Tesla: Livin’ in my own little world

Tesla
Recharge, please, © Tesla

This or a similar sentiment could describe in a nutshell the content of the tweets and comments by Elon Musk, the charismatic CEO of Tesla (Nasdaq: TSLA). Reality is a bit of a world apart. In the fourth quarter of 2017, Tesla lost around USD 675 million despite strong growth in revenue to USD 3.3 billion. The average share loss was either USD 4.01 based on GAAP, which I prefer, or USD 3.04 per share based on non-GAAP.

Losses should be seen in relation to the extraordinary income of around USD 180 million from the sale of zero-emission vehicle credits, tax credits tied to an electric car quota in the United States. Similarly, financial liquidity leaves much room for interpretation. The last quarter had cash flow in the negative by as little as USD 277 million. This figure, however, includes the USD 180 million in credit sales and customer deposits for future models. The latter range from prepayments of between USD 50,000 and USD 150,000 for the roadster to USD 20,000 for a semitruck to the amounts deposited for the company’s flagship vehicles, Model S and Model X.

The delay in Model 3 production leads me to believe that the first quarter of 2018 will see the company again incurring high losses, equal to what had been posted in the previous one, or even worse. Zero-emission credit sales should not be overlooked as a factor in all of this. Likewise, some critics suspect that Tesla will first serve customers who were willing to fork over USD 45,000 to USD 60,000 for a car. Preferring those who spend more on extras over the people who pay only the USD 35,000 list price would certainly boost revenue. But some people who made a deposit might request their money back as soon as they have to wait for more than a year and competitors start to offer models that look just as good as a Tesla car, may be much less expensive and have a higher range.

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Risk warning

Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they may experience high stock volatility. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the content of this article reflects the author’s opinion only. This article focuses on mid-term and long-term prospects and not short-term profit. The author may own shares in any of the companies mentioned in it.

Written by Sven Jösting, February 2018

1 thought on “Tesla: Livin’ in my own little world

  1. In a few years i speculate these words above written by Sven Jösting will be understood as a part of the provocative truth hiding era where established media is challenged. Itś messy out there. For now its everyones guess to freely speculate as they wish, I choose to understand that there is no competition for Tesla and there for the win is a walk in the park. You may call that a bubble if you want, but the truth is simpler than you think.

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