Elon Musk vowed to sacrifice profitability in order to expand Tesla's Fleet which will benefit once Full Self-Driving is complete. This is a weak argument for further price cuts
Really appreciate the straight forward approach. I invest in FCFs not narratives and 1Q23 is very telling. From my experience inefficiencies occur any time there are two CEOs. Day to day and then the one who ultimately makes final big calls tends to create dysfunction in the leadership team.
Apr 20, 2023·edited Apr 20, 2023Liked by Motorhead
Also, given how bad the GM and FCF looked, where r you in terms of overall 2023 earnings now
Q2 and Q3 will have price cuts as well. I expect China price cuts in coming days
They probably need to control supply but looks like they don't want to because then they won't be considered as a growth company. Earnings are going down anyway, once vehicle units don't go up or go down, there is no positive and I guess that's why they are stuck with price cuts
As of now, I'm at 1.74m deliveries and 1.83m in output (huge inventory build again). My full year adj-EPS estimate is now at $2.31 vs consensus of $3.77 and GAAP EPS is at $1.79 vs consensus of $3.37. The next shoe to drop is lower output in China, which used to supply most Teslas sold in Europe, but will drop as Giga "Berlin" ramps up. In 2022, roughly 40% of China's output was exports to Europe.
I had originally thought Tesla wouldn't start burning cash until Q3, but they may well be negative FCF from Q2. Given a greater focus on FCF yields of cyclical & tech stocks, this should cause a lot of selling.
Thanks so much. I think Q1 was the best quarter Tesla will have this year. Along with more price cuts, they also face the declining output at their China factory as exports to Europe (40% of output in 2022) drop off as their German factory ramps up.
Brad don't feel obligated to read everything I wrote here, I feel like you might get tired of it and ban me. Instead I write this to expose your viewers to a wider perspective that they don't get in the venues they visit.
We as a society are way too focused on short term profits. The revenue and cash flow and margins are little tidbits that analysts like yourself like to latch on to because it's familiar. But what not familiar is what you are not able to value correctly: world-changing products with virtually unheard of TAMs like Optimus and FSD. You cite future price cuts and unknown FSD take rate and such and such that factually correct but lacking in the spirit of what made Tesla the world's biggest automaker by market cap, which was a firm belief in the mission and that good things come if a company ambitiously does good things.
By reducing margins to make the cars more affordable, Elon has proved again that he is all about the mission. This was an audacious move because it looks bad for financials, but Tesla is not a financial company, it's a company that is about implementing the dreams of many people for an EV future and other environment stuff like solar and storage. It does happen that in the long term it will also be very lucrative but that is just a secondary effect, not the goal. I think by getting a platform in everyone's home, Tesla will eventually get most of its profits from services and add-ons, at least until energy or Optimus takes off.
I appreciate the article for what it is, an analysis of the little details on a quarterly report with some look ahead at the near term future, and all that strictly from a financial perspective. As usual the effort and writing is there and so I don't think I wasted my time reading, but like I said I just wanted to share my view of the bigger picture so your readers get a little bit of both sides.
Really appreciate the straight forward approach. I invest in FCFs not narratives and 1Q23 is very telling. From my experience inefficiencies occur any time there are two CEOs. Day to day and then the one who ultimately makes final big calls tends to create dysfunction in the leadership team.
Also, given how bad the GM and FCF looked, where r you in terms of overall 2023 earnings now
Q2 and Q3 will have price cuts as well. I expect China price cuts in coming days
They probably need to control supply but looks like they don't want to because then they won't be considered as a growth company. Earnings are going down anyway, once vehicle units don't go up or go down, there is no positive and I guess that's why they are stuck with price cuts
Great write up as always. When do u expect the 10Q? (for more visibility into IRA credits)
As of now, I'm at 1.74m deliveries and 1.83m in output (huge inventory build again). My full year adj-EPS estimate is now at $2.31 vs consensus of $3.77 and GAAP EPS is at $1.79 vs consensus of $3.37. The next shoe to drop is lower output in China, which used to supply most Teslas sold in Europe, but will drop as Giga "Berlin" ramps up. In 2022, roughly 40% of China's output was exports to Europe.
I had originally thought Tesla wouldn't start burning cash until Q3, but they may well be negative FCF from Q2. Given a greater focus on FCF yields of cyclical & tech stocks, this should cause a lot of selling.
Thanks so much. I think Q1 was the best quarter Tesla will have this year. Along with more price cuts, they also face the declining output at their China factory as exports to Europe (40% of output in 2022) drop off as their German factory ramps up.
Brad don't feel obligated to read everything I wrote here, I feel like you might get tired of it and ban me. Instead I write this to expose your viewers to a wider perspective that they don't get in the venues they visit.
We as a society are way too focused on short term profits. The revenue and cash flow and margins are little tidbits that analysts like yourself like to latch on to because it's familiar. But what not familiar is what you are not able to value correctly: world-changing products with virtually unheard of TAMs like Optimus and FSD. You cite future price cuts and unknown FSD take rate and such and such that factually correct but lacking in the spirit of what made Tesla the world's biggest automaker by market cap, which was a firm belief in the mission and that good things come if a company ambitiously does good things.
By reducing margins to make the cars more affordable, Elon has proved again that he is all about the mission. This was an audacious move because it looks bad for financials, but Tesla is not a financial company, it's a company that is about implementing the dreams of many people for an EV future and other environment stuff like solar and storage. It does happen that in the long term it will also be very lucrative but that is just a secondary effect, not the goal. I think by getting a platform in everyone's home, Tesla will eventually get most of its profits from services and add-ons, at least until energy or Optimus takes off.
I appreciate the article for what it is, an analysis of the little details on a quarterly report with some look ahead at the near term future, and all that strictly from a financial perspective. As usual the effort and writing is there and so I don't think I wasted my time reading, but like I said I just wanted to share my view of the bigger picture so your readers get a little bit of both sides.