Tesla Motors: Not as Good as It Looks?
JPMorgan’s Ryan Brinkman and team contend that Tesla Motors’ (TSLA) earnings weren’t as good as they looked as they maintain their Underweight rating on the stock. They explain why:Previously at Stocks to Watch: "Tesla Motors: It Beats! (We Think)"
Tesla reported 3Q16 earnings yesterday that at first glance appear to represent a very strong beat to consensus and JPM estimates across all metrics. However, we see one reason why the 3Q16 earnings report is not as good as it looks, and another reason why it might not be as good as it looks.
Firstly, on why it is not as good as it looks: Tesla reported a +$139 mn benefit from the sale of Zero Emission Vehicle (or “ZEV”) credits, vs. our model which had forecast $25 mn and vs. guidance for a negligible amount. We estimate this alone helped EPS +$0.73 vs. our model, meaning that what appears to be a large +$1.13 beat to JPM was more like a +$0.40 beat — so still a beat, but not as strong.
Secondly, on why it might not be as good as it looks: We cannot help but feel that there are some comparability issues relative to the firm’s reported revenue, gross profit, and net income relative to even those analyst estimates included in consensus (i.e., those who had attempted to account for a complicated change in accounting methodology prompted in part by the company’s recent termination of residual value guarantees on vehicles sold in the US). For instance, revenue tracked $2,298 mn vs. JPM $1,914 mn and consensus $1,902 mn, even though the approximate number of deliveries in the quarter was known ahead of time — we feel the difference clearly relates more to the change in accounting than it does to ASPs.
Because of these comparability issues, we are choosing to focus more on free cash flow performance in the quarter, as cash flows are unaffected by the change in accounting....MORE
Meanwhile in another corner of the Dow Jones Empire, MarketWatch says:
And after nemesis, catharsis.
But let's not get ahead of ourselves and start catharting just yet.
Which gives us time to check our motivations:
Insane Woman (La Monomane de l'envie) by Théodore Géricault, 1822
Musée des Beaux-Arts de Lyon
Nah, not envy, it's just money.