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Tesla Posts Second Profitable Quarter Ever (bgr.com)
anderzole writes from a report via BGR: Tesla on Wednesday posted its earnings report for the quarter gone by and investors will have a lot to cheer about. While analysts on Wall St. were expecting Tesla to post a loss, Tesla during its September quarter actually posted a profit, and an impressive profit at that. When the dust settled, Tesla posted a quarterly profit of $22 million and EPS of $0.71. Revenue for the quarter checked in at $2.3 billion. Illustrating how impressive Tesla's performance was this past quarter, Wall St. was anticipating Tesla to post a loss amid $1.9 billion in revenue for the quarter. As far as deliveries are concerned, Tesla during the quarter boasted that it achieved record vehicle production, deliveries and revenue. More importantly, Tesla reaffirmed via a shareholder letter that the Model 3 is still on track for a late 2017 release. You can read Tesla's shareholder letter here.
To not forecast the profit very accurately, is a sign that the business is not in control.
A businessman was interviewing accountants he asked each one:
"What is two and two?"
The first said, "Four." He wasn't hired because he was honest.
The second answered, "Five". He wasn't hired because he was incompetent.
The third said, "Whatever you want it to be." and was hired on the spot.
In steady state - no. While plowing a large amount of money into massive factories to pump out the next generation of products - absolutely, yes.
"Fake Market", just as fake as the absurdly low gasoline tax in the US that promotes the use of gasoline, or the absurdly high subsidies for corn to be grown and then converted into ethenol?
I'm perfectly fine with industries being subsidized, especially new tech, especially tech that helps with energy independence (for security), especially tech that helps with (yes I know, not "solving") slowing and then stopping carbon emissions, especially tech that has socio-economic potential benefits to society at large and not just the employees and shareholders of a company(s).
Just admit that you don't like the fact that 19 of the 20 solar companies that the DOE gave grants to succeeded, so you like to grasp onto the one who didn't.
Just admit that you don't like the fact that a company ran by a guy you don't like is succeeding. I admit my biases, but do you?
No, not true. As a company, they have lost money, and I guess if you divide how much they lost (in previous quarters) by how many cars they sold, you could come up with $7000 loss per car.
Of course that's false accounting. If they were a mature company, perhaps such calculations would sort of make sense. But Tesla is growing, investing heavily in new factories and expanding current factories.
Tesla changes their accounting methods. Dumb money is excited that TSLA is profitable. Smart money has no idea what to make of these numbers but know something smells musky.
As far as I can tell (Yes, I am a forensic accountant) they sold a lot of now-obsolete cars at a big discount and did some other tricks to prop up sales and push Q4 revenue into Q3, Q3 expenses into Q4, etc.
Now, it really doesn't matter if they're profitable or not because they have plenty of money in the bank and $22 million is a rounding error. Except Tesla is trying to buy Solar City. Why? Basically to bail out Elon Musk since Solar City is a turd circling the drain and Elon has a lot of money tied up in it (directly and indirectly through his other company, Space X). A lot of Tesla stock holders recognize this shit for what it is. But if Tesla can eek out a profit, dumb money thinks Elon is a fucking genius and let him buy up Solar City.
And how old are the funds in which you invest? Most are older than Tesla, I'd imagine. Give 'em a few years. There will be a tipping point soon, and they've got a good position to take advantage.
Solyndra was a bet that silicon prices would remain high. It was a way to get more power out of less silicon. The bet was wrong. With the drop in price in silicon, their death was inevitable. They also had a weird design decision, going for the concentrator. It made sense (in the economics of the time) to go for either concentrators or CIGS, but not both.
That said, the government took way too much flak - politically motivated - over Solyndra. With any diverse profile of startup investments, you expect some to fail. Economists analyzing the ARRA post-facto have been by and large given it quite positive evaluations for its effects on the economy. The loans program office had already wiped out the Solyndra loss just two years later.
"99 dead duelists of Dios on the wall. 99 dead duelists of Dios! Take one's ring, pass it around..."
In steady state - no. While plowing a large amount of money into massive factories to pump out the next generation of products - absolutely, yes.
While taking money for cars they haven't started producing or buying components for: No.
Is it still a fun fact if it's neither fun nor a fact?
For the 9 months ending Sep 30 2016, they made $1,150,984,000 (1.1 billion) in revenue selling cars, of which $195,592,000 (0.1 billion) was from ZEV carbon credits.
In fact, they take OUT the carbon credits from their GAAP reporting numbers (what this article refers to) so that their results aren't skewed.
It's right there in black and white in the results: http://files.shareholder.com/d...
Go back to Accounting 101, that's doesn't add much to "profit".
This is false. The car industry likes to say as a joke that the first car costs 1 billion to make, and every other car thereafter costs $1,500 in parts and labor. This is so because design and factory tooling are ultra expensive, but once the line is up and running the costs drop precipitously.
Now, this expression comes from the early 80s, so you need to adjust the figures for inflation, but you get the picture.
What this means is that it takes years to amortize the cost of car design and factory tooling and only in later years of production do you start making money from each model. Tesla's model S has already amortized it's design costs, but not yet their factory tooling costs as until very recently they were still growing by leaps and bounds their plant to meet enormous demand.
In the meantime accounting ignoramuses like yourself can get to say that they are losing $7K per car. Nothing further from the truth.
It helps for working capital, cash flow, and for usage of cash but isn't recognized as revenue. It would be noted as a liability called Deferred Revenue.
Upon partial or full delivery, it is partially or fully converted to Revenue. The cost of said delivery would be netted to obtain Profits.
So if they invested in marketing or gave some sort of paperwork about the contract and those are considered costs for delivery of vehical, then a very small part of that DR can be recognized as Rev. It can be netted against the costs and the minor profit can be recognized.
There is a little bit of wiggle room here on the business deciding how much of the liability was fulfilled. But it's not much, and all you accomplish is shifting pennies between quarters.
Tesla changes their accounting methods. Dumb money is excited that TSLA is profitable. Smart money has no idea what to make of these numbers but know something smells musky.
As far as I can tell (Yes, I am a forensic accountant) they sold a lot of now-obsolete cars at a big discount and did some other tricks to prop up sales and push Q4 revenue into Q3, Q3 expenses into Q4, etc.
Now, it really doesn't matter if they're profitable or not because they have plenty of money in the bank and $22 million is a rounding error. Except Tesla is trying to buy Solar City. Why? Basically to bail out Elon Musk since Solar City is a turd circling the drain and Elon has a lot of money tied up in it (directly and indirectly through his other company, Space X). A lot of Tesla stock holders recognize this shit for what it is. But if Tesla can eek out a profit, dumb money thinks Elon is a fucking genius and let him buy up Solar City.
I just want to point out that the OP is:
1) Claiming to be a forensic accountant
2) online
3) as AC.
4) Framing his position in emotional terms (dumb money, smart money)
5) While showing no specifics. (Tesla changed accounting methods? Using nebulously-defined "tricks"?)
6) For a company whose analysis is largely partisan.
I don't know why people bother reading up on Tesla, news and analysis is all over the map. Price points from $150 to $400 per share, negative/positive outlooks, baldfaced lies about specs, dangers, and recalls, and all absolutely certain of their analysis.
It's almost as if there are large groups of people who would personally benefit from Tesla's success or failure, and who are willing to lie and mislead to bring about that result.
Amazon still hasn't had one.
So I would advice backing SpaceX over whatever Bezos's rocket company is called.
Unicode killed the ASCII-art *
We spent 2 trillion dollars and 4000 lives to protect the oil industry. Heck, overthrowing democratically elected leaders for oil companies is one root cause of the radicalization of the middle east.
I think I can cut clean solar/electric industries a little slack when i consider what we spend t help the oil industry.
Their subsidies are buried so deep in the government, they don't even look like subsidies any more.
But imagine if 5 years from now, Oil demand had dropped another 10% due to electric cars? We'd be a lot less tempted to get involved in foreign entanglements.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Bingo. When Solyndra was formed (and to be honest, my company at the time made process equipment for CIGS deposition), solar grade polysilicon was in short supply, and was spiking in price to almost $600 per Kg. Investment in thin film amorphous silicon cells (Applied Materials and Oerlikon bet heavily here too) and CIGS (CuInGaSe) cells as the solution. Until the wild growth of the solar cell industry, spot prices for polysilicon was ~$30 - $50 Kg (from memory, all sites that have historical data seem to demand a subscription to access it).
Of course, making CIGS cells was difficult. Extremely difficult. The deposition processes are tricky, and even small variances in the composition cause great fluctuation of efficiencies. There were probably 100 players chasing the CIGS dream, including 10 or so well funded players. But at the same time, the foundries who had the ability to tool up for producing crystalline silicon saw the $600 per Kg with dollar signs (or, more accurately renminbi signs) in their eyes, and began building capacity.
Starting in 2011, much of this new capacity was coming online, and prices for polysilicon ingots plummeted. Today it is around $26 - $30 per Kg, really close to the price needed for the magical $1/W for a solar installation. Solyndra went tits up, Applied Materials and Oerlikon left the business (I have some interesting stories there as well) and the world is dominated by panels made in China.
Fun fact, in 2008, QCells, a German company was the number one producer of solar panels. Before that Japan's Sharp was #1, now most of the top 10 are Chinese companies.
Solyndra was a bet, a bet that Silicon prices would remain high, but in hindsight, a foolish bet for depending on a source raw material that can be refined from beach sand.
Suppose you were an idiot and suppose you were a member of Congress
Cash flow does not indicate profit. Profit is revenue minus expenses and short term liabilities. Accepting cash for services you are promising in the future will increase your cash flow, it will increase your revenue, but it will also add a new short term liability called "unearned income" (revenue for which you have a future obligation) and your profit will not be impacted by the transaction. Once you start purchasing the materials to satisfy the unearned income, you add expenses (negative cash flow) but remove an equivalent portion of the unearned income until you eventually satisfy the liability and can then report the remainder as profit.