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2017 Q3 ER- Predictions and thoughts

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I do not try to predict market reaction to earnings reports, since it's been whacky in the past. I have said all along that this is going to be the ER which looks really bad (because it has the worst of the Model 3 ramp but very few Model 3s delivered), and the January one will look much better, but I have no idea how much of that the average trader has incorporated into their behavior.
 
It's impossible to know the market's reaction, primarily because EM's repeated over-promises and misses open the door to more FUD. In any other stock, I'd say long-term investors would buy the dip at a certain point, but it's impossible at this time to give any credence whatsoever to even the most assertive statements from EM. He really dug himself deep and opened Tesla to more FUD with the ongoing Model 3 delays, and now we have this:

“What people should absolutely have zero concern about, and I mean 0, is that Tesla will achieve a 10,000 unit production week by the end of next year. […] I think people should really not have any concerns that we won’t reach that outcome from a production rate.”

Despite the above statement, I don't know one person who's projecting 10,000/week by end-18. Not a single person.
 
It's impossible to know the market's reaction, primarily because EM's repeated over-promises and misses open the door to more FUD. In any other stock, I'd say long-term investors would buy the dip at a certain point, but it's impossible at this time to give any credence whatsoever to even the most assertive statements from EM. He really dug himself deep and opened Tesla to more FUD with the ongoing Model 3 delays, and now we have this:

What people should absolutely have zero concern about, and I mean 0, is that Tesla will achieve a 10,000 unit production week by the end of next year. […] I think people should really not have any concerns that we won’t reach that outcome from a production rate.”

Despite the above statement, I don't know one person who's projecting 10,000/week by end-18. Not a single person.
Funny thing is, even with EM's statement, which obviously implies very strong confidence that Tesla will hit 10,000/ week production by the end of next year, it's not literally a promise to do so. He did not promise they would hit that target, he indicated people should have no concern that they will or won't reach that production rate.
 
Funny thing is, even with EM's statement, which obviously implies very strong confidence that Tesla will hit 10,000/ week production by the end of next year, it's not literally a promise to do so. He did not promise they would hit that target, he indicated people should have no concern that they will or won't reach that production rate.

Sorry, I have to correct this. EM's statement above is not an implication of very strong confidence, but of certainty.
 
It's impossible to know the market's reaction, primarily because EM's repeated over-promises and misses open the door to more FUD. In any other stock, I'd say long-term investors would buy the dip at a certain point, but it's impossible at this time to give any credence whatsoever to even the most assertive statements from EM. He really dug himself deep and opened Tesla to more FUD with the ongoing Model 3 delays, and now we have this:

“What people should absolutely have zero concern about, and I mean 0, is that Tesla will achieve a 10,000 unit production week by the end of next year. […] I think people should really not have any concerns that we won’t reach that outcome from a production rate.”

Despite the above statement, I don't know one person who's projecting 10,000/week by end-18. Not a single person.

I agree. People would have to be truly uninformed or genuinely insane to believe that Tesla will produce 10k/week at the end of 2018.

This has some detailed analysis. Published yesterday. By Dana Hull, who is well respected by long standing Tesla bulls.

Musk’s Plant Makeover Even More of a Long Shot as Model 3 Lags
 
here are my estimates. the street is far underestimating the loss - i come in at over $3 gaap loss per share on $3.02b revenue. revenues will be good. model 3 will run at -1400% gross margins by my count. curious to hear people's input. some notes:

1. i have put the solarcity fine in "1 time solarcity gain"
2. interest expense increases due to more loans
3. other income remains negative due to dollar weakness.
4. i keep opex about flat vs last quarter.
5. s&x running around 25% gross margins.
6. model 3 margins widely negative due to fixed costs spread over few cars (see q2 letter comment).
7. solar city, energy storage, and used cars sales all improving from last quarter.
8. i have no zev credits in the model although they may put in 20-40 million to help salvage how bad it looks.
9. comments welcome as always.
ls veh % total
avg price s+x
avg price model 3
revenue
auto sales ex 3
auto sales mod 3
auto leasing
1 time autopilot
zev credits
total auto
energy storage
solarcity
grohmann
services/other
total revenue
cost of revenue
auto sales ex 3
auto sales mod 3
auto leasing
total auto
energy storage
solarcity
grohmann
services & other
total cost of rev
gross profit
opex
tesla r&d
tesla sg&a
1time acq cost
solarcity r&d
solarcity sg&a
total opex
op income
interest inc
interest exp
scty interest
other income exp
1time scty gain
pretax income
income tax
net income
non-cont int.
net inc to common
basic shares
diluted shares
diluted eps
[TD2] luv q3-17 [/TD2][TD2] Jun-17 [/TD2][TD2] Mar-17 [/TD2][TD2] Sep-16 [/TD2] [TD2] 0.21 [/TD2][TD2] 0.19 [/TD2][TD2] 0.26 [/TD2][TD2] 0.32 [/TD2] [TD2] 108.00 [/TD2][TD2] 107.27 [/TD2][TD2] 108.06 [/TD2][TD2] 105.40 [/TD2] [TD2] 50.00 [/TD2][TD2] 0.00 [/TD2][TD2] 0.00 [/TD2][TD2] 0.00 [/TD2] [TD2]2,212,348[/TD2][TD2]1,913,852[/TD2][TD2]2,000,060[/TD2][TD2]1,778,901[/TD2] [TD2]8,690[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2]253,395[/TD2][TD2]272,764[/TD2][TD2]254,540[/TD2][TD2]231,285[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]35,000[/TD2][TD2]0[/TD2] [TD2]0[/TD2][TD2]100,000[/TD2][TD2]0[/TD2][TD2]138,541[/TD2] [TD2] 2,474,433 [/TD2][TD2] 2,286,616 [/TD2][TD2] 2,289,600 [/TD2][TD2] 2,148,727 [/TD2] [TD2]35,000[/TD2][TD2]15,680[/TD2][TD2]5,244[/TD2][TD2]23,334[/TD2] [TD2]285,000[/TD2][TD2]271,100[/TD2][TD2]208,700[/TD2][TD2]0[/TD2] [TD2]5,100[/TD2][TD2]10,200[/TD2][TD2]22,400[/TD2][TD2]0[/TD2] [TD2]230,000[/TD2][TD2]205,961[/TD2][TD2]170,326[/TD2][TD2]126,375[/TD2] [TD2] 3,029,533 [/TD2][TD2] 2,789,557 [/TD2][TD2] 2,696,270 [/TD2][TD2] 2,298,436 [/TD2] [TD2]1,686,317[/TD2][TD2]1,472,578[/TD2][TD2]1,496,649[/TD2][TD2]1,355,102[/TD2] [TD2]130,350[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2]162,990[/TD2][TD2]175,433[/TD2][TD2]166,026[/TD2][TD2]161,959[/TD2] [TD2] 1,979,657 [/TD2][TD2] 1,648,011 [/TD2][TD2] 1,662,675 [/TD2][TD2] 1,517,061 [/TD2] [TD2]36,750[/TD2][TD2]19,414[/TD2][TD2]6,473[/TD2][TD2]24,281[/TD2] [TD2]199,500[/TD2][TD2]184,348[/TD2][TD2]145,300[/TD2][TD2]0[/TD2] [TD2]3,825[/TD2][TD2]7,600[/TD2][TD2]14,900[/TD2][TD2]0[/TD2] [TD2]287,500[/TD2][TD2]263,569[/TD2][TD2]198,976[/TD2][TD2]120,359[/TD2] [TD2] 2,507,232 [/TD2][TD2] 2,122,942 [/TD2][TD2] 2,028,324 [/TD2][TD2] 1,661,701 [/TD2] [TD2] 522,301 [/TD2][TD2] 666,615 [/TD2][TD2] 667,946 [/TD2][TD2] 636,735 [/TD2] [TD2]250,000[/TD2][TD2]324,774[/TD2][TD2]239,070[/TD2][TD2]214,302[/TD2] [TD2]470,000[/TD2][TD2]407,757[/TD2][TD2]446,637[/TD2][TD2]336,811[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]67,000[/TD2][TD2]0[/TD2] [TD2]30,000[/TD2][TD2]45,000[/TD2][TD2]44,800[/TD2][TD2]0[/TD2] [TD2]145,000[/TD2][TD2]130,000[/TD2][TD2]127,988[/TD2][TD2]0[/TD2] [TD2] 895,000 [/TD2][TD2] 907,531 [/TD2][TD2] 925,495 [/TD2][TD2] 551,113 [/TD2] [TD2] -372,699 [/TD2][TD2] -240,916 [/TD2][TD2] -257,549 [/TD2][TD2] 85,622 [/TD2] [TD2]6,000[/TD2][TD2]4,785[/TD2][TD2]3,090[/TD2][TD2]2,858[/TD2] [TD2]-65,000[/TD2][TD2]-54,441[/TD2][TD2]-46,146[/TD2][TD2]-46,713[/TD2] [TD2]-54,000[/TD2][TD2]-54,000[/TD2][TD2]-53,200[/TD2][TD2]0[/TD2] [TD2]-12,000[/TD2][TD2]-41,208[/TD2][TD2]-18,098[/TD2][TD2]-11,756[/TD2] [TD2]-29,500[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2] -527,199 [/TD2][TD2] -385,780 [/TD2][TD2] -371,903 [/TD2][TD2] 30,011 [/TD2] [TD2]20,000[/TD2][TD2]15,647[/TD2][TD2]25,278[/TD2][TD2]8,133[/TD2] [TD2] -547,199 [/TD2][TD2] -401,427 [/TD2][TD2] -397,181 [/TD2][TD2] 21,878 [/TD2] [TD2]-50,000[/TD2][TD2]-65,030[/TD2][TD2]-66,904[/TD2][TD2]0[/TD2] [TD2] -497,199 [/TD2][TD2] -336,397 [/TD2][TD2] -330,277 [/TD2][TD2] 21,878 [/TD2] [TD2]163,000[/TD2][TD2]165,212[/TD2][TD2]162,129[/TD2][TD2]148,991[/TD2] [TD2]163,000[/TD2][TD2]165,212[/TD2][TD2]162,129[/TD2][TD2]156,935[/TD2] [TD2] -3.05 [/TD2][TD2] -2.04 [/TD2][TD2] -2.04 [/TD2][TD2] 0.14 [/TD2]
 
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here are my estimates. the street is far underestimating the loss - i come in at over $3 gaap loss per share on $3.02b revenue. revenues will be good. model 3 will run at -1400% gross margins by my count. curious to hear people's input. some notes:

1. i have put the solarcity fine in "1 time solarcity gain"
2. interest expense increases due to more loans
3. other income remains negative due to dollar weakness.
4. i keep opex about flat vs last quarter.
5. s&x running around 25% gross margins.
6. model 3 margins widely negative due to fixed costs spread over few cars (see q2 letter comment).
7. solar city, energy storage, and used cars sales all improving from last quarter.
8. i have no zev credits in the model although they may put in 20-40 million to help salvage how bad it looks.
9. comments welcome as always.
ls veh % total
avg price s+x
avg price model 3
revenue
auto sales ex 3
auto sales mod 3
auto leasing
1 time autopilot
zev credits
total auto
energy storage
solarcity
grohmann
services/other
total revenue
cost of revenue
auto sales ex 3
auto sales mod 3
auto leasing
total auto
energy storage
solarcity
grohmann
services & other
total cost of rev
gross profit
opex
tesla r&d
tesla sg&a
1time acq cost
solarcity r&d
solarcity sg&a
total opex
op income
interest inc
interest exp
scty interest
other income exp
1time scty gain
pretax income
income tax
net income
non-cont int.
net inc to common
basic shares
diluted shares
diluted eps
[TD2] luv q3-17 [/TD2][TD2] Jun-17 [/TD2][TD2] Mar-17 [/TD2][TD2] Sep-16 [/TD2] [TD2] 0.21 [/TD2][TD2] 0.19 [/TD2][TD2] 0.26 [/TD2][TD2] 0.32 [/TD2] [TD2] 108.00 [/TD2][TD2] 107.27 [/TD2][TD2] 108.06 [/TD2][TD2] 105.40 [/TD2] [TD2] 50.00 [/TD2][TD2] 0.00 [/TD2][TD2] 0.00 [/TD2][TD2] 0.00 [/TD2] [TD2]2,212,348[/TD2][TD2]1,913,852[/TD2][TD2]2,000,060[/TD2][TD2]1,778,901[/TD2] [TD2]8,690[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2]253,395[/TD2][TD2]272,764[/TD2][TD2]254,540[/TD2][TD2]231,285[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]35,000[/TD2][TD2]0[/TD2] [TD2]0[/TD2][TD2]100,000[/TD2][TD2]0[/TD2][TD2]138,541[/TD2] [TD2] 2,474,433 [/TD2][TD2] 2,286,616 [/TD2][TD2] 2,289,600 [/TD2][TD2] 2,148,727 [/TD2] [TD2]35,000[/TD2][TD2]15,680[/TD2][TD2]5,244[/TD2][TD2]23,334[/TD2] [TD2]285,000[/TD2][TD2]271,100[/TD2][TD2]208,700[/TD2][TD2]0[/TD2] [TD2]5,100[/TD2][TD2]10,200[/TD2][TD2]22,400[/TD2][TD2]0[/TD2] [TD2]230,000[/TD2][TD2]205,961[/TD2][TD2]170,326[/TD2][TD2]126,375[/TD2] [TD2] 3,029,533 [/TD2][TD2] 2,789,557 [/TD2][TD2] 2,696,270 [/TD2][TD2] 2,298,436 [/TD2] [TD2]1,686,317[/TD2][TD2]1,472,578[/TD2][TD2]1,496,649[/TD2][TD2]1,355,102[/TD2] [TD2]130,350[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2]162,990[/TD2][TD2]175,433[/TD2][TD2]166,026[/TD2][TD2]161,959[/TD2] [TD2] 1,979,657 [/TD2][TD2] 1,648,011 [/TD2][TD2] 1,662,675 [/TD2][TD2] 1,517,061 [/TD2] [TD2]36,750[/TD2][TD2]19,414[/TD2][TD2]6,473[/TD2][TD2]24,281[/TD2] [TD2]199,500[/TD2][TD2]184,348[/TD2][TD2]145,300[/TD2][TD2]0[/TD2] [TD2]3,825[/TD2][TD2]7,600[/TD2][TD2]14,900[/TD2][TD2]0[/TD2] [TD2]287,500[/TD2][TD2]263,569[/TD2][TD2]198,976[/TD2][TD2]120,359[/TD2] [TD2] 2,507,232 [/TD2][TD2] 2,122,942 [/TD2][TD2] 2,028,324 [/TD2][TD2] 1,661,701 [/TD2] [TD2] 522,301 [/TD2][TD2] 666,615 [/TD2][TD2] 667,946 [/TD2][TD2] 636,735 [/TD2] [TD2]250,000[/TD2][TD2]324,774[/TD2][TD2]239,070[/TD2][TD2]214,302[/TD2] [TD2]470,000[/TD2][TD2]407,757[/TD2][TD2]446,637[/TD2][TD2]336,811[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]67,000[/TD2][TD2]0[/TD2] [TD2]30,000[/TD2][TD2]45,000[/TD2][TD2]44,800[/TD2][TD2]0[/TD2] [TD2]145,000[/TD2][TD2]130,000[/TD2][TD2]127,988[/TD2][TD2]0[/TD2] [TD2] 895,000 [/TD2][TD2] 907,531 [/TD2][TD2] 925,495 [/TD2][TD2] 551,113 [/TD2] [TD2] -372,699 [/TD2][TD2] -240,916 [/TD2][TD2] -257,549 [/TD2][TD2] 85,622 [/TD2] [TD2]6,000[/TD2][TD2]4,785[/TD2][TD2]3,090[/TD2][TD2]2,858[/TD2] [TD2]-65,000[/TD2][TD2]-54,441[/TD2][TD2]-46,146[/TD2][TD2]-46,713[/TD2] [TD2]-54,000[/TD2][TD2]-54,000[/TD2][TD2]-53,200[/TD2][TD2]0[/TD2] [TD2]-12,000[/TD2][TD2]-41,208[/TD2][TD2]-18,098[/TD2][TD2]-11,756[/TD2] [TD2]-29,500[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2] -527,199 [/TD2][TD2] -385,780 [/TD2][TD2] -371,903 [/TD2][TD2] 30,011 [/TD2] [TD2]20,000[/TD2][TD2]15,647[/TD2][TD2]25,278[/TD2][TD2]8,133[/TD2] [TD2] -547,199 [/TD2][TD2] -401,427 [/TD2][TD2] -397,181 [/TD2][TD2] 21,878 [/TD2] [TD2]-50,000[/TD2][TD2]-65,030[/TD2][TD2]-66,904[/TD2][TD2]0[/TD2] [TD2] -497,199 [/TD2][TD2] -336,397 [/TD2][TD2] -330,277 [/TD2][TD2] 21,878 [/TD2] [TD2]163,000[/TD2][TD2]165,212[/TD2][TD2]162,129[/TD2][TD2]148,991[/TD2] [TD2]163,000[/TD2][TD2]165,212[/TD2][TD2]162,129[/TD2][TD2]156,935[/TD2] [TD2] -3.05 [/TD2][TD2] -2.04 [/TD2][TD2] -2.04 [/TD2][TD2] 0.14 [/TD2]

Thanks.

If all of this is correct I suspect even a good CC will not help the market reaction and we see a further decrease in the SP.

ZEV could help but it would be minimal.

IIRC the 'street' is expecting a loss of about $2.70/share
 
the good news, if any is that i estimate a run rate of around 3k model 3's per week at 22% gross margin is enough to drive gaap profitability. it's entirely possible sometime in the 4th quarter we start hitting weeks where the company is running at a gaap profit, with possibly all weeks in q1 going that way. you may hear that commentary on the call. gaap profitability seems to me a virtual certainty in q1 2018, assuming an exit rate of at least 2-3k vehicles per week. i would think they will discuss that because talking about a half billion dollar loss in a quarter will get old fast!

i thought street estimates were -2.34 on yahoo finance.
 
the good news, if any is that i estimate a run rate of around 3k model 3's per week at 22% gross margin is enough to drive gaap profitability. it's entirely possible sometime in the 4th quarter we start hitting weeks where the company is running at a gaap profit, with possibly all weeks in q1 going that way. you may hear that commentary on the call. gaap profitability seems to me a virtual certainty in q1 2018, assuming an exit rate of at least 2-3k vehicles per week. i would think they will discuss that because talking about a half billion dollar loss in a quarter will get old fast!

i thought street estimates were -2.34 on yahoo finance.

I will see if I can find a reference. The -2.70 was the 'whisper number' IIRC.
 
the good news, if any is that i estimate a run rate of around 3k model 3's per week at 22% gross margin is enough to drive gaap profitability. it's entirely possible sometime in the 4th quarter we start hitting weeks where the company is running at a gaap profit, with possibly all weeks in q1 going that way. you may hear that commentary on the call. gaap profitability seems to me a virtual certainty in q1 2018, assuming an exit rate of at least 2-3k vehicles per week. i would think they will discuss that because talking about a half billion dollar loss in a quarter will get old fast!

i thought street estimates were -2.34 on yahoo finance.
Any chance Solar City side can again show losses attributable to non-controlling interests?
 
I agree. People would have to be truly uninformed or genuinely insane to believe that Tesla will produce 10k/week at the end of 2018.

This has some detailed analysis. Published yesterday. By Dana Hull, who is well respected by long standing Tesla bulls.

Musk’s Plant Makeover Even More of a Long Shot as Model 3 Lags

Count me as one of the crazy ones. But since only insane or truly uninformed people think Tesla will hit that goal hopefully we will no longer be hearing that Tesla meeting its “insane” goals is already baked into the share price.:)

Also, I have alluded to this before but I personally have lost all respect for Dana Hull. She has had a negative spin/slant in virtually every article she has published for the last year or more. IMO she has fallen victim to constant badgering from the shorts and other naysayers and her articles are now not much better than Charley Grant’s at WSJ (although she isn’t as nasty on Twitter). There is a very effective anti-Tesla PR machine and she has been sucked into it.
 
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Count me as one of the crazy ones. But since only insane or truly uninformed people think Tesla will hit that goal hopefully we will no longer be hearing that Tesla meeting its “insane” goals is already baked into the share price.:)

Also, I have alluded to this before but I personally have lost all respect for Dana Hull. She has had a negative spin/slant in virtually every article she has published for the last year or more. IMO she has fallen victim to constant badgering from the shorts and other naysayers and her articles are now not much better than Charley Grant’s at WSJ (although she isn’t as nasty on Twitter). There is a very effective anti-Tesla PR machine and she has been sucked into it.

With every missed deadline big and small, I am curious why you believe this time is different.

With TSLA being as volatile as it is, one has to wonder at what price level what is priced-in and what is not. I get your point. However my earlier comments about ramp being priced in were about SP going beyond 400 to 500 range (profitability is needed). So at current price level, is promised timelines priced in? I don’t think so.

Finally, I didn’t know long standing bulls are changing attitudes towards Dana. I don’t know her and her credibility is not my concern... However, do you get the sense that EM is becoming extra loose with promises than ever before? Maybe that’s a function of why even generally positive/neutral reporters are appearing negative?

Think about this. Tom Randall literally writes likes a fanboy than a reporter. I personally don’t know of any bigger fanboy reporter (other than FredL of course). Even his latest piece was negative, actually damningly negative. Do you really think that’s because he got sold off? There is no accuracy in that report?
 
Also, I have alluded to this before but I personally have lost all respect for Dana Hull. She has had a negative spin/slant in virtually every article she has published for the last year or more.

Really strange transformation. Like a different person soon after she left the SJ Mercury.

That article seems pretty weak to me. Basically she is saying "What Tesla is planning to do is really freaking hard". Exactly. Everything Tesla is trying to do is difficult. That is one of the reasons I've invested in them -- they are solving difficult problems that many see as impossible or unlikely. And so far they've succeeded doing these things everyone says are impossible.

But this next quarter report is going to be super rough, no question about that. I expect Tesla to miss their super aggressive targets like usual, not just for this quarter, but for the foreseeable future. Basically I expect things to continue as they have been, until there is some indication of change. We haven't seen that change yet. I think this is going to be a pretty effective angle for shorts to attack. Usually short arguments are garbage, but Musk's constant problems with articulating ultra-aggressive timelines opens up an easy vector for attack. For a while now I've thought this is Tesla's game to loose -- they've proved they can do the hard stuff, their competitors are mostly asleep at the wheel, so their biggest problems will be self inflicted, like "missing timelines." If Tesla makes 250k Model 3 in a year (5k/week for 50 weeks) that will be a huge success and massive growth. Unfortunately it won't be seen as a success because Musk has framed success as 10k/week. Tesla's accomplishments are pretty astounding, but it is so easy to frame them as constant misses when the expectations are beyond astounding. Musk could easily fix this and take control of the narrative around Tesla by keeping his aggressive timelines inside the company.