Short-Term TSLA Price Movements - 2016

[mrdoubleb]

I watched too. SpaceX will earn billions of dollars each year and no competitor. Now we can seriously prepare to visit Mars.
Also, I think Elon will make the 500k model 3 in 2018 happen. It's a production increase, different from a schedule pull-in.

Yeah, and on our way back to on topic as one of us posted on the ER night, they have been off by about 10% on deliveries in the past when they missed, so even if they are off by that much this time, it's still 450k cars.

And on that thought, i really don't think that most analysts properly readjusted their numbers yet. They need to process this. So for 2017 Musk promises 100-200k M3. How much were we expecting before? Come on, raise your hands if you weren't thinking they will pull a Model X and shows a few, maybe <1k Model 3 in Q4 before they enter mass production in Q1 or Q2 2018. So now that they plan to start production sometime in Q3, even if they miss 100-200k and come in at, say, 80k or 90k, that means 2017 production will be 200k+ S/X/3, or roughly double of the previous expectations.

Napkin math time for very conservative numbers:
S/X ASP for 2017: 100k
S+X volume: 100k
S+X income: 10Bn
S+X avg. gross profit: 27% = 2.7Bn
M3 ASP for 2017: 40k
M3 volume: 90k
M3 income: 3.6Bn
M3 gross profit: 10% (very conservative; initial shipments) = 360m
Total 2017 gross profit: 3Bn+

 

[GoTslaGo]

I watched too. SpaceX will earn billions of dollars each year and no competitor. Now we can seriously prepare to visit Mars.
Also, I think Elon will make the 500k model 3 in 2018 happen. It's a production increase, different from a schedule pull-in.

Yes, it will happen. Why? Motivation.

If I recall correctly (IIRC), the first batch of model 3's will go to employees.

Will they be motivated to get the July deadline? Hell yeah, we want our car!

Will they be motivated to make sure the suppliers are held to account, and on time? Yes. we want our car!

Will they be motivated to make sure the cars coming off the line are great? Yes. That's our car!

Will they subsequently make the later cars great, if at least out of habit? Yes. That's just how we do it.

Genius.

Call me a fanboi, but I believe the right motivation works wonders. Hopefully closer on topic.

(Assumes the robots are in place to get things started...)

 

[Xpert]

View attachment 175403

I highly doubt he can ramp rocket hangars fast enough to catch up with the expected demand.

 

[Cobos]

True. Yet is supposed to be a hedge against an assumption of oil demand eventually dwindling.

Not sure if it's managers would be so sanguine if Statioil was threatened with a near total write-off of the value of Noway's oil reserves due to cascade disruption of oil based transportation.

What do you think?

The managers on NBIM has no connection to Statoil but is under our version of the Federal Reserves. The new money coming into the fund is based on income from Statoil as well heavy taxation on ALL companies operating on the Norwegian shelf. This includes lots of American oil companies that seems to not mind the heavy taxation.
Having said that, the fund manages risk mostly by extreme diversification, which is why they own almost 0,5% of every stock market listed company. If you can fault them for something it would be that they are too passive as investors and during shareholders meetings have regularily voted with the boards. Hence they have yet to invest directly in one specific company. I personally would of course love for them
to invest a few billions in Tesla directly but that has been against their MO, and their rules set by the parliament I beleive.

Cobos

 

[Fallenone]

Yeah, and on our way back to on topic as one of us posted on the ER night, they have been off by about 10% on deliveries in the past when they missed, so even if they are off by that much this time, it's still 450k cars.

And on that thought, i really don't think that most analysts properly readjusted their numbers yet. They need to process this. So for 2017 Musk promises 100-200k M3. How much were we expecting before? Come on, raise your hands if you weren't thinking they will pull a Model X and shows a few, maybe <1k Model 3 in Q4 before they enter mass production in Q1 or Q2 2018. So now that they plan to start production sometime in Q3, even if they miss 100-200k and come in at, say, 80k or 90k, that means 2017 production will be 200k+ S/X/3, or roughly double of the previous expectations.

Napkin math time for very conservative numbers:
S/X ASP for 2017: 100k
S+X volume: 100k
S+X income: 10Bn
S+X avg. gross profit: 27% = 2.7Bn
M3 ASP for 2017: 40k
M3 volume: 90k
M3 income: 3.6Bn
M3 gross profit: 10% (very conservative; initial shipments) = 360m
Total 2017 gross profit: 3Bn+

Model S has been carrying about $16.5k SG&A cost for each sold. Assuming Model X also has this and Model 3 will carry half of that in 2017. That's 2.4B taken out of the the 3B gross profit. Leaving 600M for RND to be operating profitable. Currently they are running around 640M RND a year. TE contributed about 10M revenue with unknown gross margin. Suppose it goes to 100M for 2016 and 300M for 2017 and has 30% gross margin, then it leaves 60M left for profit with the assumption of no growth in RND. Even at today's price, it would be a 500 PE company. In some sense, I would rather TSLA having a negative EPS at that stage than contemplating the 500 PE valuation.

 

[All Your Bases]

Tesla should buy Volvo

Production capability in Europe and China, and even a fine new factory coming on-line in US (South Carolina).

Good talent in the fields of manufacture, safety and self-driving included.

Volvo was sold a couple of years ago, by Ford, for less that 2B$.

Lastly, Volvo's logo is the sign for "Iron", - would fit nicely to "Ironman".

 

[mrdoubleb]

M3 ASP for 2017: 40k
M3 volume: 90k
M3 income: 3.6Bn
M3 gross profit: 10% (very conservative; initial shipments) = 360m
Total 2017 gross profit: 3Bn+

So I hate when people quote themselves, but making an exception now to add 2 more scenarios.
Leaving S/X prediction as is for now, so 2017 gross profit 2.7Bn for those.

M3 Scenario 1: as above, revenue 3.6Bn, profit 360m
M3 Scenario 2: volume 150k, ASP 45k, margin 15% = revenue 6.75Bn, profit 1Bn
M3 Scenario 3: volume 200k, ASP 45k, margin 15% = revenue 9Bn, profit 1.35Bn

So even in middle case, S/X/3/TE could very well make 4Bn gross profit. Even if operating expenses go from 500m to 750m (more stores, SCs), that leaves 1Bn in the bank.

Looking ahead to 2018, with S/X unchanged (which it won't be as decreasing cell costs and increasing production efficiencies on X will drive margins even higher even if volume plateaus...) here are 2 scenarios for M3:

M3 Scenario 1: volume 300k, ASP 40k, margin 12% (more average specced cars) = revenue 12Bn, profit 1.44Bn
M3 Scenario 2: volume 450k, ASP 40k, margin 15% (improved production) = rev. 18Bn, profit 2.7 Bn, a.k.a. equals S+X

 

[Lessmog]

mrdoubleb is not exaggerating in the least. The first barge landing allowed for a much gentler deceleration with much more fuel available for an easier landing. This barge landing was the rocket equivalent of cranking an automobile factory up to 500,000 vehicles/yr. output two years ahead of schedule. If the market needs to understand how much credibility Musk really has, all it needs to do is watch a replay of the landing video.

And in the dark too! Big feat.

 

[Intl Professor]

Simon Sinek: How great leaders inspire action | TED Talk | TED.com

People don't buy what you do. They buy why you do it.

In describing "The Law of Diffusion of Innovation" Simon Sinek describes a tipping point that is reached after purchases by the "early adopters" and "innovators" (the people he describes as the ones who just get it) where sales explode and the early majority begins to buy.

Where will the model 3 fall on the classic diffusion of innovation chart?

I want to thank you for this link but elaborate on the early part of the Ted talk. There's a lot of talk here about Elon's motivation. But why he does what he does is pretty consistent. He believes in the need to take energy use seriously and then he does something about it. The results, as with the Falcon landing, are sometimes spectacular, so too for the cars and if reported costs are accurate, Tesla Energy as well. The critics, the shorts, are motivated by money which is a much less visionary impulse for most of us. (No insult intended for traders, I'm just risk averse and too lazy to learn about options, etc., despite Motley Fools' effort to try to teach me trading. And, I'm about to commit another sin of thread.)

Simon Sinek helps me to better argue about politics, the principal lens through which I view the world. Many have said this before but the pundits seem to miss it. The appeal of Bernie Sanders and Donald Trump is clearer to me because of Sinek: their message is direct, they believe the two political parties have failed. Traditional party leaders are like the shorts. They know a lot about plans, as Sinek notes in one aside, but they do not communicate why they believe. Musk and his companies have that gift of knowing and communicating why they are motivated. Of course it resonates with those of us similarly motivated, by the hundreds of thousands as the reveal demonstrated.

Now that I've had more time to think about it, Jack1956 through Sidek also explains the early adopter thesis and why Elon's goals (the How) have been debated on this thread recently. Bravo!

 

[mrdoubleb]

Model S has been carrying about $16.5k SG&A cost for each sold. Assuming Model X also has this and Model 3 will carry half of that in 2017. That's 2.4B taken out of the the 3B gross profit. Leaving 600M for RND to be operating profitable. Currently they are running around 640M RND a year. TE contributed about 10M revenue with unknown gross margin. Suppose it goes to 100M for 2016 and 300M for 2017 and has 30% gross margin, then it leaves 60M left for profit with the assumption of no growth in RND. Even at today's price, it would be a 500 PE company. In some sense, I would rather TSLA having a negative EPS at that stage than contemplating the 500 PE valuation.

Yeah, i think we are kind of saying the same thing here. I mean Operating expenses was 500m this quarter (RND + SGA), so in my latest post i increased that by 50%. In SGA they will need more service staff for sure and more service centers and superchargers, but i don't think they'd need more than a 50% increase in spending as current infrastructure and staff can also (partially) support M3. For RND M3 replaces X spending, Y and Roadster replace M3 spending, but they will reuse the same platform, so i would expect that to be flat.

So at the very least i expect them to break even in 2017, assuming tooling and GF completion will be finance by a capital raise. In 2018 though, gross profits should jumpt o abut 2x of 2016 or more.

 

[Fallenone]

Yeah, i think we are kind of saying the same thing here. I mean Operating expenses was 500m this quarter (RND + SGA), so in my latest post i increased that by 50%. In SGA they will need more service staff for sure and more service centers and superchargers, but i don't think they'd need more than a 50% increase in spending as current infrastructure and staff can also (partially) support M3. For RND M3 replaces X spending, Y and Roadster replace M3 spending, but they will reuse the same platform, so i would expect that to be flat.

So at the very least i expect them to break even in 2017, assuming tooling and GF completion will be finance by a capital raise. In 2018 though, gross profits should jumpt o abut 2x of 2016 or more.

Increasing 50% of SG&A while getting 100% of increase in delivery is way too low. Not only SG&A includes the staff around the world, the rent they pay for the stores, the superchargers they plan to double, but also the amortization of all those Capex to crank out that 100k model 3. I think you need to double instead of a 50% increase the SG&A in your calculation to be more realistic

 

[BornToFly]

I can't sleep. My original plan until yesterday was to hold my core shares, and not buy anymore. Not because I don't believe in Tesla, but because I didn't want all my eggs in one basket. The ER call changed everything. 2 years from now (May 2018), we now expect the following. 1) Tesla Energy will be selling in significant volume with excellent profit margins and without the infrastructure needed to support the auto side of Tesla (warranty, service, chargers, etc). 2) Model 3 ramp will be huge with large delivery numbers, and the ER call in 5/2018 will discuss huge demand/sales with reduced capital spending and positive cash flow. I just can't imagine that TSLA will not be double what it is today. If there is a major Macro US/World event, then it won't matter what stock you have your money in. Barring such a macro event, I will pull a Julian and say that I will chew on one of my socks if the SP isn't at least 400 2 years from now. That makes it a no-brainer for me to increase my core holdings. The only problem is I wasn't expecting this, and I just initiated transfer of funds from my checking account to my brokerage account. I hope it clears today so I can buy the stock at the current price, and increase my core holdings by 50%. I think we will be above 220 again very, very soon (still a buy). Now I hope I can get some sleep....

P.S. - If you are a long and bought at a price higher than 220 and sell now, you shouldn't be in the market....

 

[hoang51]

that's literally the same thing as worrying about where the bottom is.

If you see it as literally the same, then you have much more to learn about the stock market. There's more than one day for stocks to go down on bearish sentiment.

 

[Xpert]

I can't sleep. My original plan until yesterday was to hold my core shares, and not buy anymore. Not because I don't believe in Tesla, but because I didn't want all my eggs in one basket. The ER call changed everything. 2 years from now (May 2018), we now expect the following. 1) Tesla Energy will be selling in significant volume with excellent profit margins and without the infrastructure needed to support the auto side of Tesla (warranty, service, chargers, etc). 2) Model 3 ramp will be huge with large delivery numbers, and the ER call in 5/2018 will discuss huge demand/sales with reduced capital spending and positive cash flow. I just can't imagine that TSLA will not be double what it is today. If there is a major Macro US/World event, then it won't matter what stock you have your money in. Barring such a macro event, I will pull a Julian and say that I will chew on one of my socks if the SP isn't at least 400 2 years from now. That makes it a no-brainer for me to increase my core holdings. The only problem is I wasn't expecting this, and I just initiated transfer of funds from my checking account to my brokerage account. I hope it clears today so I can buy the stock at the current price, and increase my core holdings by 50%. I think we will be above 220 again very, very soon (still a buy). Now I hope I can get some sleep....

P.S. - If you are a long and bought at a price higher than 220 and sell now, you shouldn't be in the market....

I am with you. I think the accelerated plan is genius in a 2-3 year time frame, it is a no brainer. Im going to transfer more $$$ and buy more shares on the dip. Huge upside vs. limited downside. Once they announce the cap raise Tsla will take off like the falcon 9.

 

[Hogfighter]

Frankly, I'm surprised that this CC was a surprise.

1) We all knew Tesla was looking to increase production plans.

2) We all knew that a capital raise would be required to fund that new plan.

3) It isn't a stretch to see that the bears, pundits and reporters would call this new plan reckless, and the SP fell accordingly.

It is important to use the 1st principle (to borrow a phrase from Elon) to evaluate the state of TSLA. Forget the noise. Look at the facts.

1) On track for 80,000 to 90,000 (complex) vehicles this year.

2) The Model 3 is not difficult to build. It's far simpler than the S. It's far simpler than an ICE vehicle. This is by far the simplest vehicle Tesla has ever produced.

3) Elon was very transparent in this call with the production plan, and got hammered for it. He laid out the goals and got ridiculed. I for one appreciate the honesty from the CEO.

4) The lack of specifics regarding the capital raise spooked investors. They really didn't answer how much this is going to cost, and the market detests uncertainty. But using the 1st principle and forgetting the noise (TSLA burning through cash, etc), they are on solid footing financially. They can fund 50% growth internally but are choosing to raise capital to accelerate that growth. That's good, not bad.

So the market can price the stock anyway they wish, and Cramer can wax poetic as much as he wants. But the plan is far from absurd, and much less risky than many believe.

 

[Drax7]

After all the mumbo jumbo I've read, my gut tells me that if its impossible
To do the 500,000 ramp, then Elon will do it for certain. Elon is a force of nature
And if you follow his rocket ship determination and road map you know he will succeed , just
Accept it.

Now it's just a matter of how you trade/ invest .

 

[Julian Cox]

"It explains why Tesla would be talking about issuing equities while busy deliberately tanking their own stock." - what planet are you on? It's fine to be long TSLA but this sort of comment discredits the longs on this forum as delusional.

Sorry to disappoint - Me, delusional? Seriously where have you been? Here I called the stock to perfection, rain or shine, actionably, in advance, all year long to date and for exactly the right reasons. Wrong target for overtures of incredulity.

 

[Hogfighter]

400,000 reservations provides a nice floor to the SP. We didn't have that floor in January.

 

[electracity]

Frankly, I'm surprised that this CC was a surprise.

1) We all knew Tesla was looking to increase production plans.

2) We all knew that a capital raise would be required to fund that new plan.

3) It isn't a stretch to see that the bears, pundits and reporters would call this new plan reckless, and the SP fell accordingly.

It is important to use the 1st principle (to borrow a phrase from Elon) to evaluate the state of TSLA. Forget the noise. Look at the facts.

1) On track for 80,000 to 90,000 (complex) vehicles this year.

2) The Model 3 is not difficult to build. It's far simpler than the S. It's far simpler than an ICE vehicle. This is by far the simplest vehicle Tesla has ever produced.

3) Elon was very transparent in this call with the production plan, and got hammered for it. He laid out the goals and got ridiculed. I for one appreciate the honesty from the CEO.

4) The lack of specifics regarding the capital raise spooked investors. They really didn't answer how much this is going to cost, and the market detests uncertainty. But using the 1st principle and forgetting the noise (TSLA burning through cash, etc), they are on solid footing financially. They can fund 50% growth internally but are choosing to raise capital to accelerate that growth. That's good, not bad.

So the market can price the stock anyway they wish, and Cramer can wax poetic as much as he wants. But the plan is far from absurd, and much less risky than many believe.

They are probably going to need MX demand to recover to meet their numbers. While it is probable that a number of buyers are waiting to feel comfortable with quality, there is no guarantee yet that they built the right car.

The model 3 will not be easy to build with large numbers of new employees. They simply can not push unfinished M3s cars out to the service centers as they did with the MX.

 

[BornToFly]

They are probably going to need MX demand to recover to meet their numbers. While it is probable that a number of buyers are waiting to feel comfortable with quality, there is no guarantee yet that they built the right car.

The model 3 will not be easy to build with large numbers of new employees. They simply can not push unfinished M3s cars out to the service centers as they did with the MX.

There is a reason they are building them for the factory workers first....