Short-Term TSLA Price Movements - 2016

[Krugerrand]

...but lack of significant target price changes/ price appreciation after this acceleration are showing how much execution risk discount is built into market perception.

So nothing to do with any 'halo effect' because if there was one today we'd see TSLA sky rocket based on the ridiculously difficult and awesome SpaceX accomplishment that just happened. Glad we've got this sorted out for maoing.

 

[Xpert]

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.

Model 3 is designed for mass production so a cave man can do it. They already starting to hire workers as we speak, theres still more than a year left.

 

[WarpedOne]

Short term price movement: market cannot believe the reality is true.
When will it see the light?
How many shorts will be onboard?
Who's paying?

 

[tftf]

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.

You are perfect and have been perfect.

Let us know mere mortals know where the stock will trade by around 2018 and how many cars (Tesla says 500k run rate) they can ship by the end of that year.

 

[BornToFly]

Short term price movement: market cannot believe the reality is true.
When will it see the light?
How many shorts will be onboard?
Who's paying?

I hope it doesn't see the light until next week. Still waiting for the funds to hit my brokerage account! (Finger starts to bleed from hitting refresh over and over again on bank account, pounds head on desk....)

 

[Krugerrand]

Let us know mere mortals know where the stock will trade by around 2018 and how many cars (Tesla says 500k run rate) they can ship by the end of that year.

All he has to say is 'more than your prediction' and he'll be right, but there will be no documentation of that because - let me check - nope, you've not provided short term or long term guidance in this thread. At least with the Gigafactory costs you put some numbers out there, as ridiculous as they were.

 

[The Blue Owl]

All he has to say is more than your prediction and he'll be right.

What prediction?

 

[Krugerrand]

What prediction?

Yes, exactly....pushed post before I was done. Added.

 

[MonroeSS]

90K M3 delivered or even produced in 2017 would be an incredibly impossible feat to achieve. I am sorry, I am just giving my opinions as someone who has followed the auto industry for a decade. Elon is insulting our intelligence when he throws out numbers like 90,000 in 2017 and 350,000 Model 3s in 2018 or 500,000 total in 2018. We need to appreciate how complex auto manufacturing really is. Ford, Tesla, Nissan, GM and BMW will collectively not sell 500,000 pure EVs globally in 2018, let alone Tesla doing it themselves. The 500,000th Model 3 will not be made before January 1 2021. This doesn't mean I doubt Tesla's success or domination of the EV market. It is highly unlikely that a million EVs will be sold in 2020, even when you combine the EV sales of all Non-Chinese automakers.

 

[austinEV]

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.

Good post. The part I highlighted is exactly right, except for the honesty being so great. I have been railing against the ER, not because I don't think it is a fine plan, and will add a ton of value to the company and many BEV cars on the road, but because for an extra 0.01% effort they could have lifted the stock instead of tanking it.

I get it. Elon, or any CEO, doesn't have a responsibility to guide the stock price and can get into real trouble by trying. But, he laid out these audacious goals, when he already has a bad reputation for missing goals (outside of his fanbase) so this plays directly into the narrative that he is delusional and over commits. He also committed to needing money before finalizing the plans to get that money. All along, the converted believed that there was long term value. We know the model 3 volume was coming. The plan FROM LAST QUARTER was optimal: pause capex, maximize financials specifically to silence critics that they make money on their current business, then resume capex on the model 3. It was a plan to reassure jittery markets that they were not all smoke and mirrors, and the 13 (or whatever it is now) quarters in a row without profit is indeed a deliberate and justifiable plan. Now it will be 13+5 at least quarters without profit and just continuing buildout. If you are a fan, you get it. If you are on the fence or working a secondary deal, it is less compelling, and you might as well stay on the sideline.

I wouldn't even care if he had just done the cap raise at $230 or something. But laying out a bold plan with vague financing (my take) is just an unforced error.

TL;DR: I fail to see what good announcing the pull in date did, except to raise the cost of capital. The market is viewing it that way too.

 

[Krugerrand]

90K M3 delivered or even produced in 2017 would be an incredibly impossible feat to achieve. I am sorry, I am just giving my opinions as someone who has followed the auto industry for a decade. Elon is insulting our intelligence when he throws out numbers like 90,000 in 2017 and 350,000 Model 3s in 2018 or 500,000 total in 2018. We need to appreciate how complex auto manufacturing really is. Ford, Tesla, Nissan, GM and BMW will collectively not sell 500,000 pure EVs globally in 2018, let alone Tesla doing it themselves. The 500,000th Model 3 will not be made before January 1 2021. This doesn't mean I doubt Tesla's success or domination of the EV market. It is highly unlikely that a million EVs will be sold in 2020, even when you combine the EV sales of all Non-Chinese automakers.

I have no idea if Tesla will reach their production goal numbers, but you'd think after all this time and what he's accomplished with Tesla and SpaceX that you'd not put your intelligence on the table in the first place. And yet....

Seriously, how much does the man and his team of workers have to do before you'll acknowledge that sometimes the seemingly impossible is in fact possible? (Rhetorical and/or reflective question for all.)

 

[esk8mw]

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

Let's not forget - your scenarios give Tesla Energy a 0. Tesla Energy will not be a 0, at all.

 

[Johan]

@MonroeSS: the Model 3 goal is either incredible or impossible (not "incredibly impossible").

There's a difference:

Impossible means not possible.

Incredible means hard to believe.

 

[Krugerrand]

But laying out a bold plan with vague financing (my take) is just an unforced error.

You've made a couple of assumptions to arrive at this...the first and biggest mistaken assumption of them all being that he doesn't already have the money lined up or know where it's coming from. Please. The guy who already had the money lined up to launch rocket 5 after rocket 4 failed. The guy who announced the building of the SuperCharger Network before anyone on the face of the planet had thought about it and offer it free for life. The guy who announced the building of the Gigafactory to a chorus of 'Where the hell does he think he'll get the money from to build that?'.



You may not know what he's thinking, but rest assured he's several steps ahead of you.

 

[techmaven]

90K M3 delivered or even produced in 2017 would be an incredibly impossible feat to achieve. I am sorry, I am just giving my opinions as someone who has followed the auto industry for a decade. Elon is insulting our intelligence when he throws out numbers like 90,000 in 2017 and 350,000 Model 3s in 2018 or 500,000 total in 2018. We need to appreciate how complex auto manufacturing really is. Ford, Tesla, Nissan, GM and BMW will collectively not sell 500,000 pure EVs globally in 2018, let alone Tesla doing it themselves. The 500,000th Model 3 will not be made before January 1 2021. This doesn't mean I doubt Tesla's success or domination of the EV market. It is highly unlikely that a million EVs will be sold in 2020, even when you combine the EV sales of all Non-Chinese automakers.

I am not sure if you are saying that demand isn't there or production isn't possible. You start with questioning production. Tesla just put in a line capable of 2,000 cars a week. That's a 95k+ production line. They already installed the paint shop for 500k+ capacity. Panasonic already built their own Gigafactories in Osaka and those are sized about the same as one phase of the Gigafactory. So almost everything related to the production of the first 90k Model 3's is really been there, done that. There are some changes, but not huge technological or production hurdles. They will likely use the next gen cells and pack design, a step increment. They will achieve a higher scale, lowering cost. So why do you think they can't build another 90k cars? Now, they are likely to shoot for 4k a week for 2017, and fall somewhere between 2k and 4K a week. What bottleneck do you think makes this impossible? Most people had assumed the demand side wasn't there... but clearly it is and certainly any number of auto production execs can build out capacity for 500k where the vehicles are actually less complex.

 

[Krugerrand]

There's a difference:

Impossible means not possible.

Incredible means hard to believe.

Incredibly impossible: hard to believe it's not possible?

 

[Lessmog]

@MonroeSS: the Model 3 goal is either incredible or impossible (not "incredibly impossible").

There's a difference:

Impossible means not possible.

Incredible means hard to believe.

Well, it could mean "so impossible I can't believe it is that impossible!" -- whatever that means ...

 

[tftf]

All he has to say is 'more than your prediction' and he'll be right, but there will be no documentation of that because - let me check - nope, you've not provided short term or long term guidance in this thread. At least with the Gigafactory costs you put some numbers out there, as ridiculous as they were.

I predicted $5-10 billion for the full Gigafactory and the Model3 tooling (combined). We will see how far off that number is. Here's my prediction for 2018:

It's the upcoming Model3 that will really sink Tesla, especially since Musk doubled down on pricing promises ($35k base, apparently the best car in the world in that price bracket) AND even more important the "500k by 2018" crazy ramp-up.

No wonder the senior people in charge of production either left or were fired...no serious production / process and QC manager will accept this job.

This launch will result in a disaster in terms of either margins or quality/warranty costs by 2018.These goals are so crazy and cap-ex intensive over the next 10 quarters that the Model X troubles and losses will look like pocket change in retrospect. Anyone with interest in... (full comment in link, too long to quote here)

http://seekingalpha.com/article/3972283-tesla-sunk-model-x#comment-72190068

 

[The Blue Owl]

@MonroeSS: the Model 3 goal is either incredible or impossible (not "incredibly impossible").

There's a difference:

Impossible means not possible.

Incredible means hard to believe.

According to your explanation, he actually got it right the first time.

 

[austinEV]

I have no idea if Tesla will reach their production goal numbers, but you'd think after all this time and what he's accomplished with Tesla and SpaceX that you'd not put your intelligence on the table in the first place. And yet....

Seriously, how much does the man and his team of workers have to do before you'll acknowledge that sometimes the seemingly impossible is in fact possible? (Rhetorical and/or reflective question for all.)

Yes he does the impossible with his great team. If he would just stop guiding for 10% more than is possible! It tarnishes everything he does. Instead of him being universally lauded as a miracle man, every single news cycle contains a poison pill of what he failed to do. If you just casually read the Tesla financials, you would indeed think that TM fails at everything they do, because their successes (wildly fanastic successes) trail Elon's promises by 1-4 quarters.

No one is squeezing Elon for ever better commitments. If he would just start committing to 90% of what his team can do, they would still be making miracles but they would appear to do it in record time with noteworthy efficiency. By committing to 110%, it makes them seem hapless. The stock price would be $700 a share RIGHT NOW if they met every goal, with the same exact output (just sandbag the goals).

No one one have complained if they committed to 80k cars last year. He once seemed to recognize this and said that he needed to help his teams with a "win feeling like a win". With this pull-in, he seemingly has not only forgotten that but is doubling down on the problem.

Even if he can meet this goal, it was dumb to publicize it. Even if this is the audacious goal they meet on time, tipping his hand at this point did more harm than good. The capital market wants to lend to companies that don't really need it. He will probably get his financing, but he has seemingly given up the power position. Now he needs to go find money he NEEDS.