TSLA Market Action: 2018 Investor Roundtable

[srius]

It is interesting that every analyst I am aware of with a low Tesla price target, is at the bottom in terms of ability. I don't understand how they have a job, or get press coverage. When they show up on TV, the first thing that should be mentioned in the introduction, is "So, Mr. Osborne, you are one of the worst analysts on record, and are basically always wrong. Please give us your opinion on Tesla..."

Most auto analysts are mismatched to cover Tesla. The auto industry is matured, cyclical and quite profitable at the moment. They seem not even able to comprehend, aside from cyclical nature, why auto stocks are valued at such low PE, and hence constantly apply the same auto valuation metrics to Tesla. On top of that, most analysts don't follow particular stocks in proper depth required. An analyst probably won't put a 4q17 delivery number higher than 2500 if he is aware of that InsideEVs put Nov delivery at ~350, and Tesla has to manually assemble part of an M3 battery pack to get around the bottleneck.

Tesla operates like a young tech company, even the over-promise/behind schedule delivery is a typical tray of such a company. Auto analysts are not fit to cover a fast evolving and disrupting company.

 

[RobStark]

One thing I'm curious is how many of the S/X are pre-owned... .

None. They are all never titled cars. Some brand new while others are test drive cars and loaners.

 

[CyberDutchie]

While Model 3 deliveries + transit and production rate pushed back by a quarter are big disappointments, but Model S/X numbers are great. So are we likely to see the post Q3 delivery reactions where stock price went down first, and then rapidly restored since investors felt that the Model S/X deliveries exceeded expectations were a good thing?

One thing I'm curious is how many of the S/X are pre-owned... Those impact revenues as can't just assume average purchase is around $100K...

Here’s one analyst reaction: Adam Jonas

Delayed Model 3 Ramp Still 2x Our Forecast: We Buy the Dip

 

[JRP3]

We Buy the Dip

Always works

 

[AlMc]

Here’s one analyst reaction: Adam Jonas

Delayed Model 3 Ramp Still 2x Our Forecast: We Buy the Dip

Do you have a link? A note or an interview?


Thanks. Al

 

[srius]

... 2500 end of Q1 and about 1000 a week now translates to about 20,000 cars in Q1 ...

The quarterly number of vehicles produced may not correlate linearly with the weekly production rate during ramp up. A production line does not run constantly at the rate when the line needs to be paused or slowed down to fix bottlenecks.

 

[Zhelko Dimic]

You left out part of that sentence that makes it very clear: "In the last seven working days of the quarter, we made 793 Model 3's, and in the last few days, we hit a production rate on each of our manufacturing lines that extrapolates to over 1,000 Model 3's per week."

So they didn't make 1,000 in the last week, but in that last week they increased the production rate such that the next week period will be over 1,000. (Meaning they are now making more than 143 Model 3s per day.)

Nope.
What this guarantees is that they run each part of production line for short period of time (an hour or two) to speed that extrapolates to over 1000 a week.
There is no guarantee that they can run line persistently, and there is no any indication they've synched the whole line to work in unisone, i.e. that just in time delivery of parts is ironed out to the same capacity and flow from one station to another at full speed is in place.

Yet, this is one of the clearer, i.e. less misleading statements related to production, as compared to Model X ramp info. For anyone that wants to bet on short-term TSLA, I advise to start reading Tesla statements in the way/spirit I've just demonstrated. Inability to do that in 2016 almost bankrupt me... If you're long term only, you have option to read it any way you want.

 

[Zhelko Dimic]

With the current ramp results.
Starting from 1000 model 3 cars this week up to a flatline 5000/week production rate starting from 'H2, is Tesla expecting to produce 205000 model 3 cars in 2018 total? Lets assume they can squeeze another 10% extra model S and modelX production, Tesla should be able to produce a good 300000 cars this year?

But it's not flatline, it's exponential curve that is much slower

 

[Curt Renz]

The after-hours reaction to the Tesla delivery report is rather muted compared to what might have been expected following the negative spin in the media. The after-hours share price is still holding above the level that provided support last week. Calm investors realize that the important thing to consider is that demand for the Model 3 is huge and reviews are glowing. Meanwhile, the more luxurious models are doing well. A delay in the Model 3 production ramp should barely cause a nick in the long-term valuation of the company. It will be interesting to see what opportunities the market may present tomorrow.

 

[DaveT]

I'm thrilled with the recent delivery report. Over 100k Model S/X for the year. 1550 Model 3s delivered... as expected if you were following VINs and deliveries. And Model 3 ramping to around 1000/week run rate in last few days of quarter. Also as I expected, Tesla pushed their 5000/week guidance to end of Q2... which makes a lot more sense. Gives them breathing room to focus on quality.

 

[viridi]

The after-hours reaction to the Tesla delivery report is rather muted compared to what might have been expected following the negative spin in the media. The after-hours share price is still holding above the level that provided support last week. Calm investors realize that the important thing to consider is that demand for the Model 3 is huge and reviews are glowing. Meanwhile, the more luxurious models are doing well. A delay in the Model 3 production ramp should barely cause a nick in the long-term valuation of the company. It will be interesting to see what opportunities the market may present tomorrow.

I imagine there will be a fair number of reiterations of sell ratings/underperform ratings from the typical naysayers that could negatively impact market psychology. I also imagine some will worry about a repeat of January 2016 from a stock performance perspective. Hopefully not, but one never knows how info will be interpreted by the markets. The reality is the luxury models just had an amazing quarter and the M3 production is progressing in a positive, albeit slower than hoped, direction. If one takes a step back, the news is not that bad, and one can argue was already priced in.

 

[AlMc]

I'm thrilled with the recent delivery report. Over 100k Model S/X for the year. 1550 Model 3s delivered... as expected if you were following VINs and deliveries. And Model 3 ramping to around 1000/week run rate in last few days of quarter. Also as I expected, Tesla pushed their 5000/week guidance to end of Q2... which makes a lot more sense. Gives them breathing room to focus on quality.

Agreed Dave, and it appears that someone is putting out realistic vs aspirational guidance to investors.

 

[JRP3]

I almost wonder if Elon might have decided to try under promising and over delivering for 2018.

 

[seabie]

Dry powder at the ready (correct gut feel to delay buying just before the holiday break just above support levels) but I have to admit disappointment in this release. We need more management color to pin a solid opinion but delaying 5K/wk to Q2 is a huge disappointment IMO. Focusing on quality is very important but I'll go back to Elon stating 'there should be no doubt in 5K/wk in 2017' in the Q2 earnings call as a major source of skepticism in my 2018 outlook given these results and the statement provided. Do we really believe this delay is about focusing on quality? Under promising vs over delivering? Supplier shortages vs news articles stating increased volume demands from Tesla?

I'm a huge fan of the company and the mission; borderline obsessed but seriously torn in 'backing the truck up' tomorrow. I do believe the Model 3 is great but if Tesla can't produce at volume it doesn't matter?

 

[Starno]

Gives them breathing room to focus on quality.

Exactly. That's what I meant in one of my previous post. Tesla could ramp up to 5000/w by end of Q1, if they chose to. BUT, they would expose themselves to probably a lot of cars defaults, and as the Model 3 is the " mainstream " car, and a lot of the customers aren't anymore " Tesla fans " who can forgive. They would risk impacting a lot the demand.

Tesla is rolling out a masterpiece act.

 

[CyberDutchie]

Do you have a link? A note or an interview?


Thanks. Al

Sorry, was in a personal training session. Here is the entire note:

Delayed Model 3 Ramp Still 2x Our Forecast: We Buy the Dip

4Q deliveries suggest revenue 10% above our forecast. Tesla officially delayed its 5k / week Model 3 milestone by another quarter. This will surely disappoint some bulls, but implies a 2Q delivery rate possibly 2x our forecast. Reiterate EW, but would buy on weakness.
[...]

Mod: sorry to have to do it, but posting entire copyrighted articles is against the terms of service. --ggr.

 

[AlMc]

Thanks @mulder1231

 

[Mike Smith]

There were three major risks with Model 3, and we've pretty much dodged them all:

1)Problems with production?
The vast majority of serious problems are revealed at the very start of production. We're now past that point.

2) Problems with the car?
A thousand cars are now in the hands of real customers and we aren't hearing about any major issues.

3) Problems with customer satisfaction?
Apparently you can sell them on Craigslist for $70,000, yet I don't see many on offer.

This is what the analysts should be talking about. Q4 was a huge success.

 

[anticitizen13.7]

Adam Jonas still has a higher PT than I do. Mine is at $365 based on reasonable future probability of 500k run rate per year by end of 2018 or early 2019.

Again that is Run Rate not absolute numbers of cars, so don’t be confused!

 

[AlMc]

There were three major risks with Model 3, and we've pretty much dodged them all:

1)Problems with production?
The vast majority of serious problems are revealed at the very start of production. We're now past that point.

2) Problems with the car?
A thousand cars are now in the hands of real customers and we aren't hearing about any major issues.

3) Problems with customer satisfaction?
Apparently you can sell them on Craigslist for $70,000, yet I don't see many on offer.

This is what the analysts should be talking about. Q4 was a huge success.

I agree with #2 and #3 but how do we know they are past the point of revealing all production problems?