Thursday, August 3, 2017

Yesterday's Enthusiasm For Tesla May Have Been A Bit Much (TSLA)

There are a lot of  folks commenting on the numbers and the conference call and we'll be back with more but in the interim here's one you might not come across on your own.

The stock traded as high as $356.70 in yesterday's after-hours action—settling at $350.02 up $24.13, and is still exuberant in today's early pre-market—$348.75, up $22.86 (7.01%).

From LearnBonds:

Tesla Inc Is a $7 Billion Cash Loser
Tesla Inc (NASDAQ: TSLA) burned more than $1 billion in cash in the three months through June. That number, contained in an earnings report published on Thursday, actually seems to have impressed Wall Street. With the Model 3 on the way, investors are hoping that Elon Musk can finally make his EV maker profitable. Others really aren’t so sure.

The second quarter’s record cash burn brings the total cost to investors to $7 billion since Tesla began public operations. That’s an average of about $1 billion per year and accelerating.
At the end of June the firm had $3 billion in cash on hand. That may be enough, depending on the initial Model 3 margins, to get it through the end of the year. Tesla can’t afford to drop below $1 billion or so in cash without investors getting very nervous, however.

Tesla has a real cash problem
The $3 billion that CFO Deepack Ahuja counts as cash on hand comes from one of two sources: investors and loans. Since it started public operations, the firm has taken about $10 billion from these two sources. It has spent about $7 billion in the seven years since. Cash raising and cash spending have both grown with car output.
Since its inception Tesla Inc (NASDAQ: TSLA) has had an insatiable need for funding. Of the $7 billion it has spent, about $6 billion ended up in capital expenditure. Another $1 billion was lost in operating expenses. Both of these are, of course, investments in the future of the company.
Skeptics, however, don’t think Tesla stock has much of a future. At least not in terms of growing stock value. They don’t see the firm’s margin promises meeting guidance goals. On top of that they think that the firm’s unbridled expansion goals will hurt cash flow for quite a while going forward.

Tesla is selling off its assets
In order to arrest the cash burn, Tesla has begun to sell off some of its assets. Zero Emissions Vehicle credits which the firm gets from states like California and others were sold during the quarter. The firm made approximately $100 million from selling these credits, a cushion for it’s cash burn during the period....

I put the jump in that spot in order to make the comment that the ZEV credits were made to be sold, that's why they are transferable, so characterizing TSLA's actions as 'selling assets', while true, is a bit of spin. The rest of the piece is pretty sold though and worth the read, should one be so inclined.