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

[SN_8]

Pretty slick. Anyone else capable of this?

Tesla Model 3 and Model Y will now detect and slow down for emergency vehicles — TESLARATI

Tesla’s software update 2021.24.12 seems to include something noteworthy for the Model 3 and Model Y. While the software update’s Release Notes were identical to previous updates in the way that they highlight features like Disney+ streaming and Car Wash Mode, 2021.24.12 also included something...

apple.news

And this is why regulators are concerned about Tesla. Not because of safety, but rather because Tesla highlights the difference between "safety through regulation" and "safety through innovation". And clearly shows what the better choice is.

In regulators defense, there has never been a company such as Tesla that can both iterate so quickly AND has such a focus on safety.

 

[EVMeister]

Pretty slick. Anyone else capable of this?

Tesla Model 3 and Model Y will now detect and slow down for emergency vehicles — TESLARATI

Tesla’s software update 2021.24.12 seems to include something noteworthy for the Model 3 and Model Y. While the software update’s Release Notes were identical to previous updates in the way that they highlight features like Disney+ streaming and Car Wash Mode, 2021.24.12 also included something...

apple.news

I am, yes.

 

[The Accountant]

I'd think you have to do it on an individual basis.

Money you've taken in, and owe something for, is a liability on the books specific to the person to whom you owe it.

On top of that- not everyone paid the same amount for it either. Nor even bought the same exact thing (the pre/post 3/19 change for example). So "customer owed FSD" isn't inherently fungible either.



That said- I'm perfectly open to being corrected by @The Accountant or someone deeper into the weeds on this stuff.

When PwC audits the release of Deferred Revenue from the Balance Sheet to the Income Statement, they will need to sign-off on 2 things:
1. Is the release of Beta v10 (the button) sufficient to recognized the deferred revenue to the income statement? and if yes,
2, is the amount recognized not materially misstated?

If Tesla were to record any of the deferred revenue from release of the button, they can calculate the revenue several ways.

Individual Method - They can track who has Beta v10, how much they paid for FSD, what portion was deferred that can now be recognized, etc.
Most companies do not do it this way because they don't have the data easily available. But Tesla is not like most companies . . .not only are they data rich but they have the software team in house to develop a simple query to get this data. Tesla would update this monthly for adds and deletes.

Assumption Method - They will either take their entire population of FSD customers and determine what portion is the US, what portion got Beat v10, what portion is deferred, and come up with a percentage to apply to the deferred revenue on the balance sheet (a large macro calculation). They could also take a sample and use statistics. If 5,000 got Beta v10, they could grab a sample of 300 and determine what percentage of the revenue to recognize. Tesla would compute this monthly to refresh the numbers for customers bumped out and new customers entering.

There are more ways to calculate it but the two I mentioned above are the most common with these type of estimates.
PwC would audit the reasonableness of the calculation and ensure that it is not materially misstated.

Copying @ByeByeJohnny

 

[The Accountant]

When PwC audits the release of Deferred Revenue from the Balance Sheet to the Income Statement, they will need to sign-off on 2 things:
1. Is the release of Beta v10 (the button) sufficient to recognized the deferred revenue to the income statement? and if yes,
2, is the amount recognized not materially misstated?

Regarding the 1st question above, does the release of Beta v10 allow for the recognition of Deferred Revenue to the income statement, I think Tesla may have some wiggle room here. I think they could argue to the Auditors yes and no. So it may give them flexibility for earnings.

The No Argument - Beta v10 is still in Development and the new users are helping to further develop FSD.
The Yes Argument - We have delivered the full commitment of FSD to a subset of our customers and can now recognize revenue.

This is why it is difficult to determine whether we will see FSD deferred revenue recognized in Q3 or Q4.

 

[Todd Burch]

My best estimate after watching Tesla’s corporate behavior over the last 12 years is that they will not recognize FSD revenue in Q3 or Q4. I think it’s more likely to be Q1 or Q2, when FSD may be reasonably safe enough to release to the masses even without a driver safety review.

This also would line up with traditionally lower demand quarters to supplement revenue, although with demand so high now that doesn’t appear like it will be a factor.

 

[ammulder]

This is why it is difficult to determine whether we will see FSD deferred revenue recognized in Q3 or Q4

Except virtually no customers will receive it in Q3. Today there are like 70 actual customers with the beta, right? (The rest being employees.) Even if the customer-facing button comes out this Friday, you wait a week for it to evaluate your driving before the feature unlocks, and then it’s Q4.

 

[The Accountant]

Except virtually no customers will receive it in Q3. Today there are like 70 actual customers with the beta, right? (The rest being employees.) Even if the customer-facing button comes out this Friday, you wait a week for it to evaluate your driving before the feature unlocks, and then it’s Q4.

Ah . . .that's right. Forgot about that timing of that.

 

[nativewolf]

And this is why regulators are concerned about Tesla. Not because of safety, but rather because Tesla highlights the difference between "safety through regulation" and "safety through innovation". And clearly shows what the better choice is.

In regulators defense, there has never been a company such as Tesla that can both iterate so quickly AND has such a focus on safety.

It is great that at this stage of Tesla they are doing this. Clearly the better option but clearly something was not optimal before re stopped emergency vehicles. Anyhow, yes great, so much better than regulations and the whole fleet can get updated; no recalls, no dealers. That's the magic.

 

[nativewolf]

Ah . . .that's right. Forgot about that timing of that.

that and the fact that this initial batch of customers with the beta will likely be very small indeed. Thoughts are that it will be 1-3% of the population (370k FSD subscriptions). Others think they'll just feed in batchs of users in 1-2k per update and keep expanding until the actual release. In either case it would not really be a huge mover until the full release as you may only have 20k total beta users before the general release. Just food for thunking.

 

[Tslynk67]

Ah . . .that's right. Forgot about that timing of that.

Another thing not mentioned for a while is the deferred tax-revenue that you and FC dug up a couple of years ago - isn't this supposed to be declared when audit are "reasonably confident" that the company will be profitable every quarter going forwards?

That's $2.4B on the bottom-line if I remember well??

 

[mongo]

Another thing not mentioned for a while is the deferred tax-revenue that you and FC dug up a couple of years ago - isn't this supposed to be declared when audit are "reasonably confident" that the company will be profitable every quarter going forwards?

That's $2.4B on the bottom-line if I remember well??

New factory ramp ups are potentially unprofitable in the near term (then they are 'surprisingly'* insanely profitable).

*as potentially spun by you know whos...

 

[bpjod]

Pretty slick. Anyone else capable of this?

Tesla Model 3 and Model Y will now detect and slow down for emergency vehicles — TESLARATI

Tesla’s software update 2021.24.12 seems to include something noteworthy for the Model 3 and Model Y. While the software update’s Release Notes were identical to previous updates in the way that they highlight features like Disney+ streaming and Car Wash Mode, 2021.24.12 also included something...

apple.news

Time to save face along with a few dollars and drop the investigation? Or, press on and determine why other automakers haven’t rolled out a similar update yet?

 

[SPadival]

If you want a good laugh, I recommend this video:-

Whoever produced these estimates together makes Gordon look like a genius. Surely this is an elaborate joke?

These days, I stick to watching Tesla Daily and Tesla Bjorn. The rest are unvarnished clickbait garbage.

 

[Tes La Ferrari]

Why Tesla (NASDAQ:TSLA) is One of the Best Buys in the S&P 500 | Entrepreneur

We discuss a few reasons why Tesla might be one of the best buys in the S&P 500.

www.entrepreneur.com

TL;DR: “With the stock market pulling back sharply over the last few trading sessions, investors would probably expect a high beta technology stock like Tesla (NASDAQ: TSLA) to be down significantly as well. That’s surprisingly not the case, as the electric vehicle company has been showing serious relative strength amidst market weakness. This could be a sign that Tesla is gearing up for an end-of-year rally, particularly when you consider the fact that the stock has been stuck in neutral for the majority of 2021.”

 

[Tslynk67]

These days, I stick to watching Tesla Daily and Tesla Bjorn. The rest are unvarnished clickbait garbage.

Daily and Bjørn are class, for sure, but SMR is pure entertainment. To be fair, when SMR first came on the scene he as doing really good content that was summarising the Tesla bull thesis, I used to share these with people who asked what it was all about, now I watch him for fun - and he has some nice merch...

 

[Knightshade]

Pretty slick. Anyone else capable of this?

Tesla Model 3 and Model Y will now detect and slow down for emergency vehicles — TESLARATI

Tesla’s software update 2021.24.12 seems to include something noteworthy for the Model 3 and Model Y. While the software update’s Release Notes were identical to previous updates in the way that they highlight features like Disney+ streaming and Car Wash Mode, 2021.24.12 also included something...

apple.news

Cruise and Mobileye both showed their systems recognizing and reacting to emergency vehicles at least a year or two ago.

Waymo was able to recognize, including using external mics to determine if one was approaching from behind or ahead of it, and even pull over to allow to pass emergency vehicles since at least 2017... (though obviously it'll be better at it in Chandler, Arizona specifically )

 

[The Accountant]

Another thing not mentioned for a while is the deferred tax-revenue that you and FC dug up a couple of years ago - isn't this supposed to be declared when audit are "reasonably confident" that the company will be profitable every quarter going forwards?

That's $2.4B on the bottom-line if I remember well??

With the stock run up, it is now likely that tesla will have Tax Losses even when they have Financial Statement Profits.
Stock options (when exercised) have a higher expense for tax purposes than for the 10k.

For example, Elon's CEO award when fully expensed will have cost Tesla $2.3B in the financial statements.
But if Elon exercises at today's price of $740, it would be a $68B tax deduction. If he exercises at $1,500/shr it would be a tax deduction of $144B.

Some of the tax benefits have Expiration dates ranging from 2024 - 2037.
However I estimate that about $300m to $400m of the tax benefits have no expiration and it's possible that Tesla could take this into earnings as there is no concern about these benefits expiring.

 

[TheTalkingMule]

Absolute funniest headline in Tesla history IMO....

GM Is Becoming More Like Tesla. Check Under the Hood.

General Motors is one of the traditional auto makers pushing most aggressively into Tesla's territory. GM's latest move: a triple electric motor.

www.barrons.com

 

[mongo]

With the stock run up, it is now likely that tesla will have Tax Losses even when they have Financial Statement Profits.
Stock options (when exercised) have a higher expense for tax purposes than for the 10k.

For example, Elon's CEO award when fully expensed will have cost Tesla $2.3B in the financial statements.
But if Elon exercises at today's price of $740, it would be a $68B tax deduction. If he exercises at $1,500/shr it would be a tax deduction of $144B.

Some of the tax benefits have Expiration dates ranging from 2024 - 2037.
However I estimate that about $300m to $400m of the tax benefits have no expiration and it's possible that Tesla could take this into earnings as there is no concern about these benefits expiring.

Speaking of Elon's compensation plan, is there any reason (beyond the 5 year lock up period) for Elon to not wait until the end of the plan period to exercise vested options? By waiting, is he improving the per share financials, or does the diluted number take into account ungranted shares (seems like it shouldn't since he could choose not to exercise)?

 

[Knightshade]

Absolute funniest headline in Tesla history IMO....

GM Is Becoming More Like Tesla. Check Under the Hood.

General Motors is one of the traditional auto makers pushing most aggressively into Tesla's territory. GM's latest move: a triple electric motor.

www.barrons.com

I'd say more like VW- the "new GM electric motors!" story mentioned they have 11,000 people working on software and are expecting that to increase.

VW was hiring 10k people for this after the ID.3 SW debacle.

Both think throwing bodies at software is a solution- and it's really not.


BTW, Tesla adjacent- Redwood (JB Straubels battery recycling and now battery-material-source company) just signed a deal with Ford-

Ford signs deal with Redwood Materials to recycle EV Batteries

The agreement is the latest indication automakers are taking steps to address the supply of raw materials needed to manufacture batteries for electric vehicles.

www.cnbc.com