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

[Remus]

I'm starting to wonder if, even if Tesla exceeds selling 1m/year, if Musk's insistence on growth over profits will keep the stock price stagnant. Talking heads on TV may be full of it, but people hitting the buy and sell button for a living aren't dumb. They see the tremendous growth Tesla is going through and it doesn't seem like they care as long as Tesla is pulling in red quarter after red quarter.

Err what about Amazon before 2015?

 

[SOULPEDL]

FSD without a driver is 5+ years out and if that is what Musk is waiting for to reliably turn a profit, he's lost.

For full adoption, I agree. Test cases and proof that it works (beyond a demo day event) will help fuel this reality.

Good news, Ford just pushed out it's Cruise technology forecast. So I really think Tesla wins the FSD race which is why I'm long (and why I bought this car). The teasers along the way just get people to buy FSD at the discount price. Adv Summon will help. Not that people need it, but it's likely as complex as everything else combined (in slow motion). After Summon, the vision becomes more plausible and the price goes up. He has a captive market, who wouldn't buy the upgrade once the TN becomes believable? This could occur in a frenzy.

 

[powertoold]

Even if FSD is still 4+ years away, the progress towards it will create publicity and interest in Tesla cars, increasing sales. If Tesla is able to create a 99.999% reliable fsd for freeways, it would make a lot of people happy. Right now, it's only about 80% reliable though (on ramp off ramp no intervention).

 

[bdy0627]

Can we talk about the fundamental difference between "We will be profitable every quarter going forward besides maybe q1 2019" and this new tone of downplaying profitability and stressing FSD?

Can we really not expect Tesla to be consistently profitable till FSD robo taxi is realized?

The massive drop in sales and gross margins of the S & X since Q4 2018 is the primary cause at this point. Elon obviously did not anticipate sales dropping by over 40% in Q1 and 35% even in Q2 with gross margins at nearly half what they were. That's why he did not anticipate the difficulty in achieving profitability over the past couple of quarters. That will be much less significant in another year as model 3 sales continue to grow, and especially as model Y comes online. However, right now it's a big deal for the financials. There has been no way to really neutralize the drag that has caused on the financials.

 

[Right_Said_Fred]

Now all of a sudden we are warned about losses in Q3 and next Q1 Q2. Understandably people are pissed.

I didn't hear them say anything about losses for those 3 quarters. Elon said he was confident Q3 will be break even (and Q4 positive). About Q1 he said it will be tough and about Q2 that it would be better but still tough. Ofcourse this can mean that all these three quarters will produce a loss, but that is not what he said.

 

[Steve m]

Today's SP drop puts us back to where we were two weeks ago.

 

[Freder Reeve]

He's claiming 2020 Q3/Q4 will be big. I suspect he was (and still is) banking on FSD sales.

I presume he meant model Y high margin sales being a sure thing then.

 

[ReflexFunds]

I didn't hear them say anything about losses for those 3 quarters. Elon said he was confident Q3 will be break even (and Q4 positive). About Q1 he said it will be tough and about Q2 that it would be better but still tough. Ofcourse this can mean that all these three quarters will produce a loss, but that is not what he said.

It seemed to me that he was talking about sequential demand growth, not profit or cash flow. His message was just that sequential demand growth in Q1 over Q4 will be tough - not surprising given seasonality, EV incentive effects etc.

I don't mind if this comment lowers people's expectations for the next few quarters though. In my view short term earnings are completely irrelevant in any case (core gross profit is important however as this is a measure of structural profitability and Tesla's EV cost advantage). The less people freak out about missed quarterly expectations the next few quarters the better.

 

[SOULPEDL]

• Service infrastructure has to scale with volume - But this is paid in warranty reserve in Auto COGs and in Service COGs.

• Call centre support staff will likely come under SG&A and this is something which should scale with volume, but likely hasn't happened so far. In any case it shouldn't be a huge expense.

His comments suggested that service costs should decrease over time (not now, future). To paraphrase yesterdays call, "The ideal scenario is when no service is needed - by building quality into manufacturing and design."

True this is every company's goal, but he is not one to put up with waste I'm sure. And it's not like he has to get all those supplier's quality up because he does more in house than his competitors. This gives Tesla a quality advantage which may lead to discovering new quality solutions.

 

[RobStark]

Why would someone without free SC complain about waiting 10-15 minutes to pay 2x-4x what they can pay at home?

Because sometimes in the middle of the day you need a quick charge to get to where you are going.

 

[avoigt]

That's my point too but that's a big big departure from "profitable every future quarters". But the management team did not let us know, not officially.

Now all of a sudden we are warned about losses in Q3 and next Q1 Q2. Understandably people are pissed.

I get it that It's the Amazon way, grab as much market share as possible while maintaining solvency, killing everyone along the way. I also understand that since the initial plan of inspiring other car makers to make EVs failed miserably, it's pretty much the only way forward for their mission.

But Bezos kept his mouth shut and refused to give rosy guidance. Yet even that Amazon stock price went nowhere when they were doing that.

I stay heavily invested in Tesla more for the mission rather than money now. it's just that I can't see the stock price rise significantly for the next year.

Agree and stay invested as well but don't fully with your last sentence. Don't forget Tesla has never been as strong and healthy as today. Nothing changed except I am more bullish now than prior to the ER.

I am not saying that the SP doubles in 6 months but I am saying I have been wrong so far with the stock prediction for 2019 but as many more people feeling depressed now we are at a good spot for a positive development. It may take time but I don't care.

 

[SOULPEDL]

Hey, still up on the month!
(Image from Monty Python's, The Life of Brian)

 

[powertoold]

Today's SP drop puts us back to where we were two weeks ago.

True, but we've been taking a huge beating for the last 4 months. At this point, good chance sp will continue to drop for the next week, back under 200 lol so sad. Not sure how much longer the longs can stand this punishment.

 

[Matias]

From my understanding is that all the robots, building and machines were paid for from the piggy bank(or borrowed money) a long time ago but their "cost" were not counted at the time of payment but "depreciated" over time. So they no longer need to buy robots from the piggy bank but still need to account for the depreciation on the books over quarters because it was not counted as a business expenses instantly at the time of purchase. So the loss is just paper accounting...but currently all the positive money they make goes to the piggy bank.

Depreciation is real in that sense, that e.g. those robots are not eternal.

 

[Steve m]

True, but we've been taking a huge beating for the last 4 months. At this point, good chance sp will continue to drop for the next week, back under 200 lol so sad. Not sure how much longer the longs can stand this punishment.

Goes back under 200 i am buying more

 

[Motor Mouth]

Goes back under 200 i am buying more

This ^^^

 

[Fact Checking]

Depreciation is real in that sense, that e.g. those robots are not eternal.

@ReflexFunds estimated "maintenance depreciation" to be around $120m per quarter - which is only a small fraction of the $578m of GAAP-inflated depreciation expense in Q2.

That artificial cost does not correspond to any ongoing business expense, and not having this GAAP expense alone could have pushed GAAP income into the green.

So about 80% of Tesla's GAAP depreciation and amortization expense is not "real".

This is one of the problems with fast growing companies reaching GAAP profitability: their GAAP income is burdened with already paid for expenses, which expenses are scaled up by the growth exponent.

This is why cash from operations is a much better (but still imperfect) metric of underlying profitability.

 

[BOBTHEJOCKEY]

Nice catch. So how old is that quote (power side making as much money as car side)? Is he reiterating this still?

Could be that they started selling Powerwalls finally, possibly held up due to the battery shortage? Also, about half of Arizona (SRP customers) just opened up from the settled lawsuit with Tesla last March. Solar activity is heating up here based on activity I'm seeing on other threads. Also seeing complaints about install issues. But that's for another thread (and Neroden who will like this for sure

Still baffled by all the empty roofs here. Panels are on ave 30% more effective in Az. Make no sense.

They have mentioned this in more than one conference call. It makes sense really. If you sell somebody solar roof and a powerwall that is more than a model 3 assuming they get their margins up. Tesla also saves on marketing by cross selling the people that buy the car.

 

[Matias]

I don't know if anybody commented on it yet, but the planned TWH level of battery production mentioned yesterday is not unrealistic. But it's a very long term goal, likely ten years out to get to the full TWH level, with an initial hundreds of GHW in five years or so.

One TWH is 1000 GWH. Current capacity is about 28 GHW. So about 35x as noted by Electrek.

Now, Tesla is producing about 400k vehicle run rate off the current 28 GWH capacity, plus some relatively small energy storage capacity. Ignoring the energy storage, 10x (or 280 GWH) would give about 4M vehicle run rate. Elon estimates Model 3 and Y to be about 1.5 - 2M. Add in pickup, S, X, roadster, and semi, that gets you to almost 4M, not counting further future growth or additional vehicles.

Tesla has stated several times that energy storage business would eventually be as big as vehicles. So another 280 GWH energy storage. That's almost 600 GWH combined in the future. So 1000 GWH (or 1 TWH) is not unrealistic, especially considering further growth in autos (beyond 4M vehicles) and energy into the next decade and beyond.

What about materials supply?

 

[mblakele]

@ReflexFunds estimated "maintenance depreciation" to be around $120m per quarter - which is only a small fraction of the $578m of GAAP-inflated depreciation expense in Q2.

That artificial cost does not correspond to any ongoing business expense, and not having this GAAP expense alone could have pushed GAAP income into the green.

So about 80% of Tesla's GAAP depreciation and amortization expense is not "real".

This is one of the problems with fast growing companies reaching GAAP profitability: their GAAP income is burdened with already paid for expenses, which expenses are scaled up by the growth exponent.

This is why cash from operations is a much better (but still imperfect) metric of underlying profitability.

How do you feel about EBITDA as a metric for TSLA?