TSLA Market Action: 2018 Investor Roundtable

[oneday]

So has TSLA

Considering Berkshire has nearly doubled in the last five years I doubt his investors are complaining. No one bats 100%. Hitting .300 will get you into the Baseball Hall of Fame.

 

[Buckminster]

The problem for Ford and other ICE manufacturers is their shareholders. They are all mostly made up of EV bears. The most enlightened will say that we need to build up an EV expertise now ready for a switchover in 20 years when the infrastructure is in place. The CEO has nowhere to go. Invest heavily and you are no better than Tesla - on a path to bankruptcy - shareholders need to put food on the table... The OEMs that survive must somehow have the 2,3,4 or 5th best EV whilst still producing a world class ICE whilst keeping their Jekyll and Hyde, "cake and eat it "shareholders happy throughout. Good luck to them!

 

[CorneliusXX]

But S&P was already B- negative outlook before Moodys caught up to them with B3 negative outlook????

My concern is the credit rating that supports price along with the liquidity of the Company. The Cs would be a hyper ugly, hyper expensive problem yet will the Agencies ignore governance issues while the SEC drama plays out on twitter? Both Moody's and S&P paid their fines to the SEC, and this will be tough for them both to ignore. Let's hope the SEC debacle is resolved quickly. BTW curious if you have a price in mind that would concern you? Appreciate your perspective.

Moody's to pay $16.25 mln to settle SEC charges | Reuters
SEC.gov | SEC Announces Charges Against Standard & Poor’s for Fraudulent Ratings Misconduct

So either moody's were wrong initially wrt the BB rating, or S&P have been wrong since march by not reflecting the reduced credit quality seen by Moody's. You can choose which one is wrong. Either way, when there is a split rating it is generally accepted that the higher rating is ignored - however there was a significant impact to the bond price - this makes the price move even less of a worry.

Governance is only one aspect of a rating, and at this stage is not nearly terrible to hurt a single B rating. It is more likely to be of concern if Tesla was rated in the A's. Single B ratings already include quite a wide level of risk. The biggest driver of future ratings will be the enormous improvement in Tesla's financial position, if latest forecasts from this website are accurate then musk could run naked down the street professing his love for hotdogs and the rating won't drop further.

 

[lklundin]

The fact that this (please see above) is being leaked out right now should be VERY concerning to anyone long this stock...

I've tried to provide some note of caution here, over the last several days, but obviously no-one cares...

You will...

Wake the F - UP!, people...

I'm sure I'll get blamed / flamed / laughed at / ignored / blocked / and maybe even kicked off this board...
I really don't care... I've done the best I can to point out a few things you might want to think about, but from the responses, clearly they're not wanted...

I wish you all well... Going to be a REAL interesting week, folks... You might want to cinch-up that chin-strap...

Plonk

 

[RobStark]

Right, and I think their point was that it isn’t necessarily about Tesla at all.

I was originally responding to Karen which said it might very well be the Tesla stores.

 

[Right_Said_Fred]

I think it's time for Ford to exit this plane of existence, or at least be in a position to sell some manufacturing facilities on the cheap, both here in the states and in Europe. Tesla has a better idea for a pickup than converting F150's.

The moment Tesla shows the pickup to the world - “oh, and one more thing” - and gives a production timeline of 2 years, the sale of regular pickups will drop and Ford will be in big trouble.

 

[Cobos]

But S&P was already B- negative outlook before Moodys caught up to them with B3 negative outlook????

My concern is the credit rating that supports price along with the liquidity of the Company. The Cs would be a hyper ugly, hyper expensive problem yet will the Agencies ignore governance issues while the SEC drama plays out on twitter? Both Moody's and S&P paid their fines to the SEC, and this will be tough for them both to ignore. Let's hope the SEC debacle is resolved quickly. BTW curious if you have a price in mind that would concern you? Appreciate your perspective.

Moody's to pay $16.25 mln to settle SEC charges | Reuters
SEC.gov | SEC Announces Charges Against Standard & Poor’s for Fraudulent Ratings Misconduct

So you are saying being the center of the badly priced CDS that led to the 2008 meltdown resulted in fines from the sec for 16 mill and 70 mill. Leading to untold trillions in losses for the economy.
But TSLA and EM possibly being a bit too cavalier with a tweet possibly leading to some anti-investors loosing a few millions leads to 40 millions in fines. Yeah this really sounds like a fair ruling....

 

[Tslynk67]

So you are quoting some shorts there, right?

So this is a hodgepodge of very confused arguments that are hard to separate. Let me try, in order:

• "Even if EBITDA is looking good, Interest is going to kill them if nothing else".
• False:
  • Take a look at Q3 estimates: interest payments are a minuscule amount compared to the cash Tesla has already generated in Q3: they generated over 1 billion dollars of cash, over 500 million in free cash flow after interest payments. EBITDA, cash-flow analysis and even GAAP Tesla is looking good with and without interest payments.
  • In addition to those estimates take a look at Romit Shah of Nomura Instinet stating that Tesla is sustainably profitable:
  • There's also the recent CNBC interview with Ron Baron stating the same.
• "he's a production line at capacity, servicing a home market with lower transportation and regionalisation, and any further growth is going to require yet more money"
• False:
  • Firstly, Fremont is not nearly "at capacity" at 4k/week levels - according to recent independent audit they can upgrade to about 8k/week with "minimal capex less than $100m". Tesla is currently limited by the battery production limit of Panasonic lines in the Gigafactory - this is being increased by about 70% by the end of the year. Final capacity will be around 10k and that can be reached with incremental capex.
    
  • Secondly, Tesla has only scratched the upper crust of Model 3 demand even in the U.S.:
    • they are only selling $49k and more expensive versions at the moment,
    • they are not even leasing/financing while around 80% of all new car sales in the U.S. are financed,
    • upcoming features like the V9 software update will increase incremental demand even more
  • Tesla generally adds extra transportation costs to the ASP in Europe and other global markets, so it's a cost for the customers, not for Tesla. They are still very large markets and generate at least as much revenue for Tesla as the U.S. market.
• "I've also seen quite an increase in used stock in the US"
• False:
  • Both Model S+X and Model 3 inventory is at very low levels for the year. Here's the Model 3 inventory:
  • 
  • Yes, you are seeing that correctly: that's only 1,985 Model 3's in inventory, or less than 3 days of production. As a comparison Ford/GM/Chrysler have inventory levels of over 60 days of production ...

That's the main misconceptions I've been able to find in that argument, but it's all pretty incoherent so I'll stop here.

tl;dr - but gave it a "love" anyway...

 

[cheshire cat]

So you are saying being the center of the badly priced CDS that led to the 2008 meltdown resulted in fines from the sec for 16 mill and 70 mill. Leading to untold trillions in losses for the economy.
But TSLA and EM possibly being a bit too cavalier with a tweet possibly leading to some anti-investors loosing a few millions leads to 40 millions in fines. Yeah this really sounds like a fair ruling....

Ten years on and I still wonder how these two companies are still in the game, rather than wound up with several people doin' time?

 

[Thekiwi]

 

[CorneliusXX]

Ten years on and I still wonder how these two companies are still in the game, rather than wound up with several people doin' time?

They're a monopoly, regulated into perpetuity through legislation (NRSRO) in many countries and included in a myriad of investment manager mandates. But I agree with you, they're paid by the issuer (in SF at least) to give ratings which is a crazy conflict of interest. There should be an impartial public ratings agency with clear methodologies and funded via a source not directly linked to the issuance of ratings - possibly a financial transactions tax or something similar.

 

[Fact Checking]

The moment Tesla shows the pickup to the world - “oh, and one more thing” - and gives a production timeline of 2 years, the sale of regular pickups will drop and Ford will be in big trouble.

Yes, and this probably happened to sedans already. BMW sales in the U.S. dropped significantly:

And while some of this is due to the much needed refresh, I think BMW is fooling themselves thinking that the 3-Series refresh coming next year is going be able to turn the trend around significantly, while they are taking their sweet time to make EVs in volume: ~2025?

Personally I think BMW botched the 2019 7th generation 3-series design:

Way too aggressive, masculine and visually complex IMHO - the coup of the Model 3 was its more neutral design which makes it appeal to a much broader group of people - even across gender boundaries. BMW customers are ~70%+ male already - by shifting it further towards the macho end of the spectrum they reduce the car's cross-gender appeal even more.

Compare it to the Model 3:

(And I tried to find an image that shows the Model 3 from a similar angle and with similar color.)

It's no contest IMO, and I believe Tesla will be able to find a similarly genial exterior design for the Model Y and the pickup truck (Model P?) as well.

 

[bdy0627]

Exactly my point (emphasis above mine) ......the rates are only part of the decline in the bond price, not the sole reason for the decline. And FWIW everyone here should be monitoring TSLA bond prices too. Critical indicators. Thank you for the chart.
View attachment 341536

Looks an awful lot like the stock movement with less volatility.

 

[KarenRei]

Depends on the hole. You can get yourself out by digging the dirt from the sides to raise the bottom.

 

[Starno]

People have been saying this for a couple of years. As the joke goes, economists have predicted 10 out of last 6 recessions.

That doesn't mean we won't have a downturn. Given raising oil prices, trade war prospects - and the ever present possibility of Trump doing something *really* bad to distract from all his tax cheating (and Mueller investigation).

The market has basically ignored political instability till now - because they got some tax cut. The luck may run out at anytime.

I don't listen to economists. I listen to Ray Dalio :

 

[kbM3]

They first started yapping about "lack of demand" back around end of June/early July. First the narrative was "Tesla would go bankrupt before they ramp up, they will never become profitable". So June came and ramp up happened successfully, they changed the narrative to "look at all those cars in the parking lots, demand dried up!", "Quick, sell Tesla stocks, they will never become profitable with lack of demand!"

July flew by, Tesla had another record production & deliveries month. August came, dual-motor trims started to sell extremely well. Uh oh, the higher margin Model 3's are capturing the enthusiast market and selling just as well as the LR version. So the narrative changed to "well they will never be able to keep this demand up". September came, Model 3 became the best selling EV, and #4 best selling sedan in the United States. Tesla is now outselling competing luxury car makers in the U.S. while at the same time capturing the Camry/Civic/Accord market. Yet somehow they're now circling back to the "demand is drying up" narrative.

When people start having to rehash old narratives, you know they've begun to run out of things to say. I suppose with Tesla having no issues producing and delivering record # of vehicles, and the inevitable profitability, they really do have nothing else to say other than "demand is drying up" or "Elon is crazy you guys should ditch him and get rid of Tesla stocks".

To the rest of the world, the REAL WORLD reactions to Tesla is extremely positive. Just watch the increasing number of youtube videos coming out from more and more happy Model 3 owners. There's one thing that hasn't changed one bit during this market mess...people are all extremely happy and amazed by Model 3's. Watch more and more P3D beating muscle cars at drag strips and getting more car enthusiasts interested in a P3D. The more Model 3's are out there, the more people are getting to know about them, and want them.

2 neighbors flagged me down today to ask me about my Model 3. I was surprised at their lack of any knowledge for the Model 3 or Tesla at all. This is how it really is in the real world, still tons of people out there that know next to nothing about electric cars. But word of mouth is spreading, people are seeing more and more Model 3's out there. Demand will continue to rise because out in the real world, people really really want this car.

The most common question I get about my 3 is “How do you charge it?”

The funniest was by a young woman who knew Tesla was something very special but wanted to find out “What kind of gas mileage does it get?”

 

[bdy0627]

A judge dismissed a civil suit making those claims a while ago. This new b.s. is a claim that SEC is now investigating the claims that were dismissed. Sad.

No, this appears to be an active investigation into the model 3 production claims over the last year. I don't understand why the SEC was convinced to investigate, but this appears to be real. The Fox reporter (Gasparino) who provided the leaked info turned out to be accurate about the other SEC investigation. This reporter, as posted earlier, is indicating that Tesla is financially doomed and points to the bonds as the tell-tale sign. That viewpoint is not unusual in the financial world. In fact, it appears to be a much more common perspective than the idea that Tesla is turning things around financially. Only one of these perspectives will prove correct. The side that is betting on the wrong perspective is going to lose a LOT of money. I don't think the outcome can be manipulated at this point. It will occur regardless of what bears/bulls believe and want to happen. The only other alternative is a successful privatization strategy. Elon and Deepak have stated repeatedly that the financials are turning around and Q3 will show that. Many simply do not believe them, not only as a result of previous statements about Tesla becoming profitable earlier, but also as a result of the financials over the last year. There are obviously ways of projecting that Tesla won't be profitable and will run out of money without additional capital. In time, the stock will follow the outcome of Tesla's financials.

I obviously believe that Tesla IS turning profitable and cash flow positive. The biggest question I have going into Q3 earnings is whether or not it will be obvious enough to the market. That will determine the short/medium term stock movement. Any thoughts on this?

 

[Fact Checking]

.the rates are only part of the decline in the bond price, not the sole reason for the decline.

This is entirely normal: the increase in Treasury rates is only part of the decline, because you missed the other big component of how corporate bonds are priced: corporate value, i.e. stock price - as I explained in this comment.

It's very similar with other corporate bonds as well, it's not limited to Tesla.

 

[Fact Checking]

This reporter, as posted earlier, is indicating that Tesla is financially doomed and points to the bonds as the tell-tale sign.

Note that the 'Tesla bonds are dropping' argument is a bogus false narrative of the short sellers. Every time TSLA drops the bonds will drop due to decreasing corporate value - and recover as TSLA recovers - and this year the drop is further magnified by a significant increase in the long term interest rate expectations: about half of the drop is caused by the worsening interest rate environment over the last 14 months. This is not limited to Tesla: corporate bonds of similar maturity, of corporations with similar valuations, will show a similar drop in bond prices after larger declines in their stock price and an increase of the Treasury interest rates.

It's a pretty clever lie actually, because the yield curve started worsening roughly in the same time frame Tesla's Model 3 troubles started - so cursory examination gives the misleading impression that the bonds declined due to Tesla's Model 3 production troubles. That's why shorts are running with that lie day in and out, especially after larger drops in the stock price.

 

[bdy0627]

But S&P was already B- negative outlook before Moodys caught up to them with B3 negative outlook????

My concern is the credit rating that supports price along with the liquidity of the Company. The Cs would be a hyper ugly, hyper expensive problem yet will the Agencies ignore governance issues while the SEC drama plays out on twitter? Both Moody's and S&P paid their fines to the SEC, and this will be tough for them both to ignore. Let's hope the SEC debacle is resolved quickly. BTW curious if you have a price in mind that would concern you? Appreciate your perspective.

Moody's to pay $16.25 mln to settle SEC charges | Reuters
SEC.gov | SEC Announces Charges Against Standard & Poor’s for Fraudulent Ratings Misconduct

When Moody's issued the downgrade earlier in the year, they indicated they were doing it primarily because of the slow model 3 ramp and the effect on Tesla's dwindling cash balance. It seemed odd to me that they did it just 1 week before the Q1 delivery numbers were released. Apparently they felt confident in their assessment that the ramp was going very poorly regardless of the actual Q1 delivery numbers. They were correct of course, but it seemed odd that they didn't wait for the actual delivery numbers for Q1 before issuing a downgrade. This time, if Moody's issues a downgrade AHEAD of the critical Q3 ER, again due to a worsening cash situation, that would be ridiculous. If Q3 financials show an improving cashflow situation, there is no need for a downgrade. If they instead show a worsening cashflow situation, then a downgrade is warranted. I personally doubt an upgrade will happen prior to the Q4 ER.