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Near-future quarterly financial projections
- Thread starter luvb2b
- Start date
"Past performance is not an indicator of future performance." What part of "production ramp" don't you understand?
@luvb2b please keep up the excellent work.
it's because i was excessively conservative before. my prior estimate was they exit q2 around 4k per week, moving towards 5k at the end of q3. assuming 11 weeks of production averaged at 4.5k that would be 49.5k plus holdovers from q2. hence my ~50k estimate for deliveries. i thought that was adequately conservative b/c 2 weeks of shutdown in q3 would be quite bad given the tax credit situation in the usa and b/c i believe they took the extra shutdowns now so they wouldn't have to later.
now there are multiple reports for multiple sources, and yes these are all varying degrees of unreliability, but enough diversity to convince me they are exiting q2 at or near 5k per week. assuming that is a burst rate, and the actual steady rate is 10-15% less at 4.2-4.5k per week, that's still 5%-10% better than i was expecting for the exit rate and warrants a proportional unit increase for q3.
we'll know in about 2-3 weeks whether or not they can sustain at 5k weekly, and if they can i will have to raise numbers again.
For the "moving Goal Post" contingent
i would accept 25k production as an accomplishment despite it being a sustained rate of under 2k a week. So when I bring up demand please dont say im moving goal posts. Demand and backlog conversion has always been a question. So when I give a "win" that is far below what the original "goal" was for the Bull side, all I ask is that you dont make up goal post moving stuff. LIke I move the goal posts in your favor if anything.
i would accept 25k production as an accomplishment despite it being a sustained rate of under 2k a week. So when I bring up demand please dont say im moving goal posts. Demand and backlog conversion has always been a question. So when I give a "win" that is far below what the original "goal" was for the Bull side, all I ask is that you dont make up goal post moving stuff. LIke I move the goal posts in your favor if anything.
ValueAnalyst
Closed
Q3 Model 3 ASP will be $65,000; not $54,000 assumed in this model.
Q3 Model 3 production will likely be much higher than the 3,750/wk assumed in this model (assuming 9k units in-transit on June 30).
Q3 Energy storage revenue will grow exponentially vs. flat assumed in this model.
Q3 will likely include high-margin AP revenue recognition with FSD features roll out vs. zero assumed in this model.
I didn't look at anything else, but the suggested changes for these four assumptions alone would lead to significantly different conclusions.
@luvb2v it looks like you didn't adjust your ASP on Model 3 despite several changes there (Price increase/descreases for various options and switched prio for AWD with and without performance) What do you figure?
Here is my Q3 mix
100% base model (49k) = 49k
80% AWD (4k) = 3.2k
30% Performance (11k) = 3.3k
80% AP (5k) = 4k
40% FSD (3k) = 1.2k
90% Paint (1k) = 0.9k
20% Performance upgrade (5k) = 1k
Total $62.6k
Q4
100% base model (49k) = 49k
40% AWD (4k) = 1.6k
20% Performance (11k) = 2.2k
80% AP (5k) = 4k
30% FSD (3k) = 0.9k
90% Paint (1k) = 0.9k
10% Performance upgrade (5k) = 0.5k
Total $59.1k
Afterwards it depends if domestic short range or international long range will get priority.
Here is my Q3 mix
100% base model (49k) = 49k
80% AWD (4k) = 3.2k
30% Performance (11k) = 3.3k
80% AP (5k) = 4k
40% FSD (3k) = 1.2k
90% Paint (1k) = 0.9k
20% Performance upgrade (5k) = 1k
Total $62.6k
Q4
100% base model (49k) = 49k
40% AWD (4k) = 1.6k
20% Performance (11k) = 2.2k
80% AP (5k) = 4k
30% FSD (3k) = 0.9k
90% Paint (1k) = 0.9k
10% Performance upgrade (5k) = 0.5k
Total $59.1k
Afterwards it depends if domestic short range or international long range will get priority.
correct i did not adjust. i simply accept i cannot be very accurate as i don't have great insight into buying take rates. if i get the general direction and rough magnitude right that will be more than adequate to get a decent financial model (which will have many other inaccuracies by the way).
my estimate for 18q1 model 3 asp was 56k.
i know they will add performance and all wheel drive options, which should raise selling prices meaningfully.
so i had taken a 4k increase in asp. i could have taken 5k, or maybe 6k. i wasn't comfortable with a > 10% increase in asp.
going from 18q1 w/asp 56k to 60k or 61k is not such a big difference in my view so i do.
my estimate for 18q1 model 3 asp was 56k.
i know they will add performance and all wheel drive options, which should raise selling prices meaningfully.
so i had taken a 4k increase in asp. i could have taken 5k, or maybe 6k. i wasn't comfortable with a > 10% increase in asp.
going from 18q1 w/asp 56k to 60k or 61k is not such a big difference in my view so i do.
not sure what the big deal is about moving goal posts. not moving them as reality changes would be foolish.
is there some taboo about changing one's mind in the face of new information?
is there some taboo about changing one's mind in the face of new information?
I think what many object to is "Tesla will die because [insert bear reason]" and then when it doesn't, or it outperforms their expectations or reaches a goal they did not think it ever will, they go "OK, OK it did not die, but now Tesla will surely die because of [insert next bear reason]".
It's not that they change their opinion based on new information. They work backwards from the notion of "Tesla will die" and find reasons to support that. When that theory does not work out, they quickly move on to another theory why it will surely die.
I don't think it requires a particularly wild imagination to predict, that the "Tesla will never make profit" argument will soon be forgotten like it wasn't one of their 10 commandments. The new one will be "OK, OK, they made profit in Q3, but that was Elon's deception. They fired people to get costs under control and timed deliveries and produced at a burst rate etc. etc.. Will not happen again". Then, Tesla even increases profit in Q4 and they will be like "OK, OK, so they can make profit at 6-8k Model 3s per week, but that's just pent up demand of early adapters/Elon fan club/cult followers. This demand will not be sustainable". Then when demand proves to be there past the pre-order number it will be like "OK, OK, but now [insert German premium brand Tesla Killer] is actually going into production, and no one will ever buy a Model 3 again" and so on.
mershaw2001
I'm short the short sellers
Your S deliveries (12,000) and your X deliveries (10,500) add up to 22.5k but I noticed you updated the total to 23k total s+x deliveries.
luvb2b, I still like your analyses. But there are some issues with your cash flow guess. Thing is, Elon outright said they'd be cash flow positive in Q3. While he's notoriously optimistic, you'd think legal counsel would have stopped that if -471K was likely.
I'm guessing the most likely mistake here is in the financing numbers. You're expecting 400000K in debt repayments in Q3, and I can't figure out what debt you'd be looking at here. There's 82500K in related party promissory notes due in August. There's 230000K from the SolarCity convertibles in November, which is Q4. There's a non-recourse term loan due in December 2018 (158472K) which is probably simply going to be reloaded. Maybe 14432K in miscellaneous "vehicle loans" and "solar bonds", some of which was due in Q2. And that's it for 2018.
So if we corrected this, I might expect -82500 in Q3 from debt repayment, which brings "net change in cash" to -153488. I'd expect an increase in collateralized lease borrowing to cover that. For Q4, I expect about 230000K in debt repayment.
Incidentally, I wonder what Musk will do with the repayment of the promissory notes. I suspect he'll either buy more Tesla stock, or pay off part of his large margin loan. It's not clear whether Musk's margin loan has a nonrehypothecation clause, but if not, his shares have probably been lent to short-sellers and the repayment will pull $115 million in loanable shares (140% of 82.5 million) out of the lending market for short-sellers. Huh.
Edit: or he could just swap them out for notes maturing in another 6 months like he did in February, which is arguably most likely
I'm guessing the most likely mistake here is in the financing numbers. You're expecting 400000K in debt repayments in Q3, and I can't figure out what debt you'd be looking at here. There's 82500K in related party promissory notes due in August. There's 230000K from the SolarCity convertibles in November, which is Q4. There's a non-recourse term loan due in December 2018 (158472K) which is probably simply going to be reloaded. Maybe 14432K in miscellaneous "vehicle loans" and "solar bonds", some of which was due in Q2. And that's it for 2018.
So if we corrected this, I might expect -82500 in Q3 from debt repayment, which brings "net change in cash" to -153488. I'd expect an increase in collateralized lease borrowing to cover that. For Q4, I expect about 230000K in debt repayment.
Incidentally, I wonder what Musk will do with the repayment of the promissory notes. I suspect he'll either buy more Tesla stock, or pay off part of his large margin loan. It's not clear whether Musk's margin loan has a nonrehypothecation clause, but if not, his shares have probably been lent to short-sellers and the repayment will pull $115 million in loanable shares (140% of 82.5 million) out of the lending market for short-sellers. Huh.
Edit: or he could just swap them out for notes maturing in another 6 months like he did in February, which is arguably most likely
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supposed to represent the acquired solarcity business. so that would not include energy storage research/production.
ah yes, thank you. i should have updated to add 250 to each, so 12,250 s and 10,750 x. will fix that next revision.
i went back and checked my debt maturities table.
you are correct - this is a mistake and a major one at that. those debt repayments are supposed to be in q4.
your fix totally changes the cash trajectory. thank you so much for pointing out this error. it makes a very big difference so if I can refresh soon i will.
there are so many moving parts in a model of this complexity i know i cannot have every detail correct. that's where help from members of the forum like yourself is needed. thanks again.
you are correct - this is a mistake and a major one at that. those debt repayments are supposed to be in q4.
your fix totally changes the cash trajectory. thank you so much for pointing out this error. it makes a very big difference so if I can refresh soon i will.
there are so many moving parts in a model of this complexity i know i cannot have every detail correct. that's where help from members of the forum like yourself is needed. thanks again.
Elon has made many financial promises before that didn't come true, including repeated promises of cash flow positivity and profitability that ultimately didn't work out. There does not seem to be some rule or person stopping him from being financially overoptimistic.
With regards to the promissory notes he holds : he already got the company to reimburse him 15% of their value when they previously came up for renewal, so it's def. part of his personal cash management plan.
Looks really high for Q3/Q4 then. Solarcity is completely gutted after the last round of layoffs. What remains is some peripheral selling done at stores and some minor r&d on solar roof. With solar revenue being less than 3% of overall revenue, I have a hard time seeing how you can allocate over 20% of SG&A to it and nearly 15% on R&D. I think you should either have overall SG&A/R&D fall or readjust between both items. It's a relevant discussion in light of 'how does SG&A scale/not scale with revenue' which is basically the difference between the bull or the bear accounting case.
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I am not sure that`s a completely fair argument to make.
Yes, he has given targets of becoming cash flow positive or making profit in so and so year, or quarter when it was a few quarters out and it did not always happen. Which, by the way, in my mind corresponds to X or Model 3 manufacturing difficulties which were not foreseen. However when he is talking about a "rude awakening" with regards to predicting low M3 production/delivery numbers in Q2, he is doing that 3-4 days before the end of the quarter. When he is reaffirming Q3 and Q4 being in the black, he is doing that on the June shareholder meeting, literally a month from the start of that period.
These are not "forward looking statements". They should have pretty good visibility into things so far out.
(I am not sure though how bad Q2 loss is going to be due to scrambling to go to 5k/wk and severance packages due to the layoffs. could be really bad... Then again Model 3 output should be 2x-3x of Q1 so...)
