Short-Term TSLA Price Movements - 2015

[Beckler]

You know the saying, they are not sorry for what they did, only sorry (for themselves) that they got caught. They would have continued on with their scam indefinitely had they not been exposed.

Most certainly. I'm also uninterested in how they supposedly "behaved in what appeared to be a very principled way" after the fact. It's like saying the serial killer was very principled during his sentencing - who cares. And besides, with each passing day, it becomes just a little more ethically questionable to be even manufacturing any gasoline car that could be reasonably electrified.

 

[gene]

Good concise BS list. Hint. The competition does not have a competing product. Not even close. Tesla has a waiting list of customers for all three product lines (including Tesla Energy), cash in the bank, global independent sales, service and charging infrastructure and is nearing Phase 1 completion of the worlds first very large scale vertically integrated battery production facility, something no competitor has even got on a drawing board, it's also a fortnight or so away from going live with a few 10's of thousands of semi-autonomous vehicles, is pretty much bound to sweep the world's auto industry awards again with the Model X and is less than six months away from unveiling a high performance V6 Mercedes E-Class equivalent vehicle for reservations at a US average vehicle sales price point of $35K and the equivalent of 50 cents per gallon to fuel that will quite likely smash up everyone else's 2016 production plans as consumers evacuate dealer lots in droves to sit in Tesla's online reservation queue instead.

But sure (Baron's) not much by way of positive catalysts to look forward to between now and Model 3.

Information advantage is good.

Well said Julian. Nice to have your input again.

 

[Newb]

Good concise BS list. Hint. The competition does not have a competing product. Not even close. Tesla has a waiting list of customers for all three product lines (including Tesla Energy), cash in the bank, global independent sales, service and charging infrastructure and is nearing Phase 1 completion of the worlds first very large scale vertically integrated battery production facility, something no competitor has even got on a drawing board, it's also a fortnight or so away from going live with a few 10's of thousands of semi-autonomous vehicles, is pretty much bound to sweep the world's auto industry awards again with the Model X and is less than six months away from unveiling a high performance V6 Mercedes E-Class equivalent vehicle for reservations at a US average vehicle sales price point of $35K and the equivalent of 50 cents per gallon to fuel that will quite likely smash up everyone else's 2016 production plans as consumers evacuate dealer lots in droves to sit in Tesla's online reservation queue instead.

But sure (Baron's) not much by way of positive catalysts to look forward to between now and Model 3.

Information advantage is good.

+1000

 

[Cobos]

Good concise BS list. Hint. The competition does not have a competing product. Not even close. Tesla has a waiting list of customers for all three product lines (including Tesla Energy), cash in the bank, global independent sales, service and charging infrastructure and is nearing Phase 1 completion of the worlds first very large scale vertically integrated battery production facility, something no competitor has even got on a drawing board, it's also a fortnight or so away from going live with a few 10's of thousands of semi-autonomous vehicles, is pretty much bound to sweep the world's auto industry awards again with the Model X and is less than six months away from unveiling a high performance V6 Mercedes E-Class equivalent vehicle for reservations at a US average vehicle sales price point of $35K and the equivalent of 50 cents per gallon to fuel that will quite likely smash up everyone else's 2016 production plans as consumers evacuate dealer lots in droves to sit in Tesla's online reservation queue instead.

But sure (Baron's) not much by way of positive catalysts to look forward to between now and Model 3.

Information advantage is good.

I agree with mot of this except that the Model 3 is similar to a 3-series BMW and hence will match a MB C-class not a E-class. The same way the Model S is in between the S class and the E class in size I suppose the Model 3 could eat a few E-class sales, but the main focus is on smaller cars like the C-class or so I believe is the plan. We'll know March'ish next year I suppose.

Cobos

 

[FredTMC]

If they are supplier constrained, why don't they run Model S on line two during the week and do a few Model X units on an a Saturday. Seems like eating the overtime costs would be worth it and allow them to validate the line for Model S, as well as Model X and be ready to run as the supplier issues are resolved?

Doesnt seem as if they've spent the engineering time yet to program the 2nd one to weld up the Model S. Was supposed to be done next year

 

[Johan]

Good concise BS list. Hint. The competition does not have a competing product. Not even close. Tesla has a waiting list of customers for all three product lines (including Tesla Energy), cash in the bank, global independent sales, service and charging infrastructure and is nearing Phase 1 completion of the worlds first very large scale vertically integrated battery production facility, something no competitor has even got on a drawing board, it's also a fortnight or so away from going live with a few 10's of thousands of semi-autonomous vehicles, is pretty much bound to sweep the world's auto industry awards again with the Model X and is less than six months away from unveiling a high performance V6 Mercedes E-Class equivalent vehicle for reservations at a US average vehicle sales price point of $35K and the equivalent of 50 cents per gallon to fuel that will quite likely smash up everyone else's 2016 production plans as consumers evacuate dealer lots in droves to sit in Tesla's online reservation queue instead.

But sure (Baron's) not much by way of positive catalysts to look forward to between now and Model 3.

Information advantage is good.

This and your previous post lays it out very nicely. Yes this is the short term thread; let's gauge sentiment the best we can, in order to try to time the market , but don't let the negative emotions of these sentiments infect us and cloud our judgement and color our long term convictions.

If the sentiment is built on bad information and poor understanding of the factual information then it's false and will not bear on long term prospects, only short term price action. But short term trading is not done best in a vacuum, on the contrary it must always be done against a long term horizon. The clearer and more correctly we're able to discern this long term horizon, the better we can time our short term trading. Especially if we are accumulating stock, and want to use our advantage of having a far superior vantage point (information- and understanding wise as compared to the market on average) to time our buy in points.

Blake Gallagher: your post was great!

Also Julian; the Model 3 will compete vs. MB C-class (not E class), which is the competitor to BMW 3-Series (not 5-series). Elon always said the Model 3 should be judged against BMW 3-Series.

 

[chickensevil]

With the current plan of delivering, at best, NA Signature MX in 2015, the goal of 50K delivered MS/MX seemed to be increasingly unlikely. The problem is that new BIW line is being used for slow ram-up of MX. The "old" BIW line which is producing MS was maxed out at 1100-1200 cars, with OT (as compared to a standard 2 shift operation). In reality, in terms of an average output, I think that existing line is maxed out at 1100 cars per week.

So, taking 12 working weeks/quarter (given the history), maximum production of MX seem to be limited to 13,200 cars. Even if we assume that all these cars will be delivered, the total MS/MX deliveries in Q4 are likely going to be limited to a maximum of 14,500 cars, resulting in a substantial 2,500 cars miss as compared with minimum guidance of 50K cars.

Theoretically, of course, it is possible to pull the rabbit out of the hat by may be not producing MX on the new BIW line, freeing it to produce MS, and then switching back to producing MX, but this will require tuning of the new BIW line, they can't just use new BIW for 4 weeks producing MS at a rate of 1,000 cars/week. The only way this can possibly work IMO, if they decide not to deliver any MX this year, and try to run existing BIW line at a steady 1,000 cars/week, while also ramping MS production on the new BIW line. This scenario, however, would produce noticeable drop is the estimated MS delivery times, which so far is not the case, with estimated delivery times actually increasing in the last several weeks.

So I am not very optimistic regarding the Q3 earnings call. I think that Tesla will need to share their outlook for Q4, and they will most likely lower it to perhaps 14,000 cars, with 2015 guidance lowered by about 3K cars to 47K.

The issues with this MX ramp up are relatively mundane in a bigger scheme of things, but given that this is a short term thread, I suspect, with all the shorting activity and hysteria ignited by constant bear crescendo, I am afraid that visiting sub $200 is not out of the question.

The long term outlook remains very good, but I would advise caution in the short to medium term.

I do not have time do dig for links, but running "old" BIW line producing MS, new BIW line producing MX, and then, at some point blending them together on the new BIW line was discussed by Elon during the Q2 call. I follow this pretty closely, and had quite a few post on this topic scattered through different threads.

I am not known for spreading doom and gloom, but the reality is just that - reality.

Once again in a grand scheme of things this is just noise, but this is short time price movements thread. There is very likely that Tesla will not be able to deliver more than 47K cars this year. I believe they will address it during the Q3 call, and SP reaction to this, with all the bears high fiving and screeming "I told you so" will not be kind.

I am not saying that this is what will definitely happen, but I feel that we are heading that way.

I am extremely bullish on this company long term, though.

BTW did anybody noticed brilliance of their decision *NOT* to introduce lower priced variant of Model X until later next year? This will ensure continuing strong demand for MS well into the next year, than they will introduce lower price MX variant *and* possibly refresh of the MS. This is "energizer bunny" of the demand generation. Simply brilliant.

Just to provide slightly different color on the situation, because I know you have crunched the numbers and have very good data. The only thing I would caution is the notion that they are going to need to wait 6 months to start to blend the MX and MS cars into one line. Yes, they said they would work on the X first and then add the S in, but given they didn't give any timelines for this, I would suggest that at some point they move to start messing around with S production on this line, especially if they are just sitting there waiting on Seats and Windshields for the X (which is what we have been lead to believe). This tells me that you have this second line sitting there doing not much of anything. They can only make so many X's to hold on site until they can put in Windshields and Seats before it becomes too crowded and then the line will just be sitting there, presumably doing nothing. Wouldn't you choose to fill that time with S test runs through that line? And given that presumably the rest of the factory is positioned to handle the higher volume regardless of car type (this was the only place in the factory that I am aware of that currently has a segregation between models, everything else was planned to be blended from the start, stamping, paint, motors - they aren't even different, and final assembly) on the timeline given previously... I am inclined to believe that any early downtime on the new line is likely to be useful filling of that time in programming it up for the S.

I am just cautioning on the notion of it taking a long time to start pushing S's through the line just based on their X hold ups. This is of course assuming that there is nothing wrong with the line and that *isn't* the hold up in any fashion. Which I am making that leap based on Elon's own comments about how someone asked him how many X's they would make this year and his response came back on the Suppliers being slow to provide their needed parts and that if they could tell them how many parts would be delivered this year, they could say how many X's. So it sounds like they are twiddling their thumbs (so to speak) waiting on these parts. Not saying your 47k number isn't in the realm of possibilty, because it certainly is. There is a lot of assumptions that we are forced to make, and I would peg your 47k number as the worst bear case on this, I still see 50k+ as plausible though.

Not good short-term news:
All Charged Up in Berlin Handelsblatt Global Edition

This is not surprising. The last ER they basically stated the jump toward cash flows would wholly depend on when the ramp happened. The ramp was originally (back in 2014) expected to be felt within Q3 to post great numbers then. It has since then been pushed back twice with them saying they would show those numbers in Q4, and the latest being that with the ramp happening *sometime* in Q4 they weren't sure if the cashflows would be seen on the sheets in Q4 or Q1's data. I have been pushing back my expectations with the following of that line of thinking and that is why my latest comments on the subject were that everyone should brace for a sweet surprise come Q1 ER (May-ish), assuming the ramp actually happens in Q4. If something happens and we get pushed back another quarter, then I would move my mark back another quarter as well. But I really feel like they are going to want to get one great green quarter (even if it is to be completely wiped out the very next quarter) just to reassure investors that they can pull numbers if they need to... all so they can get in another capital raise. Just my opinion and reading of the tea leaves, that they are not going to be content with the speed of growth that current assets and funding will allow in order to hit "millions" of cars by 2025 (comments from Elon).

 

[Johan]

Yeah chicken. But let's say they hit exactly 50k combined deliveries for the Full Year 2015. Now I think mr. Market will put different value on 48k S + 2k X as compared to 45k S + 5k X. How much of a difference though I'm not sure.

Also I agree they will likely blend the lines as early as at the exit of 2015.

They do want a green quarter very soon. From recent Elon interview (All Charged Up in Berlin Handelsblatt Global Edition

"I hope to be profitable next year. I agree, we cannot be making losses forever. This year we’ll be investing a lot into the manufacturing ramp-up of the Model X, and in the long term, the Model 3 as well. So our goal from next year onwards is to be cash-flow positive."

 

[AlMc]

Yeah chicken. But let's say they hit exactly 50k combined deliveries for the Full Year 2015. Now I think mr. Market will put different value on 48k S + 2k X as compared to 45k S + 5k X. How much of a difference though I'm not sure.

Also I agree they will likely blend the lines as early as at the exit of 2015.

They do want a green quarter very soon. From recent Elon interview (All Charged Up in Berlin Handelsblatt Global Edition

"I hope to be profitable next year. I agree, we cannot be making losses forever. This year we’ll be investing a lot into the manufacturing ramp-up of the Model X, and in the long term, the Model 3 as well. So our goal from next year onwards is to be cash-flow positive."

Johan: What do you think the Short Term (1-3 month) action will be? I agree long term but this is short term thread. Not trying to be negative but trying not to be too overly optimistic. There is a middle ground between the 'sky is falling' and the bull arguments short term.

 

[Newb]

Now I think mr. Market will put different value on 48k S + 2k X as compared to 45k S + 5k X. How much of a difference though I'm not sure.

Gross margin on the S is much higher than on the first Model Xes. In terms of financial results, it'd be a blessing if it was 48k S + 2k X. Mr Market should be able to grasp that. just saying.

 

[Julian Cox]

Johan, Cobos Tesla M3 - BMW 3 Series equivalent / Mercedes C Class. I know that you know that I know that. E Class = typo only (was musing on Model E).

TSLA IMO is all about trading the shorts against themselves. Tesla Motors Inc. is precisely as solid and on track as it ever was. Having established that the bear case is BS, the question of timing is regards to when the bear BS will implode again.

The MS and the Barclays downgrades are BS. One is complaining about the high price that customers are willing to pay for the Model X as a negative (lol) and the other is on about $52,000 of high margin options per vehicle while reservations of both S and X mount up as gross margin pressure (lol). These 'research notes' are not serious. They are tactical calls to provide an entry for big money. It is entirely possible if not likely that GS will just pitch in with an upgrade once the institutions are comfortable.

The stock also seems to be allergic to crossing below a $220 line.

I think we are a week or so away from a positive media cycle of Model X reviews and Autopilot release perhaps backed by some Musk insights to add color to the production ramp. $220 is probably adequate to take a bullish view but I think in the hiatus between now and then there is an opening for a last-ditch bear attack and an opportunity for an hour or two next week to pick up another $20 assuming Tesla does not unleash a bunch of material good news over the weekend which they occasionally have the habit of doing.

 

[Johan]

Johan: What do you think the Short Term (1-3 month) action will be? I agree long term but this is short term thread. Not trying to be negative but trying nor to be too overly optimistic. There is a middle ground between the 'sky is falling' and the bull arguments short term.

Alan,

Big money, smart money bought in at $240 recently. They're accumulating but doing it carefully now well below $240 (if they did it more aggressively they'd cause a reversal of price and sentiment). To keep fear humming they do smallish downgrades and pump out over-moderate amount of negative "media". But after some time (1-2 months) the weak longs, momo traders and others that got cold feet dry up, i.e. sellers dry up, and we'll be back to $265. It's all a game you know, we don't have power to affect the price directly, like these big players do, but we can see through the facade. So I think we're back to $265 before Jan 1st 2016. How's that for a nice direct prediction?

 

[chickensevil]

Yeah chicken. But let's say they hit exactly 50k combined deliveries for the Full Year 2015. Now I think mr. Market will put different value on 48k S + 2k X as compared to 45k S + 5k X. How much of a difference though I'm not sure.

Also I agree they will likely blend the lines as early as at the exit of 2015.

They do want a green quarter very soon. From recent Elon interview (All Charged Up in Berlin Handelsblatt Global Edition

"I hope to be profitable next year. I agree, we cannot be making losses forever. This year we’ll be investing a lot into the manufacturing ramp-up of the Model X, and in the long term, the Model 3 as well. So our goal from next year onwards is to be cash-flow positive."

Will they? I mean what is the difference between the two. The first shows they were able to ramp the X quite strongly and deliver a decent number of high-margin cash rich cars that is likely to pull up not just the ASP, but also hopefully the GM. As opposed to what we know about the S and the new blending thanks to the 70kWh battery coming in at around 1/3 of all orders and that drags down the ASP and the GM. So you continue to show strong demand of the S in spite of the X, or you show your ability to ramp a second product. Both have positives and negatives to them, so realistically I would put both in at a wash if all we are discussing is the difference of 3k vehicles being in the air as to S or X. What I think is going to set the pace more than anything as we get Q4 guidance and see Q4 play out is that final delivery number more than anything. The market really wants a win, and I think that win they want is that Tesla can give a number and actually hit that number, because they have been missing the mark on yearly guidance repeatedly (at least that is the impression I am getting).

So rather than ask how it would react over random combinations of hitting 50k, I think the important factor is are they going to hit 47 / 50 / 53 / 55 / 55+? because each one of those marks is going to carry heavier implications with it over Tesla's ability (or inability) to overall ramp production, a what a multi-car company is actually going to start to look like. This of course assuming that people aren't getting hung up on demand and making claims about how the X isn't going to sell well or whatever... which we all know both things are just stupid comments from people who aren't "getting it". If those are the reason the price drops I would be a huge buyer because those are not reasons to be dumping the stock, since we all know they are false. One thing is certain, Tesla can make a damn good product.

Johan: What do you think the Short Term (1-3 month) action will be? I agree long term but this is short term thread. Not trying to be negative but trying nor to be too overly optimistic. There is a middle ground between the 'sky is falling' and the bull arguments short term.

Not directed at me, but I would wager that what people immediately care about is getting clarity on what happened in Q3 with production, and what the end of the year is expected to look like. These two things are going to be the driver of the price in the next couple months more than anything because everything else is forecast for early 2016. Less so, people want to hear strong comments about how awesome the reception of the X has been and how that has impacted order rates. Of course early comments from the company point toward positives here, but it remains to be seen what the impact of the X is truly going to have since we only have 6 of them on the road.

 

[mmd]

"I hope to be profitable next year. I agree, we cannot be making losses forever. This year we’ll be investing a lot into the manufacturing ramp-up of the Model X, and in the long term, the Model 3 as well. So our goal from next year onwards is to be cash-flow positive."

We should be careful in assuming every hope as being a given. Both Elon and Deepak said in Q1 earnings call, that they were extremely confident of cash flow positive by Q4 of this year. This is a definite change in tone, if now he is saying 2016. Good luck to everyone, whatever your position is.

Tesla Motors (TSLA) Elon Reeve Musk on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

Ryan J. Brinkman - JPMorgan Securities LLCHi. Thanks for squeezing me in. I have a two-part question on cash. Firstly, on the last call, you mentioned reaching free cash flow positive in 4Q of this year. I'm just wondering with 1Q behind you, how you think you're tracking relative to that goal? And then, secondly, if you could perhaps comment on your capitalization and liquidity overall and the potential for – or desirability of raising any additional capital? Thanks.

Deepak Ahuja - Chief Financial OfficerWe do expect to be free cash flow positive in Q4. That doesn't change. And as we go along, clearly, we are optimizing for efficiency, which results in increase of our finished goods inventory. That makes sense for us to then establish some asset pipelines or credit which is backed by our finished goods inventory or raw materials. So we'll take those actions to make sure we have a solid balance sheet.

Elon Reeve Musk - Chairman & Chief Executive OfficerYes. Things are looking pretty good for Q4. I think it's hard to predict full quarter exactly because that whole quarterly boundary and where does the exponential ramp of production fall exactly on that side of Q4 boundary. But I think it's extremely likely that cash flow is really good at the end of Q4.

 

[AlMc]

Will they? I mean what is the difference between the two. The first shows they were able to ramp the X quite strongly and deliver a decent number of high-margin cash rich cars that is likely to pull up not just the ASP, but also hopefully the GM. As opposed to what we know about the S and the new blending thanks to the 70kWh battery coming in at around 1/3 of all orders and that drags down the ASP and the GM. So you continue to show strong demand of the S in spite of the X, or you show your ability to ramp a second product. Both have positives and negatives to them, so realistically I would put both in at a wash if all we are discussing is the difference of 3k vehicles being in the air as to S or X. What I think is going to set the pace more than anything as we get Q4 guidance and see Q4 play out is that final delivery number more than anything. The market really wants a win, and I think that win they want is that Tesla can give a number and actually hit that number, because they have been missing the mark on yearly guidance repeatedly (at least that is the impression I am getting).

So rather than ask how it would react over random combinations of hitting 50k, I think the important factor is are they going to hit 47 / 50 / 53 / 55 / 55+? because each one of those marks is going to carry heavier implications with it over Tesla's ability (or inability) to overall ramp production, a what a multi-car company is actually going to start to look like. This of course assuming that people aren't getting hung up on demand and making claims about how the X isn't going to sell well or whatever... which we all know both things are just stupid comments from people who aren't "getting it". If those are the reason the price drops I would be a huge buyer because those are not reasons to be dumping the stock, since we all know they are false. One thing is certain, Tesla can make a damn good product.



Not directed at me, but I would wager that what people immediately care about is getting clarity on what happened in Q3 with production, and what the end of the year is expected to look like. These two things are going to be the driver of the price in the next couple months more than anything because everything else is forecast for early 2016. Less so, people want to hear strong comments about how awesome the reception of the X has been and how that has impacted order rates. Of course early comments from the company point toward positives here, but it remains to be seen what the impact of the X is truly going to have since we only have 6 of them on the road.

I agree with this completely and it will dictate short term price of TSLA.

I think Johan's $265 sometime before the end of year is possible. It will take a good ER/CC in November and positive news coming out of the factory via people taking deliveries on their Xs showing that the ramp is going well.

 

[dakh]

This is one bearish argument I completely accept.

I feel I can get slapped around for responding to this in the short term thread but if anything with the dynamic organization that Tesla is, lessons learned with MX if anything will help them avoid making the same mistakes. So it's a positive for M3.

 

[Ocelot]

this probably does not belong here..but I think we need a different name than M3. M3 to most car people simply equals BMW.

 

[chickensevil]

We should be careful in assuming every hope as being a given. Both Elon and Deepak said in Q1 earnings call, that they were extremely confident of cash flow positive by Q4 of this year. This is a definite change in tone, if now he is saying 2016. Good luck to everyone, whatever your position is.

Tesla Motors (TSLA) Elon Reeve Musk on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

Your CC you are referencing makes it shakey where it really falls. I have stuck to that with my comments and as such is the reason for stating it would be seen and felt in Q1. If the surge that is the start of what takes them to cash flow positive happens Dec 15th then it technically happened on Q4, but it won't be enough to reflect on the balance sheets with only 15 days of starting that reversal of the trend. This is why I don't think you can rely on Q4 to reflect that the market will love any comments regarding cash flows. They are likely done with empty promises (or getting to the end of accepting them) and want real results shown on a balance sheet. So Q1 is the best bet of seeig that as you will start and end Q1 with strong cash flows such that there is no way it doesn't reflect on the financials.

Maybe the market will like what they see in Q4, but I'm not betting my money on it. The safer bet is to buy now-ish to plan for Q1.

- - - Updated - - -

this probably does not belong here..but I think we need a different name than M3. M3 to most car people simply equals BMW.

In conversation I have always said Model 3, in typing on a Tesla forum where everyone knows the context or it can be assumed, M3 is fine and I don't think you are going to change the culture here on that one. Unless you have a better abbreviation?

 

[EldestOyster]

... I don't think you are going to change the culture here on that one. Unless you have a better abbreviation?

M3 = BMW, Model III*, ARM processor
MS = Microsoft, Model S, Morgan Stanley*
CC = Conference Call*, Credit card, Climate Control

*=Intended use this time

I wish everyone could stop right now and read Elon's memo on acronyms that was distributed to everyone at SpaceX.
And no, I don't expect the culture to change

 

[ggr]

M3 = BMW, Model III*, ARM processor
MS = Microsoft, Model S, Morgan Stanley*
CC = Conference Call*, Credit card, Climate Control

*=Intended use this time

I wish everyone could stop right now and read Elon's memo on acronyms that was distributed to everyone at SpaceX.
And no, I don't expect the culture to change

SC = Supercharger, Service Center, Solar City, South Carolina,
AJ = Adam Jonas, Andrea James