Near-future quarterly financial projections

[AudubonB]

@The Accountant :
For this quarter, you have dropped your "Services and Other Margins" down to a minuscule -2%. Did I miss any explanation as to why you think they've been able to pare that down so handsomely? Surely it cannot be just from a larger denominator?

 

[The Accountant]

@The Accountant :
For this quarter, you have dropped your "Services and Other Margins" down to a minuscule -2%. Did I miss any explanation as to why you think they've been able to pare that down so handsomely? Surely it cannot be just from a larger denominator?

During the Q1 earnings call, Zach commented as follows:

"On services and other margins, these have recovered and are trending toward profitability, aided by strength in the used car business, operational improvements in service and additional service revenue opportunities that help absorb fixed overhead"​

In Q1, margins for Services & Other came in at -7.7%. We then saw an improvement to -3.7% in Q2. Since Zach believes the margins are "trending toward profitability", I am going with -2% in Q3 as I think Tesla gets to a positive margin in this segment by Q4 or Q1 next year.

 

[MP3Mike]

I checked the BTC price history and indeed, BTC closed at $35,040.84 on Jun 30 and hit $29,807.35 on Jul 20. This was significantly lower than at any time in Q2, which was the previous impairment charge.

Actually the low in Q2 would have been on 6/22 at $28,993.67. And I don't see any time in Q3 that was below that. So I'm predicting no impairment.

FYI: For Q2 I predicted a $21M impairment and it was actually $23M so I was fairly close last quarter.

 

[The Accountant]

Actually the low in Q2 would have been on 6/22 at $28,993.67. And I don't see any time in Q3 that was below that. So I'm predicting no impairment.

FYI: For Q2 I predicted a $21M impairment and it was actually $23M so I was fairly close last quarter.

I've checked Bitcoin historical prices on Yahoo, NASDAQ and CoinDesk. They all have different prices for low of the day.
Using NASDAQ I get an impairment but when I use CoinDesk and Yahoo prices I don't.
This is very difficult to estimate.

 

[AudubonB]

During the Q1 earnings call, Zach commented as follows:

​

"On services and other margins, these have recovered and are trending toward profitability, aided by strength in the used car business, operational improvements in service and additional service revenue opportunities that help absorb fixed overhead"​

In Q1, margins for Services & Other came in at -7.7%. We then saw an improvement to -3.7% in Q2. Since Zach believes the margins are "trending toward profitability", I am going with -2% in Q3 as I think Tesla gets to a positive margin in this segment by Q4 or Q1 next year.

Thank you. I have been focusing strictly on the "Service" portion of that agglomeration, a portion which, according to Mr Musk from some years ago and since referred to on occasion, that for Tesla, service is not to be seen as a source of profits. Whether or not that has changed, one can posit that those others Zach referred to are taking up the slack.

 

[Right_Said_Fred]

I looked at Rob's Q3 video and at the 24min mark and he states he does not expect an impairment.
I believe Dave Lee computed something like 100m a while ago and I saw one analyst estimate about 75m.
I did see the Bitcoin drop in July - so an impairment can come.

I however believe my forecast of $2.00 is balanced with potential upsides offsetting downsides.

Risks I see to my forecast are:
Bitcoin impairment: 75m to 100m
Taxes may be too low: 50m to 100m

Opportunities I see to my forecast are:
Average Selling Price may be too low: 75m
Margins may be better: 100m

There was talk about Tesla (and BYD) selling a lot of environmental credits to other manufacturers in China in August. Is that something you have accounted for? Or are credits, now that they are losing their importance, not something that you spend much thought/analysis on? (They have always been a bit of a black box)

 

[The Accountant]

There was talk about Tesla (and BYD) selling a lot of environmental credits to other manufacturers in China in August. Is that something you have accounted for? Or are credits, now that they are losing their importance, not something that you spend much thought/analysis on? (They have always been a bit of a black box)

I made the assumption, based on some chatter on Twitter, that the China EV credits had been earned and recorded in prior periods and were just being paid in August. I really have no evidence that this was true but it was a conservative assumption to take. So for Q3, I don't have these China credits in the financials.
This would be an upside to my numbers.

 

[The Accountant]

Thank you. I have been focusing strictly on the "Service" portion of that agglomeration, a portion which, according to Mr Musk from some years ago and since referred to on occasion, that for Tesla, service is not to be seen as a source of profits. Whether or not that has changed, one can posit that those others Zach referred to are taking up the slack.

My concern is that the margins may be benefiting mainly from the strength in the used car market and at some point that gravy train ends.

 

[AudubonB]

I should think the used Toyota Corolla, BMW 530i and so forth gravy trains end on the sooner side; to the extent that Tesla's star is ascendant AND that there appears to be a mismatch between DD and SS at the prevailing price point bodes very well for continued strength in the Used Tesla sector for a very long time. AND when it finally diminishes, it is because the manufacturing side finally is catching up to demand. Not an unpleasant outcome.

 

[Cherry Wine]

During the Q1 earnings call, Zach commented as follows:

​

"On services and other margins, these have recovered and are trending toward profitability, aided by strength in the used car business, operational improvements in service and additional service revenue opportunities that help absorb fixed overhead"​

In Q1, margins for Services & Other came in at -7.7%. We then saw an improvement to -3.7% in Q2. Since Zach believes the margins are "trending toward profitability", I am going with -2% in Q3 as I think Tesla gets to a positive margin in this segment by Q4 or Q1 next year.

FWIW, Troy distributed some estimates today; he independently arrives at a similar conclusion for services and other based on a formula backtested over past quarters. (Though he actually is forecasting a positive margin for that category.)

 

[DarkandStormy]

https://twitter.com/x/status/1449904584843948041

 

[willow_hiller]

https://twitter.com/x/status/1449904584843948041

Could you please consider cutting it out with the subterfuge? We can all see your post history. It's very obvious that you try and pretend to be a bull once per quarter around earnings.

If you're a bear, just be yourself. If you post coherent, good-faith arguments nobody will deride you just for being a bear.

But pretending to be a bull just to subtly introduce doubt or move goalposts is really tiring.

 

[SPadival]

Could you please consider cutting it out with the subterfuge? We can all see your post history. It's very obvious that you try and pretend to be a bull once per quarter around earnings.

If you're a bear, just be yourself. If you post coherent, good-faith arguments nobody will deride you just for being a bear.

But pretending to be a bull just to subtly introduce doubt or move goalposts is really tiring.

Dean Sheikh used to be a parking lot truther (i.e. visiting Tesla showrooms, counting "unsold" cars on the lot and claiming demand pwoblem). God knows what $TSLAQ is doing these days to keep themselves occupied.

 

[DarkandStormy]

Could you please consider cutting it out with the subterfuge? We can all see your post history. It's very obvious that you try and pretend to be a bull once per quarter around earnings.

If you're a bear, just be yourself. If you post coherent, good-faith arguments nobody will deride you just for being a bear.

But pretending to be a bull just to subtly introduce doubt or move goalposts is really tiring.

Is the analysis I posted wrong? I found it to be informative ahead of earnings. Are you not expecting an earnings "beat?"

 

[EVNow]

https://twitter.com/x/status/1449904584843948041

My guess is analysts think the margins are under pressure because of higher input costs.

 

[Zhelko Dimic]

My guess is analysts think the margins are under pressure because of higher input costs.

Sales analysts serve their customers best when they post positive projection, yet company can beat them.
This is the dance that makes WS happy.

 

[The Accountant]

Is the analysis I posted wrong? I found it to be informative ahead of earnings. Are you not expecting an earnings "beat?"

One part of the analysis is wrong. This part: "analysts are expecting those extra 40K deliveries to be at 5% gross margin"
If analysts are expecting $1.54 EPS, then they likely believe that costs have risen to decrease auto margins from 26% to 24% on all 241k units sold.
It's not that the incremental 40k are getting 5% margin, it's that all the units sold are getting 24%. That's how you get to $1.54.

The comment "extra 40K deliveries to be at 5% gross margin" is such a wrong conclusion, that I can only conclude that the twitter poster has no financial experience or is intentionally trying to mislead.

 

[Cherry Wine]

The comment "extra 40K deliveries to be at 5% gross margin" is such a wrong conclusion, that I can only conclude that the twitter poster has no financial experience or is intentionally trying to mislead.

Por que no los dos?

 

[The Accountant]

Por que no los dos?

. . . . Podía ser.

 

[DarkandStormy]

One part of the analysis is wrong. This part: "analysts are expecting those extra 40K deliveries to be at 5% gross margin"
If analysts are expecting $1.54 EPS, then they likely believe that costs have risen to decrease auto margins from 26% to 24% on all 241k units sold.
It's not that the incremental 40k are getting 5% margin, it's that all the units sold are getting 24%. That's how you get to $1.54.

The comment "extra 40K deliveries to be at 5% gross margin" is such a wrong conclusion, that I can only conclude that the twitter poster has no financial experience or is intentionally trying to mislead.

I think it's a tongue-in-cheek post.

Decreasing auto margins of ~2% combined with steady price increases throughout the year doesn't make a whole lot of sense. Auto margins have increased each quarter since 4Q20.

But you're right. Reading it literally is incorrect.