TSLA Market Action: 2018 Investor Roundtable

[Tslynk67]

Yuck. I mean, not *all* Microsoft technology is bad, just *most* of it. Can you quote some references to what Microsoft tech they were referring to?

Obviously Excel, according to $TSLAQ...

 

[LoveTSLA]

I just saw $331 so the climbing isn't done yet

We should be around 360 some time next week...

 

[jhm]

And now reading the trolls on Twitter some have shifted the attack from "imminent bankruptcy" to "they will now have slow growth".

Ha! This is not exactly a compelling short thesis. "I'm shorting Tesla because growing profitably will slow them to below 50% annual growth." Yeah, that would be like the bumbest short thesis ever.

 

[Tslynk67]

If even CNBC has nice things to say, then maybe the tide is turning.

What a difference a day makes:

 

[shlokavica22]

I just saw $330 so the climbing isn't necessarily done yet

The shorts are not the only ones knowing how to play the market. Bigger fish will take advantage eventually of the shorts overstretched positions.

I can see the price gravitating towards the $350 mark and from there on who knows what avalanche will be triggered.

 

[EinSV]

@jhm, I strongly suspect the 50% growth rate is still intact but will be "lumpy" with revenues popping when new GFs or products come online and then stabilizing as Tesla refines production before introducing the next product or building/ramping the next GF.

When Model Y and first phase of China GF have ramped up (by ~EOY 2021) we could easily be at 1.5M vehicles or more, depending on Model Y US production.

EOY 2021 could look like:

600K S/X/3 Fremont
250K 3 Shanghai
700K Y Location TBD

1.55 M S/3/X/Y

And storage growing at >100% per year, solar roof ramping up, etc.

Then Europe GF and pickup come on-line and second phase of China (to 500K). Plus Semi ramp at some point ....

I also think the path to FSD/Tesla Network brightened with the announcement of the new chip being introduced into cars next year. This could set the stage for an accelerated ramp in the early 2020s.

 

[Sancho]

In previous large moves to the upside in early trading, the shorts just waited for the first slowdown in volume in the morning, and then reversed the trend.

That may happen again this morning. But there’s a chance that a truly stellar earnings report/call, coupled with a turning point in profitability, may attract an amount of new money that swamps efforts for an early reversal.

If there is no early reversal, the SP movement will be in unchartered territory.

 

[CyberDutchie]

We should be around 360 some time next week...

Macro today not helpful unfortunately... hope I’m wrong or it won’t matter

 

[anon]

After looking at the analyst highlights in the media, I'm amazed that not one commented on the autopilot chip news. As far as I know, Google is the only competitor with the near-term capability of building a custom chip like this, and yet the analysts consider it irrelevant. I'd have thought it would make people take Tesla's self driving prospects much more seriously.

 

[sdtslafan]

I've seen this movie before, back in 2013.

Remember that Tesla shot up from $30 to $194 in a matter of months.

This IS the ultimate growth stock. P/S ratio could be whatever investors want it to be and AMZN P/S is 5/1. Next year's revenue could easily be 30 B so this could be a 150B company. Stock price $800-900.

Largely self funding from here on out so no longer shackled by Wall Street. BIG!

30-40 million shares that NEED to get bought back by shorts now that the tables are turned. But wait, I want MORE shares too, and so do you. There is no growth story like this

 

[YasB]

Ha! This is not exactly a compelling short thesis. "I'm shorting Tesla because growing profitably will slow them to below 50% annual growth." Yeah, that would be like the bumbest short thesis ever.

Ouch. You hurt my feelings.

 

[madodel]

Or, God forbid, Windows ME...

Maybe their entire AI is built on Clippy?

Clippy pops up on the tablet and says "You are about to crash. What would you like to do? Search the Internet for "crash"? Open Internet Explorer? Reboot your vehicle?"

 

[jelloslug]

So I'm *terribly* curious what the market action is going to look like. If Jesse's theory about malicious short-sellers is correct (as I think it is), we might expect an attempted bear raid after market open. The FUD is still being published... on the other hand, they might hunker down for a couple of days and renew their attacks over the weekend, or Monday.

I really doubt they've thrown in the towel this easily.

Less of them throwing in the towel, it's more like a wet blanket was thrown over their agenda.

 

[Drax7]

The EC was simply not the venue to lay out a road map to 1 million vehicles. But my concern is that this is slipping from a once 2020 target to maybe 2022 reality. I hope I am wrong, and they are simply holding cards close to chest.

An important part of this reality is that Tesla has become the single largest EV maker in the world including PHEVs. By the end of Q3 their YTD numbers will prove this out. I believe that their July numbers already show this lead.

So this is going to mean a massive reframing of Tesla's leadership in the EV industry. Not only do they lead on tech, but they lead on scale too. Musk himself is starting to talk about how the bigness of Tesla is making it hard to move fast. I've set up a thread on EV Market Share just to deal with this emerging reality for Tesla.

We really do need some clarity on building out GF capacity. Here they definitely need to hold cards close to chest, but I am concerned that facility planning is already a hard constraint on growth out to 2022. This also frustrates me around raising capital. To delay capacity build out until it can be funded by internal cash really makes the planning narrow and contingent. A shortfall in cash one year can delay capacity needed 3 or 4 years out. But a surplus of cash the next year can't speed things back up. Just barely being cash positive does not put you in a position to fund 50% annual growth.

So we'll see how Musk lays out a plan for the next 2 to 4 years.

In my view ,
Once they completely master the model 3 production, their ambitions will resurface.
They are just taking a breather after this bet the company adventure.
Succeeding at this will confirm their ambition. I would not dismiss
1,000,000 cars by 2020 and liquidate my holdings on the supposition
50% growth is over.

 

[TheTalkingMule]

This earnings call should be enough to make 50% of institutional sideline sitters jump, that will far outweigh the efforts of FUDsters through the end of the year AND they all still need to cover.

Go ahead and wait to cover til the 3Q call if you like. What happens if the other half jump in after that call? This is gonna be a mess.

 

[The Blue Owl]

Must have meant the Volvo Amazon? Right?

I'm almost certain he meant to say 'Apple' and mixed up his FAANGs. But the way it came out was so much better. The incredulous tone in Musk's voice while struggling not to burst into laughter when he said '...for Tesla?!' was priceless.

 

[Irishjugg]

I'd be surprised if the short squeeze happens. I'm certainly not covering, though I will admit that the ER wasn't as bad as me and other shorts we're hoping for.

The problem is... It's still guidance.

They burned 740M cash last quarter. It's the 3rd quarter in a row with >$4/share losses. Accounts payable now dwarfs cash. And to top it all off, gross margin on the expensive Model 3 versions is still below 5%.

If they can't get that gross margin number up significantly, they're going to be in big, big trouble.

A reminder: shorts don't believe anything Elon says. We didn't believe the 5k/week. We didn't believe cross country road trip in 2017 (or 2018). And we certainly don't believe they can achieve 15% gross margin.

Overall, report feels like nothing new beyond "their cash position is very weak, but not crippling."

Q3 is still the make or break month. I think shorts will stick around until November.

Fyi, inventory (primarily cars in transit to customers) ALSO dwarfs payables. You should consider that.

 

[aznt1217]

Being held back by macros today. Shorts are not covering. All the call did yesterday was clear off the noise to bring us back to neutral. Shorts are sticking with their thesis.

 

[scaesare]

Yuck. I mean, not *all* Microsoft technology is bad, just *most* of it. Can you quote some references to what Microsoft tech they were referring to?

The kernel underpinning Windows is remarkably solid, actually. It was built by Dave Cutler and the team that came to MS from DEC.

Dave also had a hand in Prism, the cancelled DEC CPU project that heavily influenced the later Alpha CPU, one of the first and arguably most advanced 64bit CPU's of its time. That IP eventually ended up at Intel by way of Compaq then HP.

Interestingly, Pete Dannon(sp?) on the call was also at DEC and then Intel, and now is leading the AP hardware effort for Tesla...

 

[Krugerrand]

I'm still processing the call. It feels a bit like the SpongeBob episode where SpongeBob learns to be normal. View attachment 322348

At any rate, it was good to bring in so many of the technical leaders. This helps position the company as a technology leader, and pivots attention away from singular focus on the person of Musk. This is a brilliant PR strategy. One is left with the impression that the broad, intelligent leadership of Tesla would be able to continue the mission even if Musk were somehow out of the picture.

Additionally there is a tone down of big ambition. The focus seems to be on solving many smaller practical problems. That the whole enterprise is cell constrained is quite sobering and speaks to the formidable challenges that await any EV maker that aspires to high volume EV manufacture. In fact just throwing capital at it cannot not speed things more quickly. This new heads-down-make-more-batteries posture could prove to deflate several many lines of critique used against Tesla.

On the other hand, my own investment thesis has centered around the idea that Tesla would grow revenue by 50% per year through 2025, while moving toward a 10% profit margin. This less aggressive posture is more favorable for hitting a profit margin goal, but does throw into question whether Tesla really wants or is able to keep growing at 50%. I figure that just to sustain this growth to 2020 means at least 800k vehicles sold in 2020. Specifically, 100k S/X and 700k 3/Y. But it is not at all apparent that Tels has a path to building 200k in Shanghai in 2020. So even 700k will be a stretch. Perhaps Tesla can find some way to build 35k Semis, which I would take in trade for 100k Model 3. So 100k S/X, 600k 3/Y and 35k Semi may be doable, and just barely support 50% growth rate.

Granted even if Tesla is just growing revenue at 35% per year, it is still a very good investment, but visions of a $1T market cap slip out of view. What is needed are other capital efficient ways to monetize the technology that Tesla is building. One glimmer is building AI chips for autonomous driving and other applications. The chip manufacturing can be outsourced and the technology can be licensed. So this could prove to generate earnings with low capital commitment.

So I think that institutional investors will really like the new Tesla and normal Elon. Shorts will lose ground. But some of us long-term bulls may look at this lean cow and wonder what happened to the sizzle.

So I think we could see a run up soon. It think it will lose energy around $430 to $460 as a more modest ambition Tesla can't sustain that. Then it falls back into the $370 to $400 range and gets stuck for a few years. So as Tesla surges above $400, I will be inclined to trim my position. I'm sure there are plenty of other normal stocks out there that would do just as well.

At least, this is how I see it tonight. Perhaps in the morning or the the days ahead, I may see things differently.

Here’s the thing, most everyone wanted Elon to pull back on targets and not be so optimistic. Well, there it was. Now the result of that is your underlying theme and feeling that growth isn’t going to be enough et al...

Clearly you can’t have it both ways. Now that you’ve experienced both, which do you prefer?

Not for one second do I think the train is slowing down. It may pick a smarter route to get to the destination but it’ll still be going full bore.