
Tesla beats expectations with $3.4B in revenue - GW150914
https://techcrunch.com/2018/05/02/tesla-earnings-q1-2018/
======
chollida1
Numbers: \- 1Q Adj Loss/Shr $3.35, Est. Loss/Shr $3.41

\- 1Q Rev. $3.41B, Est. $3.32B

\- Tesla reported 19.7% gross margins for Q1, beating Wall Street estimates.
Model S and Model X are now above 25%,

\- Cash burn in the quarter looks to be $1.05 billion

Misc:

\- Customer deposits up to $984 million from $854 million

\- says it will reach full GAAP profitability in Q3 and

\- company had $3.2 billion in cash on hand.

\- says it can get to 5,000 Model 3 units a week in about two months.

\- Solar City seems done as a consumer product, After installing just 87
megawatts in the fourth quarter, it deployed even less in 1Q -- 76 megawatts.

\- Tesla's 5.3% bonds are unchanged at 89 cents on the dollar,

\- Tesla will not offer a leasing option on the Model 3 this year.
Translation, Telsa needs cash and needs it right now in a big way.

\- "Our Model 3 general assembly line consists of fewer than 50 steps, which
is about 70% less than conventional assembly lines. All Model 3 vehicles use
only one standard body frame, down from more than 80 for Model S, a wiring
harness that has 50% less mass than average vehicles, and a fraction of the
number of controllers, connectors and CPUs."

\- "At this stage, we are expecting total 2018 capex to be slightly below $3
billion, which is below the total 2017 level of $3.4 billion." Open
Question... how do you ramp up car manufacturing from 2500 to 5000 to 10,000
per week and reduce CapEx at the same time. Seems like eithr Capex estimates
will blow out or prodcution will but both can't coexists. Check bond
yields....

\- Tesla spent $146 million on interest payments in 4Q -- roughly the same
interest expense as GM, a company with approximately 10 times more revenue.
Interest expenses rose to $149.5 million last quarter.

~~~
dharmon
In case you ever feel like its a waste of time, I, for one, appreciate your
posts with notes + numbers.

Its so easy for conversations about these things to get derailed about, oh, I
dunno, flying cars, that its great having your post with hard numbers there to
keep the discussion grounded.

Its great that companies have big dreams and grand visions, but how will it
work out in the numbers?

~~~
chollida1
Thx, that's appreciated.

It's really something I do for my job, I just put them here as well. I think I
often get penalized by the HN algorithms because a post can get edited 4-5
times.

~~~
mkmk
I really enjoy your posts too, thanks! Stupid questions: can you explain 'wall
street estimates'? I've heard it a million times, and I get that there are
people at the company that make estimates and also analysts at financial firms
(investment banks?) that supposedly take a stab at what the earnings per share
will be, but-- who are they? What determines if somebody 'counts' as an
analyst? How are estimates recorded so that they show up in yahoo finance?
What are the motivations and abilities those analysts have to be right?

~~~
xapata
That's like asking what counts as art. There are some major museums who hire
curators, who in turn buy art. Similarly, there are some large financial
companies that publish advice, who hire analysts. You "count" if people listen
to you.

~~~
pooya13
But don't they have a conflict of interest since their "estimates" affects the
same market they are investing in?

~~~
sz4kerto
In theory there's a strict separation between trading and research
departments. (People on the trading floor cannot even enter the area where
research sits.) This doesn't mean that there isn't some conflict of interest,
but the industry and regulators are aware of it and at least in principle
there are ways to mitigate it.

------
misja111
The talent that Tesla has to spin bad results is amazing.

"In its letter to investors, Tesla provided some updates to its Model 3
production, noting it hit 2,270 cars produced per week for three straight
weeks in April."

Seems pretty great, 2270 cars for three straight weeks! Looks like Tesla's
production is going steady. However, in its early March press release about
the Model 3 production, Tesla was still saying something else:

"The Model 3 output increased exponentially, representing a fourfold increase
over last quarter. This is the fastest growth of any automotive company in the
modern era. If this rate of growth continues, it will exceed even that of Ford
and the Model T."

Exponential production increase! .. which they now say abruptly stopped after
the press release.

~~~
IkmoIkmo
Yeah there comes a point where you stop rooting for the little guy doing
little-guy marketing gimmicks and realise it's a billion dollar company making
intentionally disingenuous statements.

The Model T reached around 70k per week. Tesla has no business referencing it.
It's like saying I got a promotion growing my salary from $50k to $80k this
year, a growth rate of income that, if continues, will exceed even that of
bill gates. It's a joke.

------
krrrh
You can listen to the earnings call here:

[https://edge.media-server.com/m6/p/nwvzygvo](https://edge.media-
server.com/m6/p/nwvzygvo)

It was... pretty strange. This is being pegged as the reason for the 5% drop
in after hours trading despite beating estimates. Some details, and a youtube
link to a portion of the call here:

[https://www.zerohedge.com/news/2018-05-02/musk-meltdown-
tesl...](https://www.zerohedge.com/news/2018-05-02/musk-meltdown-tesla-
tumbles-after-elon-cuts-conference-call-question)

~~~
unknown_apostle
When a company has nominally good news for the world but the share price tanks
after its release, this is usually a bad omen going forward.

------
Animats
CNBC business:

 _In the quarter ended March 31, Tesla 's net loss widened to $784.6 million,
or $4.19 per share, from a loss of $397.2 million, or $2.04 per share, a year
ago._

 _Revenue rose to $3.41 billion from $2.7 billion a year ago, and outpaced
analysts estimates of $3.22 billion._

It's deceptive to list the revenue in dollars and the loss in dollars per
share. Reality is a loss of $785 million on $3.41 billion revenue.

~~~
traek
> It's deceptive to list the revenue in dollars and the loss in dollars per
> share.

It's just convention. Earnings per share (EPS) is a very commonly used metric,
sales per share much less so.

~~~
justicezyx
That just means the convention is deceptive.

~~~
Retric
It's actually very useful to know earnings or loss per share as you buy shares
not the entire company.

Revenue provides different information, and is useful to figure out market
share etc.

------
caio1982
"Tesla also expects to achieve full GAAP profitability in Q3"

That would be a massive hit at skeptics as Q3 is almost around the corner (I
wasn't even expecting it to happen this year), but even being a fanboy myself
I still doubt such bold statement.

~~~
mdasen
I hope they do become profitable, but I'm skeptical they will.

1) Their losses are growing, not shrinking. From March 2017 to now, they lost
$330M, $336M, $619M, $675M, and $785M. Maybe they hit a tipping point and
there is an abrupt change, but it seems like the more natural trajectory would
be for losses to become smaller and then turn into profits.

2) Tesla has said they'd be profitable before.
[https://www.reuters.com/article/us-tesla-results/tesla-
expec...](https://www.reuters.com/article/us-tesla-results/tesla-expects-to-
become-profitable-in-2016-shares-surge-idUSKCN0VJ2J6)

Tesla is a really cool company, but it's hard to see a future where they
justify their share price. Let's say that Tesla becomes the next Toyota 15
years from now. Toyota is only worth $213B. So, the kinda max value for Tesla
is around 4x their current price. So, under really rosy conditions, Tesla
appreciates at 12% per year over the next 15 years. That's not bad, but the
likelihood that Tesla is the next Toyota is very small.

Let's say that Tesla is incredibly successful and becomes the next Volkswagen,
Daimler, or BMW (the #2, 3, and 4 auto makers by market cap). They'd be a
$106B, $85B, or $73B company. That doesn't leave much for price appreciation
over their current $51B market cap.

Maybe Tesla can make a company that's way more profitable per vehicle and sell
so many vehicles. But that's a bit of a moon-shot.

It seems more likely that Tesla will become a company like Subaru ($26B),
Mazda ($8B), Nissan ($43B), Ford ($44B), Hyundai Motor ($40B), Fiat Chrysler
($34B), Renault ($32B), PSA Peugeot Citroën ($22B), Suzuki Motor ($26B), GM
($51B), or Honda ($60B). Those are all very successful auto companies. If
Tesla becomes the next Mazda 15 years from now, that will be incredibly bad
for investors. Basically, if Tesla doesn't become the next Toyota, it seems
hard to believe Tesla won't underperform the market by a lot.

It's possible that Tesla will become the next Toyota, but unlikely. Comparing
Tesla's market cap with that of most auto manufacturers makes you realize that
investing in Tesla isn't just betting that Tesla will become a great volume
car company like Mazda. They have to become _the_ car company.

When investing, it's also important to note that money later is less valuable
than money now and account for risk. Tesla is being priced like it's making
$6B/year today and it's future is certain.

Beyond that, is the automotive industry long for this world? People are re-
urbanizing and city traffic is only getting worse. Self-driving vehicles will
mean that being driven unlimited places might fall to $50-100/mo which is
significantly less than the $400+/mo of car payments, insurance, gas, parking,
maintenance, etc. Why should I spend $631/mo for a $35,000 car plus insurance,
gas, parking, maintenance when I can just get driven around for a fraction of
that cost? Today, Uber's help is more limited since the human driver costs a
lot of money per mile. If that future comes to pass, there will be a lot fewer
cars manufactured and bought which limits Tesla's value.

If an autonomous car is serving 25 people a day, that's a lot fewer vehicles
that need to be bought. World vehicle production is around 90M/year and Toyota
and Volkswagen are 10M of that each. If the demand for vehicles falls to 4% of
its current demand, that's only 3.6M vehicles per year. Even if Tesla makes
100% of those vehicles, they don't come close to being the next Toyota or
Volkswagen. Even if an autonomous vehicle only serves 10 people a day, that
cuts the vehicle market down to 9M. Even if an autonomous vehicle can only
serve 4 people a day, that cuts the market to 22.5M. The future market for
vehicles might be pretty small compared to the current one and so even if
Tesla hits a Toyota or Volkswagen-like 10% of the market, it might not be a
large market.

And self-driving services are likely to have stiff price competition. Unlike
an Uber competitor that has the network effects of having drivers already
signed up, it's relatively cheap to blanket a city with self-driving vehicles.
$20,000/mo isn't a huge run rate to to buy 50 vehicles at $400/mo and that
will let you place a vehicle within a short distance of everyone in a city
like San Francisco (47 square miles). You could position them so that they're
usually less than half a mile away to pick you up. $20,000/mo isn't a huge run
rate to get your service started and you can buy more vehicles as you get
riders. So, even if you think that Tesla might be that self-driving network
and will make profits that way, I think it's more likely that the space will
have a lot of competition that will push margins down. Waymo and GM/Cruze are
well on their way. Nissan and Toyota are expecting to enter the game in a few
years. Uber wants to be in this space.

It just seems like Tesla is more likely to become Mazda than Toyota and that
the auto industry might be facing a large market-shrinking threat in self-
driving cars. As such, it's hard (for me) to look at Tesla's market value and
see the potential for a lot of appreciation over the long term. They're
already worth more than most successful auto makers.

~~~
IkmoIkmo
All good points but, I think you're missing one (extremely unlikely) scenario,
which is the bet that Tesla to cars will be like Apple was to phones. Not just
supplanting existing phone manufacturers, but redefining what the market means
and how big it is.

Nokia was a $90b phone company in 2007. The best-case scenario for a new phone
company could in 2007 be expressed as a topping out at Nokia's size (Toyota in
your example), but it'd be a moonshot. It'd more likely be an Ericson or
Motorola, whose phone divisions weren't half as big as Nokia's. So the best
case scenario is $90b, and more likely to be around $30b. And that would've
made sense, until you figure Apple drove a market cap approaching $900b,
mostly on the basis of its phones, all within 10 years of 2007.

So there's something to be said about the possibility that Tesla doesn't just
supplant Toyota to become _the_ car company, but also redefining cars and the
size of its market, just like with smartphones. I see some people making that
bet. That having been said, I personally think the chance of that happening
approaches zero. The points you make are very apt. Self-driving cars means we
can increase utility rates of cars (which sit still for 90% of the day) from
10% to say 90%, and that will completely destroy sales volume.

~~~
plopz
I'm not sure how that last part plays out. If you need 100 cars active at rush
hour and 10 active the rest of the day, then sure those 10 might have 90%
utilization but the other 90 wont.

~~~
IkmoIkmo
Well, suppose you have a fleet of 100 cars. In the morning and evening, 100
people travel for 1 hour to work and back during rushhour. That's 2 hours in
total, or 100% utility of the fleet during 8% of the day.

Now suppose that every hour of the rest of the day, there's only 10 people
making a trip of 30 minutes. That means there's only 10% of the traffic volume
compared to rushhour on the road. But you're seeing 22 hours of two groups of
10 people making a trip every hour. That's 440 trips.

Now suppose that the two groups of people, rush and non-rush, all used their
own cars. You'd have 100 cars for the rushhour group and 440 cars in the non-
rushhour group. You get to 540 cars needed.

Now suppose the two groups shared vehicles. You just need 100 cars still to
make the same amount of trips.

Under these (made up) assumptions, you can reduce the amount of cars needed by
5x.

Then there's the notion that you can get dynamic pricing, e.g. look at Uber,
but for semi-public transport. This incentivises people and companies to
distribute their travel in a better manner, which also allows a system where
producers of congestion pay for it. Thereby you can distribute load better,
increase utilization, decrease the number of vehicles needed even further.

But indeed, you're unable to get to 100% utilization because demand fluctuates
during the day. But even increasing it from 10% to 20%, or 30%, would
introduce massive changes to the market size.

------
bhouston
Interestingly, I think nearly all people in Ontario on the Tesla waitlist got
their option to buy cars in the last few weeks. I believe it is because the
likely new provincial leader is going to revoke a huge tax break to electric
cars, so Telsa is trying to get all of its Ontario customers to buy in before
the rebate is gone.

I know 3 people on the waitlist who just all of a sudden got told they can now
buy a car immediately. That is likely not a coincidence.

------
Theodores
Model S sales - allegedly down on April 2017.

Has America fallen out of love with the sedan? Even the Tesla version?

Ford announced they are not going to be selling sedans in America, Mustang
excepted. GM are ditching the Bolt (or Volt?) and FCA aren't making a lot of
regular cars in the USA.

From now on monster SUVs powered by oil is what the future is in America,
thanks to fracking and easy credit. Can't wait for the invasion of affordable
Chinese electric cars.

~~~
plaidfuji
This was essentially what happened in late 90s/early 00's, and the subsequent
rise in oil prices and '08 recession led to the bankruptcy of American auto
companies that had stopped producing fuel efficient cars. The taxpayer-funded
bailout included a stipulation that increased their fuel economy standards;
that part of the deal is now being reversed by the current administration.

~~~
adam
Thanks for commenting about this - I don't understand why there isn't more
commentary about Ford deciding to drop sedans. It seems like someone is way
way behind on the forecasting game. Just as oil prices are going back up and
the demand for fuel efficient vehicles will increase, they're doubling down
on...gas guzzlers.

~~~
cityofdelusion
Crossover vehicles (misleading labeled as "SUVs" by the industry) have largely
replaced sedans in the last few years. Think vehicles like the Nissan Rogue,
Ford Edge or Honda CR-V. These vehicles are essentially lifted sedans or
hatchbacks with a slightly taller body. They have nearly identical combined
fuel efficiency compared to economy sedans.

I don't think there is much risk in the industry. Sales of full-size SUVs of
yore (the gas guzzling V8s based on full-size trucks) are down, people want
the newer, smaller, lighter 4-cylinder crossover and it will end the sedan
era. Ford isn't alone here either -- every manufacturer is pumping out models
of crossovers based on sedans. Sedans are either pivoting into territory that
sportier cars used to occupy (Toyota Camry) or morphing into entry luxury
vehicles (Honda Accord). Even with this pivoting, year-over-year sales of cars
like the Nissan Altima and Honda Accord are _significantly_ down.

Real example: Mazda 3 sedan vs Mazda CX-5 crossover SUV. They use the exact
same 4 cylinder engine pushing 155 horses. The sedan gets 30/41 mpg and the
crossover 26/35\. People aren't going to give up their higher ride height and
comfy seats for 5 mpg. Another example to consider is that sales of crossovers
are way up in europe, despite having gas that costs nearly __double __that of
the United States.

Ford is making a logical move. Their 4 cylinder ecoboost engines are efficient
and they want to introduce hybrid drivetrains, even on their muscle car.

~~~
rconti
And sedans like the Taurus have become fat pigs anyway. And a Ford Fusion is
the same weight as a Ford Escape. (Yes, theoretically different size vehicles,
but consumers LOVE pretending like their SUVs have more space than they do,
and to a certain extent they 'feel' bigger due to greater distance between
floor and ceiling.. and neither vehicle has 3 rows of seats, so....)

------
newnewpdro
I find it strange there hasn't been mention of what's being reported on here
[1] in this thread. Anyone who actually paid attention to the earnings call
care to comment?

[1] [https://www.marketwatch.com/story/elon-musk-acted-like-a-
jer...](https://www.marketwatch.com/story/elon-musk-acted-like-a-jerk-and-
tesla-stock-paid-the-price-2018-05-02)

~~~
jhall1468
I didn't hear the call but that article has a pretty clear agenda given how
many shots it took. That was not a news story, it was a hit piece editorial.
Furthermore only MarketWatch is reporting on it.

~~~
newnewpdro
> Furthermore only MarketWatch is reporting on it.

Untrue, I just didn't go out of my way to fill my comment with a pile of URLs
considering news aggregators were chock full of them [1], all saying largely
the same thing.

[1]
[https://news.google.com/news/search/section/q/musk%20tesla%2...](https://news.google.com/news/search/section/q/musk%20tesla%20earnings/musk%20tesla%20earnings?hl=en&gl=US&ned=us)

~~~
jhall1468
More than half of those weren't written when I said that 6 hours ago, and of
the remainder the majority don't paint anywhere _near_ the picture MarketWatch
did.

~~~
newnewpdro
For posterity sake: I didn't cherry-pick the MarketWatch link from the
comment. It was one from several tabs I had open on the topic at the time from
casual news consumption, and they all seemed similar enough for me to not
particularly care.

------
samfisher83
[http://files.shareholder.com/downloads/ABEA-4CW8X0/623988100...](http://files.shareholder.com/downloads/ABEA-4CW8X0/6239881006x0x979026/44C49236-1FC2-4FD9-80B1-495ED74E4194/TSLA_Update_Letter_2018-1Q.pdf)

If you look at the financial statement their cash flow used by operation went
up 4x from the same quarter last year. Their margins on their cars are getting
worse, I guess probably due to the model 3. Maybe Musk would have been better
off just focusing on their high end cars and get all the processes ironed out.

~~~
ucaetano
> Maybe Musk would have been better off just focusing on their high end cars
> and get all the processes ironed out.

Tesla would never become a mainstream car maker focusing only on high-end
cars, and would not justify the market cap.

~~~
sgillen
I think maybe he is saying they should have focused on high end cars only
until all their automated manufacturing processes were ironed out.

~~~
aquadrop
You can't have the scale with just high end cars to justify same level and
dedication to automation. Ferrari sells 7-8k cars a year, Tesla wants to sell
more in a week.

------
paulcole
Stop making cars but keep taking people's money. Is this a viable longterm
strategy?

~~~
SirLJ
Yep, create company after company and not one is profitable... Musk is where
hype is going to die...

~~~
njarboe
Re-usable rockets seem to be working. The margins on SpaceX launches is going
to get huge until the competition catches up. That seems like at least a
decade off at this point.

~~~
SirLJ
Just raised money for SpaceX - not profitable... maybe it will buy Tesla :-)

