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Short-Term TSLA Price Movements - 2015
- Thread starter Robert.Boston
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I love it how we naively suppose the best of people, but when an analyst following Tesla for some time, who`s job is to follow Tesla and also read the ER and asked questions in the CC yesterday writes up something like that, I think we just have to accept they have an agenda. I can`t explain this any other way. He has to know better.
chickensevil
Active Member
What amazes me is that they had a CapEx of almost half a billion yet their cash flow was only down by like 150M$. Sure cash flow is still in the negative territory, and it is actually worse than it has ever been, but given the amount of spending on CapEx alone (nevermind the almost 200M$ spent on OpEx) and they didn't wipe out their bank account? This to mean speaks very loudly to their current GM's which are at really great levels. If they had dumped their CapEx spending by 200M$ and only invested half of what they did this past Quarter, we wouldn't even be having this discussion... but then, people would complain that they aren't expanding fast enough (actually people are complaining about that even at their current CapEx spending... but you know...) and as others have said they raised the 2B$ in cash specificially to spend it on expanding their operations, so why is this even a problem?
This is why I can't wait for Q4 because the last complaint the bears can somewhat legitimately muster is this mantra about "crazy cash spending into bankruptcy" which is why these same people are the ones saying they will do another capital raise / round of funding...
doggusfluffy
Closed
That's funny, they changed the video link in the Bloomberg story. It had Corey Johnson and the Kelly Bluebook tool commenting in the video I saw when I posted the link. I was going to rewatch it to catch his name, then comment hilariously on his Tobias Funke hairplugs...but got an entirely different video embedded.
That`s what I don`t get either. That 2Bn was raised to be spent on GF, SC expansion, new models, etc. Now that they are spending it on that, they are suddenly "bleeding money". Is this really that hard to understand?
The issue is that they will be walking on fine line if they finish spending $1.5 B this year. No problem with spending as it is required. But you need cash in hand to run the operation. Where is the math?
Furthermore, Jonas says that cash outlays were above his (arbitrary) estimates. FYI Jonas, when you build a factory, the *vast* majority of costs are front loaded. Why he would automatically assume that the same quarterly cash outflow rate would remain constant, especially given increased cashflow from operations as the lines ramp up production significantly for Model S and X, is beyond me. They aren't buying another Gigafactory every quarter, Adam!
chickensevil
Active Member
Yeah, that doesn't fit... because that assumes that they also in turn sell 0 product. Yeah, if each quarter they are spending half a billion dollars and they only have 1.5B$ in the bank they would be broke at the end of the year... except for that little tiny income stream from the Model S which is amounting to an income of like 263M$. So really if they stick to the same income stream and the same cash burn (neither of which is actually to stay the same, cash burn is expected to go down which income is expected to go up in Q4... but you know... let's go with it) That would be a burn of around 250M$ each quarter which means they would run out of cash in 6 quarters... not "by the end of the year"... And all of this is silly hyperbole that is meaningless as soon as you consider *how* and *why* and *what* they are spending all their cash on right now... namely... Fremont upgrades for the Model X. All that spending will be finished in Q3 as the last of the upgrades fall in place and there will be (should be) no more planned spending at Fremont on that level until the Model 3 starts to get ready which will be 2017! So 2016 is going to be a FANTASTIC year for low spending and high cash incomes!!!
Silly AJ and his stupid agenda...
Well, they're reiterating Q4 cashflow positive, and the vast majority of the Model X Capex is probably done at this time (they have to be due to time needed for tooling and preparing for a ramp up).
It's also not like they're going to have stationary storage sales or 10k+ cars and an unloading of a built-up CPO inventory and China inventory in the next couple quarters, either!
I think there is no pop in the stock because all the positives confirmed in the ER will only be realised in Q4 at the earliest (currency effects on GM drawing down, model X deliveries, positive cash flow, 55k guidance, storage revenue, ...). Everyone who is long on Tesla already assumed those things as a given. Everyone who's on the fence still has to live with 6 months of uncertainty, therefore there is no singular buying impulse coming of this report.
The biggest bone for new investors are the 38k consumer and 2500 commercial reservations for the energy storage products. But there are three huge qualifications to those numbers. One these reservations are deposit-free, two they were generated through unprecedented press coverage and three they'll basically producing them at break even for maybe the next 12 months.
Having mentioned the positives, we can't forget the impact of the negatives on short term prices, because they hit the ongoing quarter. There is the slight lowering of Q2 delivery guidance on the one hand and the negative currency effect. I hesitate to add it, but I also think most investors will instinctively assume margins on a 70D is lower than on a 85D. With the 70D taking a much larger share of overall production than the 60D with even worse gross margin this could be another reason to take a wait and see approach.
The biggest bone for new investors are the 38k consumer and 2500 commercial reservations for the energy storage products. But there are three huge qualifications to those numbers. One these reservations are deposit-free, two they were generated through unprecedented press coverage and three they'll basically producing them at break even for maybe the next 12 months.
Having mentioned the positives, we can't forget the impact of the negatives on short term prices, because they hit the ongoing quarter. There is the slight lowering of Q2 delivery guidance on the one hand and the negative currency effect. I hesitate to add it, but I also think most investors will instinctively assume margins on a 70D is lower than on a 85D. With the 70D taking a much larger share of overall production than the 60D with even worse gross margin this could be another reason to take a wait and see approach.
Their gross profit on revenues was $260 million in Q1. Even if you factor in cost of sales & admin at $195m, they still made $65m. How much they spend on R&D is up to them. It`s not like they can`t pay the bills if they spend all of that 1.5B. They have a 26-28% gross margin on their main product (GAAP vs. non GAAP as I recall) and record sales each quarter.
I think there is money to be made in the short term on this Jonas wackiness, but I'm not sure about timing. It's like he decided to ignore cashflow from operations, which is also going to more than double by end of year. Silly stuff. Maybe Morgan Stanley has some clients that want to snag some cheap TSLA at the open?
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
In theory there should be no connection between the investment branch an analysis branch of a bank. In reality the analysts can depressed stock price for some time, allowing the investment part of the bank to accumulate shares and then they can revise their analysis.
I agree with Q4 being cashflow positive as they have been saying since 2 quarters now. If someone has an idea how positive is that going to be, that'll help. But before that, and as we have seen with PD or any other Model S modifications, they ALWAYS have unknown amount of issues. I do expect problems with Model X launch as its entirely a new vehicle. Tesla cannot anticipate NO issues and have less cash on hand. They need buffer IMO for some black swan event or with the ramp of the X.
ev-enthusiast
Active Member
chickensevil
Active Member
The first assumption is somewhat logical, but this... this is a flawed thinking. Yes, there is more demand for the 70D than the 60 ever had, but they clearly stated that the 70D isn't affecting sales of the 85/85D/P85D. All they essentially did is increase their addressable market, not rob sales from their all-start products.
Also, It may be that the 70D is actually roughly the same cost to make as the 60 given that they are making smaller motors that are going in the front and back of the car instead of one big motor in the rear. It shares the same buildout as the newer frame of the 85D/P85D which is likely built and designed more efficiently than the original frame ever was. The only thing that might cost more for them is the added module in the pack that brings the size from 60 to 70kWh. But the rest of the car is very likely made in a more efficient way and the 5k cost increase is all they needed to hold the margins.
Also consider that now you get a better car for 75k when you would have been forced to get an 85D previously, and you have an extra 10K to spend on high margin options. Throw in a seat upgrade and the sound studio and now Tesla likely just got 50% margins (or more) on you for that 10K instead of the likely 30% margins that they would have got out of you if you just went with a base model 85D on that same 10K.
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