2017 Investor Roundtable: TSLA Market Action

[30seconds]

What's the expected range of roadster production? 25,000 units? 35,000?

This is well within Tesla's proven capacity to scale.

 

[DragonWatch]

I agree with you, but if there's one thing I realized in my investing career is that the vast majority of investors are risk-averse and want to see tangible evidence before putting their monies on the line, instead of taking management guidance at face value. This is true for all companies.

What has been surprising to me is the level at which investors are discounting EM's projections. The discount rate is extremely high. Not a single sell-side analyst expects Tesla to achieve its stated goal of 500,000 deliveries in 2018. Not a single one.

I think investors' skepticism has "super-exponentially" grown with respect to Tesla, because of repeated over-promises and under-deliveries. I wish this was not the case, but this is my best educated guess of why TSLA is still at $300. Investors will just need to sit on their hands.

If this was a typical day in *-&$!@ city, I would agree completely.

Revising "nothing ventured, nothing gained."

If Tesla/Elon was trying to compete one-on-one with say Lutz's dampened dream of ICE cars; then hell yes, Tesla should go down in flames just as any competitor should without the capital. However, at last I looked, Tesla is not using a bandaid called hybrid, Tesla has gone all out EV, bypassing the bandage. We are comparing apples to oranges. The last I looked, California turned all their orange groves into housing tracts and call them orange grove, walnut grove, and . . . . What most of us overzealous fanboys/girls got excited about Thursday was when the girl got out of the Porsche and handed the driver of the Tesla Roaster her phone number after getting into the passenger seat. Or, was it the boy taping at the window of the girl driving the Roadster hoping the girl would allow him a ride. Either way(s), Porsche was seconds behind the Tesla Roadster crossing the finish line. A graphic chart, similar to the Semi race, would have made my day.

So, to make the story longer, Just as California uprooted its orange groves and turned them into housing tracts; Tesla is taking ICE technology and turning it into ??? scrap. It takes time and is not often pretty; until you buy and own one (MS, MX, M3, or Roadster and someday SEMI). In the meantime orange groves will stay around, or maybe the drought will kill them off, as the landscape changes.

Does anyone remember Forest Gump wearing braces? How about the day he kicked them off and began to run? My high school. yeah, Hawthorne High wrote me off as a loss because my nose was so red. Just no vision.

If I were you/us, I would be more concerned if the deniers do actually crash Tesla. If they kill the EV, this economy will never, and I mean never ~ ever recover. It's kind of like the fifties movie, with Jimmy Stewart's story of "it's a wonderful life." Tesla is that big.

Tesla/Elon typically sets the bar really high, thank goodness I was a long jumper in high school. The standards are difficult at best for not only the employees, but the sad sack competition with their half baked EVs and fossil fuel consuming ICE cars are all too eager to stop the pain of growth. You may have seen Lutz along the course of the Cross Country meet, he was the one bent over holding his side and gasping for air ~ too much smoking in the bathroom, as I loped along to finish the race ~ even though I was last (CSULB JV '64) out of 300. Not bad, at least that is what my father told me Oh, I was never last again

I realize that people that say they like competition do NOT, they are hoping the competition will stop so they can continue watching TV and not sweat too much. Me, I prefer to set very high standards, that way the chaff falls away and I only compete with the best.

GM, Ford, Porsche etc, if you want to compete please pull your zipper down before peeing ~ I am just saying. Next, ensure you put into place a viable charging system for your EVs, and maybe offer free supercharging for the first 500K cars ~ what? That is not in your vision of EVs, please go to the back of the bus. Next, increase the battery range to Ludicrous so that the competition cannot catch up or even get out of the box. You know, keep them in the sandbox playing by themselves. Next, add superior quality craftsmanship, you know like your ICE cars have never had. Hey you know, it might cost Lutz a dime of two, but if it leads it bleeds ~ right. Maybe tout less maintenance? I know your dealerships that are addicted to ripping the lips off their customers will be. . . ., okay, tell them to unzip first. Try the direct sales approach and get rid of the middle man that everyone talked about years ago. Cut your top management team down to someone that can manage excel spreadsheets, it does half the work for them. I have not seen auto manufactures management teams worth their salt anywhere. You remember the ones that lied about emissions tests? How about the ones that sit on their butts and whine about the competition building EVs. That reminds me, I have yet to see anyone, especially ICE produce a brand new assembly line that can produce 5K or 10K vehicles a week in the last five years. Okay, I am sure someone can tell me I am wrong. All the big guys have been complaining instead of reinventing the assembly line:-( I could go on with my challenges, but ICE auto manufactures are an embarrassing breed.

I finally heard the song "One" the other day on our Xs available oldies but moldies. One is the loneliest number, especially when no one likes you or can come close to being like you, or you are setting high standards

Denial is a wonderful drug. Keep asking yourself if it is erosion or the sea level rising? Hell, make that an IQ divider! If they believe it is erosion then divide their IQ in half Better yet, do not give them a job.

Right now, the hiccup is the M3 production ~ period. As I have repeatedly said, and will say again, we are bystanders! Not one of us are inside the Gigafactory or the Fremont plant, or the parts manufactures. Therefore, until we get a tweet or public announcement from Tesla/Elon; we are all sitting here waiting for the buffleheads (real ducks) to show up

Flash sale Bears, puts yourself out and short ICE manufactures because Lutz says they are a crashing

 

[Ichabod]

What has been surprising to me is the level at which investors are discounting EM's projections. The discount rate is extremely high. Not a single sell-side analyst expects Tesla to achieve its stated goal of 500,000 deliveries in 2018. Not a single one.

Really? Do you recall the mountains of scorn that were heaped on Adam Jonas on this forum when the former darling analyst of TMC announced a piddling few thousand M3s before end of 2017?

I am very curious how confident you are they will deliver 500k next year. Do you really think they will do it?

 

[supratachophobia]

Source?
It seems that I recall some videos by a guy who’s receiving money from Tesla to substantially increase the reliability of battery packs seems to think they’re making great progress.

Personally I think that with the specs revealed for the Roadster and Semi point to Tesla expecting a pretty substantial jump in capacity between now and late 2019. Fitting 200kWh into the roadster cant be a small feat without a decent improvement in battery energy density.

If you are referring Jeff Dahn, he makes some statements in his video that the challenge of mixing materials to produce the anode/cathode? maybe? is reaching a point where they are using half a dozen materials but its not getting that much better (they saw big gains using 3,4,5 materials), and that the number of combinations are extreme when you look at mixing 10 or more. And I don't believe this is something they can model virtually, they need to actually build the battery and test. This is done at the gigafactory as well, unbeknownst to many.

I think if you do the math, neither new project lends itself to the idea they have made great strides in battery technology over 6 months (beyond the 2170). If you assume the simplest answer and that is the Roadster is using the new 2170 cells, but with what is essentially two packs putting out 800v total (2 x 400v). Then further assume 100kwh in 2170's is maybe 3/4 the size of an 18650 based 100kwh pack? They managed to cram it all in there somehow (totally believable, and even more so when you see the lack of frunk access in the photos).

Then you look at the height/width of the semi and assume they took that same "new" 2170 100kwh pack, rotated it 90' and stacked 2 stacks of 4-5 of them in between the forward axel and 1st set of rear axles, then that makes a lot more sense than some huge density breakthrough that didn't show up on anyone's radar on a battery technology that was reaching the end of it's optimization life-cycle.

And whether you believe either one, it doesn't take away from the feat either of them represent.

Edit: corrected 2160 to 2170

 

[MP3Mike]

I think if you do the math, neither new project lends itself to the idea they have made great strides in battery technology over 6 months (beyond the 2160).

Minor thing the new cells are a 2170 format, not 2160.

 

[Ichabod]

Several bearish analysts said it's all about Model 3. My view is different.

Great products (like Semi and Roadster) change the expectation of future cashflow, which changes today's valuation. As a long term investor, I care a lot about the valuation before I decide when to add more shares. Also, great products show the quality of the company, and affect what percentage I allocate to the stock.

Model 3 ramp indeed is important because it impacts cash position by a great deal. Bears say it's the only thing that matters because Tesla could run out of cash and bankrupt. That's the part I completely disagree.

Even I can tell Tesla is going to become a trillion dollar company based on future cashflow. I'm sure Elon knows that very well. Also consider the following: Tesla's mission; Elon's stock holding; Elon's view to debt that "debt should always be paid."; Tesla's capability to raise cash, etc,...... the view that Elon will let Tesla run out of cash and bankrupt is just ludicrous. Shorts spread this FUD so that longs will sell the shares, or at least stop buying. Elon will not let this company fail. Lots of shareholders will also not let this company fail.

That's why my approach is holding a lot, and add more if there is a big pullback. I don't care about the Model 3 ramp.

This is a truly shocking post. I have been reading on here for 4 years from literally every bull on this site, that the S and X don't matter, because it is all about the 3. And they said that because they were right. Not caring about the Model 3 ramp might be hazardous to your wealth.

 

[3Victoria]

Really? Do you recall the mountains of scorn that were heaped on Adam Jonas on this forum when the former darling analyst of TMC announced a piddling few thousand M3s before end of 2017?

I am very curious how confident you are they will deliver 500k next year. Do you really think they will do it?

I think the prediction was a 500k *run rate* before end of 2018. So, deliveries will be far below that, say 250k. Maybe 2019 gets 500k deliveries.

 

[Ichabod]

I think the prediction was a 500k *run rate* before end of 2018. So, deliveries will be far below that, say 250k. Maybe 2019 gets 500k deliveries.

Ah, the familiar "rate" vs. actual production volume debate. I think it was actual production, but who knows. What does VA think it is referring to?

 

[Reciprocity]

This is a truly shocking post. I have been reading on here for 4 years from literally every bull on this site, that the S and X don't matter, because it is all about the 3. And they said that because they were right. Not caring about the Model 3 ramp might be hazardous to your wealth.

It's all about model 3 because S/X are proven and would be profitable without massive investments that are currently purely model 3, storage and solar related. Those are all new products that will take many months to mature the same way model S and recently model X has. At some point, those products will mature and backlogs will be cleared, these are facts not guesses. Name one other company that has $25B in back orders that is not in the aerospace or defense industries. And that's only for model 3. Add another $5B for solar roof, powerwalls and packs as well as the semi and new roadster.

 

[TMSE]

This is a truly shocking post. I have been reading on here for 4 years from literally every bull on this site, that the S and X don't matter, because it is all about the 3. And they said that because they were right. Not caring about the Model 3 ramp might be hazardous to your wealth.

Do you think Model 3 ramp is the only/major concern holding stock price? What production rate would alleviate that concern?

 

[Ichabod]

Do you think Model 3 ramp is the only/major concern holding stock price? What production rate would alleviate that concern?

Given that people have come to expect less than perfect performance, I think if they are 3k per week by the end of Q1, people will start to settle down. If it is that rate or higher at the end of Q2, things will still be OK if the GM goes positive. That's just my two cents. I don't really know.

 

[Ichabod]

It's all about model 3 because S/X are proven and would be profitable without massive investments that are currently purely model 3, storage and solar related.

The problem is that this isn't necessarily true. Even if you back out all R&D, the company would still post an operating loss. Given the current (much improved but still relatively high) average waits for service, the service network is certainly not oversized for the S and X fleet, so there really isn't much proof that the S and X are profitable on their own. We aren't talking about cash burn here, we are talking about operating profits. The operation of the company, not including any investments into the future, does not turn a profit most quarters.

That being said, I do think it could be a profitable company making S and X only, but with some more drastic changes to the business model. The reason it is still all about the 3, even if Tesla is making some profit on S and X, is that the stock price is based on an assumption of 3 success. A 50+ billion USD market cap is not earned on the back of two models selling 100k total per year. It is based on the 3 selling 500k per year, and growing from there. That is why it is all about the 3. If the 3 doesn't get going, the stock price can't hang on forever.

 

[supratachophobia]

Minor thing the new cells are a 2170 format, not 2160.

Right you are, right you are.

 

[RobStark]

What's the expected range of roadster production? 25,000 units? 35,000?

This is well within Tesla's proven capacity to scale.

Ferrari had a record year in 2016 of 8,000 units sold.

I am thinking ~5k units per year.

10K units per year would be jaw dropping.

These cars are 2+2 targa coupes costing $200k-$250k.

 

[Papafox]

Hmm. TSLA looks like it just jumped up $4 in after-market trading

Edit: back to normal price now. It looks like either a late post of an earlier trade or else someone bought 5,000 shares without a sufficient limit being set.

 

[larmor]

Do you think Model 3 ramp is the only/major concern holding stock price? What production rate would alleviate that concern?

The real bottom line is revenue and profit. That won't come with a ramp, it will come with large scale rapid production and sale of M3. Still not sure why market doubts tesla execution, after continuing to sell MS and MX, high priced widgets.

The above being said, the market is priced on expectations not on actual results, just my opinion.

 

[Reciprocity]

Oh, no... they definitely run out of money. The issue is how long will investors continue to give Tesla money to fund expansion. Tesla has not had an issue raising money at thus far since spring 2013. As long as the story is intact and the path to massive growth stays clear, then I don't think Tesla will have a problem raising money.

The story will remain in tact because it's a true story. The road will be bumpy but for me this thing is de-risking everyday closer to model 3 ramp. Not that there is not a lot is risk still, but funding will be there because the story is true. BEV is superior to ICE and in 25 years, many countries will have outlawed new ICE vehicles and Tesla is and will continue to lead and not because of some secret sauce, but because they are the only company with a real plan and a true commitment. The lead really comes from solving the problems as they go, it's not like Daimler can't solve these problems. What competitors lack is the will, not the ability. They all talk a big game but I have yet to see them actually commit in any real way. Daimler is doing one very smart thing and is focusing on work vans. Most are short range around town vehicles so they are ideal for a company cutting their teeth with EVs. Vans are also perfect for the EV format because of the maximized space and enhanced safety. Vans are also $50k for the nicer ones.

 

[Causalien]

I agree, with bear sentimebts. TSLA dropped the ball on model 3 manufacturing like they did on X. My guess is because of doing too many things at once.

If the rumoured high speed welding of the battery pack is the cause, then the fault is purely on them again. it is a releatively easy thing to do and there should be lots of people who are extremely knowledgeable on this in the USA. So I am scratching my head and wondering if this is actually the cause.

My guess is that leaked middle manager complaint was true. Too much hubris on the upper management who are too proud to seek outside help, esprcially from traditional tech ppl.

 

[Causalien]

I agree with you, but if there's one thing I realized in my investing career is that the vast majority of investors are risk-averse and want to see tangible evidence before putting their monies on the line, instead of taking management guidance at face value. This is true for all companies.

What has been surprising to me is the level at which investors are discounting EM's projections. The discount rate is extremely high. Not a single sell-side analyst expects Tesla to achieve its stated goal of 500,000 deliveries in 2018. Not a single one.

I think investors' skepticism has "super-exponentially" grown with respect to Tesla, because of repeated over-promises and under-deliveries. I wish this was not the case, but this is my best educated guess of why TSLA is still at $300. Investors will just need to sit on their hands.

The problem is really the current Macro environment.

Cheap to nearly negative interest rate. If you take into considering that the real inflation rate is 8~10% you'll understand what's going on. We investors are forced to shun cash and this in turn prop up any company that is not a disaster.

2018 should still be ok. I don't see any bubble that are close to bursting yet, but the next one is going to be big. Since none of the issues are fixed and we just re-inflated the same bubble back (housing) plus 2 others (student loan + auto MBS) while the pension bubble is in the slow process of bursting.

 

[mongo]

I agree, with bear sentimebts. TSLA dropped the ball on model 3 manufacturing like they did on X. My guess is because of doing too many things at once.

If the rumoured high speed welding of the battery pack is the cause, then the fault is purely on them again. it is a releatively easy thing to do and there should be lots of people who are extremely knowledgeable on this in the USA. So I am scratching my head and wondering if this is actually the cause.

My guess is that leaked middle manager complaint was true. Too much hubris on the upper management who are too proud to seek outside help, esprcially from traditional tech ppl.

As I understand it, the problem section of the pack line was outsourced. Tesla likely could have done it in house better, (since they redid the SW in 4 weeks, and have a 4th line that is 3 times as fast). Supplier dropped the ball or misled them or something, and it was not discovered until production ramp. It could be that because it was deemed easy/ low risk they outsourced it and didn't expect any problems.

Lame analogy warning:
Do you fault OEMs for using Takata airbags? Or drivers for buying VW diesels?