TSLA - Tesla Motors

[no_free_lunch]

I don't get it. YoY sales are down 12 percent.  Profit is down.  This looks like a catastrophe to me.

[Gregmal]

I don't get it. YoY sales are down 12 percent.  Profit is down.  This looks like a catastrophe to me.

 

Same here which is why its uninvestable for me(outside of the mostly macro trade I explained earlier in the thread with some severely OTM puts). I made money long in the beginning, gave it back and then a bit shorting later on, and have awhile ago come to the realization that I am not capable of sizing up this company's place in the market.

[Jurgis]

That sounds like a CEO whose company just had a very unprofitable Q3. And yet, the stock is up this morning.

 

Great analysis, pardner.

[LounginMKL]

https://www.bloomberg.com/news/articles/2019-10-23/elon-musk-opened-tesla-s-shanghai-gigafactory-in-just-168-days

 

168 means "fortune all the way." Forget the financials, how can you mess with this feng shui!?

[Foreign Tuffett]

That sounds like a CEO whose company just had a very unprofitable Q3. And yet, the stock is up this morning.

 

Great analysis, pardner.

 

I'll eat crow here.

 

Total company gross margin increased in a big way Q/Q -- up something like 440 basis points Q/Q despite declining auto ASPs. Analyst consensus was something like 15.6% and it came in at 18.9%.

 

Gross margin in the energy segment went from 11.6% to 21.9% Q/Q, an improvement so large that it's baffling. Energy segment revenue was UP by over 9% Q/Q, but cost of revenue was DOWN by 3.5%.

 

I'm not the only one wondering how gross margins turned around so quickly. JP Morgan note says they would have asked for the impact of "non-recurring items" to be quantified if given the opportunity to ask a question. Bernstein's "guesstimate" is that "one-time items could've represented a 100+ bps sequential help from Q2 to Q3." No one seems to know with any degree of certainty.

 

[Jurgis]

That sounds like a CEO whose company just had a very unprofitable Q3. And yet, the stock is up this morning.

 

Great analysis, pardner.

 

I'll eat crow here.

 

Total company gross margin increased in a big way Q/Q -- up something like 440 basis points Q/Q despite declining auto ASPs. Analyst consensus was something like 15.6% and it came in at 18.9%.

 

Gross margin in the energy segment went from 11.6% to 21.9% Q/Q, an improvement so large that it's baffling. Energy segment revenue was UP by over 9% Q/Q, but cost of revenue was DOWN by 3.5%.

 

I'm not the only one wondering how gross margins turned around so quickly. JP Morgan note says they would have asked for the impact of "non-recurring items" to be quantified if given the opportunity to ask a question. Bernstein's "guesstimate" is that "one-time items could've represented a 100+ bps sequential help from Q2 to Q3." No one seems to know with any degree of certainty.

 

To be clear, I am not complaining about any in-depth analysis that may have predicted loss for Q3. I myself have expected lower shipments of Model 3 through this year, so I acknowledge that predicting is hard and predicting the future is even harder ;) .

 

My reaction was purely to what seemed an irrational attempt to infer something from a tweet. Even if you had a legit model predicting Q3 loss, IMO it was a mistake to read Elon's tweet through the confirmation bias lens instead of taking it as a simple reply to the guy who asked for discounts/rebates.

 

Perhaps I should have expressed my reservations less curtly.  8)

 

Take care

[Liberty]

+20% after hours. Shorting is hard.

 

Up another 9-10% today... Impressive how quickly it whips around. Not that long ago that the sentiment was that it was all over and going down...

[Investmentacct]

+20% after hours. Shorting is hard.

 

Up another 9-10% today... Impressive how quickly it whips around. Not that long ago that the sentiment was that it was all over and going down...

 

No alternative Product available in market thesis stays same. Tesla model 3 made all cars dated; which just started hitting to numbers. Hence the rhetoric question, which asked few times in past few years. "Have you driven yet?"

[awindenberger]

That sounds like a CEO whose company just had a very unprofitable Q3. And yet, the stock is up this morning.

 

Great analysis, pardner.

 

I'll eat crow here.

 

Total company gross margin increased in a big way Q/Q -- up something like 440 basis points Q/Q despite declining auto ASPs. Analyst consensus was something like 15.6% and it came in at 18.9%.

 

Gross margin in the energy segment went from 11.6% to 21.9% Q/Q, an improvement so large that it's baffling. Energy segment revenue was UP by over 9% Q/Q, but cost of revenue was DOWN by 3.5%.

 

I'm not the only one wondering how gross margins turned around so quickly. JP Morgan note says they would have asked for the impact of "non-recurring items" to be quantified if given the opportunity to ask a question. Bernstein's "guesstimate" is that "one-time items could've represented a 100+ bps sequential help from Q2 to Q3." No one seems to know with any degree of certainty.

 

I can't remember offhand if I posted here about it last year, but I was expecting Tesla Energy to see significantly improved margins sometime in 2019 because they had not one, but two pricing increases of about 8-10% between Q2 2018 and Q4 2018. Lead times for energy storage systems went out to almost 12 months at one point because of demand and the Model 3 ramp. Gigafactory can handle the volume now, but hadn't ramped up until earlier this year, so last year sounds like it was hell.

 

Looking at the situation today, Tesla stock still "looks" overvalued, but I would never short it. I think the company made it thru its most challenging period last year and now has a lot of positive catalysts, including Chinese production, Model Y, a simplified and more popular solar product, and continue energy storage growth.

 

 

[Aberhound]

That sounds like a CEO whose company just had a very unprofitable Q3. And yet, the stock is up this morning.

 

Great analysis, pardner.

 

I'll eat crow here.

 

Total company gross margin increased in a big way Q/Q -- up something like 440 basis points Q/Q despite declining auto ASPs. Analyst consensus was something like 15.6% and it came in at 18.9%.

 

Gross margin in the energy segment went from 11.6% to 21.9% Q/Q, an improvement so large that it's baffling. Energy segment revenue was UP by over 9% Q/Q, but cost of revenue was DOWN by 3.5%.

 

I'm not the only one wondering how gross margins turned around so quickly. JP Morgan note says they would have asked for the impact of "non-recurring items" to be quantified if given the opportunity to ask a question. Bernstein's "guesstimate" is that "one-time items could've represented a 100+ bps sequential help from Q2 to Q3." No one seems to know with any degree of certainty.

 

I can't remember offhand if I posted here about it last year, but I was expecting Tesla Energy to see significantly improved margins sometime in 2019 because they had not one, but two pricing increases of about 8-10% between Q2 2018 and Q4 2018. Lead times for energy storage systems went out to almost 12 months at one point because of demand and the Model 3 ramp. Gigafactory can handle the volume now, but hadn't ramped up until earlier this year, so last year sounds like it was hell.

 

Looking at the situation today, Tesla stock still "looks" overvalued, but I would never short it. I think the company made it thru its most challenging period last year and now has a lot of positive catalysts, including Chinese production, Model Y, a simplified and more popular solar product, and continue energy storage growth.

 

I would add to the list the unveiling of the new Pickup truck in 1 month. The unveiling means deposits and I suspect the specs will cause the deposits to be double or triple or more than the Model 3 deposits based on the massive sales of pick up trucks in the US and the apparent quality of the new product. Of course we won't know for a month but there is information sufficient to come up with rational estimates. For instance it looks to me like this will solve the cash flow problems during this downturn.  It should have the extended range and longer battery life and cheaper production costs from the improved battery design from the recent acquisition and the idea of making it a portable all day power supply for tools at 240V makes it incredibly useful same as the reputed 300,000 lb towing capability. That will haul logs I think. I want one at my lake. These might be the first specs that cause investors to realize what my brother has concluded that in a few years existing vehicles will be seen as depreciating assets while the Tesla with the 500,000 mile battery life will be seen as an appreciating asset due to the incredible usefulness and the new sharing economy. Someone should start a Tesla AirBnB. If you have a newish Ford F-150 or the like short it by selling it, buy Tesla stock and get a cheap truck while you wait and I bet you can buy two or more of these Tesla pickups when they come out in a couple years. By then the depreciation on the Fords and the like will be over $10,000 per year due to short lifespan. Watch for 25% market share in the segment instantly and growing from there. Think of the pricing power Tesla will have when shortages develop. We all need to get out our calculators and figure out what this might be worth and start assigning probabilities.

I am also looking a natural gas and the companies that build natural gas generating plants as the electricity demand in the US is going to soar and natural gas is part of the supply. I am also thinking abort shorts in the Winnebego etc. gas or diesel motorhomes which get killed in downturns. I may be too late as I recall reading recently of the downturn in that sector. The new model will be towed caravans as the economics are obvious. It is way cheaper to drive these things electric and the caravan can have solar and battery banks which supplement the Tesla if the manufacturers have the skill and foresight. Think of it. You pull over and spend the night in your caravan and your solar cells will recharge the battery banks. Less range anxiety. This will increase the mobility of the poor and will be a far better option than a manufactured home in a fixed location because you can move to your job and for a handyman your job moves with the truck and your tools. The rural economy should do well over time as more supercharging stations are built and nice towns building the infrastructure will attract these people causing local booms for smart town councils. I wish the posts would focus more about the future as I find these valuation estimates very challenging as it is difficult to imagine the changes in society which soon will be possible.

[gfp]

Watch for 25% market share in the segment instantly and growing from there.

 

I can't tell if you are serious or not.  Is this your actual expectation for Tesla's US pickup truck market share or are you messing around?

[Spekulatius]

You pull over and spend the night in your caravan and your solar cells will recharge the battery banks. Less range anxiety. This will increase the mobility of the poor and will be a far better option than a manufactured home in a fixed location because you can move to your job and for a handyman your job moves with the truck and your tools.

[Aberhound]

Watch for 25% market share in the segment instantly and growing from there.

 

I can't tell if you are serious or not.  Is this your actual expectation for Tesla's US pickup truck market share or are you messing around?

 

I see something and I am struggling to grasp the idea as I suspect we have the potential to buy Apple when just as the Iphone 3 came out. I remember thinking about Apple at $14, Google at $80, and Amazon at $4 and failing to press the buy button. I read Bezos' first annual report and thinking this plan was incredibly wise but I had difficulty thinking the implications through. Like then my ideas are not fully formed by I see something worth investigating.

 

Part of my thinking is that demographically we are close to the Millennial's big spending years and I suspect millions will end up with the Tesla roofs and vehicles which vehicles are mostly shared out. I am a Boomer and I don't think like Millennials. I scrimped and saved and carefully chose assets I thought would appreciate most. They did. In contrast Millennials look at the world and they are screwed. Wage rates have not grown for 20 years and assets are all super expensive. You cannot get ahead unless you figure out how to utilize things better. Tesla soon will be offering to millennials hope by changing these two major assets into an asset that save money (the roof) or becomes an income earning appreciating assets (the million mile vehicle). Just wait until Telsa's design genius gets their hands on quantum dot glass and v4 of their roof doubles in efficiency and then v5 transform skyscrapers into energy generating towers. Now the roofs are better than a new roof. In the future will it make sense to tear down and replace buildings to convert them to them to something like the v5 which to me seems to be on their path of technology? I post the thoughts in hopes those shorting whose thinking inverts my thoughts try their best to trash these ideas. If you succeed I will be corrected and save myself a lot of money.

 

This video well explains Tesla's design process advantage. I agree with this video that Tesla is at stage 3 of disruption of the auto industry and soon will enter stage 4: 

 

To me the stage 4 disruption is the change to thinking of your vehicle as being an income earning asset due to the usefulness of the vehicle and the potential to share the 97% or so of the vehicle hours that most people do not use. Pick ups in particular are rarely used for the work purposes they are designed for.

 

The author of the video cites this great article on disruption and Tesla clearly is the disruptor by these tests: https://www.vox.com/2014/1/6/11622000/the-four-stages-of-disruption-2

 

He also cites this great article on Musk's thinking process. Both techniques are useful for any investor.

 

https://www.independent.co.uk/business/elon-musk-uses-this-ancient-critical-thinking-strategy-to-outsmart-everybody-else-a7990601.html

 

We think of Tesla as a car company but isn't it more accurately described as a company that is going to take the biggest sectors ie energy and vehicles and re-imagine how they will be used in society? Technology is changing and improving at incredible rate and my thesis is that this Tesla approach will create a company with moat like we rarely see. Legacy companies almost never can make the transition. The future competitor is likely to be a new entrant and that is incredibly difficult in the car business in particular. The question is are they or will they be in a position that Amazon found themselves in that Amazon was so far ahead no one will ever be able to compete with them effectively.

[Foreign Tuffett]

Aberhound,

 

I could write about how, in all likelihood, the impetus for the original 10/2016 Solar Roof presentation was to convince TSLA shareholders to vote for the acquisition of the rapidly failing SolarCity. This is currently being litigated.

 

https://www.vanityfair.com/news/2019/08/how-elon-musk-gambled-tesla-to-save-solarcity

 

I could write about how Solar Roof v1 and v2 have basically been vaporware, with very few actual installations. Reuters found only 12 installations as of 5/2018. More generally, SolarCity deployed something like 201 megawatts of solar in Q4 2016 (the quarter it was acquired by Tesla). Last quarter it deployed 43. In Q2 it was only 29.

 

https://www.cnbc.com/2018/09/24/tesla-solar-roof-tiles-where-are-they.html

 

I could write at length about the fiasco that Tesla's announcement (via conference call) of Solar Roof v3 (I have no idea where you are getting info about v4 and v5) was last month. Scheduled at the last minute, then rescheduled at the last second for late afternoon on a Friday, the call was painfully awkward to listen to. Musk stated that "Our goal is to get north of 1000 roofs per week ASAP", but then refused to answer a softball question about how many installation crews TSLA had working on Solar Roof installations.

 

 

But instead of writing all that, I'm just going to say "OK, boomer"

[Haasje]

What changed here is the sentiment. The fundamentals are horrible. Quarterly presentation, things look great. Q-10 isn't all that positive. Revenue is down.

 

There is an abundance of red flags (exec comp, lawsuits, SCTY, employee churn, the pursuit of short-sellers, financial commentators and journalists, management risk-taking) 

 

Look at all the ambitions of the company. Now, look at what they are spending on R&D and investing. Think about where they are located. Look at what the competition is spending.

 

Very simple what is happening here is the selling of equity to sponsor a product until the scale/tech is achieved where supposedly no more capital needs to get raised.

 

They are far off, good thing they are amazing at selling stock.

 

I don't see anything remotely reasonable path to great value accruing to the equity from here. It's easy enough to come up scenarios where equity gets wiped out.

 

 

[Guest cherzeca]

does anyone have an answer to Einhorn's question, which is why there is >$1B in accounts receivable for a cash and carry (er, drive) business?

[jschembs]

does anyone have an answer to Einhorn's question, which is why there is >$1B in accounts receivable for a cash and carry (er, drive) business?

 

I haven't spent much time thinking about it, but one post asked if the ZEV credit sales are in there.

[Guest cherzeca]

does anyone have an answer to Einhorn's question, which is why there is >$1B in accounts receivable for a cash and carry (er, drive) business?

 

I haven't spent much time thinking about it, but one post asked if the ZEV credit sales are in there.

 

I don't think these credit sales have generated ARs in past. 

[jschembs]

does anyone have an answer to Einhorn's question, which is why there is >$1B in accounts receivable for a cash and carry (er, drive) business?

 

I haven't spent much time thinking about it, but one post asked if the ZEV credit sales are in there.

 

I don't think these credit sales have generated ARs in past.

 

From an accounting perspective, why wouldn't they? And large corporate "customers," particularly those loathe to have to deal with ZEVs anyway, probably far more likely to delay payments.

[jmp8822]

does anyone have an answer to Einhorn's question, which is why there is >$1B in accounts receivable for a cash and carry (er, drive) business?

 

I haven't spent much time thinking about it, but one post asked if the ZEV credit sales are in there.

 

The problem is they said on the conference call that the AR balance was so large because the Q ended on a Sunday at the time. Then, the balance never corrected. I.e. it makes you wonder what they are hiding.

[Spekulatius]

https://finance.yahoo.com/news/musk-round-global-factory-network-012002032.html

 

Interesting, first a factory in China and now roughly 12 month later a factory in Germany. Going right into the Lions den. LOL.

[Spekulatius]

So Tesla Mad Max Truck isn’t bulletproof after all:

 

Is this thing with a post apocalyptic design a joke or do they really want to sell this?

[Gregmal]

Thats exactly the thing, what separated Tesla from the million EV failures that came before it, was the very simple fact that they were the first ones to make cars that were desirable and looked like normal cars, not vacuums or UFO's or lego constructs. This is something that looks like it was produced by one of their predecessors. No way someone driving an F-150 looks at this and does anything but laugh.

[Liberty]

Seems like a pretty big mistake to me too. When you attempt something radical that is totally different from the norm, that's always a risk. It'll be interesting to see where they go from here... whether they dig in, or regroup and do some serious redesigning.

[Cigarbutt]

Some leaders have incredible vision but predicting customer preferences is awfully hard.

I'm not a car person but find that their sedan design to be appealing.

But this has an Edsel smell to it. After the 18th min. mark: