Short-Term TSLA Price Movements - 2016

[EinSV]

@DaveT,

In response to your post above, I personally believe @vgrinshpun is one of the most valuable posters on this forum and have learned a tremendous amount from him. I believe we all benefit from his highly informative posts, but feel free to put him on ignore if you like. Me too, if you haven't already.

None of us is perfect. That includes me. But that also includes you.

Your cash flow analysis in the posts quoted below is just dead wrong because it deducts from cash flow some very big ticket items like depreciation and amortization that are built into Tesla's income statements as "costs" but do not affect cash flow at all.

Since Tesla's $458M in positive cash generation in Q3 (even excluding ZEV credits, which also are cash) could raise the roughly $2 billion in capital you suggested is needed for the Model 3 ramp if repeated over the next four quarters, it would be helpful if you would acknowledge that your cash flow analysis, particularly the treatment of depreciation and amortization, was incorrect.

This is an important issue. If Tesla can fund most or all of the capital costs needed for Model 3 out of S/X sales and leases, that frees up a substantial amount of cash that it has in the bank and may generate from TE for other capital-intensive projects, such as accelerating plans for Fremont expansion, new European Gigafactory, Model Y, Tesla Semi, Solar Roof, etc.

I think there is plenty of room for legitimate debate on whether Tesla's Q3 cash generation is repeatable. I personally believe it not only is repeatable but that cash generated by S and X is likely to grow over the coming quarters, but reasonable minds can obviously differ about that.

But we shouldn't have to disagree about basic things like treatment of $280M in depreciation and amortization in Q3, which is $1.1 B projected over four quarters. So nothing to sneeze at.

@EinSV Depreciation and amortization don't affect cash flow, so I think your calculations are incorrect. Actually, depreciation and amortization only affect cash flow in the sense that they can reduce income tax.

I took a look at the cash flow statements from this quarter and last quarter, and I'm having a difficult time finding out how Tesla managed "free cash flow was $176 million" after they "invested $248 million in capital expenditures", which means they had $424 in positive cash flow. From their profit/loss statement, Model S/X sales (w/o ZEV) don't seem to cover all operating expenses, but with ZEV last quarter they covered operating expenses and after interest expense and taxes, they were left with $22 million in net profit. But this if you exclude stock-based compensation expense of $90 million, which is included in GAAP, then you have $22M + $90M = $112M in positive cash flow provided by Model S/X and services for Q3. Now there's a missing $312M in cash flow that Tesla found in Q3, and this is even after setting a bunch of convertible notes. I'm not sure how they were able to do that. Can someone who's an accountant or well-versed in finance review these cash flow statements and shed some light on this? Thanks.

I agree that depreciation and amortization don't affect cash flow, but they are baked into the income statement as costs (either cost of revenue or OpEx).

So in the calculation below both D&A and stock-based based compensation (which also doesn't affect cash flow) should be added back to derive an approximation of cash flow. They are the first two items on the cash flow reconciliation on page 7 of the 10-Q: Tesla Motors - Quarterly Report.

There are also a bunch of other items in the reconciliation that theoretically should be taken into account to derive cash flow from the income statement. From my perspective, to predict future cash flows it is more straightforward to start with current cash flows and make adjustments upward or downward from there.

There was $280M in D&A in Q3 ($620M-$340M). As noted above, D&A is included in costs in the income statement, so needs to be added back to calculate cash flow if you start with the income (profit/loss) statement. I think that covers most of the $312M. Someone who is better versed in accounting/finance can probably provide a fuller explanation.

 

[MitchJi]

Or then understand that " Buy the Rumor, Sell the News" is powerful. Tesla News; even profitability, has resulted in flat stock price.Investors are looking for the Model 3 intro spike; likely to happen again around Oct next year. This is the short term thread,and 10% of institutional investors are interested in the short term.

Not exactly. How does that explain the fact that the SP is down sine the accelerated ramp was announced.

Did you forget the sarcasm tags? Why would anyone suggest cross shopping of vehicles in completely different market segments just because they both happen to have batteries in them? Sure it might happen occasionally in rare occurrences but not in any way that matters. Do you think the ICE Pacifica steals sales from the Porsche Cayenne?

That happens all of the time. A lot of MS-MX buyers and M3 reservation holders are coming from "completely different market segments ".

 

[ZsoZso]

I just can't understand how the hybrid gets you a range of 30 miles on it's 16kWh!! battery. That's over half a kWh per mile? How does it manage that, the front wheels are going backwards while the rear wheels are going forward?
I'm glad they are not using up the same battery supply as the Volt uses, oh wait, they both get batteries from LG Chem..

Cobos

You have a problem with getting 30 miles from 16kWh battery ? I have a car (see picture in my avatar) that gets more than twice that range from 16kWh battery on everyday practical driving even in the Canadian winter.

 

[JRP3]

That happens all of the time. A lot of MS-MX buyers and M3 reservation holders are coming from "completely different market segments ".

In this case Tesla created a new market segment, i.e. desirable electric vehicles. Outside of that I doubt it happens "all of the time". Most people shop within a price range and vehicle type.

 

[Ovulation]

I'm convinced that they trey to build a 100% robotic model 3 production line. Elon said in a conference call something like "if a human is in the line the whole thing is down to people speed". And that's why the interior of the model 3 looks so spartanic, IMO they will get rid of the instrument cluster and replace is with a HUD (easier for robots) If they archive that, the productivity will be nuts, round the clock production at an incredible pace

BMW Zulieferer geehrt: BMW Supplier Innovation Award 2014
Productivity
Grohmann Engineering GmbH: Fertigungsanlage Hochvoltspeicher BMW i8

Auf der Anlage wird die Schlüsseltechnologie des BMW i8 gefertigt – der Hochvoltspeicher. Die Erzeugung von Batteriemodulen erfolgt auf engstem Bauraum bei hoher Leistungsdichte und Langzeitstabilität.

btw. Grohman Grohmann Engineering won the BMW Supplier Innovation Award 2014 in the category Productivity for the BMW i8 battery module line

 

[AlMc]

Facebook is going down. The cash coming out will go to Tesla and Google imho.

And NVDA

 

[austinEV]

And NVDA

I am just glad I put all my money in DRYS last wed. /s

 

[AlMc]

I am just glad I put all my money in DRYS last wed. /s

Excellent move

 

[Curt Renz]

And NVDA

Indeed, since its Thursday earnings report the share price of Tesla chip supplier Nvidia has increased enough to alone pay for my Model 3. This could be a subtle good sign for Tesla once we get past the merger vote tomorrow.

 

[erthquake]

Same here for shares held at Merrill and USAA

I got an email from each (10/15/16 @ 1:53 am) with a link and voted online

Same thing for me through Vanguard, even though I had less than 20 shares at the time.

 

[MitchJi]

I am just glad I put all my money in DRYS last wed. /s

I hope you are serious. It's great news if at least one the participants in this thread benefited from an epic short squeeze!
Dryships soars 1,500% amid epic short squeeze

DryShips Soars 1,500% Amid Epic Short Squeeze

DryShips (DRYS) soared some 70% in Tuesday trading and has risen some 1,500% over the past week as one of the most spectacular short squeezes the market has witnessed in a long time grips this unique investment vehicle.
<Snip>

 

[Curt Renz]

I hope you are serious. It's great news if at least one the participants in this thread benefited from an epic short squeeze!
Dryships soars 1,500% amid epic short squeeze

Although not nearly as spectacular, a short squeeze in NVDA may be occurring today.

 

[Nate the Great]

Not exactly. How does that explain the fact that the SP is down sine the accelerated ramp was announced.

That happens all of the time. A lot of MS-MX buyers and M3 reservation holders are coming from "completely different market segments ".

The stock has been trending south since the announcement of obtaining Solar City. IMO

Announcement: 06-24-16 SP 189

Following that announcement the last ATH was prior to Q2 EA 08-01-16 236

Since then we have been in a painful slide down and to the right.

I'm hopeful that we can eventually return to up and to the right.

It will be interesting to see how the SP reacts after the votes are tallied.

I'm hopeful that we at least decouple, some tiny amount of uncertainty.

 

[MitchJi]

I decided to post this speculation, for use (or not) by Nvidia investors. I think it's somewhat likely that Tesla is developing their own hardware to replace the Drive PX. In addition to the potential savings another potential advantage would be performing the very complex DSP (they check the time stamp of every returned radar pulse) in hardware (faster and potential power savings).

@AlMc I'd be very careful with staying in Nvidia, to the extent that their SP is dependent on Tesla.

 

[MitchJi]

The stock has been trending south since the announcement of obtaining Solar City. IMO

Announcement: 06-24-16 SP 189

Following that announcement the last ATH was prior to Q2 EA 08-01-16 236

Since then we have been in a painful slide down and to the right.

I'm hopeful that we can eventually return to up and to the right.

It will be interesting to see how the SP reacts after the votes are tallied.

I'm hopeful that we at least decouple, some tiny amount of uncertainty.

Obviously. But I believe that the SP was about $250 when the accelerated ramp was announced.in other words the slide started before the SCTY. I'm not saying that a big percentage of the slide isn't due to all of the SCTY FUD.

 

[davecolene0606]

So, Tesla does many things that are breaking all sorts of molds and make very difficult to value via conventional methods that many analysts and folks here utilize.

One additional factor that I believe is tripping that analysis up by what I have read so far is how Tesla's deploys capital.
It seems to me the Tesla's approach to capital deployment defies traditional practice by it high efficiency, level of risk tolerance tied to the particular use (Tesla's knowledge of what it's doing defies CW) and its razor focus on redeployment of the capital towards its goal (Acceralting the transition to....) rather than the traditional return it to investors path.

So, it seems as I have seen folks here getting more educated on valuation, they are being schooled in traditional methods. It has been interesting to see the tone of this thread change in this direction.

In order to be ahead of everyone else, one needs to not think like everyone else so that we see what no one else does.

In particular when we are deciding what the multiple could be on the SP.

Fire Away!

 

[racer26]

So, Tesla does many things that are breaking all sorts of molds and make very difficult to value via conventional methods that many analysts and folks here utilize.

One additional factor that I believe is tripping that analysis up by what I have read so far is how Tesla's deploys capital.
It seems to me the Tesla's approach to capital deployment defies traditional practice by it high efficiency, level of risk tolerance tied to the particular use (Tesla's knowledge of what it's doing defies CW) and its razor focus on redeployment of the capital towards its goal (Acceralting the transition to....) rather than the traditional return it to investors path.

So, it seems as I have seen folks here getting more educated on valuation, they are being schooled in traditional methods. It has been interesting to see the tone of this thread change in this direction.

In order to be ahead of everyone else, one needs to not think like everyone else so that we see what no one else does.

In particular when we are deciding what the multiple could be on the SP.

Fire Away!

Sounds an awful lot like Elon's entire ethos of not doing things unless the engineering first principles say that its the optimal solution.

Lockheed and Boeing build their rockets using all MIL-spec parts (which are much more expensive) because the rocket goes to space, and space is harsh.

SpaceX uses MIL-spec parts only where they are actually required and uses consumer-grade parts wherever possible - by actually testing the consumer-grade parts and seeing if their performance will meet the needs, instead of just assuming that space travel requires MIL-spec parts.

 

[Cobos]

You have a problem with getting 30 miles from 16kWh battery ? I have a car (see picture in my avatar) that gets more than twice that range from 16kWh battery on everyday practical driving even in the Canadian winter.

I think you misunderstood me. It looks like you have MiEV in your avatar and as I have several friends with that car I know it is a capable little car (though not really well-suited for long range travel).
A X75 does 316Wh/ mile using EPA measures and that's with a decent performance on electric only.
A Pacifica PHEV does 533Wh/mile. So it uses almost 80% more electricity. Or the battery has such a huge safety margin you are essentially paying for a 16kWh battery but get only 9.5kWh or so. Weight wise they should be fairly similar and the X shouldn't be 80% worth more slippery than the Pacifica.
So my main point was, good that you can get a minivan with a usefull range, but as an electric car, color me not impressed.

Cobos

 

[esk8mw]

Cross posting from the Model 3 forum as I decided to try and estimate Model 3 deposits in light of the new 600k figure being thrown around. Thought it might be of interest here.

The 12/31/15 deposits number of $283 million contains substantially all of the X reservation money, including probably close to 2800 Sigs (maybe 3,000 total, less 206 delivered in 2015) that were reserved at 40,000 a pop. Sigs alone are $112 million off the $283 million number.

Then consider all the X reservations from past years. There were big reports of reservations but let's be super conservative and say just 12,000 existed at 2015 year end (15,000 total minus 3000 Sigs) at $5k a pop. That's another 60 million out of the $283 million number. I'd say most of the backlog (say 80%?) was completed by 9/30/16. All those older X deliveries didn't increase the $283 figure - they were already factored in and reduce the 283 million figure with every pre-12/31/15 reservation delivery. 48 million + 112 million = $160 million to be subtracted from the $283 figure due to old X reservations clearing out. Of course, these get replaced with some level of new X orders but it's pretty hard to quantify.

Same with S movements. I don't think you can just look at sales and assume deposits went up on account of S. S production in 15Q4 was 13,530, then 12,851 in 16Q1, 12,145 in 16Q2 and 14,735 in 16Q3. So, it's not as if there was massive production/deposit increases here, especially since they sought to deliver every car possible at end of Q3. Orders are rising, but they are also being fulfilled at a faster rate, which moves the deposit off the books. One thing we know is that typical cars in transit at end of quarter has increased from 15Q4, from about 3k to 5k. So, 2k additional deposits * 2500 = 5 million, basically nothing.

690 million - 283 million = 407 million. Conservatively add back 160 million from old X res clearing the books (remember, even order cancellations after 12/31/15 would reduce the deposits figure) = 567 million. Lets say 10,000 people (seems high) have new X $2500 deposits in but no car as of 9/30/16: subtract 25 million = 542 million. There's no good data to suggest there's more people waiting on S with deposits in, but let's assume another 10,000 increase just for fun. Subtract another 25 million = 517 million from Model 3.

TL;DR: 517,000 Model 3 deposits as of 9/30/16 seems like a conservative estimate.

 

[AlMc]

@AlMc I'd be very careful with staying in Nvidia, to the extent that their SP is dependent on Tesla.

Thanks Mitch. Sometimes it is harder to decide when to sell a winner then it is to buy it.

Edit: I think it is not coupled too closely,
Deep learning, NN and the cloud are all in demand by other companies than TM