TSLA Market Action: 2018 Investor Roundtable

[dmckinstry]

Once the SC charge rate drops below that of the onboard charger, you're taking up space and wasting time. And you're not really supercharging either, your more like trickle charging.

Good point. Tesla should put Level 2 chargers at their busiest sites, just for topping off those needing maximum range. In my case in the last few years, most superchargers are spaced closely enough (less than 220 miles apart for me) to comfortably make it to the next charger. Util this May (when the supercharger was put in at Wheatland, WY) I had to go extra slow at max charge to make it from Gillette to Cheyenne. Lusk is a little out of the way.

 

[Right_Said_Fred]

I wonder if all of this drama will make a lot more of us lose 5k come this Monday.

What drama? Let’s not blow things out of proportion. This will have hardly any influence on SP.

 

[MXWing]

 

[mickificki]

It's not just Fred. He's not the only unhappy owner. When it comes to "pricing" these are the stakeholders:

-TSLA shareholders
-New to Tesla ownership
-Old to Tesla ownership
-Rich people with Tesla's
-Less rich people Tesla's
-People with legitimate beefs
-People who are whiney bitches
-People happy for others when price is lower (almost no one is here)
-Those indifferent for others when price is lower (I fall here, as long as its a positive overall Tesla move)
-Those resentful of others when price is lower (most people are here)

I really really wish investors would understand owners more and owners would understand investors more.

Usually it's the owners I have the most problem with. No TSLA, means no warranty and no one to maintain the supercharger network.

You can't make everyone happy all the time, but there was lots of room and ways on how things could have been handled regarding free PUP bundling.

This is how tesla has always operated and you of all people should know that. There are improvements, price drops, etc that happen all the time.

Now you and Fred and whoever else is going to get your 5k back, how many performance models have been sold? 5k? 5k sold with 5k coming back to them is what, $25 million? So how does that affect Tesla’s bottom line next quarter then?

 

[MXWing]

This is how tesla has always operated and you of all people should know that. There are improvements, price drops, etc that happen all the time.

Now you and Fred and whoever else is going to get your 5k back, how many performance models have been sold? 5k? 5k sold with 5k coming back to them is what, $25 million? So how does that affect Tesla’s bottom line next quarter then?

When you mean ALL, I hope you are not talking about me personally? I have a AP2 2016 Model X (two years for EAP parity, no problem), a 3P+ and an MR on order. I even bought FSD on the X in 9/31 to help with Q3 numbers. I have older shares with low cost basis, I have shares with higher cost basis purchased recently. I can relate to pretty much anyone here.

I am stressing that TSLA share holders really need to get out of the bubble and understand the owners matter. Outraging 5,000 (sorry no more ludicrous upgrade for your P85) owners is one thing. Outraging 50,000 (P3 buyers) is another. 500,000 (lets hope Tesla never gets here) is even worse.

If Elon owned up to making a mistake, why can't you own up to him admitting he made a mistake?

Who even said I will take the $5K deal? I'm suggesting and preferring Tesla hang on to that capital and do something else like free ludicrous or transferable FUSC. Taking that $5K would be completely contrary to my Q3 FSD investment.

 

[Fact Checking]

...has an "index squeeze" ever been documented? That is, a stock is added to an index, but the number of shares available for sale is less than the number which the index funds want to buy? What do the index funds do?

So it isn't even all "index funds" but S&P 500 indexed funds - which should be about ~40% of all passive index funds. (The "total market" funds, the large-cap funds and the tech funds already include TSLA.)

S&P 500 funds are I think about 5% of shares of high tech firms, which on TSLA would be about 7% of the float: a substantial (and temporary) pop of $50-$100 but probably not "technical short squeeze" material.

(BTW., the smartest index fund arbitrageurs are probably already buying, S&P 500 inclusion next year is probable at this point.)

"JFYI you are commenting in an investor forum of a company whose stock already went through a sustained short squeeze just five years ago, when the price went from $20-ish levels to just shy of $200. (After a surprise earnings report.)"​

Lmao. It's funny how all smart people are still crazy in one way or another.

I'm unsure what you find crazy about what I wrote, the 2013 TSLA short squeeze is a simple historic fact:

Shorts often try to argue that 2013 was different in that "days to cover" was higher. What their argument is missing is that today Tesla is a large-cap tech company and about ~80% of the TSLA intraday volume is HFT/algo trading that doesn't offer liquidity to 30 million shares shorts covering. In 2013 was a small-cap/low-mid-cap company with less HFT liquidity skewing the daily volume figures, so 'days to cover' metrics were a lot more representative of true free short-covering liquidity available on the market.

I.e. the true "days to cover" is in reality 5 times larger than listed: instead of the ~3 "days to short cover" listed by NASDAQ, the real number is closer to 15 days - and even that is using up 100% of true liquidity to cover, while in reality any such sustained momentum would attract a lot of momentum traders with which shorts would have to compete.

The real time it will take for shorts to cover at naturally available liquidity is closer to 30-60 days. Anything beyond that rate of flow will bid up the price rather significantly - i.e. a short squeeze.

Also, there are several types of short squeezers:

• A "technical short squeeze" similar to the VW short squeeze of 2008 which was violent and over in 2-3 days is unlikely for TSLA, unless a big investor is really bullish and ties up a significant part of the Tesla float.
• A "fundamentals driven short squeeze" is highly probable after Q3 results: the fundamentals of Tesla just improved immensely (cash generation ability close to Apple's and twice that of Amazon, in a much bigger market with a lot of space to grow), which is unlocking a much broader base of investors. The 2013 Tesla short squeeze was such a fundamentals driven short squeeze.

These estimates of mine roughly match what Ihor Dusaniwsky's daily short interest report is showing:

Shorts covered about ~1 million shares since their peak, while the price was bid up by about ~$60. If we naively assume that a third of the price action was shorts covering and extrapolate that to say 30 million short shares covered, that's a price effect of +$600, quite some rocket fuel which would bring the stock to near $1,000 levels if longs didn't change behavior as prices increase - but in reality longs and even long term investors will probably jump in sooner than that to take profits or to swing-trade once they think the short squeeze has been exhausted, or if they think the price levels are irresistible.

Even without a technical short squeeze some nice intraday price action is also possible at around key price levels of short capitulation: I'd not be surprised to see a massive cascade of stop orders once $390 is breached, to well above $400.

There's also some key upcoming events that will unlock even more tiers of investors, such as the Moody's upgrade and the S&P 500 inclusion next year as @neroden suggested, and of course the upcoming "profitable 18'Q4" event, the "profitable 19'Q1" event, the "profitable 19'Q2" event, etc. The "but will Tesla ever be able to post five profitable quarters in a row!!" short thesis won't have nearly as many followers.

The time frame of the 2013 re-pricing of TSLA was 6-9 months, with the most violent short squeeze portion taking about 2-3 months to play out.

Anyway, all the data suggests that it's pretty probable at this point that there's a lot of pain waiting for shorts and the price levels at which they will be allowed out of their positions will be determined by Tesla shareholders, not by anti-shareholders.

 

[strangecosmos]

what's your current valuation model (or where is it posted) if you have one? Thanks!

I’ve done a couple different ones. Unfortunately most of the articles are behind paywalls now. But you can still see the spreadsheets.

I did two scenarios in this article, autonomy and no autonomy: An Optimistic 5-Year Case For Tesla (paywalled)

It’s paywalled, but here’s the spreadsheet for the no autonomy scenario for 2023: Tesla Q1 2023 (projected)

At Toyota’s current P/E of 7.6, $15B in profit would be $114B in market cap or $671 per share.

I messed up the autonomy scenario in that article because I assumed Tesla would borrow a ton of money to build Tesla Network cars, but then I only accounted for paying the interest not repaying the principal. *facepalm* Anyway here’s the spreadsheet for an autonomous Model 3 robotaxi: Tesla Network gross profit per car (projected)

And here’s the income statement for whenever Tesla has 10 million autonomous Model 3s on the road: Tesla Network annual net profit (projected)

I have some half-finished spreadsheets that improve on those last two ones and map things all the way out to 2030, and take into account producing cars with operating cash flow. I even emailed Tasha Keeney at ARK and she was kind enough to give me some feedback that helped me out.

But I eventually gave up on that because it started to feel pointless to tweak and tweak and tweak when the end result was the same no matter what. If Tesla deploys autonomous robotaxis at scale, it will make a bajillion dollars. For me there is no actionable difference whether its market cap in 2030 is $500 billion or $5 trillion. That won’t affect my investment decision. So why spend another six hours just to chip around the margins? Maybe I’ll finish them and publish them someday but I just haven’t felt like doing it.

After making those spreadsheets I started to focus a lot more on autonomous car technology because that became the actionable information. Whether Tesla will or won’t deploy autonomous vehicles is now the question, not what will happen *if* it does so. So that’s what it makes sense to think about. Plus I love technology and have a love-hate relationship with accounting.

This is something more recent I wrote where I looked at net present value: The value of autonomous car companies Not a model or a prediction, just a brief exploration. What if you make it a coin toss: heads, Tesla launches the Tesla Network, tails, Tesla goes bankrupt? Is Tesla still a good bet? I find that, yes, the net present value of Tesla is $100 billion with those probabilities.

edit: Why is a dude working for Microsoft publishing computational finance?

lol. I guess Microsoft Research has a broad area of focus

 

[strangecosmos]

So yeah, software analogy does not really line up untill they start selling apps and media services (post FSD). In the meantime, they have a lot of potential expansion which could support a high ratio (for the current time).

Yeah, I agree with the idea that faster-growing companies in the same sector should have higher multiples than slower-growing ones. In a few quarters, we can look at Tesla’s PEG ratio. Then the question is just what the growth ceiling is. And once it hits a growth ceiling, that’s when it should be valued at similar multiples to other companies in the same sector.

 

[KarenRei]

Are there still people in this thread pretending that, rather than Model 3s actually being more expensive to make in Q2, that Tesla was actually just trying to take advantage of early adopters?

 

[strangecosmos]

but the important thing, is they made it right!

tesla is very good at trying to do the fair thing. they seem to do everything possible to be as fair as possible.

golden retrievers are so friendly

 

[Causalien]

Unfortunately, he’s right. With both the 420 tweet & the free Performance package, Elon was doing the right thing & being transparent about it. The problem is, our society punishes him/them/us for that.

Wall Street and then the SEC punished him for letting retail investors know his thoughts before he began negotiations with major investors. Now owners are mad he was transparent about the car getting cheaper over time.

I have no problem with Elon & Tesla remaining transparent because I understood how they were before I invested. I also have no problem if they become less transparent in the future in order to avoid these kerfuffles. I think @neroden stated a very useful approach they could take.

The fault is not in our stars, but in ourselves.

It is usually a dark moment of realization when an optimistic starry eyed person who wants to do good by a moral code meet up with the reality of "no good deeds goes unpunished"

It definitely pulled me more towards the darker side. I wonder if Elon can escape that predicament.

 

[MXWing]

Are there still people in this thread pretending that, rather than Model 3s actually being more expensive to make in Q2, that Tesla was actually just trying to take advantage of early adopters?

Who thinks that Tesla is taking advantage of early adopters? I don't - and I took delivery of a 3P+ August 2nd or so.

You have to be a complete bonehead (not you obviously) to think that 3P+ wasn't cheaper to make given larger economy of scales, improvements, supplier pricing, lower cost of labor per car, etc, etc.

Tesla reduced cost to make cars and passed some of it to the consumer. Or more accurately, decided to give up "extra margin" on premium features to streamline production for overall margin improvement through additional car sales.

Tesla's dynamic pricing dealt with intelligence and logic. Tesla's dynamic pricing didn't account for wisdom and emotion.

 

[strangecosmos]

If your thesis is these guys can somehow hold on to their market share, emerging from the EV revolution unscratched, holding Tesla down to less than 10% of the market share, you need to provide some more supporting evidence, since the other side of the evidence has been presented many times here. Or you could argue there will be new comers, then why there hasn't been many credible ones after all these years?

Didn’t I just do that in the post you quoted from? E.g. governments are more likely to bail out ICE automakers post-bankruptcy than just let them die.

Even when Tesla sells same number of cars as Toyota, higher profit margin means higher earning, thus higher market cap, without needing higher multiples.

Competition and commoditization of EVs can compress margins in the long run.

And at the same time you are giving 0 potential to the energy business

Yes, true. I know nothing about the energy industry and I have no idea how to value Tesla’s energy business.

I guess that is where our biggest disagreement lies. You said Apple's competitive advantage is their app system. I don't quite agree. Android has one too. Clearly Apple is earning much much more money against android phone makers.

It’s because Android is open source, free, and therefore has an entirely different business model.

 

[RobStark]

h

FYI: Somebody just 'liked' my comment from 94 pages ago...
That's two days worth.

I got a "Funny" this morning from a post I made a month ago.

The on topic post are largely irrelevant that far back.

 

[ThereAre4Cars]

So it isn't even all "index funds" but S&P 500 indexed funds - which should be about ~40% of all passive index funds. (The "total market" funds, the large-cap funds and the tech funds already include TSLA.)

S&P 500 funds are I think about 5% of shares of high tech firms, which on TSLA would be about 7% of the float: a substantial (and temporary) pop of $50-$100 but probably not "technical short squeeze" material.

(BTW., the smartest index fund arbitrageurs are probably already buying, S&P 500 inclusion next year is probable at this point.)



I'm unsure what you find crazy about what I wrote, the 2013 TSLA short squeeze is a simple historic fact:

Shorts often try to argue that 2013 was different in that "days to cover" was higher. What their argument is missing is that today about 80% of the TSLA intraday volume is HFT/algo trading that doesn't offer liquidity to 30 million shares shorts covering.

I.e. the true "days to cover" is in reality 5 times larger than listed: instead of the ~3 "days to short cover" listed by NASDAQ, the real number is closer to 15 days - and even that is using up 100% of true liquidity to cover, while in reality any such sustained momentum would attract a lot of momentum traders with which shorts would have to compete.

The real time it will take for shorts to cover at naturally available liquidity is closer to 30-60 days. Anything beyond that rate of flow will bid up the price rather significantly - i.e. a short squeeze.

Also, there are several types of short squeezers:

• A "technical short squeeze" similar to the VW short squeeze of 2008 which was violent and over in 2-3 days is unlikely for TSLA, unless a big investor is really bullish and ties up a significant part of the Tesla float.
• A "fundamentals driven short squeeze" is highly probable after Q3 results: the fundamentals of Tesla just improved immensely (cash generation ability close to Apple's and twice that of Amazon, in a much bigger market with a lot of space to grow), which is unlocking a much broader base of investors. The 2013 Tesla short squeeze was such a fundamentals driven short squeeze.

These estimates of mine roughly match what Ihor Dusaniwsky's daily short interest report is showing:

Shorts covered about ~1 million shares since their peak, while the price was bid up by about ~$60. If we naively assume that a third of the price action was shorts covering and extrapolate that to say 30 million short shares covered, that's a price effect of +$600, quite some rocket fuel which would bring the stock to near $1,000 levels if longs didn't change behavior as prices increase - but in reality longs and even long term investors will probably jump in sooner than that to take profits or to swing-trade once they think the short squeeze has been exhausted, or if they think the price levels are irresistible.

Even without a technical short squeeze some nice intraday price action is also possible at around key price levels of short capitulation: I'd not be surprised to see a massive cascade of stop orders once $390 is breached, to well above $400.

There's also some key upcoming events that will unlock even more tiers of investors, such as the Moody's upgrade and the S&P 500 inclusion next year as @neroden suggested, and of course the upcoming "profitable 18'Q4" event, the "profitable 19'Q1" event, the "profitable 19'Q2" event, etc.. The time frame of the 2013 short squeeze was 6-9 months.

Anyway, all the data suggests that it's pretty probable at this point that there's a lot of pain waiting for shorts and the price levels at which they will be allowed out of their positions will be determined by Tesla shareholders, not by anti-shareholders.

First of all, I'm bored of the weekend already. Let's get on to Monday.

What I found funny was your suggestion that I should evacuate the board if I had doubts about short squeezes. First of all, I don't have trouble with high valuations as I did just buy 6 figures worth of 400 strike price calls a couple weeks back (which made me chuckle at getting called a covert short by paranoid longs for asking moderate questions about 20 times since). I might raise an eyebrow to your 16T$+ scenario though given that the actual real world does have certain constraints on pace of growth regardless of how many T's in China.

Short squeezes get mentioned about 100x more than they happen. The 2013 event played out over ~6 months. You need a lot more evidence than you are providing this has anything to do with shorts. Demand on the buy or sell side of a stock is going to be highly nonlinear and nearly perfectly elastic with how far it gets away from a reasonable valuation. You are gonna find a lot of buyers if you go out selling 100$ bills for 98$. New shorts replace bailing shorts, longs sell, etc. as the price rises. It is more rational and at least equally probable to assume that when a stock goes from 35 to 180 as TSLA did, but takes half a year, that there is actually some retarding force that kept it from doing that all at once rather than some kind of accelerant of short covering. And if the price was being elevated beyond a rational position during this period, why did it not go back down after? Some coincidental fundamental improvement kept it up there?

So the 'short squeeze' thesis which pops up like weeds all over retail investor boards is flimsy. And of course we have all the wonderful trail of commentary back in August with giddy folks talking about ultra high prices triggered by a 420 buyout. I mean you are gonna get socially rewarded for being stupifyingly bullish. At least to some level, not an advice of course.

 

[RobStark]

Toyota is a $200B company.

That was years ago.

As of 10/26/18 Toyota is a $169.747B company.

 

[Remus]

It’s because Android is open source, free, and therefore has an entirely different business model.

Google services including especially the app store is not open source, cost money, and it is exactly modeled after Apple app store. Amazon and Samsung wanted to start their own app store, both fell flat.

Get your fact straight.

 

[strangecosmos]

IF volatility is scary, don't buy our stock" -Elon Musk

Great signature.

 

[NikeWings]

FYI: Somebody just 'liked' my comment from 94 pages ago...
That's two days worth.

Lodger you'll get more........just made it to post 53501 while flipping back/forth to new posts. If everyone could just freeze for an hour please.

 

[strangecosmos]

Google services including especially the app store is not open source, cost money, and it is exactly modeled after Apple app store. Amazon and Samsung wanted to start their own app store, both fell flat.

Get your fact straight.

Pretty sure phone OEMs don’t pay Google to install Android on their phones. Amazon and Samsung failing is exactly the network effect I’m talking about with iOS and Android. If there were 10 different phone OSes with all the same apps as iOS and Android, would Apple be as profitable? Probably not.