Short-Term TSLA Price Movements - 2016

[Johan]

Right now TSLA is:
-undervalued
-oversold
-underdiluted (props to @kenliles for coining this great term up-thread)

One possible near term catalyst that I believe is important, that may become public in the coming weeks, is something @AudubonB among others discussed earlier today; what if this secondary offering was tailored for some very big investor/institution wanting to initiate a substantial long position? If so that would very likely turn out to become a "strong long" and it may have a significant signal effect.

 

[dha]

WTF just happened after hours? Up another $5 on reasonable volume.

 

[doggusfluffy]

Open Ministerial Session: Accelerating the transition: Innovation for greener and more inclusive transport (full session) with J.B. Straubel @ ~22:30.

ITF - On Demand

 

[vgrinshpun]

Very entertaining exchange between Drew Cupps (Cupps Capital Management) and Gordon Johnson (Axiom Capital Management - I guess the name explains the ease with which he makes outlandish claims without feeling a need for any proof).

The contrast in facial expressions and tone between those two as well as CNBC hosts are priceless.

 

[dandurston]

There's been a lot of chat about Tesla's thinking with timing the capitol raise to achieve max benefit/minimal dilution. Here's my theory on why Tesla did what they did: they didn't think about it nearly as hard as we are because it's not really a big deal relative to the importance of the mission at hand.

Tesla is raising $1.4 Billion by selling 6.8 million shares for $204 each. This rise to ~141 million shares from 135 million is a 4.83% decrease in ownership per share. Had Tesla raised the same amount of money at $250 they would have only had to sell 5.6 million shares to raise the same amount for a dilution of 3.94%. The difference in dilution is about 0.9%.

Now consider what Tesla is trying to do. Elon thinks they are going to grow 1000% to be more valuable than Apple. Do you think he's really that worried about less than 1% difference in dilution such that he's concocting elaborate plans to manipulate the share price? He's got much bigger fish to fry. What he is worrying about is the big stuff, like a slow Model X ramp dropping the share price 40% and planning for the 3.

 

[Intl Professor]

Right now TSLA is:
-undervalued
-oversold
-underdiluted (props to @kenliles for coining this great term up-thread)

One possible near term catalyst that I believe is important, that may become public in the coming weeks, is something @AudubonB among others discussed earlier today; what if this secondary offering was tailored for some very big investor/institution wanting to initiate a substantial long position? If so that would very likely turn out to become a "strong long" and it may have a significant signal effect.

Like some of the entrepreneurs who are friends of Elon Musk that have been mentioned on this page, or Apple. Sheer speculation on my part. For transparency: my wife owns an iPhone and I have owned Mac computers since May 1984. No stock, unfortunately. But Baidu at $8.66 on a tip from Motley Fool.

 

[GoTslaGo]

Not sure what this means, but last night I noticed Merrill Lynch's C-3-9 (Underperform, can't remember 3, No dividend>> basically "Don't buy") rating suddenly disappeared. Clicked to see if they had a new rating, nothing. Curious to see what they will say.

 

[austinEV]

There's been a lot of chat about Tesla's thinking with timing the capitol raise to achieve max benefit/minimal dilution. Here's my theory on why Tesla did what they did. In short, they didn't think about it nearly as hard as we are because it's not really a big deal relative to the importance of the mission at hand.

Tesla is raising $1.4 Billion by selling 6.8 million shares for $204 each. This rise to ~141 million shares from 135 million is a 4.83% decrease in ownership per share. Had Tesla raised the same amount of money at $250 they would have only had to sell 5.6 million shares to raise the same amount for a dilution of 3.94%. The difference in dilution is about 0.9%.

Now consider what Tesla is trying to do. Elon thinks they are going to grow 1000% to be more valuable than Apple. Do you think he's really that worried about less than 1% difference in dilution such that he's concocting elaborate plans to manipulate the share price? He's got much bigger fish to fry. What he is worrying about is the big stuff, like a slow Model X ramp dropping the share price 40% and planning for the 3.

This is the simplest of all explanations, and is therefore probably right.

 

[vgrinshpun]

Wow, according to StreetInsider.com:

Hearing Tesla (NASDAQ: TSLA) 9.6 million share offering said to price at $215

This might be responsible for the jump in after hour trading...

 

[SPadival]

"I can't bet against Tesla, the people like the car too much" - Jim Cramer (h/t E.W. Niedermeyer)

Tesla's stock does u-turn as company passes key test

I can almost hear Cramer yanking Anton's leash.

 

[drinkerofkoolaid]

Did Yahoo break yahoo finance? Yahoo finance stopped working mid day today. I'm now seeing a new template that looks terribly designed. Anyone else seeing this?

 

[Curt Renz]

Wow, according to StreetInsider.com:

Hearing Tesla (NASDAQ: TSLA) 9.6 million share offering said to price at $215

This might be responsible for the jump in after hour trading...

The after hours price of crude oil futures jumped upward at the same time.

 

[JRP3]

Did Yahoo break yahoo finance? Yahoo finance stopped working mid day today. I'm now seeing a new template that looks terribly designed. Anyone else seeing this?

I'm not seeing that, Win7 Firefox PC or Android app.

 

[drinkerofkoolaid]

I'm not seeing that, Win7 Firefox PC or Android app.

Firefox. No idea what caused it, but it's back to normal now.

 

[Jayjs20]

WTF just happened after hours? Up another $5 on reasonable volume.

God, this entire day has been one long continuous string of, 'oh well, it's too late to jump in now~'

 

[Perfectlogic]

I'm kind of lost a little bit there.
Is this secondary happening to fund the Model 3, or this happening to fund the Model 3 two years in advance?

If it's the second option isn't just an advance on future income?
If for the next two years they would produce 160k combined X and S at an ASP of 95k$, with GM of 20% and that half of this is used for R&D and tooling that's:

160 000 x 95 000 * 20% * 1/2 = 1,5 Billion

I think this is where a lot of Tesla bulls are over optimistic, I see this kind of calculation relatively often. The problem with the calculation ofcourse is that gross profit does not equal net profit. Right now Tesla are doing something like 20-25% of gross margin with a goal of 30% I believe Elon has said. This may sound great, especially if you compare to Ford's 18% gross margin last quarter. At least that is how it seems at first glance, but the difference is that Ford puts their R&D under their COGS while Tesla puts it seperately. On top of that Tesla has relatively large overhead expenses because of their showrooms, this is another integrated part of their COGS that is listed seperately. A third cost is the superchargers that also needs to get build for the business model to work, also part of revenue but not COGS.

Right now Tesla is losing money. Forget about their capex, even if that was 0 they would be losing money, just look at how their equity is shrinking a few hundred million per quarter. I believe Tesla will need at least 30% GM to show any kind of significant profit, and that is in a scenario where both their R&D and SG&A spend is much lower relative to revenue (when they achieve better scale).

Edit; 3 dislikes in 6 minutes, that must be some kind of record!

 

[dha]

At least that is how it seems at first glance, but the difference is that Ford puts their R&D under their COGS while Tesla puts it seperately.

Because Ford R&D vs. Tesla R&D is Apples vs. Orangutans. R&D at incumbent car manufacturers is largely iterative on *existing* and mature product lines. How can you reasonably roll Tesla's R&D--the lion's share of which is currently on Model 3--into Model S COGS? That would give you a very distorted view of the company's cost structure!

 

[lango]

I think this is where a lot of Tesla bulls are over optimistic, I see this kind of calculation relatively often. The problem with the calculation ofcourse is that gross profit does not equal net profit. Right now Tesla are doing something like 20-25% of gross margin with a goal of 30% I believe Elon has said. This may sound great, especially if you compare to Ford's 18% gross margin last quarter. At least that is how it seems at first glance, but the difference is that Ford puts their R&D under their COGS while Tesla puts it seperately. On top of that Tesla has relatively large overhead expenses because of their showrooms, this is another integrated part of their COGS that is listed seperately. A third cost is the superchargers that also needs to get build for the business model to work, also part of revenue but not COGS.

Right now Tesla is losing money. Forget about their capex, even if that was 0 they would be losing money, just look at how their equity is shrinking a few hundred million per quarter. I believe Tesla will need at least 30% GM to show any kind of significant profit, and that is in a scenario where both their R&D and SG&A spend is much lower relative to revenue (when they achieve better scale).

Edit; 3 dislikes in 6 minutes, that must be some kind of record!

I have looked at the numbers too and you are not wrong but I am pretty sure this will change significantly.

It just does not make sense that they can't turn a profit on a $10B revenue vertically integrated production line at a yearly rate of 100k cars from one factory with $90k cars especially with falling battery cost. Why would their costs be so much higher than any other manufacturer that would be highly profitable with $90k cars in those volumes? The answer I think is that it costs a lot to grow and that they have not as good supplier contracts, which should change with higher volumes. It is either that Tesla is reckless spenders or that it really does cost a lot more in the beginning when you tool up and ramp production as a new company. I think the latter is much more likely. A third option is that you can't be profitable at that level of production which is clearly false.

I also think S+X soon will reach higher than 2k per week in 2017 and 2018 and that Model 3 will drive GM for S and X because of Tesla gaining importance at suppliers.

 

[Johan]

Right now Tesla is losing money. Forget about their capex, even if that was 0 they would be losing money, just look at how their equity is shrinking a few hundred million per quarter.

Tesla is at a stage of it's growth where the company is supposed to "lose" money due to big investments in R&D of new and groundbreaking product lines and very quick scaling up of production capability. I personally feel the term "losing money" to be misleading. It is certainly correct that they are net unprofitable, as they should according to the game plan, but to equate that with "losing money" doesn't sit right with me.

Not to get too philosophical here, but money is a tool - a representation of value, a social contract by which we can trade all sorts of goods and services through a common currency. Money well spent is not money "lost". Money well spent with the objective of increasing growth of the company and increasing the possibility of achieving, probability of achieving and potential scale of future profit is the definition of money invested - not lost.

We will only have the answer as we progress in to the future as to whether the money spent was lost or if it turns out the money was [well] invested. The differing guesses as to this future is what makes a market.

 

[mmd]

Edit; 3 dislikes in 6 minutes, that must be some kind of record!

LOL It happens anytime someone steps on the day dreams and they crack. Ouch!

Another day dream I read today: $200M in MX revenue a week! Now where did I read that before? Oh yes, it was right here during Q4 of 2015, when people dreamed and built models based on 2000 MX deliveries a week.