2017Q1 results

[surfside]

@luvb2b good catch on the Morgan Stanley numbers -- I had input Q1 2016 numbers instead of Q1 2017. Sorry about that.

Taking a look at Morgan Stanley's most recent note that includes a model (which is the note "The Real Surprise with the Model 3"), here is what I show:

Q1 2017 -1.94 GAAP EPS based on 168 shares outstanding and GAAP net income of -$326 and GAAP operating profit of -$255.

Also, not sure how you are adjusting the JP Morgan numbers -- their non-GAAP number of $44 million includes an addback of $90k for stock based compensation and $300k of NCI's. So their GAAP Net Income excluding NCI's should be -$256, resulting in GAAP EPS excluding NCIs of -1.58 (they use 162 shares outstanding).

surfside

 

[luvb2b]

@surfside, you're right on jpm. i was taking non-gaap eps - 50c roughly for gaap eps. clearly an error as you provided the gaap net income number and share counts.

updated:
jpm gaap eps = 44m / 162m shares = 0.27
net income w/zero nci's = 44m - 300m = -256.
also looks like i had an error on baird - fixed now.

also placed in order of who expects most net income w/zero nci's. i'm the 2nd most positive although i believe something is screwy with ubs as the most positive yet clinging to a 160 target which would barely value tesla more than mobileye.

for firms attempting to forecast nci's we have ubs @ 338, jpm @ 300, and gs @ 291. i'm at 275, the most conservative of the bunch. it looks like even a positive gaap eps number will almost surely be perceived lower quality due to the nci's effect. fortunately i don't think s&p looks at that. and maybe most traders won't look at it closely either on a first read. as @brian45011 has mentioned the model 3 ramp staying on schedule (hopefully) will be a huge part of the story.

if we're all satisfied that we have our own reasonable model with standardized analyst estimates for comparison purposes, now we can start to discuss where we think the price goes if the eps numbers come in at _____?

there's surprisingly little open interest in the 5/5, 5/12, or 5/19 otm calls except at the 350-360 strike range. that seems too far to run on this report, unless it is even more awesome than i think. most of the open interest is in the 310 calls. the 5/5 310 calls are trading around 10 and if you assume a 2x winner on a good report that would get you to 330. one thing's certain - the market is not yet positioning for blowout numbers.

Bank	Price Target	Q1 GAAP EPS	net income zero nci's	Operating Income	Net Income	Include any NCI's?	Comments
UBS	$160	-0.39	-148	Full Year -561	Full Year -477 GAAP	Yes: $338 for FYE 2017	n/a
luvb2b	n/a	0.61	-176	-52	99 gaap	yes: $275 for q1	non gaap figure 50c higher than gaap eps at 1.11
Barclays	$165	-1.57	-256	-199	-173 non-GAAP	No	forecasted -1.07 non-gaap eps
Baird	$368	-1.73	-282	-230	-198 non-GAAP	No	forecast -1.23 non-gaap eps
Morgan Stanley	$305	-1.94	-326	-255	-326 GAAP	No	Does not forecast SolarCity.
muppet sacks	$160	-1.07	-466	Full Year -864 non-gaap	Full Year -1348 nonGAAP	Yes: $1166 for full yr 2017	working off what appears to be a non-gaap eps figure of -0.57 - figures may be inaccurate need better data

[TR][TD][/TD][/TR] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TR][TD]Deutsche Bank[/TD][TD]$240[/TD][TD]-1.41[/TD][TD]-230[/TD][TD]n/a[/TD] [TD]n/a[/TD] [TD]No[/TD][TD]Had forecasted +4.19 of EPS for FYE 2017 prior to 3.14.17[/TD][/TR]
[TR][TD]J.P. Morgan[/TD][TD]$185[/TD][TD]0.27[/TD][TD]-256[/TD][TD]-159[/TD] [TD]134 non-GAAP; 44 GAAP[/TD] [TD]Yes: $1,050 for FYE 2017 and $300 for q1-17[/TD][TD]Was previously forecasting -1.52 of EPS for Q1 before modeling impact of SolarCity. forecasted 0.83 non-gaap eps.[/TD][/TR]

@luvb2b good catch on the Morgan Stanley numbers -- I had input Q1 2016 numbers instead of Q1 2017. Sorry about that.

Taking a look at Morgan Stanley's most recent note that includes a model (which is the note "The Real Surprise with the Model 3"), here is what I show:

Q1 2017 -1.94 GAAP EPS based on 168 shares outstanding and GAAP net income of -$326 and GAAP operating profit of -$255.

Also, not sure how you are adjusting the JP Morgan numbers -- their non-GAAP number of $44 million includes an addback of $90k for stock based compensation and $300k of NCI's. So their GAAP Net Income excluding NCI's should be -$256, resulting in GAAP EPS excluding NCIs of -1.58 (they use 162 shares outstanding).

surfside

 

[Navin]

Luv - are you as bullish as u were a few days ago?

 

[luvb2b]

i have no idea. i find myself asking questions like:

• do consensus numbers even mean anything? will the shorts convince others that any beat is due to smoke and mirrors of nci accounting?
• besides us and a couple hedge funds, who would have done enough work to understand how the actual numbers compare to analyst estimates?
• jp morgan is not so far away from my estimate. that means at least some professional who has thought about it has similar expectations and has probably been explaining it to his clients. this is new information - i didn't think anyone was so close to my numbers. how much less surprising will it be if one big firm is similarly accurate as my forecast?
• there is so much money indexed, the s&p 500 potential is powerful... but will people recognize it and start pricing after earnings, or will they wait til they see a q2 profit? will it depend on q2 guidance?
• why are there so few out of the money calls in open interest?
• a bunch of morons sold tesla down 7 points on non-news the other day. will their resolve to stay in the trade thru earnings be tested?
• what if any visibility do i have into q2 guidance?

i don't remember what i said a few days ago exactly. but i am feeling 350-360 on numbers that meet my estimates is a stretch. on the other hand, if i'm right 330 should be achievable. but for that scenario, you hardly get paid to take risk - $10 for a 310 call that doubles? not so attractive considering it will go to zero if i'm very wrong.

i'll post an options strategy table i built today over in the general thread so you can see how i came up with an optimal use of capital.

Luv - are you as bullish as u were a few days ago?

 

[surfside]

@luvb2b just realized in reading your latest update that misread my comment re: UBS's estimate of NCI's - the $338 number is their estimate for the full year of NCI's for 2017, not 1Q2017. UBS didn't provide a breakdown by quarter.

As a result, UBS should not be at the top of your chart.

surfside

 

[schonelucht]

In the past, it felt like if they could make 40,000 cars if everything went perfectly they would guide to 40,000. This time, we pretty much know they left 2016 at a 100k runrate, and they guided to 50k in 1H... It's like they guided to the median case instead of the best case, so that good execution would flow through and be good news.

At the risk of totally derailing this thread : early indications are that they do not have the demand for 25k deliveries this quarter. Again, it's still very early days and we've seen turn arounds happen in a month before with Tesla. But if I were forced to bet today I would rather go for 22k in Q2 than 25k.

 

[Bgarret]

At the risk of totally derailing this thread : early indications are that they do not have the demand for 25k deliveries this quarter. Again, it's still very early days and we've seen turn arounds happen in a month before with Tesla. But if I were forced to bet today I would rather go for 22k in Q2 than 25k.

Interesting. First I've read of this on any thread. What are you basing demand slow down on @schonelucht ?

 

[EinSV]

At the risk of totally derailing this thread : early indications are that they do not have the demand for 25k deliveries this quarter. Again, it's still very early days and we've seen turn arounds happen in a month before with Tesla. But if I were forced to bet today I would rather go for 22k in Q2 than 25k.

Interested to hear your thoughts, but to avoid derailing the great discussion in this thread on Q1 results may make more sense to move to the Demand thread or start a new thread for Q2 deliveries?

 

[schonelucht]

@EinSV and @Bgarret I answered in the demand thread : Demand

 

[Navin]

i have no idea. i find myself asking questions like:

• do consensus numbers even mean anything? will the shorts convince others that any beat is due to smoke and mirrors of nci accounting?
• besides us and a couple hedge funds, who would have done enough work to understand how the actual numbers compare to analyst estimates?
• jp morgan is not so far away from my estimate. that means at least some professional who has thought about it has similar expectations and has probably been explaining it to his clients. this is new information - i didn't think anyone was so close to my numbers. how much less surprising will it be if one big firm is similarly accurate as my forecast?
• there is so much money indexed, the s&p 500 potential is powerful... but will people recognize it and start pricing after earnings, or will they wait til they see a q2 profit? will it depend on q2 guidance?
• why are there so few out of the money calls in open interest?
• a bunch of morons sold tesla down 7 points on non-news the other day. will their resolve to stay in the trade thru earnings be tested?
• what if any visibility do i have into q2 guidance?

i don't remember what i said a few days ago exactly. but i am feeling 350-360 on numbers that meet my estimates is a stretch. on the other hand, if i'm right 330 should be achievable. but for that scenario, you hardly get paid to take risk - $10 for a 310 call that doubles? not so attractive considering it will go to zero if i'm very wrong.

i'll post an options strategy table i built today over in the general thread so you can see how i came up with an optimal use of capital.

Good questions to ask and try to answer. For me - its all about the reaction based on a belief that the stock will bounce due to results the market isn't really expecting.. By definition - wall street analysts are lagging indicators and TESLA is a hard stock to underwrite and understand- WS analysts would underestimate vs overestimate in most situations particularly here - being too bullish and then missing makes it hard for the institutional investors/buyers to want to trade with these banks (thats how they make money, right) --

As it relates to making money off of earnings - I personally don't like to buy short term options because you set yourself up for somewhat of a binary outcome.. I do believe the analysis is sound and TESLA will surprise and I want to be a bit greedy and make some investments based out of that.. I chose to purchase longer term options (Jan 2019 300 Calls) -- if Tesla does well - I will make a nice $ and % profit.. If things don't work out as I expect - I have plenty of time to ride out a drop in the stock which should bounce back based on all of the positive things on the horizon... Let's see how things play out - but essentially taking risk in buying options but doing so with enough of a runway to survive an unexpected outcome..

 

[MitchJi]

Bank of America just said there's ‘material risk’ to the long-term viability of Tesla

Bank of America Merrill Lynch cut its price forecast on Tesla shares on Tuesday, saying the electric car maker's "long-term viability" was at risk because of the acquisition of SolarCity.

The investment firm now believes the stock will be nearly cut in half over the next 12 months because "positive earnings and cash flow [are] now even more elusive" in light of the combination.

"We believe the SolarCity acquisition introduces material risks to the longer-term viability of TSLA, while the recent capital raise only serves to further dilute potential shareholder value," research analyst John Murphy said in a note to investors. He has an underperform rating on the stock.

Murphy sees Tesla shares falling to $165, a 46 percent drop from where the stock closed Monday at $308.03 a share. Shares were unchanged in premarket trade.

Murphy also said he is cutting his 2017 earnings estimate on the combined entity from a 25 cent loss per share to a $2 loss. Looking to 2018, he lowered estimates from $2.05 a share to $1.65 but set 2019 estimates "optimistically" at $4.55 a share.

 

[luvb2b]

a reasonable strategy. i've been moving my longer dated exposure lower in strike and closer to that september timeframe when i think the s&p index addition might be forthcoming.

those binary earnings plays can be nasty or fantastic. the key is to size the trade properly so a loss is manageable and a gain is potentially a home run. attractive pricing on the options always helps, and i know that hasn't been available in tesla too much.

the big unknown i have is the q2 guide. if they can guide to a q2 gaap profit, then the s&p addition i believe becomes a near certainty and the stock is going to have a hard time staying below 300 on that alone.

Good questions to ask and try to answer. For me - its all about the reaction based on a belief that the stock will bounce due to results the market isn't really expecting.. By definition - wall street analysts are lagging indicators and TESLA is a hard stock to underwrite and understand- WS analysts would underestimate vs overestimate in most situations particularly here - being too bullish and then missing makes it hard for the institutional investors/buyers to want to trade with these banks (thats how they make money, right) --

As it relates to making money off of earnings - I personally don't like to buy short term options because you set yourself up for somewhat of a binary outcome.. I do believe the analysis is sound and TESLA will surprise and I want to be a bit greedy and make some investments based out of that.. I chose to purchase longer term options (Jan 2019 300 Calls) -- if Tesla does well - I will make a nice $ and % profit.. If things don't work out as I expect - I have plenty of time to ride out a drop in the stock which should bounce back based on all of the positive things on the horizon... Let's see how things play out - but essentially taking risk in buying options but doing so with enough of a runway to survive an unexpected outcome..

 

[luvb2b]

i wonder if these guys any do real work. "positive earnings and cash flow are elusive?"

the solarcity acquisition made positive eps more of a certainty in my mind. any modest studying of the financials and accounting would lead to the same conclusion. like gaap or hate gaap, it's the accounting standard we are on and by that standard i see good earnings.

will try to log in to my research portal and see if i can yank their model estimates to update our table.

QUOTE="MitchJi, post: 2072415, member: 36240"]Bank of America just said there's ‘material risk’ to the long-term viability of Tesla

Bank of America Merrill Lynch cut its price forecast on Tesla shares on Tuesday, saying the electric car maker's "long-term viability" was at risk because of the acquisition of SolarCity.

The investment firm now believes the stock will be nearly cut in half over the next 12 months because "positive earnings and cash flow [are] now even more elusive" in light of the combination.

"We believe the SolarCity acquisition introduces material risks to the longer-term viability of TSLA, while the recent capital raise only serves to further dilute potential shareholder value," research analyst John Murphy said in a note to investors. He has an underperform rating on the stock.

Murphy sees Tesla shares falling to $165, a 46 percent drop from where the stock closed Monday at $308.03 a share. Shares were unchanged in premarket trade.

Murphy also said he is cutting his 2017 earnings estimate on the combined entity from a 25 cent loss per share to a $2 loss. Looking to 2018, he lowered estimates from $2.05 a share to $1.65 but set 2019 estimates "optimistically" at $4.55 a share. [/QUOTE]

 

[luvb2b]

@surfside, i believe i adjusted for that properly. here's what i had done:

ubs estimate you provided: -0.39 gaap
ubs nci estimate: 338 for 4 quarters = 84.5 per quarter.

-0.39 gaap x 163m shares = -63.6m gaap net income to common.
remove effect of nci's:
-63.6 - 84.5 = -148.1

table below updated with today's baml note. astonishing how negative they are and it makes no sense to me. stock is up 3.50 with that note. if you're following my opinions on the impact of solarcity to tesla's financials you'll know why i think this note is totally wrong.

Given our conclusion of the immediate earnings dilution and cash burn for TSLA from the acquisition of SCTY, it appears to us that TSLA and its executives are more focused on creating a vertically integrated clean energy company, rather than generating profits and returns. - b of a/merrill tesla note today​

Bank	Price Target	Q1 GAAP EPS	net income zero nci's	Operating Income	Net Income	Include any NCI's?	Comments
UBS	$160	-0.39	-148	Full Year -561	Full Year -477 GAAP	Yes: $338 for FYE 2017	n/a
luvb2b	n/a	0.61	-176	-52	99 gaap	yes: $275 for q1	non gaap figure 50c higher than gaap eps at 1.11
Barclays	$165	-1.57	-256	-199	-173 non-GAAP	No	forecasted -1.07 non-gaap eps
Baird	$368	-1.73	-282	-230	-198 non-GAAP	No	forecast -1.23 non-gaap eps
Morgan Stanley	$305	-1.94	-326	-255	-326 GAAP	No	Does not forecast SolarCity.
merrill lynch	$160	-1.44	-395	-325	-245 GAAP	yes: 150m per quarter in '17	non-gaap eps estimate at -0.85, includes 100m stock comp on 170m shares
muppet sacks	$160	-1.07	-466	Full Year -864 non-gaap	Full Year -1348 nonGAAP	Yes: $1166 for full yr 2017	working off what appears to be a non-gaap eps figure of -0.57 - figures may be inaccurate need better data

[TR][TD][/TD][/TR] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TD][/TD] [TR][TD]Deutsche Bank[/TD][TD]$240[/TD][TD]-1.41[/TD][TD]-230[/TD][TD]n/a[/TD] [TD]n/a[/TD] [TD]No[/TD][TD]Had forecasted +4.19 of EPS for FYE 2017 prior to 3.14.17[/TD][/TR]
[TR][TD]J.P. Morgan[/TD][TD]$185[/TD][TD]0.27[/TD][TD]-256[/TD][TD]-159[/TD] [TD]134 non-GAAP; 44 GAAP[/TD] [TD]Yes: $1,050 for FYE 2017 and $300 for q1-17[/TD][TD]Was previously forecasting -1.52 of EPS for Q1 before modeling impact of SolarCity. forecasted 0.83 non-gaap eps.[/TD][/TR]

@luvb2b just realized in reading your latest update that misread my comment re: UBS's estimate of NCI's - the $338 number is their estimate for the full year of NCI's for 2017, not 1Q2017. UBS didn't provide a breakdown by quarter.

As a result, UBS should not be at the top of your chart.

surfside

 

[surfside]

@luvb2b thanks for confirming - when I saw the following comment, I assumed you thought UBS's estimate of NCI's of $338 was just for 1Q 2017. I didn't take the time to run the math on the numbers - apologies.

for firms attempting to forecast nci's we have ubs @ 338, jpm @ 300, and gs @ 291. i'm at 275, the most conservative of the bunch.

 

[luvb2b]

@surfside, understood. that was hastily written on my part!

@luvb2b thanks for confirming - when I saw the following comment, I assumed you thought UBS's estimate of NCI's of $338 was just for 1Q 2017. I didn't take the time to run the math on the numbers - apologies.

 

[surfside]

what I find most interesting about your table (thanks for picking up what I started and making it way better btw) is that UBS (of all people!) has the highest EPS forecast excluding NCI's. Given some of Colin's other thoughts/research (i'm thinking primarily of the recent note re: supercharger infrastructure capital needs), I am pretty shocked by that.

surfside

 

[FredTMC]

what I find most interesting about your table (thanks for picking up what I started and making it way better btw) is that UBS (of all people!) has the highest EPS forecast excluding NCI's. Given some of Colin's other thoughts/research (i'm thinking primarily of the recent note re: supercharger infrastructure capital needs), I am pretty shocked by that.

surfside

Regarding the NCI's

Do they contribute to Tesla's Non-GAAP EPS? If not, why not?

Clearly, from Luv's analyst summary, NCIs contribute to full GAAP EPS.

TIA

 

[luvb2b]

what I find most interesting about your table (thanks for picking up what I started and making it way better btw) is that UBS (of all people!) has the highest EPS forecast excluding NCI's. Given some of Colin's other thoughts/research (i'm thinking primarily of the recent note re: supercharger infrastructure capital needs), I am pretty shocked by that.

surfside

i think something is wrong with that ubs estimate. either i did something wrong or some other error exists. it just doesn't make sense with how negative they are on the price target. the guy has the highest net income excluding nci's and the lowest price target!

Regarding the NCI's
Do they contribute to Tesla's Non-GAAP EPS? If not, why not?
Clearly, from Luv's analyst summary, NCIs contribute to full GAAP EPS.
TIA

there's a choice that needs to be made on whether tesla will choose to back out nci's for non-gaap eps. the nci's happen every quarter, and they are a real accumulation of value as best as i can tell. in q4 they didn't touch nci's when adjusting to non-gaap eps. i expect the same this quarter, although with a cfo change a different decision may be made.

personally i am betting they leave it the way it was in q4.

 

[neroden]

In case your brains aren't hurting enough (note this apparently pre-dates the Tesla restructuring but is after the intent to acquire disclosure)

http://files.shareholder.com/downlo...7DD00B/2016.06_SCTY_Investor_Presentation.pdf

Note the cash flow graph in slide 22.

FWIW, I apologize for contributing to mental Onanism, since I remain firmly in the camp that share price in the latter part of the first week of May is far more dependent on guidance about the M3 being "on track" than positive GAAP earnings from NCI allocation of losses and/or regulatory credit profits.

Let's try a quick and dirty analysis. They show a levered cash flow of about, hmm, looks like $90 million per year until 2023. I think we can assume that the "assumed renewals" (which I think will not happen) are from the out-years and not relevant to in near years. Then on the previous page, we have the SRECs, which they think are worh about $30 million a year.

Page 24 shows the result after a cash equity financing. SolarCity ends up collecting only a small amount of residual cash later (not counting the renewals, which I think will not happen), but the important point is, *it's still positive*.

Page 30 tells us that the typical "flip" for SCTY tax equity deals is in year 6.5.