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

[Lunares]

So is this past 1Q19 the last loss making quarter?
Are we ready for a decade of consecutive profits?
I am, certainly I'm not selling my shares now. Are you?

Nah, they will almost certainly have at least 1 (or 2) more quarters of loss sometime in 2020 launching the Model Y

 

[Causalien]

I noticed that too - I believe technically it means that net income will be below Q4 levels.

Technically that still allows tiny profits, but not $265m+ profits for Q1 S&P 500 inclusion.

Completed and in-transit total deliveries dropped from ~91,700 to ~73,600 (20% drop), but the increase in in-transit deliveries in Q1 is significant, which adds to the GAAP space loss and also drains some cash.

Tesla has implemented cost cutting measures, and about 10.6k vehicles in transit on 73,600 in-progress deliveries (63,000+10,600) means that about 20% plus 14.4% of the gross profit is missing - i.e. there's a -20% drop over Q4 and only 85.6% of the pending gross profit was realized by the end of the quarter due to in-transit.

If we crudely take Q4 gross profits of $1,440m then that gets reduced to $1,232m, $288+$207m is "missing", so the Q4 profit of $139m gets turned into -$356m. That first level approximation doesn't allow for 'tiny profits'.

(With that we assume that the ASP and margin increase from European and Chinese Model 3 sales is roughly equal to the missing GHG credits of about $70m.)

This assumes that there's no efficiency improvements and that overhead costs stayed constant.

There are several potential GAAP upsides:

• deferred revenue recognition,
• efficiency improvements both on the labor cost and the parts cost levels,
• higher take rates for options that are not measured in the P&D report, such as AutoPilot and FSD
• the FSD upgrades that the fleet of hundreds of thousands of customers got. For every 10,000 existing owners who bought FSD for $3k it's an extra +$30m of pure income.
• Tesla hasn't sold significant amounts of ZEV credits in a long time (only $100m for the last ~1.5 years), and they have a lot of credits saved up. It's unclear whether the market dried up due to ZEV uncertainty or Tesla is saving up a piggy bank. Any ZEV sales in Q1 would also be a 100% pure profit improvement.
• GF1 probably had more cells for Tesla Energy in Q1, which should improve revenue and generate some income. Energy only generated +$43m income, and Q1 is a seasonal low, but maybe Storage will generate some income. It probably won't be a huge contribution, yet.

There are several downsides as well:

• The ~6% price cuts reduced gross profits by up to an additional ~$100m - but only if take-rate of software and color options stayed constant - while we saw it than in the EU those take-rates improved.
  
• It's unclear whether opex stayed flat as guided, or there was maybe a spike due to service expansion or other factors.

Not advice, and @ReflexFunds or @neroden might pour cold water on my estimates as well.

They guided slight loss before the delays. So it is safe to assume the negative impact is on top of a slight loss.

So 10k of cars worth of net loss. 500 mil.

Tesla is nice when it beats. But when it misses. It misses in the worst way possible... And then some.

 

[Matias]

From my perspective, Tesla is building a product that people love, people want to buy, and their biggest issue right now is building them and delivering them to customers. That seems like a good problem to have.

Model S and X?

 

[RobStark]

Fine, we don't have to compare S/X to NUMMI. We can compare it to Model 3. Model S/X production is only 44% as efficient as Model 3 in terms of cars produced per employee per year. Therefore Tesla needs to do something about it.

Cut out the complexity of Model S/X like FWD and two screens and ramp up production to 5k per week?


I think you will find Mercedes lines producing S-Class are ~half as efficient as producing C-Class. A8 lines are ~half has efficient as lines producing A4.

It is the nature of mass production vs niche production of premium cars.

 

[Antares Nebula]

Tesla Q1 deliveries disappoint: How much cash in the bank? - Tesla, Inc. (NASDAQ:TSLA) | Seeking Alpha
(I clicked so you didn't have to.)

Tesla Q1 deliveries disappoint: How much cash in the bank?
Apr. 4, 2019 3:28 AM ET|About: Tesla, Inc. (TSLA)|By: SA Eli Hoffmann, SA News Editor

That's the title of a note this morning from Morgan Stanley's Adam Jonas, and likely the question many Tesla (NASDAQ:TSLA) shareholders are asking themselves. Jonas's comments:

"We felt the No.1 2019 determinant for TSLA's share price was if it could prove to the market it can be self-funding on a sustainable basis."

Given the focus on Tesla’s cashflow and liquidity, many expected Tesla to calm the market by disclosing its cash number. But Tesla only said it has ‘sufficient’ cash on hand, "leaving bears to continue to question the firm’s financial strength and potentially adding to uncertainty with customers and suppliers."

The biggest surprise was the "deteriorating mix," with S and X volume 40% below forecast.

Jonas's Q1 cash-burn estimate of $0.9B "has downside risk."

Bulls will point to TSLA's reiteration of the 360K and 400K full-year unit target, and a strong exit rate of deliveries at the end of Q1.

Before results, TSLA announced an event focusing on Autopilot. Historically, these have been sell-the-news events, Jonas says.

For those keeping score, Street consensus was 75K deliveries; Jonas's estimate was 67.9K. And Seeking Alpha's own Anton Walhman had deliveries at 65K.

 

[Antares Nebula]

Given the concerns raised by MS in the above note (I hate Jonas and MS), Tesla would be wise to release their ER as soon as possible, especially if the cash balance is on the order of 2.5 - 3.0B, or at least file an 8k with the latter info. That would stop the panic I think.

 

[Blip]

Pre Market at 268 ...

 

[Antares Nebula]

Others can double check, but I think ~ 262 is 10% limit down. 267 now in premarket.

 

[schonelucht]

MS/MX - unfortunately the data we've been seeing and crowing about coming in from Europe proved to be accurate. Part of the story is that refresh that we've been waiting for. But another reading is that for Europe S/X has never been an optimal car. Tesla wasntvselling ~30k of those last year over here because people enjoy parking with an aircraft carrier in our narrow old city streets. Simply, Tesla made the best EVs and the were big. Now that Model 3 is available many may have shifted their orders to that. That may also mean lots of top end 3s which may actually have better margins than S/X75 so on the long run not a major concern. But they do need to accelerate that refresh.

I agree the S/X is not at a healthy state. It's a dated car and the platform is not keeping up with the latest tech from Tesla wrt supercharging. That's bad for what is supposedly the top of the line. Maybe too early to be conclusive, but it is also possible that the S/X feels some heat from credible competitors for the first time in its existence. With the e-Tron and i-Pace now available in reasonable quantities, it looks like buyers are cross shopping. It's really the only reason I can give for the quite drastic drop one quarter to another of the S/X in Norway for example.

Given these numbers, it's the first time you one can make a serious case for just binning the S/X. Here is the thinking :

1) don't refresh the S/X. In that case, it is unlikely that delivery numbers perk up back significantly. With reduced pricing and volume, margins in absolute terms will shrink significantly. Ie, the car isn't the cash cow anymore it used to be. Also, Panasonic is unlikely to pass on cell manufacturing savings if Tesla is only buying half of its 18650 capacity and a lot of manufacturers desperately need batteries
2) refresh the S/X. Volumes may pick up again and with less price pressure and more volume, margins will stay high. The flip side is the cost in scarce resources : it will take away from R&D and floor space in Fremont. Both are needed to bring the Y in reality soon.
3) bin the S/X. This would be a typical Elon move. Bold and with a lot of risk but with high rewards if it pays off. Now there is place to produce the Y without having to wait for a new factory or split your body and paint work for two similar cars across to separate locations.

 

[PaulRocket]

Regarding refresh, greentheonly found some stuff mentioning project “Raven” in the firmware:
green on Twitter
But he says something might come out in 6 months which would be too long for my taste.

 

[Antares Nebula]

Okay people, it's time to call in all our favors. Who's got the hotline to the Illuminati?

 

[Antares Nebula]

One other data point to keep in mind is what are the big bulls doing. Ross Gerber and Loup Ventures re-iterated their bullish views last night. I doubt ARK has changed their mind (but yet to hear). Ballie Gifford? There are a few others. I will consider (as a major data point) selling if I see these guys change their mind. The day one or more of these big bulls start doubting the story is a day for concern, otherwise it's still FUD and noise.

No doubt it was a miss, so not saying that it is FUD. But what are the implications of the miss is the question. Fundamentally, what is the cash situation AND what is the long term demand situation? (And this is where the bear FUD and misinformation comes in.) These two questions are what will make or break the stock in the coming weeks and months.

Tesla should release cash balance info ASAP (as soon as they can crunch some preliminary numbers together), whether in an early earnings report or just as a stand alone statement.

The demand question will reveal itself over the next two quarters, but any intra quarter updates Tesla can provide would be helpful.

 

[SebastianR]

Obligatory statement that I don't like the numbers, that they are worse than I expected and that I think it is easy to be right in hindsight for both bulls & bears.

Secondly obligatory statement: we should take guidance serious. They guided for a loss. There will be a loss.

Thirdly on demand: I don't think there is a demand problem at all. I really like @neroden 's model for pulling demand forward with the expiration of tax credits. And I think it is important what kind of demand exists for what kinds of market segments: For instance, in Norway Tesla is essentially the "Volkswagen/Toyota" market segment: even the Model 3 Performance is priced cheaper than a VW Passat. In the US, I think Tesla is in the "BMW/Audi/Mercedes" market segment - they compete on price pretty directly with 3-Series, C-Class, A4. In Germany however, Tesla is firmly in the "Porsche" market segment: the cheapest Model is 54k Euro, the cheapest Porsche is 58k Euro (minus some discounts if you manage to haggle them).

Conversely I expect Tesla to outsell VW/Toyota in Norway (they did), outsell the German sedans in the US (they did) and outsell Porsche in Germany (they did not, but it was very close the past two months).

So if @Troy believes that the initial demand in Europe is gone, I can relate. I also agree with @neroden that more demand is left - if they start to deliver the LR RWD etc.

I will freely admit that I have no clue how to model / think about China.

Lastly on demand: cars on the road sell cars. That's true for every market and for Tesla in particular. So I expect a slowly growing organic demand in most markets where Tesla can deliver an initial number of cars.

 

[LST]

I'm in tha camp of those who desperately want to see a refresh of the S and X. The dismal sales of S / X speak for themselves. A said before, the update should be mainly drivetrain / battery, eventually some interior tweaks.

Why: The M3 is just to good. Anyone with a little bit of insight of the state of the art at Tesla, who is in the market for a S or X sized vehicle will wait for that update, i definitely would. I compare our MS 85D of 2015 (all the options, and yes, now it feels like an old car) with M3LRD (all the options) on a daily basis. There are only two fields in which i think the MS is superior:

A) size,

and now comes the bummer:

B) AP Version 1 something.

In every other aspect the Model 3 is lightyears in front. Just AP on the M3 sucks terribly. And I'm not holding my breath for FSD anytime soon. Otherwise it's the best car experience ever.

The problem is that the difference in price (S vs 3) is not justified. So Tesla is a victim of its own success, outstanding engineering and manufacturing prowess.

Why is it such a big issue to build the S and X with the newer batteries and motors ? The excess "old" format could be used for energy storage ?


I'm not anxious on the long term perspective, but I really think Tesla should switch from Start-up mode to a more mature behavior, when it comes to communications, customer service, delivery service, customer information etc.

The M3 will do extremely well no doubt, but the X will suffer even more, once the Y comes out. Looming recession won't help either.

Regarding the SP, it will be so easy for FUD'sters to spin this into a blood-bath, it will be hard to bear. Just sad I used all my dry powder in the 250 and 267 range...

Be long & strong !

 

[j6Lpi429@3j]

I don't see why there is gloom here. I try to skip all FUD and interpretation, and expectation and just read the actual report and make up my own mind and... I'm pretty happy about how things are going.

"Deliveries were approximately 63,000 vehicles, which was 110% more than the same quarter last year,"

I would kill for that growth in my own company.

"In North America, Model 3 was yet again the best-selling mid-sized premium sedan, selling 60% more units than the runner up. Inventory of Model 3 vehicles in North America remains exceptionally low, reaching about two weeks of supply at the end of Q1, compared to the industry average of 2-3 months. "

Like... come on! This is by far the best positioned car company on the plane.t They do ZERO advertising, are TERRIBLE at refuting FUD, are under huge attack, offer cars in a ludicrously small number of options, and their main model is only LHD and they STILL cannot make the things fast enough to satisfy the queue of buyers.

And oh... this is also a solar and energy storage company, and the expectation is that this finally ramps up this year.
Show me some credible competition for tesla and maybe I'll be concerned, but the competition is laughable.

It goes without saying I'm not selling a single share.

 

[Antares Nebula]

Tesla reports biggest sales drop in its history - CNN

"The sales figures do not come as a shock: Wall Street analysts expected sales and deliveries of the Model 3 to be about 50,000. And Tesla had already said it expected Model S and Model X deliveries to be lower than they were a year earlier.
Daniel Ives, managing director at Equity Research, said in an email that Wall Street was already bracing for "an apocalyptic quarter."

Ives said overall sales were "clearly soft," but the low number "represents an 'air pocket' quarter in our opinion." He added that he was encouraged because Model 3 deliveries "were better than feared."
.....

"Even so, the talk of a cash crunch has quieted down somewhat, at least compared to last year.
"From our standpoint we wouldn't characterize Tesla as having a robust liquidity position by any means, but it's less tenuous than it was six to nine months ago," said Bruce Clark, credit analyst at Moody's."

 

[Tslynk67]

To re-iterate shortly some of the above, long term, nothing has changed. And hey, still not BK, eh?

 

[SO16]

don't worry FC or Karen will be back with 10 posts explaining how this is actually good and getting 5 "likes" because it reinforces people's priors.

Don’t worry. You can spend your time on reddit to have like minded shorts reinforce your feelings 100% no matter what as well.

 

[Tslynk67]

Tesla reports biggest sales drop in its history - CNN

"The sales figures do not come as a shock: Wall Street analysts expected sales and deliveries of the Model 3 to be about 50,000. And Tesla had already said it expected Model S and Model X deliveries to be lower than they were a year earlier.
Daniel Ives, managing director at Equity Research, said in an email that Wall Street was already bracing for "an apocalyptic quarter."

Ives said overall sales were "clearly soft," but the low number "represents an 'air pocket' quarter in our opinion." He added that he was encouraged because Model 3 deliveries "were better than feared."
.....

"Even so, the talk of a cash crunch has quieted down somewhat, at least compared to last year.
"From our standpoint we wouldn't characterize Tesla as having a robust liquidity position by any means, but it's less tenuous than it was six to nine months ago," said Bruce Clark, credit analyst at Moody's."

It's a click-bait headline, but the article is very balanced and could actually be read as positive.

 

[KarenRei]

So...

1. I have a project for the evening - I need to go out and hunt a crow for supper.

2. My approach, of estimating production from paint shop capacity, completely failed. Don't know why. The only upside is that since they've clearly had line downtime, I hope they've been doing every time they had downtimes in 2018, which was upgrading the lines to higher capacity and lower production costs. Extra paint capacity in particular would be greatly welcomed.

3. I stupidly woke up briefly to check the deliveries numbers, and immediately regretted it, as I could hardly sleep all night after that. One of the worst night's sleep of my life. Comparable to, and possibly worse than, a night I spent on the sight of a mountain tethered to a crumbling cliff face that was periodically shedding chunks with a loud crash all night.

Ugh. But, onward.