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This is what seems to not be understood by a lot of investors and people commenting on investments. Amazon could have turned a profit years earlier if they want

This is what seems to not be understood by a lot of investors and people commenting on investments. Amazon could have turned a profit years earlier if they wanted to. Instead it made more sense to continue spending all of their money on expansion and R&D. It's the same with Tesla. They are selling a shit ton of cars at good markup. If they wanted a profit, they could have one. They just don't want one right now.

notfromhere 7y ago
Yeah, no. There's a fundamental difference between Tesla and Amazon in terms of their profit potential. Super misleading to say that Tesla 'just doesn't want to profit rn'
roenxi 7y ago
Not understanding is one option; not trusting is another. It is presumably quite easy to shuffle operating expenses into the earnings report as capital expenses if a company really wants to, and the 'development' in R&D can hide a bunch of things. I'm happy to be wrong, but 'Oh, they can make money the minute they choose to, but at the moment they are choosing not to' is a concerning argument. Apple might have gone from "give the money back to shareholders" -> most profitable company in the world -> broke by the time Amazon turns a serious profit for its shareholders. It is yet to be disproven beyond all doubt that Amazon is competitive by virtue of having abysmal profit margins.
RivieraKid 7y ago
Tesla can't achieve profit even after extreme cuts across the board, including capex. Their capex minus D&A has been declining for a while and is negative. https://twitter.com/TESLAcharts/status/1123186053811032064?s=19 https://twitter.com/TESLAcharts/status/1123186053811032064?s...
- SahAssar 7y ago
  Is a tweet tagged with `$TSLAQ` really a good source?
navigatesol 7y ago
>It's the same with Tesla. Can you show you get this from? I see it repeated on these boards, ad nauseum, that Tesla is spending their "profits" on R&D and building infrastructure. But in reality, you can see from their financial statements that Tesla's CAPEX spending is embarrassingly small for an auto company, and shrinking. They spent $2BB in 2018 and are on pace to spend half that in 2019. As a sibling comments states, their spending doesn't even cover depreciation of assets. For comparison, Ford spent almost $10BB on CAPEX last year, GM spent $10.8BB, VW spent over $12BB. >If they wanted a profit, they could have one. They just don't want one right now. You can't honestly believe this, can you? What are they waiting for? Why do they keep raising funds? Where is the money going?
- AgloeDreams 7y ago
  Exactly. This was true of Tesla back when they made only the S & X and blew their R&D dollars on Model 3/AP/Batteries but the Model 3's margins are incredibly bad with sky-high ops costs while they are digging a hole like a car stuck in mud. They are promising FSD (to paid customers), Semi & Roadster (To reserved customers), and a Model Y that will surely eat into Model X sales, meanwhile they are clearly reducing spend in these departments. Without a Model S/X Refresh (That Elon is repeatedly saying will never ever happen) or dramatic reduction in BOM / assembly (which, maybe the Model Y is supposed to bring? maybe? Pigs can fly?) There is no route to profitability.
  - navigatesol 7y ago
    I agree, but want to emphasize that it's not necessarily sinister: they simply have no money to do the things they've promised. That's best case. Worst case is sinister.
    - AgloeDreams 7y ago
      I agree, for the most part, FSD seems simply outlandish and by this point they already had promised coast-to-coast. There really wasn't any real path to their promises.
- 7y ago
AgloeDreams 7y ago
Tesla differs because they no-longer make reasonable profits on the Model 3 and the better build and more cohesive design of the 3 has eaten the S & X sales.
qroshan 7y ago
Huh? Clearly you are clueless about Tesla's financials. Tesla's gross margin is a piddly 18%. They also need money to build and maintain service centers, super charger networks (all needed because Tesla doesn't have a dealer network or a gas network). Then there is debt servicing, working capital, maintaining their plants, inflationary effects of labor wage (as their labor pool gain experience). All these are not discretionary R&D. Tesla is fundamentally unprofitable and Musk suddenly has realized this and hence the major pivot to FSD (which is about 15 years away)
mbesto 7y ago
No, it's not. Not at all. Cash flow for each of the companies is VERY different. TESLA: https://www.marketwatch.com/investing/stock/tsla/financials/cash-flow https://www.marketwatch.com/investing/stock/tsla/financials/... Amazon: https://www.marketwatch.com/investing/stock/amzn/financials/cash-flow https://www.marketwatch.com/investing/stock/amzn/financials/...

notfromhere 7y ago

Yeah, no. There's a fundamental difference between Tesla and Amazon in terms of their profit potential. Super misleading to say that Tesla 'just doesn't want to profit rn'

roenxi 7y ago

Not understanding is one option; not trusting is another. It is presumably quite easy to shuffle operating expenses into the earnings report as capital expenses if a company really wants to, and the 'development' in R&D can hide a bunch of things. I'm happy to be wrong, but 'Oh, they can make money the minute they choose to, but at the moment they are choosing not to' is a concerning argument. Apple might have gone from "give the money back to shareholders" -> most profitable company in the world -> broke by the time Amazon turns a serious profit for its shareholders. It is yet to be disproven beyond all doubt that Amazon is competitive by virtue of having abysmal profit margins.

RivieraKid 7y ago

Tesla can't achieve profit even after extreme cuts across the board, including capex. Their capex minus D&A has been declining for a while and is negative. https://twitter.com/TESLAcharts/status/1123186053811032064?s=19 https://twitter.com/TESLAcharts/status/1123186053811032064?s...

SahAssar 7y ago
Is a tweet tagged with `$TSLAQ` really a good source?

navigatesol 7y ago

>It's the same with Tesla. Can you show you get this from? I see it repeated on these boards, ad nauseum, that Tesla is spending their "profits" on R&D and building infrastructure. But in reality, you can see from their financial statements that Tesla's CAPEX spending is embarrassingly small for an auto company, and shrinking. They spent $2BB in 2018 and are on pace to spend half that in 2019. As a sibling comments states, their spending doesn't even cover depreciation of assets. For comparison, Ford spent almost $10BB on CAPEX last year, GM spent $10.8BB, VW spent over $12BB. >If they wanted a profit, they could have one. They just don't want one right now. You can't honestly believe this, can you? What are they waiting for? Why do they keep raising funds? Where is the money going?

AgloeDreams 7y ago
Exactly. This was true of Tesla back when they made only the S & X and blew their R&D dollars on Model 3/AP/Batteries but the Model 3's margins are incredibly bad with sky-high ops costs while they are digging a hole like a car stuck in mud. They are promising FSD (to paid customers), Semi & Roadster (To reserved customers), and a Model Y that will surely eat into Model X sales, meanwhile they are clearly reducing spend in these departments. Without a Model S/X Refresh (That Elon is repeatedly saying will never ever happen) or dramatic reduction in BOM / assembly (which, maybe the Model Y is supposed to bring? maybe? Pigs can fly?) There is no route to profitability.
- navigatesol 7y ago
  I agree, but want to emphasize that it's not necessarily sinister: they simply have no money to do the things they've promised. That's best case. Worst case is sinister.
  - AgloeDreams 7y ago
    I agree, for the most part, FSD seems simply outlandish and by this point they already had promised coast-to-coast. There really wasn't any real path to their promises.
7y ago

AgloeDreams 7y ago

Tesla differs because they no-longer make reasonable profits on the Model 3 and the better build and more cohesive design of the 3 has eaten the S & X sales.

qroshan 7y ago

Huh? Clearly you are clueless about Tesla's financials. Tesla's gross margin is a piddly 18%. They also need money to build and maintain service centers, super charger networks (all needed because Tesla doesn't have a dealer network or a gas network). Then there is debt servicing, working capital, maintaining their plants, inflationary effects of labor wage (as their labor pool gain experience). All these are not discretionary R&D. Tesla is fundamentally unprofitable and Musk suddenly has realized this and hence the major pivot to FSD (which is about 15 years away)

mbesto 7y ago

No, it's not. Not at all. Cash flow for each of the companies is VERY different. TESLA: https://www.marketwatch.com/investing/stock/tsla/financials/cash-flow https://www.marketwatch.com/investing/stock/tsla/financials/... Amazon: https://www.marketwatch.com/investing/stock/amzn/financials/cash-flow https://www.marketwatch.com/investing/stock/amzn/financials/...