Apr 5, 2013
vgrinshpun I will take a look at the table.
I was surprised to get such high numbers for the services and power trains as well, but this is the only way I can see how to make Tesla's statement on breaking even on non-GAAP basis work, given Model S revenues and stated gross margin of 15%.�
Apr 6, 2013
luvb2b the margin guidance they gave included credits as far as i know. so your 16% gross margin would apply to the $491 million in revenue.�
Apr 6, 2013
DrDave 2 shifts�
Apr 6, 2013
vgrinshpun Not sure what is 2 shifts based on. I am pretty sure that design output capacity is 500 cars/day/shift. It looks that the 2 shifts remark is based on the fact that Tesla was running partial second shift during March. If true, it is not an indication of the design output capacity, just an indication that they are not at the design output yet. Once they are able to completely tune their production and achieve 25% margin (without the regulatory credits), they will be at 500 cars/day/shift. According to their projections it will happen by the end of this year.�
Apr 6, 2013
Zzzz... The assembly line was designed to output 100 units a day, one shift, 8 hours, or 500 cars a week, in 5 working days/40 hours.
It is based on Elon's remarks and even on Tesla Factory video one station team was trying to archive around 4 minutes work time on a unit, that almost perfectly place daily output to 100 units, with one shift. Video was shot before actual production started.
It is known that in Q4 '12 TM was using two shifts. It also known that Tesla let go temporarily workers recently. I do wonder what is the source of 2 shifts info, DrDave talking about.�
Apr 6, 2013
DrDave Thought the question was if the 500 produced in a single week was done at one or two shifts, so I answered. Tesla ran full 2 shifts all of Q1 (not partial in March, not sure where that notion came from). They did run 2 shifts on a couple Saturdays in March as well, but not every Saturday like at the end of Q4.
If the question was intent or design, then yes 100/8-hr day would have been the answer.�
Apr 6, 2013
luvb2b Updated Q1 Model Income Statement
i guess tesla i.r. just doesn't reply to emails. that plus their voice messages apparently aren't checked. ok, first the initial guidance. i changed a couple assumptions: raised sg&a 5%, increased margins to 18%. i believe this is how you take the initial q1 guidance and come to a set of numbers consistent with what we were told on the last earnings call.
next i have their recently upped q1 guidance compared to the initial. i am going to assume the big-boy analysts are right and the warrant liability should be reversed. since they kept saying that they wouldn't bump up production unless they got more efficient, i think we should assume margins are going to be better than expected too. it's amazing that the average analyst's revenue/eps estimate is $489m / -1c. seem too low to me. what i did below is just take the assumptions that made the q1 guidance work and update to the revised 4750 estimate with slightly higher margins.
Revenues 2012Q4 initial q1 guide 2013Q1 A Auto Sales 294,377 4500 x 110k? 495,000 B Dev Services 11,955 guess $10m 10,000 C=A+B Total 306,332
505,000
Cost of Sales
D Auto Sales 278,710
E Dev Services 3,765
F=D+E Total 282,475
414,100 G=F-C Gross Profit (loss) 23,857 18% of sales 90,900
Operating Exp/Income
H R&D 68,832 down 15% 58,507 I SG&A 45,908 up 5% 48,203 J=H+I Total 114,740
106,711 K=G-J Operating Income (90,883)
(15,811)
L Interest Income 85
- M Interest Expense (27)
(100) N Other Income 746
500 P=K+L+M+N Income before Tax (90,079)
(15,411) Q Provision for Taxes (147)
(150)
T=P-Q Net Income (89,932) no guidance (15,261)
Reconcile to Non-GAAP
T Net Income (89,932)
(15,261) U Stock-based Comp 14,416
15,000 V Warrant Liability Chg 958
1,000 W=T+U+V Non-GAAP Income (74,558) slightly positive 739
and finally: 4,750 cars? not for me. a variety of data sources point to higher numbers. i had been using 5,100 but after some conversations with others i think it's probably just under 5,000. production i'm pretty sure was around 5,400. i think there is some real upside to margins as the consistent drumbeat on the call was that production wouldn't be increased unless margins increased.
Revenues initial q1 guide 2013Q1 updated q1 guide 2013Q1 A Auto Sales 4500 x 110k? 495,000 4750 x 110k? 522,500 B Dev Services guess $10m 10,000 guess $10 million 10,000 C=A+B Total
505,000
532,500
Cost of Sales
D Auto Sales
E Dev Services
F=D+E Total
414,100
431,325 G=F-C Gross Profit (loss) 18% of sales 90,900 19% of sales 101,175
Operating Exp/Income
H R&D down 15% 58,507 down 15% 58,507 I SG&A up 5% 48,203 up 8% 49,581 J=H+I Total
106,711
108,088 K=G-J Operating Income
(15,811)
(6,913)
L Interest Income
-
- M Interest Expense
(100)
(100) N Other Income
500 rev. warr. Liab 10,690 P=K+L+M+N Income before Tax
(15,411)
3,677 Q Provision for Taxes
(150)
(150)
T=P-Q Net Income no guidance (15,261) positive 3,827
Reconcile to Non-GAAP
T Net Income
(15,261)
3,827 U Stock-based Comp
15,000
15,000 V Warrant Liability Chg
1,000 reversed liability (10,690) W=T+U+V Non-GAAP Income slightly positive 739 positive
8,137
5400 cars made would put their end-of-quarter delivery pipeline at 900 cars. that's a big number & would give them a big jump on q2. for q1 i just have a hard time using $20k per car in credits, which is what i assumed above. so i'll go with last quarter and use $16k per car in credits, a $90k average sell, 20% gross margins. the latest version of what i believe below: $535 million in revenue, 12c non-gaap eps. if that warrant liability didn't change it will probably be over 20c non-gaap. even if the warrant liability doesn't get flipped, they're pretty close to positive gaap eps on this model.
i got some new data on the reservations and just working on my reservations model now.
Revenues updated q1 guide 2013Q1 luv's guesstimate 2013Q1 A Auto Sales 4750 x 110k? 522,500 4950x106k 524,700 B Dev Services guess $10 million 10,000 guess $10 million 10,000 C=A+B Total
532,500
534,700
Cost of Sales
D Auto Sales
E Dev Services
F=D+E Total
431,325
427,760 G=F-C Gross Profit (loss) 19% of sales 101,175 20% of sales 106,940
Operating Exp/Income
H R&D down 15% 58,507 down 15% 58,507 I SG&A up 8% 49,581 up 8% 49,581 J=H+I Total
108,088
108,088 K=G-J Operating Income
(6,913)
(1,148)
L Interest Income
-
- M Interest Expense
(100)
(100) N Other Income rev. warr. Liab 10,690 rev. warr. Liab 10,690 P=K+L+M+N Income before Tax
3,677
9,442 Q Provision for Taxes
(150)
(150)
T=P-Q Net Income positive 3,827 positive 9,592
Reconcile to Non-GAAP
T Net Income
3,827
9,592 U Stock-based Comp
15,000
15,000 V Warrant Liability Chg reversed liability (10,690) reversed liability (10,690) W=T+U+V Non-GAAP Income positive 8,137 positive 13,902 �
Apr 6, 2013
Zzzz... Ohh, I thought with all the talks about efficiency and profitability guidance that Tesla already got to about a level line was designed for... BTW, I looked up video, station team was targeting 4m40s time, and such time imply 102 cars produced a day + few seconds unit switch almost perfect 100 units a day.
luvb2b: that 2012Q4 string at the caption of columns is quite confusing, but I figured it
�
Apr 6, 2013
vgrinshpun I have re-run my calculations with an increased Gross Margin of 18.5 vs. originally assumed 15. Although Tesla's guidance was "mid-teens" which could be interpreted as 17.5%, this margin lead to improbably high Development Services income. I ended up using 18.5% because it leads to a more reasonable $17,446K in Development Services. Although this entails rather large 45.4% increase as compared with Q4 2012, this does not seem totally unreasonable, given that MB B-Series EV supposed to go in production in 2014.
The big conclusions from my calculations:
1. Gross Margin for original Tesla Q1 projection was about 18.5%.
2. Based on the revised Tesla Q1 projection (profitable GAAP and non-GAAP), the gross margin is 20.5%, 2% higher that Tesla's original projection.
3. The Model S margin for original Tesla Q1 projection is 3.65%. This positive margin for Model S is very significant, as there are some (most notably Corey Johnson of Bloomberg) that question whether Tesla is actually selling cars for more than it took to build them... Looks like Tesla's original projections indeed were based on positive Model S margin.
4. The Model S margin for the revised Q1 projection (profitable GAAP and non-GAAP) is 6.2%, more than 2.5% higher than the original projection (#3 above) and 15.8% (!) higher that -9.6% Model S margin that was achieved in 2012 Q4. This indicates that only after one quarter Tesla improved Model S margin almost half way from where there were at the end of 2012 to where they plan to be at the end of 2013. There is a good possibility that they will get to the stated goal of 25% before Q4 2013.�
Apr 6, 2013
luvb2b Avg Selling Price, Margin, & Gross Profit Table
apologies in advance as there is a lot of text & information here.
the table i was playing with below is interesting. using the most recent management guidance of $4,750 units and the assumptions matching the middle income statement model i presented above, i developed a table which shows the relationship of average revenue per car (including credits) and gross margin to non-gaap profit. the numbers in dark green bold are the combinations of revenue/car & margin that result in positive non-gaap earnings. i estimated the difference between gaap and non-gaap to be near $4 million, meaning you need at least $4 million of non-gaap to get to gaap profitability. the combinations that give you gaap and non-gaap profitability are in bright green.
there are a few interesting implications here. the gross margin for the quarter is almost certainly 18% or higher. it's most likely at least 19%. you need $115k average revenue per car at 17% margins to show non-gaap profits, that's not likely. at $110k average revenue per car and 18% margin, the non-gaap profit is $2.8m. i think that's too low to get you a gaap profit, which is what they said.
way i see it, margins had to be 19%+. that's important because even at $105k average revenue/car it means that tesla actually made gross profits on making cars, and not just on credits. this is a major criticism of the shorts. it's not a lot of profit yet, but trending in the right direction gives them credibility about their 25% goal. $105,000 x 19% = $19,950. even if credits were $16k per car with the retail price at $89k, that still implies a pure manufacturing gross profit of almost $4k per car. that's a 4.4% margin on the $89k avg retail price.
now consider that 4.4% is the average gross margin for the quarter. i'm pretty sure they started the quarter with automotive gross margins (again, excluding credits) near zero or negative. probably it means the current automotive gross margin is 9-10%. that's better than general motors and closing quickly on ford which runs 11-12% gross margins on autos. and we're still not done optimizing yet. wow. it'll be nice to see the final numbers but it's pretty damn impressive so far.
i added a couple other notes, find the [SUP]1,2,3[/SUP] numbers in the chart below, they are:
[SUP]1[/SUP] these are the closest to where the street estimates currently are.
[SUP]2[/SUP] this is where i think tesla will actually end up for the quarter.
[SUP]3[/SUP] this is tesla's longer term target: 25% gross margin on model s without any credit revenue.
i think based on this table and my estimates above, i'm pretty comfortable that the earnings report is going to be fantastic. please feel free to put forth your opinions... especially any negative ones. :wink:
i'm sure the smart money on the street already knows this, or is in the process of figuring it out. the real key now is trying to understand what the q2 and rest of year guidance might look like.
non-gaap profit @ 4,750 units, $10m dev. services, $58.5m r&d, $49.6m sg&a, 0.05m other, $15m stock-based comp. numbers in thousands. formula (not exactly spacex rocket science): (price x 4750 + $10000)*margin - 58,507 r&d - 49,581 sg&a + 50 other + 15,000 stock based comp. gaap profit = non gaap profit - $4 million. the table shows non-gaap earnings.
avg rev./car
margin $ 90.0 $92.5 $95.0 $97.5 $100.0 $102.5 $105.0 $107.5 $110.0 $112.5 $115.0 14.0% (31,788) (30,126) (28,463) (26,801) (25,138) (23,476) (21,813) (20,151) (18,488) (16,826) (15,163) 15.0% (27,413) (25,632) (23,851) (22,069) (20,288) (18,507) (16,726) (14,944) (13,163) (11,382) (9,601) 16.0% (23,038) (21,138) (19,238) (17,338) (15,438) (13,538) (11,638) (9,738) (7,838) (5,938) (4,038) 17.0% (18,663) (16,644) (14,626) (12,607) (10,588) (8,569) (6,551) (4,532) (2,513) (494) 1,525 18.0% (14,288) (12,151) (10,013) (7,876) (5,738) (3,601) (1,463) 675 2,812 4,950 7,087 19.0% (9,913) (7,657) (5,401) (3,144)[SUP]1[/SUP]
(888)[SUP]1[/SUP] 1,368 3,625 5,881 8,137[SUP]2[/SUP] 10,393 12,650 20.0% (5,538) (3,163) (788) 1,587 3,962 6,337 8,712[SUP]2[/SUP] 11,087[SUP]2[/SUP] 13,462[SUP]2[/SUP] 15,837 18,212 21.0% (1,163) 1,331 3,825 6,318 8,812 11,306 13,800[SUP]2[/SUP] 16,293[SUP]2[/SUP] 18,787 21,281 23,775 22.0% 3,212 5,825 8,437 11,050 13,662 16,275 18,887 21,500 24,112 26,725 29,337 23.0% 7,587 10,318 13,050 15,781 18,512 21,243 23,975 26,706 29,437 32,168 34,900 24.0% 11,962 14,812 17,662 20,512 23,362 26,212 29,062 31,912 34,762 37,612 40,462 25.0% 16,337[SUP]3[/SUP] 19,306[SUP]3[/SUP] 22,275 25,243 28,212 31,181 34,150 37,118 40,087 43,056 46,025 26.0% 20,712[SUP]3[/SUP] 23,800[SUP]3[/SUP] 26,887 29,975 33,062 36,150 39,237 42,325 45,412 48,500 51,587 �
Apr 6, 2013
vgrinshpun �
Apr 6, 2013
luvb2b thanks. corrected the error.�
Apr 6, 2013
vgrinshpun luvb2b, how are you getting to $105K ASP?
According to my calculations, assuming that 25% are ordering Model S Performance, I am getting around $95K. In the end my analysis yields very similar results (see my post above). The detailed Q1 2013 results will be very strong.
Thinking about Elon's strategy - teaser about profitability GAAP and non-GAAP, then the financing, service, superchargers and mystery announcement, and then final round in the form of detailed Q1 2013 results - it is brilliant indeed.�
Apr 6, 2013
luvb2b the selling prices i am showing above include the zev / ghg credit revenue. you had that as a separate item and i don't.
i used average retail price of $89k and then added $16k for credits = $105k total revenue per vehicle.�
Apr 6, 2013
vgrinshpun Thanks, I did figure the same after posting...
The reason that I included regulatory credits separately is because I was calculating Model S margin as opposed to the total gross margin. I am looking forward for Tesla to confirm that as far as Model S margin is concerned, they are indeed half way from where they started in Q4 2012 to where they were guiding investors they will be at the end of 2014.�
Apr 6, 2013
Clprenz Just to add again, based off of surveys the cars price is most likely between 89,000 and 94,000. that it for Tesla, for the consumer it would be like 81,500 - 86,500
That is not a Variable in estimates. The only variables we are looking at is Profit margin per car, and emission credits per car. the average car price it not 110,000 sense that would be the very few performence people with everything installed. the car on average is probally about 92,000. Tax credit wise I think would be about 12,000 per car�
Apr 6, 2013
Jonathan Hewitt Maybe after this next earnings report stock price won't go down...assuming we don't have a huge run up right before. I wish I could put more money in but I will be job searching next summer and need to have some transition money for that time period.�
Apr 6, 2013
luvb2b i changed some of the wording in my table post. i meant to say average revenue per car, not average selling price as i had it written. hopefully it's clear now that i include credits in that average revenue per car number. i also added another color to denote the combinations i think will yield gaap profitability.
also keep in mind that the credits per car can have timing issues. that is, for every car booked as revenue in q4 2012 were the credits also booked as revenue in that quarter? or did some of the credits not get sold in time for the end of the year, and therefore the revenue will be realized from those credits this quarter? same could be asked of 2013 q1 credits - will all the credits get sold in this quarter, or are they holding on to some and selling them next quarter?
that's why i posted the table. instead of guessing price and margin and then trying to figure out profit, it gives you a chance to look at the "final answer" and deduce the answers to the initial question. from the table i can readily deduce that margins almost surely have to be at least 19%.�
Apr 8, 2013
kenliles �
Apr 9, 2013
Robert.Boston Margins will be helped, too, by reduced re-works, i.e. cars where final inspection kicks the car back down the line. I've heard from reliable sources that the rework rate is below 1%, while for the earliest cars it was effectively 100%.�
Apr 10, 2013
vgrinshpun Wondering if somebody can comment on the significance of pair of Form 4's filed with SEC today. The quantity of options seem unusual compared to other similar documents.
Tesla Motors - Statement of Changes of Beneficial Ownership
Tesla Motors - Statement of Changes of Beneficial Ownership�
Apr 10, 2013
Robert.Boston What am I missing -- these are for 350 shares each to Elon and JT? Not a big number at all.�
Apr 10, 2013
Clprenz What's even more weird is, it was at market price!?�
Apr 10, 2013
Robert.Boston No, it appears to have been at $0. So, an outright grant. But, seriously, 350 shares @ $41.83 = $14,640.50. This hardly pays for the admin costs of filing.�
Apr 16, 2013
luvb2b so morgan stanley upgrades today, i copied from benzinga below. wow these guys are still pretty well below where i have margins and profits. just don't get how the analysts seem so far behind of where i think tesla will report. stock's up $2.50 on this report, i think. i wonder where it would trade if the reality is even better than the report surmises.
In the report, Jonas noted, �Following Tesla's pre-announcement, we adopted the guidance for net profitability on a GAAP and non-GAAP basis at over 4,750 units of Model S. We raise our FY Model S delivery forecast to 18k from 16k previously, but remain below the company's target as we expect a modestly slower pace of production in 2H as the company rolls out deliveries to international markets. We expect a 0.2% positive OP margin (including stock comp) is the year's peak, falling to -2.4% in 2Q and further in 2H, for a -5% FY OP margin. We expect Tesla benefited from significant sales of ZEV credits in the quarter that we fade to zero by 4Q. For 2014, we expect 20k units delivered, up from our previous estimate of 20k.�
Read more: Morgan Stanley Reiterates Overweight Rating, $47 PT on Tesla Motors on 1Q13 Preview | Benzinga�
Apr 16, 2013
Citizen-T Morgan Stanley confuses me so much. Price target of $47 (current price is just under $46) yet an overweight rating? They must be expecting some crappy performance by the S&P over the next 12 months. They did this before when they cut Tesla's rating to underweight and dropped it's price target to $44. This was when the stock was trading in the 20s. I was confused then too.�
Apr 16, 2013
Curt Renz They did not upgrade; they reiterated.�
Apr 16, 2013
Nicu.Mihalache I think they are more confused than you (about TSLA). It made absolutely no sense to downgrade to underweight and give a 12 month target that was way above the market price.�
Apr 25, 2013
DonPedro A different take on the upcoming Q1 results: http://seekingalpha.com/article/1370771-tesla-s-q1-earnings-an-epic-april-fools-prank�
Apr 25, 2013
Citizen-T That's a JP link, FYI. Don't click if you like many on this board refuse to give him the revenue.
Sent from my XT912 using Tapatalk 2�
Apr 25, 2013
luvb2b the stock has rallied 50% since i started this thread with a high conviction note forecasting an upcoming earnings beat.
i backed the forecast i put forward by putting my own dollars on the line.
john peterson has been on the wrong side of my train and by his own admission, he has put none of his money where is mouth is.
'nuff said.�
Apr 25, 2013
Citizen-T Amen. Anyone who has followed his advice has missed 170% run, or worse yet, has been short for a good chunk of that.�
Apr 25, 2013
DonPedro I love this forum. And I am making a bigger bet on Tesla than on anything else since I was so lucky to do the 3com/Palm arbitrage way back when. Thus not worried about being accused of having money and mouth at different places.�
Apr 25, 2013
luvb2b so as morgan stanley issued lukewarm analyst reports, they quietly corralled a huge stake in tesla during q1.
see: Tesla Motors, Inc. (TSLA) Institutional Ownership & Holdings - NASDAQ.com�
Apr 26, 2013
NigelM Which proves that Chinese Walls do exist and work as they're supposed to?�
Apr 30, 2013
gg_got_a_tesla I presume you are being sarcastic, Nigel?! I read that as if MS (Morgan Stanley, that is) subtly ensured that they got the stake at a cheap level on the investment side by staying lukewarm on the analyst side.
Chinese Walls are only as weak as the beers are strong in the pubs of downtown New York�
Apr 30, 2013
viperboy While I am bullish on TSLA long term, at what point has this stock been run up too much? What could / would spark a correction from the earnings report? I'm looking for an entry point (before or after the earnings, doesnt matter), but watching this thing spike 3-5% day after day makes me thing it's overbought!
[disclosure, no current stake in TSLA]�
Apr 30, 2013
Citizen-T It's overbought. If you aren't in yet, I'd probably stay out of the way, this thing could take your head off. If you absolutely can't, I'd advise using options (if you know what you are doing) or at least don't invest your full position. Save a bunch of cash so you can buy more if the stock does correct.�
May 5, 2013
CapitalistOppressor This. The only question is whether there will be a pop after the announcement, and what it's magnitude will be. After that, I expect the stock to normalize at a lower level.
Could be wrong, since it is a judgement call as to how much of Tesla's potential future earnings you want to bring forward to balance against their potential for medium term failure (short term failure is no longer possible).�
May 5, 2013
ShortSlaver And even with a positive earnings call an upward pop isn't guaranteed. The main question is how much potential is already priced in? If TSLA comes in $.07 with good guidance the stock could still take a good hit. It could also move into the $60.00's. I just don't think anyone knows what it's priced at in terms of expectations for the earnings report and guidance. What EPS and guidance does the current price expect?
I'm holding on through the call unless something nutty happens the next few days, but I am not anticipating a massive move upwards - even short-term. Unless they absolutely kill it during the call. To put a large stake of your holdings into TSLA at around $55.00 right now is gambling. Which is OK for certain positions. But I'm not sure anyone knows where it's going to be by Friday this week.�
May 5, 2013
luvb2b i know the stock has priced a lot. however the analysts still appear to be offsides here with estimates that are way far back of what could happen. take a look at the yearly figures for example. still quite low. 0c for next quarter is the current estimate.
in my opinion the keys will be a modest or better beat vs. current expectations (which have come to at least match the given guidance) and then the most important piece: guidance. with solid commentary for the coming quarter and bullish talk on the demand side i doubt very many institutions will be looking to get out. if the guidance is lukewarm, all hands down below to man the bilge pumps.�
May 5, 2013
Zythryn I would never say short term failure is not possible. All sorts of things could happen. I would say short term failure is much less likely than it was.�
May 6, 2013
CapitalistOppressor Well yes. I suppose I was talking about in relation to the dominant thesis back in July and August 2012 when Tesla was presumed to be in a cash crunch with bankruptcy or a terrible secondary and then bankruptcy being the very near term expectation.
Under current conditions I wouldn't rule out a meteor hitting Fremont next week, but outside of something like that I suspect that a bankruptcy filing at the end of June is not going to happen.�
May 6, 2013
mitch672 This must be what the "investors" who are still short TSLA must be hoping for... That or aliens making initial contact soon, and they take our brightest people (looking at Elon here)�
May 6, 2013
kenliles Might be SpaceX has the meteor thing covered as well�
May 6, 2013
luvb2b everyone try to keep in the back of your minds the stock has moved almost 70% in about 7 weeks. the market cap has increased by a few billions when the earnings beat is likely to be just a few millions.
even a good report might see a short term selloff. or it might not.
as i mentioned earlier, my hope is for excellent guidance which will make life very interesting indeed!�
May 6, 2013
avatar Maybe I'm just way too bullish. I still think that the market has not priced anything in. There is rampant misinformation out there. Until there is a formal P/E that people can use to frame the discussion in lay mans terms that market is just projecting noise. I'm betting that once a formal P/E exists there will be a realization amongst a critical mass of buyers that a fundamental case for Tesla at $80 - $130 exists today. No gimmicks (credits etc) needed.
Elon needs to show that there isn't a demand problem for tesla (i don't think there is) and we are in the clear. The math for future cashflows is childishly simple. You can discount that back and get the $80 - $130 current price valuation. Done and done.�
May 6, 2013
ShortSlaver Exactly. I'm cautiously optimistic, especially since this nugget just came in:
"Tesla has delivered over 10,000 electric vehicles to customers in 31 countries."
This was in the footer of their latest email.
The email they sent out last Friday after the update to financing was this:
"Tesla has delivered almost 10,000 electric vehicles to customers in 31 countries."
This is good.
- - - Updated - - -
You could be right. An email announcing Chris Porritt came out today and then the stock jumped. This was known information. Who knows? Like I said, I'm cautiously optimistic but have no idea what the market would consider good at this point. I'm expecting good news.�
May 6, 2013
avatar Lol- we might close at $59. incredible.�
May 6, 2013
kenliles Not that low. Almost made $60. And AH trade made $60!�
May 6, 2013
CapitalistOppressor Very much this. +1000000
This isn't about fundamentals. It's about bull psychology and the short squeeze. We need a strong report to keep the pressure on the shorts, but it might be that they need a really weak report to hammer the stock back into the low $40's and allow them to exit. It's nice to say the pro-psychology might lose some steam, but the shorts are under extreme pressure even at prices 15-20% lower than they are now. Who knows what a good, but not great report will do.�
May 7, 2013
DonPedro I think a key part of this psychology is: If you are a short, do you have the cool to wait to the low 40s to cover? You've been sweating bullets for weeks, wishing when it reached 48 that you'd covered at 45, at 53 you cursed not getting out at 50 and so forth. With the volatility here - will you not settle for 50 and cut your losses?
At the same time I see reports all over this forum and others by people who took profit and now are looking for a way back in. Will they feel that 50 is a sweet deal by now? My guess is yes.
I do not rule out hitting 40 next week, but unless the Q1 report has some obviously bad news I think that there will be a lot of resistance around 50 from shorts and longs both.�
May 7, 2013
raymond I couldn't have put it better myseld. :smile:
- - - Updated - - -
Am I the only one thinking this is funny as this post is less than a day old?�
May 7, 2013
Jonathan Hewitt There's a post from someone in the yahoo TSLA message boards from 2 months ago (March) telling people to buy the stock as it will reach $60 within 2 years. A guy resurrected the post and told the guy he was really off�
May 7, 2013
avatar t minus 5 minutes. Usually they post the shareholders letter by now. I wonder why it's not out yet.�
May 7, 2013
Jonathan Hewitt You're 1 day early�
May 7, 2013
Johan Love the enthusiasm though! :-D�
May 7, 2013
avatar hahahhahaha! Yes indeed. That's embarrassing :redface: - oh well - to tomorrow! :tongue: I guess I can wait another day for Elon to crush the shorts�
May 8, 2013
smorgasbord OK, time to hazard a guess, just for fun:
While there will be lots of good news coming today, I wouldn't be surprised if the market gets spooked by the declining reservation backlog. That has always been the cushion to show that demand for Model S won't plummet like it has for other EVs (even though some have recovered from their lows). Shorts will point to the low reservation count as indication that Tesla is running out of customers, and so they'll hold on for another couple of quarters. People who don't fully believe will get scared and sell to take what profits they have. Only those, like us, who really "get it" will understand that Tesla has to move towards a more typical "want a car, buy a car, get a car soon" sales cycle.
However, I expect that the reservation backlog overseas is quite strong. I think demand for Model S in European countries with high gas prices and other huge tax incentives will stroke demand for Model S. Heck, even Fisker had some traction there for a while. So that could compensate in total, but shorters will still point to "shrinking demand in the US."
At any rate, I don't expect a short squeeze this week.�
May 8, 2013
Citizen-T I expect TSLA to be down pretty hard tomorrow. I just can't imagine a credible scenario where they can exceed the expectations that are built into the current stock price. At least not on reported numbers. The only thing that I can see making a rally happen from here is superb guidance. I'm not quite sure what that guidance looks like though.
I think smorg is right though. Focus is going to be on the reservation backlog and the margins (sans credits). I don't have any better visibility into either of those than anyone else, which makes me nervous.�
May 8, 2013
ModelS8794 I believe Tesla will not disclose a backlog figure anymore - and this may have the same impact (or worse) than disclosing a declining backlog figure. I agree in practice though, that discord around the backlog has the biggest chance of being the spoiler this earnings season. A bit odd of course, given Tesla's fairly transparent and disclosed plan of producing quickly enough to get the wait times (and thus, backlog) down to as low as possible (one month on average), thereby making the sales decision easier for a customer who wants their car 'now' and is used to getting it.
Last call for instance:Adding: I think a second item has a big chance to spoil the call for TSLA long investors... that's the GAAP accounting for Tesla's new financing plan where Tesla is giving away a 3 year put option to buyers at that fixed residual value. Elon stated he believed up to half (is that right?) of new reservations may very well come through this financing program.
This is something not much discussed among TMC or elsewhere, but Barclays has written a bit about it. I'll post Brian's summary comments, they seem on target to me:
�
May 8, 2013
ShortSlaver The prudent move is to have some stake in it all and also have cash on hand to buy if there's a backlash. You lose some top end if things go great but you also leave yourself open to an opportunity if things don't go so great.
It feels like the deck is stacked against TSLA in this call. The bears will just point at anything and you get the feeling no matter they announce it won't be good enough. They might have a high margin and higher going forward, but bears might say they didn't sell enough cars. Or the margin is too low and so many cars sold.
I think for things to pop a bit we need higher than expected margins and projects of over 22,000 MS's being sold this year with margins potentially rising slightly about 25% sometime this year.
I'd like to believe they wouldn't have released such great news in April only to really not back it up with anything else here. I'd hope there would be a surprise here of some sort. But if there isn't and it's 4750 vehicles, 15% margins and still on pace for 20,000 cars this year - but we made a profit - then I would expect a buying opportunity for longterm TSLA investors.�
May 8, 2013
luvb2b i think the last unveiled financing is pretty darn compelling when you look at it from the point of view of anyone driving 30,000+ miles per year.
also the upcoming consumer reports article where they describe model s as the "best car" they have ever tested will have significant impact, something similar to winning motor trend car of the year i would guess.
if you consider my reservations model from the other thread, there's a third positive factor vs. that model: the cancellation rates in my model were deliberately high. with the time between reservation and finalizing cut down as much as it is, you should find cancellation rates are much lower.
the combination of these 3 factors should result in tesla's commentary getting closer to being totally sold out for 2013. if there was any doubt before it will surely be erased with the consumer reports review.
- - - Updated - - -
i thought about this issue a bit and i think the note isn't quite right.
first, tesla's financing program is a bank-financed purchase, not a lease. in a bank financed purchase tesla will get the full cash proceeds and the bank will hold the loan and default risk. it's not any different than if a buyer finances through penfed (for example). tesla gets a check, the bank gets the loan & risk.
second, i believe the guarantee requires a balance sheet liability that reflects the likely cost to perform on the guarantee. in tesla's case, i think that figure is the net value provided by the guarantee. i believe this value would be the difference between the market value of a model s and the guaranteed value. i think that's why they used the mercedes s class as the initial comparison. since that was one of the worst performing luxury sedans on resale value tesla could reasonably say the value of the guarantee was something small. there is no information on residual market value of a model s, so the auditors would likely require the guarantee value was calculated off a close comparable. i think elon probably realized he could provide this guarantee essentially without a significant impact to eps.
with the financing update, they up the guarantee value a bit, by what seems like about 7%: prior guaranteed resale was 43%, now it's 50%. if they assumed for accounting purposes that model s would retain only 40% of its original value, then i think the guarantee liability would have to be 10% of the selling price for a tesla-financed purchase (50% guaranteed value - 40% presumed market value = value of guarantee).
on the last call elon said about 25% of customers are using the tesla financing. so as a percentage of revenues, i think you could expect:
25% users of financing x 10% market value of guarantee x selling price = guarantee liability = 2.5% x selling price.
since average revenue per vehicle seems to be about 10% higher than selling price (due to credits), you could expect something on the order of 2-2.5% impact to gaap gross margins for this program.
that's my guess anyway. a cpa with better knowledge of how gaap accounting will work for the guarantee would be able to provide the best answer... anyone out there like that?�
May 8, 2013
deonb That would be accurate for a long position.
However, keep in mind that the shorts aren't just betting on lackluster performance. They're betting on outright failure. Ala Fisker.
Otherwise it's insane to pay 50% interest in the hope that the price will maybe trickle down a bit before you can make a profit. The risk-reward just isn't in there.
So I don't think they'll be looking at backlog - a small backlog is not going to cause the company to fail in a year. The thing to look out for is cashflow and whether or not there is going to be a secondary.
This thing is unprecedented. I think even if you have the earnings release in your hand you'd probably not be able to predict with any degree of accuracy what the price is going to do as a result.
I can however totally imagine that tomorrow price won't start with a 5.�
May 8, 2013
smorgasbord This. Elon and Co. are smart. They know what their previous conference calls did to the stock price, and their recent moves show they don't want that to continue to happen. If they're rolling out good news continuously before the earnings call, then one has to believe that they're saving something for the call itself.
After hours trading is going to be wild today. Initial reaction might not be the reaction tomorrow morning. For instance, the reaction to the original financing plan was way overdone. All that's really changed is a longer term and different defaults on the payback calculator. Yet, that's what enabled Tesla to reach the $60 level.
Right now, the market seems tepid about pre-earnings positioning. Stock briefly touched $58, but since then has steadily sunk to just about $56.60 as I write this. If you're a long term investor, you can enjoy the show. If you've got some short-term skin in the game, there will be some nail biting in the next several hours.�
May 8, 2013
ShortSlaver I don't know, I put $500.00 in play.
I have to imagine, even at these high premiums, there are a lot of option straddle plays going on.
I think the speculation is this thing is going to move one way or another- which leads me to assume it will be fairly ho-hum and just sort of be flat. Nobody is predicting that. The bulls and bears may each have their case causing the stock to sort of standstill or not move very much.�
May 8, 2013
deonb Nails?? What nails??�
May 8, 2013
raymond Is that a Tesla guarantee or an Elon guarantee?�
May 8, 2013
akula There are none left here...
�
May 8, 2013
smorgasbord Non-Petersen article in SA on same: http://seekingalpha.com/article/1414231-will-there-be-big-waves-from-tesla-s-earnings-announcement�
May 8, 2013
ModelS8794 It is a Tesla guarantee with Elon backstopping it.
Luvb2b, I believe Brian's take is accurate. Our business experimented with multi-year full money back guarantees in recent years, and the income statement and balance sheet impact was as Brian describes wrt Tesla. Not exactly the same, we sell subscription services, not cars. But setting up a 3 year 100% money back guarantee meant establishing a large deferred revenue liability and likewise reduced current period revenue, though not impacting cash flow.�
May 8, 2013
luvb2b that would still be consistent with what i said. a subscription has no resale value if refunded and your guarantee is 100%, so you'd have to set aside a big chunk of revenue to honor it.
for sure a car has residual value, and the guarantee is only 50%, and even then applying only to 25% of domestic customers. it should be much less impact imo.�
May 8, 2013
DonPedro I think there is a psychological factor at play today which might be easy to overlook. This time, Elon Musk is presenting as a CEO who has proved that he can deliver (product, production and demand). They doubted him and he proved them wrong.
This means that when he puts forward expectations, visions, strategies and musings, they may be be taken much more seriously/literally than at previous earnings calls. This may be a positive factor.�
May 8, 2013
CapitalistOppressor FYI, there was an anecdotal report in another thread about a customer who visited the factory last week and had them say they were nearly 500/week and had reduced costs by a lot. Dunno about credibility (its just one report).
Nothing in the data precludes a late April or early May ramp back to ~500/week. Deliveries last week look to be ~400, but production increases take a couple of weeks to echo into the delivery data.�
May 8, 2013
luvb2b now the earnings are out and it's time for my last post on this thread.
with full benefit of hindsight you can see that i underestimated revenue, but by being conservative on the expense figures my bottom line ebitda ended up being spot on.
hope you guys made a few bucks off the research in this thread. thanks for all your comments and suggestions.
�
May 8, 2013
DonPedro CapitalistOpressor and luvb2b in particular: If I ever meet you in person, you get your free choice of:
1. Drinks on me all night
2. Luxury dinner
3. Heartfelt gratitude for sharing your analyses and insights
At second thought: You don't have to choose.�
May 8, 2013
Citizen-T I bought calls yesterday when we were trading around $55 based on this thread. So yeah, thanks. I definitely owe you guys a drink.�
May 8, 2013
avatar Now that we have a PE Ratio for TSLA (~660), I am wondering what is stopping this stock from trading at $300/share. If you extrapolate forward earnings of $.60/share for 2013 and the market continues to offer a 660 multiple you are looking at $300/share/ Could it really be that that shorts will squeeze this all the way to $300?�
May 8, 2013
Johan Me too (bought calls that is). Couldn't agree more on the big thanks that go out to all contributors, especially CapOp and luvb2b! It kind of sounds like we are organizing a party ad-hoc right now�
May 8, 2013
DonPedro Forget P/E at this point.�
May 8, 2013
mcornwell Up 15% after hours!
�
May 8, 2013
deonb
Shoutout from me to CapOp and luvb2b as well. It was nailbiting but I hung in there because of you - I really owe you guys.
Tomorrow I will start to change my option position to a long stock position, and if the current price even close to hold through the morning, I would effectively be acquiring TSLA at: $2.50 per share by virtue of the option trades I did over the last 21 days.
This is the first time ever I've broken a 2000% gain in a month, and I would have exited a long time ago if it weren't for your analysis.�
May 8, 2013
Citizen-T It was the guidance. Like I said, I didn't know what that would look like, but now I do.
I did buy the calls because of this thread though. I actually wanted to sell ahead of the report. But you guys gave me enough doubt to buy a handful of calls just in case. It was money I fully expected to lose, but it worked out.�
May 8, 2013
ShortSlaver EPS was far and away larger than anything the street was expecting. Most consensus was at like $.04. Guidance too of course, selling at least 1,000 more cars.�
May 8, 2013
Citizen-T Eh. I think it's more about the demand guidance. That 30,000 cars a year demand number put the nail in the coffin of the short's thesis.�
May 8, 2013
CapitalistOppressor This +30000�
May 8, 2013
Benz In after hours it went pretty high: $72
And the volume was substantial as well: 1.27M
Tomorrows trading day is going to be interesting.�
May 8, 2013
smorgasbord OK, I was wrong: only Cory Johnson of Bloomberg cares. Everyone else is happy with:
I also think the comments about getting people to finalize pretty soon after placing their order helping avoid cancellations are also appropriate. I do think the haters will use this to say Tesla demand could evaporate any time, but it looks like until Tesla can't sell an average of 58 cars a day no-one will care.
I may be wrong on this, too. For some shorters, the stock has more than doubled - for other shorters it's about to double tomorrow. I think there will be some new shorters getting in, perhaps by buying Puts, since even some believers think a $70+ level is unsustainable.�
May 8, 2013
Citizen-T I have to eat crow too and say that I was wrong. I also didn't see a beat coming, and expected us to be down. I'll own that.
Never been so happy to be wrong in my life. =)�
May 8, 2013
ModelS8794 Well, the Customer Deposit liability landing at 131 million probably mitigates some of the fears about the big bad unknown reservation book and what cancellation activity looked like. That $8 million decline represents only 1,620 net reduction in reservations (or less, if Canadian Sigs were in the 12/31 number... I can't remeber now when they went out the door)... The implication of that line item is perhaps ironic; the more forcefully one insists cancellations hampered Tesla this quarter, the more credit one must give to the current pace of new reservations.�
May 8, 2013
CapitalistOppressor Excellent point. I hadn't even looked at that. I'm still trying to figure out how they are getting to their top line revenue number. It seemed bloated (in a good way) last time too, but I rationalized it because of the Sig premium.
I seem to recall Canadian deliveries not starting until 2013. I think they were still waiting on all of the approvals, which would mean Canadian Sigs were still on the books at end of Q4.�
May 9, 2013
DonPedro 500 EU sigs should be good for Q3 ASP.�
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