Thread by @AlmingtonCap

1) Thread on 3Q19 earnings: The $TSLA long thesis assumes that it will not only soon become profitable (necessarily ignoring all material evidence showing this is false), but also that it is somehow immune to auto market cyclicality. We call BS. $TSLAQ

finance.yahoo.com/news/tesla-not…

2) Auto manufacturing is a cyclical industry. That's just a fact. Yet, even when producing at full capacity in a robust consumer market, $TSLA has proven only fleetingly profitable – and even then it took a host of one-off gimmicks to do it in 2H18. $TSLAQ

https://twitter.com/Tweetermeyer/status/1181286182845419521

3) 2H18 profit came thanks to a lot of financial engineering, a focus on high-ASP variants, stiffing suppliers, etc. They could only do that once. As we opined at the time, 3Q18 was as good as it would ever get for Tesla. $TSLA $TSLAQ
finance.yahoo.com/news/teslas-3r…

4) In the best of all possible worlds, $TSLA still can't make a profit. In 3Q19, the world is not nearly so good as it was in 2H18. There will be some residual buffs to margins thanks to the LHD rollout, but it's a blip – and not much of one. Lower ASPs are the killer. $TSLAQ

5) There's been an interesting melt-up in $TSLA's share price over the past few days. It looks like some folks are positioning themselves in hopes of a beat, while some shorts have evidently covered. This is inconsequential. We have an observable fact: imploding fundamentals.

6) Sure, there's always the risk of Elon trying to pull a fast one, but 3Q19 looks like it's going to be pretty ugly. Will posting a fat loss after selling a record number of units break bulls' spirits? Not likely. And that really isn't what matters. $TSLA $TSLAQ

7) Playing this as a trade is risky, whichever side you're on. The volatility and story-stock component has proven profitable for some – @Andreas_Hopf has managed to do well as a rational bear who plays to the story on the up-swings. Not our game, but we can respect it. $TSLA

8) $TSLA isn't going to die a slow, gradual death. Nor do we expect it to collapse suddenly and spectacularly like $WE has done over the past 2 weeks. Elon's too wily, and his worshippers too numerous and loud, for that to happen. The end will come in stages. $TSLAQ

9) First, as the growth story dies the death by a thousand cuts, $TSLA will begin to reprice toward a more "conservative" growth profile, probably in the $150-200 range. A bad back-half this year could easily see that happen.

10) Second, the market will begin to sweat about the valuation multiple on a capital-intensive, cyclical business operating in the late-cycle. As the risk becomes plain for all to see (early 2020?), a new bout of downward repricing will ensue. $TSLA $TSLAQ

11) Third, as $TSLA's valuation melts toward those of other autos (but likely still enjoying a 3x or more mult premium), Elon'll have to go begging to capital markets yet again. If there's recession, it's basically curtains. If not, he should be able to scrounge a couple billion.

12) Fourth and finally, whatever raise $TSLA undertakes, it'll be on very harsh terms. We got a preview of that in July. While unpleasant, its terms'll seem downright generous in 2020. Here at last we enter the death spiral: always raising, on ever worse terms. $TSLAQ

13) Elon's particular personality and antics make the short an especially dangerous and volatile trade. But the outcome is inevitable. Will $TSLA ever actually go $TSLAQ, though? Maybe. But there's plenty of dumb money we could see swooping in to "rescue" the corpse.

14) $TSLA is a mid-term short, with some long-term short-to-zero potential. As we've opined before (borrowing the terminology of the irreplaceable Montana Skeptic), the co. is structurally bankrupt. But that doesn't mean we can expect Ch11 anytime soon.
seekingalpha.com/article/427914…

15) There are better, cleaner shorts out there. But $TSLA is by far the most entertaining. It's an incredible show that's gone on longer than we once thought possible. But, even if Elon insists like Barnum that "the show must go on", will alone won't change fundamental economics.

16) The end is certain; its timing and form are not. Will Elon keep this ailing beast alive for a while longer, or will someone step on its neck and put it out of its misery? That remains to be seen. Either way, the long side is going to get increasingly ugly. $TSLA $TSLAQ

17) Maybe 3Q19 will mark the next turning point in $TSLA's inevitable drive to ruin, maybe not. Elon the magician has a talent for survival, after all.

We reckon this quarter could mark the beginning of the endgame. But this story is far from over. $TSLAQ