
Tesla announces Q2 2017 earnings - lpolovets
https://electrek.co/2017/08/02/tesla-tsla-q2-2017-earnings/
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simonsarris
I've owned TSLA a long time and I hope they _don 't_ start making money, and
continue the Amazon model and actually build something with years of minimal
or no profits, re-investing vigorously. Amazon had almost 20 years in business
without "making any money" except a few quarters where they accidentally eked
out some non-trivial profit.

But without their spending, they wouldn't have become Amazon. Without Tesla's
spending, they won't be a _future_ company, they'll just be a tiny car
company.

It's amazing just how many people on different sites (stocktwits, seeking
alpha, reddit) continue the "they're losing money, why are they valued so
highly?" comments. How is it not obvious what Tesla is trying to do? The
operative thing isn't that they're losing money, its that they're spending
everything they've got. This is a good thing. The Starcraft analogy is simple
to make: The winning player is the one that spends all their resources, not
the one that hoards them. Nobody raises cash just to hold on to it. I have no
idea why people can't grasp this.

For earnings, what matters is whether or not revenue is higher than expected
($2.79B vs. $2.51B estimated) and what the gross margins are (27.9%). Check
and check.

~~~

Bit of a diversion:

For some historical comparison: Amazon added $6bn in debt as recently as 2014.
Even very large and very successful companies take on debt to fuel growth far
beyond "bootstrap" numbers. Both companies leverage as much investment money
as they can to build and expand as fast as they can. If you look at Amazon's
raises in the late 1990's you'll find something more comparable to Tesla today
relative to revenue. In 1999 Amazon raised $1.25 billion, and their revenue
for the year was $1.64 billion. So they raised proportionally way more money
than Tesla has so far this year. And spent it all!

(Also note the crazy growth: 293 million in Q1 to to 676 million in Q4 for
Amazon that year. They were expanding like mad, but they still needed way more
money than they were producing to reach their goals.
[http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Revenu...](http://www.wikinvest.com/stock/Amazon.com_\(AMZN\)/Data/Revenue/1999/Q4))

~~~
entee
I think a viable criticism would be more along the lines of does the valuation
make sense based on the size of the market they can capture?

That's a hard question to answer.

The Bull case says yes because Tesla isn't a car company it's a battery and
energy company that sells cars. Therefore no sense comparing to GM or Ford or
any other car company, which tend to be valued far, far more conservatively if
we look at share price vs #cars sold, or pretty much any metric.

The bear case is that Tesla's share price makes zero sense at all compared to
any car company ever. It's well summarized in an old article here:

[http://aswathdamodaran.blogspot.com/2013/09/valuation-of-
wee...](http://aswathdamodaran.blogspot.com/2013/09/valuation-of-week-1-tesla-
test.html)

And the share price has radically increased since then.

In short the article asks, what would the share price be if Tesla had the
scale of Audi and the margins of Porsche. The value is on the order of $70 at
that point. The $325 it's at today seems a little ambitious in that light.

Personally, I think the bear case is correct, though I admire the company,
have friends who work there and I firmly hope they succeed. But wow, that
price is insane.

~~~
Tomminn
I think the bull case is built mainly along Tesla's brand. For a normal car
company, the more cars you make, the less you can charge for them. You dilute
your brand by going mass market and become something approximating a
commodity. I think there is a case to be made that quantity will not dilute
the Tesla brand as much as it dilutes other luxury car companies, since the
brand isn't built on scarcity it's built on a something like a superhero.

So the bull case to me is that Tesla may be able to do what Apple did-- have a
small fraction of the market and take home the vast majority of the profits.
And this isn't because other car companies will be less profitable then they
are now, it's just that Tesla will redefine what profit margins are possible
on mass market cars.

Toyota has $260B revenue. Imagine a company a quarter of the size, with a
25-30% profit margin.

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Animats
That's a bit deceptive - giving revenue in dollars, and losses in dollars per
share.

Better view of the numbers.[1]

[1] [http://www.zerohedge.com/news/2017-08-02/tesla-burns-
record-...](http://www.zerohedge.com/news/2017-08-02/tesla-burns-
record-13-million-day-q2-and-its-about-get-worse)

~~~
homosaphien1
The comment section is cancer in this link. Classic zero hedge crowd.

~~~
simonh
I gave up at the "I just spent 15 minutes reading about electric cars and..."
comment. Instant expertise is the best expertise!

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wott
In the document:

Net loss of last quarter: $400M

Net loss since beginning of the year (6 months): $800M

(Because the article gives absolute figures for the revenue, but for the
losses it only gives the loss per action, which doesn't talk to me.)

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theologic
Since there is some confusion about why investors would support the TSLA stock
price, I thought I would pull a couple of sell-side analysts reports to see
what industry watchers were saying. (I happen to currently have a business
role running a P&L, and I have access to sell-side research as one of my
resources.)

I'm not an auto guy, and while I read Elon's biography, I'm looking at this
for the first time.

It seems that the simple way the sell-side analysts are looking at it is by
going out a few years, let's say 2020, and then projecting the possible EPS in
2020 then assigning a multiple.

One guy said that they could get to an EPS of $6, and gave it a 30 multiple or
roughly a $180 price, and said the stock is way too high.

Another guy said they could get to an EPS of $20, and gave it a 32 multiple
(but then discounts the value to today in 2017) for roughly a $400 stock
price.

The difficultly is predicting what the EPS is going to be in 3-4 years. The
bulls are confident that Elon has a battery and innovation edge such as the
auto-pilot (or Warren Buffet moat or competitive advantage). The bears say
that the tech is too easy to copy.

I understand concern over "how big can they get?" However to counter this, the
absolutely auto market is massive (somewhere around or over $1.5T). The
problem is that the market is fractured into a lot of small guys. I suppose
there is an argument that Tesla could sell tech to a vast majority of these
guys, and unite them under a common battery/OS platform (think IOS or MS-
Windows).

Mind you, I am not investing in Tesla at all, but there is a valid path to a
high stock price. You just have to accept multiple things need to happen.
Right now, I'm not investing, so this is a passing point of interest.

Time to look at this page in 2020.

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antaviana
One of the great, and I mean really great, intangible assets of Tesla is its
brand value.

Tesla has a guaranteed pipeline of strong sales for years to come, saving
themselves a ton of money for advertising that their competitors must spend.

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scott_karana
I assume it's tactical that they released this information after the trading
day finished?

TSLA closing price was $325.89, and after hours trading recently peaked at
$347.14!

~~~
yumraj
AFAIK that is standard practice, at least in the US

~~~
btilly
[https://qz.com/300486/the-best-times-to-release-bad-
earnings...](https://qz.com/300486/the-best-times-to-release-bad-earnings/)
says that as of 2012 only 2% of earnings are announced while the stock is
tradition, down from 20% in 2000. There is no reason to believe that this
trend has changed.

