Tesla Model 3 deliveries beat Wall Street targets, shares up 7% | Hacker News Reader

Tesla Model 3 deliveries beat Wall Street targets, shares up 7%

finance.yahoo.com

185 pointsjayess71 comments

Amazing. The Tesla haters were going to town on them all quarter, claiming bankruptcy was imminent and there was "no demand".

Now they've delivered more cars than any other quarter in their history.

What's amazing is the power of their message. There is just too much money to gain by Tesla competitors and investors who bet against Tesla. All the negative headlines going into this quarter results had little to no substance, but were louder than ever.

I'd hardly say 3 VPs leaving in a week says nothing of substance whatsoever.

what's new about this? They'v always had high levels of turnover. Their head of production left right as model 3 was in the midst of production hell.

Have we seen 3 VPs leave in such rapid succession especially after what was supposedly an amazing quarter ?

Tesla isn't some startup any more. They've been around long enough to not warrant this level of chaos.

Eeeeeh there's always something new. At this point unless it's legal trouble I don't pay attention to any negative article about Tesla -or any article in general-. I just look at the quarter numbers.

Will you be looking at Q2 and Q3 earnings?

Yes every quarter I take a peek.

exactly.

It's clear now that an avalanche of electric vehicles are on the way. These VP's are in very high demand, not unlike star athletes on the championship team. They are leaving now because they know that with this quarter most of the major issues (other than battery supply) have been taken care of. Counter intuitively, perhaps, it's a good sign for Tesla. Next man up.

People routinely change jobs in the Valley. I bet if you look closely 3 exec would have left Google / Apple / FB this week as well.

Before any VP left, the negativity train was on full steam. In fact, the delivery numbers are the focus because all estimates predicted Tesla was going to miss them.

Check this for example.

https://www.reuters.com/article/us-tesla-deliveries/tesla-fa...

or this:

https://qz.com/1590939/teslas-first-quarter-auto-deliveries-...

They have lots of turn over. Common in tech and with low jobless rate, and it's an extremely demanding job. Other auto companies are getting rid of their CEO

Good point - it shows that those betting against tesla on the short side have some SERIOUS connections and clout.

So who are they?

Koch money and texan hedge funds maybe, who knows. It would be interesting to see when the 13F comes out.

Of course they delivered more cars.

The Model 3 is substantially cheaper than the S/X models which means you get more volume with lower margins. And we are seeing quarter by quarter a drop in the ARPU as the S/X models are being cannibalised by the Model 3.

It's amazing that Musk has twisted the narrative to be all about deliveries instead of profitability. But ultimately unless they can dramatically reign in costs it will be their downfall.

With their deep discounts this quarter, Tesla is selling a dollar for ninety cents and will suffer massive losses. US Model 3 demand peaked in 2018, and Europe is down in Q2 (especially considering the two month sales window in Q1).

If you are a typical Tesla hater then you have been making mistaken predictions every quarter for the last ten years.

s/a typical Tesla hater/Elon Musk/g

I like how any criticism what so ever of Tesla/Musk results in comments like this.

How about addressing my points. Specifically focusing on profitability and their declining ARPU.

Of course they delivered more cars! Probably because TM3 is light years ahead of anything else on the market, EV or otherwise.

One thing I love about Tesla is their plan was always all about the Model 3 (and eventually Y). They didn’t relegate their best technology into S/X and hobble the 3. They put everything they had into TM3 to make it the pinnacle of what they could accomplish and as forward thinking as possible. It’s an absolute generational leap which I think will sell very strongly for a decade. All the while they will continue to work on cost efficiency, margins, and scale, while delivering a constant stream of software and hardware updates to the growing fleet.

The next big refresh of S/X will drive them forward with their newest battery tech, powered by their Maxwell acquisition, and motor, suspension, and most notably I would assume materials improvements which will re-differentiate S/X from the 3 and pull more buyers up to that level.

But TM3P is just so incredibly compelling I’m not at all surprised a Tesla buyers at the $60k+ price point would go with that over the S.

I think we will see in Q3/Q4 that Tesla does not need a $60k ASP in order to be profitable. Part of that of course will be buoyed by credits and rebates which is an important part of their overall strategy. Legacy carmakers will pay Tesla billions to cover their ICE pollution cost.

I expect some of the orders were people wanting to get their car before the federal tax credit phased out entirely. (I thought about it, but couldn't convince myself to buy a very expensive car with no access to service manuals.)

Hopefully they can keep selling cars as fast as they can make them even without the credit.

It halved again (-$1875) where it will stay for another 6 months.

FYI on the service manuals. The service manuals are out there on the internet if you look.

It’s very likely Tesla lost money in Q2 whist pushing Elon’s sales narrative. I expect retained earnings to soon exceed -$7B and another capital raise in 2020. Demand in existing markets, like the US and Europe, is down from 2018 and sales are being driven by heavy discounts this quarter, including the SR+.

I normally try to stay out of Tesla discussions on HN, and I've had more than one get quite toxic in the past so I'm writing this from a throwaway, but in what world is demand down from 2018 for tesla?

According to this release, they still have more orders than deliveries which means they are still taking more orders than they can produce and deliver right now, this quarter had a record setting number of deliveries for the company, and i'm not sure what other markets they are currently delivering to in huge numbers other than the US and Europe (The UK just recently started getting deliveries, and I doubt a large portion of Q2's deliveries was from the UK, but I fully admit I could be way off base there).

There also aren't really any "discounts" they are offering, especially not on the SR+. I just helped a friend go through the process of picking one out, and he waited until near the end of the quarter hoping there would be discounts, but there weren't any, even for the few inventory cars that were available (Tesla's website shows literally 0 inventory cars within 200 miles of me in Florida right now...) In fact over the course of Q2 they INCREASED the price of the Model 3 (SR+ included) by at least $400 in the US.

I can't speak to their financials at all, for all I know Tesla is losing money at crazy speeds, but demand seems to be there just fine, still over what they can produce, and they sure as hell aren't discounting any car that my friend or I was able to buy.

If you answer nothing else, please at least answer where you got the idea that they are heavily discounting anything at the company, ESPECIALLY the SR+ Model 3? Because that seems almost entirely made up and 100% against literally everything I can see myself. Unless you are somehow counting the lower price of their "refresh" Model X and S that they announced march 1st, which seems to be literally the only time prices have gone down for their lineup over the past quarter.

This comment is hilarious. Last quarter the narrative was Tesla was doomed because there was no demand. This quarter the narrative is that all demand is because of heavy discounts. Last year the narrative was that Tesla was doomed because tax credits will expire. I am still waiting for that doom moment for the last 10 years.

Ive been bearish on the stock since the $7500 credit expired. However, this weekend, the stars aligned, and I pulled the trigger on a Model 3. It’s nothing less than amazing (panel gap issues aside). I now understand why Tesla has so many fans. They’re light years ahead of the competition.

Even bob lutz gave them praise and said there is no panel gap issue

I’ve got a model 3 which has panel gap issues. That’s my data point.

Very curious to learn whether they are cash flow positive this quarter, and whether/how much gross margins went up.

If so, and demand exceeded deliveries, could be sailing into blue skies.

My inner cynist asks:

So when a company beats whatever targets set by analysts, the stock goes up. What happens if analysts deliberately set targets that they believe the company would have slim chance of achieving? What if only some (arguably optimistic) analysts set a high target which the pessimists act on?

I think it's likely I have some fundamental misunderstandings on how "targets" work in general, but I can't help but feel that "all Tesla news can and will be interpreted as a weakness"...

Then they wouldn’t be good analysts and people wouldn’t give a sentient fuck about them.

There’s a big market for the services of analysts who hit close to the mark. The size of that market exceeds the size of the market for analysts who miss, intentionally or otherwise.

You may see one bank's analysts do this, but others should balance them out. If one bank's analysts are routinely off every quarter, no one will listen.

All the analysts could conspire to set impossible targets, but the only way to profit would be considered illegal. For this reason bank's have a Chinese wall between analysts and traders.

On a similar topic, I think it's common to see CEOs try to mislead analysts into lowering their targets. I believe this happened with Apple for a long time, but to the same effect - analysts stopped listening to Cook's guidance.

It's somewhat odd that the stock is benchmarked against conservative analyst estimates, instead of against the predictions of the company's own CEO:

https://twitter.com/elonmusk/status/1098013283372589056

Any Tesla cheerleaders willing to bet that Tesla will build ~340k cars in 2H2019? Or is this another "LOL, nothing that Musk says matters" moment?

He said that Tesla will be able to build 500k cars per year by the end of the year. It absolutely doesn’t mean that they will build 500k cars this year. Btw his predictions of ~400k deliveries for the year wouldn’t be that far off if they continue to deliver ~100k cars per quarter like in the current quarter.

In my opinion hitting the FY19 numbers will depend on getting production running in Shanghai. I think they’ll need 20k cars Made in China to get solidly into 360k+ territory.

Currently lines will make ~1,000 per day. The Shanghai line will be the next big leg up in volume. When it turns on will determine the year end volume.

Oh, he has said all sorts of things, e.g. 420k - 600k: https://www.livemint.com/companies/people/elon-musk-s-new-fo...

YTD, they delivered 160k, so it would take 120k a quarter to get them to 400k cars in 2019, or 130k to get them to 420k cars. I'll take the under.

They're almost certainly still losing money, however.

Will they ever not "lose money" like the Amazon strat?

I bought AMZN stock in 1996. Rode it up to $420 ($60 at today's prices), then back down to $14. In 2004, it was around $55. Quarter after quarter, AMZN was reporting massive losses and massive borrowing. Debt climbed to $2BB or thereabouts. I was sitting on a modest profit, and I lost faith and sold.

It turns out that the massive losses and debt were because AMZN was building a monster company. Building a monster, capital-intensive company, and bringing it up fast, requires huge debt.

The question at this point in TSLA's life is the growth rate. At the time I sold, AMZN's revenue were also growing at a huge rate, 40-50% annually.

Write TSLA off if you want, but I've seen this movie before and those who invest for the long haul are going to be very well rewarded.

Amazon was almost always cash flow positive. Debts are not losses.

That’s Amazon’s story and thousands of others that failed. Trying to paint a parallel between Tesla and Amazon based solely on they both had losses for a certain period is foolish. You’d need a lot more similarities to make the comparison useful.

His argument is not that Tesla is like Amazon because they both had losses.

His argument is that Tesla's losses can be explained by investment in the future, just like Amazon invested in the future while half of wall street was telling them to make a profit.

Tesla is growing revenue 50% YoY for the last decade.

In Q2/2019 they delivered over 2x cars than in Q2/2018.

If you can find a single company in the history of capitalism that grew that fast in a capital heavy manufacturing business then let me know.

Tesla is currently building a giant factory in China (at record-breaking speed). That requires a lot of money.

When they start delivering cars from that factory sometime in Q1/Q2 2020, their profitability will skyrocket because they'll flip from "lots of expenses, zero revenue" to "no expense, lots of revenue".

This has happened 3 times in Tesla's history when Tesla bounced from heavy losses to profit.

First when they scaled production of Model S and before they started investing in design and manufacturing of Model X. Then after they scaled production of Model X and before they started investing in design in manufacturing of Model 3. Then when they scaled production of Model 3 and before they started Model Y / european expansion / china factory.

If you can find a single company in the history of capitalism that grew that fast in a capital heavy manufacturing business then let me know.

Ford and Toyota both grew faster than that...Hyundai too. Also GM (the original one). And Fiat. and Tata Motors... Actually, most of the big names in the automotive world grew faster than Tesla. They just didn't spend a lot of time or money constantly telling people about it because growth is irrelevant if you can't convert the growth into profits. It's easy to grow big losing money. It's much harder to grow big profitability.

Outside of automotive? Apple went from nearly dead to one of the world's biggest companies in about a decade. Back in the day, the railroad and gasoline companies grew at literally exponential rates. During the shale oil boom, some companies became billionaires overnight.

That's not how finances or accounting work. A big factory costs lots of money to run. You have to pay for the electricity to run everything, the workers, the parts and supplies to make the cars. And you only get the revenue if you can actually sell the cars that you make. That's a big question mark in a Chinese market that has transitioned away from demanding American luxury goods.

This has happened 3 times in Tesla's history when Tesla bounced from heavy losses to profit.

In the financial world, we call this financial engineering. It means that you're pushing expenses or revenue into one financial period to make another financial period look better. Usually, if you know you have a bad quarter, you put as many expenses as you can into that quarter so that you can goose the numbers for your remaining quarters. Tesla openly acknowledges doing this, especially with regards to car deliveries. It's one of the reasons why their CFO left and they keep losing executives.

You took the wrong lesson from Amazon. Amazon was always making money (and profits) from its core business; it was simply reinvesting its profits in expanding its business. IOW, it's growth was self-funded by revenue.

Tesla has yet to manage the profitability part. Its growth is funded almost entirely by debt and capital raises, which eventually run out.

Despite heavy discounting, introduction to new markets and introduction of lower cost variants, unit sales declined ~9% from 2018H2 to 2019H1.

See what you can do when you're not picking stupid online fights?

A general observation/question related to this style of headline we see here: “[...] beats [analysts] target”

Why do we write like that? Wouldn’t it make more sense to write “[analysts] misses [...] target”? It feels to me like writing “Weather rains more and beats meteorologists’ expectations” when “Meteorologists underestimates rainfall” would be more true.

I'm trying hard to find a flaw in this argument but I can't. Good point.

I think (I'm winging it here), it's because the market acts on the analysts predictions. The market turns the analysts predictions into expectations and acts on them.

That’s the first argument I thought of, but people make plans based on the weather forecast too.

"X beats Y's target" makes sense to me due to the nature of the stock market, and how expectations are "baked into" the share price.

Quarterly earnings are all about performance relative to expectation, while it is accurate to say that the analysts are wrong in this instance, the market gives so much "trust" to analysts that we expect their targets to be expressed in good faith (I sense an SEC violation otherwise), so when a company beats expectations we view that as a decent proxy for performance.

Because you want the most salient piece of information at the start.

Otherwise, the front page of a financial site would look like this:

  * Analysts miss target regarding Tesla
  * Analysts are optimistic about Q2 returns for Boeing
  * Analysts etc.

Maybe it should look like that.

Nothing wrong with that, but it won't happen when analysts are the ones writing most of the material for those financial sites... of course they're going to claim Tesla "beat expectations" rather than "analysts underestimate Tesla"

Here Tesla is the active agent, whereas the weatherman is the active agent in that scenario because rain is 'dumb' compared to a company. One wouldn't write 'the target avoided being hit by the archer' in a more hyperbolic example. Not that the other way around is wrong per say, just that the emphasis changes.

This is the correct answer.

Tesla is "dumb weather" in this scenario, it's not building cars to chase analyst targets and then being pleased when it hits them, it's building and shipping cars - as many as it can - regardless of what analysts say.

Analysts are trying to predict how many cars Tesla can build, and if they understand the company really well, their prediction will be accurate. With this result, you haven't learned much about Tesla, but you have learned that the analysts did not predict Tesla very well - so they don't understand it very well, and their reports might be wrong in the same way for other companies.

When the Patriots[1] win a game where they are the underdogs[2], does the Boston Herald[2] headline read 'NFL analysts fail to predict outcome of football game'?

[1]A team of people, trying to create as many points as possible, who don't give a damn what the analysts are saying. When they win, are we learning about the Patriots or the talking heads (who probably haven't changed much in the past week)?

[2]A guy can dream.

[3]Sportsbook digest, if that is a publication, might have that headline.

Would the headline read "Patriots deliver more touchdowns than analyst targets, bets up 7%"?

Do people talk about "targets" rather than "predictions" or "odds" in American Football analysis? "We set a target of X game wins for the Patriots this season". "Patriots beat analyst targets".

No, it would say "Patriots beat Otherteam!", "Patriots win championship!". Analysts wouldn't get a mention. Phrasing it like Tesla is a team playing against Wall Street analysts is a bit weird, now that commentor mentions it.

If you see companies as a force-of-nature that can only be marginally influenced by humans, then you're right that the only variable is the analyst's prediction accuracy.

But if you see companies as organizations made up of humans, that are capable of both overperforming and underperforming, then you have multiple variables. An analyst could provide an estimate for future-sales, and this estimate could be the best possible estimate given the information known at the time. And the estimate could still be wrong because the company's leadership/workers succeeded in turning things around.

TLDR: If you believe in free-will, then it's possible for someone to beat highly-accurate 3rd party estimates. If you don't believe in free-will, then any mis-estimates are purely due to analyst error

TLDR: If you believe in free-will, then it's possible for someone to beat highly-accurate 3rd party estimates.

How can you call them "highly-accurate" if they aren't accurate? Yes they can be "best available, given the information known", but we're talking about predicting the future - it's impossible to have all the information; if your prediction is wrong, you don't get to call it "accurate".

If you don't believe in free-will, then any mis-estimates are purely due to analyst error

That doesn't make it analyst /error/. It tells you the analysts' understanding of Tesla as is not as good as they thought. If they had predicted the result spot-on, they would be excellent analysts working with excellent information. They didn't, so now you know one or both of those is not excellent, or both, or they made errors.

If you see companies as a force-of-nature that can only be marginally influenced by humans

To go down this route, you have to imagine Tesla didn't really want to produce many cars at all - all the incentives and motivation they have about making lots of cars, earning millions, paying debt back, the incentives employees have for bonuses, doing what the boss says, staying employed, all amount to virtually nothing, but the commentary from Jones of SomeBank is enormously influential and can turn the entire company round. That's so disproportionate, I can't just take it as given.

You're squabbling over semantics and ignoring the larger point. Someone can put together the best-possible estimate today based on all the information available. And this estimate could still be wrong, through no fault of the analyst, because of human free will. This makes stock-analyst estimates fundamentally different from weather predictions.

Why does it? You could put together the best-possible weather prediction today based on all the information available, and this estimate could still be wrong, through no fault of the meterorologist.

And what we'd learn is that the meteorologist cannot predict the weather and we shouldn't rely on their predictions as much in future.

We don't call the meteorologist "accurate" because they couldn't do better, we call them "inaccurate" because they were inaccurate.

The fact that "weather" has no free will, but humans do, makes your analogy unworkable. If a meteorologist has all available information at time-T, as well as the computing power to crunch all the numbers and run a simulation, it's impossible for them to mispredict the weather.

The very definition of free-will means that the above is impossible for predicting human behavior. Even if you had perfect information, models and computing power, you still can't predict human behavior with 100% accuracy. A good analyst may be able to predict human behavior with higher levels of accuracy than others - but even a perfect analyst with perfect information will still make mistakes due to free will, which makes it qualitatively different compared to a meteorologist.

reminds me of this classic https://www.fool.com/investing/general/2013/11/14/stupid-thi...

Because way more people care much more about companies and their stock prices than play celebrity analyst.

Analysts predict value of a company based on a lot of public data, and usually the stock price reflects those expectations.

Who cares a hoot if analysts are wrong? Whereas Tesla beating expectations and their sales numbers are more important.

and they lost three VPs in a week's time and the shares slumped correspondingly, this bump is despite that

[edit] my mistake about the slump in share price, I had misread the chart

Stock was $224 on June 19th, hit $224 again on the 24th and closed today at $224. Not sure what the slump is you're referring to?

ahahah you are absolutely correct I was looking at the wrong zoom level on the chart, my mistake

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