One month ago, following the latest negative note from Goldman's auto analyst David Tamberrino, Elon Musk decided to take it personally and in a leaked memo to his employees, said that Goldman is "in for a rude awakening :)"
With Tesla stock sliding 15% since then, it is not exactly clear who has had a more rude awakening, the bulls or bears, but in having kept silent for the past month, Goldman (which has a Sell reco and a $195 PT on TSLA), has come out with another negative note on Tesla, just two days before Tesla's Aug. 1 earnings, in which Goldman details the key investor questions and recent debate on the stock from its conversations with clients.
As Tamberrino writes, "the key focus areas revolve around (1) sustainability of Model 3 production, (2) pace and demand-variants of Model 3 order conversion, (3) margin improvement potential, and (4) FCF burn."
More importantly, for the first time, the Goldman analyst introduces a new analysis on Model 3 sentiment based off social media posts. "This stems from our work on Model 3 order conversion and customer reception."
And the punchline: "Ultimately, we believe the data potentially points to waning customer enthusiasm for the vehicle as order availability and test drives have increased."
We expect another very angry Elon Musk memo to be "leaked" shortly.
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With that out of the way, here is Goldman's Q&A on several key questions relating to the Model 3 roll out:
1. Post the 5k/week Model 3 production achievement in the last week of 2Q, how is the run-rate so far in 3Q?
We track VIN registrations closely for the Model 3, and following the end of 2Q18 the company has registered another 20,700 VINs. With historical conversion from VIN figures to production numbers (as of the end of 2Q18, TSLA had 56k VINs registered and produced 41k Model 3s), we believe this implies that TSLA has produced approx. 15k vehicles in the past four weeks. This essentially equates to a production figure of approx. 4,000/week. We believe questions on the conference call will focus on the sustainability and potential to increase this rate up to (and possibly beyond) the 5,000/week rate – and what the company eventually does with its GA4 assembly line. The sustainability of this rate – particularly without the aid of the GA4 tent assembly line (which produced 20% of the 5,000 vehicles in the last week of 2Q18), is important as it potentially sets the company up for positive FCF in 3Q18 as well as potential for putting incremental capex into Model 3 assembly to increase the production rate to the 10,000/week target – timing for which has been uncertain after the production delays in late 2017/early 2018.
Are reservation holders converting?
As production improves for...