TSLA Market Action: 2018 Investor Roundtable

[bdy0627]

That's exactly what happened and I'm not sure why so many people are struggling with this. Elon has said multiple times, emphatically, that they will be profitable in Q3/Q4 and that 5000/wk Model 3 production was the key benchmark they needed to achieve this. The market did not believe that they would be able to get anywhere close by the end of Q2.

The fact that the market has shrugged off an incredible one-two punch of positive news is not Elon's responsibility. The market will catch up to reality eventually. He promised the short position would explode and it has - they're like Wile E. Coyote who's just run off a cliff. The fact that they haven't fallen yet is irrelevant - there's no ground to stand on.

I've seen a lot of grumbling from people who made short-term bets on Elon's tweet and are clearly salty about it. Maybe you should follow Elon's example - he accumulated shares instead of buying options.

Well said. I totally agree. I continue to think it's really this simple - nothing shocking coming up other than Tesla executing. To me, there is no question that Elon lit the fuse on the short burn by being able to produce 5,000/week. Once there for a week, it is just a matter of time until it becomes sustainable. It looks like it will be sustainable quite soon. With production finally meeting guidance, the bearish analysts clearly pivoted to focus on deliveries, even though the much more important metric right now is production. If they can't produce, they can't deliver. Deliveries are guaranteed to happen quickly following production since the vehicles are sold out for over a year. It's such a misguided focus to obsess over the Q2 "deliveries miss."

What the analysts and shorts did is sort of like trying to insist the balance in your bank account is a serious problem, even though you just deposited a huge paycheck the day before that requires another day to clear, and they know about the paycheck. It's just plain silly, intentionally missing the forest for the trees. Musk rightly focused on production. Once Tesla demonstrates sustained production at 5,000+, bearish analysts and shorts can be expected to shift their skepticism onto the next thing on the list - profitability. There is certainly some valid skepticism there. Tesla absolutely has to show they can be profitable mass producing the model 3. Bearish analysts can use that card for another few quarters, but as Rob Stark pointed out, with each profitable quarter that goes by, their position is going to look more and more ludicrous.

The key right now is to be patient. There is going to be volatility and consolidation because the views are still so polarized. Each week that goes by takes us closer to the tipping point for the stock. Once the shift occurs, I believe Elon is going to be proven correct once again on delivering what he promised, just not quite on the timeline he suggested.

 

[FrANce]

The key right now is to be patient. There is going to be volatility and consolidation because the views are still so polarized. Each week that goes by takes us closer to the tipping point for the stock. Once the shift occurs, I believe Elon is going to be proven correct once again on delivering what he promised, just not quite on the timeline he suggested.

Well said. Looking patiently forward to it.

 

[jhm]

Well said. I totally agree. I continue to think it's really this simple - nothing shocking coming up other than Tesla executing. To me, there is no question that Elon lit the fuse on the short burn by being able to produce 5,000/week. Once there for a week, it is just a matter of time until it becomes sustainable. It looks like it will be sustainable quite soon. With production finally meeting guidance, the bearish analysts clearly pivoted to focus on deliveries, even though the much more important metric right now is production. If they can't produce, they can't deliver. Deliveries are guaranteed to happen quickly following production since the vehicles are sold out for over a year. It's such a misguided focus to obsess over the Q2 "deliveries miss."

What the analysts and shorts did is sort of like trying to insist the balance in your bank account is a serious problem, even though you just deposited a huge paycheck the day before that requires another day to clear, and they know about the paycheck. It's just plain silly, intentionally missing the forest for the trees. Musk rightly focused on production. Once Tesla demonstrates sustained production at 5,000+, bearish analysts and shorts can be expected to shift their skepticism onto the next thing on the list - profitability. There is certainly some valid skepticism there. Tesla absolutely has to show they can be profitable mass producing the model 3. Bearish analysts can use that card for another few quarters, but as Rob Stark pointed out, with each profitable quarter that goes by, their position is going to look more and more ludicrous.

The key right now is to be patient. There is going to be volatility and consolidation because the views are still so polarized. Each week that goes by takes us closer to the tipping point for the stock. Once the shift occurs, I believe Elon is going to be proven correct once again on delivering what he promised, just not quite on the timeline he suggested.

This is in line with my slow burn take of the burn of the century. Ultimately, positive cashflow and profitability will win the day. When shorts vacate their positions, is totally their choice. (And I'm not looking for personal validation from shorts.) What is more critical is when new buyers will arrive an demand Tesla shares. But even if our little cult falls short on new recruits, cashflow and profits will ultimately enable Tesla to repurchase stock.

But what time scale are we talking about? Elon has an incentive package to drive market cap to $650B, if memory serves. The key to his success is drive Tesla to about $50B in earnings, more or less depending on whatever PE ratio the market would dictate at the time. So fundamentally, Musk will drive Tesla on a path to $50B earnings. The critical near term question for him is how to scale the product portfolio and manufacturing capacity to be able to deliver $50B earnings. So near term cashflow and profits are primarily needed to finance product development and new factories. If cash flow can fully fund expansion, this is better than taking out debt. Tesla certainly does not need leverage to boost ROE because the opportunity for organic growth is so high. But before we can get much insight into the limits of self-funded growth for Tesla, we need to see how much cash Tesla can generate in the next few years. We will soon see how much incremental cash gets generated from incremental weekly production above what is needed to be profitable (or simply above 5k/wk). This will tell us an awful lot about how Tesla adds an extra $B to earnings.

Musk thinks that the Model 3 is the last bet the farm situation for Tesla. I think this has a lot to do with achieving sufficient scale to become self-funding. Once Tesla has emancipated itself from capital markets, thinks really heat up. That's the burn.

 

[bdy0627]

as I said, if we had truth serum, I’d bet 50:1 what he does not believe what he says about Tesla. he’s just working real hard to get some of the rest of us to believe it. this can happen with very high cognitive aptitude but plenty to work on re awareness/maturity (no shortage of people with that combo).

Didn't Chanos lose quite a bit on SolarCity when Musk decided to save it instead of letting it go down? I think what he doesn't believe that he continually says is that Tesla is a "zero." He obviously knows it's not worth $0, but to make money after SolarCity, I think he needs Tesla to fail to actually profit. Tesla just dropping down to about $200ish isn't enough for him to climb out of his hole. His entire narrative is designed to push the perspective that Tesla is worth nothing.

 

[Cosmacelf]

Didn't Chanos lose quite a bit on SolarCity when Musk decided to save it instead of letting it go down? I think what he doesn't believe that he continually says is that Tesla is a "zero." He obviously knows it's not worth $0, but to make money after SolarCity, I think he needs Tesla to fail to actually profit. Tesla just dropping down to about $200ish isn't enough for him to climb out of his hole. His entire narrative is designed to push the perspective that Tesla is worth nothing.

IIRC, the Solarcity acquisition essentially put a floor on the SCTY stock price of around $25/share and that’s about the SCTY stock price when the deal was finalized. At the 0.11 conversion ratio, that’s a TSLA stock price of about $227/share. Many SCTY shorts would have been shorting when SCTY stock price was in the 40s, but since it was heading downhill pretty fast, I’ve got to assume that there was a lot of shorting occurring in the 20s as well. After the acquisition, they are are now stuck with short positions effectively initiated around $250 or less TSLA price. No wonder they are hurting.

I honestly don’t see an expected catalyst to drag the stock price down to $250 from here, short of WW III, or a big recession, neither of which appears likely.

 

[Causalien]

After adjusting for the current reality, here are my macro plans for the near future.

Use the run up to earnings to exit the short term options plays. And then sell call options on 10% of tsla shares. The tesla shares are unplanned as I just discovered an extra 10% I had sitting in another brokerage.

The idea is to exit most of the short term positions before October where TSLA stock traditionally starts to dive and short attacks ramp up.

I'd also buy a 1 year call option (once volatility dies down back to 40% ish) that is far otm with 1% gambling money on Tesla breaking even. However my sentiment is that it will be 1 quarter later.

At this point, the reasoning is that nothing I do in short term trades can match the potential lift off from core holdings if tesla gets to eps neutral. So the only additional play is the riskest option buy.

This is a based on most tmc user's position. Large core holding with some tradable shares on the side and maybe 1% gambling money.

 

[generalenthu]

I am liking the newly chilled out @elonmusk Twitter feed. Bio is gone, the pinned tweet about media attacks is gone. Funny, and he has a silly response to a random person pinned.

 

[Ugliest1]

Deliveries. Goldman always does DELIVERIES.

Here is the link (for Q2) which Musk referenced in his mail.
Goldman reiterates sell on Tesla and expects Model 3 deliveries to miss estimates

Here is the GS Q1 prediction for DELIVERIES
GOLDMAN SACHS: Tesla may fall 'well short' on its first-quarter deliveries (TSLA) | Markets Insider

That’s all well and good, but both GS and you are (deliberately?) forgetting the end-Q2-extra-special-case, the 200,000 US deliveries limit that Tesla planned to delay until July. That obviously means, focus on production over deliveries in the US, and stockpile a few to really ramp US deliveries in early July.

Tesla now has a full 6 months where US customers receive the full $7,500 US tax rebate, before it drops to $3,750 for 1H 2019.

 

[Off Shore]

Purple, please.

Here ya go, @neroden. Digital wish fulfillment.
Model ≡ ColorS

 

[Esme Es Mejor]

Purple, please.

The thing is, I really wish Tesla would offer plain white. It's the easiest color to wrap or overpaint.

George R. R. Martin’s Purple Tesla Model S

 

[EVMeister]

George R. R. Martin’s Purple Tesla Model S

I genuinely like that. Oh no.

 

[jasonb]

Once Tesla demonstrates sustained production at 5,000+

this + thing interests me. if you take the fastest line making the 3 and make all the lines that fast do we get to 7500/wk? i know elon set expectations for next year for 10k, but i'm suspicious....

 

[Thumper]

At some point, maybe after we hear Q3 guidance at the Q2 conference call, or somewhat later, the popular press and the non-manipulative business press will decide that OMG Tesla really is making all those cars and they are selling them and wow it looks like they are highly profitable. If it is clear that TE is a major profit contributor, that will provide a face saving opportunity for some "analysts" and commentators. "Well I was only evaluating the auto part of the company, but with TE maybe this thing will make lots of money." Once the prevailing narrative turns, writers will fall all over themselves to get clicks for the "newly discovered" Tesla story. IMHO

 

[CuriousSunbird]

That’s all well and good, but both GS and you are (deliberately?) forgetting the end-Q2-extra-special-case, the 200,000 US deliveries limit that Tesla planned to delay until July. That obviously means, focus on production over deliveries in the US, and stockpile a few to really ramp US deliveries in early July.

Tesla now has a full 6 months where US customers receive the full $7,500 US tax rebate, before it drops to $3,750 for 1H 2019.

I think you missed the point of the discussion. We were not discussing whether the GS predictions were good or bad or relevant or whatever.

We were discussing why Elon, in the full knowledge that he was about to announce deliveries of 18.5k, would announce to all his staff that the GS analyst who had just predicted 22k was in for a rude awakening.

Any thoughts on that subject?

 

[Causalien]

I think Elon should announce the beginning of the marketing campaign for Model 3 and start vetting potential partners .

This will shut the journalist up for a while as they fight to stay on his good side.

I believe the currwnt journalist thinking is that, since tesla will never advertise, they don't lose anything by attacking tesla.

 

[Esme Es Mejor]

I think you missed the point of the discussion. We were not discussing whether the GS predictions were good or bad or relevant or whatever.

We were discussing why Elon, in the full knowledge that he was about to announce deliveries of 18.5k, would announce to all his staff that the GS analyst who had just predicted 22k was in for a rude awakening.

Any thoughts on that subject?

Three possibilities:

One, he overestimated Tamberrino’s intelligence. He assumed Tamberrino was talking about production, since production is the only metric that matters when the waiting list is over 400k.

Two, he overestimated Tamberrino’s intelligence. Estimating deliveries without considering the hard cap of 200k cars would be insane and negligent, and he didn’t realize how insane and negligent Tamberrino really is.

Three, he overestimated Tamberrino’s intelligence. 22k deliveries would hit the 200k limit in Q2, so Musk was saying Tamberrino was in for a rude awakening if he thought Tesla was going to hit the limit in Q2.

 

[SPadival]

Any ideas, suggestions on what will the bear thesis will move on to next, once their own source has M3 sustained production at 5k/week?

Brodie Ferguson on Twitter

 

[generalenthu]

Any ideas, suggestions on what will the bear thesis will move on to next, once their own source has M3 sustained production at 5k/week?

Brodie Ferguson on Twitter

It's there on Twitter. Martin Tripp and SEC will bring down Tesla. Tripps 'thesis' was that the cells were touching or punctured or some crazy nonsense. I wanted to yell that SEC didn't even look at product claims. But who cares. Let them wallow in the mud. No point getting there and getting dirty.

Also, a hedgie put out a model that only goes out to Q2 and he got offended when I called it lazy. I referred him to luvb2b's thread, and he promptly blocked me. That place is one crazy echo chamber.

 

[oneday]

Any ideas, suggestions on what will the bear thesis will move on to next, once their own source has M3 sustained production at 5k/week?

Brodie Ferguson on Twitter

I expect we start hearing them claiming that once Tesla clears through the backlog of reservations they won’t have enough demand. We already heard it a little when Tesla announced they had 420,000 reservations.

 

[Ugliest1]

I think you missed the point of the discussion. We were not discussing whether the GS predictions were good or bad or relevant or whatever.

We were discussing why Elon, in the full knowledge that he was about to announce deliveries of 18.5k, would announce to all his staff that the GS analyst who had just predicted 22k was in for a rude awakening.

Any thoughts on that subject?

Sure. I think Elon doesn’t care as much about deliveries as he cares about production. Especially, as others have pointed out for a year or more, with 400,000 reservations that they won’t be able to get through for 1-2 years.

And the other thing is, Tamberino has proven he’s a little out of touch with what to think and write about. Including asking a question during a conference call that had already been asked. He actually NEEDS a rude awakening.