TSLA Market Action: 2018 Investor Roundtable

[lklundin]

• S&P 500 inclusion requires four profitable quarters in a row by some sources, five by others, i.e. it would happen around this time next year or early 2020. Current inclusion criteria used by the S&P 500 committee seem to be somewhat opaque, but I don't think there's a rule to have a profitable year, is there?

Our forum has seen plenty of arguments that inclusion in the S&P 500 will be beneficial to Tesla's SP.

With SEC's legal action against Tesla and Elon Musk as the worst example, I believe we have seen plenty of examples that Wall Street does not play by the rules when it comes to Tesla.

I can thus very easily imagine a number of influential Wall Street players who would stand to lose money by the inclusion of TSLA into S&P 500, and who would therefore discreetly approach the S&P 500 committee to explain how this inclusion really need to happen at a later time, if at all.

Feel free to make me more optimistic about TSLA's coming inclusion in the S&P 500.

 

[Chickenlittle]

Panasonic chairman on earnings call
1. To take gigafactory to 35 GW by March
2. Highest priority to make batteries at China gigafactory
3. Concern over musk behavior but sees no disruption in company operations and urges strong second in command to be appointed

On second note why not nominate Straubel to board as independent member

 

[Words of HABIT]

Starlink could become the worlds biggest internet provider. Worldwide 5G coverage for $30 a month x 1 billion people.

I'd drop my current internet service provider (Rogers) in a heart beat to move to Starlink, no door to door salesperson, gimmicks required.

 

[ItsNotAboutTheMoney]

Panasonic chairman on earnings call
1. To take gigafactory to 35 GW by March
2. Highest priority to make batteries at China gigafactory
3. Concern over musk behavior but sees no disruption in company operations and urges strong second in command to be appointed

On second note why not nominate Straubel to board as independent member

Because he's not independent.

 

[Artful Dodger]

In other words, if the battery production is currently the limitation factor, MR can allow to make ~20% more cars with margin 13.2% (instead of 15% that the LR has).

This estimate is already stale. During the 2018 Q3 Earnings Call, Tesla announced the gross margin for Model 3 LR was 20.4% whereas this author is stil using the 15% estimate that Tesla provided during the Q2 Earnings call.

On Topic: Macros up at the Opening:
NASDAQ: 6,946.62 +136.50 (2.00%)
Oct. 31, 9:41 a.m. EDT

 

[defc0n]

Looking a bit candle toppy again. Made a few bucks off my bookface trade. Will be looking to see if it gets to $310, and if that doesn't hold, $295ish.

 

[AlexS]

no buyers in the morning

 

[scaesare]

I am a smart dude, like easily top 1%...

 

[tivoboy]

Visited the local showroom (no service or delivery capability) today. One M3 on the floor and another one in the mall's parking lot for test drives. Was told I had less than a week to order a MR if I wanted it delivered before year-end to receive the $7,500 tax credit.

Yes it's odd. At the beginning of the month of Oct, they said the 15th was the cut off (maybe it was 18t) Even now just today, tesla is saying if one wants say the mid range model pack, they can still order now to get it delivered by end of year and that is basically nationwide. They are saying only four weeks lead time if picked up and delivered at the Fremont factory and eight weeks to East coast. So, they can either produce them quickly or have them but I can't imagine they can still guarantee it if they don't think they can deliver.

From my post above, I think there isn't going to be TOO much of a fall off come H119 due to the 7500 cut in half to 3750. Not yet at least.

 

[Fact Checking]

Our forum has seen plenty of arguments that inclusion in the S&P 500 will be beneficial to Tesla's SP.

That part is a certainty:

• Inclusion of any stock in the S&P 500 mandates passive index funds to buy it, which means about 7% of Tesla's float, or about 9 million shares will be bought. That alone will give TSLA a nice pop.
• Being part of the S&P 500 is also a prestigious position that raises the visibility and eligibility of TSLA stock.

I can thus very easily imagine a number of influential Wall Street players who would stand to lose money by the inclusion of TSLA into S&P 500, and who would therefore discreetly approach the S&P 500 committee to explain how this inclusion really need to happen at a later time, if at all.

Feel free to make me more optimistic about TSLA's coming inclusion in the S&P 500.

So by the time Tesla becomes part of the S&P 500 I think most of the shorts will be gone and Wall Street is going to be optimistic about Tesla.

(They just need time to build up their big short positions of ICE automotive. )

Tesla not being part of the S&P 500 is already exceptional: there are $5b market cap companies there and Tesla with 50b+ market cap is not included.

So I'm more optimistic - but Wall Street shenanigans cannot be 100% ruled out either ...

 

[cheshire cat]

no buyers in the morning

Well someone just dumped a load - price down to €291 coming back up for air tho'

 

[tivoboy]

Not sure what you mean by "measurable". Does that mean 1% or 10% or 50% ? All are measurable.

All the folks I know who are likely to buy 3 are high earning younger folks who don't want to spend $100k on a car. They probably pay upward of $30k in taxes a year.

The model 3 is clearly not that same demographic overall. By measurable I don't mean 1%. Of the top five cars traded in for a Tesla Model 3, number 1 was a prius, #3 was a Honda Accord and #4 was a Honda Civic. There was a survey done back in April of Tesla owners/buyers household income and Model 3 was less than half that of Model S buyers. So, I think we know something, but clearly not enough to say what measurable is - definitively.

What do YOU think will happen and what the impact will be?

 

[Ellec]

Backup above $335 now.

 

[KarenRei]

Apologies if it was already posted- Troy's take on the Lemur is quite fascinating - Tesla starts production of the Model 3 Mid Range - Teslike.com

The important bits:

• Based on my latest calculation, I estimate that the Model 3 MR battery pack has 3,648 cells compared to 4,416 for LR and 2,976 for SR.
  
• In terms of gross margins, after the latest price adjustments, the Model 3 MR has only 1.8% worse gross margins than the LR.

In other words, if the battery production is currently the limitation factor, MR can allow to make ~20% more cars with margin 13.2% (instead of 15% that the LR has).

Um... Model 3 LR is $53k, because it includes dual motor. Not $49k. Dual motor adds a couple thousand dollars more profit for Tesla on the LR, meaning that the comparative profitability difference between LR and MR at present is much greater.

This table might be comparing some hypothetical future scenario where you can detach dual motor from LR and MR.

 

[mongo]

As to your "the sum of the last four quarters, as well as the last quarter, 'should' be GAAP profitable" claim, could you please provide citation where the S&P Index Committee defines those rules?

It's from the 1500 rules which you quoted.

S&P Composite 1500.

The sum of the most recent four consecutive quarters’ Generally Accepted Accounting Principles (GAAP) earnings (net income excluding discontinued operations) should be positive as should the most recent quarter.

I get where you were going with the 500 vs 1,500, but you may have it a little backward. the 1500 is made up of the 500, 600, and 400 indexes. So the 500 eligibility criteria is the 1,500 eligibility as spelled out in the document.

S&P Composite 1500. The index is a combination of the S&P 500, S&P MidCap 400, and S&P SmallCap 600.

 

[Starno]

Would be nice if we close above 340

 

[Oil4AsphaultOnly]

Heads have rolled at SpaceX.

Musk shakes up SpaceX in race to make satellite launch window: sources | Reuters

How does this affect the Tesla Network?

That reuters article is misleading. The build out of starlink is going to be cash-flow negative for a long time (consider it infrastructure investment)! It will be counter to spaceX's profitability, not critical for their cash-flow. someone has a narrative to push.

as for Tesla, the sooner starlink is up, the sooner they can stop paying at&t for all the new cars going into service.

 

[mikevbf]

2. Highest priority to make batteries at China gigafactory

Are you sure about that? Fred over at Electrek is reporting the opposite:
"Tsuga was asked if they plan to invest in the project, but the CEO said that they 'will put the priority on building additional capacity at the Gigafactory over China'”.

 

[LoveTSLA]

you call this no buy?

 

[X Fan]

This was pointed out by @brian45011 in this comment, quoting the 10-Q:

"Panasonic has partnered with us on Gigafactory 1 with investments in the production equipment that it uses to manufacture and supply us with battery cells. Under our arrangement with Panasonic, we plan to purchase the full output from their production equipment at negotiated prices. As these terms convey to us the right to use, as defined in ASC 840, Leases, their production equipment, we consider them to be leased assets when production commences. This results in us recording the cost of their production equipment within property, plant and equipment, net, on the consolidated balance sheets with a corresponding liability recorded to financing obligations. For all suppliers and partners for which we plan to purchase the full output from their production equipment located at Gigafactory 1, we have applied similar accounting. As of June 30, 2018 and December 31, 2017, we had cumulatively capitalized costs of $955.4 million and $473.3 million, respectively, on the consolidated balance sheets in relation to the production equipment under our Panasonic arrangement. We had cumulatively capitalized total costs for the Gigafactory 1 of $4.14 billion and $3.15 billion as of June 30, 2018 and December 31, 2017, respectively."​

So if this is is capitalized by Tesla and expensed as a capital lease, not as an operational lease, then that would suggest a lease-to-own construct.

I might be wrong about that though. @brian45011's comment also includes links to two contracts that define the Gigafactory 1 arrangement.

Appreciate the detail. From what I know, Capitol lease has four possibilities, two of which wouldn't convey ownership:

A lessee should record a lease as a capital lease and therefore apply capital lease accounting if ANY of the following criteria are met:

• First Criterion: Ownership of the underlying asset transfers to the lessee after the lease term; or
• Second Criterion: There is a “bargain purchase option”, meaning that the lessee has an option to buy the underlying asset after the lease term at a price that’s below-market; or
• Third Criterion: The lease term is 75% or greater than the useful life of the underlying asset; or
• Fourth Criterion: The present value of the minimum lease payments is at least 90% of the fair value of the asset.