bashed Tesla before, so I don’t see him turning 180 now. By putting himself out there, his credibility may take a hit if he’s wrong, then we’ll know not to visit his site anymore if that is the case...But for now, his 30k number has to be taken somewhat seriously as Inside EV numbers are soon to be release. As mentioned above, deliveries will outpace production this quarter but the question is: will that be enough for CF positive? Given Elon’s credibility for missing guidance (and all the distraction the past 2 weeks), I think there is a slight chance we may miss the projected goal. In the end, this isn’t very important as long as we are within striking distance for cash flow positive in Q4.

Gene Munster has alluded to the fact that we may miss the 6k goal by end of August, it could be 5.5k by mid September if there are more bottlenecks to solve along the way. If I were investing, I would not buy options this quarter and divert it to shares instead (this new piece of information could save a lot of short term options trader). I think that if we can get to 5.5k mid September or 3rd week of September, it’ll be a win. Otherwise, play it safe for now and save some dry powder for more positive signals from Tesla.

 

[neroden]

You really should be skeptical of what you are reading. Why would a WSJ reporter know intimate details about the Saudi fund? Just don’t take things you read about in the papers as necessarily true.

Yeah. Unfortunately I've read rumors from other (non-Murdoch) sources about Saudi palace politics, specifically related to the failed ARAMCO IPO. It seems plausible to me that the Saudis claimed they could fund the whole thing but have been kind of lying about how much money they actually have free.

In the oil-business-focused trade papers they've been talking about this: there's a slowly-developing consensus that the Saudis have been lying about their oil reserves, which are probably much lower than claimed. They may have waited too long to dispose of Aramco, and their Aramco-related assets may have become unsaleable; one view is that they stopped the IPO to avoid revealing the real reserves, another view is that they simply couldn't get as much money as they were looking for.

 

[Zaxxon]

Tesla's guidance is that Q3 deliveries will be higher than production of 50-55k.

That can only be done if the last two weeks of Q3 production is slowed down a bit, to fall below the end-of-Q2 rate of production, to have fewer M3's in transit than 11k.

It's close to a mathematical necessity.

Note that an end of quarter burst of production is working against their goal of improving cash flow, because most of those cars will be "unsold".

I understand what you're saying, but the fact remains that Tesla ramps up during quarters. They always (and I mean always) produce more in the 2nd half than the 1st half. They have a much higher record of hitting this simple truth than of being spot-on with guidance.

I'm not suggesting a burst at EoQ. Just steady (or spurt-like) increases.

They will produce more in the 2nd half than the first. This is not a novel or contentious assertion. I'm not going to follow the path of our poor poster who lost anatomical completeness today, but I'm close to confident enough in this to do so...

 

[Thumper]

Don't worry Hopeful, I heard about a guy who's whole left side was amputated. He's all right now.

 

[neroden]

Anyway, furniture doesn't look like that of someone with 7 figure net worth, so you might be on to something. Bad idea to do video conference from his living room.

*cough* you haven't seen my furniture.

(OK, so some of it is inherited 100-year-old antiques, but a lot of it is cheap yard-sale stuff.)

Some people don't spend their money on furniture.

 

[Fact Checking]

As mentioned above, deliveries will outpace production this quarter but the question is: will that be enough for CF positive?

At this point I find it hard to come up with a scenario where Tesla would miss profitability:

• They mentioned really good margins for Q2 which should generate quite a bit of cash flow,
• the restructuring cost savings should start kicking in in Q3,
• ZEV credits earned should be robust, they scale with units produced, not revenue.

Unless there's some significant complication the numbers are there I think.