2017 Investor Roundtable: TSLA Market Action

[Fifield]

Tesla's revenue has the potential to rise by 20x from $7 billion in 2016 to $150 billion in 2020. ... How would this affect your percentile analysis?

Instead of shares outstanding or market cap, you may want to look at shorted value ($10 billion) vs. float (which should exclude long-term investors like T. Rowe and Elon's shares), and it is small. How would this compare to April 2013?

Plugging in that growth rate puts a move of equal magnitude in the 95th percentile of likely trading range (and projects a $1 trillion market cap by 2021). I do not assign a high level of probability to that outcome, though. Is that your median guidance, best case projection, intuition?

And yes, short interest as % of float is 27% now vs 31% in 2013, both very high. I do think the move will be similar, I'm just not projecting 5x within in a few months.

 

[Paracelsus]

When Elon sarcastically tweeted "This investor group should buy Ford stock. Their governance is amazing..." on April 12th I was certain that it was only a light jab regarding the fact that Tesla passed Ford in market value. I am now wondering if it was also a clue about the Tesla Pickup unveil which will hit Ford very hard in its bread & butter F150 market, upon which their conservative governance depends. Was he providing a clue that when combined with the Tesla Semi they will have all bases covered? Elon must have a pretty good time composing his tweets since they certainly seem to hold more meaning after we watch history unfold. Why wouldn't any short run for the hills after Elon tweets a "Stormy Weather in Shortville" warning a 2nd time?

 

[ValueAnalyst]

Plugging in that growth rate puts a move of equal magnitude in the 95th percentile of likely trading range (and projects a $1 trillion market cap by 2021). I do not assign a high level of probability to that outcome, though. Is that your median guidance, best case projection, intuition?

And yes, short interest as % of float is 27% now vs 31% in 2013, both very high. I do think the move will be similar, I'm just not projecting 5x within in a few months.

This is my bull case, if everything goes according to plan with Model 3 ramp-up and Tesla Energy, and I don't have any reason to expect otherwise at the moment. I can tell you that it is not purely based on intuition. I think there are certain growth elements to this company that even some bulls are underestimating. Tesla has certain competitive advantages that I believe will prove durable, but not yet talked about.

I've been wrong before, and time will tell.

 

[ValueAnalyst]

When Elon sarcastically tweeted "This investor group should buy Ford stock. Their governance is amazing..." on April 12th I was certain that it was only a light jab regarding the fact that Tesla passed Ford in market value. I am now wondering if it was also a clue about the Tesla Pickup unveil which will hit Ford very hard in its bread & butter F150 market, upon which their conservative governance depends. Was he providing a clue that when combined with the Tesla Semi they will have all bases covered? Elon must have a pretty good time composing his tweets since they certainly seem to hold more meaning after we watch history unfold. Why wouldn't any short run for the hills after Elon tweets a "Stormy Weather in Shortville" warning a 2nd time?

Why wouldn't they? Because that would trigger the short-squeeze. Why trigger your own death when you can wait and hope for the slim chance of a rescue?

 

[steve3]

Once we cross the demand "chasm" and enter the tornado demand phase, the firms market cap tends to
Balloon . The introduction of model 3 is likely to provoke that. We all know that.

However, In this instance we have the combination of a tornado and a massive short
Position which combined enhance the explosive nature of what can likely happen.

In my view once model 3 is in the show rooms, and the general public
Gets to see the car, the reservation numbers may well double, and
That may well be an iPhone moment. I doubt that is discounted at present
given the massive short position .

tornado + massive short = significant upward move.

Even if the tornado phase is presently discounted, the massive short interest
Will do the heavy lifting and provoke a substantial upward move.

Previous to the most recent upward move that started last December, there were a lot of comments on this forum about how Elon does not care about the stock price. I believe that the situation with the unionizing has changed his viewpoint on this beginning last fall; and I think his viewpoint has been aligned with "a significant upward move" this year, as the last three years have been in a constricted trading range, and employee vesting is four years.

 

[Fifield]

I just figured it was Elon's way of telling the investor group to go F themselves.

 

[ValueAnalyst]

Plugging in that growth rate puts a move of equal magnitude in the 95th percentile of likely trading range (and projects a $1 trillion market cap by 2021). I do not assign a high level of probability to that outcome, though. Is that your median guidance, best case projection, intuition?

And yes, short interest as % of float is 27% now vs 31% in 2013, both very high. I do think the move will be similar, I'm just not projecting 5x within in a few months.

I think you may be overestimating true float. I think one should exclude T.Rowe and Fidelity's shares from the denominator? I don't expect them to sell anytime soon, based on their investment style and how undervalued this stock is.

Now, if the stock shoots above $1,000, then I suppose all is fair, but we shall see! If I had to guess, I think they would hold even at that level. I probably will.

 

[austinEV]

No ticker to look at. .twitch.

Someone show me a green number. <twitch>

 

[ValueAnalyst]

I'll try to do it later tonight. The comparisons are simply too striking to ignore
Stockcharts.com has a RS rating system called SCTR and the SCTR for TSLA is exactly the same for both time periods 99.6
If I'm even half way right then between now and September/October 2017 TSLA is highy likely to mount a furious rally which could at the very least double the current SP to $600 or even higher like $750!
The biggest lottery ticket I hold is $400 $500 call options for 2018 and 2019
Others are more sedate like $250, 260, 290 and 300s for 18 and 19
5 times current SP is $1500 not going to happen
But 2 to 2.5 times is possible within next 6 months
But if there is a massive short squeeze then this stock could temporarily overshoot to $1000

Sounds like you're the reason shorts are trying to keep the stock down. Thanks...

 

[Reciprocity]

Tesla Pickup unveil which will hit Ford very hard in its bread & butter F150 market

Its hard to know for sure if Elon meant the Tesla pickup would be out in 18-24 months or an announcement in that time, which would put it on the market closer to 36 months from now. That is a very long time. Also, F150 means a lot of different things, anything from a 15k bare bones work truck all the way up to a 60-70k fully loaded luxury model. Hard to know what the plan would be here and odds are Elon didnt have a sold plan when he made his comments about buying Ford stock. The plan to date appears to be high margin vehicles to lower margin volume vehicles. So I would expect a higher end truck with smaller market but higher margins, though maybe that gets turned on its head with the successful launch of the 3 and they shoot for a high volume pickup in the 25k range and a total cost of ownership closer to 15k. That would truly be a game changer. It could be a platform they could put a van body or all the way up to a small box truck to really open things up.

 

[ValueAnalyst]

Its hard to know for sure if Elon meant the Tesla pickup would be out in 18-24 months or an announcement in that time, which would put it on the market closer to 36 months from now. That is a very long time. Also, F150 means a lot of different things, anything from a 15k bare bones work truck all the way up to a 60-70k fully loaded luxury model. Hard to know what the plan would be here and odds are Elon didnt have a sold plan when he made his comments about buying Ford stock. The plan to date appears to be high margin vehicles to lower margin volume vehicles. So I would expect a higher end truck with smaller market but higher margins, though maybe that gets turned on its head with the successful launch of the 3 and they shoot for a high volume pickup in the 25k range and a total cost of ownership closer to 15k. That would truly be a game changer. It could be a platform they could put a van body or all the way up to a small box truck to really open things up.

My guess is that Ford may go bankrupt before Tesla brings its pick-up to market.

 

[JRP3]

No ticker to look at. .twitch.

Someone show me a green number. <twitch>

Took me a while to figure out why my quotes weren't changing

 

[generalenthu]

When Elon sarcastically tweeted "This investor group should buy Ford stock. Their governance is amazing..." on April 12th I was certain that it was only a light jab regarding the fact that Tesla passed Ford in market value. I am now wondering if it was also a clue about the Tesla Pickup unveil which will hit Ford very hard in its bread & butter F150 market, upon which their conservative governance depends. Was he providing a clue that when combined with the Tesla Semi they will have all bases covered? Elon must have a pretty good time composing his tweets since they certainly seem to hold more meaning after we watch history unfold. Why wouldn't any short run for the hills after Elon tweets a "Stormy Weather in Shortville" warning a 2nd time?

I am pretty sure Elon meant this sarcastically because Ford has a very shareholder unfriendly dual class share system. The Ford family can control the firm while issuing unlimited number of shares to the public. The link below talks in detail about the situation at Ford.

Real Life Example of Dual Class Structures in a Public Company

 

[austinEV]

Its hard to know for sure if Elon meant the Tesla pickup would be out in 18-24 months or an announcement in that time, which would put it on the market closer to 36 months from now. That is a very long time. Also, F150 means a lot of different things, anything from a 15k bare bones work truck all the way up to a 60-70k fully loaded luxury model. Hard to know what the plan would be here and odds are Elon didnt have a sold plan when he made his comments about buying Ford stock. The plan to date appears to be high margin vehicles to lower margin volume vehicles. So I would expect a higher end truck with smaller market but higher margins, though maybe that gets turned on its head with the successful launch of the 3 and they shoot for a high volume pickup in the 25k range and a total cost of ownership closer to 15k. That would truly be a game changer. It could be a platform they could put a van body or all the way up to a small box truck to really open things up.

There are so many winning strategies here. I don't think high end truck is optimal, though I concede it is most probable. What I wish they would do is the barebones, cheap, work truck. There is a vast fleet of work trucks out there that go 50-70 miles in a day loaded with paint, plumbing, electrical, lumber supplies. You could put a 40kWh battery on that, sell it for 30-35k and be supply limited for 10 years.

 

[austinEV]

Took me a while to figure out why my quotes weren't changing

Max pain must be $304... Someone really wants it to finish there.

 

[Paracelsus]

Why wouldn't they? Because that would trigger the short-squeeze. Why trigger your own death when you can wait and hope for the slim chance of a rescue?

Completely agree. And timing is everything. On the run-up to the May 2013 earnings report the shorts were somewhat caught off guard because the potential for profitability was never mentioned in the FUD of that time that only wrote about how the company and the CEO survived off stimulus monies. Although the charts and even the number of shorts are forming up in an eerily similar fashion to 2013, the shorts also now have the same lessons in history that we have. Thus at some point the ones that have done their due diligence will be the first ones to quit arranging their deck chairs on the Titanic and grab the first life raft they can find, even if they have to leave all their belongings behind. History has already proven that the last shorts to stay in the TSLA short game go down with the ship on this stock.

 

[Rarity]

Important to note that the cost to short is running maybe 1% now, when in March - May 2013, it was something like 40% - 80%. Shares to short are much more available nowadays.

 

[ValueAnalyst]

A couple very separate thoughts.
1. I think it's obvious this move will not be the same magnitude of 2013, even if it is similar. Still, even if pointless, I wanted to see what the price movements would look like with today's prices and half the magnitude. This is them, based on prices leading up to the 2013 Q1 earnings and the week after. Not bad, and I think within the range of likelier possibilities at this point:

Date - Close
3/22/2013 - 278.06
3/25/2013 - 281.47
3/26/2013 - 282.71
3/27/2013 - 283.84
3/28/2013 - 282.82
4/1/2013 - 305.47
4/2/2013 - 307.01
4/3/2013 - 294.86
4/4/2013 - 298.27
4/5/2013 - 295.87
4/8/2013 - 297.60
4/9/2013 - 292.61
4/10/2013 - 297.71
4/11/2013 - 304.20
4/12/2013 - 304.80
4/15/2013 - 303.11
4/16/2013 - 311.70
4/17/2013 - 311.18
4/18/2013 - 316.88
4/19/2013 - 320.10
4/22/2013 - 328.95
4/23/2013 - 332.02
4/24/2013 - 329.85
4/25/2013 - 335.74
4/26/2013 - 332.74
4/29/2013 - 346.76
4/30/2013 - 343.20
5/1/2013 - 340.54
5/2/2013 - 343.65
5/3/2013 - 345.30
5/6/2013 - 363.86
5/7/2013 - 348.90
5/8/2013 - 349.95
5/9/2013 - 400.99
5/10/2013 - 428.59
5/13/2013 - 469.99
5/14/2013 - 452.89
5/15/2013 - 458.89
5/16/2013 - 486.67
5/17/2013 - 483.86

Wait. I missed the phrase "half the magnitude." Sweet mother of chocolate.

Also - what is your second point?

 

[ValueAnalyst]

Important to note that the cost to short is running maybe 1% now, when in March - May 2013, it was something like 40% - 80%. Shares to short are much more available nowadays.

As far as I understand, and someone should correct me if they know better, cost to short reflects the incremental demand to short, but is not necessarily an indication of how many shares are available to short. My broker tells me there are not that many shares to short at the moment.

I would expect that once the short-squeeze starts, we will see an increase in cost to short if shorts decide to replace their squeezed out shares with new capital as they did throughout the summer of 2013.

This time around, though, they may need a lot more than $10 billion. I don't know of a stock in which $20-30-40 billion is short. So I do not expect the short interest to stay as high if Tesla can launch and ramp-up the Model 3 as planned.

This is the last call for shorts, or longs. Time will tell.

 

[MitchJi]

I just figured it was Elon's way of telling the investor group to go F themselves.

Idiocy squared:

Elon Musk's remark that if a Tesla investment group wants greater board independence they should buy the stock of Ford has earned a rebuke from one of his institutional investors.

The Tesla CEO was responding to a letter in which several investors urged the company to strengthen its corporate governance by appointing directors that don't have ties to Musk and to have yearly board elections. In a Tweet on Wednesday afternoon, Musk advised the group to buy Ford stock, saying their governance is "amazing."

"Comments like that contradict the company's statement that they take their investors' concerns seriously," Etelvina Martinez, corporate governance manager at CtW Investment Group, one of the investor groups that wrote to Musk, said in an email. "We would like to meet with the board to discuss our concerns and their director recruitment process."

<Snip>
It was not an accident that he used Ford as an example:

Musk's point appears to be that in fact, Ford's corporate governance is dominated by a stock structure that benefits company insiders. The board of directors at Ford includes a couple of Ford family members, according to BoardEx. BoardEx is a business unit of TheStreet.

Great-grandson of the company's founder, William Clay Ford Jr., 59, has served as Ford's executive chairman for 29 years. Fellow director and cousin Edsel Ford II, 68, was elected in 1988.

Under Ford's dual class structure, which was put in place when the automaker went public in 1956, Ford family shares are allowed 16 votes per share compared to the one vote per share for regular shareholders. That means the family retains 40% control of the shareholder voting power.

There have been attempts to change the structure, but none have succeeded. The past two years, shareholders defeated a proposal that sought to abolish super-voting shares and strip control from founding family.

There is a similar proposal this year, according to Ford's 2017 proxy statement filed with the SEC. Shareholder John Chevedden says, "This dual-class voting stock reduces accountability by allowing corporate control to be retained by insiders disproportionately to their money at risk."

Shareholders will vote on the proposal at Ford's annual meeting, which is scheduled for May 11 at 8:30 a.m. EST.