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I'm definitely not an expert, but my model shows basically no path to profitability for Q1 unless some combination of the following occur: (i) opex happens to come way down, (ii) they sell a ton of ZEV credits, (iii) margins surprise bigly to the upside (guidance is for a return to the 16Q3 level, 25%, even with AP revenue coming in) and/or (iv) TE/solar produces a big surprise.
I expect a GAAP loss of about $1.50/share. Would love, love love to be wrong (just as I was wrong on deliveries, expected 22,000).
I have been trying to figure out a good strategy in that regard. Great post. How do you think about Taxes when doing this? I am getting to the point where there would be some huge tax bills if I were to start selling in the next 9 months.
yes, this even drew Elon to talk to this point more explicitly than ever in the past,
Elon Musk
✔@elonmusk
@ForIn2020 @waltmossberg @mims @defcon_5 Exactly. Tesla is absurdly overvalued if based on the past, but that's irrelevant. A stock price represents risk-adjusted future cash flows.
4:01 PM - 3 Apr 2017
I think going forward when this false overvalued narrative gets repeated by someone of some notoriety like Mossberg, we could encourage them to ask Warren Buffett to analyze Tesla's value. They might ask, and Buffet might respond if asked enough. fwiw, I don't think Mossberg meant any malice, but was simply repeating what the merchants of Tesla doubt keep flood the conversation with to make it seem as if it is common sense.
ps can someone explain how to cleanly copy tweets into posts here on TMC?
larmor
Active Member
Tesla's future profits are much higher than the current market has priced in, and will come from energy and solar solutions.
thanks for the reply. so what i reached back to was that 3rd quarter when they reported profitability.
at the time many thought the $138m in zev credit sales is what got them to gaap profitability. of course non-gaap they were strongly profitable.
perhaps its overly simplistic, but my thought is they just need to add around $150m is gross profit to get to being profitable (basically take the q3 numbers and do something to compensate for not selling zev credits).
now the key fact for me is from the recent 10k:
"During the third quarter of 2016, we discontinued our resale value guarantee program in North America. The resale value guarantee was originally introduced in 2013 to help to reassure customers that Tesla vehicles would retain value over time."
the last balance sheet had 2.4 billion of resale value guarantees (rvg), including $179 million classified as current.
another thing happens too: with fewer leased vehicles more revenue is booked vs. deferred, and with the end of the rvg program more gain is booked because there are no reserves taken for at least the north american rvgs.
my belief is that with the end of the north american rvg program, a lot of the built-up reserves will get released into earnings. fewer leased vehicles could increase revenue per vehicle and realized gross profits. that plus tesla energy and higher auto revenues will drive the path to profit.
if anyone knows more about the leases please chime in.
also correction: my prior post on profitability should read "tesla energy revenue" not "tesla revenue"
at the time many thought the $138m in zev credit sales is what got them to gaap profitability. of course non-gaap they were strongly profitable.
perhaps its overly simplistic, but my thought is they just need to add around $150m is gross profit to get to being profitable (basically take the q3 numbers and do something to compensate for not selling zev credits).
now the key fact for me is from the recent 10k:
"During the third quarter of 2016, we discontinued our resale value guarantee program in North America. The resale value guarantee was originally introduced in 2013 to help to reassure customers that Tesla vehicles would retain value over time."
the last balance sheet had 2.4 billion of resale value guarantees (rvg), including $179 million classified as current.
another thing happens too: with fewer leased vehicles more revenue is booked vs. deferred, and with the end of the rvg program more gain is booked because there are no reserves taken for at least the north american rvgs.
my belief is that with the end of the north american rvg program, a lot of the built-up reserves will get released into earnings. fewer leased vehicles could increase revenue per vehicle and realized gross profits. that plus tesla energy and higher auto revenues will drive the path to profit.
if anyone knows more about the leases please chime in.
also correction: my prior post on profitability should read "tesla energy revenue" not "tesla revenue"
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with option trading profits in a taxable account, taxes will be paid if i make money. just a fact of life.
There are many reasons that I feel strongly about my investment in TSLA, but one that gives me great pleasure is how Elon pays attention to the stock price and the manipulations of the shorts. His "stormy weather" tweets demonstrate just how much he is aligned with all of us on this forum. Our pain has been his pain too, and nobody is working harder than Elon to financially reward all of us who are long. And nobody is working smarter, more strategically, and more courageously than Elon.
It was great watching my net worth climb today, but it gives me even greater joy to think about how satisfying it must be for Elon to see his hard work pay off for everyone who believes in what he is doing.
It was great watching my net worth climb today, but it gives me even greater joy to think about how satisfying it must be for Elon to see his hard work pay off for everyone who believes in what he is doing.
Yes, RVGs will be tailing off and added to earnings each quarter, but keep in mind that the amounts getting added back this past quarter will be RVG cars from Q1 2014, when sales were much lower (6457 deliveries). That 2.4b is quite backloaded given the huge ramp in sales up through when the RVG was discontinued in 2016. Also, 2.4b includes a good chunk of RVG that has not been discontinued - some non-US countries still maintain an RVG program.
I agree we might get some ZEV credits but I'd guess under 50 million. Value has to be declining given oversupply and prospect of Trump eliminating the requirements.
I still think capex keeps us from getting to GAAP profit and opex keeps us from getting to non-GAAP profit, but there's still the possibility of surprises from areas no one knows how to model (TE/Solar).
T3slaTulips
Member
Grand Rapids NBC station WOOD TV 8 had Tesla as their big stock market story tonight.
They couldn't be bothered to get the right all time high as they listed $294.15 (must have made the story much earlier today) and it closed $298.52. They did also highlight last years vehicle sales comparison between the two companies.
They couldn't be bothered to get the right all time high as they listed $294.15 (must have made the story much earlier today) and it closed $298.52. They did also highlight last years vehicle sales comparison between the two companies.
erthquake
Active Member
Heh. This is why I always try to be on the good side of time decay, and never sell a covered call unless I'm completely willing to exit the stock at that price.
And for some reason the market is not offering covered calls at strikes I'd be comfortable with, like $1000. Dunno why. ;-)
Oooh, there's a very very broad hint in the first page of that ruling. After saying that this is a "narrow legal ruling", there's an entire paragraph devoted to saying that this is a question of whether a *subsidiary* of Tesla can get a license to sell cars in Utah, and that they are *not* ruling on the question of whether Tesla, Inc., the Delaware corporation which is the manufacturer, can get a license to sell cars in Utah.
I read this as a hint. More or less a "go back and try that". Tesla's legal department may be too stupid to try that, but they definitely should.
I figure this is unlikely given that they're still hiring and ramping up at two Gigafactories and an auto factory, and *hopefully* some more service centers...
Unlikely to help much even if they do, since the ZEV credits are teetering on worthlessness
A possibility but not a likely one
This, on the other hand, has a definite chance of happening and it would be worth trying to estimate how likely it is. Tesla's been ultra cagey about stationary battery deliveries.
FredTMC
Model S VIN #4925
I hope Elon and Team set conservative achievable guidance each quarter's expected deliveries.
No reason to get crazy, the QoQ growth will be insane anyway. Don't give stretch goals as guidance. Fine to have internal stretch goals.
We all know from past performance that production ramp and S-curve is difficult to predict, so be conservative with guidance.
Having a few quarters of under-promise and over-deliver is just fine.
No reason to get crazy, the QoQ growth will be insane anyway. Don't give stretch goals as guidance. Fine to have internal stretch goals.
We all know from past performance that production ramp and S-curve is difficult to predict, so be conservative with guidance.
Having a few quarters of under-promise and over-deliver is just fine.
I suggest you review what you know about Elon Musk (especially q2 '16). Tesla's on a mission, and we're just along to help keep financing options open so that they can achieve their mission. If TSLA does well as the mission proceeds it's just gravy, but nowhere near the priority objectives. Keep that in mind when making your investments.
I'm bitter today, because I had sold call options last week that expired ITM. Now I need the stock to drop so my put options can be exercised!
Waiting4M3
Active Member
I think there is a shift when you transition from selling to early adopters to selling to mass market. When you're selling to early adopters, you want to give the optimistic target to get them excited, creating demand. When you're selling to mass market, creating the correct expectation is more important than drumming up demand, to avoid disappointing potential customers. To some degree this may apply to investors as well: early investors are more likely to be patient and wait for long term goal, but as you grow larger, you will get more casual investors who just want to see returns each quarter, and not as focused on long term goal, so you need to pay more attention to nail each quarterly target.
Then buy some more! This happened to me a few weeks ago (I posted at the time but can't be bothered looking it up at the moment.) Classic arbitrage. I regret being offline most of the day, today was full of opportunity.
tinm
2020 Model S LR+ Owner
While on the subject of transitioning from early adopters to mass market, this continues to be, imho, one of Tesla's biggest risks. Tesla has not demonstrated they know how to be a company that can deliver, communicate, and have the necessary degree of responsiveness and accountability that a mass-market business has to have to be sustainable let alone growable.
Model 3 buyers/owners (subtracting out the many existing Tesla owners who are buying 3s) are probably situated more in the mainstream mass market, and have a set of expectations for buying a car, receiving a car, and servicing a car that we early adopters never had or had to a lesser degree.
For instance, will mainstream Model 3 buyers tolerate no service centers in many states, or one that is far away? Will they tolerate Rangers? Will they tolerate non-responsive delivery specialists, not to mention missed dates and on-again, off-again delivery dates?
Will Tesla be able to service a fleet of Model 3s? Especially in the many states in which there are zero service centers?
I remain super-long on TSLA (ain't sellin' until it passes $1000), but these issues continue to make me nervous. I have seen little evidence of Tesla doing much yet to address them. I think they know this.
Prediction: Tesla's gonna punt, give up on its principles, and either open up a special, very restrictive, high-touch, expensive-to-get-into, requiring extensive training and certification, franchise dealership program, or partner with someone like AutoNation or CarMax with similar extreme certification and training and service and marketing standards, to sell and service cars in all the states that don't offer Tesla stores or service centers. That's my guess. Within next 12 months, possibly within next 6 months.
Waiting4M3
Active Member
It's encouraging that within the last year, the doubt on M3 bottleneck has migrated from design to production to delivery and now to service. I wonder what the next few months will bring. I wouldn't be surprised if Tesla does partner with someone, I really don't know much about car dealerships and servicing. But I wonder what would qualify the names that you mentioned to better sell and service Tesla than Tesla themselves, besides being in cahoots with the dealership cartels.
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