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

[BornToFly]

I am so mad at myself. I thought about selling half my 2020 250 calls before close today in case the SP went down. Instead I held thinking that the SP was too low because of all the FUD that was about to be annihilated in the ER. Instead I'm looking at a big loss now.

 

[Steve m]

A repeat experience of Q1.

So many bulls on here were singing a cheerful tune, all the while Tesla stays the same

Nonsence there is a 1.5 billion improvement in cash flow from Q1 to Q2.

 

[Navin]

Meh

What positive catalysts do we have near term?

Even a truck reveal wont really help much.

 

[Thekiwi]

Impressed with the $50K ASP

However I think Tesla missed a golden opportunity to control the narrative with regards to margins, given that when regulatory credits are excluded margins actually improved by 200 basis points! That should have been a top line highlight in the letter (not buried on page 3)

 

[KSilver2000]

Nonsence there is a 1.5 billion improvement in cash flow from Q1 to Q2.

I was talking about from a TSLA investment standpoint. Did your portfolio balance go up or something?

 

[powertoold]

That's wrong, it was very probable he was talking about record deliveries, given the audience that his email was sent to: Tesla's delivery team.

Elon made the "record on every level" statement on stage at the shareholder's meeting.

 

[traxila]

Don’t forget though that q2 had a cashflow tailwind of deliveries exceeding production.

Doesn't that mean that Q1 had a headwind of production exceeding deliveries? This is why these quarterly snapshots are such garbage, especially for a company in hyper growth mode.

What would you be saying if the FCF had been negative DESPITE the deliveries exceeding production? Bad news indeed then....

 

[Fact Checking]

One piece of bad news is that Model S/X production is still single shift. No mention of increasing it further anytime soon.

IMO that's good news: they made 15k S/X units with half the previous assembly workforce. The Q2 margins are mostly dictated by the pre-Raven inventory flush - Q3 Raven margins should be significantly higher.

This also suggests they could scale to ~30k/quarter ~120k/year S/X production in the future.

 

[AndreN]

One piece of bad news is that Model S/X production is still single shift. No mention of increasing it further anytime soon.

Not sure that's bad news. They're likely aiming for max gross margin on S/X. Running double shifts costs overtime, so they make less per car output.

 

[MarcusMaximus]

Sure, but it was hyperbole on his part. Record on every level vs on production and deliveries. Two starkly different impressions, especially when talking at a shareholder's meeting.

He was talking about in terms of moving cars. “On every level” does not include absolutely everything in the universe. He did not imply, for example, that they used a record amount of toilet paper during the quarter.

 

[X Fan]

Just bought AH @ 238.84......it may go lower short term but cash generation is bullish to me and the shorties are playing their usual tricks.

 

[Thekiwi]

Don’t forget though that q2 had a cashflow tailwind of deliveries exceeding production.

I might be wrong, but I don’t believe shifting of deliveries between quarters has much impact on reported quarterly cashflow (as cost of goods sold is recognised in the quarter car is delivered in). It would have an impact on end of quarter cash balances and assets/liabilities - but not so much on reported cashflow.

 

[traxila]

You can blame it on FUD or whatever you’d like.
But, regardless of the reasons, you can’t ignore that TSLA is at the same price as it was five and half years ago. Even with YoY revenue increases. Longs could’ve done better with a CD. Better with an index fund.

Until GF3 is fully up and running spitting out cars, I don’t see any major upward trend in TSLA.

TSLA was severely overvalued five years ago. People bought into a timeline that was impossible and bid the stock up as shorts got destroyed.

Is it overvalued or undervalued now? If the SP hits 1000 in five years would that ten year span be a good investment?

They really need to figure out this service thing....

 

[Steve m]

I was talking about from a TSLA investment standpoint. Did your portfolio balance go up or something?

More nonsence. Stock prices are ephemeral. From an investment stand point TSLA is miles improved in their capabilities then 3 months ago.

 

[goinfraftw]

"Going forward, we believe Tesla can achieve sustained quarterly profits, absent a severe force majeure or economic downturn, while continuing to grow at a rapid pace. We expect to generate positive cash including operating cash flows and capital expenditures, as well as the normal inflow of cash received from non-recourse financing activities on leased vehicles and solar products."

https://ir.tesla.com/static-files/7235e525-db16-470c-8dce-9ecac0ad7712

This is why Q1 hit me so hard. I don't care (too much) about profits, as long as cash is coming in... I don't think that profits are in Tesla's best interest right now. But cash to fund expansion and growth is what I'm looking for. And in Q2 I found it - so if Q1 was a silly blip, I'm all happy. (And yes, I will buy more shares in FRA at opening tomorrow - hope the effects of the short attack are holding up until then...)

Great find! I actually wonder about the wording of both. With the capital raise and the huge increase in deliveries (plus Tesla Energy)...to me, the difference between the "expect to generate positive cash" (which technically they do by selling enough cars to make "positive cash") and "being self-funding" is the ability to expect a positive-generation engine, the former, and a business/vehicle that they expect to be self-perpetuating going forward into the future.

One takes good engineering to get the engine started and expected to run well. It's wholly another to prove that it can continue on, run well, and run in perpetuity - which is what I read when I see "self-funding".

 

[moneyburner1]

Some thoughts.

The main difference between consensus estimate and what they reported is restructuring cost of $117M. Excluding restructuring cost, here is what it looks like :

Factset Estimate : -0.35
My estimate : -0.31
Actual EPS : -0.28 (-1.12 including restructuring) [ps : My calculation and Tesla's calculation when including restructuring don't match - so, this might be a little more than -0.28]

Factset Rev Estimate : $6.47B
My Rev estimate : $6.523B
Actual Revenue : $6.349B

Free Cash Flow estimate : $136M
My FCF estimate : $858M
Actual FCF : $614B (excluding restructuring, $731M)

$47M restructuring were already announced in the Q10 of Q1 2019 - page 16


The in-process research and development (“IPR&D”), which we acquired from SolarCity, is accounted for as an indefinite-lived asset until the completion or abandonment of the associated research and development efforts. If the research and development efforts are successfully completed and commercial feasibility is reached, the IPR&D would be amortized over its then estimated useful life. If the research and development efforts are not completed or are abandoned, the IPR&D might be impaired. The fair value of the IPR&D was estimated using the replacement cost method under the cost approach, based on the historical acquisition costs and expenses of the technology adjusted for estimated developer’s profit, opportunity cost and obsolescence factor.In April 2019, the Company determined that it would abandon further development efforts on the IPR&D and will impair the remaining $47.0 million in the quarter ending June 30, 2019.

 

[Chunky Jr.]

I saw a headline that “Tesla is still bleeding money”. Not sure how adding hundreds of millions of cash is bleeding money, but if it is, I wouldn’t mind bleeding like that.

 

[dha]

TSLA was severely overvalued five years ago. People bought into a timeline that was impossible and bid the stock up as shorts got destroyed.

That "impossible timeline" from 5 years ago is right on track:
https://seekingalpha.com/article/25...-tesla-to-sell-500000-cars-in-2020-are-absurd

(Published September 2014)

 

[traxila]

One takes ignition and good engineering to get the engine started and expected to run well. It's wholly another to prove that it can continue on, run well, and run in perpetuity - which is what I read when I see "self-funding".

No ICE references allowed here, sir. Update your metaphors!

 

[Fact Checking]

Elon made the "record on every level" statement on stage at the shareholder's meeting.

I misremembered that (edited my comment to fix it), but still the context was IMO very obvious if you read the exact quote:

[timestamp 33:00]

"[Q2] sales have far exceeded production, and production has been pretty good, so we're actually doing doing well, and we have a decent shot at a record quarter on every level, [...] if not it's gonna be very close, [...] we've got a shot at a record quarter, and 90% of orders are coming from non reservation holders, so these are new customers."

Elon was clearly talking about production and deliveries there, and on June 13 he'd have no idea about Q2 revenue and profits yet.