Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[oneday]

Ok, I’m going to do some *very fuzzy* napkin math. I know that this is not how it actually works (real world numbers are far more complex and my numbers won’t even try to account for product mix) but serves for some kind of approximation.

As I said earlier, Tesla’s FCF was a big positive for myself in Q2. However, as people mentioned there was a huge vehicles in transit at end of Q1 coupled with the fact that Tesla also sold more than they built, which is certainly a quarterly exception. I wanted to try to *very roughly* approximate what FCF would be if this was a more standard quarter.

• Q2 deliveries: 95,356
• Q2 production: 87,048
• FCF: $613,929,000
• FCF/delivery: $6,438

Now that we have a FCF/vehicle sold number, I can calculate what FCF would be if this was a more usual quarter. Tesla being a growing company should *on average* have at least 1 week more production than deliveries. Let’s say 7,000 - 14,000 deliveries.

If Tesla kept the same FCF/deliveries ratio and only sold 80,000 cars. FCF = $515,000,000

If Tesla kept the same FCF/deliveries ratio and only sold 73,000 cars. FCF = $470,000,000

I could live with either of these numbers. In fact, I think they are both phenomenal, as I see FCF for Q2.

Obviously things are far more complex, especially considering Tesla probably expenses a lot of the European shipping costs that were hanging over in Q1 in Q1.

However, FCF/delivery should also improve as GM improves.

Hope I didn’t trigger any OCD accountant minds on this board with my fuzzy math.

 

[defc0n]

Some musings after listening to the call...

I think we are only now getting a decent idea of what sustainable demand looks like, and it looks pretty decent. I believe Elon mentioned he thinks 15k per week globally for model 3 if I recall. Seems pretty close to reasonable if you take into account 3 Giga factories worldwide producing locally to allow smaller ASP.

I’m hopeful that with Shanghai, Tesla can be profitable in the model 3 era on a yearly basis, even before the European factory.

The best news I see is that Tesla should have no issues surviving now until the model Y era, where profits will start to actually look meaningful after it ramps. There were a few times that the cash level was looking pretty iffy, but the bankwupt thesis should essentially be dead now.

The bad news is that I’m not confident you’re all going to be rich until/unless full self driving becomes a thing. And that’s extremely difficult to time correctly or know how long it will take.

My biggest disappointment over the past few years is the energy storage ramp speed. I envisioned that accelerating much faster than it has.

Will try not to get too bullish here during Q3 as my best guess is it will be a small loss.

Biggest short to medium term risk in my view as far as your portfolio goes is Tesla’s valuation relative to earnings.

As always, good luck to all!

 

[Singuy]

Not to get in a tit/tat, but a 3-5 year timeframe is inclusive of 4 and 5 years. And it's pretty presumptuous to claim to know what the share price will be in June 2020 (even if the targeted timeframe extends all the way to June of 2022).

Correct, I take back my 5 year claim because I was thinking not making a return the last 5 years vs all time high messed up. But 3 years time (from June 2017) hitting 500 is very unlikely using elon's projections. He is predicting significant loss q1/q2 because you have seasonality AND heavy cash burn for initial S curve ramp of Shanghai giga. Share price is not going to magically jump to 500 under those circumstances.

 

[mulder1231]

I'm just glad Adam Jonas wasn't on the earnings call. We can do without that level of lunacy.

I think I know what question he would have asked:

JB Straubel gives up CTO role. In our view, this may be the biggest news of the quarter. Investors may question what motivated the 15-year Tesla vet to give up direct operational responsibility at this time. Unfortunately, nobody asked this on the call.

And his second thought:

Despite Elon Musk’s comments about how the S and X will mathematically account for a smaller and smaller percentage of global unit volume, we still believe the S and X are important revenue generators and do anticipate significant refreshment (especially for the X) of the hardware/design of these products in coming years.

Head scratcher to me... why would Model X need a refresher? It’s such a unique car, way way ahead of anything you can buy today.

 

[S3XY]

twitter to EM and Tesla with some mimes should do it

 

[RobStark]

I don’t believe he said he would stop making S/X. And, of course, they have already planned the introduction of an even *higher* end car.

Yeah, and VW makes Bugattis,Bentleys and Lamborghinis too.

 

[dc_h]

Does anyone have the time of the 2 TWh lithium battery statement, or is there a story about it yet.
I assume it’s related to the Indonesia plant with CATL and LG.

 

[KSilver2000]

Maybe Profits in Q3 and very likely in Q4 - continuing positive trend.

As long as Y is still on track to ship in Fall 2020 - some weakness in Q1/Q2 should be easily overlooked in view of the looming revenue explosion and resulting massive profit boost about to hit later in the year.

Just a reminder to all longs: Tesla is around breakeven at the current point of about 100k+ quarterly deliveries (based on Q3 expectations) - once that increases to 150k including higher margin Y in 2nd half 2020, money is going to be absolutely gushing in as the company moves into deep green territory

From back of the napkin calculations, and as @neroden has said, breakeven seems to be at 10k/week.

Tesla needs to be doing ~103k/qtr deliveries this quarter and next to just make 360k. Nothing so far points to having achieved a sustainable 8k/week average yet. They’ll need a lot of incentives for both employees and buyers to have 2 consecutive record quarters of production AND deliveries IMO, hurting the bottom line.

Now they’re expected to do 500k production by June 2020. To do so, they’ll then need to ramp it up to 11,500/week starting January 1. Can they all realistically do ~50% more in five months than they are now? That’s with any potential effects from buyers holding off on a 3 for the Y.

 

[ggr]

Regarding service, my Model 3 has 18k miles and no regular service required.

Shameful admission time: My first call to service for our new (at the time) M3P was that there was stuff on the wheel that looked to me like leaking brake fluid or something. So I booked it in for the next week, but then got a call from the San Marcos service center: "we can take you tomorrow!" (Funny thing, I don't mind driving... so even though there are now two closer SCs I made the 40 minute drive to San Marcos.) No problem with the brakes. The next day I saw someone walking their dog past our house, and it stopped to raise a leg on the M3P...

 

[sparcs]

Does anyone have the time of the 2 TWh lithium battery statement, or is there a story about it yet.
I assume it’s related to the Indonesia plant with CATL and LG.

I think they're holding all the details until Battery and Drivetrain Investor Day which is expected in Feb/March next year.

Considering the way Elon communicates, perhaps some details might filter out between now and then.

 

[UrsS]

[QUOTE="
. . .
Elon: "To some degree battery day will kind of be master plan part three. Which will be how do we get from tens of GWh per year to multiple TWh per year. That's a pretty giant scale increase. That's an increase of roughly 100x. "
Elon: ... "How do we get to like 2TWh per year"
Drew?: "That's the way you have to think about it because that's what you need to do."
Elon: "Yeah exactly. In order to really make a fundamental shift in the world's energy usage, and really transform things to a sustainable energy future, if you're not in the TWh range its a nice news story but its not fundamentally changing the energy equation"[/QUOTE]

That does not sound like they are planing to produce 1 or 2 TWh of batteries, that sounds like they see the need for such amount of battery storage. The question remains:
Elon: ... "How do we get to like 2TWh per year?"
Does he have an answer ?

 

[KSilver2000]

What is incredible is that by next year their qtr run rate will be 150k. And in two years 200k.

Never before a better risk/reward on the stock price.

Don’t forget to convert from Elon standard time.

 

[1kEE]

Being bearish in of itself, need not be moronic. Its a question of why.

For eg., short term you can be bearish because you think the next quarter won't beat expectations or in the long term because there are lot of risks/unknown etc.

Yep... I keep telling myself, it’s perfectly normal for two proficient, profitable and talented traders to have contradictory opinions on the same stock, and both be “right”. One reason is time frame (stock movement / time). Another is risk management. Also overall strategy and expectations.

 

[Causalien]

[QUOTE="
. . .
Elon: "To some degree battery day will kind of be master plan part three. Which will be how do we get from tens of GWh per year to multiple TWh per year. That's a pretty giant scale increase. That's an increase of roughly 100x. "
Elon: ... "How do we get to like 2TWh per year"
Drew?: "That's the way you have to think about it because that's what you need to do."
Elon: "Yeah exactly. In order to really make a fundamental shift in the world's energy usage, and really transform things to a sustainable energy future, if you're not in the TWh range its a nice news story but its not fundamentally changing the energy equation"

You throw money at it.

 

[RobStark]

Does anyone have the time of the 2 TWh lithium battery statement, or is there a story about it yet.
I assume it’s related to the Indonesia plant with CATL and LG.

The Indonesia thing is about mining nickel and cobalt.

Not producing finished cells.

It is reportedly a consortium of CATL,LG,Tesla,VW and Daimler according to the official Indonesian news agency.

 

[Carl Raymond]

Does he have an answer ?

Yes, and it will be ridiculously ambitious, and it will likely be achieved.

If the fossil fuel industry hated/feared Elon yesterday, today those feelings are x100. Fascinating that he loves to broadcast his plans, like he feeds on the shockwaves.

 

[RobStark]

. . .
Elon: "To some degree battery day will kind of be master plan part three. Which will be how do we get from tens of GWh per year to multiple TWh per year. That's a pretty giant scale increase. That's an increase of roughly 100x. "
Elon: ... "How do we get to like 2TWh per year"
Drew?: "That's the way you have to think about it because that's what you need to do."
Elon: "Yeah exactly. In order to really make a fundamental shift in the world's energy usage, and really transform things to a sustainable energy future, if you're not in the TWh range its a nice news story but its not fundamentally changing the energy equation"

That does not sound like they are planing to produce 1 or 2 TWh of batteries, that sounds like they see the need for such amount of battery storage. The question remains:
Elon: ... "How do we get to like 2TWh per year?"
Does he have an answer ?[/QUOTE]

He said he will give a concrete plan at the show & tell battery investor day in Spring 2020

 

[StealthP3D]

Head scratcher to me... why would Model X need a refresher? It’s such a unique car, way way ahead of anything you can buy today.

The X doesn't need a "refresher". Musk says no such plan is in the works for X or S. It just got updated with new tech and a longer range.

 

[StealthP3D]

Elon: ... "How do we get to like 2TWh per year?"
Does he have an answer ?

He said he will give a concrete plan at the show & tell battery investor day in Spring 2020

Musk knows not to ask a question on a conference call that he doesn't already know the answer to.

 

[Sancho]

If we look back just 3 months, the success of Q2 is astonishing. When the Q1 ER hit, Tesla looked like it might have a serious cash crunch and a real demand problem. To counter this perception, Musk offered 4 pieces of guidance, all of which seemed questionable at the time:

1. 90-100k deliveries in Q2
2. Cash flow positive in Q2
3. Less GAAP sequential loss in Q2
4. 360-400k deliveries for year

All the info on Q2 is now in, and what happened? Everything Musk guided came to pass (or, as to 4, reiterated, and no longer looking dubious).

Musk’s credibility has been greatly boosted by this quarter’s performance.

And rhe demand and cash burn issues have been completely debunked.

I’m having trouble understanding tonight the gloom thesis. Perhaps part of the gloom is because the biggest positive news about the quarter (95k deliveries) was announced weeks ago, and now people are more focused on GAAP losses. Or perhaps it’s just that the SP is down 10% tonight, when hopes were for a boost. But c’mon peeps, short term moves of the SP are horribly manipulated. Give it a few weeks, and there is likely to be a different direction. Not investment advice!