2014 1 QTR predictions/results

[Chickenlittle]

So working off of hummingbird’s notes, Q4’s guidance, Barclays, DaveT’s productions estimates, and my fairly limited time browsing these forums.

(hummingbird's notes)
2013 Q1 produced 5000, guided to sell 4500, sold 4900 (an 8.88% beat)
2013 Q2 produced 5500, guided to sell 4500, sold 5150 (a 14.444% beat)
2013 Q3 produced 6600, guided to sell 5000, sold 5500 (a 10% beat)
2013 Q4 produced 6587, guided to sell 6000, sold 6892 (a 14.8667 beat)
With an average of a 12.05% beat in sold cars

I’m concluding three different scenarios. A worst, conservative, and best case. These will include sales #’s, Gigafactory events, possible Model X suprises, and expenditures. I will ignore guidance for now, I don’t really know how to guestimate their production and sales I’ll leave that up to you guys. I will assume that we are entering the report with todays 207$ price.

Worst Case

#’s
2014 Q1 produces 7400, guided to sells 6400, sells ~6400.
This is assuming that TSLA doesn’t keep with its previous history of having a ~12% beat in in sold vs. guidance.

Gigafactory
Locations haven’t been decided, partner hasn’t been decided, we are told they are still working everything out.

Model X
No new information

Expenditures
The 15% was a lowball, R&D expenses increase because of Model X delays, SG & A spending increases as expected because of SC’s.

Thoughts
So where does this put us on the morning of 5/9/2014? Tesla has been hurting, already having a serious drop leaving the price at the time of this post $207.73. A failure to match a historical beat, no new information with the Gigafactory or Model X and lower margins this could be a painful drop. Sub 200 surely but how far?

Likelihood
This, I doubt, is a very likely scenario. TM has been pretty consistent in lowballing and beating expectations. But there is a first for everything.
We are also talking about a spectrum of possibilities here. What if we still get around 6900 sold with no new information on the Gigafactory, or model X, and we have higher than projected expenditures?

Conservative Case

#’s
2014 Q1 produces 7400-7600, guided to sell 6400, sells ~6600-6800
This is meeting Barclays + a little bit more, not quite the 12% historical beat , but still above guidance.

Gigafactory
Locations have been decided, but no partner announcement.

Model X
Everything is on track, no delays.

Expenditures
The 15% is still a lowball, but other expenditures are within projected ranges.

Thoughts
Pain still. I would still consider this a disappointment, I don’t know about you guys but no matter what these #'s will be spun as evidence of slower demand or a plateau. Sub 200 still maybe in the 170 – 180$ range for the short term. Depending on what is revealed with the Model X and the Gigafactory we will keep our heads in the 190$’s

Likelihood
I’m really placing a hedge for this possibility. It’s not outlandish, and Barclays is banking on the numbers. However it seems like a strong possibility that the Gigafactory scenario will occur. We don’t have any definitive evidence that Panasonic is ready yet, or anyone else.

Best Case

#’s
2014 Q1 produces 7500-7800, guided to sell 6400, sells ~7000-7300
Based on DaveT’s two estimates. Hits the 12% beat perhaps 14%. 15% and TM would have to say something right? This question still hasn't been answered.

Giga
Locations picked, ground breaking planned, partnership is concrete.

Model X
Everything on track, perhaps some goals accomplished earlier than expected

Expenditures
15% was accurate, R&D expenditures are larger than Q4 but not surprisingly so, same with SG&A.

Thoughts
Everything is really as expected and more. Perhaps a similar situation to Q2 2013 depending on the reaction to everything else? Likely more depressed considering the current downtrend. 220-250 maybe? 260-290 in the wildest case?

Likelihood
This is where my bet will go. DaveT’s estimates are reasonable on sold cars and are in line with TM history. A 15-20% beat is unlikely. I doubt we will be ahead of the game with the model X, but I trust Elon with the Gigafactory even though I will still hedge against it. I think expenditures will be higher than expected but not by a surprising amount, based on Q4 data.

Conclusion

While I'll be placing my bet for TM to have a good earnings I still see a lot more room to fall with the conservative and worst case scenarios. A mediocre report is a bad report for Tesla, and we've been promised a mediocre quarter. I would like for people to chip in on what guidance could do in each case. I do expect guidance to be lukewarm though, as production was set to really increase in the second half of this year. I will likely put a larger hedge than I have with other earnings reports.

You mention amount produced and sold first qtr. these are not things they will report based prior reports. They only report cars DELIVERED they do not include cars sold but not in customers hands nor cars produced and in transit or to be used as demos or loaners. They will guide for 2nd qtr though

 

[AlMc]

Cwin: Thanks for getting the predictions restarted. I think TM will use up their ZEV credits to offset the 'Battery shield' and make up for some of the change from 'all cars produced delivered' to 'cars in the pipeline' quarter to quarter philosophy. Also, while the weather may have delayed some SC openings, I believe TM may have slowed them purposely to save $ for the change in production/delivered philosophy having less impact on the 'bottom line' in Q1. The weather, and increased delivery numbers in Q2 should see a big increase in their numbers.

 

[aznt1217]

I'm seriously hoping things are priced in already because the short interest is so high. I don't really expect a beat... As much as I hate to say it. I think we'll see a Q3 scenario, in terms of deliveries and holding the guidance flat, but our saving grace here would be Model X progress and Giga factory progress.

 

[Jack6591]

I'm seriously hoping things are priced in already because the short interest is so high. I don't really expect a beat... As much as I hate to say it. I think we'll see a Q3 scenario, in terms of deliveries and holding the guidance flat, but our saving grace here would be Model X progress and Giga factory progress.

China is the 800 pound Gorilla in the Q1 CC room.

 

[techmaven]

I don't see this data posted:

Tesla Model S Sales Figures - GOOD CAR BAD CAR

I don't believe these numbers, which are apparently sourced from Automotive News. It basically says more than 6016 Model S sold in the U.S. in Q1, 2014. That is really unlikely IMHO. If you add that to the known European delivery number of 3,047 from:

EV Sales: Europe March 2014 (Updated)

You get over 9,000 cars. There's no way. EV Sales Blog estimate is 6,907:

EV Sales: World Top 10 March 2014

 

[AlMc]

I don't see this data posted:

Tesla Model S Sales Figures - GOOD CAR BAD CAR This appears to be an estimate posted in August 2013 by the author.

I don't believe these numbers, which are apparently sourced from Automotive News. It basically says more than 6016 Model S sold in the U.S. in Q1, 2014. That is really unlikely IMHO. If you add that to the known European delivery number of 3,047 from:

EV Sales: Europe March 2014 (Updated)

You get over 9,000 cars. There's no way. EV Sales Blog estimate is 6,907:

EV Sales: World Top 10 March 2014

While well intended I don't believe this...but hope springs eternal

 

[techmaven]

While well intended I don't believe this...but hope springs eternal

I believe he updates this and it doesn't update the blog post date. The Canadian Jan and Feb 2014 numbers are correct against his source:

Google Sheets - create and edit spreadsheets online, for free.

 

[uselesslogin]

Forget deliveries though. Let's assume they delivered 6,600 cars this quarter. Lets assume they hit 700 cars/week at the end of the quarter and will produce 8,000 this quarter. Let's assume the 1,000 in the pipeline from Q1 get to their destinations and 8,000 cars are delivered in Q2. Now I have seen VIN assignment rates tick up and the article stating Tesla is making 1,000 cars/month. That means for Q3/4 delivery of 26,000 cars should be easy. So that means 26,000+8,000+6,600=40,600. If the production ramp has already happened or is happening then there will be no reason not to raise the guidance because they will easily beat 40,000 since I think that the 1,000 cars/week is a low ball and that 1,100+ cars/week is possible. So there is a possibility that the guidance will be raised on an early ramp up. This is what makes me think it will be a good report. And if this one isn't I'm very certain things will be moving by the Q2 report.

 

[c041v]

So there is a possibility that the guidance will be raised on an early ramp up. This is what makes me think it will be a good report. And if this one isn't I'm very certain things will be moving by the Q2 report.

So here's a thought: If things are going well now (1,000 cars/month) and there was no major issue (Beyond cell supply speculation) why would Tesla have waited a full quarter to increase guidance if they were confident they could easily beat 35,000 back in January? I'm no expert on the subject, but I don't understand why they would keep the "real" guidance number in reserve and slowly work towards it each quarter as the window to hit that number diminishes.

Seems dangerous for a young company still in the early phases of a true ramp-up to be moving the goal posts as they are headed for the end zone.

 

[uselesslogin]

So here's a thought: If things are going well now (1,000 cars/month) and there was no major issue (Beyond cell supply speculation) why would Tesla have waited a full quarter to increase guidance if they were confident they could easily beat 35,000 back in January? I'm no expert on the subject, but I don't understand why they would keep the "real" guidance number in reserve and slowly work towards it each quarter.

OK, my thinking is that in February they either didn't know if there wouldn't be additional delays for the ramp up or at least saw the potential for such delays and did not want to guide higher until they knew exactly when it would be. If they thought it would be somewhere between May and August that is a big time window. If it doesn't happen until August they could still hit 35,000 easily. Now that it happened (maybe) in May they know they have 4 more months of high production levels than they had planned. Maybe they still wanted to account for possible issues with the second production line which is also needed to exceed 700 cars/week. So my theory is they have less of these concerns and can now raise guidance cautiously. The biggest thing they don't want to do is produce less than is guided and the truth is you don't know in February exactly how many cars you can produce when there are a lot of moving parts.

 

[hummingbird]

Also keep this in mind. MS Adam Jonas warns of negative NA YoY headline numbers.

Tesla Motors Inc Looks Solid Despite Negative Morgan Stanley Report

(DaveT: if you have access to this MS note perhaps you could give us a summary)

 

[ItsNotAboutTheMoney]

So here's a thought: If things are going well now (1,000 cars/month) and there was no major issue (Beyond cell supply speculation) why would Tesla have waited a full quarter to increase guidance if they were confident they could easily beat 35,000 back in January? I'm no expert on the subject, but I don't understand why they would keep the "real" guidance number in reserve and slowly work towards it each quarter as the window to hit that number diminishes.

Seems dangerous for a young company still in the early phases of a true ramp-up to be moving the goal posts as they are headed for the end zone.

I think you're reading too much into the "1,000 cars" reports. In order to ramp up, Tesla has to get its ducks in a row and that means making sure all of their suppliers can deliver necessary volume. Panasonic's cells will be the last duck.

I think part of the reason for pushing at the end of a quarter is that they have a week off at the beginning of each quarter. So they can use end of quarter to push the business and set aims for next quarter, give production a break and make any adjustments and then get going again next quarter. If they keep taking that approach the question should always be "What's the beat going to be this time?"

 

[techmaven]

Also keep this in mind. MS Adam Jonas warns of negative NA YoY headline numbers.

Tesla Motors Inc Looks Solid Despite Negative Morgan Stanley Report

(DaveT: if you have access to this MS note perhaps you could give us a summary)

Actually, the article is providing an unnecessarily negative slant on the Adam Jonas's report which basically dismisses the U.S. Tesla S deliveries decline bear theory as needlessly pessimistic. Using a subhead like, "Tesla likely to miss vehicle shipments in May" is also unnecessarily inflammatory. As in delivering a lot to Europe is likely to lower U.S. delivery numbers, which is expected and not a negative. Which is why the Automotive News data is so out of place, but also very strange - it matches the Autodata report of 1,600 in March, and if those numbers are true, then the negative slant of the Autodata information of 1,600 as a decline in March from January and February would be true. But with such massive known Europe numbers, delivering more 1,600 cars in Jan and Feb seems unlikely. A lot of confusion - does anyone have better sources for U.S. DMV registration data? I was going to subscribe to Automotive News or Wards Auto, but I don't know if their data is any good.

 

[uselesslogin]

I think you're reading too much into the "1,000 cars" reports. In order to ramp up, Tesla has to get its ducks in a row and that means making sure all of their suppliers can deliver necessary volume, which will happen ahead of the Panasonic ramp.

Yes, to be honest the report doesn't convince me as adding that report to the increase in VIN assignment rates in April:
Model S Order Delivery Tracker - Q1 2014

We all know making conclusions from VINs could be misleading but it is a possibility is all I am saying.

- - - Updated - - -

Also keep this in mind. MS Adam Jonas warns of negative NA YoY headline numbers.

Tesla Motors Inc Looks Solid Despite Negative Morgan Stanley Report

(DaveT: if you have access to this MS note perhaps you could give us a summary)

Which, by the way, is a reason I am bullish this time. In the fall the sentiment was that the earnings report would have a high number of deliveries with the uptick in VIN assignments. This was a highly published thing. Then they came out and reported a low number of deliveries and things went south. Now the expectation seems so low to me that it would be hard not to beat them. Though I will admit I have no options expiring until September because I still think there is a chance things won't go well this time around.

 

[AlMc]

Yes, to be honest the report doesn't convince me as adding that report to the increase in VIN assignment rates in April:
Model S Order Delivery Tracker - Q1 2014

We all know making conclusions from VINs could be misleading but it is a possibility is all I am saying.

- - - Updated - - -



Which, by the way, is a reason I am bullish this time. In the fall the sentiment was that the earnings report would have a high number of deliveries with the uptick in VIN assignments. This was a highly published thing. Then they came out and reported a low number of deliveries and things went south. Now the expectation seem so low to me that it would be hard not to beat the expectations of the market on this release.

Agree it is hard to get a handle on 'deliveries' when we do not even know production numbers and how many cars are 'in transit'. I will never use VIN assignments to try to predict either demand, production or deliveries again. Lesson learned: Q3 2013

****Did anyone ever get an idea of ZEV credits TM has in their pocket? (I got no response when I asked Inverstor Relations' that question AND does anyone know if there is a 'legal' requirement to anounce in advance a 'beat' on guidance, and if so, what the % of beat that is to trigger a pre announcement?****

 

[hummingbird]

Actually, the article is providing an unnecessarily negative slant on the Adam Jonas's report which basically dismisses the U.S. Tesla S deliveries decline bear theory as needlessly pessimistic. Using a subhead like, "Tesla likely to miss vehicle shipments in May" is also unnecessarily inflammatory. As in delivering a lot to Europe is likely to lower U.S. delivery numbers, which is expected and not a negative. Which is why the Automotive News data is so out of place, but also very strange - it matches the Autodata report of 1,600 in March, and if those numbers are true, then the negative slant of the Autodata information of 1,600 as a decline in March from January and February would be true. But with such massive known Europe numbers, delivering more 1,600 cars in Jan and Feb seems unlikely. A lot of confusion - does anyone have better sources for U.S. DMV registration data? I was going to subscribe to Automotive News or Wards Auto, but I don't know if their data is any good.

Forget the article. Read what Jonas says only. Jonas's point was to warn about headline news after the ER, that NA YoY numbers will be down. Q1 2013 Tesla sold 4900 cars in NA. He notes that his clients have been asking about it.

 

[techmaven]

Forget the article. Read what Jonas says only. Jonas's point was to warn about headline news after the ER, that NA YoY numbers will be down. Q1 2013 Tesla sold 4900 cars in NA. He notes that his clients have been asking about it.

If Tesla delivered 4900 cars in NA to match Q1 2013, then the total would be at least 7,947 vehicles delivered which is way over the 6,400 estimate. Therefore, any estimate of deliveries under 7,947 cars for Q1 2014 would mean a drop in deliveries to North America YoY. Even an enthusiastic 7,600 Q1 '14 delivery number would mean a drop in YoY NA deliveries. Therefore, bears could seize upon that number, which is nonsense.

One of the common bear theories on places like Seeking Alpha is that NA demand has plummeted because deliveries to NA have collapsed. I still have to fight to state that Tesla is production constrained. But with so many publications espousing this theory, it is natural that clients ask about it.

 

[uselesslogin]

If Tesla delivered 4900 cars in NA to match Q1 2013, then the total would be at least 7,947 vehicles delivered which is way over the 6,400 estimate. Therefore, any estimate of deliveries under 7,947 cars for Q1 2014 would mean a drop in deliveries to North America YoY. Even an enthusiastic 7,600 Q1 '14 delivery number would mean a drop in YoY NA deliveries. Therefore, bears could seize upon that number, which is nonsense.

One of the common bear theories on places like Seeking Alpha is that NA demand has plummeted because deliveries to NA have collapsed. I still have to fight to state that Tesla is production constrained. But with so many publications espousing this theory, it is natural that clients ask about it.

And on my side I feel like this point has been brought up by the bears so many time it won't be new news. Anyone who thinks this is a problem has already sold.

 

[Cwin]

You didn't mention to expenditure increase and hit on margin due to tank mode.

Cwin: Thanks for getting the predictions restarted. I think TM will use up their ZEV credits to offset the 'Battery shield' and make up for some of the change from 'all cars produced delivered' to 'cars in the pipeline' quarter to quarter philosophy. Also, while the weather may have delayed some SC openings, I believe TM may have slowed them purposely to save $ for the change in production/delivered philosophy having less impact on the 'bottom line' in Q1. The weather, and increased delivery numbers in Q2 should see a big increase in their numbers.

I agree with this. The ZEV credits are oh **** money and , baring any emergency, bling money to add to revenue when needed. We don't have a source for ZEV credits for this quarter, but we do know that California is almost halving ZEV credits later this year correct?

Q1 seems like the most appropriate quarter to use the credits, offsetting larger expenditures and mediocre deliveries. If we can get a sense of how many credits TM has, it would be a great help to predict how TM will mitigate this quarter.

You mention amount produced and sold first qtr. these are not things they will report based prior reports. They only report cars DELIVERED they do not include cars sold but not in customers hands nor cars produced and in transit or to be used as demos or loaners. They will guide for 2nd qtr though

My apologies. It was late and I was working off of hummingbird's vocab rather than the Q4 earnings report. I will edit my post.

Forget deliveries though. Let's assume they delivered 6,600 cars this quarter. Lets assume they hit 700 cars/week at the end of the quarter and will produce 8,000 this quarter. Let's assume the 1,000 in the pipeline from Q1 get to their destinations and 8,000 cars are delivered in Q2. Now I have seen VIN assignment rates tick up and the article stating Tesla is making 1,000 cars/month. That means for Q3/4 delivery of 26,000 cars should be easy. So that means 26,000+8,000+6,600=40,600. If the production ramp has already happened or is happening then there will be no reason not to raise the guidance because they will easily beat 40,000 since I think that the 1,000 cars/week is a low ball and that 1,100+ cars/week is possible. So there is a possibility that the guidance will be raised on an early ramp up. This is what makes me think it will be a good report. And if this one isn't I'm very certain things will be moving by the Q2 report.

My understanding of the argument against the 1000/wk number is that it would require a second production line to be up and running. If that were so we would have already heard something about this correct?

Not only that but TM would have to double its currently limited battery supply as well. Where is the evidence to support this?

It also goes against our anecdotal evidence of the 600/wk-700/wk datapoints from the mouths of TM themselves. If they were at 1000/wk surely they would tell us.

The 7900 cars delivered is an extraordinary claim, that doesn't match TM's ER history. TM promises a mediocre quarter, but 7900 cars delivered with 6400 guided would be the best ER we've had ever.

 

[austinEV]

So here's a thought: If things are going well now (1,000 cars/month) and there was no major issue (Beyond cell supply speculation) why would Tesla have waited a full quarter to increase guidance if they were confident they could easily beat 35,000 back in January? I'm no expert on the subject, but I don't understand why they would keep the "real" guidance number in reserve and slowly work towards it each quarter as the window to hit that number diminishes.

Seems dangerous for a young company still in the early phases of a true ramp-up to be moving the goal posts as they are headed for the end zone.

Since this question of pre-warnings keeps coming up: I don't think there are any rules at all for when or whether you warn for positive or negative surprises. Just rules on how you do it, if you choose to do so.

Profit Warning Defination Example | Investing Answers

A company might be motivated to pre-warn for missing guidance to try to soften the blow or reduce potential liabilities. There seems to be even less reason to warn for a positive surprise. I think TM had done so in the past because they were just being tactical. They both preceded secondary stock offerings.