Wednesday, November 22, 2017

TDS: Tesla Derangement Syndrome -- November 22, 2017


November 24, 2017: from Business Insider -- the Model 3 is putting Tesla in dangerous territory.
The Model 3, meanwhile, is a production disaster. And it is sort of unprecedented in the auto industry — in two ways. First, because Tesla has 500,000 pre-orders for the vehicle, something that's never happened before for any automaker. Second, because if any other automaker had half a million pre-orders for anything, it would be moving heaven and Earth to get those vehicles to market. There's nothing intrinsically exotic about the Model 3, either. It's a midsize sedan. Toyota could build a million next year without breaking a sweat.
Original Post 

As mentioned earlier, I suffer from TDS - Tesla Derangement Syndrome. I am simply fascinated by the company. 

From Investopedia, July 31, 2017, from an investor "long" on TSLA:

How did estimates compare to actual results? Actual results were posted at this link. It seems there are a number of different "numbers" provided for actual earning results: GAAP: non-GAAP: fantasy; the company numbers; and so on.

Ignoring 3Q16, there were only three quarters in which the forecast for the quarterly loss beat the actual number (and then, just barely). Perhaps worse, in 4Q15, analysts had forecast a small gain, but actual results were the worst up to that point on the graph above.

And then look at that: the "experts" suggested that the loss in 3Q17 would be less than that in 2Q17. In fact, the loss in 3Q17 came in a $3.70/share vs $2.04, the previous quarter. What is that? An 81% worse loss month-over-month and that was supposed to be when things started getting better.

And "the market" blew that off. TSLA shares just kept on appreciating.

Burning through $8,000/minute works out to:
  • $11.52 million / day
  • 345.6 million / month
  • $1.04 billion / quarter
Of course their automobiles are only part of their business, but --
  • 5,000 cars/month with a $10,000 profit margin on each car = 
  • $50 million / month
  • $150 million / quarter
If they get to 10,000 cars/month with a $10,000 profit margin on each car =
  • $100 million / month
  • $300 million / month
Plus $250,000 for the new roadster x 2,000 orders =
  • $500 million -- a one-time good deal
So, I was curious. It seems there's a bit of a gap between burning through $8,000/minute and anticipating an income of $300 million + $500 million. The EPS forecast in the graphs above was back in July, 2017.

What is the current EPS forecast for 4Q17 for Tesla. Here's the link; don't hold your breath: a loss of $3.75/share, much worse than the -$1.50 forecast in the graph above.

At that same link, Tesla's yearly earnings are forecast to be a minus $11.38 (for the year). So far,
  • 1Q16: -$1.25
  • 2Q17: -2.04
  • 3Q17: -3.70
  • Sub-total: -$6.99
Yearly forecast at the link: -$11.38.

The delta between $11.38 and $6.99 is $4.39 which is slightly different, but in the same ballpark as the estimate of a $3.75 loss for the December, 2017, numbers.

This continues to be a fascinating story to watch.

Disclaimer: the usual disclaimer applies. I often make simple arithmetic errors.

By the way, in this article, November 1, 2017, this comment by the writer, albeit in a link from one of his earlier posts:
With Model 3 anticipation high, Tesla is still selling record numbers of Model S and X. In Tesla’s just-released Q3 2017 earnings report, the company announced that in the same quarter that the much-antipated Model 3 was (soft-)launched, they’ve still managed to produce and deliver record numbers of the Model S and X. This is despite Tesla’s recent focus on “anti-selling” the Model 3, for fear that the upcoming product will negatively affect current S/X sales.
Fact check:

Total number of Model X and Model S sold/delivered in the following months:
  • June: 2,200 + 2,350 = 4,550
  • July: 1,650 +1,425 = 3,075
  • August: 1,575 +2,150 = 3,725
  • September: 3,210 +4,860 = 8,070
  • October (most recent data): 850 +1,210 = 2,060
Only if one averages September and October sales (5,065) does one get "record number of sales on a monthly basis.

I can only assume October was an anomaly, and that November sales will be "out of this world. "

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