17 ms·

Tesla beats expectations with $3.4B in revenue

303 points by GW150914 8y ago

krrrh 8y ago
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-tesla-tumbles-after-elon-cuts-conference-call-question https://www.zerohedge.com/news/2018-05-02/musk-meltdown-tesl...
- unknown_apostle 8y ago
  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.
newnewpdro 8y ago
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-jerk-and-tesla-stock-paid-the-price-2018-05-02 https://www.marketwatch.com/story/elon-musk-acted-like-a-jer...
- jhall1468 8y ago
  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.
  - planteen 8y ago
    Reuters is covering it too. It's on the front page of Yahoo Finance. "The price of Musk cutting off analysts? For Tesla, it's $2 billion" https://finance.yahoo.com/news/price-cutting-off-analysts-tesla-004349194.html https://finance.yahoo.com/news/price-cutting-off-analysts-te... > In a note titled "The Importance of 'Boring' Questions," Morgan Stanley's Jonas called into question Tesla's financial standing. > "While they may be 'dry' in nature, we argue such questions are extremely important for a highly-levered and cash-hungry company," Jonas said. > Morgan Stanley's Adam Jonas said it was the most unusual call he had heard in 20 years in the business. https://finance.yahoo.com/news/tesla-stock-takes-hit-elon-134000693.html https://finance.yahoo.com/news/tesla-stock-takes-hit-elon-13...
  - newnewpdro 8y ago
    > 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%20earnings/musk%20tesla%20earnings?hl=en&gl=US&ned=us https://news.google.com/news/search/section/q/musk%20tesla%2...
    - jhall1468 8y ago
      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 8y ago
        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.
misja111 8y ago
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 8y ago
  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.
bhouston 8y ago
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.
chollida1 8y ago
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.
- empath75 8y ago
  It seems like there’s a disconnect between expected revenue and the stock price. If people took the expected revenue from analysts seriously then they’d have to believe that Tesla was nearly insolvent.
- rdl 8y ago
  Solar City is 'done', does that include the Powerwall?
  - Robotbeat 8y ago
    You're confusing editorializing and actual data. "Solar city is done" is an editorial opinion by the poster based on the lower installed Megawatts this quarter from last, it isn't necessarily reflective of Tesla's actual plans. An equally valid perspective is it's currently a low priority compared to just getting Model 3 out the door. There are occasional comments by Musk that they're still very much interested in consumer solar roofs and certainly Powerwall. Granted, it's also a valid point to say "the proof is in the pudding" and point out the lower actual installed capacity this quarter.
caio1982 8y ago
"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.
- Jdam 8y ago
  Does GAAP exclude one-time-effects? I can see them selling their grounds, offices and renting it again and the like.
- mdasen 8y ago
  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-expects-to-become-profitable-in-2016-shares-surge-idUSKCN0VJ2J6 https://www.reuters.com/article/us-tesla-results/tesla-expec... 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.
Animats 8y ago
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 8y ago
  > 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 8y ago
    That just means the convention is deceptive.
    - fgonzag 8y ago
      It's only deceptive to people who shouldn't be buying stocks based on those metrics in the first place.
    - barbegal 8y ago
      Not really. In a conventional business revenue tells you how big it is so should be reported in absolute terms. And traditionally, dividends matter to the shareholders and that is directly related to earnings per share. Profits may increase in absolute terms but earnings per share could decrease as a result of issuing more shares (also known as stock dilution).
    - Retric 8y ago
      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.
samfisher83 8y ago
http://files.shareholder.com/downloads/ABEA-4CW8X0/6239881006x0x979026/44C49236-1FC2-4FD9-80B1-495ED74E4194/TSLA_Update_Letter_2018-1Q.pdf http://files.shareholder.com/downloads/ABEA-4CW8X0/623988100... 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 8y ago
  > 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 8y ago
    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 8y ago
      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.
  - dx034 8y ago
    You can be very successful just producing >$80k cars. You'll never be the largest car manufacturer but you can dominate a market. I think Tesla could've done that by producing more sports cars instead of affordable cars. There's a lot of wealth in the world, enough to justify a gigafactory.
- deleted 8y ago
  [deleted]
Theodores 8y ago
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.
- Robotbeat 8y ago
  This is one thing that is strongly in Tesla's favor. A pivot to SUVs and trucks has essentially zero geopolitical/oilprice risk, unlike every other domestic automobile maker which is gambling big time that gas prices don't continue to increase. I'm not sure Ford (focusing nearly exclusively on trucks) could survive a sustained $4/gallon gas price again, let alone whatever the gas price would be if the "$300 per barrel" scenario [0] happened (even for just a few months). Gas prices are about $1/gallon higher than they were when the Model 3 was unveiled and Tesla got a huge backlog of orders. That's about $5000 in additional gas savings over the life of the vehicle (some of that in the form of residual used value). OPEC is still cutting back, and they want oil at about $80/barrel, up from the current ~$65. Gas prices arguably still haven't reached equilibrium for the current price of oil, and continued under-investment in oil capacity during the last slump could lead to significantly higher oil prices going forward, particularly if the global economy stays fairly strong. This is incredibly good for Tesla. So I think Tesla has more going for it than a lot of people give credit. Theoretically, other car makers could've switched to electric tech, too (it's fairly simple, although it takes investment), but just about the only car makers who are TRULY serious about it (versus talking about it) are in China. Certainly when compared to other domestic car makers. [0] http://www.businessinsider.com/300-oil-is-not-impossible-says-oil-hedge-fund-manager-2018-4?r=UK&IR=T http://www.businessinsider.com/300-oil-is-not-impossible-say...
  - ghazak 8y ago
    Aren’t electric vehicles more at risk of the reverse, ie. a big decline in gasoline prices? They’re more costly so users usually hope to make some of it back due to lower operating costs. It’s not a huge risk though.
paulcole 8y ago
Stop making cars but keep taking people's money. Is this a viable longterm strategy?
- SirLJ 8y ago
  Yep, create company after company and not one is profitable... Musk is where hype is going to die...
  - njarboe 8y ago
    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 8y ago
      Just raised money for SpaceX - not profitable... maybe it will buy Tesla :-)
  - dmode 8y ago
    PayPal is not profitable ?
    - SirLJ 8y ago
      Hello, Musk was newer PayPal CEO
      - fastball 8y ago
        create company Musk was definitely a co-founder of the company PayPal, so he "created" it - stop changing your claims post facto.
        SirLJ 8y ago
        Max and Peter created the PayPal predecessors... Musk was an obstacle before the IPO and was replaced...

303 points by GW150914 8y ago

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

unknown_apostle 8y ago
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.

newnewpdro 8y ago

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

jhall1468 8y ago
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.
- planteen 8y ago
  Reuters is covering it too. It's on the front page of Yahoo Finance. "The price of Musk cutting off analysts? For Tesla, it's $2 billion" https://finance.yahoo.com/news/price-cutting-off-analysts-tesla-004349194.html https://finance.yahoo.com/news/price-cutting-off-analysts-te... > In a note titled "The Importance of 'Boring' Questions," Morgan Stanley's Jonas called into question Tesla's financial standing. > "While they may be 'dry' in nature, we argue such questions are extremely important for a highly-levered and cash-hungry company," Jonas said. > Morgan Stanley's Adam Jonas said it was the most unusual call he had heard in 20 years in the business. https://finance.yahoo.com/news/tesla-stock-takes-hit-elon-134000693.html https://finance.yahoo.com/news/tesla-stock-takes-hit-elon-13...
- newnewpdro 8y ago
  > 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%20earnings/musk%20tesla%20earnings?hl=en&gl=US&ned=us https://news.google.com/news/search/section/q/musk%20tesla%2...
  - jhall1468 8y ago
    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 8y ago
      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.

misja111 8y ago

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 8y ago
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.

bhouston 8y ago

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.

chollida1 8y ago

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.

empath75 8y ago
It seems like there’s a disconnect between expected revenue and the stock price. If people took the expected revenue from analysts seriously then they’d have to believe that Tesla was nearly insolvent.
rdl 8y ago
Solar City is 'done', does that include the Powerwall?
- Robotbeat 8y ago
  You're confusing editorializing and actual data. "Solar city is done" is an editorial opinion by the poster based on the lower installed Megawatts this quarter from last, it isn't necessarily reflective of Tesla's actual plans. An equally valid perspective is it's currently a low priority compared to just getting Model 3 out the door. There are occasional comments by Musk that they're still very much interested in consumer solar roofs and certainly Powerwall. Granted, it's also a valid point to say "the proof is in the pudding" and point out the lower actual installed capacity this quarter.

caio1982 8y ago

"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.

Jdam 8y ago
Does GAAP exclude one-time-effects? I can see them selling their grounds, offices and renting it again and the like.
mdasen 8y ago
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-expects-to-become-profitable-in-2016-shares-surge-idUSKCN0VJ2J6 https://www.reuters.com/article/us-tesla-results/tesla-expec... 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.

Animats 8y ago

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 8y ago
> 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 8y ago
  That just means the convention is deceptive.
  - fgonzag 8y ago
    It's only deceptive to people who shouldn't be buying stocks based on those metrics in the first place.
  - barbegal 8y ago
    Not really. In a conventional business revenue tells you how big it is so should be reported in absolute terms. And traditionally, dividends matter to the shareholders and that is directly related to earnings per share. Profits may increase in absolute terms but earnings per share could decrease as a result of issuing more shares (also known as stock dilution).
  - Retric 8y ago
    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.

samfisher83 8y ago

http://files.shareholder.com/downloads/ABEA-4CW8X0/6239881006x0x979026/44C49236-1FC2-4FD9-80B1-495ED74E4194/TSLA_Update_Letter_2018-1Q.pdf http://files.shareholder.com/downloads/ABEA-4CW8X0/623988100... 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 8y ago
> 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 8y ago
  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 8y ago
    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.
- dx034 8y ago
  You can be very successful just producing >$80k cars. You'll never be the largest car manufacturer but you can dominate a market. I think Tesla could've done that by producing more sports cars instead of affordable cars. There's a lot of wealth in the world, enough to justify a gigafactory.
deleted 8y ago
[deleted]

Theodores 8y ago

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.

Robotbeat 8y ago
This is one thing that is strongly in Tesla's favor. A pivot to SUVs and trucks has essentially zero geopolitical/oilprice risk, unlike every other domestic automobile maker which is gambling big time that gas prices don't continue to increase. I'm not sure Ford (focusing nearly exclusively on trucks) could survive a sustained $4/gallon gas price again, let alone whatever the gas price would be if the "$300 per barrel" scenario [0] happened (even for just a few months). Gas prices are about $1/gallon higher than they were when the Model 3 was unveiled and Tesla got a huge backlog of orders. That's about $5000 in additional gas savings over the life of the vehicle (some of that in the form of residual used value). OPEC is still cutting back, and they want oil at about $80/barrel, up from the current ~$65. Gas prices arguably still haven't reached equilibrium for the current price of oil, and continued under-investment in oil capacity during the last slump could lead to significantly higher oil prices going forward, particularly if the global economy stays fairly strong. This is incredibly good for Tesla. So I think Tesla has more going for it than a lot of people give credit. Theoretically, other car makers could've switched to electric tech, too (it's fairly simple, although it takes investment), but just about the only car makers who are TRULY serious about it (versus talking about it) are in China. Certainly when compared to other domestic car makers. [0] http://www.businessinsider.com/300-oil-is-not-impossible-says-oil-hedge-fund-manager-2018-4?r=UK&IR=T http://www.businessinsider.com/300-oil-is-not-impossible-say...
- ghazak 8y ago
  Aren’t electric vehicles more at risk of the reverse, ie. a big decline in gasoline prices? They’re more costly so users usually hope to make some of it back due to lower operating costs. It’s not a huge risk though.

paulcole 8y ago

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

SirLJ 8y ago
Yep, create company after company and not one is profitable... Musk is where hype is going to die...
- njarboe 8y ago
  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 8y ago
    Just raised money for SpaceX - not profitable... maybe it will buy Tesla :-)
- dmode 8y ago
  PayPal is not profitable ?
  - SirLJ 8y ago
    Hello, Musk was newer PayPal CEO
    - fastball 8y ago
      create company Musk was definitely a co-founder of the company PayPal, so he "created" it - stop changing your claims post facto.
      - SirLJ 8y ago
        Max and Peter created the PayPal predecessors... Musk was an obstacle before the IPO and was replaced...