Short-Term TSLA Price Movements - 2016

[Oil4AsphaultOnly]

Thanks, great post and good perspective. One thing though is I believe there are many many more "buy and hold" investors on the long than on the short side, due to the cost over time in maintaining a short positions vs. a long position (where there's only opportunity cost). Sure there will be some die hard shorts thinking "I'll short this thing until TSLA goes bankrupt, it's bound to happen sooner or later" but this is not most shorts. Shorting a stock isn't the exact opposite of going long, in many ways it's similar but not the exact inverse. That said I agree with your logic regarding the psychology here. My hope of course is that short interest is higher now than before.

I'm hoping the same. Am expecting only 31 million shares short to be reported next week though. And thank you jesse for the perspective images.

 

[dreamingof3]

Remember these fun times shorts??? History repeats itself

Squeezed Tesla Bears Buying $276 Million Hand Musk 146% Gain - Bloomberg Business

 

[AlMc]

Looks like the tiff continues. The reminds me of a bull and a bear going at it and I know which is which.

I like the polite discord. Assumptions that cause me to invest hard earned money need to be challenged. I learn from the exchange. Currently, I tend to be more cautious about where TSLA is right now and where it will be in 3 months.

I agree with 'Jesse': There are, IMO, many smart shorts and many smart longs. They have opposite theories but the smart ones all make money on their investments.

 

[Muaddid]

As many have said before, we need both sides of the coin to each make the best investment decisions we think we should.

So I welcome both Julian's opinions and Jesse's counter points and hopefully everyone can continue to discuss and argue without straying off-topic and going personnal

 

[Buddyroe]

By the way, if someone believes 200 was a good buy, and 140 was just a better buy, then by that logic you will never be wrong. It is like a short saying 40 was a good short, but 100 was an even better short, and 290 was just the short of a lifetime. Not that he was wrong. Speaking of wrong:

View attachment 111756

What REALLY actually happened:

View attachment 111758

I guess one way of looking at this is that neither the longs or the shorts were right or wrong about the Q4 FCF. It wasn't green like the "long" predicted predicted, but it also didn't follow the trajectory that the shorts were expecting - looks like it is maybe slightly tainted to the shorts being correct (ie, taking a midpoint of what the shorts and longs predicted and it is slightly closer to what the shorts predicted). Q1 will be huge when making this comparison again. Would be nice to be positive, but most important, is to continue the trend in our direction until positive FCF is achieved.

 

[CatB]

I like the polite discord.

Me too, glad to have Julian back and really appreciate Jesselivenomore's graphs. They perfectly depict why I still feel good about being long, and why I really like the operational cashflow breakout. Spending capital and profits on R&D is necessary and good, now we can show that more clearly without looking like they're losing money.

 

[chickensevil]

If Fidelity and others wanted to play hardball and "create" a short squeeze they could call away their shares as we neared the high. there most certainly can be a short squeeze but certainly not at these levels. You are assuming Fidelity allows their shares to be borrowed. It does generate interest income however Fidelity cannot stand shorts. No employees of Fidelity are allowed to short sell stocks. Maybe retail longs should be hesitant to loan out shares.

Short Selling - Fidelity

Interesting that you point out how much Fidelity hates shorting. Even their learning center on the subject doesn't speak very kindly toward the subject. The only thing they remotely recommend is with options, and generally as a means of hedging, not to actually run against a company.

 

[Julian Cox]

What I gathered from the conference call

Explanation:

They said that they will be FCF positive from March. Which I take to mean not for January and February.
They said that they would start spending money again big league in Q4 (on Model 3) but emphasized GAAP profits in Q4. I take that to mean a bunch of CapEx but FCF negative.
They said that they would be FCF positive for the year. Which means that Q2 and Q3 will be Yuuuge.

That also means that Q1 guidance in Q2 will be great, and dominated by MX celebration and M3 hoopla anyway.
That also means Q2 results and Q3 guidance in Q3 will be Dazzling.
That also means that Q3 results will be Dazzling - by which time they will I think have raised a shed load of money somewhere around the $400 per share mark and could no longer care less about the SP for a while.

As for anyone bellyachining about the stock from here to Q3 I would suggest do what they do and not what they say.

$165 was a good deal. Be happy.

 

[Gerardf]

Saft is reporting slower than expected uptake of their LiIon for large energy storage. They are even taking a pretty big write down of their production factories.

Saft profit dives as lithium-ion battery take-up disappoints - Yahoo Finance

I doubt the market still sticks to lead-acid. Anyway Tesla already has some nice utility reference projects.

Could it be the market feels it should hold of ordering to wait for Tesla with the (probably significantly) lower prices to have production volume ? Is Saft already feeling Tesla Energy's price pressure and risking customers switching to Tesla ?

I feel there are some hints to that in the article (mentioning price war)


or is the market indeed maturing slower ?

 

[chickensevil]

I think all "TRUE" longs would vote with Musk against a hostile takeover. Of course, others may disagree with my definition of a true long.

There is a reason people have been frustrated with even trying to get resolutions passed at the annual shareholder's meetings. Because when the board votes one way, they pretty much move the entire company. If I am not mistaken the Board (including Elon) owns combined 50% or more of the company. Keeping in mind that people like Steve Jurvetson have their own investing arms which is what invested heavily into Tesla in the early days. Since Steve owns this company, he is not going to let those shares be voted against his wishes. These count toward the "institutional" owned share percentage as opposed to "insider" which is less than 30%.

So the only hope of a company doing in Tesla isn't from the inside, but externally. That is a far more costly prospect, but it would be possible.
1: Pay off politicians to influence public policy away from electrics (I can only see this being effective by either raising a false flag of "hope" toward something like... I don't know Hydrogen... thankfully that is mostly failing right now. The other is by removing all influence toward electric adoption... that ship has mostly sailed at this point though, so I don't see this working well in major locations.)
2: Buy up any and all patents and bury them away so they can't be used (This has been happening for a *very* *very* long time. Thankfully better batteries is currently the major influence of things like consumer electronics and you don't want to piss off a trillion dollar industry to protect your own trillion dollar industry... you will get people on Tesla's side since it will be more of the Enemy of my Enemy is my Friend sort of thing... So I don't see that happening)
3: Influence Tesla's suppliers to break deals with them (it has been speculated that this might already be happening on some level. Tesla has shown that they are willing to overcome supplier issues by just bringing that part in house. You won't make my seats for me? I guess we will make our own! This is failing, if it is happening).
4: Sabotage (This is some conspiracy level, grassy knoll, fake moon landing, level stuff... That being said, buildings are insured, and as much as it would hurt to lose a key member such as Elon or JB, there are a LOT of smart people at Tesla. At most you would slow them down... this ship has already sailed and the window is no longer there.)
5: Real Competition (Uhhhh, isn't that a win for Tesla? Big Oil would never support this to overthrow Tesla as it would still end with their downfall.)

I can't think of anything else as external threats leveraging endless pockets of cash... but most of these are either no longer an issue, or would at most, just slow Tesla down... The cat is out of the bag, and there is no putting that genie back in the bottle.

 

[dreamingof3]

Short Selling - Fidelity

Interesting that you point out how much Fidelity hates shorting. Even their learning center on the subject doesn't speak very kindly toward the subject. The only thing they remotely recommend is with options, and generally as a means of hedging, not to actually run against a company.

IN theory, if tesla doubled from these levels-with interest of say 10% due to the lender of shares, a short could be out 110% of their money in one year. Nothing worse than losing it all-----and then some.

 

[everman]

Thank you for the welcome messages.

The answer is Q2 ER in Q3. Cannot hide the reservation account totals longer than that.

Welcome back, Julian!!! Was thinking your timeout should be due to expire any day now! I lit up seeing your name and post! You've certainly called it so far, and excited for the developments in the short and mid terms!

 

[Tenable]

Thanks Julian, I'm buying the stock down. Hopefully it drops a bit more before it explodes. ;-)

 

[everman]

I suppose Julian didn't quite call Q4 right, but his thesis of mirroring 2012-2013 I think is still intact.

Look at the Q3'12 to Q4'12 to Q1'13 transition and we are seeing the same thing (albeit amplified) during Q3'15 to Q4'15 to Q1'16. Q4 pulling up from a downward trajectory, and Q1 peeking positive.

The he difference will come when our Q2 and Q3 are even stronger than in 2013.

 

[Bgarret]

An observation of Macro/Micro and TSLA share price. TSLA is down about 30% YTD; the Nasdaq is down a little less than 10% (3x1 Ratio). If the macro recovers (see Morgan Stanley's equity analyst letter - Bizzaro World: "Are we on a cube-shaped planet?"....Should 'Us do opposite of all Earthly things?'" Everything seems backwards. Sell winners, buy losers, own staples in both up and down markets. Just do the opposite of what makes sense. Bizzaro World." The note is worth reading for both Macro bulls and bears)

If we leave Bizzaro World and come back to Earth, i.e. - NASDAQ struggles back to zero for the year - I could foresee TSLA retracing losses by 30% due to Macro (similar 3 x 1 ratio). That would equate to a macro-adjusted share price of about $210. From there, it would be up to Tesla to run. How much above $210 for successful Model X rollout, exceeding guidance, positive cash flow from operations, Tesla Energy validation, successful Model III rollout and reservations spike, gigafactory opening and proof of concept, possibly announcement of additional factories/gigafactories or overseas expansion - any or all of which would be additive to $210.

Similarly, we could either continue to inhabit Bizzaro World (see market irrational longer than you can stay liquid), in which case get comfortable with the mid 100s for a while. Or, TSLA could fumble any or all of the above and analysts/investors can continue to love the product and the concept, but hate the execution and TSLA gets penalized down from $210.

my 2 cents

 

[CaliBear1]

This is an absolutely riveting thread. Whether you are a long or a short or a hand-wringing sideliner, I have a hard time believing there is a more compelling story in the market than TSLA/Tesla. Who needs reality TV when we have this drama? Thanks to all the amazing contributors and their varied positions-especially those who take the time to factually support their hypotheses. And it is great to again have both Jesse and Julian in the house. They are both on the Tesla train, it's just that Julian is in the (electric of course!) locomotive!

I'm a believer in "The Gorilla Game" and think TSLA is well-positioned to win in the BEV space and beyond. Hence I'm a long. Good luck to all riding this amazing train!

 

[MitchJi]

Welcome back Julian, thank you for continuing to provide excellent analysis of the mid-term trajectory, as confirmed (IMO) by the ER.

Julian, thank you for the thoughtful and well written post. Do you think now is a good time to pickup additional shares $170 or do you believe its best to wait and see if we hit a drop/resistance?

That said why are asking someone who went all-in at $207, and was saying that $200 was a slam dunk bargain (which I think will be shown to ultimately be correct) as opposed to Jesse and Fluxcap who both urged caution at $200, and who both subsequently bought in at ~$148?

 

[Sancho]

Tesla is setting up an iPhone style launch for Model 3. The lines won't be as long, but the buzz in the last two weeks of March should be incredible. Stock-moving incredible.

And if people line up at stores, or stay up late to reserve online, to avoid having to wait two months to buy a phone fairly similar to the one they already have, how much more motivated are they going to be to avoid waiting an additional year, and missing a substantial subsidy, on a car unlike anything they've driven before?

 

[dmunjal]

Tesla is setting up an iPhone style launch for Model 3. The lines won't be as long, but the buzz in the last two weeks of March should be incredible. Stock-moving incredible.

And if people line up at stores, or stay up late to reserve online, to avoid having to wait two months to buy a phone fairly similar to the one they already have, how much more motivated are they going to be to avoid waiting an additional year, and missing a substantial subsidy, on a car unlike anything they've driven before?

If you're analogy is correct and going by previous launches, then we should see a run up into the announcement and a sell off afterwards.

 

[Zhelko Dimic]

Thanks, great post and good perspective. One thing though is I believe there are many many more "buy and hold" investors on the long than on the short side, due to the cost over time in maintaining a short positions vs. a long position (where there's only opportunity cost). Sure there will be some die hard shorts thinking "I'll short this thing until TSLA goes bankrupt, it's bound to happen sooner or later" but this is not most shorts. Shorting a stock isn't the exact opposite of going long, in many ways it's similar but not the exact inverse. That said I agree with your logic regarding the psychology here. My hope of course is that short interest is higher now than before.

Great post Jesse. I like that you spend lots of time thinking about psychology and short term…

Welcome back Julian. I share your long term optimism and thoughts on what a game changer Tesla is.

Having said that, with TSLA around $200, I wish I listened to Jesse more and less to you.

Don’t get me wrong, it was all my decision and my fault, as I repositioned from moderate risk to high risk between $190 and $200, considering $180 un-breacheable. However, collective wisdom has a way of influencing someone on the fence and confirming their existing biases. Your words have some influence whether you believe it or not, whether you think they should or not, and whether person reading post is moron (here!) or not.