Whitney Tilson’s email to investors discussing Tesla Inc (NASDAQ:TSLA)’s Q2 delivery estimates; the capital raise; bull case; reliability.
Various comments from friends…
Q1 hedge fund letters, conference, scoops etc
1) Some of my bearish friends are moving their delivery estimates for Q2 up a bit. Once commented:
The orders did come in for the X and S when they improved the longer-range powertrains, along with the price cuts. Price cuts do tend to drive sales -- here as with everywhere.
I still don't have more than about half of Europe's data yet, but it's looking weak overall. I was at 65,000 a few short days ago, but I am higher now -- around 67,000. I go where the data leads me, from all the geographies. Perhaps we do end the quarter around 75,000 -- that's entirely possible. I am not going to bet against that. But that is -- not yet -- where I have my nameplate-by-nameplate, country-by-country, data. Maybe I'll get closer to 75,000 in a matter of days, weeks or... a month or more. Or not.
France: Came in weaker for April (vs expectations)
Norway: Weaker
Denmark: Stronger
Sweden: Slightly weaker
Netherlands: Slightly weaker
Finland: Slightly stronger
Switzerland: Weaker
Austria: Slightly weaker
Unknowns include: Germany, Belgium, UK
2) Comment on the financing on Twitter here:
Rumor is equity piece will be upsized and priced at $243. Goldman called in some favors for this one. Shares will be dumped tomorrow, and traders will pile on next week. Sub-$200 by mid-June IMO. Increasing my short position. Have a wonderful evening Mrs. Lincoln. $TSLA
3) Another comment:
The punishment for the company here should be that it must publish a transcript and replay of the deal call, for everyone to hear the horror with their own ears, or at least read the insanity. The company must be held accountable for Elon's impossible promises and outright lies.
In the very last minute of the after-market, the stock suddenly jumped up a peg from having been up something like 75 cents, to being up $1.45. No manipulation there, I am sure.
4) Another friend makes the bull case:
You and all your friends are missing the point. The money is getting raised. You should be calling it the beginning of the end for shorts. Q2 sales way ahead of Jan/Feb. Lots of markets just now coming online. Solid S/X updates. China factory humming along (too fast, according to shorts). The autonomy is clearly coming along. End of 2020 plausible (even forgetting that voyage is already live).
What you and your ilk consider lies are just aggressive execution and is the singular reason for Elon’s hyper success in not one, but two, near-impossible industries. No matter the date it will always be missed. Which makes setting overly optimistic dates imperative. There are 1000s of variables that have to be going in the right direction. Audi and Kia can’t even get batteries.
I know the confirmation bias is strong all the way around but it's really off the charts with a number of shorts. The China factory is a terrific example where "that's impossible" switched to "2020 at the earliest" switched to "they're moving too fast". Wahlman keeps trotting out his 8 days of Norway sales numbers, Glenn's hung up on levels, someone quibbling about how much ink was spent on autonomy vs car production, shorts are losing their mind that safety-based insurance is coming, on and on.
All the while, Elon keeps producing. Oh, and by the way, he's got a rocket going to the space station tomorrow.
I don't totally buy it but could easily see Teslas appreciating. The obvious example is the inflated prices people were willing to pay for Priuses with the carpool lane stickers. Tesla will control who can put their cars into the system. Simply by preferencing on purchase timing would increase earlier-purchased car values.
5) Another friend:
Interview with CEO of Ark Invest – defending their Tesla position (their largest position and price target of $4,000) – starts from 3:40 onwards –
Nothing ground breaking here but still interesting.
Mentions that their analyst is from NVIDIA and understands Tesla’s AI chip spec which is apparently amazing. Mentions that they have 4 research analysts collaborating on studying Tesla from different innovation platforms – robotics, AI, energy storage , transportation as a service so they understand it well because unlikely that anyone else has approached it from all four angles.
6) A debate over reliability. One friend writes:
Apart from Consumer Reports -- which has a very low reliability rating for Tesla -- the TrueDelta survey measures how often a car has to be taken to the shop:
https://www.truedelta.com/Tesla-Model-3/reliability-1376
By their measures, the Tesla Model 3 is in the shop more than any other car in the market as of the 2018 model year. How much more often? It looks like 468%.
In the entire U.S. car market today, the Tesla Model 3 is as an extreme of an outlier as you can get, based on how often it needs to be taken to the shop. It's in a different league altogether. I'm not sure I can say Yugo 1992 territory, but it's the worst of any car you can buy in the U.S. market as of recently. Maybe this has changed in the last handful of months, in 2019. I don't know.
Remember how various automakers were "shaken out" of the U.S. car market -- either by shrinking dramatically, or disappearing altogether -- starting in the 1970s, and with more following through in the 1980s, 1990s and 2000s? That was to a large degree as a result of lack of QRD (industry term for "Quality, Reliability and Dependability."
The final verdict on Tesla has not yet been written. Anything can happen. But from this one particular perspective, Tesla has a very deep hole from which it needs to dig, in order to come even close to approaching current U.S. market industry averages.
Another replies:
Hmm. That data, which is admittedly bad, ends in July 2018, and it supports what everyone knows; that the first few thousand Model 3s sold had defects. I believe TSLA has improved quality dramatically, albeit just through hearsay. I have no data to back that up. We will have to wait until July 2019. I know that site has 106,000 members supplying their own data, but I didn't see how many Model 3s were written about...important stat. Did 10,000 Model 3 owners put their info on that site or did 1,000? Or 100? And why do car owners put their info on that site?? What is the incentive? Sorry to be so cynical, but a car company or oil company could pay someone to post a few hundred negative reviews on their pretty easily. A real name is not required.
But Consumer Reports pulling their ranking holds more weight than True Delta. Both reach negative conclusions.
I read lots of anecdotes about quality problems (like Glenn's!), but every tesla driver I stop (and I stop everyone I can) loves their cars and will never buy another brand. Time will tell!
I have to get back to my day job...
