TSLA Market Action: 2018 Investor Roundtable

[JRP3]

I hesitate to post an SA link here, but: https://seekingalpha.com/article/42...g-short-targets-might-know?source=marketwatch

In fetching the link I saw that they have added three more SA articles.

I know, I can always just ignore the article feed -- but is there any site that tracks stock price that doesn't push the FUD articles?

I found this comment on that article to be interesting:

In a note from Roth Capital published today. Who knows if it's true or not:• The Tesla (TSLA-NR) Model 3 production shortfall was not caused by any ST Micro (STM-NC) supply shortage. ST Micro buys SiC wafers mostly from II-VI (IIVI-NC), with only a portion from Wolfspeed (CREE-Buy). We directly confirmed with multiple sources that the wafer supply to ST Micro is uninterrupted. Tesla's Model-3 also uses a mix of inverters that either incorporate SiC MOSFETs or silicon JFETs, so this excuse for the miss looks even less likely. Tech executives from ST Micro had no comment, but we take the sum of our conversations to mean there is no credible reason to be concerned about ST Micro's supply of SiC MOSFETs.

https://seekingalpha.com/article/42...ing-short-targets-might-know#comment-79634848

 

[Unpilot]

We need a way to quarantine any article from Seeking alpha...just looking at the link causes some stomach distress.

 

[ZsoZso]

One more anecdotal evidence for end of Q3 delivery push: got my email to schedule pickup of my AWD Model 3 the last week of September. Based on projected time-frame and being a non-performance car in Canada, I was expecting November delivery.

 

[defc0n]

Bought some today with my Roth IRA at $276.14. This is the most TSLA shares I’ve ever owned.

 

[dondy]

I found this comment on that article to be interesting:
In a note from Roth Capital published today. Who knows if it's true or not:• The Tesla (TSLA-NR) Model 3 production shortfall was not caused by any ST Micro (STM-NC) supply shortage. ST Micro buys SiC wafers mostly from II-VI (IIVI-NC), with only a portion from Wolfspeed (CREE-Buy). We directly confirmed with multiple sources that the wafer supply to ST Micro is uninterrupted. Tesla's Model-3 also uses a mix of inverters that either incorporate SiC MOSFETs or silicon JFETs, so this excuse for the miss looks even less likely. Tech executives from ST Micro had no comment, but we take the sum of our conversations to mean there is no credible reason to be concerned about ST Micro's supply of SiC MOSFETs.

forget about all this sic mosfets nonsense. As it was pointed immediately they have no idea what they are talking about.

better check it out what Musk buddies cooked:
Panasonic Displays Solutions and Advanced Technologies For Industrial and Automotive Applications at PCIM 2018 | Panasonic Industry Europe
and it is just a beginning.

P.S. about "Elon Time".
From what I see Musk has fundamental difficulties with internal time, or better said internal clock. As expected it doesn't work properly. What is interesting it can be trained.

 

[Fact Checking]

Just a hunch, but It’s possible model 3 demand will look a lot like demand for other popular premium consumer brand sales, in that there will be large demand at the high end, and a lot of demand at the low end, with the least demand for the middle options.

I think the big difference is that in western economies cars are so expensive that about 80% of the sales are financed. In fact there's a fair argument to be made that ICE cars are currently only selling in such numbers because of a car-mortgage debt bubble, created by overly easy loans given by the finance side of ICE companies. There's 1.1 trillion dollars of car mortgages outstanding currently.

(I.e. a vendor-financing debt bubble: the phenomenon that almost killed one of the largest dot-com darlings, CISCO. Drop in ICE demand due to EVs is going to hit them in the worst possible moment - but I digress.)

But the point is, many customers don't really look at the sticker price, they look at the financing rate, the monthly rates, whether they get the loan to begin with, versus the utility the new car gives them.

And the Model 3, once out in all options, will be a really ... addictive product in terms of incremental utility:

• $35,000 base price. Yay, we can buy a Tesla, we officially made it in life! Cannot wait to post this on Facebook!
• +$9,000: Long Range. 50% more mileage, no more range anxiety! More effective regenerative braking. Ability to do road trips without spending half the time at Superchargers, and charging faster as well. Ability to recharge only once every one or two weeks, if there's no charger at the condo. ("Also, while it accelerates better, that's honestly not the reason I want it, honey!")
  
• +$6,000: AWD. A must in the snow belt. Absolutely because of the safety of the children and the wife, not because of the acceleration! ("Even in sunny California AWD is a must because we always wanted to drive up to the Mammoth Mountain Ski Resort, honey!")
• +$4,000: EAP. AutoPilot makes you arrive more relaxed at work. More relaxed back home as well, through rush hour on the highway. Totally worth every single dollar, not to mention Summon and AutoPark.
• +$1,500: White seats. Totally stain resistant Elon promised, and they don't get hot in the summer. They also look slick as hell.
• +$5,000: Premium interior. ("Honey, this option is for you, look how nice everything looks with premium interior, and it's easier to clean as well! We get the premium connectivity package as well.")
  
• +$2,000: Premium paint. That red looks totally awesome. ("Honey, this is the one option we'll be buying just for me, and it's the cheapest - in exchange we won't be buying those overpriced $9,000 red brake calipers! Also, did you know that black is the hardest car color to keep clean??")

In a blink of an eye you are above $60,000 with a $1,000+ car mortgage, you have blown up the family budget and there's serious negotiations which option to nuke. Tesla is really good at moving people up the price ladder and making them spend a lot more on a car than they ever thought they would spend.

With an iPhone there's very little true differentiation in utility, the choice is really binary: you either have it or don't have it. Storage space is secondary with cloud storage so there's really just two options that make sense: the most expensive iPhone (because it's the most expensive one), or the cheapest iPhone (because it's still an iPhone).

 

[DaveT]

Elon's timelines/guidance should always be understood in the following context:

• "If that job was done by clones of Elon Musk, working 24/7, sleeping on a couch, and if absolutely everything went well, then we'd be ready in that time frame. Perhaps."

Elon cannot make any other estimates: he has no real notion about the distance in capability between himself and others, and he certainly doesn't assume or expect failure, because he usually sees the path forward on a first principles basis. The farther out the end of a project is, the worse his estimates are usually.

But it doesn't matter - just multiply all his estimates by at least 2x. What matters is that Elon gets the really difficult aspects of his job right: he knows in which direction to go and he knows whether something is possible with the resources available.

That ability of Elon is really uncanny: it was amazing to see how within 10 short years he effectively threaded the needle with similarly fanatic people at SpaceX and pulled off something that a planetful of literal rocket scientists genuinely found to be somewhere between "impossible", "unfeasible" or "uneconomical": launching and then landing commercial scale liquid fuel orbital boosters able to launch huge geostationary satellites, financed as a side R&D project of a regular launch system. There was very little FUD: it was the absolutely honest, informed opinion of most of them that it's not worth going there.

Similarly, he knew the Model 3 would be a hit and could be made. This is what a CEO needs to be able to do, and screw timelines, that's only something you know after the fact anyway, for any reasonably complex high-tech project. Any manager who says they can keep timelines is either lying or is wasting money.

I agree with most of this, but I'll point out that I think Elon's exaggerated timelines/guidance on earnings conference calls is very counter-productive. After the 15th (or so) conference call where Elon spews exaggerated timelines/guidance, analysts get disillusioned and no longer trust Elon's words. This becomes a problem as it feeds into the negative FUD against Tesla which hurts the company. In other words, analysts don't trust Elon, investors also start not trusting Elon, the media stops trusting Elon, and thus more negative stories get published, and the public gets skeptical of Elon, and all of this feeds off of each other... where you get what we have now. I'm not saying analysts start the cycle, but they are a part of the cycle and some investors rely on them. Anyway, in this cycle of negativity very few people of prominence defend Elon and are able to stop the cycle. The cycle gets its own momentum because the various spokes feed off of each other. A lot of this can and could have been prevented if Elon would just keep his "first principle" timelines to himself. If he can't help himself, then he should let others run the conference calls and give more conservative guidance. Tesla needs to repair the trust that's been broken from years of outlandish guidance. I'm hopeful that Jerome as President of Auto will be the first step toward making this happen.

 

[dondy]

This is not actually new news. Tesla had / has in fact a few remanufacturing engineer positions open at Lathrop for a while. What the Shorty Airforce doesnt know is this is so common that there is an industry term for it.

To my knowledge, the same location also looks at parts that are returned from service centers (like damaged drive units, etc.,) to figure out what improvements to make in the production processes. It's an iterative process to keep the product improving and there are a good number of Engineers in this area.

good observation, finally I've looked at what they have in Lathrop.
Re-manufacturing=rebuilding. It is even father from rework than production process. By looking at job description they need engineers for highly automated lines.

For autos most common parts for remanufacturing are engines (motors here) and wheels. Often people use word reconditioning for describing same process. I wouldn't be surprised if these engineers are going to another location in Lathrop.

 

[beachbum77]

This is complete magical thinking, Donn. Care to give *any* backing for this wildly ludicrous statement other than your bare, unsupported, ridiculous assertion?

I've seen the gigantic staging lots which other manufacturers have for transportation logistics. Right now, Tesla simply doesn't have them.

The big players are shipping about 2 million new 2019 units around the U.S. this month to Tesla's 20-25,000. I fail to see how a comparison of their staging lots matters.

 

[Boomer19]

Noumea analyst Romit Shah on Bloomberg tv right now

Calls Tesla “uninvestable”. Has downgraded stock to neutral. “Because tweets”

Then proceeds to say:

“Fundamentals of the company have never been better.”

Then says “the resignation of the CAO was the tipping point for me”

But then says:

“I don’t believe there to be any accounting shenanigans, everything is fine accounting wise”

???

he did a complete 180, and clearly doesn’t sound convinced. maybe he was told to downgrade it

he basically is giving the adam jonas two step...
“it could go up or it could go down, we think it will do both...good luck folks”

well, thanks for nothing, analysts.

 

[Krugerrand]

True, but when's the last time Tesla actually delivered something ahead of time?

Model 3

 

[Zhelko Dimic]

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%.

You missed the point of OP completely. He wasn't discussing second half of 2018, he was discussing 2019. If anything, he acknowledges implicitly great second part of 2018

It would appear to me that you suffer from 'Elonitis', i.e. inability to hear opinions that differ from your own.

 

[dondy]

The big players are shipping about 2 million units this month to Tesla's 20-25,000. I fail to see how a comparison matters.

None of the big players shipped 2 mln obviously.
Anyway none of the big players with the exception of Toyota has ecosystem comparable with Tesla. None of the big american players has functional sells system.

he did a complete 180, and clearly doesn’t sound convinced. maybe he was told to downgrade it

he basically is giving the adam jonas two step...
“it could go up or it could go down, we think it will do both...good luck folks”

well, thanks for nothing, analysts.

financial shows in CNBC are stamped using "good cop bad cop" template.
Bulls inspire some "positive thinking" investors, bears inspire "contrarians" and "fighters". There is never a normal discussion, there is never consensus, it's always some noise with numerous "trues" fitting different viewers. You will never hear normal grounded arguments besides their betting. But, as some comedy relief they are quite natural.

 

[beachbum77]

None of the big players shipped 2 mln obviously.
Anyway none of the big players with the exception of Toyota has ecosystem comparable with Tesla. None of the big american players has functional sells system.

financial shows in CNBC are stamped using "good cop bad cop" template.
Bulls inspire some "positive thinking" investors, bears inspire "contrarians" and "fighters". There is never a normal discussion, there is never consensus, it's always some noise with numerous "trues" fitting different viewers. You will never hear normal grounded arguments besides their betting. But, as some comedy relief they are quite natural.

Dondy, I was talking 2 million combined.

Here in the U.S. we should sell a little over 17 million new cars and trucks in 2018. This is the busiest shipping time of year (when the new year models begin arriving at dealers. Anyone with any experience in the auto industry knows this is the toughest time of year to ship cars if you are not a big player. Tesla is learning this the hard way. They have never tried to ship this many cars before in such a tight timeframe.

What "ecosystem" helps get cars shipped?

 

[neroden]

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 is FUD.

This isn't FUD (in fact it's absolutely certain and there is very little doubt),

This is FUD.

By 2019 Tesla will have a better handle on the cost structure. The will be some lower-price trims sold... but if the S and X are indicators of anything, it's that the ASP will continue to be high. Tesla should have a solid billion per quarter in operating cash flow by first quarter of 2019, which is plenty to pay off the bonds. So maybe R&D will be a little bit delayed. The semi will almost certainly be a little bit delayed, but that's OK. Competition remains essentially nonexistent; every EV will sell all they can make, but Nissan is the only company in the ballpack of Tesla right now, while VW are the only other company planning to ship as many as 100,000 per year, and that's in 2020. All of those put together aren't enough to eliminate gas cars from the market (unfortunately). Demand continues to be strong (you're making up "waning demand", that's a fake) and very few people were "counting on" the federal tax refund to afford the car.

 

[neroden]

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?

This is an old strategy. It may simply be designed to take out any idiots who used stop-loss orders. (NEVER use stop-loss orders; they're an invitation to get raided.)

 

[neroden]

We have been discussing Electrek here over the last few days. Seems that Fred doesn't like criticism:

I don't know why he's so thin-skinned. Both KarenRei and myself have been shadowbanned (Karen more than once) for what were really rather polite corrections to serious errors of assumption by Fred. We were trying to be *helpful*; we're on his side, but he's blocking our comments.

 

[neroden]

Current bonds obviously are not cheap. That's why you won't see any information about.
They point 2025 bonds which are universally 8.5% for B3+.
So if your bonds are 5.5% in 2025 any investors software will automatically derate it in 8.5 or 100$->88$.

Geez, *this* is what the lunatics pointing at the bond prices are talking about?!? That's nothing.

Tesla got very lucky and issued their 2025 bonds at record low interest rates for "junk bonds" -- Tesla's were actually a record low among record lows. (There were articles marvelling that they could get that rate and saying it was an aberration.) The price has of course corrected since then (pretty quickly) so that the bonds are yielding interest rates typical for similar "junk bonds". If there was serious worry in the bond markets about Tesla's solvency, they would be yielding substantially higher rates than other "junk bonds".

 

[beachbum77]

This is FUD.



This is FUD.

By 2019 Tesla will have a better handle on the cost structure. The will be some lower-price trims sold... but if the S and X are indicators of anything, it's that the ASP will continue to be high. Tesla should have a solid billion per quarter in operating cash flow by first quarter of 2019, which is plenty to pay off the bonds. So maybe R&D will be a little bit delayed. The semi will almost certainly be a little bit delayed, but that's OK. Competition remains essentially nonexistent; every EV will sell all they can make, but Nissan is the only company in the ballpack of Tesla right now, while VW are the only other company planning to ship as many as 100,000 per year, and that's in 2020. All of those put together aren't enough to eliminate gas cars from the market (unfortunately). Demand continues to be strong (you're making up "waning demand", that's a fake) and very few people were "counting on" the federal tax refund to afford the car.

Neroden, many were counting on the full tax credit. The press wrote article after article about the $27,500 Model 3. Then they actually read the FITC rules and realized you still have to pay $35,000 and hope you qualify for the full credit when you prepare your tax return. But the damage was already done and ten of thousands reserved a car ($27,500 after the credit) that probably will never exist.

Many have justified the M3 LR option to themselves since $3,750 of it will be paid for by the otherwise smaller credit after 12/31/18. That is not a guess. You will find these comments right here in the TMC threads.

 

[ValueAnalyst]

I admit to being one of the victims of disagreeing with @DaveT - not a good idea.