Tesla Q4 Another Win & Competition in the Electric Vehicles Market

Tesla Stock News - TSLA Q4 results

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

 Tesla Share News

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.

Tesla Latest News

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.

For more information, contact Ben Yeo at byeo@phillipcapital.com.au. Find out how to trade Tesla shares with POEMS, online trading division of PhillipCapital.

 

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About Benjamin Yeo

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Responsible for developing equity market solutions for PhillipCapital’s Corporate Clients, Benjamin has over 10 years experience in the Financial Services Industry and strong personal relationships with both investor and issuer clients.

Specialising in providing corporate and strategic advice to both private and public companies especially in relation to takeovers, mergers, acquisitions and divestments, venture capital, capital management, including debt and equity raisings, IPO’s and MBO’s.

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