Short-Term TSLA Price Movements - 2016

[SBenson]

I am not so sure. In Q1 they delivered 15k cars with automotive revenue of $1.5B and automotive cost of revenue $1.1M for an automative profit of $400M. Let's say they grow sales by 70% in Q3 compared with Q1 and that automotive profit scales the same way. That means an additional profit of $280M, enough to offset their net loss of $230M in Q1. But that's a best case because

1) The Model X mix will contain a lot more lower optioned cars, possible dropping average profit by $10M easily
2) The Model S mix will contain probably somewhere around 3k of 60kWh models, meaning $25M less automotive revenue versus the scaled estimate above
3) Even a very modest 10% increase in general expenses means another $30M charge

Given the above I think it is more likely than not non-GAAP EPS will also be negative in Q3. Maybe they can play the ZEV credit game if they're close?

I'm going by consensus analyst estimates of 2.4B revenue and +0.45 EPS (both non-gaap).

My very rough math is that 2.4B revenue corresponds to 24K deliveries. So Tesla would have to deliver without missing a heartbeat.

Secondly, SCTY EPS is expected to be -2.5. If the merger goes through, this will be a net negative on consolidated Income Statement, with the appropriate conversion ratio applied.

So a positive EPS is in the cards but with a dwindling probability.

 

[cluster]

My take is that Tesla has intentionally shifted many deliveries to Q3 to soften the Q3 miss.

I have the same feeling. I tend to think they intentionally hold many deliveries until Q3. See below.
BTW, S60 orders are very strong.

Tesla Q2 delivery (14,370) is down 440 from Q1 (14,810), making it the first sequential decrease.
However, with "5,150 completed Model S/X orders in transit", why couldn't they deliver the extra 440 units?

Suppose they were close to 2000/week production. A significant bulk of these 5150 cars must be made about three weeks before the end of June, e.g., 1700 for week 2/3/4 of June, respectively. Usually, Tesla pushed hard for US deliveries at the end of quarter, so it is probably safe to say about 800 cars produced in the week 2 of June were for US delivery, which means Tesla had about three weeks to deliver 800 cars for US customers. But they missed it by 440 units, only ~3% of 14,810.

Can someone explain to me how possible? (unless all were Model X requiring weeks of QC at the service center)

 

[electracity]

I have the same feeling. I tend to think they intentionally hold many deliveries until Q3. See below.
BTW, S60 orders are very strong.

Why would they miss Q3 when they are finally ramping the model X? I think they had a big influx of model S orders towards the end of Q2 that they just couldn't get to customers in time.

 

[brian45011]

by the way, with more that 5K cars on a way to customers and the Asset Backed Line of credit to be used to count cash from sales of these cars in Q2,

If they just received $1.7 billion in proceeds from the secondary, why draw on the ABL (and pay interest)? Or do think the ABL's rate is lower than Tesla can earn in the short term market, and it's just an arbitrage situation?

 

[DrJohnM]

Volkswagen, BMW, Daimler Raided Over Steel-Buying Cartel

Life looking hard for legacy ICE

 

[sundaymorning]

Come on, guys, I can't believe I keep reading about choke point being delivery, while it is clearly productions shortcomings, specifically their inability to ramp-up in the first two month of Q2, that caused the miss in deliveries. As I posted few times, in Q1 and Q2 Tesla use extreme geographical batching to maximize delivery of cars produced within the quarter by the end of the same quarter. In order to make this work they produce cars slated for Asian deliveries for the first couple weeks of a quarter, then for about 4 weeks switch to manufacturing the European cars, and finally finish the quarter (remaining 6 weeks) manufacturing cars for NA.

Since they produced only about 1000 cars per week in the first 8 weeks, the quntity of cars shipped to Asia and Europe was much less than they planned. So the reason for underperformance is not inability to deliver all cars that were shipped, but inability to ship enough cars to begin with. So the issue is delayed production ramp (as is clearly stated in the Press Release), not inability to deliver cars that were shipped in time to be delivered.

This all squares with Elon having sleeping bag on the factory floor - I can understand that, when production was crawling at about only 1000 cars/week in April and May! The departure of manufacturing executives, I think, is linked to the same problem. Thanks God, we have a CEO who can roll his sleeves and demonstrate that what he was probably told "was not possible" is possible indeed - i.e. scaling general assembly line to produce about 2,000 cars/week, even though the MX ramp was obviously not working as planned, slowing down the general assembly line, and having negative impact on MS throughput.

I am very frustrated with the miss, but perhaps it is the time to pause staring in the rear view mirror. The net result is that new manufacturing team is in place, Elon proved that they can sustain 2000 cars/week, and, by the way, with more that 5K cars on a way to customers and the Asset Backed Line of credit to be used to count cash from sales of these cars in Q2, the financials will not look as bad as many seem to believe.

The strength of TSLA today might just be reflection of the fact that large institutional shareholders increase their positions as I am typing this...

EDIT: ABL will help with cash flow, not revenue

Keep fighting the good fight V, you're the few trusted source in regards to orders. Love your spreadsheets.

 

[30seconds]

If they just received $1.7 billion in proceeds from the secondary, why draw on the ABL (and pay interest)? Or do think the ABL's rate is lower than Tesla can earn in the short term market, and it's just an arbitrage situation?

ABL is just a tool to manage short term cash flow. Probably isn't needed this quarter, but usually you just want to get into a pattern where it is used consistently, especially since the company is ramping. For that reason alone I would think that they use it this quarter.

 

[vgrinshpun]

Here is additional snippet from the today's DB note, via Streetinsider.com:

"Somewhat encouragingly, there are reasons to believe execution of the next phase of automotive growth should be achievable. For example Tesla has committed to a simpler design for Model 3 (e.g. the M3 Inverter will have 25% fewer parts vs. on S/X; there will be ~8k discrete parts for the M3, which compares with >20k for an entry level ICE vehicle). Based on the forecast for EV cost reduction, we continue to believe Tesla has potential to disrupt the Auto Industry with highly cost competitive EV’s."

 

[electracity]

That's what makes the 50K in Q3 and Q4 so problematic. Demand, although key, is a very unpopular topic on this thread.

X sales may come at the expense of model S sales. They may not have expanded the market. Q3 they are still booking model X backorders. By Q4 may have to stand on ordinary demand.

But I think Tesla will launch a car service once the have some spare model X capacity, either before or after the Model 3 release. Not only did they design the Model X for car service, but also the model 3. And they have the next autopilot and probably a new dash electronics coming to stimulate demand.

They knew they had potential problems revealing the model 3, and likely have plans to keep customer/investor interest up. (SCTY not being one of those plans, but more likely rescue).

 

[MitchJi]

is your item-3 is many quarters away. It will take volume production of model-3 to get there.

So I was just saying you might as well tune out of that metric for now.

Okay I misunderstood your point. But I'm not ready to give up on positive cash flow by Q4 or earlier yet.

SCTY impact won't happen for about 2-3 months after due diligence is completed which means:
No impact on Tesla until Q3 or Q4.

SCTY plans to be cash flow positive by Q4. So by Q3 the impact should be small and by Q4 it should be positive, which will probably surprise the market. In any case it's possible that the SCTY acquisition could improve the prospects for positive cash flow by Q4.

Given the above I think it is more likely than not non-GAAP EPS will also be negative in Q3. Maybe they can play the ZEV credit game if they're close?

If they are close maybe in the context of the M3 preparations, when it isn't expected, close will have an impact that is similar to a hit in normal times?

 

[sundaymorning]

Is the cup half full or half empty?
If one was to count undelivered 5,000 cars at the end of June then the perception is that the cup is half empty. But if one was to factor in the 5,000 cars that will undoubtedly be delivered m, then it's half full. To me, the answer is obvious, those cars will get delivered.

From reading messages on this board, I have not heard a compelling bear argument and I think if we look at this Q with a "cup half full" mentality, then Tesla handily beat guidance by over 1,000 cars. My message to short/bears is that you are playing Russian Roullete at this point, with a combination of a stellar 3rd quarter production ram up and no shares to short, it's only a matter of time before the dominos fall...

Tesla may just be able to purchase scty with money coming from the bear market during the 3rd Q.

 

[MitchJi]

Car Industry Faces Brexit Breakdown

<Snip>
There are plenty of reasons to think trouble lies ahead. The U.K. is Europe's second-biggest car market and -- as Gadfly warned before the referendum -- it's a profitable place to sell motor vehicles. Thanks to the popularity of leasing, British buyers drive cars they might otherwise struggle to afford. Premium models with lots of add-ons earn higher margins.

With a question over London's finance sector jobs, it's difficult to imagine British punters thinking now's the time to splash out on a prestige motor. Carmakers who export lots of vehicles into the U.K., such as Peugeot, face a double hit to revenue because of the weak pound. Then there's the risk that Britain's hara-kiri vote undermines confidence elsewhere in Europe too. With discounting already at high levels, European carmakers don't have much room to slash prices to prop up sales.

In the past, auto-makers could offset Europe's weakness with growth elsewhere, notably the U.S. and China. But neither looks ready to help them offset the Brexit blues right now. While a strong dollar helps those with U.S. sales exposure, such as Daimler and BMW, the American autos market looks saturated.

 

[Mike Smith]

The short term share price will now focus its attention on the July 29 Gigafactory opening party. Elon has said it will be 'a real eye opener' and is now giving out golden tickets; and when golden tickets are given for factory tours you know something major will be announced. I think the share price will rally this month in anticipation of this being a lot more than your everyday battery factory dance party.

 

[Jayjs20]

Kinda glad I didn't panic sell now. We're basically back to the level of last Wednesday/Thursday.

 

[sundaymorning]

After contemplating over numbers, Tesla is still within striking distance of this year's goal. They guided between 80-90k, as of June 30th, they are behind by about 6,000 cars in terms of deliveries, but are about break even in terms of production. Many of us were expecting Tesla to produce a maximum of 1,800-2,000 cars a week, but with Elon estimating 2,000-2,300, our projected goal is within striking distance. The real story will be quarter 3, if we are able to iron out the kinks, and it appears Tesla is doing just that, wow!!

 

[theschnell]

Is the cup half full or half empty?
If one was to count undelivered 5,000 cars at the end of June then the perception is that the cup is half empty. But if one was to factor in the 5,000 cars that will undoubtedly be delivered m, then it's half full. To me, the answer is obvious, those cars will get delivered.

From reading messages on this board, I have not heard a compelling bear argument and I think if we look at this Q with a "cup half full" mentality, then Tesla handily beat guidance by over 1,000 cars. My message to short/bears is that you are playing Russian Roullete at this point, with a combination of a stellar 3rd quarter production ram up and no shares to short, it's only a matter of time before the dominos fall...

Tesla may just be able to purchase scty with money coming from the bear market during the 3rd Q.

Just FYI, they missed guidance on production as well as deliveries.

That said, I am very happy with stock price today and I can't believe how many Tesla haters there are, both from an investment standpoint and even more so from a non-investment standpoint. I get the valuation bear argument, but beyond that the vast majority of people should be supporting this company ideologically, even if they choose not to do so financially...but article after article tries to tear them down. It is just ridiculous.

 

[Papafox]

You don't DEMAND is material to a Short-Term TSLA Price Movements - 2016 thread?

X Yes?,
Strange as it might seem, there are people who spend many hours a week posting nothing but negative comments on this thread, with the specific objective of pulling TSLA stock price down. For years now, a favorite discussion of these people is that demand is about to fail. They'll say things like, "those demand warnings were made by other people in the past, mine are real," that sort of thing. Thus, we've decided to place all demand issues in a separate thread so that short-term traders have easy reference to demand discussions when they want to view them, but don't need to wade through them the rest of the time.

 

[Mike Smith]

So the shorts got about the best sales numbers they could hope for and Tesla is down 2.8%. On a day the nasdaq is down 1.3%. And there's no more stock left to short. I'd be wondering why I'm still short at this point.

 

[JRP3]

You don't DEMAND is material to a Short-Term TSLA Price Movements - 2016 thread?

Not until there is actual relevant data that suggests a real change in it. In the mean time feel free to talk about it as much as you like in the thread dedicated to the topic. Please remember we've been hearing about all these "demand" problems from day 1, long before you showed up on the scene, and they've always been wrong. The onus is on you to provide real proof that "this time it's different". Construct that "proof" in the demand thread, and if it hasn't been torn to shreds there, feel free to bring it over here.

 

[esk8mw]

There were no share left at IB this morning, but now showing 62k available.

On another note, I'm glad I made strong disclaimers on my ridiculously over-optimistic and wrong deliveries guess for Q2 in this thread. My first go at trying to model TSLA performance went horribly awry! I got moderate burned on some short term options based on my diligence but so far not so bad. Maybe it's true that lawyers should stay far, far away from calculators.