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2014 Q2 Prediction Thread

Discussion in 'TSLA Investor Discussions' started by hershey101, Jun 10, 2014.

  1. hershey101

    hershey101 Member

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    I toured the factory and thought that now would be a good time to start the Q2 predictions thread. I'm not sure why the discussion of production numbers based on tours has been so limited in recent quarters but it seems like Tesla is going to beat its estimates, at least for production, this quarter.
    Without going into the details right now, it seems like they are pumping out 750-800 cars/week. (2 shifts x 80/day x 5 days). Thats 9600 cars assuming 12 weeks in Q2.
    Im traveling right now so I dont have time to crunch the numbers, but can someone figure out what this means for deliveries and EPS (it seems like they are going to continue to fill the pipeline).

    Also, as a side note, this was my first time in the bay area and quite literally every block I saw a Tesla near Mountain View, in about 30 min of driving I saw more than 20 Model S's. Thats amazing!
     
  2. aznt1217

    aznt1217 Active Member

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    We should delete this thread so we get a pop when they beat. lol
     
  3. uselesslogin

    uselesslogin Enthusiast

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    Guidance is 8,500 to 9,000 produced. They plan to deliver 7,500 as they stuff the pipeline further. i would be happy with a beat of 8,000 deliveries and 9,000 produced. There is obviously no reason to think they will miss guidance. At least as far as production goes the previous quarter's shareholder letter seems to offer the best prediction. It is obviously a conservative number and you can expect it to be a little higher. For deliveries I guess they surprised in Q4 but it wasn't on higher production they just delivered all the cars they could.
     
  4. maoing

    maoing Active Member

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    I assume another 1000 cars will be put in the pipe for delivering to China/UK and Hongkong etc. In Q1, TM just barely met the guidance and people will be very disappointed that TM barely met guidance again in Q2. So I think 7500 delivery number is very conservative considering the high production guidance is 9000. I would say 8000 is the "internal" delivery goal for TM as minimum, and the surprise will come from how much TM can beat 9000 production guidance?


     
  5. mershaw2001

    mershaw2001 Member

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    I don't see how you can predict a beat in this situation. It sounds like a beat on production, but it looks like the street only cares about deliveries and you have no way to know if they are stuffing the pipeline to different parts of the world with an extra 500 here or there. It's unpredictable. I know in the past I've been disappointed to find out that tesla addresses these problems upfront and stuffs early (wiser in the long run, bad for short term options)- so they will be just meeting guidance of the current quarter as far as deliveries go but shuttling some extra cars off to different parts of the world will give them a beat in the future quarters one these pipelines are up and running. The beat will occur when those deliveries arrive in a quarter or two.
     
  6. maoing

    maoing Active Member

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    I see your point and you might be right. But 1000 car in pipe is already a big number and we can also extract such from Quarterly guidance.

    Q1 guided 7500 production and 6500 delivery, say put 1000 in pipe
    Q2 guided 8500-9000 production and 7500 delivery, so TM used the low guide of production to minum 1000 in pipe to get 7500 delivery to be safe. Because TM already guided 9000 as high production, I think not only the street but also myself would think it's NOT met if production not touching 9000.



     
  7. 32no

    32no Member

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    #7 32no, Jun 10, 2014
    Last edited: Jun 10, 2014
    Here is what I see happening for Tesla in Q2. My scenarios are Normal (7500 cars-200 cars leased, 25.5% Gross Margin), Good (7800 cars, 26.5% margins), Great (8000 cars, 26.5% margins). All three scenarios use an ASP of $108,000.
    Q2 TSLA.png

    I think that Tesla Investors should all expect the Normal scenario and no more because otherwise the stock will take another dent.

    As for important things that can be said in the letter, Tesla should update news on Model X and Gigafactory for a slight effect on the stock depending on what they say. The most important piece of news will be guidance for Q3, it will have to be above 10,000 deliveries in Q3 in order to move the stock. I doubt that Tesla will update the end of year delivery guidance either due to the fact that there is still uncertainty about ramping up production flawlessly.
     
  8. evme

    evme Member

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    I think the most important thing to look for in Q2 is information about Panasonic's supply. Musk said that he expected to see new production line for Panasonic to start and deliver in Q2. So Q2 should have some info on that hopefully.
     
  9. vgrinshpun

    vgrinshpun Active Member

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    So based on your tour the factory is currently running at 800 cars a week. This confirms my expectation that I posted about a week ago (Short-Term TSLA Price Movements - 2014 - Page 484). It would be wrong, however, to calculate total production in Q2 by multiplying 12x800=9,600 because the factory did not run at 800 during the first several weeks of the quarter.

    The data points:


    • From the Q1, 2014 shareholder letter: "Production is now at almost 700 vehicles per week, up 15% from our weekly production rate at the end of Q4." It is reasonable to assume that this was production rate during the full week preceding the May 7th - the date of the shareholder's letter i.e. week ending May 2nd. Further assuming that factory was shut down first week of April, in the first four weeks of Q2 factory produced 4 x 700 = 2800.
      -
    • On 06/03 Ben Kallo, analyst from Baird indicated that he had meeting with the TM management at the factory "2.5 weeks ago". This means that the meeting was held during the week ending on 05/16. In the video that I linked back at that time Ben Kallo indicated that TM was running "ahead" of their production goals and "we have a quarter lined up very nicely for a solid beat", further saying "I think that deliveries will be very strong for the quarter".
      Based on the above I concluded that TM ramped up production to 800 cars/week starting the week ending May 9, i.e. total production for the last 8 weeks of the quarter will be 8 x 800 = 6400 (Tesla top stock pick for 2014: Analyst)

    This puts total projection for the quarter at 2800 + 6400 = 9200, or 200 cars ahead of the 9,000 upper production goal set in the shareholder's letter.

    Since per the shareholder's letter the deliveries were guided to 7,500 cars, while upper production goal was set to 9,000 cars, there were total of maximum 1,500 cars slated for filling up the "pipe". Based on this we can expect about 7,700 deliveries in Q2, or at least 200 cars more than guidance. If TM decides for some reason reduce the 1,500 cars slated for the "pipe" the deliveries could be accordingly higher than 7,700 cars.

    It should be noted that 400 cars/shift/week seem to be the maximum production rate of the current final assembly line, so the production rate of higher than 800 cars/week is not likely, unless factory is running during the weekends.

    Based on the above we can take a swag at projected EPS. According to the shareholder's letter: " Despite the start of leasing vehicles, investments in R&D and geographic expansion, we expect to be marginally profitable in Q2 on a non- GAAP basis. Based on our current stock price, the diluted shares outstanding are projected to be about 142 to 144 million in Q2." Assuming that delivering projected 7,500 yields break-even point, the revenue from extra 200 delivered cars will constitute profit. Further assuming ASP of $100K, and 25.5% margin (slightly higher than 25.4 reported in Q1): 200 x 100,000 x 0.255 = $5.1M. Dividing by the projected outstanding shares: EPS = 5.1 / 144 = $.035
     
  10. AlMc

    AlMc 'Senior Moments' member

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    VG: Nice analysis. I think TM will 'sandbag' Q2 2014 to a certain extent. I agree with your numbers. Looking for a good beat on production and a minimal beat on deliveries. They will use some of the built up pipeline to help meet delivery goals in early Q3 when the factory will not be adding product for two weeks. I think they will use their ZEV credits in Q2 to make up for pipeline fill and minimal beat. As much as it will hurt my September options I do not see a big price movement. (aside: I should have read the tea leaves better and saved money to buy mid to late November options!)

    Q3 2014 is going to VERY interesting. Pipeline may be near full so deliveries will continue at the same (or better?) rate even though the factory has a total of 10 days down minimum in early July. Once the factory reopens then the two production lines will refill the pipeline. Panasonic will start delivering more batteries. We could see a real blow out quarter. In addition the end of Q3 may see the 'X reveal' event and maybe some mention of the anticipated AWD S and firmware 6.0 with some much anticipated features.
     
  11. DaveT

    DaveT Searcher of green pastures

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    Are they actually reaching 80/shift (160/day) right now or is that more of a goal?
     
  12. vgrinshpun

    vgrinshpun Active Member

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    I exhibited the same foresight as you did, and as a result holding quite a few badly bleeding September $225 and some $215 calls. In the end, I somehow feel that we will be OK with these September calls... :smile:
     
  13. uselesslogin

    uselesslogin Enthusiast

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    OK since ZEV credits came up again. Which carmaker is short of compliance vehicles this year? When Tesla repeatedly says not to expect ZEV income why do we keep hoping for it every quarter?
     
  14. AlMc

    AlMc 'Senior Moments' member

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    Obviously I don't know the answer to this question. My opinion is that TM will be able to sell the credits whenever they wish but at what price and when? Price ?? Timing: I think they use them when they have a quarter where revenue is impaired. Dory of like insurance. If execution of second production line, intriduction of X and whatever they will call the E is probable through management's crystal ball I would use then now...Q2 as the may have filled the pipeline and could use to book revenue from them now as deliveries may be at or modest beat of quidance

    excusr typos...at a CE conference tapping away on my phone!
     
  15. eepic

    eepic Member

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    I think your analysis would be an optimistic case and caution that if any one of several key assumptions you used do not hold true, the error margin becomes larger than the delta from official guidance.

    Particularly:
    - The estimation of Ben Kallo's qualitative statement equating to a 800/week rate. A ±50 error margin from that for a few weeks already negates the entire delivery beat you are suggesting.
    - Holding 1500 for the Q3 pipe. There is no basis for this assumption other than using the production/delivery difference in the shareholder letter. You're just picking and choosing specific numbers with no justification.. there's an equal case to be made TM may hold more in the pipe to mitigate production line reconfiguration delay risks (and take the beat in Q3 if there is no problem).
    - I wish we would stop perpetuating the 400/shift/week as some factual number. The production patterns and labour input is still evolving, so this could be way off. Analysis using this specific number for Q1 turned out to be quite inaccurate and led to a lot of disappointment.

    I'm cautiously optimistic about the quarter and it's certainly possible your numbers may turn out to be close, but let's not pass on all these assumptions as facts prematurely... there's some broken telephone that then propagates to other parts of the forums and then gets cited by media.
     
  16. hershey101

    hershey101 Member

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    Vgrinshpun: According to the guys at factory, they are going to start bringing the second production line online "soon in preperation of the Model X". Does that mean that it will do both X/S in the beginning? Otherwise, I don't see how Tesla can do more than Model Ss 800/week for the latter half of 2014. They definitely aren't running the lines during the weekends right now, only the giant machine that takes sheets of aluminum and imprints them runs 6 days a week, but they have odd hours so it ends up being roughly 40hr work weeks.

    - - - Updated - - -

    It seems like they are achieving the goal.
     
  17. vgrinshpun

    vgrinshpun Active Member

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    Please listen to Ben Kallo's interview one more time - it is him, not me stated: "I think that deliveries will be very strong for the quarter". Since this statement was made after the visit to the factory, you should not label this as an "assumption". It is more or less a fact. There is no way to TM to beat their 7,000 projection unless they ramped up to 800 carsduring the week of My 9th.

    No basis? Please re-read shareholder's letter: "Planned production is again higher than deliveries because of the growing pipeline of intransit cars to Asia and Europe that have been built-toorder for customers."

    Just read carefully posts by hershey101 in this thread...


    I understand your caution and might I add palpable fear that stock will not move in the direction and with speed you would like, but please refrain from lecturing as it is adding very little value to the discussion.
     
  18. vgrinshpun

    vgrinshpun Active Member

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    My personal believe (speculation really) is that they will switch MS production to a second new line that is capable to produce up to 1200 cars/week after the July break, and in time will rump up to a maximum rate. They will also start upgrading the original assembly line so that maximum rate can be increased simailarly to the new line, to 1200 cars/week. I believe that this need to be preceded by moving certain auxiliary processes to Lathrop facility to free up the space.
     
  19. eepic

    eepic Member

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    #19 eepic, Jun 11, 2014
    Last edited: Jun 12, 2014
    What if they shortened the pipeline and delivered faster? So say 7200 delivered with 1300 in-transit (vs. 7200 and 1500). I'm not saying this is the case, but just provided a possible case that disproves your "fact".

    With regards to 1500 in the pipeline, I think you're misunderstanding my point. My point is that if you're going to discard the 7500 guidance number in the very same shareholder letter, then you can't go assuming the 1500 in-transit number as a hard fact for your new estimate.

    Right, and hershey101 uses 750-800/week as an estimate, for example. You take the 800/week, divide by 2 and drive on from there. A 50/week margin of error on your estimation over the quarter is 600 units, already outsizing your prediction on the beat.

    Don't get me wrong, I qualitatively agree with your analysis and I actually believe there's a chance the numbers could be higher. What I'm saying is the degree of certainty you are putting behind some of the specific numerical assumptions is unjustified. And I disagree that I'm not adding value, I think it's important for the TMC community to peer review each other's numbers and facts. I'm sure other readers who aren't following the situation as closely would appreciate someone pointing out when things may be inaccurate.
     
  20. 32no

    32no Member

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    Ben Kallo stated that tesla is on track for a "solid beat" in this quarter. The shareholder letter guided for 8500-9000 produced, and the shareholder letter also stated that the production was almost 700 cars per week. The shareholder letter was released in the 5th week of this quarter. That means that 3500 cars were produced during those first weeks. That leaves 7 weeks and at least 5500 to be produced in order to beat guidance, which is 785 cars per week. In order to actually beat guidance, Tesla needs to be at 800 cars per week.
     

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