Short-Term TSLA Price Movements - 2016

[Perfectlogic]

Because Ford R&D vs. Tesla R&D is Apples vs. Orangutans. R&D at incumbent car manufacturers is largely iterative on *existing* and mature product lines. How can you reasonably roll Tesla's R&D--the lion's share of which is currently on Model 3--into Model S COGS? That would give you a very distorted view of the company's cost structure!

Ford is working on newer models too, but yes clearly there is a difference in scale of sales. My point on the different accounting methods still stands though, some of the R&D is for the S and X.

 

[maoing]

Tesla is at a stage of it's growth where the company is supposed to "lose" money due to big investments in R&D of new and groundbreaking product lines and very quick scaling up of production capability. I personally feel the term "losing money" to be misleading. It is certainly correct that they are net unprofitable, as they should according to the game plan, but to equate that with "losing money" doesn't sit right with me.

Tesla could had been lost a lot less money if TM can execute better on model X and model S demand is stronger. Remember Elon Musk first called FCF+ from Q3 of 2015 back to September 2014.

 

[sundaymorning]

From reading yesrderday's post, we can see who got left behind... from reading this evening's post, we can tell who is getting burned very badly.

 

[Johan]

Tesla could had been lost a lot less money if TM can execute better on model X and model S demand is stronger. Remember Elon Musk first called FCF+ from Q3 of 2015 back to September 2014.

This is like saying Tesla could have made more money if the made more money, which is of course a statement which is as true as it is pointless.

 

[Perfectlogic]

I have looked at the numbers too and you are not wrong but I am pretty sure this will change significantly.

It just does not make sense that they can't turn a profit on a $10B revenue vertically integrated production line at a yearly rate of 100k cars from one factory with $90k cars especially with falling battery cost. Why would their costs be so much higher than any other manufacturer that would be highly profitable with $90k cars in those volumes? The answer I think is that it costs a lot to grow and that they have not as good supplier contracts, which should change with higher volumes. It is either that Tesla is reckless spenders or that it really does cost a lot more in the beginning when you tool up and ramp production as a new company. I think the latter is much more likely. A third option is that you can't be profitable at that level of production which is clearly false.

I also think S+X soon will reach higher than 2k per week in 2017 and 2018 and that Model 3 will drive GM for S and X because of Tesla gaining importance at suppliers.

I agree it does seem weird that Tesla can't be profitable at this point, this is the main reason I sold my shares last year, their margin just haven't gone up as far as I had hoped (for the record I'm not bearish, pretty neutral at this price point). When you look at their income statement it just doesn't look great, like I said both their R&D and their SG&A would have to come down massively for them to show a profit, clearly a lot of the R&D is for the model 3 which isn't relevant for the S and X profitablity, but the lion's share of the SG&A is relevant to their current sales.

What it looks like to me is that Elon is trading profitable for sale volume hoping to then get the economies of scale that will let the margin go up later.

 

[SBenson]

9.6m shares got priced at $215 each.

 

[MitchJi]

Very entertaining exchange between Drew Cupps (Cupps Capital Management) and Gordon Johnson (Axiom Capital Management - I guess the name explains the ease with which he makes outlandish claims without feeling a need for any proof).

The contrast in facial expressions and tone between those two as well as CNBC hosts are priceless.

Cupps and Archambault both believe that TSLA will not need to raise additional capital between now and the M3 launch. If that's correct IMO that's a huge positive catalyst.

9.6m shares got priced at $215 each.

Up $3.40 after market

 

[Papafox]

9.6m shares got priced at $215 each.

Source? More info please

 

[maoing]

This is like saying Tesla could have made more money if the made more money, which is of course a statement which is as true as it is pointless.

I just want to point your logic hole that "growth" isn't the excuse to lose so much money. Tesla should had been doing much better job than this.

 

[Johan]

9.6m shares got priced at $215 each.

Nice! Would those 9.6m million include the shares Elon sold or not? What is your source? If it's 9.6m newly issued shares $215 then that's just slightly above $2 billion raised!

 

[Johan]

I just want to point your logic hole that "growth" isn't the excuse to lose so much money. Tesla should had been doing much better job than this.

According to you yes. According to the market who just apparently bought up 9.6 million newly issued shares at $215 they've done an OK job despite losing all that money.

 

[The Blue Owl]

Nice! Would those 9.6m million include the shares Elon sold or not? What is your source? If it's 9.6m newly issued shares $215 then that's just slightly above $2 billion raised!

The 9.6m does include Elon's share. According to the prospectus, Tesla's offering is 6.8m. At $215 per share, it means a raise of $1.46B.

 

[Fallenone]

I agree it does seem weird that Tesla can't be profitable at this point, this is the main reason I sold my shares last year, their margin just haven't gone up as far as I had hoped (for the record I'm not bearish, pretty neutral at this price point). When you look at their income statement it just doesn't look great, like I said both their R&D and their SG&A would have to come down massively for them to show a profit, clearly a lot of the R&D is for the model 3 which isn't relevant for the S and X profitablity, but the lion's share of the SG&A is relevant to their current sales.

What it looks like to me is that Elon is trading profitable for sale volume hoping to then get the economies of scale that will let the margin go up later.

It's not the gross margin not high enough, it's the depreciation of their CapEx over the past years burdening their OpEx that gives them negative net profit. A lot of this depreciation are coming from previous CapEx from their investment in Model 3. Increasing revenue with Model 3 is key, although ramped up X would be able to turn them to operating profitable already.

 

[Johan]

The 9.6m does include Elon's share. According to the prospectus, Tesla's offering is 6.8m. At $215 per share, it means a raise of $1.46B.

Thanks. I just figured maybe there was some new info out that the offering had been oversubscribed and thus increased?

 

[maoing]

According to you yes. According to the market who just apparently bought up 9.6 million newly issued shares at $215 they've done an OK job despite losing all that money.

People buying TSLA new shares might be Tesla shorts too. 30M shares borrowed for shorts, so this is good opportunities for them to cover bulk of short position without pushing up the SP. I'm just kidding

 

[The Blue Owl]

It's not the gross margin not high enough, it's the depreciation of their CapEx over the past years burdening their OpEx that gives them negative net profit. A lot of this depreciation are coming from previous CapEx from their investment in Model 3. Increasing revenue with Model 3 is key, although ramped up X would be able to turn them to operating profitable already.

This has been discussed before, and my understanding was that a part (most?) of the depreciation would be counted as COGS, since it's mostly for long-term productive assets.

 

[Fallenone]

9.6m shares got priced at $215 each.

So no over subscription

 

[Fallenone]

This has been discussed before, and my understanding was that a part (most?) of the depreciation would be counted as COGS, since it's mostly for long-term productive assets.

No, according to their SEC filings, only the tooling counts as COGS. All other depreciation goes to OpEx (mostly SG&A).

 

[The Blue Owl]

No, according to their SEC filings, only the tooling counts as COGS. All other depreciation goes to OpEx (mostly SG&A).

I was assuming the tooling and buildings would account for the bulk of the capex and that those would be depreciated as COGS, so I was assuming the depreciation included in SG&A would be significantly smaller.

(Or so I thought; I could be wrong.)

Edit: dropped workers' salaries from capex.

 

[Perfectlogic]

It's not the gross margin not high enough, it's the depreciation of their CapEx over the past years burdening their OpEx that gives them negative net profit. A lot of this depreciation are coming from previous CapEx from their investment in Model 3. Increasing revenue with Model 3 is key, although ramped up X would be able to turn them to operating profitable already.

The depreciation of their entire PP&E was $100M last quarter, is 1/3rd of their quarterly net loss. Their equity went down $113M + another was it $300M they got before the quarter ended in M3 deposits? That would be more than $400M in equity lost. In Q4 they lost $231M in equity. These huge equity losses suggest that they are a far cry from being profitable from operations.