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Articles/megaposts by sleepyhead
- Thread starter sleepyhead
- Start date
Actual: 5,500 cars delivered, 1,000 of those to Europe. $603 million in revenue. $0.12 EPS. 21% gross margin excluding ZEV credits.
The reason why TSLA is down 10% has to do with the following items from shareholder letter:
We expect our non-GAAP profitability to be about consistent with Q3. Analyst estimates for Q4 were $0.20, so another $0.12 in Q4 is a disappointment. This is the major reason for the sell-off.
Other less than stellar items include:
25% increase in R&D in Q4 and 20% increase in SG&A.
Q3 results were good, but guidance is disappointing. No 2014 guidance doesn't help either.
We expect our non-GAAP profitability to be about consistent with Q3. Analyst estimates for Q4 were $0.20, so another $0.12 in Q4 is a disappointment. This is the major reason for the sell-off.
Other less than stellar items include:
25% increase in R&D in Q4 and 20% increase in SG&A.
Q3 results were good, but guidance is disappointing. No 2014 guidance doesn't help either.
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Mario Kadastik
Active Member
That and I think the biggest so far is the lack of concrete FY2014 guidance. My hope is that Elon will elaborate on the battery deal and if he does throw out the 1200-1500 cars / week capacity that he did in Munich at end of 2014 and that is where they are aiming (or that they aim to about double the current production rate) i.e. all the things we know already from German interviews and London talks etc. Then this might work into a form of guidance going forward.
The stock is already slightly recovering, above $160
ModelS8794
Member
Sleepy, looks to me like ASP came in at $105k! (ex 10mm ZEV and ~8mm GHG)
And guiding for similar ASP next qtr. I find that incredible, but...
And guiding for similar ASP next qtr. I find that incredible, but...
Yeah, very strong! Makes me believe they will go significantly above 25% GM in Q4.
I think that a lot of you covered all of the positives in the short-term trading thread; and there are many positives for the long-term investor, so I will go over the negatives here that virtually nobody pointed out:
-SG&A is growing out of control. Up 34% in Q3 vs. Q2. Tesla guided towards 20% increase in Q4. SG&A is growing twice as fast as revenue,which is not good.
-R&D up "only" 10%, but forecasted to rise 25% in Q4. Once again not good.
-GAAP loss getting bigger QoQ. I don't really care about GAAP, but the stock-based compensation worries me a lot.
-EPS guidance for Q4 same as Q3 results, which is 40% lower than analyst consensus. This is the main reason TSLA tanked today; momo traders are out.
-No 2014 guidance means no forward visibility, i.e. increased risk due to uncertainty, which leads to lower share price.
-Deliveries are growing at a 5% QoQ pace, which does not extrapolate into 100% YoY growth rate, but more 30%. We expect a lot more from Tesla, but there is no evidence to point that Tesla will be able to achieve 40k deliveries in 2014. I believe they will be able to meet that number, but the market is not so sure.
-Share count is growing too fast for my liking. Another 2m share dilution coming in Q4, which looks to me like 100% is from stock-based compensation. Even though companies strip this out to get to non-GAAP earnings it is a real cost to shareholders and I don't like that companies do this. It is cheating, but all companies do it.
I wrote a couple of weeks ago that TSLA is now a buy and hold investment and people like bonnie, who stay true to this strategy will be ok. It doesn't matter if the stock goes down to $10 tomorrow if it ultimately ends up at $1000 in the future. I also wrote that playing options during earnings does not give you a good risk/reward ratio like it did in Q1 and even Q2. It will be very hard to make money with short term options on TSLA. I recommend taking a buy and hold strategy.
That said, I played this ER mostly with weekly OTM options; they will all go worthless tomorrow and I will lose a lot of money. I am not worried though, because it is part of my bigger strategy and I am now in position to buy TSLA at a discount. I will cover my trading strategy in more depth in the future, but wanted to add that I buy certain options for a reason and I always have a plan. That's why when people ask me what options I bought, I usually refuse to respond. I am ok with taking a 100% loss, because I have a plan to deal with that loss and even though I buy call options I might actually be rooting for them to expire worthless (this might not make sense to you, and that is why I don't like to disclose my positions). If TSLA went up to $200 tomorrow, I would make a nice gain. But now, if it goes down a lot, I am in position to make a lot bigger gain. Only difference is that it will take me a little longer. But I am patient and I can wait for more money in the future vs. less money now.
As it stands my Q3 options will go worthless tomorrow and my legacy bull call spreads need some work to finish at max payout. I will be sitting on the sidelines with TSLA right now and plan on taking a bigger position if the stock goes down a lot. I will re-evaluate TSLA in a couple of weeks. I took some profits on my weeklies, but kept most unhedged going into ER. I didn't lose too much of my initial investment, but my big paper profits are getting wiped out tomorrow.
It is impossible to tell how the market will react over the next couple of weeks, but I expect TSLA to go down in the short run. Then again, I am sure that Elon has some aces up his sleeve and he will dip into them to keep the price stable.
The most important take-away from this earnings report is that nothing has changed. Tesla is still on track to dominate the auto industry in the long run. Its just that it will take a little longer than some of us hoped. No reason to panic now, since fundamentals are intact.
There will be a period of consolidation, but once production constraints are resolved TSLA will take-off once again.
The way to invest in TSLA is to buy and forget. Open up an IRA or roth-IRA (if you can), put some money in it and buy TSLA at a discount. Then forget the password and don't login for the next few years. It is still a great long term play. If you are playing short-term options with TSLA then you are fighting an uphill battle.
-SG&A is growing out of control. Up 34% in Q3 vs. Q2. Tesla guided towards 20% increase in Q4. SG&A is growing twice as fast as revenue,which is not good.
-R&D up "only" 10%, but forecasted to rise 25% in Q4. Once again not good.
-GAAP loss getting bigger QoQ. I don't really care about GAAP, but the stock-based compensation worries me a lot.
-EPS guidance for Q4 same as Q3 results, which is 40% lower than analyst consensus. This is the main reason TSLA tanked today; momo traders are out.
-No 2014 guidance means no forward visibility, i.e. increased risk due to uncertainty, which leads to lower share price.
-Deliveries are growing at a 5% QoQ pace, which does not extrapolate into 100% YoY growth rate, but more 30%. We expect a lot more from Tesla, but there is no evidence to point that Tesla will be able to achieve 40k deliveries in 2014. I believe they will be able to meet that number, but the market is not so sure.
-Share count is growing too fast for my liking. Another 2m share dilution coming in Q4, which looks to me like 100% is from stock-based compensation. Even though companies strip this out to get to non-GAAP earnings it is a real cost to shareholders and I don't like that companies do this. It is cheating, but all companies do it.
I wrote a couple of weeks ago that TSLA is now a buy and hold investment and people like bonnie, who stay true to this strategy will be ok. It doesn't matter if the stock goes down to $10 tomorrow if it ultimately ends up at $1000 in the future. I also wrote that playing options during earnings does not give you a good risk/reward ratio like it did in Q1 and even Q2. It will be very hard to make money with short term options on TSLA. I recommend taking a buy and hold strategy.
That said, I played this ER mostly with weekly OTM options; they will all go worthless tomorrow and I will lose a lot of money. I am not worried though, because it is part of my bigger strategy and I am now in position to buy TSLA at a discount. I will cover my trading strategy in more depth in the future, but wanted to add that I buy certain options for a reason and I always have a plan. That's why when people ask me what options I bought, I usually refuse to respond. I am ok with taking a 100% loss, because I have a plan to deal with that loss and even though I buy call options I might actually be rooting for them to expire worthless (this might not make sense to you, and that is why I don't like to disclose my positions). If TSLA went up to $200 tomorrow, I would make a nice gain. But now, if it goes down a lot, I am in position to make a lot bigger gain. Only difference is that it will take me a little longer. But I am patient and I can wait for more money in the future vs. less money now.
As it stands my Q3 options will go worthless tomorrow and my legacy bull call spreads need some work to finish at max payout. I will be sitting on the sidelines with TSLA right now and plan on taking a bigger position if the stock goes down a lot. I will re-evaluate TSLA in a couple of weeks. I took some profits on my weeklies, but kept most unhedged going into ER. I didn't lose too much of my initial investment, but my big paper profits are getting wiped out tomorrow.
It is impossible to tell how the market will react over the next couple of weeks, but I expect TSLA to go down in the short run. Then again, I am sure that Elon has some aces up his sleeve and he will dip into them to keep the price stable.
The most important take-away from this earnings report is that nothing has changed. Tesla is still on track to dominate the auto industry in the long run. Its just that it will take a little longer than some of us hoped. No reason to panic now, since fundamentals are intact.
There will be a period of consolidation, but once production constraints are resolved TSLA will take-off once again.
The way to invest in TSLA is to buy and forget. Open up an IRA or roth-IRA (if you can), put some money in it and buy TSLA at a discount. Then forget the password and don't login for the next few years. It is still a great long term play. If you are playing short-term options with TSLA then you are fighting an uphill battle.
I worried about this, too, but my read is that a lot of the stock compensation is defined in terms of # of shares. As the share price has risen dramatically, so to has the cost of the share-based comp.
I don't know Sleepy, I think this is one of those situations where analysts and money managers reevaluate. I know we are down a ton right now, but the main thing holding price targets back was execution risk. The letter (to me) is another thing to allay that fear.
I also think Sg&a expenses aren't necessarily a negative. In this quarter Tesla had to do a ton of hiring because of international roll out. These will stabilize in due time.
Granted, in my mind I wrote off my Nov 200's but I still think there's a possibility of a run by the end of this week. Elaine Kwei, Andrea James, and Deutsche are probably reassessing and will revise up or reaffirm the hold because of gross margin progress and performing at or above their expectation. Except now there is the dimension of global demand.
I also think Sg&a expenses aren't necessarily a negative. In this quarter Tesla had to do a ton of hiring because of international roll out. These will stabilize in due time.
Granted, in my mind I wrote off my Nov 200's but I still think there's a possibility of a run by the end of this week. Elaine Kwei, Andrea James, and Deutsche are probably reassessing and will revise up or reaffirm the hold because of gross margin progress and performing at or above their expectation. Except now there is the dimension of global demand.
My friend's brother is a service technician for Tesla and said he was given 100 shares when he was hired.
I am not worried about $ loss on GAAP basis, but rather the # of shares issued as stock based compensation. 2 million shares per quarter seems like a lot, by the end of the decade their will be 200m shares outstanding at this pace.
I haven't looked into details, but Tesla guided towards 139m shares in Q4 vs. 137.1m in Q3. I assume all of that is stock based comp, since there are no other potentially dilutive events coming up; that already happened in Q2 and Q3 due to convertible note offering.
edit: hopefully as the price goes up there will be a lot less shares issued to employees due to higher share price. At the same time, as the company expands there will be a lot more employees hired who will get shares.
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There is a very good chance that you might be right.
I am not talking about the price movement for the rest of the week, but rather over the next couple of months. I see no reason to rush in and buy shares now. I am in a wait and see approach because I don't see the stock going to $200 any time soon; I hope that I am wrong because my bull call spreads need TSLA to reach $200 by Dec. expiration.
We might see a period of consolidation and I will stay patient before buying a lot of TSLA. In the mean time if I am wrong and TSLA takes off, then my BCS will make me money, so it is a win-win for me.
Another thing that worries me is that the overall market has been running really hot and is due for a pullback before the annual Santa Clause rally in December. I think that the short-term favors the shorts, but I am not willing to short the stock or buy puts. I am just thinking out loud to spur discussion.
These are just my opinions that can differ completely from the market's opinion. My TSLA exposure is going to be very low tomorrow due to TSLA tanking and I am taking a wait and see approach.
+1. The beauty of common stock is that if you're invested in a good company you can wait out the bumps in the road even if it takes a couple extra years. With options, you're not just betting on the company but you're betting on timing as well. It's exponentially more difficult.
Precisely. That is also why it is potentially can have an exponential return. I am a stock holder at heart. Bought a couple Nov. calls just to see how they worked along with a couple Jan 2015 LEAPS. The loss on the Nov calls will be close, if not, 100%. Lesson learned, luckily at not too great a cost.
What does Sleepy say 'Buy and Hold'.....Yep. Oh, and maybe get a couple LEAPS. :biggrin:
Thanks for all the brother/sisterhood on the TMC forum. Truly 'good people'.
Sleepy...Get some sleep and enjoy the beach.
100% agree sleepy. This is a long term investors play right now. I know you are short term oriented. I usually am a long term investor and make careful choices. I tried to play the short term game and got burned, but there's still a chance it will bump. After listening to this call I'm noticing the evolution of questions. It's as if Model S ramp up is a given, they focus SO heavily on the massive ramp up for NUMMI's former capacity.
I agree with you, Sleepy, regarding stock based comp. I also don't like that they take that out of the non-GAAP accounts, which they state they use for internal governance purposes. They should be careful not to treat stock grants as "free".
I support their use of non-GAAP wrt. lease accounting, but the credibility of those numbers is hurt by this practice.
(On the other hand, I understand their reasoning - as a young company they are rightly focused on cash flow, so they make non-GAAP as close to cash flow as possible).
I support their use of non-GAAP wrt. lease accounting, but the credibility of those numbers is hurt by this practice.
(On the other hand, I understand their reasoning - as a young company they are rightly focused on cash flow, so they make non-GAAP as close to cash flow as possible).
Sleepy, do you have any thoughts on why Tesla decided not to include any 2014 production guidance in the shareholder's letter? After all the information on 2014 and 2015 production goals was provided by Elon during the visit to Germany, and he did throw around some numbers, including the plnanning " kind of next generation production line for the S and X".
The second question is regarding their use of stock as a part of compensation packages. Do you think that because of this Elon has an incentive to do some targeted release of additional information to prevent further erosion of the stock price.
I am basically a long term investor, but am using margin and options as a share accumulation tool. I feel your pain as I am also likely to take heavy loss with the Nov 16 call spreads. Ironically this ER call was all about exceeding expectations on how agressively company is planning major expansion of the production, short, medium and long term, and this is, after all, what supposed to firm up valuation that is not based on current performance, but can only be justified in context of rapid company growth.
The second question is regarding their use of stock as a part of compensation packages. Do you think that because of this Elon has an incentive to do some targeted release of additional information to prevent further erosion of the stock price.
I am basically a long term investor, but am using margin and options as a share accumulation tool. I feel your pain as I am also likely to take heavy loss with the Nov 16 call spreads. Ironically this ER call was all about exceeding expectations on how agressively company is planning major expansion of the production, short, medium and long term, and this is, after all, what supposed to firm up valuation that is not based on current performance, but can only be justified in context of rapid company growth.
1. This is what I wrote in DaveT's thread a few hours before ER:
And I still think this to be the case, i.e. they don't know when supplier constraints will be solved so they can't give guidance. If they were close to resolving the issue they probably would have given guidance.
No guidance means supplier constraints will continue into early 2014.
2. I really don't think that Elon cares that much about short term price movements and I don't think he spends too much time trying to figure out how to prop up the share price. He just does his job and has pre-arranged plans for press releases. I highly doubt that he sits with aces up his sleeves only to use them when the stock needs some good news. I don't think he is reactive to the stock price at all.
Side note:TSLA is all about buy and hold. There is still a lot of money to be made day trading the stock, but you have to know when to short it as well if you are going to day trade; requires a lot of skill. If your day trading consists of buying front month call options then you will need a lot of luck; in the long run the odds are against you.
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