Sure. The problem is that Tesla OpEx isn't really investment. It's just money to keep the lights burning in the sales center. Well of course that's a gross simplification and some of the expenses (like hiring a new sales advisor) are in a way an investment. But they as short term frontrunners of additional revenue and by far don't have the multiplicative properties like real investment in for example R&D for the semi has. I'd like Tesla to be a little more frugal on the OpEx side so there is more for CapEx, not necessarily to be profitable.
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Sure. The problem is that Tesla OpEx isn't really investment. It's just money to keep the lights burning in the sales center. Well of course that's a gross simplification and some of the expenses (like hiring a new sales advisor) are in a way an investment. But they as short term frontrunners of additional revenue and by far don't have the multiplicative properties like real investment in for example R&D for the semi has. I'd like Tesla to be a little more frugal on the OpEx side so there is more for CapEx, not necessarily to be profitable.
I guess the point I was making is that Tesla will need to make massive investments over the next 2-3 years to ramp up Model 3, develop and ramp Model Y, Semi and Pickup, begin building 3-5 more Gigafactories, begin build the Megacharger network, ramp TE, ramp the Solar Roof, plus develop and and ramp production of new products we haven't heard about yet.
Model 3 should start generating tons of cash in 2019 to fund this, but these are huge projects so I would not be at all surprised if they gobbled up most if not all of it at least through 2020 and maybe longer.
OpEx is only one small part of this (although an important one). I expect R&D expenses to continue increasing to develop all of these new projects, although I do expect increased operational efficiency will reduce OpEx as a percentage of revenue as time goes on. Controlling inefficient SG&A expenses is obviously a good thing, although they have to be careful not to do this in a way that hurts the brand, which can create long-term impacts. Reducing Solar City sales staff in favor of in-store solar sales is a good example. On the other hand, automotive sales staff already appear to be stretched thin and there are lots of customer complaints about poor communication. Some of that can undoubtedly be handled by more efficient systems, but it will also require continuing to hire and train good people, which is not cheap.
I think it depends on when they break ground on the other gigafactories and when the larger expenses occur. I think we might see them GAAP profitable at the end of this year because they are "saving" for when they can deploy the money into the new factories, at which point they will hopefully spend it all and raise more capital so they can start manufacturing products at those factories as quickly as possible.
Hopefully the ER will have information on new Gigafactory locations, and predictions about possible GAAP profitability for a quarter later this year. Didn't Elon say in the past that breaking ground is not very expensive compared to later stages of construction?
Good points -- it is definitely a possibility although as I said I am not counting on it. Personally I would be very happy if they continue focusing on long-term growth and take full advantage of their huge lead on the competition, but if they could manage the timing of expenses to eke out even a small GAAP profit for a few quarters in a row I'm sure the market would love it.
With all due respect this thread needs an accountant. There are a lot of misstatements re: terms like gaap profitability, gross margin, ebitda, capital investment and particularly CASH FLOW. Fwiw
We are really saying the same thing except this. OpEx is not a small thing. At least, it isn't as small as I was hoping it would be by this time (and I think most bulls). It is the CFO's business to make sure OpEx becomes small but at this point in time I am not sure it is a priority.
MitchJi
Trying to learn kindness, patience & forgiveness
Jonathan Hewitt
Active Member
I guess this means you're for sure reinvesting before March
I will volunteer this. If you can not explain those elements of a financial statement you are not investing on fundamentals. That's ok, just admit it and don't throw terms around that can be misconstrued. CheersA big Thank You for volunteering!
MitchJi
Trying to learn kindness, patience & forgiveness
It did mean that, but now I’m not sure.I guess this means you're for sure reinvesting before March
I should have checked our crystal ball before I posted. She currently thinks that we should wait for March to buy back in. I’m not sure if I can hold out if the price continues to drop.
bdy0627
Active Member
Ok, I admit it. I'm not throwing those fancy accounting terms around though, and I DO fundamentally believe in Musk and Tesla.
Jonathan Hewitt
Active Member
She won't even let you sell way OTM puts or something? Unless she thinks the bottom is going to fall out it makes no sense to at least collect some premium decay while all that cash is sitting there making 0.01% in a money market. If she thinks the bottom might fall out she should share that with us
bdy0627
Active Member
Why does it have to be all or nothing? You can dip your toes in when it looks nice but wait a bit to take a full plunge.
bdy0627
Active Member
I don't have a clue what the stock will do over the next couple of weeks. Consolidation seems in order at this point. Does anyone expect anything decisive prior to ER?
I don't know either. I want to sell more DITM 2020 Puts, and I don't know if I should do it now or after ER (to potentially make more money on the same strike price if it goes down after the ER).
Given the fact that sales is expected to continue to increase 50%+ per year for the next 10 years, current GAAP and cash flow is pretty meaningless at this point. We are trading based on future expected market cap, not current P/E. The latter is what Bears are doing, which is why they are losing so much money.
Hmm, that's a good question. Being profitable and being cash flow positive are two different things. I think Tesla's cash flow will be looking very good toward the second half of 2018. But then they need to fund Model 3 production ramp to 10k/week and also new gigafactories, and that's going to take significant capex. How much? I think a lot of it depends on how fast they want to build the new gigafactories. But my hunch is that Tesla will be raising money in cap raises (in bonds or maybe sometimes convertibles) every year for the next several years.
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