Tesla Q4 Another Win & Competition in the Electric Vehicles Market
Tesla turning another profit + competition in the electric vehicles market. Ben Yeo, Head of Equity Capital Markets, appeared on Your Money Interview (1st February 2019)
Tesla (NASDAQ: TSLA) - Long Term Viability
- This is Tesla's fourth profitable quarter overall since it went public in 2010, and the first time Tesla has reported back-to-back profitable results.
- Elon Musk said that last year was the most challenging year but also the most successful year for Tesla
- Tesla earnings were hit on a number of fronts
- Decline in revenue from the sale of regulatory credits;
- Higher import duties on parts from China;
- Lower prices on the Model S and Model X in China; and
- Lower-priced midrange version of the Model 3.
- Tesla generated strong free cash flow, which should ease balance sheet-related concerns, which is the biggest positive from this release.
- EPS $1.93 vs $2.20 below expectations
- Revenue slightly better than expected as $7.23B vs. $7.08B
- Cash on hand has increased by over $718m to $3.7B which appears adequate to pay off the $920m convertible bonds ($359.87) due 1 March 2019.
- 400,000 vehicles sold was better than expected and Elon Musk said that he is expecting a 50% increase in sales over the next 12 months
Were the job cuts factored into the Q4 results
- Tesla reduced full-time employee headcount by approximately 7% however this has not fed through to the Q4 results in Tesla yet.
Elon Musk effect
- Elon Musk is what makes Tesla and with a new and younger CFO replacing the outgoing CFO Deepak Ahuja it will be interesting to see the market response over the next 12 months.
- Controversial management style especially social media and Elon is very defensive towards any critic of Tesla, understandably so given it is his company.
- 31 analysts that cover Tesla Inc. on the NASDAQ, 10 Sell, 10, Hold and 11 Buy so diverse across the analysts and no consensus.
- “Trumpesque” style of leadership makes it difficult to forecast Elon Musk’s next move which creates an interesting dynamic in the markets.
Telsa’s next move and competitors
- Over the next two years Tesla will still be THE Electric Vehicle
- Tesla’s product line is starting to get stale so Telsa will need to either develop additional models across the price spectrum or focus on building additional infrastructure to support their vehicles.
- Tesla does however face new competition from the likes of Mercedes-Benz and BMW, Audi, Porsche and Jaguar following VW huge investment into EV.
- VW due to dieselgate committed $50B in investment in EV and have built the I.D sub-brand as well as EV-exclusive new modular platform.
- Other mainstream manufacturers creating competitors to Tesla vehicles:
- Jaguar I-Pace direct competitor to Telsa Model X (10% cheaper);
- Audi e-Tron Sportback SUV competitor to Telsa Model X;
- Audi e-Tron Gran Turismo competitor to Telsa Model S;
- Porsche Taycan competitor to Telsa Model S;
- Porsche Mission E Cross Turismo competitor to Telsa Model X;
- BMW i4 sedan competitor to Telsa Model 3;
- Mercedes Benze EQA competitor to Telsa Model 3;
- Mercedes Benz EQC competitor to Telsa Model X;
- Polestar 2 EV competitor to Telsa Model 3;
- Hyundai Kona Elexctric competitor to Telsa Model 3;
- Kia Niro EV competitor to Telsa Model 3; and
- Renault ZOE competitor to Telsa Model 3.
Sales in Australia
- Australian market difficult for Electric Vehicles given the limited distance they can run between charges (approx. 300km).
- The hybrid gas/Electric vehicles are more successful in Australia than the full electric vehicle and therefore until more infrastructure is built to support EV’s the Australian market will continue to face challenges for Tesla.
This publication has been prepared solely for the information of the particular person to whom it was supplied by Phillip Capital Limited AFSL 246827 and/or Phillip Capital Trading Pty Ltd AFSL 246796 (together “PhillipCapital”).
This publication contains general securities advice. In preparing the advice, PhillipCapital has not taken into account the investment objectives, financial situation and particular needs of any particular person. Before making an investment decision on the basis of this advice, you need to consider, with or without the assistance of a securities adviser, whether the advice in this publication is appropriate in light of your particular investment needs, objectives and financial situation. PhillipCapital and its associates within the meaning of the Corporations Act may hold securities in the companies referred to in this publication. PhillipCapital believes that the advice and information herein is accurate and reliable, but no warranties of accuracy, reliability or completeness are given (except insofar as liability under any statute cannot be excluded). No responsibility for any errors or omissions or any negligence is accepted by PhillipCapital or any of its directors, employees or agents. This publication must not be distributed to retail investors outside of Australia.
It is recommended that you seek independent advice and read the relevant Product Disclosure Statement before making a decision in relation to any investment. Any advice contained in this communication is general and has not taken into account the investment objectives, financial situation and particular needs of any particular person.