Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[woodisgood]

Come on, people. No disrespect but this is getting silly. Yes, Tesla is amazingly innovative, efficient and adaptable, but no, they will not be building a new general assembly line elsewhere in the middle of a Coronavirus scare! That is a severe underestimation of what's involved in building cars. It's on-thing to do it in a tent alongside the other production lines, entirely different situation to do it in a new location.

Not gonna happen.

Probably true. But I think they could pivot to ventilators?

 

[Artful Dodger]

Does anyone have a good logical way of thinking about the economic impact this crisis will have?

Yes, @DaveT shared his analysis of Global risks in the vid:

 

[Prunesquallor]

Can someone explain to me why if Alameda is fine with there being 2500 employees there, why they'd give a rat's arse whether those employees are producing cars or not?

Well, back to Tesla fighting this, based on their "transportation and energy are classified as essential field by the DHS" grounds.

In addition, do the county officials really have nothing better to do than police what activities 2500 authorized factory workers are doing?

 

[mickle]

I just heard from a guy I work with that has a factory in Dongguan, that has been mostly locked up for a while, he says:

"China is getting better and better, I think everything will be ok next week, so everybody can go outside talking、shopping and do business."

Though I should add, he said a lot of people are cancelling orders.

 

[StealthP3D]

I bought Jun'21 $900s and Jun'22 $990s when SP was $490-$520 in mid-January.

You might think that this turned out to be a terrible trade, but even though SP is down ~35% since then, these options are up ~50% and ~70%.... somehow.

Are you sure you didn't buy puts or write calls instead of buying calls?

 

[Zero CO2]

NY Times

China reports zero local infections, a major turning point.
For the first time since the coronavirus crisis began, China on Thursday reported no new local infections for the previous day, a milestone in its costly battle with the outbreak that has since become a pandemic, upending daily life and economic activity around the world.

Officials said 34 new coronavirus cases had been confirmed, all involving people who had come to China from elsewhere.

In signaling that an end to China’s epidemic might be in sight, the announcement could pave the way for officials to focus more on reviving the country’s economy, which nearly ground to a halt after the government imposed travel restrictions and quarantine measures. In recent days, economic life has been resuming in fits and starts.

Remind me when did China initiate lockdown? about 2 months ago?

 

[FrankSG]

Here's how you find out what's really going on. If Short Interest goes down again in the next bi-weekly report from NASDAQ, even while the SP is being hammered AND heavily shorted, then we know this is net cover, this whole charade (shareraid?) was just a scheme to assist the big boyz in covering their massive short exposure BEFORE the S&P 500 event.

I think this is what's been happening from the last 2 Short Interest reports, and the next one, if also down, confirms it.

HODL™

In the case of TSLA, I feel like it'd be a stronger sign if short interest increased massively. I think higher short interest and lower real selling indicate more manipulation, and lower short interest and more real selling indicate more real investors having changed their mind about the company for now.

 

[FrankSG]

Are you sure you didn't buy puts or write calls instead of buying calls?

Ha! The person/entity who sold me these calls must be real effin pissed right about now

SP dropped 35%, yet the calls he sold appreciated 50-70%

 

[RobStark]

This is really the untold story. F and GMC need to regularly shut down plants to balance production with demand (as dealership lots are filled to the brim from coast to coast). Tesla can sell every car they can make (and that number is growing rapidly every year). So Tesla is the only one actively fighting to stay in production.

Ironically, it's the UAW union that typically argues for concessions and additional benefits during these shutdowns. Now they are arguing for the shutdowns. I think the UAW and management of F and GMC are a little bit too cozy. The UAW represents the workers only in pretense, they have become an arm of the automaker's management that is funded with worker's pay! GMC and F are getting a heck of a deal here as the UAW union fights for exactly what manufacturing wants and they are doing it under the pretense of the health and safety of the workers!

All three Detroit automakers have a healthy inventory with their days' supply with FCA at 75, Ford at 95 and GM at 70, and the overall industry at 69, according to Edmunds Inc.

Detroit carmakers will close plants due to coronavirus concerns

60-70 days supply is considered good. This is normal stock.

When a particular line of vehicle has 90-100 days of supply it is considered a loser/ slow seller.

 

[Artful Dodger]

Come on, people. No disrespect but this is getting silly. Yes, Tesla is amazingly innovative, efficient and adaptable, but no, they will not be building a new general assembly line elsewhere in the middle of a Coronavirus scare! That is a severe underestimation of what's involved in building cars. It's on-thing to do it in a tent alongside the other production lines, entirely different situation to do it in a new location.

Not gonna happen.

Mostly agree, but I think you are OVERESTIMATING the task.

What they would do (if it became necessary/obviously needed), is DISASSEMBLE the GA4 Tent line complete, and move it to a remote site that is out of reach of the SFO County restrictions but is still accessible for logistics.

People here forget that in 1946, after WWII ended, Volkswagen was building Beetles in a bombed-out factory WITHOUT a roof! Get'er'dun! #WHATEVERITTAKES

 

[FrankSG]

The length of this is the question. 2-3 weeks wouldn't be too bad. Probably going to be 2-3 months however. Hopefully the infection disease doctors at my hospital are wrong.

Aren't a lot of people (especially middle-class) working from home also, and should still be getting paid throughout of this?

I also doubt there'll be 2-3 months hardcore lockdowns anywhere. China has pretty much freed itself from the virus and lockdowns there didn't last anywhere near that long.

 

[gerebgraus]

This is really the untold story. F and GMC need to regularly shut down plants to balance production with demand (as dealership lots are filled to the brim from coast to coast). Tesla can sell every car they can make (and that number is growing rapidly every year). So Tesla is the only one actively fighting to stay in production.

Ironically, it's the UAW union that typically argues for concessions and additional benefits during these shutdowns. Now they are arguing for the shutdowns. I think the UAW and management of F and GMC are a little bit too cozy. The UAW represents the workers only in pretense, they have become an arm of the automaker's management that is funded with worker's pay! GMC and F are getting a heck of a deal here as the UAW union fights for exactly what manufacturing wants and they are doing it under the pretense of the health and safety of the workers!

Let us face demand for all cars including Teslas are down. When people stay home, they do not go to work, socialize, entertain plus they lose or afraid to lose their income they do buy less cars. Model Y and MIC Model 3-s are in good shape, but even you can read in the Model Y forum that people choose to delay or cancel delivery. Others will happily scoop up these cars though. ( My working assumption that once the panic is over and (that will happen much faster than predicted on the virus forum) economic recovery will not be V shape, but Tesla demand recovery will be. (You do not need to know anything about epidemiology to know that infectious disease control specialists' prediction for both the duration and mortality of the coronavirus is grossly exaggerated, the economic theory of agency risk tells you that. I.e. infectious disease specialists will present theories that will make them seem more important than they are.)

 

[PhaseWhite]

That's at least as good of a guess as any. But what do you think about this:

For the last month, Tesla has been falling much faster than the overall market even though it should be impacted to a lesser degree than most public companies for a number of reasons, the primary one being is that they were not already demand constrained when the Coronavirus hit. It also has a much bigger growth engine compared to most public companies. Actually multiple growth engines. But over the last month's period, TSLA fell much harder. If TSLA tracked the $SPX for the last 30 days we would be sitting at $640/share. You might assume the sharpest divergence from the $SPX would have happened near the beginning of the period when TSLA was valued at $891. But no, the steepest divergence from the $SPX over this 30 day period was from $630 and down in the last week. Talking about a coiled spring!

What do you think the chances are that Tesla will turn around sooner and harder, countering the overall trend while the broader market continues to make new lows? And with TSLA not included in the SPX, it can rise as much as it wants without having any buoyancy effect on the index whatsoever.

TSLA was previously trading on lofty future growth estimates based and excellent execution, my take is now we are seeing it sell off more than the broader market since it's valuation was levered to that future growth which the market has lost confidence in. In times like these investors are buying companies with deep cash reserves and strong balance sheets where as TSLA only recently started minting a lot of FCF but will certainly be going back to cash burning mode in the next few quarters. There's a risk-off premium here to the downside.

Regardless of how the stock market trades I am fairly certain that consumer confidence will continue to decline which will reduce demand for new cars, particularly ones on the upper price range that are TSLA's bread and butter, this will take time to re-adjust, perhaps a year or more. The worst case I'm preparing for is If we see a several month time period of business closures and factory shutdowns all over the US we will see the same type of deflationary spiral we did in 2008. Having Musk at the helm gives me confidence that TSLA will navigate through this but I don't think it's going to be a V shaped recovery.

My plan is to buy TSLA equity with no expiration date.

 

[MC3OZ]

Let us face demand for all cars including Teslas are down. When people stay home, they do not go to work, socialize, entertain plus they lose or afraid to lose their income they do buy less cars. Model Y and MIC Model 3-s are in good shape, but even you can read in the Model Y forum that people choose to delay or cancel delivery. Others will happily scoop up these cars though. ( My working assumption that once the panic is over and (that will happen much faster than predicted on the virus forum) economic recovery will not be V shape, but Tesla demand recovery will be. (You do not need to know anything about epidemiology to know that infectious disease control specialists' prediction for both the duration and mortality of the coronavirus is grossly exaggerated, the economic theory of agency risk tells you that. I.e. infectious disease specialists will present theories that will make them seem more important than they are.)

Even if they are not exaggerated, all problems have solutions, it is crazy to think humanity and Tesla will sit back and be powerless to do something about a problem...

The main problem with the economy is very poor political leadership in a number of countries, it is going to take them a while to stumble on the right formula..... but if the medical and engineering experts can solve the major problems the politicians just need to get it half right for the worst be be over.

 

[Pras]

Not to downplay what doctors are saying.....but they're doctors, not economists. There is absolutely no way the US economy could sustain an entire quarter of the current lockdown status that most major areas and cities are in. I forget what the exact number is, but for every 1% of unemployment, something like 30k people die from being displaced, loss of health care benefits, etc...A full quarter of this current state would be unemployment on a ridiculous scale. It's literally not possible to continue this past April, even if the government was doing all it can to supplement the economic loss.

I think the economy should be let open in phased manner. Hopefully starting in two three weeks. For example

• areas that are not hotspots, or have shown recovery, such as new cases less than 10, should be allowed to return to normal with extra caution in place. They should promote remote working, limited gathering and general hygiene hyper sensitivity.
• massive amount of testing should be made available, with a database, and perhaps eventually test everyone in the hotspot areas. I heard pharmas are ramping to 5 million a week capacity of testing, or more, so this can be done.
• stock up on masks and asks people to wear masks in public transport. Airlines should mandate masks when flying. No food service onboard in short haul flights. (I know masks are not 100% proof but they minimize the transmission both from and to.
• international travel remains limited with a requirement of self quarantine for 14 days.
• continue to shut leisure activities with mass gathering and resume sports but without live audience.
• restaurants should continue take out preference in hotspot areas. Again any service workers including a barber should wear masks. Taxis may include wipes / sanitizers (assuming they can be stocked up) as standard service.
• schools should open 4-6 weeks later. Cut back a month from summer vacation. Childcare is an issue but remote working is helpful. I guess the challenge is slightly different than summer months.
• lastly continue to operate Covid-19 emergency process (drive through testing, dedicated hospital beds, procurement of ventilators, etc) for next 3-4 months.

 

[EV forever]

I am now beginning to get concerned about the possibility of Tesla getting bought or going private. If this has been discussed already here, I apologize for not having caught up on the thread.

With the current stock price, a 20% premium would put it at ~ 420 range. If the stock drops another 10% tomorrow, $420 would seem like a great price for a company with this high level of potential growth. We talk about VW having lost their chance last year when Tesla was below $200, but we are getting dangerously close to dropping below $300 - that is cheap for a company with such sound fundamentals. In fact, now it is an even better buy, as they have proven to be successfully profitable 2 quarters with continued demand for their products.

I don't believe VW or anyone else could do a hostile takeover, but would Elon be willing to sell to someone, if he stays on for a certain period to get it through the growth over next few years? Alternatively, would he be so fed up of all the struggles that he tries to take it private - as he tried in 2018? Even with this market crash, there is plenty of money that could be raised. Heck, China might be willing to fund him themselves.

 

[Artful Dodger]

In the case of TSLA, I feel like it'd be a stronger sign if short interest increased massively. I think higher short interest and lower real selling indicate more manipulation, and lower short interest and more real selling indicate more real investors having changed their mind about the company for now.

Ouch, that's so confused! Hard to unpack this *take*.

Let's try with just this statement: "lower short interest ... indicate more real investors having changed their mind". So:

• short sellers are NOT real investors; they are anti-investors
• # of shares shorted goes UP when sentiment is poor; DN when good
  
• fewer Short shares reduces supply; net effect is to increase SP

So in the scenario where both the number of Short shares AND the share price have gone down, we conclude:

• sentiment has improved in Anti-Investors
  
• the supply of shares available from Long investors increased

This seemingly contradictory conclusion can only be justified if we also conclude that the group(s) that are buying are covering their shorts, AND they are doing it by scaring the shares out of low-information Investors.

Matches the headlines and the intraday bear raid tactics over the past 10 weeks of trading. But this is already too long, and it would take 3x this analysis to parse the rest of your thesis, so I won't.

Cheers!

 

[Drumheller]

Aren't a lot of people (especially middle-class) working from home also, and should still be getting paid throughout of this?

I also doubt there'll be 2-3 months hardcore lockdowns anywhere. China has pretty much freed itself from the virus and lockdowns there didn't last anywhere near that long.

Wuhan went into lockdown on Jan 23rd, almost two months ago. They are not fully out of lockdown, yet.

 

[guidooo]

Does anyone have a good logical way of thinking about the economic impact this crisis will have?

I don't, so i'll give it a try.

Tesla specific shorter term (let's say a few months or so)? In uncertain times with sickness around, replacing a car is probably one of the last things on your to do list. Unless you have to. Lucky for us, Tesla's are considered sexy and usually high in demand. Let's also see what energy and GF3 can do.

Macro specific? A lot of paper wealth, like the calculated money on stock exchanges, seems to be destroyed. Unknown when or how it will return. When people feel poor (or less certain) they spend less and what they spend is on items they think they need. When they calculate themselves rich, they might be willing to spend more and more on luxury items. This probably affects the middle class most. Also somehow the lost productivity costs and increased health care costs need to be paid for one way or the other. I do not have the insight to judge whether these costs are negligible or not on a longer time frame. And less quality companies /sectors in the economy might get considerable tax payers money for whatever reason or helicopters might drop money, all of which makes predictions more cloudy. And the outcome maybe full of surprises.

Would appreciate if his reply is not used/seen as any form of investment advice. There should be opportunities, but think it's clear that at this moment the market is controlled by the pandemic and our perception of it. Think logic tells a market turning point is related to that perception. Highly likely it doesn't play out the way we think it will, but in hindsight we think we could have foreseen it would play out like it did. Pandemic tomorrow solved without long term lockdowns and we can live our lives like the sky is the limit -> Restaurants and physical shops will mostly survive and therefore also keep things like real estate values more stable. Think if (and it's a big IF) the pandemic is not going away this season, it might all be too complex to tell, like all transformations are.

 

[vikings123]

I think the economy should be let open in phased manner. Hopefully starting in two three weeks. For example

• areas that are not hotspots, or have shown recovery, such as new cases less than 10, should be allowed to return to normal with extra caution in place. They should promote remote working, limited gathering and general hygiene hyper sensitivity.
• massive amount of testing should be made available, with a database, and perhaps eventually test everyone in the hotspot areas. I heard pharmas are ramping to 5 million a week capacity of testing, or more, so this can be done.
• stock up on masks and asks people to wear masks in public transport. Airlines should mandate masks when flying. No food service onboard in short haul flights. (I know masks are not 100% proof but they minimize the transmission both from and to.
• international travel remains limited with a requirement of self quarantine for 14 days.
• continue to shut leisure activities with mass gathering and resume sports but without live audience.
• restaurants should continue take out preference in hotspot areas. Again any service workers including a barber should wear masks. Taxis may include wipes / sanitizers (assuming they can be stocked up) as standard service.
• schools should open 4-6 weeks later. Cut back a month from summer vacation. Childcare is an issue but remote working is helpful. I guess the challenge is slightly different than summer months.
• lastly continue to operate Covid-19 emergency process (drive through testing, dedicated hospital beds, procurement of ventilators, etc) for next 3-4 months.

I will just add one more:

• Require people older than 60 or people with preexisting conditions to stay home as much as possible to avoid any critical/serious cases of infection AND no visitors allowed. To me this is a common sense measure until you truly have a grip on the spread of the virus.