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Tesla Reports Third-Quarter Profit That Beats Market Expectations (cnbc.com)
Rei writes: When Tesla announced late last year that it was targeting sustained profitability in the second half of 2018, reaffirming this target throughout the year, the markets reacted with skepticism. Indeed, despite repeated insistence that the company had no need for a capital round, news analysts have treated the concept of Tesla dilution to raise more capital as inevitable and urgent to pay off convertible bonds next spring, even suggesting insidious theories that the reason it hadn't was that it "couldn't."
Well, today Tesla put the doubts to rest with a blockbuster Q3 report -- not simply eking out a profit and small free cash flow growth, but $2.92 per-share profit and $881 million free cash flow -- almost raising the entire value of their convertible bond debt in a single quarter. While many were skeptical about Tesla's claims that it would go from near zero profit margin on Model 3s to their claimed target of 15%, Tesla instead hit a 20% margin on the Model 3 (now the highest-revenue car in the U.S.), with a 25.8% overall automotive gross margin. This was all achieved with only $52 million worth of zero-emission vehicle credits claimed this quarter. While Tesla bears will likely claim that this quarter was a one-off that won't be repeated, Tesla reiterates guidance for sustained profitability from herein, barring a force majeure event.
Well, today Tesla put the doubts to rest with a blockbuster Q3 report -- not simply eking out a profit and small free cash flow growth, but $2.92 per-share profit and $881 million free cash flow -- almost raising the entire value of their convertible bond debt in a single quarter. While many were skeptical about Tesla's claims that it would go from near zero profit margin on Model 3s to their claimed target of 15%, Tesla instead hit a 20% margin on the Model 3 (now the highest-revenue car in the U.S.), with a 25.8% overall automotive gross margin. This was all achieved with only $52 million worth of zero-emission vehicle credits claimed this quarter. While Tesla bears will likely claim that this quarter was a one-off that won't be repeated, Tesla reiterates guidance for sustained profitability from herein, barring a force majeure event.
I'm waiting to hear how Tesla is losing money on each car it sells, such as some people have been saying around here (FALSELY) for months. If they lose money on each car they sell, how did they wildly beat all the analysts by selling more of them?
When everyone is telling you that you are wrong, sometimes it's a good idea to gain a little objectivity and at least examine the possibility that you actually are wrong.
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
I am a big Tesla fan. But we should acknowledge that there are still some problems. Mainly that the spare-parts supply chain hasn't caught up with manufacturing, leaving cars inoperable for months while Tesla's own shops wait for parts. If you want right-to-repair, Tesla hasn't caught up to that by making diagnostic tools available or parts available to non-partner shops and end-users.
Bruce Perens.
I actually pay attention to all the Tesla/Musk/Tesla/Musk critics out there and follow their arguments about how the company is going to crash and burn and Musk is delusional and the technology won't work and the production can't work and the quality is crap gasoline is actually greener and cheaper and and the major automakers are going to bury them and the workers have reverted to savagery and yadda yadda.
I have been following all that for, what, five years now? How many portentous pronouncements of Tesla and/or Musk's demise has there been? I have lost count.
A few days ago my e-trade board delivered this little news nugget:
Citron Research, which has previously advocated short positions on Tesla, says it has changed course, and that the electric car maker is "destroying the competition, as Citron makes the case for why it's taking a long-term view.
So apparently there are short sellers out there will actually fold up the tent for another from-scratch assessment. Granted, they were wrong before so they could be wrong again. Tesla could still crash and burn or at least hit a major bump in the road. But if it does it will have nothing to do with what the chronic naysayers that post here say.
THE BELLS! THE BELLS!!!
"What is the difference between a Ponzi Scheme and an Investment Bank?" -- Jon Stewart
Claiming to not be convinced by overwhelming evidence is not a particularly effective way to prove that evidence wrong.
Well, shit. Looks like LynwoodRooster is going to have to come up with a whole new series of anti-Tesla rants to copy & paste into Slashdot Tesla stories.
Slashdot: providing anti-social weirdos a soapbox, since 1997.
Am eagerly awaiting delivery of my new Model 3 !
Elon also said "I begged the other companies to invest in battery capacity and charging networks" according to some live blogging site. And some thing along the lines of if they make an adapter he will let them use Tesla super chargers. Not sure if he really said that or these guys are putting words in his mouth.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
The bears have to make a hard choice. They were hoping a cash crunch of debt payment in Q4 2018 and Q1 2019 of about 1.5 billion will choke the company. It was already burning through cash at some prodigal rate in Q1 and Q2. They seem to have miscalculated. Last reports from S3 Partners was that there was some 32 million shares outstanding. Wondering how many covered when the price crashed to 250 and got out with some profits. How many are still holding out waiting for Tesla to go bankrupt.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Standard short conspiracy theories.
1) Tesla only delivered about 2 1/2 thousand more vehicles than they produced this quarter (due to issues related to timing the tax credit expiry). Doesn't even remotely come close to the profit this quarter. Furthermore, they were lower ASP vehicles than the ones held up in delivery delays this quarter.
2) Tesla, like all companies, has had varying disputes with suppliers. The grand total in Q3 was, if I recall correctly, around $8m. I mean, stop the presses.
3) Tesla's loaner fleet is still very much intact. It periodically sells off older vehicles and replaces them with newer ones.
4) "They haven't made a profit" - Hmm, what's that river in Egypt....
5) "They will lose money when their debt payments come due" - Yeah, they made that much free cash this quarter alone.
"What is the difference between a Ponzi Scheme and an Investment Bank?" -- Jon Stewart
Tesla deliberately held off shipping (and, by GAAP rules, recognizing revenue) in Q2 in order to make Q3 numbers look good.
I'm pretty sure your post is the part of the Hitler video near the beginning where he's waving hands and saying "This quarter doesn't matter because there's no way they can make next quarter because they deliberately held off shipping" and then the generals correct him, and he clears the room...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
False. Tesla has $157M due in December, and another $920M due in March.
Meanwhile, production keeps rising. If you're betting on a "Christmas slowdown" to save you, keep dreaming.
This is only just starting. Fremont scales to at least 7k without new lines (confirmed not just by Tesla, but also analysts who've toured Fremont). Model 3 is designed for 25% margin at its full range of variants. I mean, what exactly did you all think would happen to margin over time? Shorts kept complaining about high scrap rates and excess labour requirements - did you think it would remain that way forever? It takes a long time to get those things down (Tesla is still slowly reducing production costs on the Model S), and reducing them equals margin. With the introduction of the MR, margin improvements will get eaten up by a lower ASP in Q4, but in Q1 you not only get further margin improvements, but also a higher ASP due to the start of high-end sales in Europe.
Seriously, what exactly did you all expect was going to happen?
"What is the difference between a Ponzi Scheme and an Investment Bank?" -- Jon Stewart
TSLA longs lost over 17%
While they may be DOWN by that much (but are not, see aftermarket) by definition "longs" have lost nothing... because if they are long, they are holding not selling.
I bought some shares in the middle of the year but I have "lost" nothing because why on earth would I sell? The end game is way north of $400, by the end I will have made quite a lot on TSLA (and some of it I bought longer ago when it was a lot cheaper).
As a long investor what I do is pick stocks that I think have lots of potential, put money into them, and maybe look a few times a year to see how things are going. That's how you long, not bailing out at the first sign of any dip. If you choose well the dips fade away and you have mostly growth across a portfolio. Maybe someone doing day trading is making more but I'm pretty sure I'm leading a less stressful life.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The profit number also completely ignores 2 and 3.
2) Not paying vendors doesn't mean you don't account for the bill, it simply means it may adjust in the future.
3) Selling a loaner fleet is revenue neutral it's trading asset for cash, if there was profit in it it just means the loaner fleet was undervalued before, it's still legitimate profit.
The 2.5k cars does dramatically shift the numbers, but not enough to tank the company (2.5k * 60k is about half of the profit), also, there could be sins hiding in that huge cashflow (or it could be 2 and 3 from the list).
All and all, I do tend to think this completely turns around my outlook on Tesla, I was certain they'd succeed, but then started getting worried this year and last with all the missed M3 goals.
I also have concerns about Musk's health, he can't possibly be a net positive for the company again until he takes a nap (just my opinion from the outside).
Wow, sent an e-mail as suggested when clicking on "use classic" banner, and got a fast response that addressed my msg
I'm waiting to hear how Tesla is losing money on each car it sells, such as some people have been saying around here (FALSELY) for months.
Tesla HAS been losing money on each car they sell. That is a factual statement. But it doesn't mean what some people think it means. People here keep confusing gross margin with net margin and haven't a clue what free cash flow is or fixed costs or variable costs.
It's absolutely normal for a new product to lose money on the first units they produce because they haven't produced enough units to amortize the fixed costs over. Here's a oversimplified totally-made-up example. I spend $1,000,000 making an assembly line - one time cost never to be repeated. It also costs $500,000 per year to operate the assembly line no matter how many units I make whether it be 1 or 100,000. So before I make a single unit I have $1.5 million in operating costs. Let's say I'm selling a car for $50,000 and my actual cost of labor and materials in that car is $40,000 so I have a gross profit of $10,000 per vehicle. That means the first 150 vehicles I make are going to be sold at a loss. I also have to sell a minimum of 50 vehicles every year just to cover the fixed costs of operation.
Tesla is in that exact situation, just with much larger numbers. The have the added wrinkle that they also have a lot of debt to service (around $11 billion reportedly) which can be treated as an additional fixed cost.
Q2 Automotive gross margin increased to 20.6% GAAP and 21.0% non-GAAP. Thats their profit margin.
Gross margin is NOT profit margin. Those are different things and you need to understand the difference. Gross margin does not consider sales, administration, interest, taxes, and other overhead like engineering etc. Gross margin is just revenue minus cost of goods sold which is just direct costs of materials and labor. Gross margin is NOT profit and should not be confused with profit. You can easily have a 20% gross margin but a negative profit margin and if that remains the case long enough the company will eventually go bankrupt. Software companies often have gross margins in the 60-80% range because cost of production is very tiny - most of their costs are in engineering, sales and marketing. Manufacturing companies usually have gross margins in the 15-40% range depending on the product being made but that does not mean they are profitable.
Also, FYI, you book revenue when you ship, not produce. So having 13k vehicles in inventory is a drag on their balance sheet, not a boost.
How revenue is booked is unfortunately FAR more complicated and to a significant degree is an arbitrary decision. It's perfectly legitimate to book a sale when you sign a contract but before the product is delivered. Many companies do this. Other companies book the sale when the product is sent to a distributor (like an auto dealer) but not actually sold to the end customer. Other companies only book a sale when the end customer has received the product. You can even book a sale when cash is received for the product. All of these approaches are perfectly valid under GAAP. From what I understand Tesla somewhat conservatively books sales only when the customer takes delivery of the car. This is unusual in the industry. Most of the big auto makers book "sales" when the ship a car to a dealer even if it hasn't actually been sold to an end customer. They are treating the dealer as the customer of the product.
Fuck the cars, high end electric vehicles are a limited market.
All markets are limited markets. That said the market for luxury vehicles is a very big market and Tesla is doing rather well in it sales wise. I don't think you would argue that BMW or Mercedes are tiny companies and Tesla is apparently out selling them. That's nothing to sneeze at.
The big Tesla market, something the hedge fund shorts absolutely do not want to discuss, the home electric power systems, panels, batteries and control gear a far bigger market, probably something like 100 times the size of the vehicle market, each unit worth similar to a low end car and far more profitable, with numbers in the hundreds of millions.
Possibly true but if Tesla doesn't get their car company scaled up they aren't going to have the finances to try to tackle the power generation market. They have to crawl before they run and the energy generation market is likely going to be even trickier than the car market to figure out.
Tesla home power systems, cut your house from the grid, invest in a higher return than bank interest, far higher and fuel your Tesla vehicle from home.
That remains to be seen.
No, but they are long term issues that affect customer loyalty. There are rumblings amongst Tesla owners about service issues. In-warranty service is slow. Out-of-warranty is slow AND super expensive. Like $900 to fix a door handle. Dealerships are known for stiff markups, but $900 to fix a door latch is usury.
https://forums.tesla.com/forum...
My Other Computer Is A Data General Nova III.
An item is overpriced when it does not sell. While there is plenty of demand, and not enough supply, that is an indication that the car is underpriced, not over.
I prefer the "u" in honour as it seems to be missing these days.
Cost to fix a Cadillac Escalade door handle (and latch mechanism) $430:
https://www.cadillacforums.com...
My Other Computer Is A Data General Nova III.