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

[Artful Dodger]

How would that work? Even if q2 was profitable q1 wasn't and they have to have 4 consecutive quarters of profit don't they?

Four consecutive quarters that are profitable, in toto.

Shall TSLA be added to S&P500? (out of main)

I think (don't quote me) is 'the sum of the last 4 quarters must be GAAP profitable, including the last quarter being profitable'.

There's a PDF with the src info at the link if you want to wade through it.

Cheers!

 

[Stephen zz]

I think there is a decent chance that Q2 results will satisfy the financial metrics required for S&P inclusion, HOWEVER, that does not mean that TSLA would be included, forthwith. The fact that there is a committee that ultimately has discretion as to inclusion is a big problem, IMO. Think about it-----do you think that there might be a person or two on that committee that might have friends, relationships with people at Goldman Sachs and/or Morgan Stanley? The sudden inclusion of TSLA would put a major hurt on these two, and other firms that have lent massive amounts of shares to their shorting clients. If the numbers are good enough, I believe actual inclusion will be delayed. I'd love to be proven wrong.

Assuming they made the crireria, I would be surprised if they weren't included in the next Index reset. By market cap they are about 100th so the optics would look bad and S&P would have to explain themself. Also as soon as a company is perceived to be eligible for an index, the trackers can buy preemtively.
ere might be a person or two on that committee that might have friends, relationships with people at Goldman Sachs and/or Morgan Stanley? The sudden inclusion of TSLA would put a major hurt on these two, and other firms that have lent massive amounts of shares to their shorting clients. If the numbers are good enough, I believe actual inclusion will be delayed. I'd love to be proven wrong.

 

[tander]

Just crunched the numbers, if you go by the net of last 4 qtrs, they would need to have a 310M profit or more in Q2.
Edit: On the optimistic side I wonder how quickly Tesla gets their earnings audited and if they could be submitted to S&P for inclusion prior to posting them publicly. On the realistic side assuming they continue to prioritize profits seems like q3 has a pretty good shot.

 

[Stars aligned]

mrmage, post: 3850234, member: 94514"]Weekend conspiracy theory....
The first step is admitting you have a problem
We know that Tesla has invested like crazy on the product, factory and tech which drives near term revenue by producing a very nice product with margin.

We also know that Tesla has been underinvesting in certain aspects of the company (to the extent that posts on it are no longer allowed) which could hurt its long term success.

Tesla also has the cash to remedy said deficiencies but has been slow, much to the dismay of certain members.

We also know that EM is very smart (understatement), good with numbers, tech, and strategy. He’s not a people person (also understatement), but that has nothing to do with the deficient areas.

So why underinvest? Perhaps he has a very good reason.

What if Tesla might be able to get onto the s&p 500, by cutting expenses in certain areas? The resulting inclusion in indexes and prestige would totally be worth the short term pain.
Customer service is less important if you have a superior product.
How likely is that?
Seems like decent odds.
How big would that be?
Pretty big, especially if coupled with FSD and cars that appreciate.
Although it’s a long shot, would s&p inclusion and commensurate profits change everything overnight?
Not that much of a long shot, odds are pretty good in the next couple years if they prioritize profits v. expansion. Main criteria they are missing is 4 consecutive qtrs of profits, although I think sometimes they will wave a bad quarter if they have a profitable year (not absolutely sure)

I'm absolutely with you in the line of thought. If EM has any chance within the rules, it would be worth to take short term pain to gain the inclusion. Afterwards, Tesla would play in a new category, and many investors would have to catch up.

Let's hope EM and his team see it the same way, and equally important, they reach this goal. On the positive side, there is a lot of wiggle room in both GAAP standards and daily operations. Let's stay tuned.

 

[kengchang]

 

[Stars aligned]

I think there is a decent chance that Q2 results will satisfy the financial metrics required for S&P inclusion, HOWEVER, that does not mean that TSLA would be included, forthwith. The fact that there is a committee that ultimately has discretion as to inclusion is a big problem, IMO. Think about it-----do you think that there might be a person or two on that committee that might have friends, relationships with people at Goldman Sachs and/or Morgan Stanley? The sudden inclusion of TSLA would put a major hurt on these two, and other firms that have lent massive amounts of shares to their shorting clients. If the numbers are good enough, I believe actual inclusion will be delayed. I'd love to be proven wrong.

Is there any precedence that a company which has reached the metrics has not been included due to the decision of the committee? Would love if you could bring up examples.
Otherwise, sorry to say, you are just spreading FUD.

 

[mrmage]

View attachment 432153

I see a lot of comments on that thread, but don't understand the context for the number. Over what time frame?

 

[Right_Said_Fred]

View attachment 432153

Those VIN registrations are good news. They are still selling a lot of LR and P.

 

[Krugerrand]

There’s an S&P thread, right?

Right!?

Because this conversation has been had at least a dozen times. At least!

*continues to mutter that there has to be a thread on the topic somewhere on this forum*

 

[Artful Dodger]

View attachment 432153

Model 3 VINs‏ @Model3VINs 6h6 hours ago

~20% or 5,070 estimated to be RHD.

5 replies 8 retweets 90 likes​

 

[Hock1]

Is there any precedence that a company which has reached the metrics has not been included due to the decision of the committee? Would love if you could bring up examples.
Otherwise, sorry to say, you are just spreading FUD.

I have no idea about precedence. Is there any precedence for a company like Tesla? Has there ever been as disruptive a company as Tesla in a market environment where naked shorting is legal and used to manipulate (depress) share price? Me, spreading FUD? Ha!

 

[mblakele]

There’s an S&P thread, right?

Right!?

Because this conversation has been had at least a dozen times. At least!

*continues to mutter that there has to be a thread on the topic somewhere on this forum*

Yes: Shall TSLA be added to S&P500? (out of main)

 

[FrankSG]

Given low ASP, I don't see how margin can be so high. Remember most of the S&X sold was pre-raven inventory with pre-Raven COGS.

For Model 3 - we have the same issue. Since the mix has more SR+, difficult to see how the margin goes up.

You might be right about S+X pre-raven inventory, but then shouldn't they have even better margins, because a lot of this inventory might've been produced a few quarters before (when margins were great) and served as showroom cars until now? Maybe I'm not understanding this right, if so, please enlighten me.

For Model 3, SR+ mix hasn't gone up that much since Q1. Perhaps slightly, because there were a very small number of SR+ deliveries in some overseas countries (Netherlands), but still no SR+ in others (Norway). Overall, I think M3 margins will be much better than the ~20% I estimate they were in Q1 due to the 3 factors I mentioned:

• 50% more volume, so fixed costs are spread out much more. I think this alone could've added 2% or more to margins.
• Autopilot now standard since beginning of Q2.
• Potential further cost savings. They just lowered prices by quite a lot, and I don't think they would do this if their margins weren't strong.

 

[Carl Raymond]

I’m no accountant, but something strikes me as not right with Gali’s HyperChange Q2 preview. Hopefully somebody with better understanding can clarify.

In Q1, the bottom line was bad. Cars were made (costly), transported, and not delivered (sold). So you lose big time on those cars(?).

In Q2, that should reverse. Those cars are delivered, but not made, so there should be a windfall on those cars.

I can’t see where Gali has taken this into account. He’s just taken total cars delivered and assigned a margin of 18 percent across the board.

Or is inventory factored in somewhere as standard practice?

 

[RobStark]

Pre-raven inventory is outdated so it needs to be discounted in order to sell. Cutting into margins.

 

[ggr]

Yes: Shall TSLA be added to S&P500? (out of main)

Mod: Thanks. This is the LAST post on this subject in this thread. Followups have been moved. --ggr

 

[kengchang]

I guess one unknown is how much benefit does single BiW for S/X provides, anyone familiar with auto manufacturing can chime in?

 

[FrankSG]

I’m no accountant, but something strikes me as not right with Gali’s HyperChange Q2 preview. Hopefully somebody with better understanding can clarify.

In Q1, the bottom line was bad. Cars were made (costly), transported, and not delivered (sold). So you lose big time on those cars(?).

In Q2, that should reverse. Those cars are delivered, but not made, so there should be a windfall on those cars.

I can’t see where Gali has taken this into account. He’s just taken total cars delivered and assigned a margin of 18 percent across the board.

Or is inventory factored in somewhere as standard practice?

I also think it's a bit weird that he lumps together automotive revenue with leasing and especially service.

However, the reduction in inventory you're alluding to will not show up in the income statement, it will show up under "changes in operating assets and liabilities" in the cash flows statement. If you look at the Q1'19 cash flows, you'll see that "changes in op assets and liab" is -676M, largely due to -810M$ worth of product that ended up in inventory. (You'll have to look at 10-Q to see detailed breakdown of "changes in op assets and liab", and exact change in inventory.)

I do agree this will be substantial and surprise many people. I think FCF will be higher than Q3'18 and Q4'18, and Tesla could end up with a cash position of 6B-7B at the end of the quarter (including capital raise).

 

[Doggydogworld]

In Q1, the bottom line was bad. Cars were made (costly), transported, and not delivered (sold). So you lose big time on those cars(?).

In Q2, that should reverse. Those cars are delivered, but not made, so there should be a windfall on those cars.

I can’t see where Gali has taken this into account. He’s just taken total cars delivered and assigned a margin of 18 percent across the board.

Or is inventory factored in somewhere as standard practice?

As you say, inventory is factored in as standard practice. Example:

Q1 - make 10 cars at a cost of 40k each, sell 1 car for 50k
Revenue - 50k
COGS - 40k
Gross Profit - 10k
Gross Margin - 20%
Add 360k to Finished Goods Inventory

Q2 - make 0 cars, sell 9 from inventory @ 50k each:
Revenue - 450k
COGS - 360k
Gross Profit - 90k
Gross Margin - 20%
Subtract 360k from Finished Goods Inventory

As for Galli, you're a lot better off using the models from @EVNow and @luvb2b in the Near-future Quarterly Financial Projections thread.

 

[EVNow]

You might be right about S+X pre-raven inventory, but then shouldn't they have even better margins, because a lot of this inventory might've been produced a few quarters before (when margins were great) and served as showroom cars until now? Maybe I'm not understanding this right, if so, please enlighten me.

That is not how it works. I suggest you read the posts about margin, COGS, ASP etc in the finance thread.

COGS is the cost determined (one of the ways, anyway) at the time of manufacture. They take the cost (avg, FIFO etc) of all the parts that went into that car, labor allocated to that car, depreciation allocated to that car etc. Usually this is done by model, trim, options, rather than individual car in practice.

But margin is determined at the time of sale. Margin = (Sale price - COGS)/Sale Price. This is also usually determined by model+trim, but reported only at Tesla level.

So, a particular car comes with a particular COGS, attached to it in the quarter it was manufactured. But the price and the margin is determined only after the actual sale takes place.

Given a particular COGS, you get lower margin if the price (or ASP) is lower. The kind of ASP you are estimating (which I hope is too low) would give very low margin. I didn't look into why you think ASP would be that low, though.

COGS = 80K

ASP1 = 100k , Margin = 20%
ASP2 = 90k, Margin = 11%
ASP3 = 80k, Margin = 0%