TSLA Market Action: 2018 Investor Roundtable

[Frank Einstein]

Edit If you are an investor and you can put capital to work, it's a waste to put capital into something that doesn't generate profit, like a house. So maybe consider renting or a loan.

I am tempted by this - tempted to take a larger mortgage but to keep my TSLA shares. But this would be the same as taking out a loan to buy TSLA - something I'd never normally do as it adds a ton of risk to my family's finances.

Someone once told me that the nicest houses in town are owned by the people who sold too early, but on the other hand, I fully agree with your assessment of Tesla's potential. Maybe I should just be grateful for my nearly 10x return on TSLA and not be too greedy? I'm really not sure what the best path is for my family.

Thanks for taking the time to write out your view of Tesla's future - I appreciate it.

 

[YasB]

First question is where this guy got that photo. Since it's a crazy permabear, it could be weeks old.

If that photo is dated recently, then this confirms what some have speculated: the tent is for GA4, and GA3 is inside the building.

He said it was taken yesterday and probably took it himself. And yes, he's crazy enough to regularly post pictures of the employee, contractor and delivery parking lots. It's up to you if you want to believe that or not. I'm willing to believe it for now. At the same time, i wouldn't bet money on any single 'fact' that is posted on Twitter (or here, or Electrek or SeekingAlpha). It's more about the overall picture ...

https://twitter.com/DowdEdward/status/1008228958293278720

I'm honestly confused about that assembly line stuff right now. If you take another look at the assembly lines they showed in the CNBC? interview and some of the other pictures we have seen a while ago showing the lines inside the plant, the new one looks radically different. There were dozens if not hundreds of robots, it looked much longer, had a conveyor system to move the cars around and looked more sophisticated than what we were shown yesterday. Not sure what to make of that right now. Could it be a manual line for the new versions? Maybe. Could it be for finish or end-of-line control or a partial line to help GA 3 or so? Well, why not? Could it be an early version of a fourth line to help achieve a higher run rate that gets fleshed out in the next months or so? Sure. What it probably isn't, is a completed new general assembly line with any meaningful level of automation.

Based on the clues dropped so far, GA1+GA2+GA3 will get Tesla to a reliable 5000/week. I have no doubt that the module zone 4 bottleneck can be handled, and likewise with the body line. The only one which sounds worrisome is the paint shop.

I'm not sure whether they can do that in 2 weeks. On the other hand it probably won't matter much. Eventually they'll get to and beyond 5,000 a week. About 11 month ago, when the first delivery event took place, expectations were set for 5,000 a week in December 2017. Meanwhile they delayed that for 6 months, which means they already lag the planned output by something like 120,000 cars, while the stock price is back to comparable levels. I don't see why another small miss of 5,000 or even 10,000 cars produced would matter, compared to that. More important things have happened in Q2, like having to introduce additional shifts, updating China and Model Y timeline, quitting the Home depot deal and restating they aim for profitability in Q3 / Q4. Anyway, there's a steak waiting in my kitchen and it's facing an existential crisis. I should stop babbling and offer to help ...

 

[anon]

The fire has finally made it to many mainstream news websites overnight, so not looking good for tomorrow!

 

[rameshbende]

Some predictions for Q2.
Model 3 production of 30K and deliveries 20K.
Model 3 production rate at the end of june to be more than 4.5K per week.

So if we look at the bigger picture production tripled and production rate more than doubled compared to Q1. Tesla hits 5K per week by end of june or couple of weeks later is immaterial. Just to put in perspective Model 3 at 4.5K means Tesla has effectively tripped as company. Which is huge achievement given the complexity involved in manufacturing.

Off course bears will see it as Elon lied about 5K and hence Tesla profitability in Q3 is also lie. No matter what happens bulls will find some excuse. So even if tesla hits 5K they will Tesla wont be profitable though and if Tesla is profitable in Q3 they will say it as one off.

But the fact remains Tesla is continuing to make huge progress in Model 3 Ramp and will achieve profitability in Q3. My predictions for Q3 is 200 million of GAAP profit , Q4 is 600 million GAAP profit and Q2 2019 when M3 is fully ramped profit will be 1.5 billion. Tesla does not need to raise cash to fund Model Y and semi.Tesla will generate 2.5 billion cash flow from operations in Q2 2019 alone and will continue in following quarters.

I see many people in this forum think Tesla will be profitable for only just two quarters and then as they start making investments for Model Y and semi profitability will go away in 2019. That wont be the case because capital investment Tesla is making gets marked as depreciation only when first car is produced and sold. Till then CAPEX does not appear in P/L statement. Off course any employees expense Tesla incurs due to employees working for model Y and semi will get booked in P/L statement but that wont be making huge dent in profit because Tesla wont be hiring in big numbers until they start production. So profitability will dip in first half of 2020 as depreciation kicks in for Model Y and Semi plus employees are hired in big numbers but production is low. But profit will bound back later in second half of 2020 as Ramp progresses.

I see stock to remain volatile over next 6-9 months as model 3 at 5K, profitability, model 3 at 10K, Free cash flow, sustained profit, solar roof, Powerwall2, Full self driving and valuation all these questions get answered. In second half on 2019 stock will be stable and be S&P 500.

 

[mongo]

I'm honestly confused about that assembly line stuff right now. If you take another look at the assembly lines they showed in the CNBC? interview and some of the other pictures we have seen a while ago showing the lines inside the plant, the new one looks radically different. There were dozens if not hundreds of robots, it looked much longer, had a conveyor system to move the cars around and looked more sophisticated than what we were shown yesterday. Not sure what to make of that right now. Could it be a manual line for the new versions? Maybe. Could it be for finish or end-of-line control or a partial line to help GA 3 or so? Well, why not? Could it be an early version of a fourth line to help achieve a higher run rate that gets fleshed out in the next months or so? Sure. What it probably isn't, is a completed new general assembly line with any meaningful level of automation.

The robot section is powertrain/chassis marriage and a bunch of the interior.
The tent is a General assembly line (50 steps or so), likely stuff like wheel covers, trim pieces, door seals, QA (but with the new line style, who can say...)

 

[J X 3]

I am tempted by this - tempted to take a larger mortgage but to keep my TSLA shares. But this would be the same as taking out a loan to buy TSLA - something I'd never normally do as it adds a ton of risk to my family's finances.

Someone once told me that the nicest houses in town are owned by the people who sold too early, but on the other hand, I fully agree with your assessment of Tesla's potential. Maybe I should just be grateful for my nearly 10x return on TSLA and not be too greedy? I'm really not sure what the best path is for my family.

Thanks for taking the time to write out your view of Tesla's future - I appreciate it.

It's your decision, investments always come at a risk.
There is potential for upside even short and mid term too .You are at 10x now but maybe in 2 years it would be 40x and then in 10 years 1000x .
I like long in things that can grow 2-3x in 2-3 years, like AMD at under 2$ in 2016 vs 16$ now, Micron at under 10$ a couple of years ago vs almost 60$ now.
Ofc you are responsible for your decisions and you need to be comfortable with what you decide.

On the car sales side, can they make 500k M3 +100K S&X next year and end up around 40B revenue? At what margins?
Then in 2020 can they make 800k M3&MY +100K S&X at 25% margins, for maybe 60B revenue, 15B gross profit, 9B op income?
In 2021 ramp Model Y and add pickup truck for 75B or better. Roadster and Semi would add some too but not including those to keep it simple.

And if they can do that, will there be demand? Can they make good enough products? Would suck if demand for M3 is 5k per week and they have production capacity for 10k.

They keep screwing up production so some caution on volumes is normal and their products are much better in many ways than the competition but they got weak points too, like the interior not feeling luxurious or M3 no HUD increasing friction instead of decreasing it - not the safest and most comfortable solution so they increase friction, make the user's life harder.

So do your own math, how revenue trends, how income goes with it. The multiplier is driven by growth, they are not gonna have 30-100 P/E if growth stops.
The car as a service stage and its huge potential comes when it comes, Waymo is already aiming to start later this year so Tesla better get full autonomy working in 2 years or it gets risky.

Ofc nobody needs billions to have a decent life so not suggesting you starve today to be very wealthy tomorrow but do your best to balance the two.While not forgetting about risks ofc.

Tesla dares to innovate, aim high and get it done. on the other hand, Musk doesn't seem to own a watch and better planning might not hurt.
They've been fully committed to electrification and autonomy, unlike anyone else and that's a huge advantage. Others are mostly doing it just in case, so they don't miss out.

Good luck in finding the right balance between today and tomorrow, hope you find a reasonable way to keep some shares, if you end up seeing potential in Tesla.

 

[YasB]

Off course bears will see it as Elon lied about 5K and hence Tesla profitability in Q3 is also lie. No matter what happens bulls will find some excuse. So even if tesla hits 5K they will Tesla wont be profitable though and if Tesla is profitable in Q3 they will say it as one off.

I suppose that was meant to read bears.

My predictions for Q3 is 200 million of GAAP profit , Q4 is 600 million GAAP profit and Q2 2019 when M3 is fully ramped profit will be 1.5 billion. Tesla does not need to raise cash to fund Model Y and semi.Tesla will generate 2.5 billion cash flow from operations in Q2 2019 alone and will continue in following quarters.

I predict none of this will happen. Now let's wait another year.

 

[lklundin]

Tesla does not need to raise cash to fund Model Y and semi.

Here is my take on that:

Elon Musk has publicly lamented how Tesla went for public financing (unlike SpaceX), since this limits Tesla's freedom.

Still, following the commitment to speed in the Secret Master Plan, Tesla should try to raise funding for the Y and Semi as soon as it can. This point in time would arrive when Tesla demonstrates to potential funding sources that the 3 starts to pay for itself, i.e. around the time when the 5k/week rate is reached, i.e. right around now. The Shanghai GF will for example require several Giga-dollar.

However, my guess is that Elon Musk has had it with the endless reports of how Tesla relies completely on external funding and how it has not and will not ever post a profit (except for that one quarter, before they went and raised more funds).

So instead, I speculate that Elon Musk is thinking: To hell with all the Shorts and the naysayers, I will postpone the launch of the Y and the Semi by six months and be self-financing, and in doing so I will utterly destroy those pesky short holders, that have purposely created so much negative attention regarding Tesla.

 

[Yggdrasill]

The robot section is powertrain/chassis marriage and a bunch of the interior.
The tent is a General assembly line (50 steps or so), likely stuff like wheel covers, trim pieces, door seals, QA (but with the new line style, who can say...)

Powertrain/chassis marriage and interior is all a part of general assembly. It goes like this: Body in White -> Paint Shop -> General Assembly.

I agree with the view that GA1 is S/X. (Someone mentioned that they thought S and X each had a general assembly line, but I think they each have a body in white line, while general assembly is on the same line.)

Then you have GA2 and GA3, which are the Model 3 lines installed mostly last year, and then you have GA4 which is new. Judging by the state of the tent, I expect that much of the line is actually indoors, and then when the robots have done most of the heavy lifting, the cars are routed to the tent, where the cars are finished.

 

[Words of HABIT]

As it’s Sunday and the markets are closed, I just wanted to take this opportunity to give my heartfelt thanks to this community. I’ve been lurking on this forum for many years - as I’m neither a sophisticated investor nor an engineer, I don’t have much to add to the discussion. I don’t touch options, I don’t touch margin - I’m strictly buy-and-hold only (and most of my money is in boring index trackers). My average TSLA purchase price is a shade under $40.


I’m about to buy a house for myself, my wife and our three kids - in large part thanks to TSLA. This means selling most of my shares. I know I’ll certainly miss out on future gains, but my purchase of TSLA has achieved its original goal - to boost my family's standard of living.


I mention this for two reasons. First, to express gratitude to Tesla, TSLA and the TMC community for making this possible. Secondly, because there’s been a lot of talk about leverage, margin, options, and risk - which I fear for some people means knowing when to buy but not when to sell. I hope I’m making the right decision to sell now, and I hope other people on this forum who have no idea who I am, but whose wisdom I’ve learned to respect over the years continue to be safe on the market.


I sincerely wish you all well for the future.


(lurk-mode reactivated)

Frank,
Congratulations on your 10X gain with TSLA. Your TSLA returns likely outpace 95 out of 100 TMC posters on this thread. Surprised you have not been an active poster.

There is an old expression, "one bird in the hand is worth two birds in the bush." Selling TSLA now after your 10X gain, at a Share Price just shy 7% from it's All Time High, to purchase Real Estate, IMHO would be a very smart move for someone in your position. TSLA shares in themselves can not be enjoyed. They are placecards for future enjoyment. A house and home is something that you and your family will enjoy most every minute of every day. Live for the living.

However you may wish to keep 10% of your TSLA, just to give you an excuse to come back to this forum. If some of the TMC posters (me included) have it right, this 10% portion could grow to your reach your current cost position over the next ten years, then sell to pay off your mortgage.

Best, Daniel

 

[mongo]

Powertrain/chassis marriage and interior is all a part of general assembly. It goes like this: Body in White -> Paint Shop -> General Assembly.

I agree with the view that GA1 is S/X. (Someone mentioned that they thought S and X each had a general assembly line, but I think they each have a body in white line, while general assembly is on the same line.)

Then you have GA2 and GA3, which are the Model 3 lines installed mostly last year, and then you have GA4 which is new. Judging by the state of the tent, I expect that much of the line is actually indoors, and then when the robots have done most of the heavy lifting, the cars are routed to the tent, where the cars are finished.

You could be right. I think Elon said GA was only 50 steps in a previous call, and I thought that to be the manual people side of things. If GA is 50 steps including the automation, then the part inner/ part outer would make sense.
But it that's the case, wouldn't they need another large batch of robots per line? (Along with material feeders) Doesn't seem possible to set that type of equipment up in a few weeks time. It also means that only 1 of the 3 lines doesn't need attention.

Tell ya'll what, since we can keep going in circles, I'm gonna drop this 3 vs 4 thing and just deal with my mental dissonance internally regarding the data till Elon tweets the answer.

 

[neroden]

I thought that there were two GA lines for the S&X. (With #1 being S only, and #2 being for both S&X, but mostly used for X.)

No. This I can state definitively, because I've seen it. There's only one GA line for the S&X together. There is a body line (#1) for the S and a body line (#2) for the X.

(Edit: the body line for the X was supposed to make both S and X, and they were going to transition S to that body line, but they changed their minds and left S on the original body line)

 

[neroden]

Ya, I remember giving you words of caution during that time. But I only did it once since I know human nature means nobody will listen to advice, especially when they are winning

In my opinion, leverage using option is fine if you don't dip into your margin to achieve leverage. However, leverage using options or futures needs to be structured. You need to have a plan to manage your book just like the pro gamblers in a Casino. Problem arises when margin gets involved and you get an uncontrollable event where the broker empty your hands.

Right. A plan to deal with catastrophe situations. Initially I only sold puts covered by cash. Then I realized I could sell them against my margin capacity without paying interest, but I'm still only selling them against the margin capacity provided by *stocks which aren't Tesla*, and I'm using only about half of *that* capacity, so that if those stocks drop by 50%, *and* Tesla dips so that all my puts get executed, I can have them executed without borrowing money at all.

The problem with margin leverage is that you are almost always forced to go all in or all out.

The curious interest rate structure for margin (lower rates on larger loans) encourages this. My principle is to never pay interest, however.

Because of margin's psychological effect, when selling, the trader tend to sell all. It is very bad for tax planning purposes. Especially when the $$$ amount reaches the higher levels. I don't think I've met anyone who's still doing all in with leverage at my level. It doesn't make sense to have most of it getting taxed away. You also run the risk of having to pay a huge capital gains tax but having your networth wiped out at the same time, which means debt to the IRS.

But you encountered your catastrophic event and managed to stay in, which mean the eventual recovery. Speculators who survives that tends to be able to perform better.

 

[bdy0627]

Tesla produced 2270 Model 3s in the last week of April and now has capacity for at least 3500/week in mid-June -- more than a 50% production increase in about 6 weeks. Tesla gives update on Model 3 production: battery module now OK, focus on automation update

Pretty impressive. Doesn't look like 5K/week by end of June is in the cards, but hopefully they'll be close (in the 4K+ range) after one more round of upgrades, although there is obviously a lot of work to be done to get to 5K/week.

Having Performance production up and running much earlier than almost anyone expected should really help balance out the margin equation for Q3 and Q4, assuming Tesla can ramp up relatively quickly. Looking forward to hearing how the P performs now that it will start getting delivered to customers. Given's Elon's tweets, I think it is going to surprise a lot of the doubters.

I'm very interested to hear about the performance of the P3 as well. Elon sure talked it up, and he generally does not exaggerate on performance of the vehicles, just the timelines.

 

[bdy0627]

Whatever that building is, it is not a tent.

Steel frame with some sort of polymer skin is going to be light and strong. Plus it’s in Fremont, where it doesn’t snow or sleet or freeze or have dust storms or basically anything but some rain between Late December and late March.

Pretty interesting solution

Seems like a wise choice from the standpoint of minimizing capex for a new GA line if it can't fit in the Fremont factory building. It's undoubtedly also the fastest structure they could build to house the new line.

 

[Waiting4M3]

Powertrain/chassis marriage and interior is all a part of general assembly. It goes like this: Body in White -> Paint Shop -> General Assembly.

I agree with the view that GA1 is S/X. (Someone mentioned that they thought S and X each had a general assembly line, but I think they each have a body in white line, while general assembly is on the same line.)

Then you have GA2 and GA3, which are the Model 3 lines installed mostly last year, and then you have GA4 which is new. Judging by the state of the tent, I expect that much of the line is actually indoors, and then when the robots have done most of the heavy lifting, the cars are routed to the tent, where the cars are finished.

So sounds like the "tent" could be the "End of Line" that Elon said in the letter. Also the 1st 3P photo in the "tent", that Elon tweeted that is coming off the line, that spot in the "tent" should be the literal "end of line", right?

 

[BozieBeMe2]

Man, I always think the same thing. Some are Elon is god or I love you Elon, but the majority are just stupid jerks. Unfortunately such is the way of wide open social media. It all seems that way, whether it's the survivor of a school shooting or a respected journalist (there still are some believe it or not). I'm glad this is a closed group and the folks here seem to be intelligent and respectful of each other's opinions.

Twitter does seem to attract a certain amount self-professed evangelists who are hell bent on saving us from ourselves. They and only them, can see the error of our ways and mistakes.
The amount of intelligence and foresight there, is beyond my scope, so, thank goodness we have such an abundance of brotherly love to help save us from the evil Tesla Empire.......

Long Live the Resistance! /s

 

[Reciprocity]

It's your decision, investments always come at a risk.
There is potential for upside even short and mid term too .You are at 10x now but maybe in 2 years it would be 40x and then in 10 years 1000x .
I like long in things that can grow 2-3x in 2-3 years, like AMD at under 2$ in 2016 vs 16$ now, Micron at under 10$ a couple of years ago vs almost 60$ now.
Ofc you are responsible for your decisions and you need to be comfortable with what you decide.

On the car sales side, can they make 500k M3 +100K S&X next year and end up around 40B revenue? At what margins?
Then in 2020 can they make 800k M3&MY +100K S&X at 25% margins, for maybe 60B revenue, 15B gross profit, 9B op income?
In 2021 ramp Model Y and add pickup truck for 75B or better. Roadster and Semi would add some too but not including those to keep it simple.

And if they can do that, will there be demand? Can they make good enough products? Would suck if demand for M3 is 5k per week and they have production capacity for 10k.

They keep screwing up production so some caution on volumes is normal and their products are much better in many ways than the competition but they got weak points too, like the interior not feeling luxurious or M3 no HUD increasing friction instead of decreasing it - not the safest and most comfortable solution so they increase friction, make the user's life harder.

So do your own math, how revenue trends, how income goes with it. The multiplier is driven by growth, they are not gonna have 30-100 P/E if growth stops.
The car as a service stage and its huge potential comes when it comes, Waymo is already aiming to start later this year so Tesla better get full autonomy working in 2 years or it gets risky.

Ofc nobody needs billions to have a decent life so not suggesting you starve today to be very wealthy tomorrow but do your best to balance the two.While not forgetting about risks ofc.

Tesla dares to innovate, aim high and get it done. on the other hand, Musk doesn't seem to own a watch and better planning might not hurt.
They've been fully committed to electrification and autonomy, unlike anyone else and that's a huge advantage. Others are mostly doing it just in case, so they don't miss out.

Good luck in finding the right balance between today and tomorrow, hope you find a reasonable way to keep some shares, if you end up seeing potential in Tesla.

Not arguing for or against anything here. but I wanted to bring up a possibility that I have never seen anyone make. Why do we assume S/X will always be pegged at 100K/Y? With Tariffs eventually being phased out in China and maybe even lowered in Europe (If Trump can pull it off.) My latest theory is that Tesla can double S/X production and will come out with an S/X 120D using 2170 cells while getting rid of the S/X 75D and keeping the S/X 100D using 18650 cells though at 2x the volume. This will help them leverage Panasonic to the fullest and allow them to migrate to 2170 over time for S/X. I have no idea on the timing, but the best timing would be now with the tax credits phasing out with the biggest credit gone by years end. But regardless of US tax incentives, the China market will explode if tariffs drop $10k per car. This will have the effect of doubling or even tripling the size of the market for Tesla in China. I obviously thought this was a better theory a few weeks ago when trade talks looked positive and Xi was talking about lowering barriers. But I still think much of the current trade war stuff is bluster and all sides will come to a fair deal where tariffs and barriers in general are lower for everyone.

 

[wipster]

Twitter does seem to attract a certain amount self-professed evangelists who are hell bent on saving us from ourselves. They and only them, can see the error of our ways and mistakes.
The amount of intelligence and foresight there, is beyond my scope, so, thank goodness we have such an abundance of brotherly love to help save us from the evil Tesla Empire.......

Long Live the Resistance! /s

I certainly hope you didn't misunderstand my post and that your post above was in jest, as I certainly do not think Tesla is an evil empire by any stretch of the imagination. I was just trying to differentiate between the twits who either regard Elon as the second coming or think of him as Lucifer and the folks on this forum and TMC in general who agree in Tesla's mission and invest according. This forum gives us the opportunity to discuss our investments and how various actions by Tesla and others will affect the SP and I appreciate being able to discuss it intelligently and without animosity.

 

[BozieBeMe2]

I certainly hope you didn't misunderstand my post and that your post above was in jest, as I certainly do not think Tesla is an evil empire by any stretch of the imagination. I was just trying to differentiate between the twits who either regard Elon as the second coming or think of him as Lucifer and the folks on this forum and TMC in general who agree in Tesla's mission and invest according. This forum gives us the opportunity to discuss our investments and how various actions by Tesla and others will affect the SP and I appreciate being able to discuss it intelligently and without animosity.

By all means! It was in Jest, notice the /s?
that means sarcasm, not meant toward you but Twitter's ditizens
Twitter has an abundance of 'Shorts'