Short-Term TSLA Price Movements - 2016

[esk8mw]

TSLA appears to be in the penalty box. It got stuck in there when the SCTY acquisition was announced. Institutional shareholders, analysts, and a broad part of the market don't like surprises, and SCTY was struggling selling itself to the markets anyways, so not only was it a surprise, but a negative one.

When stocks are stuck in the penalty box, good news (like the great sales numbers, or no need for capital raise) don't move the stock much. It usually takes stocks several, and I mean several, good quarters to get out of the penalty box.

I suspect the stock isn't going anywhere quickly, and may drift down, until the SCTY acquisition is done, one or two good consolidated quarters, and M3 starts shipping.

Prevailing sentiment (even a good chunk on this very bullish board) is negative towards the merger and many view it as simply a bailout or vanity project for Musk. I think the 28th announcement will potentially be huge because it will contain Elons no brainer rationale for the acquisition. It will show that there's more to this idea than a bailout.

The natural response is yeah, but cash burn! Well, apparently that's been taken care of as well. We don't have full visibility into the exact mechanism allowing for the improved cash position, but we do know Elon chooses his words carefully and is certainly not afraid to dabble in creative financial solutions.

Shorts will always doubt him and bulls that have been paying attention will stand to profit from this. The market clearly does not trust him right now, so he is doing exactly what an analytical mind would do - dismantle the short thesis one by one until the market gets it.

I'm sure he's quite exasperated at this point after delivering record production and deliveries, hinting at profitability, pointing out that cash isn't needed for six months, telling us the merger has wide institutional support, announcing two product offerings, announcing major tesla energy projects and moving the er date up a week. And the price hasn't moved up. He's probably thinking..."do I need to mail you guys a handwritten invitation? Buy the stock!"

 

[vgrinshpun]

I think you can safely assume that Elon wouldn't view using the asset backed line as corporate debt. Legally it is, but Tesla really does treat it as a timing facility (to deal with overseas shipments, etc). Tesla will probably still borrow against that. (Financially, this debt falls under short-term borrowings on the balance sheet and that's why they wouldn't really call it corporate debt either).

SolarCity is different when you talk asset-backed. I feel like I'm beating a drum that no one is listening too, but I'll try again...

SolarCity is the seller in its ABS transactions (these are really complicated and I'm simplifying, but for cash flow purposes it is the same thing regardless of how the deal is structured). It is not the borrower -- these transactions are not debt. (Many posters on this forum seem to conflate this issue when they talk about the recent ABL sale to riase $305 million in September and the "interest" rate paid).

In fact, these ABS transactions are likely the primary reason that SolarCity projected that it would be cash flow positive in Q3 and even more so in Q4. Yes, the discount rate is higher than they'd like. In other words, SolarCity is monetizing its huge portfolio of solar leases -- an asset that the market has practically been assuming is worthless.

Putting it all together, I think it's rather significant that Elon made the observation that neither Tesla nor SolarCity will need cash.

He meant it on both a stand-alone and a combined basis. In fact, on a combined basis, Tesla has likely found their short-term source of capital. I mentioned it up-thread, but I'll reiterate it here. Tesla can likely accelerate the process that SolarCity began and liquidate the remaining solar lease portfolio and generate a great deal of positive cash flow (probably more than enough to deal with all near-term cash needs).

SolarCity probably hasn't been inclined to be too aggressive because I believe it would have a worse earnings impact for them. (Tesla is probably writing down all these solar leases as part of the purchase transaction and therefore wouldn't have the earnings impact).

As an aside, few here have mentioned it (and all the articles seem to miss it too), but Elon subsequently replied on Twitter that they "probably" didn't need capital in Q1 17 either. That's almost as big a deal as not needing it this quarter because you should assume most of their M3 capital requirements would occur by Q2 17.

Finally, complete speculation on my part, but I think they believe they have enough cash for 2017 Gigafactory progress and initial M3 launch -- at least enough until Fremont doubling.

Spectacular summary!

So SolarCity future cash flows are not fantasy, as they clearly are able to SELL them for CASH. Market is seemingly unable to comprehend this. It is similarly is unable to comprehend that TE is bound to scale up dramatically, bringing profits and hard cash. I think that combination of the two was really the foundation of Elon's tweet on the need to raise funds. If they will manage to flood analysts with abundant color during the ERs for both companies, we might see a complete re-set. There are also signs that TA, similarly to Q4 2015, is prepared to empty the transit pipeline in Q4, which could result in about 25K cars built, but about 28K cars delivered. I think that strong Q3 for both companies along with firm positive guidance for Q4 could re-set the SP.

The cash that SolarCity and TE are bound to generate reminds me Q1 2013 when a lot of guesses were made on this forum how Tesla could be both GAAP and non-GAAP profitable, only to be surprised by white swan of ZEV credits. It seems that in spite of Elon telegraphing that both SolarCity and Tesla will be cash flow positive this quarter and unlikely to have a need for capital raise at least looking 2 quarters out, the Market is stubbornly refuses to acknowledge it because it shreds the preconceived notion about the merger.

BTW, here is MotleyFool's article highlighting the fact that SolarCity can help Tesla Motors finances: No Capital Needed: How SolarCity Corp. Could Help Tesla Motors Inc.

 

[mmd]

I just had several thousand shares returned to me by Fidelity that were lent out to shorts
Seems like shorts are losing their appetite for TSLA
Also the Interest rate dropped to 5.5%
On sept 27th interest rate was 14%
Sounds like a big move to the upside is coming for TSLA and smarter shorts are liquidating their positions in anticipation
The fact that broader market was down big and TSLA held its own combined with Elon tweets leaves me with the inescapable conclusion that TSLA is about to make a big move to the upside
I couldn't care less for the loss of interest from shorts, if TSLA goes up big time I stand to make a killing
A $1 move in SP will pay me more than a whole month of interest payment from shorts
Still, it was good while it lasted
I'll be watching TSLA like a hawk, every single minute starting tomorrow
I'd be shocked if this thing doesn't melt up pretty soon

Are you a professional trader? Your comment seems quite misinformed and confused.
Shorts weren't holding your shares, some other longs were. Every short position also means an additional long position. If short positions decreased, so did long positions. So, we can also say that some longs lost their apetite to hold the shares.

Now consider this alternate explanation. Fidelity has sold several thousand call options and put options. Anytime TSLA goes up, they borrow yours and others, and supply additional demand by shorting. It goes down, they cover, reduce supply of shares and return your shares. All call and put option holders lose, while Fidelity rakes in big profits.

 

[vgrinshpun]

According to this article from CNBC the Fremont Planning Commission is scheduled to meet Thursday to discuss recommending the approval of the Fremont factory expansion to the Fremont City Council, which will, in turn, hold it's meeting during which it will decide on green lighting the plan next month.

 

[Ulmo]

Black sheep, left field theory: Short range utility cargo van. A Model X, with a sliding door with only front seats. 40-60kWh batteries for <100 miles per day service and daily recharging. Uses spare capacity on line 2.

Delivery vehicles use energy all day. Maintenance vehicles much less so. I'm thinking they put in higher capacity (via whatever means) in the delivery type vehicles, and lower capacity in the maintenance type vehicles, so I don't agree with your requirement that it be short range, but it could be variable range -- like I said in my guess post, 4 bays for batteries, comes standard with minimum one battery, and you can swap and add more as needed (if you can't charge overnight you just swap in fully charged batteries before leaving the warehouse hub). Also, I don't think a utility van requires much engineering: a safety cage, strap down hook points, and square structural integrity. Yes, it requires engineering, but nothing spectacularly novel.

 

[tander]

Spectacular summary!

So SolarCity future cash flows are not fantasy, as they clearly are able to SELL them for CASH. Market is seemingly unable to comprehend this. It is similarly is unable to comprehend that TE is bound to scale up dramatically, bringing profits and hard cash. I think that combination of the two was really the foundation of Elon's tweet on the need to raise funds. If they will manage to flood analysts with abundant color during the ERs for both companies, we might see a complete re-set. There are also signs that TA, similarly to Q4 2015, is prepared to empty the transit pipeline in Q4, which could result in about 25K cars built, but about 28K cars delivered. I think that strong Q3 for both companies along with firm positive guidance for Q4 could re-set the SP.

The cash that SolarCity and TE are bound to generate reminds me Q1 2013 when a lot of guesses were made on this forum how Tesla could be both GAAP and non-GAAP profitable, only to be surprised by white swan of ZEV credits. It seems that in spite of Elon telegraphing that both SolarCity and Tesla will be cash flow positive this quarter and unlikely to have a need for capital raise at least looking 2 quarters out, the Market is stubbornly refuses to acknowledge it because it shreds the preconceived notion about the merger.

BTW, here is MotleyFool's article highlighting the fact that SolarCity can help Tesla Motors finances: No Capital Needed: How SolarCity Corp. Could Help Tesla Motors Inc.

Kind of nice to read this about SCTY. I did my initial research on it a year or two ago when things were all warm and fuzzy. But the consensus has really gone doom and gloom and I still haven't seen anything that bad with SCTY, my understanding is that a lot of it is a) just fallout because of things going on in the industry and b) SCTY/TSLA not minding/helping avoid the fallout much because it's a lot cheaper for Tesla to do the merger at 25 than at 45, 65, or 85. Maybe I'm in left field but I get the feeling like SCTY is up for a big significant turnaround too, things look peachy when what everybody thinks is a hurricane turns into a little thunderstorm. But I wonder if it happens before the merger or after.

 

[Ulmo]

Spectacular summary!

So SolarCity future cash flows are not fantasy, as they clearly are able to SELL them for CASH. Market is seemingly unable to comprehend this. It is similarly is unable to comprehend that TE is bound to scale up dramatically, bringing profits and hard cash.

Ah but wait ... can I oversimplify further? Here's what you seem to be saying: Solar City income is now & long term, and Tesla income is future with a now-cash need. They convert the Solar City long-term income into compressed short term income with tail end lack of as much income, but that's great for pairing with Tesla, since now they can invest that compressed short-term income into huge market growth and huge future income, all the while integrating what they need and want into their product line (including the source of their energy for the rest of their products), then just when the compressed income stream from Solar City slows, Tesla has this healthy huge income growth to replace it, keeping all the companies (now one company) in good financial shape.

 

[everman]

It seems the consensus is that the product unveiling will be AP2. TeslaVision makes the most sense to me. I think they would do a soft reveal for this without too much of a show. Any vehicle unveiling would almost certainly involve invitations and much more of a production. Assuming it is TeslaVision, what do people here expect in terms of a market reaction? I'm guessing fairly modest myself.

I was thinking this too, that the fact the unveiling is on a Monday means no large party and therefore no major product.

But, picture this...

Live video production from the test track! Car with AP2.0 driving through traffic, streaming live from the back seat. The car is put into auto-pilot, and it begins navigating around traffic, stoplights and other obstacles. Then, the driver pulls over, gets out, and ... the car drives off!

The unveiling is a video production. Streamed live, and packaged for a million views on YouTube.

 

[racer26]

Ah but wait ... can I oversimplify further? Here's what you seem to be saying: Solar City income is now & long term, and Tesla income is future with a now-cash need. They convert the Solar City long-term income into compressed short term income with tail end lack of as much income, but that's great for pairing with Tesla, since now they can invest that compressed short-term income into huge market growth and huge future income, all the while integrating what they need and want into their product line (including the source of their energy for the rest of their products), then just when the compressed income stream from Solar City slows, Tesla has this healthy huge income growth to replace it, keeping all the companies (now one company) in good financial shape.

Exactly.

 

[dakh]

Just to add on to the thoughts on TeslaVision, if that is it, "buy the rumor and sell the news" would seem to apply. Except one must consider the ER a week later. Agree? or Disagree?

Might depend on the actual content, believe it or not. So far we've heard that the new ai is some seriously impressive stuff so it is not too far out that we'll see just how far ahead they are.. If it becomes clear that Tesla is as close as Elon was claiming to full autonomy, that would be a stock moving event. I'm not holding my breath.

 

[justdoit]

I just had several thousand shares returned to me by Fidelity that were lent out to shorts
Seems like shorts are losing their appetite for TSLA
Also the Interest rate dropped to 5.5%
On sept 27th interest rate was 14%
Sounds like a big move to the upside is coming for TSLA and smarter shorts are liquidating their positions in anticipation
The fact that broader market was down big and TSLA held its own combined with Elon tweets leaves me with the inescapable conclusion that TSLA is about to make a big move to the upside
I couldn't care less for the loss of interest from shorts, if TSLA goes up big time I stand to make a killing
A $1 move in SP will pay me more than a whole month of interest payment from shorts
Still, it was good while it lasted
I'll be watching TSLA like a hawk, every single minute starting tomorrow
I'd be shocked if this thing doesn't melt up pretty soon

I can't tell if you're trolling or if you're actually serious. All of your posts are extremely bullish but without any real reasoning or substance. I hope you're right and I hope you make a lot of money but I'll probably skip on reading some of your posts This forum is bullish enough as is and I don't want posts like yours to have a subconscious affect on me.

 

[stealthology]

Tesla should raise cash soon, despite Musk's tweets, analyst says

Watch this video. Can someone give me a bit more hope that Oct 17 will be AP 2.0? Colin Rusch of Oppenheimer seems like he knows what he's talking about.

He thinks this 'product unveiling' on Oct 17 will not be a car, and will be something of an incremental refinement or an evolution of what they've already offered to the market. He notes that if this is something big, they would have announce this earlier and get as much attention to this event as possible, etc. Hmm.

 

[dakh]

@stealthology when you say AP 2.0 what do you mean exactly? To me the progression they're on is they'll simply run something similar in functionality that is already there on different hardware and more in-house software than before. And probably also have some kind of indication of what that system is capable of in the future.

Essentially decoupling from MobilEye is what the short term news would be, plus some longer perspective of what that enables.

 

[schonelucht]

As long as it's available within weeks at most and not a repeat of the mockery of what was 'the end of range anxiety' announcement, I am good.

 

[stealthology]

I still have a feeling Tesla wants and expects to raise funds this Q, partially because they they know what's in store for the remainder of the year.

1-2-3-4-5 Punch before the end of the year:

• Oct 17: [hopefully] Autopilot 2.0
• Oct 26: Earnings-- GAAP profits & other goodies with Tesla Energy, margins, AP, etc.
• Oct 28: SolarCity/Tesla Solar Roof & battery advancement showcase
• Merger goes through
• Capital raise

 

[PaulRocket]

I still have a feeling Tesla wants and expects to raise funds this Q, partially because they they know what's in store for the remainder of the year.

1-2-3-4-5 Punch before the end of the year:

• Oct 17: [hopefully] Autopilot 2.0
• Oct 26: Earnings-- GAAP profits & other goodies with Tesla Energy, margins, AP, etc.
• Oct 28: SolarCity/Tesla Solar Roof & battery advancement showcase
• Merger goes through
• Capital raise

Don't forget Clinton becoming president and investing massively in Solar and EVs.

 

[stealthology]

It's a product, and unexpected... hmmm.

• 100D regular products--widely expected
• A/P 2- not a product and widely expected.
• Model Y: not a chance. way too soon and not necessary to show at all. risk of osborning. Plus that would be a big party.
• Semi/Bus: too early. Again, I think it would be a big party. Remember the referreral program prize for 10 is literally a ticket to the next big reveal party so this is a thing they are continuing.
• Powerwall 2.0: widely expected
• New inverter? Maybe and just dull enough to warrant a call event but not a party. But that should be bundled into SCTY product talk.
• Model 3 part 2: not a product, widely expected.

• Is Autopilot 2.0 really not a product? It consists of hardware and software. It may be widely expected for those like us who are investors and hang out at TMC frequently. Also, 'unexpected by most'-- could it also mean it's just releasing earlier than most anticipated?
• I would rule out Powerwall until the 'SCTY/Tesla' (Elon's words) event on Oct 28.
• Probably not a completely new vehicle

Is it safe to say it's too late for this to turn into a televised event with an audience? I don't want some boring presser where I'll have to read the transcript, but I doubt it comes to that.

 

[WarpedOne]

Can I buy autopilot without a car?
No? So it is not a product but a feature of a product that I can buy.

AP2.0 would be a product if tesla decides it wants to sell this feature to other companies. Than it becomes a product. Impossible? Not at all. Unexpected? A bit.

 

[mutle]

Not sure if this has been posted yet:

Elon Musk’s House of Gigacards

By buying SolarCity, Elon Musk is making an already difficult job much harder

Haven't finished reading the article, but the tone appears to be quite negative. I've noticed a shift in sentiment in the tech press and by some tech pundits over recent months, a lot of it seems to be based on the same arguments that the bears use, so hopefully will be disproven soon.

 

[Runarbt]

Can I buy autopilot without a car?
No? So it is not a product but a feature of a product that I can buy.

AP2.0 would be a product if tesla decides it wants to sell this feature to other companies. Than it becomes a product. Impossible? Not at all. Unexpected? A bit.

A bit premature to offer this, when AP still is seen as dangerous by some?