Tesla Motors death watch

[Spungo]

We already have a thread for RIM, so let's have one for Tesla. This company is an absolute train wreck, so there is a lot of money to be made by shorting this at the right time. It could be tomorrow, it could be next week, nobody knows.
google finance

Net Income (loss)
2009: (55.74m)
2010: (154.33m)
2011: (254.41m)
2012: (396.21m)
2013 Q1: 11.25m
2013 Q2: (30.50m)
The company loses more money every year.

Total Equity
2009: 65.70m
2010: 207.05m
2011: 224.04m
2012: 124.70m
2013 Q1: 1683.58m
2013 Q2: 629.43m
Equity growth is slow.

Total Liabilities
2009: 64.72m
2010: 179.03m
2011: 489.40m
2012: 989.49m
2013 Q1: 975.20m
2013 Q2: 1258.42m
Liabilities grow by leaps and bounds.

Cash from Operations (losing money)
2009: (80.83m)
2010: (127.82m)
2011: (128.03m)
2012: (266.08m)
2013 Q1: 64.08m
2013 Q2: 25.89m
Numbers in Q1 and Q2 are cumulative. Ending Q1 with 64.08m then ending Q2 with 25.89m means Q2 on its own lost 38.19m. The operations of this company lose money every year.

Cash from Borrowing (debt paid back)
2009: 25.15m
2010: 71.51m
2011: 204.01m
2012: 173.25m
2013 Q1: (14.22m)
2013 Q2: 204.03m
The company borrows more money each year.

Cash from Selling Stock (cost of share buy back)
2009: 132.32m
2010: 270.19m
2011: 241.99m
2012: 246.38m
2013 Q1: 17.90m
2013 Q2: 590.41m
Selling worthless stock is the company's main source of cash.

Price to Book
Price to book is how much something costs relative to its current value. A McDonalds restaurant might cost 500k to build, but a person might pay 1m for it because the business and its employees are a reliable source of revenue. Tesla is currently trading at 35.74x book value. One might pay an outrageous price for something that makes a lot of money, but Tesla does not. Tesla constantly loses money, sort of like owning a car. This would be equivalent to paying $536,000 for a Ford Focus that depreciates in value every year.

Debt to Equity
Debt by itself is not a bad thing. If a company finds a huge oil well, borrowing money to extract and sell the oil would be a great investment. Tesla doesn't work that way. The borrowed money is used to cover bills, much like the federal government. Tesla's debt to equity ratio is 94. Tesla's position is comparable to you owning a house that is worth 100k, but you are unemployed and have been unemployed for the last 4 years, and you owe the bank 9.4 million dollars. The people buying stock are like relatives who buy a guitar for you because they think the music career you don't yet have will be able to pay all of your debts and pay them a regular fee for letting you use their guitar. They feel that your music career is more likely to happen than you selling the guitar to buy food.

Trending vs Profits
Stock price usually follows profits. A company that is consistently profitable, like McDonalds, will have a consistently rising stock price. McDonalds was not affected at all by the housing crash because people still ate at McDonalds. Walmart was not affected because people still bought everything at Walmart. When a company's stock price doesn't line up with profits, it's very likely that the stock is overvalued or undervalued. The price can be skewed by anticipation or fear. Lockheed Martin is currently way overvalued because people bought the stock in anticipation of a war with Syria or Iran because a war would be highly profitable for that company. Tesla's stock should be in steep decline because the company has never made money, but the price is going up based on speculation. It's reasonable to believe that the stock will drop down to what it's actually worth. Tesla's current book value per share is only $5.18, and it should be trading below that because the company is not profitable. Diluted earnings per share for the last 12 months was $-1.95. If the company still runs at a loss of $1.95 per share per year in the next year, and the current book value is $5.18, then you would theoretically break even if you bought the stock for $3.23 per share today and held it for 1 year. When hype is factored in, the stock is actually trading at $186.67. That's almost 58x more than what I think it's worth. Even if my rough calculations are off by 100%, it would still be 29x too expensive. Something has got to give.

Cash Flow
A company doesn't need to make money to have positive cash flow. If I borrow $1000 from the bank, I would write that down as positive cash flow. If I borrowed $1000 and spent $800 of it on vodka, I would still say my net cash flow was +$200 after ($800) worth of operating activities., but it would be written down as $1000 of liabilities, and the minimum payments would be negative cash flow. Tesla's situation is interesting in this regard. As of June 30, net cash flow for 2013 was +544 million, meaning the company has more cash on July 1 than it did on January 1. Of that 544 million, 590 million came from issuing new shares to meet the demands of hype. They've been doing this for years. From 2009 to 2012, the number of common shares increased from 7.28 million to 114.21 million. The analogy here is similar to the federal government trying to print money to pay debts, and the value of the money only stays stable because US dollars are the world reserve currency. The more dollars or shares in circulation, the less each one is worth. In contrast to Tesla, McDonald's number of common shares dropped from 1076.7 million in 2009 to 1002.7 million in 2012; doing a share buy back makes each share worth more.
If people stop buying Tesla shares, the net change in cash would become negative and the value of each share would fall through the floor.

Oil in America
The hype around Tesla, in my opinion, is based on the idea that electric cars are the future. When gasoline hits $10/gallon, cars like Porsche and Ferrari are less appealing while Tesla cars are more appealing. The problem is that I don't think oil prices will rise in the coming years. I'm thinking oil might actually cost less in the near future. Due to technological advances, we're finding new oil wells all over America. The amount of oil being found is staggering to say the least. article. The amount of recoverable shale oil in America is actually greater than that of Saudi Arabia. If prices at the pump either decline or hold steady, people will continue to buy gasoline powered cars and Tesla will go down in history books as a company that had the right idea but the wrong timing.

2015 Q3 updates:
More cash losses! Yay!
http://www.cnbc.com/2015/11/03/tesla-stock-gyrates-on-bigger-than-expected-loss-of-58-cents.html

The company reported on Tuesday that it had a negative free cash flow of about $596 million for the three months ending September 30. That compares to the negative $565 million in the prior quarter, and the negative $312 million in the year-ago period.

That's impressive. It takes skill to lose half a billion dollars in 3 months.

 

[Juddog]

Tesla had an awesome idea; they basically got savagely attacked by the rest of the auto industry when they realized what a threat they posed.

 

[Crono]

I think they'll survive. Essentially there is enough confidence in the ideas and the company that even if they are piling up debt, they'll keep producing new models until they can make a profitable, mass market sub $30-40k electric. I thought the company would have died after the roadster, but a few years later and I think the company will stay in business for at least a decade.

It's a race to an "iPhone of electric cars", and as long as electricity is cheaper than gasoline, they can be be very successful with an electric car that's relatively affordable. They already have huge mindshare with the S, even among car enthusiasts. It's one of the highest-rated luxury cars, and not many were even predicting that any electric car would sell like that just 5 years ago.

 

[ThinClient]

Tesla had an awesome idea; they basically got savagely attacked by the rest of the auto industry when they realized what a threat they posed.

Bingo. I'm all for them. To hell with Detroit.

 

[Joe1987]

I dunno, stock is at a 52 week high. I bought in at ~$135. Will likely sell soon, have some covered calls I want to expire, then I'll sell.

Detroit and the other manufacturers need to sell a product before I'd call Tesla dead though. The Leaf is the only high volume pure electric competition so far (at least in the US)

 

[Red Storm]

Bingo. I'm all for them. To hell with Detroit.

Same.

 

[cheezy321]

I keep on seeing more and more teslas on the road here in PHX. I think I have seen 5 now. I see them quite a bit in CA.

 

[Atomic Playboy]

To hell with Detroit.

The Universe is way ahead of you on that one.

 

[Lyfer]

It doesn't take a rocket scientist to figure out how well they were going to do. There starting prices are ridiculous, we are a country with the mentality that we want things at the cheapest price even if it means putting American's out of work and outsourcing stuff to third world countries.

MURICA!

 

[Kaido]

Selling worthless stock is the company's main source of cash.

I dunno, they're on track to sell 21,000 Model S sedans this year with a 1-2 month backlog currently. Assuming the base price is $70,000 before tax rebate and that nobody goes up to the $121k full suite, that's 21k sold * 70k base price = $1,470,000,000 in revenue. So $1.4 billion in sales from just the 2013 sale of cars. I think their last profit margin was around 13%; Apple's is only a bit higher at 19%. That's still around $191 million in profit. As long as they (1) continue to sell cars, (2) at a profit, I don't see them failing unless they are horribly mis-managed, but Mr. Musk seems to be pretty good that this expensive company thing, so my vote is nah, they won't fail. I hope. Because I really want a Tesla :wub:

 

[jaedaliu]

I dunno, they're on track to sell 21,000 Model S sedans this year with a 1-2 month backlog currently. Assuming the base price is $70,000 before tax rebate and that nobody goes up to the $121k full suite, that's 21k sold * 70k base price = $1,470,000,000 in revenue. So $1.4 billion in sales from just the 2013 sale of cars. I think their last profit margin was around 13%; Apple's is only a bit higher at 19%. That's still around $191 million in profit. As long as they (1) continue to sell cars, (2) at a profit, I don't see them failing unless they are horribly mis-managed, but Mr. Musk seems to be pretty good that this expensive company thing, so my vote is nah, they won't fail. I hope. Because I really want a Tesla :wub:

I would imagine most people order the one with the biggest battery that they can. If you're spending $70k on a car, why not spent an extra $40% or whatever it is to get the big battery for better range and performance? Most people that get a car at that price aren't scraping by.

 

[PricklyPete]

As much as the numbers don't look good from a pure business perspective, the car guy in me really wants them to survive and flourish. They are building an awesome vehicle that has a lot of potential. Hope they can keep the hype (and resulting financing) in place long enough to produce cars for everyday people (which has been stated regularly as their long term goal).

I would love for my next vehicle to be a Tesla. I see them daily here in Denver.

 

[Texashiker]

If Tesla continues at its current rate of production, it will consume the worlds supply of lithium batteries in the next few years.

http://www.greencarreports.com/news...ne-double-global-demand-for-its-battery-cells

This no more cell phones, no more laptops, no more tablets,,, nothing will be left.

However, who is to say telsa is not going to create a new type of battery to fill the worlds shortage of lithium batteries?

 

[GagHalfrunt]

I see them quite a bit in CA.

California is the only place in the country with the proper density of rich tree-huggers. Everywhere else the save the Earth hippie freaks are too poor to buy over-priced electric cars. Tesla has some good ideas and a makes a good product, but they're a niche company. The cars are simply too expensive for most of their target demographic to be able to buy one.

 

[Crusty]

California is the only place in the country with the proper density of rich tree-huggers. Everywhere else the save the Earth hippie freaks are too poor to buy over-priced electric cars. Tesla has some good ideas and a makes a good product, but they're a niche company. The cars are simply too expensive for most of their target demographic to be able to buy one.

I saw 3 different Tesla's on the road yesterday here in Austin, and they're not even legally allowed to sell their cars here.

 

[Crono]

California is the only place in the country with the proper density of rich tree-huggers. Everywhere else the save the Earth hippie freaks are too poor to buy over-priced electric cars. Tesla has some good ideas and a makes a good product, but they're a niche company. The cars are simply too expensive for most of their target demographic to be able to buy one.

You're forgetting about NY.

 

[Kaido]

It doesn't take a rocket scientist to figure out how well they were going to do. There starting prices are ridiculous, we are a country with the mentality that we want things at the cheapest price even if it means putting American's out of work and outsourcing stuff to third world countries.

MURICA!

Well, 2 items there:

#1 - there's already a month or two backlog on the cars, so they're selling faster than they can make them.

#2 - they'll be coming out with a 200-mile $35k model in a few years once the battery technology gets cheaper. A $35,000 car is still a lot for most people, but when you calculate the TCO, it gets pretty reasonable - no gas, cheap electricity, lots of free charging options, minimal maintenance. So if you got a 5-year loan on $35k, you'd be looking at around $590/mo, plus around $30 to charge it up monthly, so $620 total.

If you get a basic $21k Toyota sedan or something, you're already going to be spending $350/mo on the loan, plus gas & maintenance. The average American family spends over $4,000 a year in gas, so that's another $330 a month, so for an average car spending average gas you're already at $680 a month. Right away you get a $60/mo savings by going electric instead of with a standard Toyota or Honda or something like that.

 

[ElFenix]

California is the only place in the country with the proper density of rich tree-huggers. Everywhere else the save the Earth hippie freaks are too poor to buy over-priced electric cars. Tesla has some good ideas and a makes a good product, but they're a niche company. The cars are simply too expensive for most of their target demographic to be able to buy one.

these things are all over texas.

 

[Capt Caveman]

I dunno, they're on track to sell 21,000 Model S sedans this year with a 1-2 month backlog currently. Assuming the base price is $70,000 before tax rebate and that nobody goes up to the $121k full suite, that's 21k sold * 70k base price = $1,470,000,000 in revenue. So $1.4 billion in sales from just the 2013 sale of cars. I think their last profit margin was around 13%; Apple's is only a bit higher at 19%. That's still around $191 million in profit. As long as they (1) continue to sell cars, (2) at a profit, I don't see them failing unless they are horribly mis-managed, but Mr. Musk seems to be pretty good that this expensive company thing, so my vote is nah, they won't fail. I hope. Because I really want a Tesla :wub:

OP doesn't know what he's talking about. The stock may be overvalued but Tesla will survive. Losing money in the beginning years of a start-up manufacturing/auto company is normal.

 

[Slew Foot]

Well, 2 items there:

#1 - there's already a month or two backlog on the cars, so they're selling faster than they can make them.

#2 - they'll be coming out with a 200-mile $35k model in a few years once the battery technology gets cheaper. A $35,000 car is still a lot for most people, but when you calculate the TCO, it gets pretty reasonable - no gas, cheap electricity, lots of free charging options, minimal maintenance. So if you got a 5-year loan on $35k, you'd be looking at around $590/mo, plus around $30 to charge it up monthly, so $620 total.

If you get a basic $21k Toyota sedan or something, you're already going to be spending $350/mo on the loan, plus gas & maintenance. The average American family spends over $4,000 a year in gas, so that's another $330 a month, so for an average car spending average gas you're already at $680 a month. Right away you get a $60/mo savings by going electric instead of with a standard Toyota or Honda or something like that.

lol at cheap electricity. PGE charges 30 cents a KW in CA

 

[Daverino]

Interesting that the OP decided to skip revenue, which is growing by leaps and bounds.

 

[Doppel]

Many of us called tesla dying a while ago including me and we were wrong. I have learned not to discount elon musk. The model s is a fantastic vehicle, praised by all who have driven one. I think there is plenty of future left in Tesla.

 

[BoberFett]

#2 - they'll be coming out with a 200-mile $35k model in a few years once the battery technology gets cheaper.

What makes you think batteries are going to get cheaper any time soon? Refer to Texashiker's post regarding global battery production.

 

[Joe1987]

If Tesla continues at its current rate of production, it will consume the worlds supply of lithium batteries in the next few years.

http://www.greencarreports.com/news...ne-double-global-demand-for-its-battery-cells

This no more cell phones, no more laptops, no more tablets,,, nothing will be left.

However, who is to say telsa is not going to create a new type of battery to fill the worlds shortage of lithium batteries?

http://green.autoblog.com/2013/04/30/wyoming-lithium-deposits-much-bigger-than-originally-expected/

There's more lithium to be found as well.

There's a video of a guy and his Leaf experiences in LA, one of my favorite lines from it was "Bottom line is that I've driven 35K miles in the last year and haven't paid a cent to charge my car yet." He finds outlets and other places to charge his Leaf at work for free.

 

[Doppel]

lol at cheap electricity. PGE charges 30 cents a KW in CA

National average is about a third of that. For the rest of us an electric car is like driving a car that gets around 100mpg when gas is $4/gallon.