Q4 2015 Earnings prediction

[bonaire]

ASP should be down due to the probability that a lot of the sales were older inventory of RWD models that had been discounted a bit (news out of China regarding discounting, for instance). Plus, more 70 and 70D are settling into the flow. ASP in the low $90K is probable given that. We don't know what the sales "deals" are in other countries such as Denmark to help do the big sales push there in December. Higher ASP to come in Q1 2016 with Model X but it is also probable that they are going to sell about 15k units in Q1 as the end of year rushes appear to be over for US tax season deliveries and Denmark but the China selling profile may continue. Only problem is that in China, the wealth effect may be troubled by their, well, troubled stock market. Revs of about $1.575-1.625B probable for Q4.

 

[FredTMC]

Yes, when they calculate their FCF they didn't include the leasing deferred revenue in it (actually the numbers don't quite match with 0 deferred revenue either, seems like they take the lease revenue of that quarter in their FCF to me).

If the leasing revenue cannot be included in the FCF, then it would even be quite a challenge for them to be FCF positive in 2016 Q1. My rough calculation is under the assumption that opex and capex together are cut by 50% compared to Q3 2015, which is about 400m. 12k S with ASP 95k (some 2015 year end referral/discount sliding in, plus X drawing away some high end buyers) and 5k X with ASP 135k. Service and Energy assume to be 10% of automotive revenue. Overall GM 23% (X is getting bigger share but GM on X is still not optimized, thus the lower overall GM). Then I got about 400m too. Quite close and the delivery numbers are a tall order.

Yep, I'm of the same mindset as you for Positive FCF for Q1'16. Tesla said (Elon and Deepak) on the Q3 call that tesla was gunning for Positive FCF in Q1'16. I want someone to explain to me how they get there.

Seems to me Tesla will continue to spend 300-500M in CapEx per quarter in 2016. Maybe I'm wrong. Maybe they are planning to dramatically lower CapEx in 2016. I guess that's possible if they only have GigaFactory construction and nearly zero in factory expansion.

On the Factory side, all tooling and assembly lines are already in place for MX/MS

On the Gigafactory side, maybe in Q1 they've already added most of the "phase 1" building and the majority of expense is for Panasonic to add their initial manufacturing equipment. Not sure when Panasonic is planning on initial cell production at the GF.
Another issue is when Tesla plans to move Car battery manufacturing to the GF. But again, most of this is simply moving that tooling from Fremont to the GF. Its existing tooling.

Help me understand FCF target in Q1'16
(I wish jesselivenomore didn't go away, I'm sure he could help explain)

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Your ASP seems close enough. But the part in bold looks like a stretch. Sales increased so much, but opex halved? Also, hard to cut capex when the company is still growing.

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IMO, only the automotive revenue should be scaled up by 17400/11603, not the non-auto revenue. That was $1.16B for 11603 cars in Q3. So, $99,970 per car sold. If you do an exact calculation ( with these assumptions, of course), for Q4, we get:
17192 Model S * $100k model s non-gaap asp + 208 Model X * $144k = $1,748 M

Still not quite $1.9B. I think the ASP you are using is too high. Not sure what that is based on. Since Tesla is not mentioning the ASP in the recent letters, better just multiply the total auto revenue with the ratio of sales. We could ignore the Model X ASP, as there were only 208 of them.

On the bright side, COGS line may be lower than usual, as Tesla sold more cars than it produced (17400 vs. 15400, may be).

Yep, 1748M rev sounds realistic. I then assume they'll have well over $100M in services (was 88M in Q3'15). All those CPO cars in Q4'15 plus service center rev

 

[Fallenone]

I assume they play defense and keep RND and capex at the very minimum, that is, stop growing as fast as they did in the past two years. It is a strategy to be considered given the current macro market situation. In a bull market, you can get by with cash burn every quarter. In other time, the company usually gets burned if it still can't generate free cash flow.

It is possible to do so as RND on X is done, 3 is ready to be shown, construction of phase 1 GF is almost done and the capex for equipment is to be shared with Panasonic. So all in all, RND+capex ~ 100m for Q1 2016. The problem with this defensive play to get FCF positive is, the potential delay of the fully completed GF, which will delay the 500k per year in 2020.

Your ASP seems close enough. But the part in bold looks like a stretch. Sales increased so much, but opex halved? Also, hard to cut capex when the company is still growing.

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Yes, dramatically lowering capex and RND is the only way they can possibly be FCF positive in Q1 2016. And I think the scenario you described is likely happening now. In addition, they're likely to squeeze some more $ by stricter internal employee cost controls (things like no free lunches, limiting international travel, etc.). Achieving FCF positive on GAAP basis in Q1 2016 will be tough, very tough.

Yep, I'm of the same mindset as you for Positive FCF for Q1'16. Tesla said (Elon and Deepak) on the Q3 call that tesla was gunning for Positive FCF in Q1'16. I want someone to explain to me how they get there.

Seems to me Tesla will continue to spend 300-500M in CapEx per quarter in 2016. Maybe I'm wrong. Maybe they are planning to dramatically lower CapEx in 2016. I guess that's possible if they only have GigaFactory construction and nearly zero in factory expansion.

On the Factory side, all tooling and assembly lines are already in place for MX/MS

On the Gigafactory side, maybe in Q1 they've already added most of the "phase 1" building and the majority of expense is for Panasonic to add their initial manufacturing equipment. Not sure when Panasonic is planning on initial cell production at the GF.
Another issue is when Tesla plans to move Car battery manufacturing to the GF. But again, most of this is simply moving that tooling from Fremont to the GF. Its existing tooling.

Help me understand FCF target in Q1'16
(I wish jesselivenomore didn't go away, I'm sure he could help explain)

 

[aznt1217]

Take it for what it is.

 

[Mike Strauss]

Let's see if they can make guidance this time around.. analysts are not so sure https://www.tipranks.com/stocks/tsla

 

[uselesslogin]

Let's see if they can make guidance this time around.. analysts are not so sure https://www.tipranks.com/stocks/tsla

What guidance specifically?

 

[mmd]

On the bright side, COGS line may be lower than usual, as Tesla sold more cars than it produced (17400 vs. 15400, may be).

I was wrong about this statement. When the car is sold from inventory, its inventory value (carried at cost) will be added to 'Cost of goods sold' line. So, margins won't improve because of inventory sales. But the company could spend less to build new cars. So, still some upside for cash flow in Q4. But I am not betting on FCF positive with this saving.

 

[Fallenone]

Update, I forgot something that could tip the scale to FCF in Q1 2016, zev credits. In Q3 2015 shareholders letter, they say they won't sell zev credits in Q4. Historically, zev credits are worth about 4% of their automotive sales. If they save up Q4's zev and sell them in Q1 2016, combined with the zev in Q1 2016, it is possible for them to add 80-100m revenue with zev. Would help quite a bit. I think they explicitly made this decision to push for FCF Q1 2016.

On the downside, prepare for an ugly Q4 2015 financial report.

 

[pGo]

Update, I forgot something that could tip the scale to FCF in Q1 2016, zev credits. In Q3 2015 shareholders letter, they say they won't sell zev credits in Q4. Historically, zev credits are worth about 4% of their automotive sales. If they save up Q4's zev and sell them in Q1 2016, combined with the zev in Q1 2016, it is possible for them to add 80-100m revenue with zev. Would help quite a bit. I think they explicitly made this decision to push for FCF Q1 2016.

On the downside, prepare for an ugly Q4 2015 financial report.

ZEVs are normally front loaded. So, you can assume 2016 ZEVs possibly applying in q1 and 2.

 

[FluxCap]

Jesse, are you still here? Nice predictions above. Going to be interesting to see how the market reacts to Q4 ER. At today's share price, it's almost like the market forgot that Tesla is actually going to report huge revenues in 12 days.

 

[Fallenone]

Actually, I'm not familiar how zev credits are treated. My assumption is they get zev credits for each car they sell in CA, and they can sell those zev to other car makers for cash. But is there a limit per quarter? Does it expire? Does zev credit has a fixed value when sold or the buyer can haggle for a lower price? I would greatly appreciate it if you can help me understand this one better. Especially the meaning of them not selling any zev in Q4 2015.

ZEVs are normally front loaded. So, you can assume 2016 ZEVs possibly applying in q1 and 2.

 

[uselesslogin]

Well, here is some interesting information for the 2014 ZEV year which is Q1 2014 through Q3 2015. The short of it is that Tesla sold 44,423 ZEV credits which we know earned them $179 million if we add the values given in the corresponding shareholder letters. That represents $4029 per credit which, honestly, is excellent since the government fine is $5,000 so that is the hard cap on the value of a ZEV credit. Also of note, however, is that Tesla only has 5,000 credits in the bank. Now, the link is confusing because it shows the transfers in terms of g/mi NMOG which needs to be divided by 0.035 at least for current balances. The 44,400 credit number I obtained by dividing Tesla's credits sold in terms if g/mi NMOG by 0.035 so I can't guarantee that is 100% correct but if not it is certainly close.

Zero Emission Vehicle Credits

That also means we can conservatively estimate at least 12,000 credits per quarter so at least $50 million in revenue if they continue to be marketable but it also means they don't have any in the bank to provide for a surprise source of revenue.

 

[Fallenone]

Thank you so much for this link! This is very helpful.

A few comments:

50m per quarter from zev is what I estimated for Q4 2015 and Q1 2016.

The link shows it was last reviewed Oct 13, and TSLA usually sell out their zev each quarter as I understand it. So at the first 2 weeks of Q4 2015 they have nearly 5000 credits is quite sizable I think. If they did what they said in Q3 2015 shareholders letter, they should be sitting on a pile of credits now and still accumulating. I don't think the link here invalidate the surprise source of revenue in Q1 2016.

Well, here is some interesting information for the 2014 ZEV year which is Q1 2014 through Q3 2015. The short of it is that Tesla sold 44,423 ZEV credits which we know earned them $179 million if we add the values given in the corresponding shareholder letters. That represents $4029 per credit which, honestly, is excellent since the government fine is $5,000 so that is the hard cap on the value of a ZEV credit. Also of note, however, is that Tesla only has 5,000 credits in the bank. Now, the link is confusing because it shows the transfers in terms of g/mi NMOG which needs to be divided by 0.035 at least for current balances. The 44,400 credit number I obtained by dividing Tesla's credits sold in terms if g/mi NMOG by 0.035 so I can't guarantee that is 100% correct but if not it is certainly close.

Zero Emission Vehicle Credits

That also means we can conservatively estimate at least 12,000 credits per quarter so at least $50 million in revenue if they continue to be marketable but it also means they don't have any in the bank to provide for a surprise source of revenue.

 

[pGo]

Please review last 4 quarterly statements and notice that credits are accounted for more into early quarters and less so in latter half. 50m as zev is too much to consider for q4 regardless.

 

[Fallenone]

Thanks for the tip. For the last 4 quarterly statements (Q3, Q2, Q1 2015 and Q4 2014), the zev credit revenue were 39m (Q3), 14m (Q2), 51m (Q1), 66m (Q4), looks a bit random to me. They did allocated 90% of zev in H1 2013 though.

I don't expect them having any zev revenue in Q4 2015. They said this in Q3 letter. I expect them to hold the credits earned in Q4 and sell them, with new credits earned, in Q1 2016. In this way they can help Q1 2016 FCF for several dozens millions.

Please review last 4 quarterly statements and notice that credits are accounted for more into early quarters and less so in latter half. 50m as zev is too much to consider for q4 regardless.

 

[HiTech]

NUMBERS!!!! hahaha... Love the detail. I do same thing tracking data over the last several years, including my estimates vs actuals.
One more thing I like to add in is the stock price (my expectations and actuals). Based on this, what do you think has been the "formula" for the stock price looking back? How does that trend help you forecast what's coming (next quarter or over 3 years)?
Without this level of detail in my tracking (using some guestimating), I feel that the stock pricing has a fairly strong connection to Revenue * magic ratio = Market Value... where "magic ratio" has been going from around 10 down towards 6... thinking this will level off soon, but not sure what this factor should be based on the industry (part auto, part tech, part energy, part.....) and the fact that it's also shaking up both auto and energy business.

In terms of company growth, my estimates lead me to believe they will announce a new factory creation later this year, with added costs going into that in 2017. Then a new giga-factory to be announced in 2018. This is based on my expectations on the increase of the Gross Profits out pacing Total Operating Expenses, and the comments from leadership that they plan on being roughly break-even until closer to 2020.

Take it for what it is.

View attachment 109415

 

[aznt1217]

NUMBERS!!!! hahaha... Love the detail. I do same thing tracking data over the last several years, including my estimates vs actuals.
One more thing I like to add in is the stock price (my expectations and actuals). Based on this, what do you think has been the "formula" for the stock price looking back? How does that trend help you forecast what's coming (next quarter or over 3 years)?
Without this level of detail in my tracking (using some guestimating), I feel that the stock pricing has a fairly strong connection to Revenue * magic ratio = Market Value... where "magic ratio" has been going from around 10 down towards 6... thinking this will level off soon, but not sure what this factor should be based on the industry (part auto, part tech, part energy, part.....) and the fact that it's also shaking up both auto and energy business.

In terms of company growth, my estimates lead me to believe they will announce a new factory creation later this year, with added costs going into that in 2017. Then a new giga-factory to be announced in 2018. This is based on my expectations on the increase of the Gross Profits out pacing Total Operating Expenses, and the comments from leadership that they plan on being roughly break-even until closer to 2020.

Thanks. I just lay it out a bit different. I thought about putting stock price with it, but honestly where we are-- it will distort your judgement of how the company is actually performing for a couple of reasons:

1. The market is manic-depressive
2. Short Interest + Squeezes
3. The sensationalist news headline effects on the share price

I only things that I am really focusing on are R&D, SG&A, and Capex spend to figure out the trajectory while understanding if management is maintaining its costs most efficiently.

 

[HiTech]

Thanks. I just lay it out a bit different. I thought about putting stock price with it, but honestly where we are-- it will distort your judgement of how the company is actually performing for a couple of reasons:

1. The market is manic-depressive
2. Short Interest + Squeezes
3. The sensationalist news headline effects on the share price

I only things that I am really focusing on are R&D, SG&A, and Capex spend to figure out the trajectory while understanding if management is maintaining its costs most efficiently.

Fully agree. The only reason I have my estimates to where I think the stock price would be/has been is to see the goal longer term. I've bought in near the beginning and have mostly stayed put. Plan on being on course at least another 3 years... but that plan is based on how well the company follows the expectations they have set and my understanding.

 

[HiTech]

My expectations:
Q4 2015: total revenue = $1.575b; total cost of revenue = $1.180b; total expenses = $.5b.... for a GAAP loss of $106m (sorry, I don't understand the non-GAAP stuff... or I have it backwards... hehehe...)
FY 2015: total revenue = $4.407b; total cost of revenue = $3.308b; total expenses = $1.773b... for a loss of $674m.

My 2016 predictions: 50k Model S sales, 30k Model X sales
FY 2016: total revenue = $8b; total cost of revenue = $5.9b; total expenses = $2b... for a gain of $90m.

 

[FredTMC]

My expectations:
Q4 2015: total revenue = $1.575b; total cost of revenue = $1.180b; total expenses = $.5b.... for a GAAP loss of $106m (sorry, I don't understand the non-GAAP stuff... or I have it backwards... hehehe...)
FY 2015: total revenue = $4.407b; total cost of revenue = $3.308b; total expenses = $1.773b... for a loss of $674m.

My 2016 predictions: 50k Model S sales, 30k Model X sales
FY 2016: total revenue = $8b; total cost of revenue = $5.9b; total expenses = $2b... for a gain of $90m.

Thanks. Regarding Revenue and EPS, Wall-street only cares about NON-GAAP.

So, for example 17400 deliveries at $100k ASP is $1.74B revenue plus maybe $100M in Service dept

for EPS, I think consensus is around $0.10