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Short-Term TSLA Price Movements - 2013
- Thread starter Robert.Boston
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smorgasbord
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MS has always discounted what Tesla has promised, and you can't fault them for being conservative in their recommendations. After all Tesla didn't make it's original 2012Q4 numbers, and we we still don't know Tesla's gross margin for the quarter. I don't expect MS to recommend based on Tesla's own numbers until Tesla shows years of consistently hitting those numbers.
Citizen-T
Active Member
I don't expect them to believe Tesla's forecasts either. I do expect them to update their model based on what actually happened and what the new trend looks like. That alone will force them raise their price target.
Norbert
TSLA will win
I'd put that differently. I'd say that while Tesla made those numbers only a bit later, they did get to those numbers. And they did beat MS's numbers, earlier, so far.
The problem with all of this is you're using Morgan Stanley's estimates hahaha. Sorry... banker joke. I go off Goldman Sachs ones. Target price is at $50 and it hasn't been revised yet.
it's amazing to me that more analysts haven't taken up numbers.
the research i posted in the other thread indicates pretty clearly that tesla will have to do at least +4c non-gaap eps to have positive gaap eps. yet the consensus non-gaap estimates are still negative?
my research also indicates that margins are probably going to come in 19%+, with implied automotive margins ex credits averaging around 4%+. margins should be starting to close on double digits by the end of the quarter. these are relatively straight forward logical implications of the updated guidance and units.
obviously this means they are well on track to reaching the stated 25% objective for margins-ex-credits by the end of the year.
yet none of the analyst reports i've seen have modeled this kind of progress.
the biggest question mark i have is the reservations rate, which i addressed in another post. even those seem to have accelerated in the last few weeks, so they should have positive commentary around the reservations numbers for the upcoming period.
Norbert
TSLA will win
I'm not using MS's numbers. I'm using Tesla's, except that I allow delays, and my own "price target" (for within 12 month) would be significantly higher than $50.
What are Goldmann-Sachs numbers in more detail?
Citizen-T
Active Member
I justified my reasoning for looking at Morgan Stanley's numbers first by saying that a change in their estimate often moves the stock 10% or more. I don't care whether their estimates are any good or not. I care about who can move the stock price and what they are going to do.
I would be interested to know what GS thinks about production and margins though.
I would be interested to know what GS thinks about production and margins though.
Norbert
TSLA will win
Yes, it seems analysts are behind reality, Tesla is doing better than any predicted. I'm wondering: is there an exception?
Citizen-T
Active Member
There were one or two price hikes, but not from any of the big boys. I think at this point they must be waiting for more details from the quarterly report and conference call.
that's similar to my thinking and agree with luvb2b- been really surprised at lack of analyst 'lack-of-belief' in the numbers; As a long TSLA I'm clearly biased though
I expect the analysts are waiting to see whether Tesla's Q1 profits are founded on fundamentals of the business or some one-off accounting matters, e.g. with the ATVM loan.
Norbert
TSLA will win
Yeah, some reporters/commenters/bloggers came up with all kinds of fancy ideas for how to doubt that the quarter had a straightforward profit.
smorgasbord
Active Member
I think general consensus is that overall profitability was enabled by the selling of ZEV and GGG credits (state and federal). Most people think that's not sustainable. It certainly won't scale - once other manufacturers, like Honda, have enough of them they won't buy anymore, so later Model S's this year won't have the same level of credits sold per car.
However, I think Tesla will continue to refine their manufacturing prowess and gain efficiencies that compensate for the loss of revenue from these credits. But, I could see where other people see uncertainty there, especially with today's many-thousands-of-dollars per car income from them.
Norbert
TSLA will win
"sustainable": In fact, Elon has expressed that the following quarters are not yet certain to be profitable as well (speaking in the conference call for Q4 2012), although they may very well may be. However, it also why Elon had stressed that end of 2013, they will be able to achieve 25% margin *without* the credits. Several analysts had questions about this point.
i posted a table in the earnings thread - a logic exercise based on the new guidance that showed (among other things) that automotive-ex-credit gross margin was probably at least 4% average for the quarter. yes credits carried them to a profit. but assuming linear improvements in margin through the quarter it means they probably ended the first quarter above 8% ex-credit gross margin. i would expect in the 2nd quarter they can get that number to at least low double digits to reach the 25% you/elon mention.
meanwhile most of the world is asking themselves if tesla can make money making cars.
I am interested in one-off effects that may affect coming quarters. It is sometimes hard to distinguish cash flow effects from accounting effects, but for a startup both are important.
Start of European deliveries: I think of this as splitting up the current US delivery stream of 500 cars/week into two: A 300 car US delivery stream and a European 200 car delivery stream. The EU stream takes 3-4 weeks longer from factory to delivery, and so there is a one-off hit to cash flow while the shipping pipeline fills up. The 3-4 week shipping pipeline is approx. 600-800 cars, i.e. $40-50 million. This hit will start at the time when the first car in the European production would have been delivered if it were sold in the US. With EU production starting June, it sounds like this means that the cashflow dip happens in July. The next question is how this hits the P&L. Assuming that Tesla accounts for its completed goods at manufacturing cost, it is only the margin on each car that hits the P&L. With 25% gross margin, that means a Q3 P&L hit of approx. $10 million. What I don't know if whether there will be any impact on the credits for the export cars.
Service vehicles: In Q2 (?) Tesla took 80 P85s out of the delivery stream and put them in the service center as loaner cars. Assuming an $85k sales price, this is a $6-7 million hit to cash flow. The cars are of course put on the balance sheet at manufacturing cost, which means that the P&L consequence is only the lost margin plus quarterly depreciation. So this will only be some $1.5-2 million in Q2, and negligible thereafter ($0.35 millionish, assuming 5 years depreciation of the cars).
Advertising: I am pretty sure that Tesla will start advertising at some point in time, to generate demand to match the manufacturing capacity i 2014 (whether that capacity is kept at 20k/yr or, more likely, increases).
Screwups: Screwups always happen. A recall would be the worst, of course, but there is a category below that of costly-but-not-critical stuff. Hard to predict, and also not always something outsiders learn about (except indirectly, by scratching heads over somewhat worse-than-expected results.
Feel free to add to the list.
Start of European deliveries: I think of this as splitting up the current US delivery stream of 500 cars/week into two: A 300 car US delivery stream and a European 200 car delivery stream. The EU stream takes 3-4 weeks longer from factory to delivery, and so there is a one-off hit to cash flow while the shipping pipeline fills up. The 3-4 week shipping pipeline is approx. 600-800 cars, i.e. $40-50 million. This hit will start at the time when the first car in the European production would have been delivered if it were sold in the US. With EU production starting June, it sounds like this means that the cashflow dip happens in July. The next question is how this hits the P&L. Assuming that Tesla accounts for its completed goods at manufacturing cost, it is only the margin on each car that hits the P&L. With 25% gross margin, that means a Q3 P&L hit of approx. $10 million. What I don't know if whether there will be any impact on the credits for the export cars.
Service vehicles: In Q2 (?) Tesla took 80 P85s out of the delivery stream and put them in the service center as loaner cars. Assuming an $85k sales price, this is a $6-7 million hit to cash flow. The cars are of course put on the balance sheet at manufacturing cost, which means that the P&L consequence is only the lost margin plus quarterly depreciation. So this will only be some $1.5-2 million in Q2, and negligible thereafter ($0.35 millionish, assuming 5 years depreciation of the cars).
Advertising: I am pretty sure that Tesla will start advertising at some point in time, to generate demand to match the manufacturing capacity i 2014 (whether that capacity is kept at 20k/yr or, more likely, increases).
Screwups: Screwups always happen. A recall would be the worst, of course, but there is a category below that of costly-but-not-critical stuff. Hard to predict, and also not always something outsiders learn about (except indirectly, by scratching heads over somewhat worse-than-expected results.
Feel free to add to the list.
Norbert
TSLA will win
This would be balanced by the "end of european deliveries", especially if they switch back to delivering in the US in the same quarter. And then do the same thing next quarter.
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