TSLA Market Action: 2018 Investor Roundtable

[SteveG3]

My candle comment was just a description of what shows up on the chart when a stock goes down earlier in the day and then goes strongly positive. Nothing predictive about the candle causing the move. It's simply a reflection of the move. Such a move suggests a trend reversal for the stock. You don't need the candle to assess that but it's a pretty simple visual indication of it.

I don't actually understand why, but $265 is a level that traders are talking about that TSLA needs to stay above to confirm trend reversal technically. Since traders are focused on it, it may be helpful to keep an eye on it for those who are buying and selling options.

okay, so it's a picture of the past, "nothing predictive" as you wrote. that, we are in agreement on bdy, sorry I misunderstood your comment as suggesting something predictive from a chart.

 

[Greenback]

I don't think we can close the gap down from yesterday, but added an additional 200 shares at 260 for a short term hold. I get delivery of my model 3 tomorrow.

 

[CuriousSunbird]

i would like to understand (in layman's terms) what this drop in stock price mean to the Tesla company as a whole? Would there be any negative impact if the share drops further still? Tesla itself would still be manufacturing cars on a daily basis right? So that would mean they are still earning from customers who paid and collect their cars.

So how does this affect them? Would they run out of money? What would happen if the price drops to $0? (if that's even possible?) I would like to understand the implications of what this drop means.

They are going to have to get more cash soon from somewhere - Moody's thinks about $2 billion. The Moody's downgrade has effectively closed off their access to the debt market (see Moody's Thinks Tesla Will Soon Be Out Of Cash - Tokyo Picker | Seeking Alpha). That leaves the equity market. If the shares are in freefall they will have trouble finding investors and underwriters. If they can't raise equity or debt, they are in trouble.

In addition, a rapidly falling stock price may spook suppliers into asking for the $2.4 billion they are owed, or depositors into trying to recover some of their $850 million. Tesla probably now has less than $3 billion in cash.

 

[NicoV]

Does the Dutch stuff also mean - "don’t listen to financial types who claim to know something about technical issues" ?

yes.
but not literally.

 

[CuriousSunbird]

To my view, only direct impact would be if they look to raise more funds by selling more shares, the higher the stock price, the more efficient the raising of funds (less dilution to existing shareholders). I don’t see Tesla raising any funds near term (clearly do not need to now) and in the big picture, a $45 billion market cap is not by any means a poor point to raise funds if it were needed.

Moody's view on the cash is "These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion."

 

[SteveG3]

Moody's view on the cash is "These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion."

Indeed, Moody's has said that. I watched an interview on CNBC with the analyst they said was behind the move... here's what I wrote on the other thread last night about my impressions of Moody's view of Tesla after watching the interview (link to source video included),


"CNBC host opens with a pretty strong question,

~Tesla is reporting on Q1 production next week... if there's upside to that Model 3 number, would you upgrade that rating? if it's weaker than expected would you downgrade it further?~

Moody's analyst,

~I don't think there's upside if they exceed the 2,500. 2,500 is still significantly below where we thought the company was going to be. If they're significantly below that 2,500 number, that's a negative sign...they're going to have to go back to the capital markets...~

This is a 'critical time’ for Tesla, says Moody's analyst who caused its bonds and stock to drop

The analysts comments are both curious and not indicative of a very strong grasp of Tesla's situation.

Did Moody's need nearly 3 months to absorb two basic data points Tesla announced in the first 3 days of January (2.5K targeted was reset for end of Q1, 5K for end of Q2)?

Do they really have such a limited understanding of Tesla that they think a month or two change in the ramp means another capital raise is a sure thing?

Or, does there, "good news doesn't matter, bad news is important", hint at something fishy about what Moody's is doing?"

 

[CuriousSunbird]

If Tesla's heroic 300 car/day happens, that theoretically put them at 2100/ mo. Do you think missing the projection will stave off another Moody's downgrade?

2,100 per week I think (or 1,800 if they don't work Sundays). Moody's says "Prospects for addressing its liquidity requirements (whether equity, convertible notes or debt) will be supported if the company can establish credibility for reaching Model 3 production levels -- 2,500 per week by the end of March, and 5,000 per week by the end of June."

 

[Krugerrand]

Moody's view on the cash is "These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion."

Moody who?

 

[TMS]

Moody's = criminal market manipulators, pure and simple! Investors who pay attention to these criminals, have nothing but themselves to blame!
Moody's $864m penalty for ratings in run-up to 2008 financial crisis
MOODY'S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts

 

[Mkorpal]

They are going to have to get more cash soon from somewhere - Moody's thinks about $2 billion. The Moody's downgrade has effectively closed off their access to the debt market (see Moody's Thinks Tesla Will Soon Be Out Of Cash - Tokyo Picker | Seeking Alpha). That leaves the equity market. If the shares are in freefall they will have trouble finding investors and underwriters. If they can't raise equity or debt, they are in trouble.

In addition, a rapidly falling stock price may spook suppliers into asking for the $2.4 billion they are owed, or depositors into trying to recover some of their $850 million. Tesla probably now has less than $3 billion in cash.

Following the logic here. Tesla has 3.4 billion in cash. Tesla has 3.4 billion in debt and refundable reservations. If all creditors demand repayment and all reservations cancel, they will run out of cash. That will happen if their credit is downgraded and the stock price crashes. So, because of that, cash, we will downgrade their credit and tank their stock price.

It's a self serving prophecy. It's like a bank repossessing your home because you couldn't repay your mortgage today if for some reason they demanded it.

 

[SteveG3]

Following the logic here. Tesla has 3.4 billion in cash. Tesla has 3.4 billion in debt and refundable reservations. If all creditors demand repayment and all reservations cancel, they will run out of cash. That will happen if their credit is downgraded and the stock price crashes. So, because of that, cash, we will downgrade their credit and tank their stock price.

It's a self serving prophecy. It's like a bank repossessing your home because you couldn't repay your mortgage today if for some reason they demanded it.

not impossible that something like this was being attempted

 

[CuriousSunbird]

Indeed, Moody's has said that. I watched an interview on CNBC with the analyst they said was behind the move... here's what I wrote on the other thread last night about my impressions of Moody's view of Tesla after watching the interview (link to source video included),


"CNBC host opens with a pretty strong question,

~Tesla is reporting on Q1 production next week... if there's upside to that Model 3 number, would you upgrade that rating? if it's weaker than expected would you downgrade it further?~

Moody's analyst,

~I don't think there's upside if they exceed the 2,500. 2,500 is still significantly below where we thought the company was going to be. If they're significantly below that 2,500 number, that's a negative sign...they're going to have to go back to the capital markets...~

This is a 'critical time’ for Tesla, says Moody's analyst who caused its bonds and stock to drop

The analysts comments are both curious and not indicative of a very strong grasp of Tesla's situation.

Did Moody's need nearly 3 months to absorb two basic data points Tesla announced in the first 3 days of January (2.5K targeted was reset for end of Q1, 5K for end of Q2)?

Do they really have such a limited understanding of Tesla that they think a month or two change in the ramp means another capital raise is a sure thing?

Or, does there, "good news doesn't matter, bad news is important", hint at something fishy about what Moody's is doing?"

The timing is certainly strange. Given what Moody's said in August, you would have expected the downgrade in October/November, not March.

 

[doctoxics]

hello new clue on ramp progress!

Tesla Urges Workers to Prove the ‘Haters’ Wrong and Ramp Up Production

"Doug Field, senior vice president of engineering, said if the team can exceed 300 Model 3s a day it would be an “incredible victory” at a time when some investors are casting doubt on the company and shorting its stock."

"At the time of Field’s email, Tesla was making more than 200 Model 3 sedans a day on every line, he wrote. Field urged workers to quickly break through the 300-cars-a-day barrier and keep going, while keeping quality standards high."

I'm taking odds we've bottomed up to 75% (90% if you exclude shorts trying to game pricing in the pre-market, first hour or two of Monday's trading).

Very very likely we just got what we've been waiting for. It's super likely right there, no need to wait until others see this to see it for ourselves.

BATTERY PACK PRODUCTION AT GIGAFACTORY 1 IS NO LONGER LIMITING PRODUCTION OF MODEL 3!

 

[CuriousSunbird]

Following the logic here. Tesla has 3.4 billion in cash. Tesla has 3.4 billion in debt and refundable reservations. If all creditors demand repayment and all reservations cancel, they will run out of cash. That will happen if their credit is downgraded and the stock price crashes. So, because of that, cash, we will downgrade their credit and tank their stock price.

It's a self serving prophecy. It's like a bank repossessing your home because you couldn't repay your mortgage today if for some reason they demanded it.

$10 billion in debt. But that's not such a problem, because most of it is not yet due (so your mortgage analogy is appropriate). The problem is the $2.4 billion owed to suppliers and $850 million owed to depositors, both of which can be demanded almost immediately, together with the $1.2 billion in debt due in the next 12 months.

 

[Waiting4M3]

I think more likely they're trying to save 1 day of production cost on MS/X to improve margin, and also likely to reduce the chance of a logistic bottleneck that can cause delays in M3 deliveries right at the end of the quarter.

Further thoughts on the Friday MS/X shutdown:

1) I still think financials is a likely cause. Every year my company shuts down around x-mas time, to give people more time off, and to shave some PTO balance off of the books. Also a wild hunch of mine, the fact that they initially wanted to shut down for 2 days but reduced to 1 day may suggest that they're almost exactly where they need to be, but have room to dial back a little and not need every trick in the book to meet it, which is probably a good sign.

2) I take back the comment on MS/X shutdown relating to M3 delivery logistics. The production to delivery gap is too large for this Friday to make a difference.

3) The extra man power to work on M3 production may not be to increase production, but to give the M3 production people an extra day off this Easter weekend. As Elon has said, the nature of M3 production is that it only works at how fast the robots can work, you can't just put a person next to the robot and expect it to run faster. We've heard anecdotes that M3 production people have been working overtime to ramp up production recently, so this seems more likely that they simply need someone to stand-in for a day. This could also explain why the shutdown was reduced from 2 days to 1 day, and that only a "limited" number of people are needed to move to M3 line, maybe after Tesla looked at how many people on the M3 are requesting an extra day off this weekend, they decided only 1 day off from MS/X is needed.

 

[Crowded Mind]

Sounds like Tesla can probably do 275/day steady state right now, or at least very close to it. 6 days a week for 12 weeks in a quarter is 19,800 per quarter.

At an ASP of $50.5k, that’s $1.0B in revenue/quarter. Not bad for a product that launched 9 months ago. Q1-18 will probably be the last time in the next 10-15 years that the Model 3 doesn’t do a billion in quarterly revenue. Pretty neat.

 

[Waiting4M3]

$10 billion in debt. But that's not such a problem, because most of it is not yet due (so your mortgage analogy is appropriate). The problem is the $2.4 billion owed to suppliers and $850 million owed to depositors, both of which can be demanded almost immediately, together with the $1.2 billion in debt due in the next 12 months.

$2.4B owed to supplier, at 20-25% margin, means $500-$600M gross profit. Damn, I was hoping that # is even higher

 

[Waiting4M3]

Sounds like Tesla can probably do 275/day steady state right now, or at least very close to it. 6 days a week for 12 weeks in a quarter is 19,800 per quarter.

At an ASP of $50.5k, that’s $1.0B in revenue/quarter. Not bad for a product that launched 9 months ago. Q1-18 will probably be the last time in the next 10-15 years that the Model 3 doesn’t do a billion in quarterly revenue. Pretty neat.

They are almost certainly running 7 days a week, see my post explaining this 3 pages ago

The way I read the article, "At the time of Field’s email, Tesla was making more than 200 Model 3 sedans a day on every line, he wrote", this says that >200/day is the steady rate as of last Fri 3/21. As they are ramping up from 300/day going into the end of the week, 275/day steady rate seems possible but I don't think we can put that as certainty.

ASP for the 1st production model is $54K, based on the % of what options people reported in Troy's sheet, using your 275/day rate we're looking at $12.5B/Q

Edit: sorry $1.25B/Q, decimal points are so easy to miss ;D

 

[Crowded Mind]

They are almost certainly running 7 days a week, see my post explaining this 3 pages ago

The way I read the article, "At the time of Field’s email, Tesla was making more than 200 Model 3 sedans a day on every line, he wrote", this says that >200/day is the steady rate as of last Fri 3/21. As they are ramping up from 300/day going into the end of the week, 275/day steady rate seems possible but I don't think we can put that as certainty.

ASP for the 1st production model is $54K, based on the % of what options people reported in Troy's sheet, using your 275/day rate we're looking at $12.5B/Q

Yes, just working back from $1B milestone using rough numbers, not trying to forecast.

Edit: For comparison, the Chevy Bolt, Jaguar IPACE, or Porsche Mission E will likely never do $1.0B in any quarter.

 

[bdy0627]

They are almost certainly running 7 days a week, see my post explaining this 3 pages ago

The way I read the article, "At the time of Field’s email, Tesla was making more than 200 Model 3 sedans a day on every line, he wrote", this says that >200/day is the steady rate as of last Fri 3/21. As they are ramping up from 300/day going into the end of the week, 275/day steady rate seems possible but I don't think we can put that as certainty.

ASP for the 1st production model is $54K, based on the % of what options people reported in Troy's sheet, using your 275/day rate we're looking at $12.5B/Q

How are you getting $12.5B/Q?