TSLA Market Action: 2018 Investor Roundtable

[beachbum77]

Today’s action was positive for bulls in that low volume orderly pullback despite a major desertion by an erstwhile bullish analyst premarket
Claiming $TSLA is no longer “investable”
Really! Sure go ahead and invest in $F
I’ll stick with trading $TSLA
I expect a big up day tomorrow

Care to share why you see a big up day tomorrow?

 

[kbM3]

It's definitely my opinion that we won't see standard range Model 3 until Q2 next year. My opinion is based on a variety of factors I shared in my earlier posts. One of those factors (although not the only one) is how I interpret the tour article saying standard range coming in the next 8 months. And it appears that you're disagreeing, based on your interpretation that the 4-7 months estimate on Tesla's site is accurate. I guess we'll choose to disagree here, and we'll see when the standard range Model 3 does actually ship.

Why don’t you believe they will deliver limited quantities before q2?

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.

All of these points absolutely pale in comparison to the upside of the company moving faster because of the optimistic deadlines. Pulling schedules forward by over a year and convincing employees to put in massive unpaid overtime far outweigh these negatives.

How can you question a tactic that Elon has utilized effectively his entire career?

I’m focused on years from now. Not what analysts think in the short run.

 

[keydiver]

Tesla is underprovisioned on parking lot space for the logistics of delivering cars.

The other day, a friend of mine told me that Tesla has purchased/leased the closed Gander store in West Palm Beach, which has 200+ parking spaces. That should give them some room for more Model 3 deliveries!

Pebb comes back from tragedy with Tesla dealer, Gander Mountain site

 

[TrendTrader007]

After the taking private fiasco I consider $TSLA as an iPO and realize that shorts here to stay and the greatest opportunity resides in taking advantage of volatility over periods of time
Just go with the flow
Stock is eminently tradeable as well as investable
Will make new highs each year but with considerable volatility
At least another 10 years worth of trading opportunities

 

[beachbum77]

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.

Great observations. Many bulls and bears alike just shake and hang our heads listening to Musk on the CC's. Investors and customers alike have been so forgiving of Tesla's delays that I for one have never understood why Musk feels the need to keep drawing lines in the sand quarter after quarter with higher and higher expectations. Why not just say look what we did? And we are ramping up while keeping quality in check. Instead, it is 200k in 2017, then 5k by 12/31, then 5k by 3/31, then 5k by 6/30 of which 4,300 needed rework. Good God, after a few failed deadlines...STOP ISSUING DEADLINES WITH NUMBERS. Just say we continue to ramp, then celebrate what you actually accomplished.

 

[beachbum77]

The other day, a friend of mine told me that Tesla has purchased/leased the closed Gander store in West Palm Beach, which has 200+ parking spaces. That should give them some room for more Model 3 deliveries!

Pebb comes back from tragedy with Tesla dealer, Gander Mountain site

Tesla taking over a former Volvo dealership. What a novel idea. There are empty dealerships all across the country begging for tenants but instead Tesla has gone into expensive mall and shopping centers with no service capability. Maybe they have finally hired someone with an automotive background to do site selection who could convince management of the value of all-in-one locations. Bravo!

Now can we send that person to Raleigh, NC please?!

 

[RobStark]

(The latter actually describes myself, we would never consider buying a new car - but are going to buy the $35k model 3)

Pretty much everyone thinks their consumer behavior is normal and widespread. Because it makes perfect sense to them.

People who can afford an S Class but buy a mainstream compact/midsize sedan for less than $25k think they are quite normal and assume many/most buyers of new $20k-$25k sedans can actually afford an S Class.

 

[Do It]

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.

Money is tight for 2019 but nothing beyond what tsla has shown to be able to handle in the past. Tsla built a 20B business with about 14B cash (9B debt + 5B from gross profit selling S and X), therefore there is no reason to doubt that it can expand the business another 20B with 14B more cash. If we assume tsla gross margin being 20% then it will have 5B cash available in 2019, >7B in 2020, and >8B in 2021 - that is 20B cash! It seems reasonable to assume tsla can easily use that cash to expand its revenue to 50B - 60B based on it's proven capital efficiency.

If this high level estimate is not good enough, I challenge anyone to come up with a financial model that shows tsla can not get through 2019. luvb2b's model is the most comprehensive - it shows huge R&D, SG&A, and PP&E expenses - I believe much of the model 3, model Y, Sami expenses are already covered with those line items.

 

[Zaxxon]

Tesla taking over a former Volvo dealership. What a novel idea. There are empty dealerships all across the country begging for tenants but instead Tesla has gone into expensive mall and shopping centers with no service capability. Maybe they have finally hired someone with an automotive background to do site selection who could convince management of the value of all-in-one locations. Bravo!

Now can we send that person to Raleigh, NC please?!

Uhh, here in Denver they bought a vacant BMW dealership last year. Now it's a fantastic location for them--gallery, service center (much larger and more capable than their former location, which now serves as mobile service HQ), separate delivery building, and a reasonably large amount of parking.

Rather than call the idea novel, I'd suggest that they are being opportunistic with expansion and grabbing significant real estate improvement when they can do so at reasonable cost.

 

[oneday]

Great observations. Many bulls and bears alike just shake and hang our heads listening to Musk on the CC's. Investors and customers alike have been so forgiving of Tesla's delays that I for one have never understood why Musk feels the need to keep drawing lines in the sand quarter after quarter with higher and higher expectations. Why not just say look what we did? And we are ramping up while keeping quality in check. Instead, it is 200k in 2017, then 5k by 12/31, then 5k by 3/31, then 5k by 6/30 of which 4,300 needed rework. Good God, after a few failed deadlines...STOP ISSUING DEADLINES WITH NUMBERS. Just say we continue to ramp, then celebrate what you actually accomplished.

Musk said at the shareholder meeting he is working on it... but, yeah, it frustrates bulls and bears/shorts get to have their manufactured outrage (this bothers me more than the missed deadline). It really seems like it’s part of who Elon is at this point. As a project manager I would give myself and my team deadlines that could only be met if everything went perfect. Sometimes having to defy all odds, last minute scramble, to make a deadline really brings people to max productivity. It certainly has always been the case for me. I think it helps me overcome the inherently lazy part of myself. I digress.

Now looking at q3 guidance it appears Elon finally gave himself a somewhat moderate guidance. We will see in two and half weeks. I think to myself, maybe he is getting better, then at the same time v9 has been punted out a little. Based on his track record, I think he probably just wants a good future to come quicker than anyone else alive. And that’s ok with me.

 

[beachbum77]

Uhh, here in Denver they bought a vacant BMW dealership last year. Now it's a fantastic location for them--gallery, service center (much larger and more capable than their former location, which now serves as mobile service HQ), separate delivery building, and a reasonably large amount of parking.

Rather than call the idea novel, I'd suggest that they are being opportunistic with expansion and grabbing significant real estate improvement when they can do so at reasonable cost.

Outstanding! Thanks for the info. The ones I have visited...not so great. Here they did a $250k remodel of a former paint store for the delivery and service center. Nowhere near enough parking without annoying the other tenants in the center. Sales showroom is 5 miles away in a high-end outdoor mall next to an Apple store. On a test drive, it takes about 5-10 mins just to get out of the center since Tesla is at the very back. Vacant dealerships on major highways with easy freeway access make a lot more sense.

 

[beachbum77]

Musk said at the shareholder meeting he is working on it... but, yeah, it frustrates bulls and bears/shorts get to have their manufactured outrage (this bothers me more than the missed deadline). It really seems like it’s part of who Elon is at this point. As a project manager I would give myself and my team deadlines that could only be met if everything went perfect. Sometimes having to defy all odds, last minute scramble, to make a deadline really brings people to max productivity. It certainly has always been the case for me. I think it helps me overcome the inherently lazy part of myself. I digress.

Now looking at q3 guidance it appears Elon finally gave himself a somewhat moderate guidance. We will see in two and half weeks. I think to myself, maybe he is getting better, then at the same time v9 has been punted out a little. Based on his track record, I think he probably just wants a good future to come quicker than anyone else alive. And that’s ok with me.

I worked under similar conditions most of my career. But those targets were set for internal use and did not kill us if missed. Musk is publicly proclaiming targets that are repeatedly missed. That creates disillusionment for everyone.

If you think two consecutive quarters of profits and positive free cash flow for both (something never accomplished in 15 years) is moderate guidance I'd hate to hear what you think excessive or extreme guidance would be.

 

[Electroman]

I firmly believe if Tesla fails to hit a profit this quarter it will not have been because of production, it will have been because of poorly planning the delivery ramp including the points you mentioned above.

I think so too. But this would somehow be spun as a debilitating shortcoming of bankruptcy proportions by the shorts and haters.

I see 5 stages: Design a great product, create demand, produce in volume, deliver in volume, service in volume.

The first 3 are the most difficult. And they have crossed that chasm. Among that, getting delivery logistics right is the least difficult problem to solve and they will solve it. I am more worried about servicing.

 

[geometro]

Outstanding! Thanks for the info. The ones I have visited...not so great. Here they did a $250k remodel of a former paint store for the delivery and service center. Nowhere near enough parking without annoying the other tenants in the center. Sales showroom is 5 miles away in a high-end outdoor mall next to an Apple store. On a test drive, it takes about 5-10 mins just to get out of the center since Tesla is at the very back. Vacant dealerships on major highways with easy freeway access make a lot more sense.

Eventually they’ll have tunnels under the expensive mall showrooms to shuttle people to the service center for the test drives.

 

[SpudLime]

Now can we send that person to Raleigh, NC please?!

How about you scout some sites this weekend? I hear traffic will be light.

 

[beachbum77]

I think so too. But this would somehow be spun as a debilitating shortcoming of bankruptcy proportions by the shorts and haters.

I see 5 stages: Design a great product, create demand, produce in volume, deliver in volume, service in volume.

The first 3 are the most difficult. And they have crossed that chasm. Among that, getting delivery logistics right is the least difficult problem to solve and they will solve it. I am more worried about servicing.

It will be a temporary problem. Logistics issues with deliveries are not nearly as destructive as major design flaws or something along those lines. Service is a TBD issue.

 

[Thekiwi]

Pretty much everyone thinks their consumer behavior is normal and widespread. Because it makes perfect sense to them.

People who can afford an S Class but buy a mainstream compact/midsize sedan for less than $25k think they are quite normal and assume many/most buyers of new $20k-$25k sedans can actually afford an S Class.

I wasn’t suggesting my behavior was normal, I was suggesting that the demand for Model 3 SKUs may turn out to be barbell shaped like other premium consumer brands are - something like 40/20/40 (entry level/mid level/high end)

In that scenario the LR RWD would be one of the less popular SKUs

 

[beachbum77]

How about you scout some sites this weekend? I hear traffic will be light.

While I gave you a funny, sadly some sites may not be standing after this weekend. I have been through Ivan, Dennis, and Rita. I've had enough of Cat 4 and 5 storms, thanks. They need to get the cars they have in Raleigh and Charlotte moved to protected locations. Here comes Musk's "force majeure". Did he jinx Tesla?

 

[Thekiwi]

While I gave you a funny, sadly some sites may not be standing after this weekend. I have been through Ivan, Dennis, and Rita. I've had enough of Cat 4 and 5 storms, thanks. They need to get the cars they have in Raleigh and Charlotte moved to protected locations. Here comes Musk's "force majeure". Did he jinx Tesla?

How many cars are we talking about here? A few hundred? just curious, what do car dealers with large outdoor lots normally do in these situations? Just rely on insurance payouts?

 

[beachbum77]

How many cars are we talking about here? A few hundred? just curious, what do car dealers with large outdoor lots normally do in these situations? Just rely on insurance payouts?

It varies. Some load up their high-end inventory and pay carriers to hold them out of harms way until the storm passes and cleanup is complete. Others like one dealer here in Jacksonville ahead of a recent storm moved his high-end inventory into a hospital parking structure. Some just take their chances because they just have too much inventory to move. Deductibles are probably a deciding factor in some cases.