TSLA Market Action: 2018 Investor Roundtable

[TheTalkingMule]

Flat for two weeks would be a delight.

 

[RoadsterPlease]

nice green bar, somebody bought 460k shares at open!

 

[humbaba]

Really excited if TSLA will trade even lower during the trading day.
Cash sitting and waiting for even more opportunities.

Getting ready for the dip. Let's see how low they can go! C'mon, I need to lower my average price per share, gimme some short love!

 

[MP3Mike]

Why in the world hasn’t Elon replaced those 13.7 million pledged shares of TSLA with SpaceX shares instead?

As long as those shares are pledged as collateral, his lenders can loan them out to shorts. By using SpaceX shares as collateral instead, Elon would instantly decrease the shares available to short by 13.7 million. If that didn’t cause a short squeeze, it would at least increase borrowing costs for shorts, and make shorting more dangerous.

How do you know that Elon didn't arrange for his pledged shares to not be lent out? (You can do that but then you have to pay more in interest.)

 

[Tslynk67]

That's a nice pop already, but it did similar yesterday before the macros went blood-red...

However, $TSLA is incredibly underpriced right now and other than a little uncertainty over this SEC business, it's all positive news.

In case some of you don't know, Elon getting a lot of credit on Twitter in the last 24 hours for covering the cost of water filters for Flint residents and schools. So he came good on this promise. As he does on all his promises, actually, just don't bet too much on the timing...

 

[ev-enthusiast]

Later during the day we might get a descision on driving bans for diesel cars in Berlin, Germany: Driving restrictions are threatening on Berlin streets

And here is the driving ban for #DieselGate vehicles in Berlin, Germany: court imposed diesel driving bans on several Berlin roads

 

[humbaba]

And here is the driving ban for #DieselGate vehicles in Berlin, Germany: court imposed diesel driving bans on several Berlin roads

Unfortunately the link isn't working for me. So I take it affected vehicles are not allowed to be driven on certain Berlin roads? What is the expected impact?

 

[Fact Checking]

t has been in another thread, there are low and high numbers. I am on a long side so I don't buy into these low numbers, but here they are look at the low figures:

Smack Check on Twitter

Ok, I had a (very) quick look at "Smack Check's" estimates with 'bear glasses on', and the biggest problem I can see is the revenue estimate, which doesn't hold up:

• For some reason he uses an unrealistically low Model S+X ASP estimate of $93k. The real number is closer to $104k, as luvb2b's modeling shows, which gives a perfect match for Q1 and Q2 reported numbers. (BTW., luvb2b estimated Q2 revenue at a better than 99% accuracy and posted it to the thread, weeks before the earnings report.) This is one of the biggest contributory factors I can see: $400m inexplicably missing from the income side.
• From this point on the estimates go downhill:
• In the "low" case he estimates $90k ASP for Model S+X, despite Tesla reporting record high S+X orders, i.e. high demand.
• In the "low" case he estimates a Model S/X gross margin of 20%. This is simply not happening:
  • Tesla reported 28% gross margin for Q2,
  • Tesla reported record strong new order inflow for S+X,
  • The 3x unit count of Model 3 shifts some of the costs away from the S+X, further improving S+X gross margins due to fixed costs of shared facilities such as the paint shop shifting the cost accounting towards Model 3, and also better utilization of existing infrastructure.
  • A fully loaded Model 3 Performance overlaps in ASP with the least expensive Model S variant - which probably resulted in a shifting of Model S sales towards higher priced variants. That too improves both Model S and Model 3 margins.
• I.e. maybe, maybe a 25% gross margin for the Model S+X could be seen in a bear scenario - but it would be a major miss.
  
• In the "low" case he estimates a Model 3 gross margin miss of 12.5% instead of Tesla's 15% guidance - despite:
  • Tesla guiding a 30% reduction in labor overhead for the Model 3 in August and other efficiency improvements,
  • much stronger than expected AWD and EAP sales which shifted sales towards higher margin options and higher ASP,
  • several rounds of price hikes to get explosive demand under control, such as AWD price increase from $4k to $5k
  • much better economies of scale due to a 3x increase in Model 3 deliveries.
  • they significantly exceeded guidance in both production and deliveries, which increases margins
• I.e. maybe a 14% gross margin for the Model 3 could be taken as the 'low' point.
• He also doesn't seem to be taking into account significant reductions in both S+X and Model 3 inventory.
• He doesn't seem to be considering the possibility of deferred revenue recognition.
• But the biggest flaw of all, as it relates to the claim you made: he doesn't seem to be performing any cash flow analysis, only income analysis. You cannot come to any conclusions about ability to make future debt payments if you don't estimate the cash position of Tesla. A lot of the GAAP expenses are accounting fictions that matter in terms of GAAP profitability (such as stock compensation or depreciation/amortization) but have little relevance to their ability to pay back debt and grow. Amazon was running very low profits for 20 years and somehow still became a trillion dollar company through strong cash generation.

I.e. the 'low' case would be, if everything went absolutely wrong in Q3: 14% M3 margin, 25% S+X margin, slight S+X ASP drop of say $103k, and all the cost increases in his calculation - but still this would be a narrow loss of maybe -$100m, but with still good cash flow with $400m-$500m.

His 'high' scenario is suffering too, $250m ZEV credits are very unlikely IMO, and the $65k Model 3 ASP just isn't happening, nor do the opex reductions - Tesla guided 'mostly flat' opex and Tesla has a track record of an opex optimist. But the big S+X ASP mistake and revenue shortfall on that side makes up for most of the unrealistic upsides from the 'high' estimate.

 

[ZachF]

Tesla has a great product. Anyone notice the gas prices lately? $4 a gallon in Southern California. Anyone care to guess when it’ll get to $5?

Tesla's Battery In South Australia Breaks Stranglehold Of Natural Gas Industry | CleanTechnica

Here in the US we are a bit sheltered from the recent oil spike. There is a $10 discount in US oil because of shale, and the dollar has gained a lot of value in the last few years.

Oil priced in euros is pretty much back to its 2008/2011-2014 highs..
Oil (Brent) price in Euro | Markets Insider

 

[Drax7]

Price action wise I need a close above the prior days high, that would be 267.76.
To add to my position. That would signal a bottom of sorts, though not an uptrend.

 

[Right_Said_Fred]

Ok, I had a (very) quick look with 'bear glasses on', and the biggest problem I can see is the revenue estimate from 'Smack Check', which doesn't hold up:

• For some reason he uses an unrealistically low Model S+X ASP estimate of $93k. The real number is closer to $104k, as luvb2b's modeling shows, which gives a perfect match for Q1 and Q2 reported numbers. (BTW., luvb2b estimated Q2 revenue at a better than 99% accuracy and posted it to the thread, weeks before the earnings report.) This is one of the biggest contributory factors I can see: $400m inexplicably missing from the income side.
• From this point on the estimates go downhill:
• In the "low" case he estimates $90k ASP for Model S+X, despite Tesla reporting record high S+X orders, i.e. high demand.
• In the "low" case he estimates a Model S/X gross margin of 20%. This is simply not happening:
  • Tesla reported 28% gross margin for Q2,
  • Tesla reported record strong new order inflow for S+X,
  • The 3x unit count of Model 3 shifts some of the costs away from the S+X, further improving S+X gross margins due to fixed costs of shared facilities such as the paint shop shifting the cost accounting towards Model 3, and also better utilization of existing infrastructure.
  • A fully loaded Model 3 Performance overlaps in ASP with the least expensive Model S variant - which probably resulted in a shifting of Model S sales towards higher priced variants. That too improves both Model S and Model 3 margins.
• I.e. maybe, maybe a 25% gross margin for the Model S+X could be seen in a bear scenario - but it would be a major miss.
  
• In the "low" case he estimates a Model 3 gross margin miss of 12.5% instead of Tesla's 15% guidance - despite:
  • Tesla guiding a 30% reduction in labor overhead for the Model 3 in August and other efficiency improvements,
  • much stronger than expected AWD and EAP sales which shifted sales towards higher margin options and higher ASP,
  • several rounds of price hikes to get explosive demand under control, such as AWD price increase from $4k to $5k
  • much better economies of scale due to a 3x increase in Model 3 deliveries.
  • they significantly exceeded guidance in both production and deliveries, which increases margins
• I.e. maybe a 14% gross margin for the Model 3 could be taken as as the 'low' point.

I.e. the 'low' case would be, if everything went absolutely wrong in Q3: 14% M3 margin, 25% S+X margin, slight S+X ASP drop of say $103k, and all the cost increases in his calculation - but still this would be a narrow loss of maybe -$100m, but with still good cash flow with $400m-$500m.

His 'high' scenario is suffering too, $250m ZEV credits are very unlikely IMO, and the $65k Model 3 ASP just isn't happening, nor do the opex reductions - Tesla guided 'mostly flat' opex and Tesla has a track record of an opex optimist. But the big S+X ASP mistake and revenue shortfall on that side makes up for most of the unrealistic upsides from the 'high' estimate.

The short thesis on SA is that Tesla was only able to move so many Model S and X by giving huge discounts. I have seen no signs of that happening.

 

[RobStark]

Well, considering that FORD is dropping all their small cars, which get the best gas mileage, and now 95% of what their factories pump out will skew their average mpg a lot higher, won't they need more ZEV credits to get them back to the mandated CARB/CAFE average mpg?

Ford is getting rid of their sedans in the USA.

Still make subcompact 3 cyl CUVs and compact 4 cyl CUVs.

Replacing Fusion PHEV and Focus BEV with midsize CUV BEV with 300+ miles of EPA range.

And the CAFE numbers are not fixed.

There is a number for trucks and another for cars. Then they adjust based on footprint. Bigger cars get bigger allowance.

Dodge Chrysler also got rid of their subcompact and compact sedans but kept their large sedans. Also added Pacifica PHEV. Did not need to buy a lot more credits. But buys them from time to time at 50% off face value.

 

[Unpilot]

The short thesis on SA is that Tesla was only able to move so many Model S and X by giving huge discounts. I have seen no signs of that happening.

Thank you sir for wading into SA. I for one try but usually have to back out when the muck and stench gets too much for me.
So it seems the variation on the "demand theme" has not changed much.

 

[ZachF]

Safety sells!
S3X sells!
Thx Gali!

For those of you taking people out in your Model 3, make sure to tell this to parents, especially mothers in between stomping the throttle (almost wrote gas, lol) and telling them it cost $9 to fill up.

 

[ev-enthusiast]

Unfortunately the link isn't working for me. So I take it affected vehicles are not allowed to be driven on certain Berlin roads? What is the expected impact?

Yes, affected vehicles are not allowed to be driven on certain Berlin roads.
German Umwelthilfe is fighting a tough fight city by city for driving bans for #DieselGate vehicles.
Expect to hear about even more driving bans in additional cities during the next weeks / months as they are fighting in other cities, too.
This growing number of driving bans in German cities is a fact that just keeps growing and getting bigger.
While most people in Germany still talk in favor about polluting diesel engines ('we need these engines to be able to reduce CO2'-lie), you just can not discuss the existance of these driving bans!
Truth about polluting diesel tech is sinking in and it is getting more and more obvious how bad diesel engines really are.
This will help selling more electric vehicles (and Tesla vehicles) and less diesel vehicles in Germany.

 

[brian45011]

Little bit off topic, but it’s really quiet here on the NIO-subject. It went up 100% in a few days time and I saw some posts in this thread from people buying into that trend. But if had crashed completely since then and is back to where it started.

Reuters headline:
BAILLIE GIFFORD & CO REPORTS 11.44 PERCENT PASSIVE STAKE IN NIO INC AS OF SEPTEMBER 30 - SEC FILING Source text

 

[ZachF]

CNBC The Tesla effect on oil.

Nevermind climate change, I can't wait until we no longer have to deal with this nonsense.

 

[tivoboy]

So what happens after the break below $255?

re-test of 240/245, if it holds, up. If not, down to 220/225.

 

[brian45011]

Curious of which three not-for-profit media entities you're thinking of. And if it's not on the list, have you heard of The Young Turks? They're almost entirely political coverage, not business or anything else, so not usually relevant here. Also, depending on your definition of not for profit, they might not count - they have taken various forms of investment in the past, but a good chunk of their operating budget comes from subscriptions, and while they do make money from YouTube ads, they're not generally getting paid by any advertiser directly - so they're closer to a publicly funded non profit than most outlets. They at least appear not to be interested in profit for profit's sake, but to continue operating and hiring more investigative journalists and so on. They certainly are one of the most progressive outlets around.

Non-profits funnel money to their principals. Ever donate blood, and then need a transfusion in a hospital?

 

[ggr]

So, we wait for news from The Future Investment Initiative conference [FII].

Cheers!

Oct 23-25, in case anyone was wondering. I did a quick skim, didn't see anyone from PIF presenting (but could have missed someone, or maybe it is just the place for them to make an announcement). The CEO of Ford is on a one-person panel about smart cities.