I'd give it a 20-25% chance of Tesla showing a GAAP profit in Q4 of $0.01 eps or higher. IMO they need to show very high ZEV income or very high revenue (ie., $740m+) with lower-than-expected deferred revenue or super high revenue (ie., $750m+) or some odd combination of all of those to make even a nominal GAAP eps possible. I would love to be surprised though as GAAP profit would quite shocking.
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I'd give it a 20-25% chance of Tesla showing a GAAP profit in Q4 of $0.01 eps or higher. IMO they need to show very high ZEV income or very high revenue (ie., $740m+) with lower-than-expected deferred revenue or super high revenue (ie., $750m+) or some odd combination of all of those to make even a nominal GAAP eps possible. I would love to be surprised though as GAAP profit would quite shocking.
When I plugged my numbers into your spreadsheet it gave me a $0.12 GAAP EPS, but there are some flaws in the model. Some of the numbers are hard coded, when they should be formulas. I did not really have time to audit your model, so that GAAP EPS of $0.12 may be off by a lot. My $0.48 EPS non-GAAP number is highly unlikely, but just wanted to point out that it is a possibility.
CyberDutchie
Active Member
I just looked at it again and you're right. Actually my eps estimate (off of $720m) shows a GAAP -$0.05 eps. So, if revenue was higher (ie., $730-740m) or if ZEV income was higher than my $3m estimate, then we could be seeing a positive GAAP eps. Hmmm, maybe I'll give it a 40% chance.
BTW, I was thinking that TSLA did $600m in revenue in Q3 on 5500 cars. And they guided towards just under 6000 in Q4.
Quick math and that gives you an estimate of $650m in revenue.
Then they announce 6900, and said that "revenue will exceed guidance by 20%". Therefore:
$650m *120% = $780m in revenue.
This is how I understand Tesla's message, but it just sounds to good to be true. That is why I used $740m in my estimates.
The worst case is that it comes in at $720m (or 20% above Q3). This would not make any sense at all since they guided towards 10% more cars, then preannounced that revenues will be 20% above guidance.
In any case $720m is the absolute bottom floor for revenues. There is no way that it is any lower than that.
$780 is a remote possibility, and where it should be based on their PR. But I just think it was really bad PR, so we will not see that number.
Quick math and that gives you an estimate of $650m in revenue.
Then they announce 6900, and said that "revenue will exceed guidance by 20%". Therefore:
$650m *120% = $780m in revenue.
This is how I understand Tesla's message, but it just sounds to good to be true. That is why I used $740m in my estimates.
The worst case is that it comes in at $720m (or 20% above Q3). This would not make any sense at all since they guided towards 10% more cars, then preannounced that revenues will be 20% above guidance.
In any case $720m is the absolute bottom floor for revenues. There is no way that it is any lower than that.
$780 is a remote possibility, and where it should be based on their PR. But I just think it was really bad PR, so we will not see that number.
Here's my view. Very excited for today's ER and CC.
Really unsure which way we'll go tomorrow. I want to be optimistic, and agree with a lot of sentiment on here, but I still feel the burn of Q3. I think most on here are OVERLY optimistic: assuming giga-factory details finalized, beat on Gaap and Non-Gaap, soaring China demand, 40k+ guidence for 2014, battery constraints relieved, etc. I agree all these things wil happen, but not all at once and not all now. We must remember what Elon has already told everyone, which is counter to these starry-eyed predictions.
I'm all but certain it was a great Q4 and that 2014 will be amazing as well, by most metrics. However, that means almost nothing when it comes to how the market reacts today/tomorrow.
Really unsure which way we'll go tomorrow. I want to be optimistic, and agree with a lot of sentiment on here, but I still feel the burn of Q3. I think most on here are OVERLY optimistic: assuming giga-factory details finalized, beat on Gaap and Non-Gaap, soaring China demand, 40k+ guidence for 2014, battery constraints relieved, etc. I agree all these things wil happen, but not all at once and not all now. We must remember what Elon has already told everyone, which is counter to these starry-eyed predictions.
I'm all but certain it was a great Q4 and that 2014 will be amazing as well, by most metrics. However, that means almost nothing when it comes to how the market reacts today/tomorrow.
It seems, Analysts are already expecting a revenue above $710 Mill and -$0.02 EPS.. I am not sure we are going to beat this very significantly.. Even Dave T's original numbers were lower than this.
Sleepyhead's numbers even though optimistic won't be a significant beat..
Final Hour: Tesla Motors Inc (NASDAQ:TSLA), QUALCOMM, Inc. (NASDAQ:QCOM) | Market News Call
Sleepyhead's numbers even though optimistic won't be a significant beat..
Final Hour: Tesla Motors Inc (NASDAQ:TSLA), QUALCOMM, Inc. (NASDAQ:QCOM) | Market News Call
In the "menu of potential good news items" you list, I don't think the reasonable person would think all of those things will happen today. Rather, it would just take one or 1.5 really good things to be the excuse the market needs to push it higher. Short interest further fuels any gaps up.
The whisper numbers are in at $0.30 non-GAAP. I think its going to be very very difficult to beat these numbers. I don't see how TSLA comes out with more than $0.25 EPS. That being said, I'm holding on to a small bullish position today in case I'm wrong. I don't see a scenario where we are below $180...
MassX1317
Addicted to TMC
Due to the high number of cars sold from the inventory fleet in the 4th quarter, I would expect the profit margin on the additional 1400 cars to be lower than the profit margin for the first 5500. Also, for anyone who financed under the Tesla trade in program, virtually none of their revenue will be recognized under GAAP in the 4th quarter. Another unknown is the number of credits sold to other manufacturers.
In terms of GAAP vs. cash basis bottom line figures...that number will become closer and closer as more supercharging stations are rolled out.
- If I bought my car in December using the trade in program, Tesla has very little revenue from that sale under GAAP in Q4.
- If a supercharger is built during Q4, Tesla has very little expense under GAAP in Q4.
Under cash basis, it's the opposite, both the revenue from the sale and the expense from the supercharger would be reported. I know there are a lot more things reported differently between GAAP and cash basis but I was just looking at it from a quick and dirty perspective.
I think they will be right around break even under both methods. It's anybody's guess, way too many unknowns beyond the number of cars sold.
What you write about superchargers recognized as expense on cash basis may be correct, but non-GAAP is not the same as reporting on cash basis. Non-GAAP treats superchargers exactly the same as GAAP. Nobody reports numbers on a cash basis ever. Therefore, your post is kind of irrelevant; and if you are using "cash basis" as a substitute for "non-GAAP" then you are incorrect.
FluxCap’s Tesla Market Strategy Update Pre-Q4 2013 Earnings
Disruptive, Revolutionary Business Model Strategies Continue to Defy Wall Street’s Short-Term EPS Obsession/Addiction
Signs of Improvement in Handling of PR
Waking the Dragon – Tesla and the People of China
Infrastructure for Building an EV Empire
Room to Grow / Building the Company Intelligently:
Cheers,
FluxCap (Adam)
Disruptive, Revolutionary Business Model Strategies Continue to Defy Wall Street’s Short-Term EPS Obsession/Addiction
There are so many simultaneous revolutions happening under Elon Musk’s guidance of Tesla Motors that it’s hard not to see them as normal any longer for those on these forums. But to the rest of the world (including many analysts), the understanding of this has only begun.
In particular, the shift to a direct, internet-enabled, high-end, Apple-style sales model, even if this was the only innovation that Tesla Motors brought to the transportation industry and in fact global transportation economy, would be huge on its own. Combined with the obvious creation of a premium, “most-desirable” product and the beginnings of a brand, this force has the potential to be unstoppable.
Supporting and creating this sales channel and model takes long-term dedication, relentless focus, hard work and a refusal to focus on the “easy way” or short term. The keys are continued advocacy with legislators at the state as well as Federal level, growing goodwill and brand power of Tesla among consumers, and frankly, largely ignoring Wall Street analysts and naysayers along the road.
Elon famously visited with over 150 members of Congress personally last year, but I believe this is not sustainable given his other responsibilities. He has a regulatory team, but he may need to beef this up going forward with talented people.
On EPS -- I still think that EPS, at this stage in TSLA's evolution (revolution?) is so low on the list of things that should be used to analyze the future value of this company that I wish analysts would not focus so much on it, but they tend to be obsessed with it. As I believe sleepy said some time ago, for a truly disruptive growth company still in the beginning stages of its trajectory, a short term "spot check" of EPS is not the best indicator of future potential.
Tesla is that rare company that literally can't seem to find a cap on the demand for its products at any price.
So then, a focus on how management is handling the growth of the company from an engineering, supply chain, sales channel, and even PR standpoint becomes more important. Indicators like margins, future guidance and especially supply chain / production optimizations as the company scales are things I am focused on.
EPS will be watched because the market is obsessed with it, but there is a bigger, better story to tell. And I think we will hear a lot of it from Elon and company tonight.
In particular, the shift to a direct, internet-enabled, high-end, Apple-style sales model, even if this was the only innovation that Tesla Motors brought to the transportation industry and in fact global transportation economy, would be huge on its own. Combined with the obvious creation of a premium, “most-desirable” product and the beginnings of a brand, this force has the potential to be unstoppable.
Supporting and creating this sales channel and model takes long-term dedication, relentless focus, hard work and a refusal to focus on the “easy way” or short term. The keys are continued advocacy with legislators at the state as well as Federal level, growing goodwill and brand power of Tesla among consumers, and frankly, largely ignoring Wall Street analysts and naysayers along the road.
Elon famously visited with over 150 members of Congress personally last year, but I believe this is not sustainable given his other responsibilities. He has a regulatory team, but he may need to beef this up going forward with talented people.
On EPS -- I still think that EPS, at this stage in TSLA's evolution (revolution?) is so low on the list of things that should be used to analyze the future value of this company that I wish analysts would not focus so much on it, but they tend to be obsessed with it. As I believe sleepy said some time ago, for a truly disruptive growth company still in the beginning stages of its trajectory, a short term "spot check" of EPS is not the best indicator of future potential.
Tesla is that rare company that literally can't seem to find a cap on the demand for its products at any price.
So then, a focus on how management is handling the growth of the company from an engineering, supply chain, sales channel, and even PR standpoint becomes more important. Indicators like margins, future guidance and especially supply chain / production optimizations as the company scales are things I am focused on.
EPS will be watched because the market is obsessed with it, but there is a bigger, better story to tell. And I think we will hear a lot of it from Elon and company tonight.
Signs of Improvement in Handling of PR
Since I wrote my Open Letter to Elon Musk last November, I have further written about my huge sense of relief at the deft and skilled handling of the latest potentially negative press situation already, but I want to re-emphasize it now. The simple paragraph produced in the Toronto fire issue belied how much work I’m sure went into creating it. It required trust and communication among engineering, marketing, sales, finance and operations teams to get that statement right. That kind of capability was not displayed in the negative press events of late last year, and this bodes very well.
What impresses me most about the handling of this non-incident is:
1) A clear, firm, concise response issued by Tesla about this BEFORE it became news. THAT is proper PR.
2) The fact that a number of forum members here called Tesla directly, and not only were they given a response on this issue, they were given the right one by the call center reps, which means someone in PR funneled this clear and concise information down to them properly and RAPIDLY, and empowered them to communicate it. That is trusting your team.
That is how you run a tight ship from a messaging point of view folks, and that is good business. It is clear that they have reinforced their PR team in some good places since I wrote about this last year and perhaps Elon has empowered some members of his team with a little more trust.
I’d like to see more evidence of this improvement, and suspect we will.
What impresses me most about the handling of this non-incident is:
1) A clear, firm, concise response issued by Tesla about this BEFORE it became news. THAT is proper PR.
2) The fact that a number of forum members here called Tesla directly, and not only were they given a response on this issue, they were given the right one by the call center reps, which means someone in PR funneled this clear and concise information down to them properly and RAPIDLY, and empowered them to communicate it. That is trusting your team.
That is how you run a tight ship from a messaging point of view folks, and that is good business. It is clear that they have reinforced their PR team in some good places since I wrote about this last year and perhaps Elon has empowered some members of his team with a little more trust.
I’d like to see more evidence of this improvement, and suspect we will.
Waking the Dragon – Tesla and the People of China
It is hard to overestimate the significance of Elon’s decision to enter the Chinese market with commitment at this stage in the company’s evolution. He knows that demand is off the charts worldwide and supply constraints are all that are holding them back, but he also is bold when others would be timid here – laying the groundwork for success in China one victory at a time is crucial. Make no mistake, the next decade could as easily belong to China as it does to the US or EU from an economic power standpoint, and Elon is positioning himself well no matter what. China is important for so many reasons, and having lived there myself for a time, I know that to get actual, official Chinese government support of your business there is so huge of a victory that it’s almost impossible to quantify. Now the government is fickle, and changes their mind without warning, but the skies in China are black with soot, and as sleepyhead has said here, they no longer have an option, they are going huge into renewables, solar and electric power alternatives to combustion. This is very good for Tesla Motors:
“The Chinese Finance Ministry is going to extend a subsidy program for consumers that want to buy electric vehicles. The subsidy program for electric vehicle purchases is scheduled to happen in 2015.
The Chinese government extended the program with the goal of hitting 500,000 hybrid or EV vehicles next year and 5 million by 2020. Tesla Motors is started accepting preorders for vehicles in China last August and is going to start delivering vehicles in China this month or next. Tesla has received positive feedback from customers in China and Europe. Shipments in China could hit the same number as U.S. shipments by next year. Tesla Motors may even build a facility in China eventually."
That's a significant committment to a lot of EV's in the world's most important emerging economy, and thus far, there is no credible competition to Tesla Motors for product desirability / customer satisfaction from any manufacturer. Traders are pricing in more sales for Tesla accordingly, but I think the full scope of this strategic move’s effect on Tesla’s valuation is only beginning.
“The Chinese Finance Ministry is going to extend a subsidy program for consumers that want to buy electric vehicles. The subsidy program for electric vehicle purchases is scheduled to happen in 2015.
The Chinese government extended the program with the goal of hitting 500,000 hybrid or EV vehicles next year and 5 million by 2020. Tesla Motors is started accepting preorders for vehicles in China last August and is going to start delivering vehicles in China this month or next. Tesla has received positive feedback from customers in China and Europe. Shipments in China could hit the same number as U.S. shipments by next year. Tesla Motors may even build a facility in China eventually."
That's a significant committment to a lot of EV's in the world's most important emerging economy, and thus far, there is no credible competition to Tesla Motors for product desirability / customer satisfaction from any manufacturer. Traders are pricing in more sales for Tesla accordingly, but I think the full scope of this strategic move’s effect on Tesla’s valuation is only beginning.
Infrastructure for Building an EV Empire
The expansion of the completely proprietary and free to customers Tesla Supercharger network has only begun, and the market just has not yet realized how powerful this will be when the network is fully built out and public awareness is higher. Getting people to understand that the supercharger network is a supplemental charging solution for long-range travel, and not the “EV Gas Station” network that is unnecessary in cars that have over 200 miles of range and that charge at home, is a hurdle that will be crossed in the coming year. This may take some marketing effort, but it is coming. This will only propel the brand, the company and the stock further when it comes to fruition. I am eager to hear more about plans and expect we might on the Q4 Earnings call.
On the CapEx / cost of building this network: it is so ridiculously cheap to buy a piece of real estate in the middle of nowhere, plop what amounts to a few electric outlets with fancy signs on them down, pour some concrete, and WALK AWAY. No gas refilling needs, no convenience stores unless already on site, no management, no real service. It’s just a free place for customers to power long-range transportation. That is unprecedented and revolutionary.
On the CapEx / cost of building this network: it is so ridiculously cheap to buy a piece of real estate in the middle of nowhere, plop what amounts to a few electric outlets with fancy signs on them down, pour some concrete, and WALK AWAY. No gas refilling needs, no convenience stores unless already on site, no management, no real service. It’s just a free place for customers to power long-range transportation. That is unprecedented and revolutionary.
Room to Grow / Building the Company Intelligently:
Marketing –
Despite Elon’s famous and mostly wise decision to have “no marketing budget” (largely meaning traditional advertising), I believe it’s time to relax that stance a bit, spend a little on some more good hires, and launch a few low-cost, high-return small marketing programs that could pay huge dividends in general public good-will and awareness, which contributes not only to demand but to political and policy advocacy – which remains a hugely important issue for Tesla.
For example, take care in a more meaningful way of the owners who are already the company’s advocates so you can gain an exponential increase in their support for a fraction of time, staff and money invested. I’m not kidding, a free T-Shirt contest or program is cheap, and “fans” can live off a free t-shirt for months. I’m one of them.
Management –
I remain concerned, perhaps surprisingly, about the health and welfare of Elon Musk. He is, without a doubt, the Steve Jobs/Henry Ford of this generation. Yet, as much as I like to indulge the fantasy, he very much is not Iron Man. He cannot be everywhere at once and be all things to all people indefinitely, which is why you hire and retain key talent. So far he has done a TREMENDOUS job at this, though I do think he needs to place a bit more trust in some parts of his team, or beef them up accordingly.
Elon Musk is the story of Tesla Motors. This is fun, and a great start to the brand, but over time, the story of Tesla Motors should become the story of all of us. It should become the story about how we reminisce about the days when we all drove around in fire-breathing combustion cars that wasted most of their stored energy to heat, polluted the planet our children live on, and were chained to one of the most destabilizing and harmful industries ever to grace our planet, the fossil fuel industry. Freedom from that, just like carrying an iPhone in every pocket, is the promise of Tesla Motors, and it is a promise that we all need to help Elon achieve. I’m confident he will rely on us to help him get there.
Thanks all for reading, and please excuse errors/omissions. I was rushing to get this out so folks would have a chance to read it if desired in advance of the call.Despite Elon’s famous and mostly wise decision to have “no marketing budget” (largely meaning traditional advertising), I believe it’s time to relax that stance a bit, spend a little on some more good hires, and launch a few low-cost, high-return small marketing programs that could pay huge dividends in general public good-will and awareness, which contributes not only to demand but to political and policy advocacy – which remains a hugely important issue for Tesla.
For example, take care in a more meaningful way of the owners who are already the company’s advocates so you can gain an exponential increase in their support for a fraction of time, staff and money invested. I’m not kidding, a free T-Shirt contest or program is cheap, and “fans” can live off a free t-shirt for months. I’m one of them.
Management –
I remain concerned, perhaps surprisingly, about the health and welfare of Elon Musk. He is, without a doubt, the Steve Jobs/Henry Ford of this generation. Yet, as much as I like to indulge the fantasy, he very much is not Iron Man. He cannot be everywhere at once and be all things to all people indefinitely, which is why you hire and retain key talent. So far he has done a TREMENDOUS job at this, though I do think he needs to place a bit more trust in some parts of his team, or beef them up accordingly.
Elon Musk is the story of Tesla Motors. This is fun, and a great start to the brand, but over time, the story of Tesla Motors should become the story of all of us. It should become the story about how we reminisce about the days when we all drove around in fire-breathing combustion cars that wasted most of their stored energy to heat, polluted the planet our children live on, and were chained to one of the most destabilizing and harmful industries ever to grace our planet, the fossil fuel industry. Freedom from that, just like carrying an iPhone in every pocket, is the promise of Tesla Motors, and it is a promise that we all need to help Elon achieve. I’m confident he will rely on us to help him get there.
Cheers,
FluxCap (Adam)
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Elon definitely learned from Q3, which is why I think that Elon will guide for 7500+ in Q1 2014 and will hide for 40k for 2014. He now understands that the market wants good guidance. Since Elon might want to do a secondary offering in the near future to raise money for the battery Gigafactory, he would want to take advantage of the shorts who piled in after Q3 and squeezing them out with good guidance for 2014 in order to cause a short squeeze. This would allow Elon to do a large secondary offering without too much dilution.
MassX1317
Addicted to TMC
I am probably wrong, but I thought there were various methods for reporting "non-gaap". I personally think cash basis and GAAP are both important measures. Any measure inbetween become more conveluted. In any case there are still non-depreciated expenses of adding more superchargers such as employing a larger work force and paying the electricity charges. I think the profit margin will be lower than expected if people just base the bottom line off the number of cars sold, but I don't think that is necessarily a bad thing for Tesla or TSLA. They are laying the ground work to become a powerhouse in the auto industry and the stock price will continue to reflect that.
carrerascott
FUEL FTR
Looks like we may start ticking up as we near the close... longs getting in/shorts covering? Gonna be an interesting 60 minutes!
Cash basis is a very poor way to present financials: in Tesla's case they would have to recognize all Model S ad X reservation deposits as revenue the moment they collect them. Then you would have to reverse that if the customer cancels and asks for a refund.
Non-GAAP makes a lot of sense, because it strips out non-recurring items and a lot of BS that GAAP forces you to do to be ultra conservative.
Good luck to those who are holding. Previous quarter earnings announcement was devastating and I'm on the sideline seeing where TSLA is going. I think that when the pre-announced numbers came in (car numbers sold), I think that there isn't much more news to send TSLA sky rocketing anymore. But who knows...
MassX1317
Addicted to TMC
Good point on the deposits, that would make the cash basis a problem when looking at Tesla. Do you know which form of Non-GAAP they are using?
I don't see a $0.35 eps GAAP profit likely. I'd give it a 1.5% likelihood.
Tesla deferred $146m in revenue (lease accounting) in Q2, and $171m in Q3.
Sure they shipped more to Europe but still they still shipped a ton to California and I don't see much indication that percentage of people signing up for Tesla-backed loans in California was much lower than Q3.
In my model, I kept the deferred revenue the same for Q4 as Q3, at about $170m since I figure they probably kept the same pace of deliveries to California and other U.S. States but just increased pace of deliveries to Europe. The fraction of deferred revenue compared to the total revenue is smaller for Q4 since there is at least 20% greater revenue, but the actual amount of deferred revenue might be the same.
But even if we reduce the deferred revenue to $130m (which I don't think is likely but we'll do it for exercise sake), and we say they had $740m total revenue... when I add these numbers into my spreadsheet, I'm showing a GAAP profit of $0.03 eps.
Hi DaveT
The Whisper Number for Tesla Q4 is supposed to be a GAAP Loss of 18 cents, Analysts estimates, a GAAP loss of 17 Cents.
Whisper Number: How Will Tesla Investors React to Earnings?
Apparently at least 2900 units of the 6900 went to Europe as opposed to 1000 of the 5500 on Q3, so unless the uptake of lease accounting became a much larger % of the total US deliveries we ought to be looking at something like the difference between 18% and 42% deliveries to Europe definitely excluded from lease accounting treatment. That ought to come to 24% of deliveries that are not denied recognition of nearly half of their value under GAAP, classing it instead as a liability. In round figures a 10% uplift in GAAP revenues that is all profits (the non application of liability). Something in the order of $70 Million extra GAAP profit. I think that sounds about right.
Q3 121.9 million shares x $0.32 GAAP loss = $39 Million GAAP loss.
This $70 Million looks on the right scale to reverse a GAAP loss, and with extra GM across the board go further than that.
I am calling a $0.25 (25 cent GAAP profit) vs analyst estimates of a -$0.17 (17 cent GAAP loss) and a whisper number of -$18 (18 cent GAAP loss).
If so this is incredibly huge and significant.
Please double check.
If 1000 of 5000 went to Europe in Q3 and 2900 of 6900 went to Europe in Q4, then we've got 4500 to US in Q3 and 4000 to US in Q4. This does reduce the Model S revenue deferred due to lease accounting, thus increasing GAAP revenue and thereby increasing GAAP profit. But I'm still getting single digit GAAP eps numbers with a $740m non-GAAP revenue number when I input them and not the GAAP $0.25 eps number you're calling for. But if ZEV income is really high, all things are possible.
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