TSLA Market Action: 2018 Investor Roundtable

[Fact Checking]

All the discussion in this thread is pointless. It is perfectly clear after Friday and Monday’s SP action that the only thing causing the violent mood swings is the shorting.

Exactly, I believe this price action is in significant part shorts amplifying volatility with an intent to influence the price. It's clearly visible again in today's price action, see the price action at the following timestamps: 9:45, 9:47, 10:49, 10:54, 11:35.

These were all selling 'spikes' not present in yesterday's price action under similar setups. My hypothesis is that it's at least one market participant with a short position who uses borrowed shares to mark down the price via pressure sales to take out critical levels of support: 'spikes' of 30-60k shares using market orders. These sold shares are then bought back more quietly after larger drops in the price using limit orders ('pumping' the price: aggressive when selling, passive when buying), or are not bought back but used to increase a short position.

None of these price movements were present yesterday or on Friday after the 'circuit breaker' "only short on uptick" trading rule went into effect for $TSLA. The reason is that the main tool to mark down the $TSLA stock price aggressively was not available to short sellers: market orders or limit orders placed below the current highest bid.

Note that these spikes trigger despite there being a green macro environment: NASDAQ up, Dow up.

To me these look like pretty clear-cut attempts at manipulating the price - but SEC lawyers are probably too busy reading Elon's tweets, maybe there's something actionable in today's tweets?

 

[RobStark]

So you don't agree with that? What are your forecasts for returnable revenue into those things in Q3, 4 2018 and 1, 2, 3 and 4 in 2019?

I can't see it without a new capital raise, and I can't see a new capital raise without issuing new equity, and the stock price isn't looking like it will support that.

Do you have an alternative view?

What are you so called most optimistic forecast for returnable revenue in Q3, 4 2018 and 1, 2, 3 and 4 in 2019 that so diverges from management forecast?

 

[bdy0627]

Exactly, I believe this price action is in significant part shorts amplifying volatility with an intent to influence the price. It's clearly visible again in today's price action, see the price action at the following timestamps: 9:45, 9:47, 10:49, 10:54, 11:35.

These were all selling 'spikes' not present in yesterday's price action under similar setups. My hypothesis is that it's at least one market participant with a short position who uses borrowed shares to mark down the price via pressure sales to take out critical levels of support: 'spikes' of 30-60k shares using market orders. These sold shares are then bought back more quietly after larger drops in the price using limit orders ('pumping' the price: aggressive when selling, passive when buying), or are not bought back but used to increase a short position.

None of these price movements were present yesterday or on Friday after the 'circuit breaker' "only short on uptick" trading rule went into effect for $TSLA. The reason is that the main tool to mark down the $TSLA stock price aggressively was not available to short sellers: market orders or limit orders placed below the current highest bid.

Note that these spikes trigger despite there being a green macro environment: NASDAQ up, Dow up.

To me these look like pretty clear-cut attempts at manipulating the price - but SEC lawyers are probably too busy reading Elon's tweets, maybe there's something actionable in today's tweets?

Good points, and to any of us following TSLA closely for a while, this focus on driving the price down aggressively to create the trend or defeat rallies is all pretty obvious. It has been going on for years and does not appear to be something the SEC is concerned with. It's precisely why there is so much volatility with the stock.

 

[Wooloomooloo]

What are you so called most optimistic forecast for returnable revenue in Q3, 4 2018 and 1, 2, 3 and 4 in 2019 that so diverges from management forecast?

You've answered a question with a question - I guess you have no opinion of your own.

Tesla provided guidance that Model S and X sales would increase in 2019, which seems unrealistic given current pricing, additional competition and losing the tax subsidy and a possible 'correction' in the economy (which even Tesla admit is a factor).

Model 3 projections might be more realistic, but the ASP and gross margin on each vehicle is almost certainly going to be lower than the 2nd half of 2018, simply because the lower cost vehicles will be made available and volumes will be higher. I'm sure you'd argue that efficiencies and scale will offset that, but to what extent is definitely debatable. My expectation is that 2019 revenue will fall short of costs and Tesla will have a net loss in 2019.

Even so, this is a very narrow component of your original post and my response and you haven't offered any reason to agree with Tesla management's rosy forecasts, unless you just believe everything they say. If that's the case, then that's based on a somewhat patchy reputation.

 

[Unpilot]

So you don't agree with that? What are your forecasts for returnable revenue into those things in Q3, 4 2018 and 1, 2, 3 and 4 in 2019?

I can't see it without a new capital raise, and I can't see a new capital raise without issuing new equity, and the stock price isn't looking like it will support that.

Do you have an alternative view?

Why should he answer your question when you wont answer mine.
Do you think Deepak and Elon are lying or delusional outliers?

They do have a deeper look at the books you know.

 

[Alphacrux]

Battery pack prices are falling. Musk made a statement that they are working on improvements that will make the $35k base model profitable.

 

[bdy0627]

You've answered a question with a question - I guess you have no opinion of your own.

Tesla provided guidance that Model S and X sales would increase in 2019, which seems unrealistic given current pricing, additional competition and losing the tax subsidy and a possible 'correction' in the economy (which even Tesla admit is a factor).

Model 3 projections might be more realistic, but the ASP and gross margin on each vehicle is almost certainly going to be lower than the 2nd half of 2018, simply because the lower cost vehicles will be made available and volumes will be higher. I'm sure you'd argue that efficiencies and scale will offset that, but to what extent is definitely debatable. My expectation is that 2019 revenue will fall short of costs and Tesla will have a net loss in 2019.

Even so, this is a very narrow component of your original post and my response and you haven't offered any reason to agree with Tesla management's rosy forecasts, unless you just believe everything they say. If that's the case, then that's based on a somewhat patchy reputation.

My suggestion would be to look at the thread by @luvb2b on the Q3 financials. It appears to many of us to be a very reasonable, certainly not pie in the sky, forecast. Tesla looks like they will be generating very solid FCF over at least the next 2 quarters, and probably beyond as well. Certainly they will have to grow slower if they try to internally fund their plans, but that at least appears to be a viable option. Most of us would like to see them do what they need to do to continue to grow revenue at about 50% annually on average. Without additional outside funding, that growth rate would likely be quite a bit lower.

 

[Unpilot]

Battery pack prices are falling. Musk made a statement that they are working on improvements that will make the $35k base model profitable.

Yeah this....cost's are not static...the company is not going to stop innovating...finding ways to make the car's faster and with less cost.

The idea that some internet poster knows more about the financial's of a company than it's CEO and CFO is...to be kind...STUPID.

 

[theschnell]

Everything you just said there is untrue - ordinarily bond traders don't give a crap about stock price, in this case they care a little more (but not a whole lot) because of the potential of debt conversion to equity.

However the bonds are tanking because it's becoming apparent to almost everyone (aside from some delusional outliers) that Tesla are really going to struggle to fund the debt, R&D for the Y, the Truck and continue to ramp up production for lower margin cars, all at the same time. The math doesn't add up even with the most optimistic forecasts. Everyone knows Q3 and Q4 will look rosey because of the higher ASP models being focused on right now. The rubber hits the road in 2019 when higher proportion of lower priced cars are being sold at the same time as debt obligations coming due, a needed boost in R&D, a focus on the semi and additional competition in the market, along with (what is apparently waning demand) because original reservationists were counting on the Fed Tax refund and won't get all of it.

This isn't FUD (in fact it's absolutely certain and there is very little doubt), it has nothing to do with short sellers, it has nothing to so with Musk's antics, it's simply a reality bond traders especially are considering and (it would seem) hedging somewhat heavily.



While this would reduce long term commitments, it might not make sense because new debt would be surely issued at a higher rate, and I don't think Tesla can manage this with the above factors I mentioned. All that cash flow needs to go into R&D, global factories and ramping up semi production.

Last word: I'm not joining the chorus of FUD - I'm a fan of Tesla, I have my $75k Performance almost in my hands, but dismissing this as 'typical' and 'cyclical' and they could 'just buy their bonds back' is nonsense.

I would not be so quick to assume that lower priced models will be available the first of next year. My guess is we won't see SR until July 2019 because I believe in the first half of 2019 they will start exporting the higher ASP of the Model 3 before they start producing short range. There is still a huge backlog of demand for current versions of Model 3 around the world... Why start producing short range before that demand is filled?

 

[mongo]

Battery pack prices are falling. Musk made a statement that they are working on improvements that will make the $35k base model profitable.

Based on the 28k cost estimate from tear downs, the base is profitable. However the production volume is not high enough yet to compensate for less total profit per car.

 

[winfield100]

Battery pack prices are falling. Musk made a statement that they are working on improvements that will make the $35k base model profitable.

link?

 

[MarcusMaximus]

Tesla provided guidance that Model S and X sales would increase in 2019, which seems unrealistic given current pricing, additional competition and losing the tax subsidy and a possible 'correction' in the economy (which even Tesla admit is a factor).

Your argument here is pretty speculative. I see nothing that suggests that any increase in competition will cause a downturn in S/X sales, and a correction in the economy is always a question mark until it happens.

 

[RobStark]

You've answered a question with a question - I guess you have no opinion of your own.

You are just calling Elon and Tesla management liars.

Back it up.

 

[mickificki]

You are just calling Elon and Tesla management liars.

Back it up.

well he does believe theverge.com moreso than elon and deepak

 

[abasile]

I think Tesla needs to produce the $35K version of the Model 3 before too long, but mainly for PR purposes. As long as there's plenty of demand for higher-priced versions, they need only produce a trickle of cheaper cars, so the ASP (average selling price) shouldn't be affected too much. And the demand is there - Tesla just needs to start overseas deliveries.

 

[aubreymcfato]

This is nice:
Tesla’s fleet reaches total of 9 billion electric miles on the road to the rEVolution

 

[HG Wells]

I think Tesla needs to produce the $35K version of the Model 3 before too long, but mainly for PR purposes. As long as there's plenty of demand for higher-priced versions, they need only produce a trickle of cheaper cars, so the ASP (average selling price) shouldn't be affected too much. And the demand is there - Tesla just needs to start overseas deliveries.

As to Short Range 10% of production would be nice. 5% is acceptable. 1 % too small.

There are probably a lot of factory workers still waiting on the SR.

 

[Fact Checking]

You've answered a question with a question - I guess you have no opinion of your own.

Tesla provided guidance that Model S and X sales would increase in 2019, which seems unrealistic given current pricing, additional competition and losing the tax subsidy and a possible 'correction' in the economy (which even Tesla admit is a factor).

Model 3 projections might be more realistic, but the ASP and gross margin on each vehicle is almost certainly going to be lower than the 2nd half of 2018, simply because the lower cost vehicles will be made available and volumes will be higher. I'm sure you'd argue that efficiencies and scale will offset that, but to what extent is definitely debatable.

Your post combines a condescending tone with basic flaws of logic:

• In Q2 Tesla did not sell a single AWD or Performance Model 3, which are $4k-$5k-$9k+ ASP higher.
• As per the August conference call the mix of AWD+P orders was higher than 50%, about 1 month into Q3.
  
• In Q2 Tesla has actually beaten their guidance of Model 3 gross margin, which turned slightly positive despite deliveries of only about 2k/week due to the 200,000th U.S. delivery limit constraining deliveries.
• In Q3 deliveries are guided to be twice as high, with a significant improvement in Model 3 gross margin.
• In Q2 Model S+X gross margin actually rose, probably due to the manufacturing synergies with the Model 3 and higher take-rates of EAP/FSD.
  
• In Q3 Tesla is expected to make more Model S+X's, like in Q3 2017, which will generate more income. This is what happened in 2017: in Q2 2017 Tesla delivered 22,000 Model S+X cars, while in Q3 that increased to 25,930. That increase of 3,930 cars generated about 400m of extra revenue and 130m of additional gross margin.
• In Q2 Tesla reported record levels of new orders for Model S/X.
  
• Improving economies of scale due to more than twice as many Model 3 deliveries and higher production in Q3 come in addition to all these factors.

Take a look at @luvb2b's projections for Q3 if you want to inform yourself about what to expect for Q3, and stop spreading disinformation: Model 3 ASP is expected to rise from Q2 $55k to $59-60k, and Model 3 gross margin is expected to rise from break-even to about 15%.

 

[bdy0627]

I would not be so quick to assume that lower priced models will be available the first of next year. My guess is we won't see SR until July 2019 because I believe in the first half of 2019 they will start exporting the higher ASP of the Model 3 before they start producing short range. There is still a huge backlog of demand for current versions of Model 3 around the world... Why start producing short range before that demand is filled?

I believe Tesla is still officially indicating that SR will start to be available at the beginning of 2019. I think they will more or less follow through on that timeline, but it certainly would make no sense to shift primarily to SR. It will likely be a relatively small portion of the mix for at least 1H 2019, which will limit the negative effect on ASP.

 

[Joe F]

Tesla provided guidance that Model S and X sales would increase in 2019, which seems unrealistic given current pricing, additional competition and losing the tax subsidy and a possible 'correction' in the economy (which even Tesla admit is a factor).

You appear to not understand that those who can afford a 6 figure Tesla, which fits their lifestyle better than a model 3, are not going to purchase another S or X or in many cases, both, just because a model 3 is available at a lower price point. I feel you underestimate the appeal of a larger Tesla and the purchasing power of those who love them. Also, a tax break, while nice, in no way breaks the bank for many if it goes to zero.