Articles/megaposts by DaveT

[Cwin]

maybe they decided to sell them in Q1 to make up for the costs of filling the pipeline.

I was thinking the same. However, there is still going to be a reduced amount of available ZEV income next year. So they have more incentive to keep a hold of them and sell them later for a higher price.

But if they really aren't trying to rely on ZEV income that much, maybe its better to blow em now when they will have more affect on earnings. Rather than in the future where they will be getting much larger revenues from sales.

It's just such a large unknown.

 

[AlMc]

I wouldn't say we "lose" $35m off the top since that is DaveT's wild guess. I'm not sure about that number though because I think more manufactures have compliance cars now and may not need ZEV credits. Also, if car makers did need the credits, I would have thought that we would see some ZEV income in Q4 since that was the start of the new model year. OTOH, maybe they decided to sell them in Q1 to make up for the costs of filling the pipeline.

That is the 35 million dollar question. Logic would tell me if you are sitting on ZEV credits and you have taken a 5-7 million dollar one time 'hit' with the battery protection installs and you have changed delivery philosophy from'rush everything (including loaners) out the door before Q ending' to 'we need to start building up an inventory pipeline' that this would be the ideal time to use them.

 

[c041v]

DaveT - Excellent analysis, I was nodding my head up and down as I read through your summary.

My thoughts;

1. I'm glad to see that you've reeled in ASP a bit, I feel like some of the guesses near $110K were getting a bit rich.
2. ZEV will certainly be a huge wildcard as others have indicated, so nothing additional there.
3. I'm really curious about R&D expenses. I don't think you're wrong, but the 'deafening silence' around the X and someone's comments about Elon telling the engineers to re-make the parts until they were perfect makes me wonder just how much cash they are burning through to get the X perfect.
4. Interest. Tesla has $2.2 billion sitting in the bank in addition to previous cash reserves, do they not? In my industry, progress payments (Revenue) are held into low-interest short term GICs until they need to be withdrawn to cover expenses. They earn next to nothing, unless you have a substantial amount. The last project I was on was earned 7 figures in interest off the float we had between Revenue and Expenses, which varied a great deal and was far less than what Tesla is holding onto right now. Surely, I would expect that $2.2 billion to be invested in something...

Overall, I think these numbers are very sound, but I still worry that the market will punish the stock.

 

[FredTMC]

Yep, great analysis DaveT (as usual). I don't disagree with summary

a lot of the price action will come down to their guidance and gigaF news.

My view is stock will trade down unless there is good news on guidance increase or gigaF firming of plans. It wouldn't take much on either point to help support the stock.

Examples:

We are announcing gigaF down-selections on X date.

We are increasing delivery guidance to X in 2014 based on 2nd line production progress.

 

[aznt1217]

Here's how I imagine the call will go

Elon and Deepak will talk about the deliveries this past quarter and how they didn't deliver blow out numbers because cars are in transit and emphasize that demand is NOT plateauing in the US.
They will go over the extra expense for the titanium underbody shields and ZEV credits
Probably mention something about the JV with daimler and the B series
Some guidance in Q2 and sticking to FY guidance

Answers to the following questions will help/hurt the stock:
1. Model X progress
2. BMW i series competition (laughs)-- but some analyst will probably ask
3. Demand in China and progress in China
4. Gigafactory progress

Between the Gigafactory, Model X, accelerating production, and the China market... it's seriously just a matter of time before money starts raining on us.

 

[Cwin]

What can be said about the Gigafactory and Model X that we don't already know?

 

[FluxCap]

Dave, great analysis as always and thanks. I'm more optimistic this ER than you, but I love your analysis.

 

[vgrinshpun]

Thank you DaveT for your analysis!

I think you have couple of typos for the Developmental services. The actual numbers from the shareholder's letter are listed below:

_______________________Q3______ Q4___l
Development Services__ $1,150K__ $4,368K
Cost of Dev. Services__ $5,051K__ $3,595K

I also think that TM might get a large income from the Development Services in Q1 because last couple of quarters development services margin was negative. See my post linked below for more details: http://www.teslamotorsclub.com/show...ctions-results?p=647566&viewfull=1#post647566

 

[austinEV]

Here's how I imagine the call will go

Elon and Deepak will talk about the deliveries this past quarter and how they didn't deliver blow out numbers because cars are in transit and emphasize that demand is NOT plateauing in the US.
They will go over the extra expense for the titanium underbody shields and ZEV credits
Probably mention something about the JV with daimler and the B series
Some guidance in Q2 and sticking to FY guidance

Answers to the following questions will help/hurt the stock:
1. Model X progress
2. BMW i series competition (laughs)-- but some analyst will probably ask
3. Demand in China and progress in China
4. Gigafactory progress

Between the Gigafactory, Model X, accelerating production, and the China market... it's seriously just a matter of time before money starts raining on us.

I am worried that the report will come out "ok", even in line with TMC projections. Then the questions will be dumb, because analysts have a talent for avoiding the really good questions. For instance, I will be shocked if someone doesn't take time discussing the Model "E" name change, which doesn't matter for anything.

Also, the "success" of the earnings release will be determined in 100-200ms after it's release. (not joking). Market makers' computers are poised to parse the report and we will see if it is big red or big green instantly, as has been the case in last reports. There has never been a case of a bad reaction to the earnings release turned around by the conference call discussions, or vice-versa.

 

[JRP3]

What can be said about the Gigafactory and Model X that we don't already know?

GF: When, where, and with who?
X: When?

 

[Cwin]

Who: From whats been released already, partner discussions will take place all the way up till Q3. No doubt Panasonic is on the list, but who else? Is it time for us to know this yet?
Where: 4 states, 2 finalists then a decision. No doubt they have a state by now. How much could a final location affect today's stock price?
When: This has been announced already, albeit without concrete dates, in their first press release.

X. We have a when, 2015 after delays. Nothing has stated otherwise and I doubt we will hear a change after this report. Why announce it now and not later if there was a definitive date or another change in its timeline, unless it were a delay?

 

[Robert.Boston]

At some point we'll need to give some careful attention to the Parts & Service side of Tesla Motors. If you need (non-warranty) replacement parts, Tesla charges you a very hefty price. Clearly they've borrowed a page from other OEMs about the margin on parts.

 

[TSLAopt]

Also, the "success" of the earnings release will be determined in 100-200ms after it's release. (not joking). Market makers' computers are poised to parse the report and we will see if it is big red or big green instantly, as has been the case in last reports. There has never been a case of a bad reaction to the earnings release turned around by the conference call discussions, or vice-versa.

this is is not necessarily true...when Q4 earnings was released we immediately dipped a few points before skyrocketing up if I remember correct.

 

[austinEV]

this is is not necessarily true...when Q4 earnings was released we immediately dipped a few points before skyrocketing up if I remember correct.

I remember it differently; it was a down day all day, from about 205 to about 195. Then at the bell boom straight up and it was in the 225 range AH. It only opened 215 and closed at around 210 the next day. I remember because we were all so disappointed it didn't hold those AH levels. I remember staring at my stockcharts.com at the close of earnings day and it showed a crazy spike up as it accidentally took orders that were past the cutoff. I at least never saw anything but up at the close.

 

[JRP3]

At some point we'll need to give some careful attention to the Parts & Service side of Tesla Motors. If you need (non-warranty) replacement parts, Tesla charges you a very hefty price. Clearly they've borrowed a page from other OEMs about the margin on parts.

Yes, what happened to "We don't want to profit from our mistakes"?

 

[NuclearPowered]

Yes, what happened to "We don't want to profit from our mistakes"?

Includes parts for accident/insured damage too. Not Tesla's mistake.

 

[JRP3]

So do they charge less for a part that fails out of warranty, that was not damaged in an accident?

 

[DaveT]

I know it' hard to predict, but what's your take on market reaction to the above scenario, disregarding any factory/X news? I read somewhere, that consensus is a $700 mil revenue with a 0.10 EPS.

It’s tough to say since lots of growth stocks are getting pounded lately. But I don’t think Q1 2014 will be as good as Q4 2013 earnings in terms of surpassing people’s expectations with revenue or cars delivered. But I do think that it’s fairly obvious to see that Tesla will be ramping up the rest of the year so that gives the stock support as well as a 200 dma approaching $180.

Any thoughts about the total amount of Customer Deposits on March 31st, 2014?

In the Shareholder Letter of ER Q4 2013 this amount was $163,153,000 (on December 31st, 2013).

Customer Deposits will likely go up because of Model X reservations. I shared some speculative numbers on current reservation amount here: 2014 1 QTR predictions/results - Page 13 . Based on those numbers I’d make a wild guess of an increase of $25m (maybe $30m) in customer deposits.

My thoughts;
1. I'm glad to see that you've reeled in ASP a bit, I feel like some of the guesses near $110K were getting a bit rich.
2. ZEV will certainly be a huge wildcard as others have indicated, so nothing additional there.
3. I'm really curious about R&D expenses. I don't think you're wrong, but the 'deafening silence' around the X and someone's comments about Elon telling the engineers to re-make the parts until they were perfect makes me wonder just how much cash they are burning through to get the X perfect.
4. Interest. Tesla has $2.2 billion sitting in the bank in addition to previous cash reserves, do they not? In my industry, progress payments (Revenue) are held into low-interest short term GICs until they need to be withdrawn to cover expenses. They earn next to nothing, unless you have a substantial amount. The last project I was on was earned 7 figures in interest off the float we had between Revenue and Expenses, which varied a great deal and was far less than what Tesla is holding onto right now. Surely, I would expect that $2.2 billion to be invested in something...
Overall, I think these numbers are very sound, but I still worry that the market will punish the stock.

1. I think ASP will start to go down a bit quarter-to-quarter since from what I’ve been hearing at showrooms is that they’re selling less Performance models compared to the S.

3. I’m not too concerned about Model X R&D. Most of the expenses will likely come in the 2nd half of this year with tooling, stamping, etc.

4. Regarding interest, I think you’re right that Tesla will accrue significant interest off of their cash. But from their prospectus it appears the bonds were issued on March 5 or so, so that’s less than a month of interest. Could be a few extra million in income.

My view is stock will trade down unless there is good news on guidance increase or gigaF firming of plans. It wouldn't take much on either point to help support the stock.

I think that’s reasonable. I think though it might be difficult for them to raise full year guidance right now, since they’re only at 700 cars/week (beginning of April). It would make sense for them to raise guidance later on in the year when they’ve been more successful in ramping production.

Thank you DaveT for your analysis!

I think you have couple of typos for the Developmental services. The actual numbers from the shareholder's letter are listed below:
_______________________Q3______ Q4___l
Development Services__ $1,150K__ $4,368K
Cost of Dev. Services__ $5,051K__ $3,595K
I also think that TM might get a large income from the Development Services in Q1 because last couple of quarters development services margin was negative. See my post linked below for more details: 2014 1 QTR predictions/results - Page 31

Thanks, vgrinshpun. I made the change.

 

[dalalsid]

Any thoughts about the total amount of Customer Deposits on March 31st, 2014?

I'm looking for 180M as Model X deposits continue to rise (I'm thinking 130M in depostis for Model X and 50M for Model S).

 

[sleepyhead]

Thanks a lot for the analysis DaveT. I think that if Operating expenses do go up as quickly as you modeled (an additional $30m vs. Q4), then we might see a sell-off.

The market has a 3-month time frame and they don't really care too much that upfront investments in stores, services centers, and superchargers will benefit TSLA immensely in the long run.

I am still negative going into this ER, but I am not taking any short term positions for this ER and will be sitting this one out.

Cheers and good luck to everyone.