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
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
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
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
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
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
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
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
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
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
You can follow @AlmingtonCap.
Tip: mention @twtextapp on a Twitter thread with the keyword “unroll” to get a link to it.

Latest Threads Unrolled:

By continuing to use the site, you are consenting to the use of cookies as explained in our Cookie Policy to improve your experience.