JRP3
Hyperactive Member
You're new around here.I thought the ER and conference call was okay tbh. I don't see the " terrible" as some of you see though?
Maybe because I didn't have any special expectations ?
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That's true
But what would a good ER and conference call would have looked like for you ? " Yeeepeee, we are not yet at 2500/w, but very close, we are making HUGE progresses, by end of march we'll definitely be there .... ". Something along those lines ?
Elon not needing to treat current M3 production rates like he was playing dodge ball would have been nice.
So looking at the Q4 results it seems that Tesla needs to get to about 4500 Model 3/ week to get to positive net income.
$600m quarterly net loss will be offset by 50,000 Model 3 at $50k with ~25% GM. Thats around 4200/week. So won't happen in Q1 (not surprised) but could happen in Q2. We should see a significant drop in cash used for operations between Q1 and Q2.
More interesting is looking to see Model 3 scale beyond 5,000 / week. At that point cash flow positive, but of course it will be aimed for Model Y and next GF.
$600m quarterly net loss will be offset by 50,000 Model 3 at $50k with ~25% GM. Thats around 4200/week. So won't happen in Q1 (not surprised) but could happen in Q2. We should see a significant drop in cash used for operations between Q1 and Q2.
More interesting is looking to see Model 3 scale beyond 5,000 / week. At that point cash flow positive, but of course it will be aimed for Model Y and next GF.
Looks like production ramp is going to take longer than expected. If Tesla is flying in module production equipment in March to the GF and then need that to get to 2000-2500, then we're probably looking at 1000 cars/week average until we get that up and running. And Elon is probably thinking he can get it up and running by last week of March... but it's probably cutting it close. And then they need to get a new parts conveyance system installed by end of Q2 to reach 5000 cars/week, and I'm not sure how far along they are with that.
Looks like also Tesla pushed back delivery estimates for everyone's online accounts... even with an owner reservation the standard battery is now pushed back from "early 2018" to "late 2018".
So, ramp is probably going to take longer than expected. But they'll get through it, like Elon said. It's a solved problem. Funny, I used those exact words in a post this morning on my site, "Tesla has their work cut out for them in terms of ramping Model 3 production. But in my opinion this is a solved problem. In other words, ramping production has been done by every major auto manufacturer on the planet, and Tesla will be able to do it as well. It might take a bit longer than expected, but they’ll get there."
As to stock price action tomorrow... I don't know. I think you got a lot of good things from Q4 earnings, but more production ramp delays might take dampen spirits. We'll see.
Looks like also Tesla pushed back delivery estimates for everyone's online accounts... even with an owner reservation the standard battery is now pushed back from "early 2018" to "late 2018".
So, ramp is probably going to take longer than expected. But they'll get through it, like Elon said. It's a solved problem. Funny, I used those exact words in a post this morning on my site, "Tesla has their work cut out for them in terms of ramping Model 3 production. But in my opinion this is a solved problem. In other words, ramping production has been done by every major auto manufacturer on the planet, and Tesla will be able to do it as well. It might take a bit longer than expected, but they’ll get there."
As to stock price action tomorrow... I don't know. I think you got a lot of good things from Q4 earnings, but more production ramp delays might take dampen spirits. We'll see.
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DurandalAI
Member
Thankfully it is purely cosmetic, but I’m sure that hurts the ego. I personally would go for some touch-up paint and then call it a day until later in case of other issues, but maybe I wouldn’t if I paid that much for a car. Lol. Dirt poor compared to you guys.
Speaking of, looks like I get another 3 months of limping along with my Leaf until I get my Model 3 since my delivery estimate was pushed back. At this rate I’m pondering a used Model S to bump me up in the priority list.
Very much agree with everything DaveT says. One caveat, my reservation has changed to the following: Model 3 current config changed from 4 weeks to 3-6 weeks. Dual motor has been delayed to "Mid 2018" and standard battery has now been changed to "Late 2018."
JRP3
Hyperactive Member
Tech summed it up fairly well. I have no confidence that Model 3 production issues are well in hand. This stuff should have been sorted long ago.
I think he knows what's needed to achieve (and how to achieve it) and everyone at Tesla are working at their maximum speed to achieve it. Thus I think that's why he seems like it's not a big deal. Basically he sees everything is on path, as of today, a long path yes, maybe even longer than expected, but still the right path.
bdy0627
Active Member
I don't think you can apply 25% gross margins at that point. On the conference call, Musk reiterated that is their margin goal for M3, but probably not until much later in the year. No way do they hit that level of gross margin in Q2. It's possible they could approach it at the very very end of Q2 but margins for the quarter would be much lower.
Ah ok, thank you for the clarification.
Though I must say end of Q1 is in barely 7 weeks. And they confirmed that 2500/w by end of Q1 is still the plan. Now they might miss it of course, that's even the most likely outcome.
But from your perspective, it seems like they won't even achieve 2000/w by end of Q1. If that would be the case I think they would have updated the target and said something along the lines " 2500/w by early Q2 ".
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But maybe I'm naive and as you said I'm new in here, so I don't know if that's standard practice ...
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The macro should soar if the threat of uncertainty over budget future is reflected in the Senate compromise. Much depends on Pelosi and Ryan now. Trump could claim his hardball tactics achieved compromise—bipartisanship. Looks like the Senate has chosen to govern; a popular stance in an election year. More BFOs.
Edit: Just came across details from WPost:
Opinion | McConnell and Schumer jam the House: Six things that just happened
Trump's power to surprise will be diminished by getting rid of the cap on debt.
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bdy0627
Active Member
Completely agree with what DaveT said here. The production may trickle up a bit from 1,000 but probably not much until late March. At that point, once they get the new module line installed, I would expect the rate to almost suddenly jump to 2,000. That should happen near the very end of March or possibly early April. I think it would be wise for investors to anticipate that production jump.
Didn't get to hear the conference call since I was on a plane. Can anyone explain what the positives are in this call? I think we all agreed the biggest thing that would determine reception was news on the Model 3 ramp. Way I read the shareholder letter : we are not going to get to 2500/week this quarter at all. And when @DaveT says the conference call added the news they need to fly in module assembly equipment to the gigafactory by March, that's even worse than I thought. And with the push back of the SR model to end of this year, it means GM beat Tesla a full two year with a $35K car to the market.
JRP3
Hyperactive Member
Standard practice is to miss projections. I expect improvement over time.
bdy0627
Active Member
So here's my take on the Q4 ER/CC and how I think this will play out on the stock. M3 production is the driver of this stock. No question there. Production is around 1,000 per week, perhaps. Musk actually wouldn't answer the question of what the current production rate is. It might be a bit less than 1,000 per week. Battery module production is the limiting factor. They urgently developed a new battery module line in Germany that will be flown to the Gigafactory for installation in mid to late March. That will allow production to very rapidly increase to 2,000 per week. Until then, they are running semi-manual battery module production that probably only allows for M3 production of around 1,000 per week, maybe less. That may trickle up a bit but it seems clear that production won't jump substantially until late March/early April.
For now, I think the market won't like this too much and the stock will trickle down for a couple of weeks. I don't think the stock will sustain much of a climb right now. I would expect any climbs right now to likely fail and drop back down into the mid to lower trading range. In short, continued volatility. We need to see what the market does with this tomorrow, but I generally think the stock near-term is a good buy in the $330s and a great buy in the $320s. I expect a run to ATH by the end of April. For trading purposes, I believe ITM April calls will provide an excellent gain for the stock rising in March and early April, but it's cutting it close. June gives you more time cushion with less gain. Are April calls worth the added stress with less time to go up? For me they are, at least for a portion, and particularly if they are purchased with TSLA in the lower end of the trading range. The key is buying them with the stock in the lower trading range. I'm convinced shorts will give us that opportunity. Even if the stock goes up 5-10% from there, those calls will do extremely well. Otherwise, J19 and J20 LEAPs should do very well over time. But the volatility is there, so why not try to profit from it?
For now, I think the market won't like this too much and the stock will trickle down for a couple of weeks. I don't think the stock will sustain much of a climb right now. I would expect any climbs right now to likely fail and drop back down into the mid to lower trading range. In short, continued volatility. We need to see what the market does with this tomorrow, but I generally think the stock near-term is a good buy in the $330s and a great buy in the $320s. I expect a run to ATH by the end of April. For trading purposes, I believe ITM April calls will provide an excellent gain for the stock rising in March and early April, but it's cutting it close. June gives you more time cushion with less gain. Are April calls worth the added stress with less time to go up? For me they are, at least for a portion, and particularly if they are purchased with TSLA in the lower end of the trading range. The key is buying them with the stock in the lower trading range. I'm convinced shorts will give us that opportunity. Even if the stock goes up 5-10% from there, those calls will do extremely well. Otherwise, J19 and J20 LEAPs should do very well over time. But the volatility is there, so why not try to profit from it?
Noticed he didn’t even congratulate Elon on the FH launch despite being the 2nd or 3rd caller
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