Near-future quarterly financial projections

[Troy]

Btw., I'm wondering how you arrived at a delivery rate of 46,000 in the U.S. in Q4, despite twice as many samples and no new VIN registrations?

My 46K Model 3 delivery estimate is for NA, not US. I'm calculating 42,479 Model 3 deliveries in NA in Q3. Q4 should be higher based on historical trends. Here is what I think happened in Q3:

Btw, does anyone know whether the Fremont factory has 1 shift on Sundays or none and what the situation was in Q3?

 

[kbM3]

So my baseline for Q4 deliveries is @Doggydogworld's ~105k, which is a nice new record and probably roughly what's priced in.

But there's one big contradiction, the uptick in @Troy's Model 3 survey registrations for Q4:

View attachment 492451​

Note the increase over Q2: both the U.S. and Canada is showing a big uptick.

Part of this could be the lower inventory and longer wait time, which gives future owners more time to discover Troy's somewhat low profile survey.

But has the waiting time really increased by a factor of 2.3x in the U.S. and a factor of 1.6x in Canada?

If not then there's probably more of a Model 3 production increase than the +10% most are assuming.

If yes then the longer waiting time is good news for margins: weeks of waiting time allows Tesla sales staff to upsell customers to higher margin units, in exchange for faster delivery.

Could we be in for a big production surprise? In an earlier conference call (Q2 maybe?), Elon estimated 10k / week from Fremont alone, with Model 3 at about 8500 / week. In addition they’ve been discussing a production goal of 500k / year by the end of the year. Is there any conceivable way Tesla could hit 125k in Q4 from Fremont alone? Or if not, at least hit that rate in one week?

 

[Fact Checking]

Could we be in for a big production surprise? In an earlier conference call (Q2 maybe?), Elon estimated 10k / week from Fremont alone, with Model 3 at about 8500 / week. In addition they’ve been discussing a production goal of 500k / year by the end of the year. Is there any conceivable way Tesla could hit 125k in Q4 from Fremont alone? Or if not, at least hit that rate in one week?

With the current evidence that's a low probability outcome at this point I believe: most of the increase in the outgoing ship traffic appears to have been done at the expense of making U.S. customers wait more.

Some uptick in Model 3 production is possible or even probable over Q3: +~10% to around 90k?

Model S/X with 15k would put this at 105k total.

 

[Troy]

Here is my current calculation for Q4:

 

[EVNow]

Model S/X with 15k would put this at 105k total.

Anything so close to 360k for the year would make Tesla do a big push for higher sales. Reading tea leafs, I think they are safely above 105k that is needed for 360k in 2019. How much higher would it need to be for Tesla to feel comfortable …. I don't know. I'd guess 2 or 3k.

My estimate is still 106.5k - with a slightly different mix than I had thought - lower S&X (15k) and higher 3 (91.5k). This should maintain s&x inventory levels while decreasing 3 by 6 to 7k.

 

[Thekiwi]

600,000 cars at $4000 profit per car = $2.4 bln
2.4 times 40 equals $96 billion valuation
96 bln / 180 mln shares = $533 per share.
Pure guess estimate exercise

I enjoy discussing potential valuations based on fundamentals, thanks for chiming in.

Have to start with your $4000 profit per car figure. That is too low to be a gross profit figure, as a margin of 25% on an ASP of $50K equals $12.5k per car. I presume you were talking net profit per car, but to get that figure we have to subtract operating expenses and company wide finances (including non-auto profit/losses), and then debt & tax payments etc to come up with a net profit amount that we can start to apply an earnings multiple (like your proposed 40x).

Working through from the conservative gross profit per car figure of $12.5k (and assuming very conservatively for simplicities sake that Tesla Energy profit is zeroed out by Services losses), then gross profit on 600k cars comes to $7.5 Billion.

$7.5 Billion Gross Profit less approximately $4 Billion in SGA + R&D, leaves $3.5 Billion profit from operations, less $750k in interest comes to $2.75 Billion before income taxes. After income taxes maybe $2 Billion net profit.

$2 Billion net profit x 40x earnings multiple = $80 Billion Market cap.

However I actually think a 40x multiple is very low if the company is growing as fast as it currently is, and all the figures I have used above are very conservative I think most would agree. It is also tough to use the traditional Price/Earnings Ratio for a company like Tesla, when there is a high chance they will follow the Amazon model of using any potential large profits to instead make their products cheaper to increase the growth trajectory. For instance in my crude calculation above, I have $750 million outgoing due to income tax payments. I think there is likely a strong desire for Tesla to instead find a way to plow that cash back into the business, which would mean minimising profits somewhat in a manner that improves company growth.

 

[EVNow]

$7.5 Billion Gross Profit less approximately $4 Billion in SGA + R&D, leaves $3.5 Billion profit from operations, less $750k in interest comes to $2.75 Billion before income taxes. After income taxes maybe $2 Billion net profit.

$2 Billion net profit x 40x earnings multiple = $80 Billion Market cap.

With a low 540k cars sold in 2020, I get a 2.9B gaap profit.

With a p/e ratio of 40 - we get $629.

If we take a P/E ratio of ~ 100, like with Netflix, it would be $1,500. Given various uncertainties in all these numbers, we can expect SP to be between $200 and $2000

 

[The Accountant]

With a low 540k cars sold in 2020, I get a 2.9B gaap profit.

With a p/e ratio of 40 - we get $629.

If we take a P/E ratio of ~ 100, like with Netflix, it would be $1,500. Given various uncertainties in all these numbers, we can expect SP to be between $200 and $2000

I'm really scratching my head on where Analysts have their TSLA SP targets for 2020.
I've looked at @EVNow 's 2020 EPS projection of $15+ and @FrankSG 's EPS of $12+ and they seem solid...definitely achievable.
To be conservative, I'm calculating $10 EPS. When I use an 80 P/E ratio I arrive at $800 per share by Jan 2021 once Q4 2020 is published.
I believe the 80 multiple is on the low end, so $800 SP is the floor in my calculation.
It is going to be very interesting watching 2020 play out....that's for sure!

 

[EVNow]

I'm really scratching my head on where Analysts have their TSLA SP targets for 2020.
I've looked at @EVNow 's 2020 EPS projection of $15+ and @FrankSG 's EPS of $12+ and they seem solid...definitely achievable.
To be conservative, I'm calculating $10 EPS. When I use an 80 P/E ratio I arrive at $800 per share by Jan 2021 once Q4 2020 is published.
I believe the 80 multiple is on the low end, so $800 SP is the floor in my calculation.
It is going to be very interesting watching 2020 play out....that's for sure!

Our unstated assumptions
- Can sell all that is produced in China. Analysts don't think so.
- Can produce all that can be produced of Y. Analysts not so sure.
- Margin will continue to be flat/improve. Analysts not so sure.

In 2020 I expect TSLA to be a different type of stock. More tied to Nasdaq - less manipulation by shorts. Inclusion in S&P 500 and continued profits will make sure of this - esp. after Q2, if China sales are going well.

 

[FrankSG]

I'm really scratching my head on where Analysts have their TSLA SP targets for 2020.
I've looked at @EVNow 's 2020 EPS projection of $15+ and @FrankSG 's EPS of $12+ and they seem solid...definitely achievable.
To be conservative, I'm calculating $10 EPS. When I use an 80 P/E ratio I arrive at $800 per share by Jan 2021 once Q4 2020 is published.
I believe the 80 multiple is on the low end, so $800 SP is the floor in my calculation.
It is going to be very interesting watching 2020 play out....that's for sure!

Fwiw, I don't think it's very useful to look at Tesla's trailing P/E Ratio. Tesla is growing at such a rapid pace that I rather extrapolate a current quarter's finances and calculate an EPS and SP off of that. In that case SP should be even higher after Q4'20 finances come out.

Of course that doesn't account for seasonality, but I think Tesla's growth rate pretty much negates that. Q1'19 was more due to international delivery logistics, tax credits, and introduction of the M3 SR. These had little to do with seasonality.

 

[mrdoubleb]

Given various uncertainties in all these numbers, we can expect SP to be between $200 and $2000

Is that you Adam (Jonas)?

 

[mrdoubleb]

I'm really scratching my head on where Analysts have their TSLA SP targets for 2020.
I've looked at @EVNow 's 2020 EPS projection of $15+ and @FrankSG 's EPS of $12+ and they seem solid...definitely achievable.
To be conservative, I'm calculating $10 EPS. When I use an 80 P/E ratio I arrive at $800 per share by Jan 2021 once Q4 2020 is published.
I believe the 80 multiple is on the low end, so $800 SP is the floor in my calculation.
It is going to be very interesting watching 2020 play out....that's for sure!

I think one thing that may be happening is that they do the same math you guys do. However when they get to those numbers, their lizard brain kicks in and says "I am going to make myself the subject of ridicule in the financial community if I say little Tesla, selling 5% the volume VW will in 2020 is worth 2x as much as VW", so they discount it heavily. This is why they say analyst are not very good at forecasting growth companies taking over an industry. They are wired to analyze 100 year old behemoths, with established product lines and market presence growing 2-3% each year.

 

[Drax7]

I enjoy discussing potential valuations based on fundamentals, thanks for chiming in.

Have to start with your $4000 profit per car figure. That is too low to be a gross profit figure, as a margin of 25% on an ASP of $50K equals $12.5k per car. I presume you were talking net profit per car, but to get that figure we have to subtract operating expenses and company wide finances (including non-auto profit/losses), and then debt & tax payments etc to come up with a net profit amount that we can start to apply an earnings multiple (like your proposed 40x).

Working through from the conservative gross profit per car figure of $12.5k (and assuming very conservatively for simplicities sake that Tesla Energy profit is zeroed out by Services losses), then gross profit on 600k cars comes to $7.5 Billion.

$7.5 Billion Gross Profit less approximately $4 Billion in SGA + R&D, leaves $3.5 Billion profit from operations, less $750k in interest comes to $2.75 Billion before income taxes. After income taxes maybe $2 Billion net profit.

$2 Billion net profit x 40x earnings multiple = $80 Billion Market cap.

However I actually think a 40x multiple is very low if the company is growing as fast as it currently is, and all the figures I have used above are very conservative I think most would agree. It is also tough to use the traditional Price/Earnings Ratio for a company like Tesla, when there is a high chance they will follow the Amazon model of using any potential large profits to instead make their products cheaper to increase the growth trajectory. For instance in my crude calculation above, I have $750 million outgoing due to income tax payments. I think there is likely a strong desire for Tesla to instead find a way to plow that cash back into the business, which would mean minimising profits somewhat in a manner that improves company growth.

A p/e of 40 is a number I heard Marty Zweig use as the most one should pay for growth.
In his analysis thereafter the risk/reward is unfavorable.
It’s really arbitrary, disruptive companies easily exceed that ratio. I choose
40 for a conservative valuation.

So far the price range is in the $533 to $629 area.

 

[Rarity]

It's good to remember that over the last year, Tesla hasn't grown that quickly. 10-20%. We all expect 2020 to be a banner year for growth, but don't be surprised if the market values TSLA for a while based more on the lower growth figure.

 

[PlaidCPA]

Should we incorporate the following email from Jerome in Q4 production estimates? -


Guillen sent an email to employees in which he said that he couldn’t “be too specific”, but Tesla is working on raising output (via Bloomberg):

"The company is “making preparations” to raise output at its auto plant in Fremont, California, Tesla’s automotive president, Jerome Guillen, said in an email to employees on Tuesday. “While we can’t be too specific in this email, I know you will be delighted with the upcoming developments."
Source: Bloomberg - Are you a robot?

 

[EVNow]

It's good to remember that over the last year, Tesla hasn't grown that quickly. 10-20%. We all expect 2020 to be a banner year for growth, but don't be surprised if the market values TSLA for a while based more on the lower growth figure.

Do you mean the SP growth ?

TSLA has grown in "spurts". There was big growth in 2013 and 2014. 2015 and 2016 were essentially flat. 2017 it grew again - but 2018 was flat. Obviously 2019 has been a wild year - mainly because of Q1.

That is the reason '20 Q1 will be a very important quarter. If its good with growing deliveries and profit every quarter after Q1, we should expect a big year. Tesla has never had more than 2 quarters of profit. Assuming profit in Q4 '19 - if they can show a profit in Q1 '20 - it would have broken the trend - will get into S&P 500 and the expectation will be continuing profits after that.

 

[Rarity]

Do you mean the SP growth ?

No, I mean full year over full year revenue growth. 2019 grew only 10-20% over 2018.

 

[EVNow]

Is that you Adam (Jonas)?

Adam would put the range as $20 to $2000 - to be safe.

 

[EVNow]

No, I mean full year over full year revenue growth. 2019 grew only 10-20% over 2018.

Deliveries grew ~50%, but the Revenue only grew 10% in 2019. The main reason being reduction of ASP - both of Model 3 and greatly because of S/X unit & ASP reduction in a big way.

We are now out of that - and if we see that 50% growth in deliveries again (because of GF3 and Y), we should see a similar growth in revenue. If anything, we'll have the high Model Y ASP in '20 (like we had with 3 in '18), probably not to the same extent. I don't think Tesla will price Y high and reduce price substantially in '21 - but they will deliver higher trims early on in '20.

Ofcourse this is not to say there won't be any hiccups or downside risks. We'll continue to have
- China demand risk
- Overall margin risk
- Macro risk

 

[Rarity]

@EVNow -- Agreed on all of that. My post was most relevant to some of the P/E ratios being bandied about in this thread. Market participants may focus on the 10-20% top-line growth of 2019 rather than the 80% of 2018 and 50% (or whatever) of 2020. And that would impact the P/E that they believe is appropriate.