Read on Twitter
1/ My latest for @gurufocus, 'Tesla: The High Price of S&P 500 Inclusion', just went live.
"A closer review of what Tesla had to do to gain admission to the S&P 500 should give thoughtful investors reason for pause."
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
"A closer review of what Tesla had to do to gain admission to the S&P 500 should give thoughtful investors reason for pause."
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
2/ When Tesla reported its 4th consecutive quarterly profit in July, many investors saw index inclusion as inevitable, an expectation that caused the stock to climb over the summer. However, the S&P 500 Committee opted to punt in September.
$TSLA $TSLAQ https://twitter.com/AlmingtonCap/status/1319375359377346561
$TSLA $TSLAQ https://twitter.com/AlmingtonCap/status/1319375359377346561
3/ Despite the September snub, Tesla's index inclusion hopes were far from dead. Indeed, after reporting a fifth consecutive quarterly profit in October, hopes of S&P 500 inclusion reached new heights. These hopes were vindicated on Nov. 16.
$TSLA $TSLAQ https://www.marketwatch.com/story/tesla-stock-jumps-after-news-company-will-join-s-p-500-11605566132?mod=home-page
$TSLA $TSLAQ https://www.marketwatch.com/story/tesla-stock-jumps-after-news-company-will-join-s-p-500-11605566132?mod=home-page
4/ While Tesla has reported five consecutive quarterly profits, it's far from certain whether this is sustainable over the long run. The biggest issue involves regulatory credits, which account for almost all profitability to date.
$TSLA $TSLAQ https://fortune.com/2020/09/30/tesla-profit-revenue-environmental-credits-elon-musk/
$TSLA $TSLAQ https://fortune.com/2020/09/30/tesla-profit-revenue-environmental-credits-elon-musk/
5/ Reg credit sales were also critical in Q3, accounting for 77% of pre-tax earnings. With the value of credits set to decline precipitously in the coming years, Tesla won't be able to rely on them to plug its financial holes indefinitely.
$TSLA $TSLAQ https://seekingalpha.com/article/4381646-tesla-q3-profit-conceals-underlying-problems
$TSLA $TSLAQ https://seekingalpha.com/article/4381646-tesla-q3-profit-conceals-underlying-problems
6/ Stripping out the impact of credits, we can get a more accurate view of the state of Tesla’s core auto business. Calculated on a 4-quarter rolling basis, automotive revenues less credit sales have been stagnant.
R/T @fly4dat
$TSLA $TSLAQ https://twitter.com/fly4dat/status/1319009591544451074
R/T @fly4dat
$TSLA $TSLAQ https://twitter.com/fly4dat/status/1319009591544451074
7/ Making matters worse, falling ASPs have eaten into Tesla’s margins, erasing most of the benefits of increased unit volume. In fact, rolling 4-quarter auto revenue has declined on a per-share basis.
R/T @TESLAcharts, @fly4dat
$TSLA $TSLAQ https://twitter.com/TESLAcharts/status/1320720496695169025
R/T @TESLAcharts, @fly4dat
$TSLA $TSLAQ https://twitter.com/TESLAcharts/status/1320720496695169025
8/ Things look even worse if one considers what Tesla had to do to secure 4 profitable quarters in a row, even after benefiting from credits: slash capex to the bone. From a high of $3.41B in 2017, capex fell to $1.33B in 2019.
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
9/ In the first three quarters of 2020, Tesla spent just $2.01B on capex. While it's promised a capex surge in 2021, Tesla has a lot of ground to make up, as its ever more overstretched service infrastructure exemplifies.
R/T @ElectronComm
$TSLA $TSLAQ https://twitter.com/ElectronComm/status/1328347060777566210
R/T @ElectronComm
$TSLA $TSLAQ https://twitter.com/ElectronComm/status/1328347060777566210
10/ Chronic underinvestment and short-term strategic thinking are already weighing on Tesla, as the latest @ConsumerReports reliability ranking highlighted today. Reversing that trend is likely to prove expensive.
$TSLA $TSLAQ https://twitter.com/Lebeaucarnews/status/1329440499191734277
$TSLA $TSLAQ https://twitter.com/Lebeaucarnews/status/1329440499191734277
11/ Tesla’s imminent S&P 500 inclusion is undeniably a positive catalyst for the stock. With trillions of dollars invested in index funds, rebalancing will force substantial net index buying over the next month.
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
12/ Tesla’s share price is already up more than 20% since the inclusion announcement. With index fund buying likely to soak up as much as 13% of the float, according to Evercore analyst Chris McNally, Tesla is likely to be buoyed higher.
$TSLA $TSLAQ https://www.marketwatch.com/story/heres-how-teslas-s-p-500-inclusion-may-play-out-11605633659
$TSLA $TSLAQ https://www.marketwatch.com/story/heres-how-teslas-s-p-500-inclusion-may-play-out-11605633659
13/ Despite the short-term catalyst, however, it is important to keep in mind what Tesla had to do to secure index inclusion, and what that may cost it in the future.
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
14/ Ultimately, Tesla's decision to throttle back growth investment in order to show an ephemeral profit may have lasting consequences for its growth trajectory – and its ability to meet the market’s wildly optimistic expectations.
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
$TSLA $TSLAQ https://twitter.com/gurufocus/status/1329523628413771777
