2012 Q4 Earnings Report thread

[augkuo]

That depends upon the price of TSLA and amount of the shortfall between Wall Street estimates and the report

Look at HP, up ~7% after reporting profits of -16% -

You are paying for the future earnings of a company by buying a stock - it's price is set by supply and demand, generally the big institutional investors who buy large chunks.

If TSLA makes 20k cars and sells them with 25% gross margin, they'll make 500 million (assume $100k/model s). Their total operating expense last year was ~456 million so let's just say 50 million profit
for next year. 50 million profit/114 million shares of TSLA ~ 44 cents a share. Normally one would pay 10-20 times earnings for a stock ($8.80 max) but for "growth" stocks, the multiple can be much higher
(NFLX is 637!) . Because of such a high multiple, any little deviation from the "consensus" will whack these stocks down a bunch or make them shoot up like a rocket.

In general these stocks shouldn't comprise the bulk of your portfolio, you can have some (~20-25%) just to make life interesting

So, out of curiosity looking into the eventual Q1 report. If the Q1 report says Tesla is profitable, but the profitability is short of "The Street", would the stock nose dive again on that?

 

[DriverOne]

Yea, this line of thinking always just completely goes over my head. Why would I ever root against a company I've invested in? If I want the stock to drop, I should be completely divested and shorting it. If I think the stock is going up, I want to be completely invested. That maximizes expected value. If the goal is risk mitigation, that's different.

Mostly the depressed part is because the stock movement is just completely irrational to me by anything I'd think would make a meaningful measure on a company like Tesla (startup, everything is growth based rather than value based). I don't like it when things make no sense to me

Let me take stab at an explanation. The stock got downgraded and sank today not because of the good news contained in the report, and there was plenty of good news. So good, in fact, that you may decide to increase your investment - in which case a (temporary, you forecast) drop in the price is great news. You get in at a cheaper valuation even while you believe the company is actually stronger than before.

The drop came because of the bad news. To me, that was that they are holding production at 20K cars. Last year Elon was forecasting 20K as one of the goals for 2013, with 25% margin. But also with an indication that these goals could be beat, e.g. people started thinking 25-30K at 27% margin. It doesn't look like those optimistic numbers will be met; the goal for 2013 really is 20K and 25%. Hence a whack to the stock price.

Me, I sold some yesterday and I'll be buying it back in the mid-30s I hope, perhaps tomorrow. I just didn't have time today!

 

[CapitalistOppressor]

It's not a sports team.

You need to think about the stock market more like a supermarket. I like Coke, I don't want the company to go bankrupt. But when I go to the store today, I'm going to be hoping that it is on sale. Because I want more of it, and I'd rather not pay what I actually think it is worth. I want to pay less than that.

And, in fact, as a big time Diet Coke drinker I try to time my big purchases when it's on sale. If I'm out and need a fix I purchase the absolute minimum required, because I know that if it's full price right now, it very likely will be on sale soon. Fortunately I don't have a caffeine addiction to satisfy when it comes to purchasing securities, so I can withhold from purchasing for any length of time necessary.

 

[tlo]

Funny to see people upset about an "irrational" drop to 35. Despite the drop, the stock is still above January levels. We just enjoyed a pre-earnings run in the past month.

The fact that there seems to be good support at 34-35 is a good sign. This is after a disappointing earnings report. Yes, I do think the earnings report was disappointing because TSLA missed expectations on net loss, cars delivered, and cash flow. TSLA's state at the end of Q4 was indeed a little worse than street expectations. Forward guidance was positive, but that doesn't matter as much (for now), and it is possible they can fall short of guidance again.

 

[CapitalistOppressor]

I could be mistaken, but if I read the analysis from the Bank of America downgrade issued today correctly, the only reason they seem to give is they don't believe Elon about 25% margins, and think the Model S is too expensive. Their estimate of 10 cents per share (11million in profit) is a bit confusing.

if they were counting the EV credits as part of the 25% margins the estimates would make sense, but Elon explicitly said this was not the case, numerous times during the conference call. I see it as possible that they will earn $1-3 per share if EV credits are worth what I think they are. 20,000 Model S with an Average Price of 85,000 and 25% gross margins = about 400million profit. The EV credits alone could be 400million in profit. If operating expenses are 400 million for the year, and the 300million in debt is paid off, that gives them earnings of 100million, or over $1.

Am I missing something? My only guess is that they don't believe Elon can produce on his claims.

Jeffries seems to agree to some extent, and affirmed their target of $45. Does anyone have the detailed analysis?

Doesn't a miss by 10 cents only mean they spent 11million more than expected on something? They also seem to have explained the problem some buyers had mentioned about receiving the wrong tires, I think?

I didn't bother doing a deep dive on their note. But I don't have a huge problem with a $30 target.

Just a few months ago the big time Wall St types took a close, hard look at Tesla and valued it at ~$28 based on assumptions and goals that were basically met and validated in the most recent report. For me, that puts a floor under the stock at around that price because I'm fairly sure that the smartest of the smart investors will buy loads of the stock at that price as long as Tesla continues to execute according to its plan.

That's the floor I see. The further from that floor you get, the less likely the stock can sustain the price. As Tesla continues to execute, quarter by quarter, that floor will come higher. The normal trading range should be well above the floor as long as the company is doing well, and especially because it has "potential". For me, that justifies a trading range of anywhere between $30-$40 and my inclination is to buy when its near the bottom of that range and sell when it's near the top.

 

[Norbert]

The stock price is to some degree a balance between those who think the company will go bankrupt, and those who think it will become a large yet cost-effective auto manufacturer, in a decade or two.

Today had huge volumes (> 9 mill). I'm thinking today had a lot of trades by those who look at quarter numbers, instead of those who look at the future and see either huge failure or huge success. If so, then things might calm down in the next few days, towards something different.

 

[drinkerofkoolaid]

I absolutely agree. I honestly don't see how the greater than expected loss from the quarter is a sellable negative for any informed investor. This selling is likely panic by retail, and I'd consider the churning to be a good sign. 9x volume with a base at $35 is a good sign. (I know very little about technical analysis and could very easily be mistaken). If you look at the block trades from today, only retail was selling. Institutional buyers were jumping on board 20.2million in block buys. Less than 400k in block sells.

Funny to see people upset about an "irrational" drop to 35. Despite the drop, the stock is still above January levels. We just enjoyed a pre-earnings run in the past month.

The fact that there seems to be good support at 34-35 is a good sign. This is after a disappointing earnings report. Yes, I do think the earnings report was disappointing because TSLA missed expectations on net loss, cars delivered, and cash flow. TSLA's state at the end of Q4 was indeed a little worse than street expectations. Forward guidance was positive, but that doesn't matter as much (for now), and it is possible they can fall short of guidance again.

 

[kenliles]

Looks like it had a hard time staying below $35. As well it should given the clarity with which things are forming. Great car, great customer feedback, great media feedback, production rate and quality demonstrated sufficient, no immediate or apparent recall requirements, cash flow and now profit picture bottomed, most if not full year sold out, early charging structure a success, stores and service center open and succesful, winning dealership battles, cash reserve and demonstration of cash raising ability for GenIII when needed.

So many of the 'Tesla going out of business' and basic survival questions now put to bed. I think we should see a new level of bottom to the stock in the $33 range, up from that $28 level.

 

[zingbow]

Let's see "tesla price" how to go at google trend:
http://www.google.com/trends/explore#q=%22tesla+price%22&cmpt=q

 

[Bardlebee]

I lack any type of good experience in investing. But I have a feeling we will see a quick rebound from this drop...

 

[vfx]

I like how he calls out J Peterson.

Getting Tesla Wrong - TheStreet

 

[agelston]

Does anyone actually know how much they get in EV credits per model S?

The only numbers I could find were from 2010. And I don't think they can be right. Cause if they are then EV credits total about 15k/car.

​Edit:Actually might have found it

Getting 6k/car from their 2011 10-k numbers. Which is alot

 

[JRP3]

I like how he calls out J Peterson.

Getting Tesla Wrong - TheStreet

Mr P made an appearance in the comment section.

 

[smorgasbord]

I like how he calls out J Peterson.

Getting Tesla Wrong - TheStreet

Yeah, but this line is incorrect:

There are millions of people around the world who are on their third or fourth Mercedes S550 or BMW 750

Go visit Wikipedia. The TOTAL number of 7-series vehicles made from 1997 to 2010 is under 700K. Even adding for 2011 and 2012 it's still under 800K.


And that's before the silly 100% market share thing in Silicon Valley.

And the car isn't carbon fiber.

 

[JRP3]

A reasonable Seeking Alpha piece from a former skeptic:http://seekingalpha.com/article/1216601-it-will-be-bullish-if-tesla-meets-its-goals

 

[SteveG3]

I did notice this. and as to JPs comment, I also noticed JP now can see a scenario of Tesla becoming a viable business enterprise. Not that I expect him to stop trying to Broder public opinion of Tesla any time soon.

JPs comment:

"Tesla finished the year with an estimated working capital deficit of $14 million, just as I predicted it would. This morning JP Morgan forecast a year-end working capital deficit of $160 million. I continue to believe another couple hundred million of new financing is essential for Tesla to become a viable business enterprise."

I like how he calls out J Peterson.

Getting Tesla Wrong - TheStreet

 

[VoltAir]

ZEV credits

Hello. I’ve been lurking here as a TSLA trader for more thana year.
I am a Volt owner, but not a Tesla owner/reservation holder. My work experience is around complex energy systems in design, operations and management, which has led me to concentrate my options trading efforts around energy and related fields. It’s been a little more fruitful than more passive index investing, though hardly exceptional. Some of the pragmatic thinking on this thread has been really helpful, so thanks for all the upside you’ve given me.
If you wouldn’t mind indulging me, I will have a question from time to time. You won’t see my posts outside of investor issues since as a non-owner/res holder I can’t justify participation in enthusiast topics. Expect me to post at a low frequency, without an argumentative stance.

_________________________________

My current question is around ZEV credits, the discussion of which took front and center for a few minutes during the call since they accounted for a material fraction of the Gross Profit in Q4. I know in the past Tesla has made significant gains, to the tune of $13M or so. Here are my questions:
(1) In the absence of the upcoming 10-K, any guesses as to the Q4 2012 revenue/margin numbers from credits?
(2) Are they entered as “Automotive Sales” or “Development Sales”?
(3) CEO and CFO both waved off discussion on the topic, and the 8-K indicated there wasn’t much to expect in the future. How much would you expect here as potential upside over the next few years?
(4) Any ideas as to the current market price of a credit?Also, does the Model S count as a Type III (4 credits)?
(5) Who are the potential credit purchasers?
(6) Does the potential value of credits show up anywhere on the balance sheet? (I did a doc search in the last four filings, and “ZEV credits”only appears in the Risk section.)
Many thanks to all here and good luck in your trades.

 

[anticitizen13.7]

That's fine Todd, but I am single, and a lot closer to retirement than you probably are (I am 53), so each person has to do what's best for them.
I have tried buying on downdrafts before, and "averaging down", usually doesn't work well for me. If TSLA makes another move to the downside, I am out.
P.S. Good choice of color (I also have 85KW, Dolphin Gray, 19" wheels, grey leather, pano, tech, sound studio, air, and dual chargers)

I think people may be expecting too much stability from the share price of a company that is still relatively new. Investment in Tesla should be done on a 10+ year horizon, because there are inevitably going to be a lot of ups and downs.

Does anyone remember what AAPL was like in the 1980's?

I absolutely agree. I honestly don't see how the greater than expected loss from the quarter is a sellable negative for any informed investor. This selling is likely panic by retail, and I'd consider the churning to be a good sign. 9x volume with a base at $35 is a good sign. (I know very little about technical analysis and could very easily be mistaken). If you look at the block trades from today, only retail was selling. Institutional buyers were jumping on board 20.2million in block buys. Less than 400k in block sells.

I think that a significant number of speculators were hoping for a stellar Q4 report, which would pump up the stock as people rushed to buy. When the #'s didn't meet "analyst" expectations, the speculators sold in droves because they knew there would be no post-report run up of share price. This is exactly the kind of "market noise" that serious investors should ignore, because it doesn't reflect much if any reality about the company. Investors should ignore speculators.

The Q4 report showed some good and important things: establishment of stable production rate that meets goals, lowering of costs going forward as the supply chain gets more efficient, and a customer base that is growing. This is not as exciting as $x.yz earnings per share, but it is the most important for investors. This is a company that now has a very high chance of success, because the building blocks of success are in place. A year ago, there were still serious questions about whether Tesla could establish a mass production line and deliver production mass production vehicles to paying customers. I don't think there's any question left that they've done it.

 

[aronth5]

Interesting perspective on why Tesla is not like GM/Ford etc.

Anton Wahlman from the street. http://www.thestreet.com/_nasdaq/story/11847967/1/heres-the-only-company-more-misunderstood-than-apple.html?&cm_ven=nasdaq&cm_cat=free&cm_ite=na
"The only thing that matters in this report is that they have accelerated profitability by 9 months (4Q13 to 1Q13) while maintaining the 2013 sales goal of 20,000 cars. This is a clear incremental positive.

Everything else is noise ..."

 

[derekt75]

I'm still interested in how service contracts affect things.

When Tesla asks us to pay for our service contracts, they'll probably receive some $10 million in cash over a couple months.
I imagine that on a GAAP basis, this somehow needs to be amortized over the life of the service contract, but on a non-GAAP basis, they suddenly have $10m more in the bank, right?
$10m isn't a huge %age of their revenue, but it could be the difference between a positive cash flow and a negative cash flow.

Anyone know for real how that works?

When are we going to need to pay, anyway?