2017 Investor Roundtable: TSLA Market Action

[Sudre]

This will be a good opportunity to purchase more shares in my opinion. All Elon has to do is drive up to the SpaceX announcement with any Model 3 then when asked about the car say something like, "That's the Model 3. Have you heard the rumor Tesla plans on starting production "soon"?", then go on with his SpaceX announcement.

Once the auto sell on news is looked into by the people running the scripts they should feel a little foolish noting GS had the rating at 190 while the stock shot up and have now simply re-lowered it to 185 while technically saying out the other side of their mouth everything looks great for a long investment. They just feel the short term months will be rocky. REALLY?

At a minimum I am think this will be good for a weekly swing trade.

My opinion of GS???

Go Google, "Goldman Sachs SEC violation"
"Jan 14, 2016 - Goldman Sachs to pay $15 million to settle SEC stock lending case ... "
"Jan 14, 2016 - Goldman Sachs announced a $5.1 billion settlement to resolve probes..."
"Apr 21, 2016 - Why the S.E.C. Didn't Hit Goldman Sachs Harder ... "

 

[Peoria]

Hopefully we are seeing the lows for the day right now. If there isn't a recovery above $250 today, this correction may not be close to being over.

At this pace I am expecting to be knocked out of my shares with the stop loss I have in place sometime early today so your play should be buy the farm at $245 since I will be out and TSLA will bounce up $15 from todays lows this week. I have an uncanny knack of finding the bottom and selling 5 to 10 cents above it. In reality, it's an amazing ability. I really hate having this much control over the stock price when I don't even own 50 shares. I hope I am wrong. Good luck to all you TSLA bulls out there today. We need it.

 

[myusername]

Hopefully we are seeing the lows for the day right now. If there isn't a recovery above $250 today, this correction may not be close to being over.

At this pace I am expecting to be knocked out of my shares with the stop loss I have in place sometime early today so your play should be buy the farm at $245 since I will be out and TSLA will bounce up $15 from todays lows this week. I have an uncanny knack of finding the bottom and selling 5 to 10 cents above it. In reality, it's an amazing ability. I really hate having this much control over the stock price when I don't even own 50 shares. I hope I am wrong. Good luck to all you TSLA bulls out there today. We need it.

"I have an uncanny knack of finding the bottom and selling 5 to 10 cents above it. In reality, it's an amazing ability."

does everyone always talk about your ability?... do you have the biggest most amazing ability ever?... when you show off your ability is everyone around you like... "oh Donald... your ability is so amazing"?

 

[Lump]

More from the GS note...

We downgrade shares of Tesla from Neutral to Sell with 28% downside to our 6-month price target of $185. We expect to see pressure on shares as we progress through the year, as cash burn intensifies and the ramp of Model 3 volumes proves to be slower and flatter than assumed in guidance/consensus. Further, the acquisition of SolarCity – which is undergoing its own business model transition – comes at a time when we believe Tesla should be singularly focused on becoming a mass automobile manufacturer. Lastly, while we see Tesla as a net beneficiary of potential tax reform, we believe the net present value of those benefits would remain effectively unchanged from the current tax system given the increased time it would require to utilize increased NOLs. Our key concerns are as follows:

• Model 3: Launch curve a concern, operating margin dilutive at current cost, and reservation conversion may be hindered by higher selling prices. We believe the Model 3 will have a more subdued launch curve than the company is targeting as some suppliers have expressed concern around final designs not being locked down. As a result, we expect the company to achieve mass market volumes (i.e., above 100k annualized run-rate) in 4Q18 vs. Tesla’s target of 4Q17.
• SolarCity business model unproven and acquisition comes at a pivotal point in Automotive product cycle. We believe the recent acquisition of SolarCity increased the risk profile of Tesla amidst a business model transition – from company-owned equipment installation and lease/PPA contracts to customer purchased equipment on cash/loan sales – and provides limited synergies. Ultimately, the acquisition raised the net leverage of Tesla while creating EBITDA and FCF drag that requires incremental non-recourse debt to be raised.
• Capex ramping significantly, driving incremental capital raise: We forecast a significant increase in near-term capex levels required to bring both the Fremont, CA factory and TSLA’s gigafactory to scale. Overall this drives our forecast for $3bn of automotive capex in 2017 and FCF burn of $2.8bn in 2017. Ultimately we see another equity raise needed before 4Q17. This is further exacerbated by the addition of SolarCity, whose business would continue to be a FCF drag and requires an equal amount of sale of project level debt and tax equity financing to maintain cash balances.
• Potential tax benefits significant, but would be recognized over a longer period of time – driving net present value lower. While we would expect TSLA to be a net beneficiary of potential US tax changes (i.e., scenario including destination-based tax with border adjustment as well as full capex expensing and elimination of net interest expense) and forecast its NOLs to grow under a potential tax change scenario, based on our model we find that the net present value of these higher NOLs is slightly worse than the status quo given a longer time period to achieve (the company is not currently a cash tax payer and a lower corporate tax rate would push out recognition of NOL benefits).
• Estimates now include SolarCity; we are well below the Street: We update our 2017 through 2020 estimates following 4Q16 results and further layer on our SolarCity forecast. Overall, our EBITDA estimates fall by an average 12% (SolarCity inclusion, lower Automotive gross margin, pushed out Tesla Energy volume ramp) and are on average approx. 30% below the Street.

We would become more positive on the stock if the company were able to demonstrate improved manufacturing execution by driving more rapid quarterly production growth in its current vehicle offerings than we model, demonstrate key milestones implying its Model 3 launch remains on track for mass volume in 2H17, drive down the cost of its battery packs faster than expected, demonstrate considerable market demand for the cross-selling between Tesla products and SolarCity products, and deploy capital more efficiently – driving reduced incremental capital requirements.


We continue to view Tesla as a disruptor in the electric vehicle and alternative energy segments – with a clear lead relative to its peers with respect to vehicle technology adoption (increasing advanced driver assist features, revolutionary over-the-air update capabilities, infotainment capabilities, and general consumer-desired features), electric vehicle architecture, and (potentially) battery scale with the build-out of its gigafactory. However, over time we do not see competitive barriers to entry (other than ease of raising capital and achievement of scale) that traditional OEMs, new entrants into the space, and other battery manufacturers could not duplicate. As a result while we do believe the company has at least one product cycle lead on its competitors, there ultimately could be a Samsung to this Apple (think smartphones), with incremental competition on the horizon as we have detailed in past reports. That being said, this is still an unprofitable Apple at present and pushing growth out and to the right would drive present value down. With that as a backdrop, we see valuation as appropriate at $185, and anticipate downside to shares as we progress through what we believe will be a choppy Model 3 launch that is slower than anticipated.

• Share move opens entry point: Since 12/2/16, TSLA shares have risen 42% (vs. S&P500 +8% and Auto coverage average +9%) driven by a mixture of positive news flow (potential beneficiary from tax proposals, gigafactory investor tour, Model 3 pre-production). However, fundamental operations have not exhibited a material improvement and we estimate potential tax benefits are a wash looking at the net present value of NOLs generated.
• Operational execution still unproven: We see room for shares to de-rate as the Model 3 production launch likely disappoints and as an unproven SolarCity business model likely weighs on the company’s focus/results.
• Capex ramping, see capital raise in 3Q17: We forecast $3bn of automotive capex in 2017 and FCF burn of $2.8bn, necessitating a $1.7bn equity raise.
• Valuation: Our 6-month price target becomes $185 (from $190), now adding SolarCity ($9) to Tesla Energy ($31 from $34 on slower ramp) and probability-weighted automotive segment ($145 from $156 on lower margins) valuations.
• Key risks: Stronger Model S/Model X demand and/or production, positive free cash flow generation, and incremental new product announcements

Trading the TSLA hype cycle: TSLA shares have mostly traded in a $180 to $280 range over the past couple years (Exhibit 1), and we again see room for downside toward the bottom of this band. Historically, (1) the stock takes an average 3 months to move significantly higher driven by “hype” around incremental product launches, new business lines, and delivery growth is priced in; (2) post these runs, TSLA takes approx. 7 months to de-rate as launches are pushed out, deliveries miss expectations, and gross margin percentage disappoints. This has occurred three times over the past three years. And as laid out above, we believe the drivers behind the most recent stock surge (beneficiary of potential tax changes, Model 3 launch/delivery timing, and gigafactory investor tour) are baking in benefits that will take longer to materialize and we expect the stock to de-rate as a result.

 

[Hogfighter]

So we had 2 upgrades following the ER, which did nothing for the SP....but a $5 downgrade moves the stock 3% lower?

I will say that the GS report is the best sell side analysis to date. Hog Negativity Index now at 4.

 

[vgrinshpun]

There is sharp increase in shorting activity at Fidelity today. There were 208k shares borrowed today during the pre-market hours. This compares to the total of 311k shares traded. I suspect that majority of this volume was short selling.

 

[Peoria]

"I have an uncanny knack of finding the bottom and selling 5 to 10 cents above it. In reality, it's an amazing ability."

does everyone always talk about your ability?... do you have the biggest most amazing ability ever?... when you show off your ability is everyone around you like... "oh Donald... your ability is so amazing"?

You'd think but I only have to answer to my wife and boy is she not impressed with my last week. I jumped away from my normal approach by buying ang holding prior to ER and I'm about to eat my shorts today because of my misread. Time to get out, regroup and start playing the moning dip again to recoup the last week of losses. These after and pre markets have been the death of me since ER. They have been huge in moving this Frankenstock lately. Still long. Especially since I likely will be booted today.

Anyone thinking we are seeing lows now and bulls will create a bounce today or is it downhill from here? A $10 pummeling should be enough from the junk GS spewed but the pre-market moment could take us down further. Not sure where support is now that $250 was broken.

 

[doctoxics]

The Goldman Sachs sell analysis fails to consider the incredible growth and development of new technologies over the three year period in their chart. We have seen their recommendations serve their buy/sell needs in the past. I expect they are now buying.

 

[Peoria]

And I'm out. BUY BUY BUY

 

[FluxCap]

I'm tempted to buy the straddle here. Might be some modest proceeds for the bold.

 

[elasalle]

GS downgrade
Goldman Sachs Downgrades Tesla Motors (TSLA) to Sell

Either TSLA not doing a Cap Raise, OR GS not invited to the party ... bought some Jan 19 Leaps (320), sold some Jan 18 Calls (340)

 

[jhm]

Well, we could close the gap at $240.

 

[Yggdrasill]

Bought a little at 245. Just a little though, I think it can fall further. But I'm standing by to back up the truck.

 

[geneclean55]

Here comes that gap fill

 

[geneclean55]

Actually, maybe bounce off the 50 day? It wants to touch it. Lets see how it reacts

 

[neroden]

GS downgrade
Goldman Sachs Downgrades Tesla Motors (TSLA) to Sell

Yep, fits the timing. Amazing that anyone listens to those guys, but they do seem to have an effect in the short term...

 

[elasalle]

BMW i3 plug-in hybrid recall to fix fuel-vapor problem, fire concerns ..title says it all(just sharing)

 

[Paracelsus]

This will be a good opportunity to purchase more shares in my opinion. All Elon has to do is drive up to the SpaceX announcement with any Model 3 then when asked about the car say something like, "That's the Model 3. Have you heard the rumor Tesla plans on starting production "soon"?", then go on with his SpaceX announcement. "

Or maybe drive up in the Model MR-1 (the Model Mars Rover 1) produced at the Gigafactory on the Model 3 chassis.......and then tell the crowd that "in order to accelerate the mission to Mars, I have decided to move SpaceX under the Tesla umbrella, similar to how we recently brought Solar City under that umbrella. We will need solar and electric transport on Mars in the long term, and the massive amount of money that Tesla's earth-bound products will soon be making will help accelerate the establishment of colonies on Mars through our SpaceX wing of the Tesla business. In the short term however, the infusion of billions and billions of extra SpaceX dollars into Tesla will greatly accelerate the development of the very equipment that can be used on earth and on Mars, and provide full testing here on earth in the form of autonomous transport and solar roofing, and I have recently brought Deepak back to Tesla to help ensure this transition happens seamlessly,,,,,,,,,,,,,,,, (and maybe go on to say avoid the cap raise that GS just tried to capitalize on 'again', by lowering the share price 'again')

Anyways, if a near-term cap raise has not already been arranged and this GS report isn't just another orchestrated hit piece to help manipulate near-term price to the pre-arranged selling price (how convenient that they did not include their previous 'hit piece' ratings on their own graph just before TSLA price decreases), then I do think this must piss off Elon in a BIGLY way. He had just recently released his Tesla working conditions report and stated that employees benefit directly from a growing share price, and that the share price was going to grow in a similar fashion to 2013 in the near term once again. His statements told the world that his management practices include incentives that motivate his employees by putting company success in the form of share price increases in their pockets directly because they are share holders in the company. Today's note feels more like a 'power struggle' to me. If the share price continues to grow and the calendar continues to get closer to the Model 3 release date, then the cap raise potential continues to decrease IMHO, and the number of Wall Street tentacles wrapped around Tesla's flexibility are thus reduced. Perhaps those at GS that benefit from our policies of austerity are simply upset that they have to share their investment bag with not only Elon, but his employees no less. In a perfect world Elon's next 3-D chess move creates a way forward for Tesla that does not include a path for GS to control more shares or share price. Otherwise, as some have already mentioned on this board, a cap raise at a price near $240 - $250 has already been arranged and we just didn't get the memo last Friday.

 

[Irishjugg]

I'm tempted to buy the straddle here. Might be some modest proceeds for the bold.

Buying the straddle is basically buying volatility. I don't think we have ever really been flat trading at the 245 level. Seems like it could be a good plan.

 

[JBRR]

Ihor Dusaniwsky on Twitter