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

[ReflexFunds]

Bear highlights:

• Declining profit despite growing revenues. Underlying profits are higher, non cash NCI and reg credits are the only things down.
• Still no China funding: "We expect to arrange financing through local banks in China to fund most of the capex for Gigafactory Shanghai.". $3.7bn unrestricted cash on balance sheet and $1bn per Q cash flow before expansion capex.
• What's happening with Accounts Receivable? Down QoQ as they guided.
• Why is interest income not keeping up with cash? Especially when interest rates went way up towards the end up Q3? There are many reasons but who cares.
• No mention of plans for Semi.
• No mention of 35k Model 3
• No mention of full self-driving
• Model Y won't be in 2019. Y mass production wasn't expected in 2019, but it sounds like they aim to have the production line in good shape this year.
• No mention of Roadster
• Installed fewer Solar Panels in Q4 than any other quarter in 2018. Have you heard of winter?

Remind me of how they're going to get to 1M cars per year in 2020?

 

[Chocochip]

"Barring unexpected challenges with Gigafactory Shanghai, we are targeting annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020. "

http://ir.tesla.com/static-files/c5722c36-29db-4e33-a9a7-c33f254aff04

10k is still the goal, but not this year.

10k is still the goal, but not from Fremont.

 

[KarenRei]

They mention beginning production on Model Y and Semi this year

Tooling for them this year.

 

[MarcusMaximus]

Well:

• Q2'18: -$717m
• Q3'18: +$311m
• Q4'18: +$140m

So the threshold for Q1'19 is +$260m - within possibilities.

There's a few potential tailwinds for Q1, but most should help cash flow, not GAAP profits.

Inclusion criteria is based on GAAP, then?

 

[KarenRei]

10k is still the goal, but not from Fremont.

For the obvious reason that a China Gigafactory used to be a longer-term concept. There's no point to 10k in the US anymore.

 

[Chocochip]

Bear highlights:

• Declining profit despite growing revenues
• Still no China funding: "We expect to arrange financing through local banks in China to fund most of the capex for Gigafactory Shanghai."
• What's happening with Accounts Receivable?
• Why is interest income not keeping up with cash? Especially when interest rates went way up towards the end up Q3?
• No mention of plans for Semi
• No mention of 35k Model 3
• No mention of full self-driving
• Model Y won't be in 2019
• No mention of Roadster
• Installed fewer Solar Panels in Q4 than any other quarter in 2018

Remind me of how they're going to get to 1M cars per year in 2020?

Yeah, totally, TSLA is a zero! You should definitely short some more!

 

[MD70]

This is interesting, bodes well for demand going forward.
“Our trade-in data suggests that consumers are significantly changing their purchasing habits in order to buy a Model 3. Of all trade-ins we’ve ever received from customers buying a Model 3, only 17% are other mid-sized premium sedans. Perhaps more surprisingly, almost 60% of these trade-ins are non-premium vehicles. We are also seeing that a significant number of Model 3 buyers are trading down in size from a larger car or a SUV to a Model 3. Designed from the ground up to be electric, Model 3 has more interior space than its gas-powered equivalents. Interestingly, Model S accounted for only a small portion (4%) of total Model 3 trade-ins.”

 

[Buckminster]

M3 & Y sharing 75% of components.

 

[TradingInvest]

Well:

• Q2'18: -$717m
• Q3'18: +$311m
• Q4'18: +$140m

So the threshold for Q1'19 is +$260m - within possibilities.

There's a few potential tailwinds for Q1, but most should help cash flow, not GAAP profits.

So joining S&P 500 after Q1 is still possible. If not, then after Q2 the GAAP requirement will be met. In the long run it doesn't matter, TSLA will join the index sooner or later.

 

[Hogfighter]

Some tidbits from the update letter:

• Both Q4 operating cash flow and profits are artificially lower by $141m, because the land purchase capex in China apparently had to be accounted as opex, because it's a 50-year lease, not ownership.
• So the real operating cash flow was not $1.23b but $1.37b - this is strong.
• Very nice overall opex drop - didn't expect this.
• Payables expansion was minimal - and there's further growth in receivables, which is the main reason why cash flow wasn't even stronger. This might help Q1 cash flow.
• Almost zero ZEV sales - rainy day fund until the Trump cloud passes?
• European sales appear to be strong, so they'll take the in-transit pill in Q1 to fill the delivery pipeline. This is the reason for the "tiny Q1 profit" guidance.
• They are guiding Q4'19-Q2'20 ramp up to 3k/week of Model 3 production in China - very aggressive.
• They are guiding 7k/week at Fremont by end of 2019.
• Capex guidance is good, they can cover it all with internal cash.

Do you think they are storing up their ZEV credits and minimized payables expansion to use as ammo to boost Q1 to be profitable? Seems that way to me

 

[ReflexFunds]

Do you think they are storing up their ZEV credits and minimized payables expansion to use as ammo to boost Q1 to be profitable? Seems that way to me

I think payables is saved for Q1, but I expect nobody is buying ZEV credits until we get resolution of California's court battle over the EPAs attempt to end the program. It should be much easier to get to Q1 profitability if they are expecting potential for ZEV sales.

 

[NicoV]

European sales appear to be strong, so they'll take the in-transit pill in Q1 to fill the delivery pipeline. This is the reason for the "tiny Q1 profit" guidance.

For me this is the most important thing in the shareholder letter. It’s the main reason for the bad Q1. More importantly, it is a bitter pill they only have to swallow once (and they should have already done this much earlier, they even said that they would do this a year or two ago, but never did). All is well, Tesla grows as expected. Imagine Q2,Q3 and Q4 2019, without bonds to pay back nor dramatically more cars in trnasit.

 

[Remus]

My guess is they figured out that 7k/week is the sweet spot to balance current demand, and with GF3 in Shanghai becoming operational by the end of the year, and then (presumably) a European GF to follow, they won't need more.

Expected China Factory online Q4, does that mean we will see $35k model 3 around that time?

Thinking of buying one for my teenage daughter since she has been such a sweet girl without any nasty traits of teens

 

[sweter]

Bear highlights:

• Declining profit despite growing revenues
• Still no China funding: "We expect to arrange financing through local banks in China to fund most of the capex for Gigafactory Shanghai."
• What's happening with Accounts Receivable?
• Why is interest income not keeping up with cash? Especially when interest rates went way up towards the end up Q3?
• No mention of plans for Semi
• No mention of 35k Model 3
• No mention of full self-driving
• Model Y won't be in 2019
• No mention of Roadster
• Installed fewer Solar Panels in Q4 than any other quarter in 2018
• Edit, one more: CapEx spending was below depreciation.

Remind me of how they're going to get to 1M cars per year in 2020?

Did you actually acknowledge profit in context of Tesla? How far the world has gone...

 

[KarenRei]

Expected China Factory online Q4, does that mean we will see $35k model 3 around that time?

Thinking of buying one for my teenage daughter since she has been such a sweet girl without any nasty traits of teens

Sooner. Very much doubt it will take until the end of the year, based on what Tesla has said.

 

[Pezpunk]

It seems to me that Tesla has just finished pivoting from a story based on growth and potential to an actual money-printing machine. look at their revenue, look at their margins, look at their debt situation. Sure, hand-wring about future competition that doesn't currently exist if you want, but this company has just finished proving that it is self-sustaining and profitable, WHILE growing by leaps and bounds.

 

[Oil4AsphaultOnly]

Bear highlights:

• Declining profit despite growing revenues
• Still no China funding: "We expect to arrange financing through local banks in China to fund most of the capex for Gigafactory Shanghai."
• What's happening with Accounts Receivable?
• Why is interest income not keeping up with cash? Especially when interest rates went way up towards the end up Q3?
• No mention of plans for Semi
• No mention of 35k Model 3
• No mention of full self-driving
• Model Y won't be in 2019
• No mention of Roadster
• Installed fewer Solar Panels in Q4 than any other quarter in 2018
• Edit, one more: CapEx spending was below depreciation.

Remind me of how they're going to get to 1M cars per year in 2020?

You might want to update your bear thesis. In Q2 2018, Tesla had already clarified that it was an aspirational goal: Elon Musk backs off Tesla's goal of making 1 million vehicles by 2020
"I think so, yeah," Musk replied. "If it's not a million, it's going to be pretty close. I'd say if it's not a million it'd probably be 750,000 or something like that in 2020. So, we're aiming for a million, 2020, but somewhere between half million and a million seems pretty likely."

Please make sure you are shorting based on ALL the facts.

 

[SebastianR]

Call is on now...

 

[elasalle]

So much whiplash ? shorts covering, bond holders selling lol

 

[Chocochip]

Expected China Factory online Q4, does that mean we will see $35k model 3 around that time?

Thinking of buying one for my teenage daughter since she has been such a sweet girl without any nasty traits of teens

Two things here:
1. The Shanghai GF is to only produce for the Greater China market
2. The guidance for $35k Model 3 is late Q2 / early Q3. Please apply Elon-time factor, YMMV, etc.