2017 Investor Roundtable:General Discussion

[luvb2b]

i'm curious if anyone has thought about how much profit solarcity might contribute?
in solarcity's 10q for 9/30/2016 they made ~$50m in net profit for shareholders but the 9 month total was ~25m
the solarcity 10k shows full year 2016 net income at ~239m, meaning q4 2016 was a 265m profit. that's huge!
if tesla can pick up the average between the q3 2016 and q4 2016 result it would mean around $150m in added profit.
but they've been swearing up and down they are making solarcity more efficient, reducing costs etc.

has anyone worked out an expectation for solarcity contribution to tesla's bottom line this quarter? that $150m would be almost $1 per share and go a long way towards helping my idea of gaap profitability this quarter.

 

[jhm]

A very large amount of my PhD-era classwork...discussions....bull jams (but never research!) centered around both a carbon tax AND a value-added tax; there never was enough in the way of counter-arguments to dissuade me from their efficacy.

That, however, was in the ethereal ideal of the ideas. There always appeared to be hard-shelled gremlins appearing in the details; the watering-hole around which such nasties tended to congregate were, in the case of a carbon tax, determining the appropriate pricing of a desequestered quantum of carbon, and in the case of a VAT, (1) how the lesser taxing authorities - states, counties and municipalities - would react to the relegation of their tax collecting to the federal government, and (2) how to keep such a VAT from not becoming yet one more layer of tax.

These are monstrous blocks to overcome; regardless, I both am ever-hopeful of serious discussion and deliberation of these concepts occurring at the highest levels in D.C., and am beside myself with satisfaction that Mr Musk shares my interest and sentiments.

How about a simple disposal fee. For every tonne extracted, you pay the cost of sequestering a tonne back below. This creates a competitive market for CCS, while linking that cost back to economic activity lead to emissions in the first place.

 

[FredTMC]

Nice to finally see a close above $300!

It's been a long slog since the prior ATH at 291. Over three years.

Congrats to all The Longs!

Thrilled we finally busted thru.

MX production delays was a real downer.

Hopefully Musk and team learned some valuable lessons for Model 3 production. Certainly seems that way

 

[Noble Ninja]

Perhaps this is the start of him trying to erase his TSLA history to avoid looking like such a fool.

The Internet remembers.

You can take screenshots before he deletes stuff and dedicate a new blog website to showing evidence of his foolishness ... or just link to his Twitter account, which basically does the same thing.

 

[jhm]

i'm curious if anyone has thought about how much profit solarcity might contribute?
in solarcity's 10q for 9/30/2016 they made ~$50m in net profit for shareholders but the 9 month total was ~25m
the solarcity 10k shows full year 2016 net income at ~239m, meaning q4 2016 was a 265m profit. that's huge!
if tesla can pick up the average between the q3 2016 and q4 2016 result it would mean around $150m in added profit.
but they've been swearing up and down they are making solarcity more efficient, reducing costs etc.

has anyone worked out an expectation for solarcity contribution to tesla's bottom line this quarter? that $150m would be almost $1 per share and go a long way towards helping my idea of gaap profitability this quarter.

One thing to keep in mind about SolarCity revenue is that it is seasonal. Much of the revenue physically depends on the amount of sunlight each quarter. So Q2 and Q3 are higher revenue than Q1 and the preceding Q4. There is also secular growth y/y as new systems are deployed, but the seasonality is pronounced. So I would not expect anything big in Q1, but Q2 could be "surprising" to a market that has difficulty understanding how the seasons work.

 

[luvb2b]

thanks. but wouldn't q4 revenue be equally bad? it's not so much the revenue side that interests me as much as the large bottom line profit. please look at those links and see if you can help me understand how those profits are coming about, and if they will accrue to tesla shareholders. thanks.

One think to keep in mind about SolarCity revenue is that it is seasonal. Much of the revenue physically depends on the amount of sunlight each quarter. So Q2 and Q3 are higher revenue than Q1 and the preceding Q4. There is also secular growth y/y as new systems are deployed, but the seasonality is pronounced. So I would not expect anything big in Q1, but Q2 could be "surprising" to a market that has difficulty understanding how the seasons work.

 

[Fallenone]

thanks. but wouldn't q4 revenue be equally bad? it's not so much the revenue side that interests me as much as the large bottom line profit. please look at those links and see if you can help me understand how those profits are coming about, and if they will accrue to tesla shareholders. thanks.

SCTY did start laying off people in Q4 so would reduce OpEx. Also, I guess (but not sure), that part of their RND also is taken up by TSLA, which also would reduce OpEx.

 

[Bgarret]

i'm curious if anyone has thought about how much profit solarcity might contribute?
in solarcity's 10q for 9/30/2016 they made ~$50m in net profit for shareholders but the 9 month total was ~25m
the solarcity 10k shows full year 2016 net income at ~239m, meaning q4 2016 was a 265m profit. that's huge!
if tesla can pick up the average between the q3 2016 and q4 2016 result it would mean around $150m in added profit.
but they've been swearing up and down they are making solarcity more efficient, reducing costs etc.

has anyone worked out an expectation for solarcity contribution to tesla's bottom line this quarter? that $150m would be almost $1 per share and go a long way towards helping my idea of gaap profitability this quarter.

I'm confident there are others here that are more capable of answering this in greater depth, but here's a shot:

The outsized ($150 million) in profit was from the one-time sale of bundled solar leases in Q4 2016 (Tesla’s SolarCity sells $241 million equity in its solar portfolio). There may be more of these in the future, but there was no similar sale for Q1 2017.

That said - and re-iterating Fallen's point from above - Tesla has reduced body count and switched from more long-term leases(that could then be bundled, monetized/sold, or kept on the books for long-term income) to more sales/financed solar installations for which they receive immediate rather than deferred payment. They are also moving into new territory - Florida, which could prove lucrative. The sale of the leases may have just been a gap fill until they had re-aligned the business model to be either cash-flow neutral or cash-flow positive.

The difficulty is Solar City's finances were so tangled. While the business model may have proved out with continued infusion of capital, the changing marketplace (see Nevada) and finding continual financing to keep installations going proved more and more difficult. Rather than looking to SolarCity as a silver bullet, I would guess that Tesla Energy, with Powerwall sales in Australia, Powerpack installations in California and globally and a leaner SCTY might just get TSLA to that magic $100 million of profit, but Q1 will be a good baseline to build on as Powerwall goes from Australia only, to the US & Germany....etc. This is a verbose way of me throwing up my hands and saying, "We'll know more in May."

 

[jhm]

thanks. but wouldn't q4 revenue be equally bad? it's not so much the revenue side that interests me as much as the large bottom line profit. please look at those links and see if you can help me understand how those profits are coming about, and if they will accrue to tesla shareholders. thanks.

I can't remember the numbers well enough. Generally there is some secular growth from Q4 to Q1 that makes revenue a little sweeter. But on the cost and expense side, poor weather can slow down construction. I think the impact is a little greater in Q1. Also in Q1 the sales force used to be pretty busy queuing up projects for Q2, but now they are backing off on sales. They are also going for more cash sales rather than financed sales. So cash sales should recognize revenue and cost all at once and track with deployment activity. So Q1 could be a weak quarter for both power generation (low sunshine) and cash sales (low deployment due to poor weather).

In case anyone may be wondering, while the weather is pretty good in California, SolarCity does a lot of work in the north eastern states. So they've got guys trying to work on iced over and snow covered roofs.

Anyway, there are a lot of factors here that drive seasonality. I am pretty confident that Q2 earning are better Q1, but hard to tell between Q1 and prior Q4.

Another issue is that, for utility scale Powerpacks and perhaps some solar, utilities love to role these out in Q4. But the dynamics in TE are so intense, we may not really appreciate this seasonality for a few years, sequential growth will be so strong.

On the auto side, we've got a solid Q1 and next Q4 should be good. Q2 and Q3 could get dicey with Model 3 ramp up issues. So it is nice that we've got the power of the Sun to help us with Q2 and Q3. It would be wonderful if Tesla could get to a place where total revenue grew sequentially even as the various lines of business have their own seasonality.

 

[jhm]

This is a verbose way of me throwing up my hands and saying, "We'll know more in May."

Indeed.

 

[luvb2b]

reviewing tsla and scty filings, i find no disclosure of a large profit connected to this sale. they don't even mention the sale from what i can see.

i did find an 80 million odd one size gain from silevo failing to meet milestones.
that still leaves solarcity with a $180+m profit in q4 2016.

The outsized ($150 million) in profit was from the one-time sale of bundled solar leases in Q4 2016 (Tesla’s SolarCity sells $241 million equity in its solar portfolio). There may be more of these in the future, but there was no similar sale for Q1 2017.

 

[EcoBruin]

Just FYI, model 3 sighting posted on Reddit.

Model 3 sighting near Tesla HQ • r/teslamotors

 

[brian45011]

please look at those links and see if you can help me understand how those profits are coming about, and if they will accrue to tesla shareholders. thanks.

Description.......9 mo's 2016..12 mo's 2016...4Q16 ( All in $k)

Net Profit (Loss)..(758,704)....(820,347)...(61,643)

Attributable to .....(731,442)...(1,059,121)...(327,679)
Other Interests

Attributable to ...(27,262)....238,774....266,036
Shareholders

So the Net Loss in the 4th Quarter was nearly $62 million but SCTY laid off over five times that amount to " non-controlling interests and redeemable non-controlling interests."

I suspect it relates primarily to "Sammons Renewable Energy (SRE), a Sammons Enterprises, Inc. company, announced today (12/20/16) that it led the equity portion of a $241 million cash equity transaction with SolarCity (SCTY). Franklin Park Investments manages SRE. As part of the deal, SRE is investing in a portfolio of solar projects in 16 states, including 26,000 home residential systems and 19 commercial and industrial solar projects. The financing is non-recourse to SolarCity." Sammons Renewable Energy Leads $241 Million Solar Cash Equity Transaction with SolarCity | Sammons Enterprises Inc.

 

[ecarfan]

Isn't the WaitButWhy article due out this week? That should give the press a new story to run through a few news cycles.

I understand that WBW article will be about Elon's new company, Neuralink, not about Tesla.

 

[SPadival]

I am just $2,000 short of a free base model 3.

 

[Ovulation]

I am just $2,000 short of a free base model 3.

Will you panic an sell

 

[kenliles]

I am just $2,000 short of a free base model 3.

The first 3 is always the hardest...

 

[neroden]

although the data doesn't cover 100% of transacted volume, it covers much more than what can be seen from a couple brokers. the purple line shows the percent of the day's volume coming from shorts.

I'm just shaking my head at the fact that they're still net shorting rather than net covering. I mean, heck, even if the company were in terrible shape, they'd be at great risk due to the already high percentage of the float short.

 

[neroden]

Oh, SolarCity accounting is completely whacked. They're following GAAP but unfortunately that's misleading -- current GAAP is a complete mismatch for their former business model. This will get straightened out when the new GAAP lease and revenue accounting standards are adopted, which will actually give us the numbers we should have been looking at all along, but it looks like that won't be until 2018. Thankfully switching to a cash-sales and bank-loan business model will put them in a situation which is *far more comprehensible* under GAAP, but the lease and PPA deals will still be incomprehensible until the accounting standards change.

 

[Starno]

I am just $2,000 short of a free base model 3.

Wait a few years and you will get a model 3 just with dividends