Depreciation accounts for over half of their SG&A expenses. So IMO, yes, investments in those things explain losses quite a bit. Of course, not all depreciation are pure future investment (like the fremont factory already in use and most of the machines within). But certainly a good chunk of the depreciation comes from investments for Model 3 (like most of the 500k/year capacity paint shop, most of the GF, etc.)
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Depreciation accounts for over half of their SG&A expenses. So IMO, yes, investments in those things explain losses quite a bit. Of course, not all depreciation are pure future investment (like the fremont factory already in use and most of the machines within). But certainly a good chunk of the depreciation comes from investments for Model 3 (like most of the 500k/year capacity paint shop, most of the GF, etc.)
Not an AP bug. This exact scenario is spelled out in the Tesla user manual and the video describes exactly what the manual indicates it's not designed to handle.
Yes, but, but, that would require reading the manual for 20 seconds about a feature that literally controls your life.
Come on, who's got time for that?
The amazing part is that even after the incident people are happy to opine without any thought or attempt to check the Manual first...
That's my point. Earliest that will be is over a year from now, with most people expecting more like two years from now. Who ever heard of a stock that doesn't respond to massive news for over a year simply because everyone is waiting for the "grand event?" My point is just that something has to give. Enormous losses that are even greater than expected have to have a consequence at some point. As dead as the stock was to an obviously significant negative event, I have a hard time seeing it respond hugely positively to anything other than a huge, successful, profitable launch of the M3. Can the stock just float at 230 for another 1-2 years?
Here's another point, at the great personal risk of being forever labeled a "FUDster":
Who will blink first? Well, for the big, institutional longs, blinking means booking huge profits, since most of them have been on board for quite some time. For the shorts, blinking means booking at best a modest profit if they bought at just the right time, but for most a modest to severe loss on a position that both the mass media and recent quarterly have been supportive of their hypothesis.
I am not predictor, just fascinated at this highly unusual situation. I have watched quite a few individual stocks over the years, but this one is unique. Either some shorts or some longs are in for a world of hurt sooner or later.
Who will blink first? Well, for the big, institutional longs, blinking means booking huge profits, since most of them have been on board for quite some time. For the shorts, blinking means booking at best a modest profit if they bought at just the right time, but for most a modest to severe loss on a position that both the mass media and recent quarterly have been supportive of their hypothesis.
I am not predictor, just fascinated at this highly unusual situation. I have watched quite a few individual stocks over the years, but this one is unique. Either some shorts or some longs are in for a world of hurt sooner or later.
Some napkin math is in order (2017, before M3) On an annual run of 120K MS and MX, at ASP=$95K and GM=28%, the Gross Profit is 120 x $95 x 0.28 = $3,192M.
Assume stationary storage revenue of $500M, with GM=50%, Gross Profit = $250M
The Operating Expenses are projected at around $2B this year, assuming 20% growth, $2.4B in 2017.
The above nets about $1B in non-GAAP net profit, before the Model 3 is selling in any sizable quantities. There is life before Model 3.
Where do you see that? The cash flow statement only shows total D&A. Isn't it likely most of the D&A is in COGS?
R&D in many respects is similar to CapEX in the sense that the benefits of current expenses are recognized during future periods; but all the expenses, regardless if they relate to further development of current products or research about future products, ends up as OpEX and currently reduce the bottom line.
I suspect Elon was thinking about R&D for Model 3 and not its CapEx when he made the "otherwise profitable" comment
Sorry, but unless there's some kind of EV apocalypse, I don't see how longs will get burned. The longer you hold TSLA, the richer you're going to get, simple.
Why would longs blink?
3Victoria
Active Member
@Ichabod While you make a valid conclusion re Tesla that "this one is unique", you, and others, keep applying the usual analysis, and wondering why it doesn't apply. This is a good investment for longs, ie 5 years out. Its fluctuations are good for shorts, if they can predict the fluctuations, which seems to be very difficult.
Tesla *is* making product with a fantastic growth rate -- ie it is real, anf if it was not investing into the 3, it would be profitable. In fact, it would have been profitable even with that investment *except* for the advancement of the ramp due to the unexpected exuberant demand.
Also, I do not understand why investing in real estate and production equipment is considered 'burning cash'.
Tesla *is* making product with a fantastic growth rate -- ie it is real, anf if it was not investing into the 3, it would be profitable. In fact, it would have been profitable even with that investment *except* for the advancement of the ramp due to the unexpected exuberant demand.
Also, I do not understand why investing in real estate and production equipment is considered 'burning cash'.
Yes, longs are not paying interest to hold our position. No blinking here.
Mike Smith
Active Member
It really surprises me that so many people fail to understand the extremely simple idea that Tesla is sacrificing current earnings in order to bring the 375k model 3 pre-orders to market faster. Jim Cramer wrote an unbelievably stupid article this morning in which he suggests Tesla must me a cult because earnings expectations for this year have fallen substantially without the stock price following suit. Is the concept of a company investing in its own future more complicated than I think it is?
3Victoria
Active Member
One has to sssume that most pundits seek instant gratificatuin and cannot understand planning beyond sux months. That explains why people can't fathom that climate chsnge will bite us big time if we don't plan for it and make change.
Pretty good napkin math, and I'm not going to argue over whether or not what you are proposing will come true. It very well might. The point is that such napkin math was done at least as early as 2014, and certainly was done in 2015. There has always been light at the end of the tunnel, it's just that we can't seem to get there. It seems that the consensus that we find out whether the light is the end or the oncoming train with the M3 selling at volume. Are the big funds going to be that patient? They have been so far, but as the saying goes, past performance cannot be expected to predict future results.
If you had a cure for cancer, which would require 10 billion upfront and 5
Years to be on the market, how would you value that company?
Years to be on the market, how would you value that company?
I am doubtful of 120k S+X in 2017. I also think GM 50% for TE is way too high. Just for the hardware probably, but you also need to account for the human labor and transportation. OpEx growing 20% is way too low. All that $2.25B CapEx is going to ramp up depreciation in OpeEx, plus the additional stores they are going to open.
Come on, the distance between current reality and what I outlined on the napkin above is immensely different from similar math and what was reality in 2014 and 2015.
We are currently at about 96K MS and MX yearly run rate, with improving margins and company demonstrating fiscal discipline for two quarters now (in Q1 Opex came lower than the guidance).
Most of MX ramp is done, tuning of production lines for MX and combined MS and MX completed.
I can go on and on. Your reasoning in abstract and in generall is prudent, but IMO really not consistent with the situation on the ground.
CapEX does not accrue D&A until the asset is placed in service.
"1. Manufacturing overhead(also referred to as factory overhead, factory burden, and manufacturing support costs) refers to indirect factory-related costs that are incurred when a product is manufactured. Along with costs such as direct material and direct labor, the cost of manufacturing overhead must be assigned to each unit produced so thatInventoryandCost of Goods Soldare valued and reported according to generally accepted accounting principles (GAAP).
Manufacturing overhead includes such things as the electricity used to operate the factory equipment, depreciation on the factory equipment and building, factory supplies and factory personnel (other than direct labor). How these costs are assigned to products has an impact on the measurement of an individual product's profitability.
2. Nonmanufacturing costs(sometimes referred to as "administrative overhead") represent a manufacturer's expenses that occur apart from the actual manufacturing function. In accounting and financial terminology, the nonmanufacturing costs includeSelling, General and Administrative (SG&A)expenses, andInterest Expense.Since accounting principles do not consider these expenses as product costs, they are not assigned to inventory or to the cost of goods sold. Instead, nonmanufacturing costs are simply reported as expenses on the income statement at the time they areincurred.
Nonmanufacturing costs include activities associated with the Selling and General Administrative functions. Examples include the compensation of nonmanufacturing personnel; occupancy expenses for nonmanufacturing facilities (rent, light, heat, property taxes, maintenance, etc.); depreciation of nonmanufacturing equipment; expenses for automobiles and trucks used to sell and deliver products; and interest expenses. (Note thatfactoryadministration expenses are considered part of manufacturing overhead.)"
Manufacturing Overhead Costs | Explanation | AccountingCoach
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