Just over a month after 2020, the volatility of Tesla’s share price is already in history. Based on the closing price of December 31, 2019 ($418.33), Tesla is up 29 percent in nine trading days, 39 percent in 19 trading days, and 112 percent in the 23rd (February 4) market value of $159.7 billion. Tesla’s market value evaporated by $27.4 billion, narrowing its 2019 closing price to 76 percent.
Short “bursts” are a key factor in Tesla’s surge and rapid pullback, but don’t think of it as a “monster stock.” Only the results that determine whether and when Tesla’s market value can reach $1 trillion.
Capital markets have been deeply polarized with Tesla’s attitude, with a few viewing it as “a great company comparable to Apple”, with a market capitalisation of $1 trillion sooner or later;
A long-time Short Tesla star fund manager on Wall Street is believed to have “successfully” become a multi-millionaire after he was a billionaire.
In 2020, Tesla’s share price has soared, and short positions are popping up.
On February 3rd, the intraday high of $786 was up 20.8 per cent from the previous session (January 31) and 47.23 million shares were traded throughout the day, up 300 per cent from the previous session.
As of the close on February 3rd, there were still 24.1m shares of open short positions (180m shares of Tesla’s total equity), and $18.8bn was needed to buy back and return borrowed shares (i.e. close positions).
On February 4th it was trading at $969, up 48.9 per cent from January 31st, with 60.94m shares traded throughout the day, up from 388 per cent on January 31st.
The intraday high on February 3rd was up 131.6 per cent from the last trading day of 2019, and no shorts survived the gains. When the share price reaches a preset level, the short is forced to buy, and the share price climbs further. Mouth scolding, heart hate, hands but do not count the cost of high prices to eat. “Short-sitted short” is the reason why Tesla is skyrocketing.
But shorts are also a step forward, with Tesla’s current short-fill edits at 1.65 days, or about 20 million shares. The next round of fighting between the long and empty spaces has begun.
Economy of scale
On January 29, 2020, Tesla released its 2019 Q4 and full-year results, the trigger for a “short stampede.”
In 2019, Tesla delivered 112,000 vehicles, including 195,000 Model X/S and 926,000 Model 3s.
Delivered 245,000 vehicles in 2018 marks the end of Tesla’s dark days. With 368,000 deliveries in 2019, Tesla’s life is getting better.
Cars are typical economies of scale, and Tesla’s rise and fall once again demonstrate skilled technology and brand image, with annual sales of less than 200,000 vehicles and only a struggle on the brink of life and death, with annual sales of nearly 400,000 vehicles to see Sugon.
Annual sales from 100,000 vehicles is still 108,000 miles away from the “new force of car construction” or do not waste investors’ money. Musk has only one, And Tesla has successfully “crossed the road” can not be copied.
Breaking through the ceiling
In 2018, Tesla delivered 91,000 vehicles, but grew only 3.3 percent month-on-month, while Q1 delivered only 63,000 vehicles in 2019, down 42 percent from a year earlier. This is because China and the United States on the new energy vehicle concessions greatly “downhill.”
In the second half of 2018, the “small blowout” in the Market for New Energy Vehicles in China and the United States is the “top rush” formed by potential car owners’ “last dinner”. Tesla’s 2019 Q1 sales are particularly ugly because demand is overdrawn early and the Q1 is originally an off-season.
Major international banks such as Goldman Sachs have issued reports warning investors to stay away from Tesla, which has a share price of less than $300.
The prevailing argument at the time was: “The rich basically bought it.” The poor don’t buy when they have subsidies, and they don’t buy them without subsidies. Demand for electric cars is close to the ceiling. “
Not all voices are singing, such as the March 13, 2019 article “Tesla’s Performance Has Reached”, “Tesla’s Success.”
On March 1, 2019, Tesla’s entire range of models was cut sharply. In the Chinese market, Model 3 fell by 26,000 to 44,000, Model S by 113,000 to 277,500, and Model X by 174,500 to 341,100.
Tesla owners, especially those who have just “sidonted”, are very unhappy. But after the preferential policy recedes, the new buyer sits back on how many subsidies, and the price is not necessarily low.
Like PCs and smartphones, electric vehicles are getting stronger and cheaper, and it’s a big trend to buy early and buy later.
Against the backdrop of a decline in subsidies for new energy vehicles, Q4 Tesla’s deliveries and sales in 2019 both hit record highs, and price cuts are key to Tesla breaking through the “ceiling.”
The knack for living
The biggest challenge Tesla faced in previous years was “living.” If Vanke has a three-point relationship, Tesla is twelve points dangerous.
The first trick tesla can survive is higher than the gross margin of traditional automakers.
Ford’s 2018 revenue was $148.3 billion, with a gross margin of less than 1.8 percent; GM’s revenue was slightly smaller than Ford’s, with a gross margin of 9.3 percent; and Toyota’s gross margin was 18 percent, more than Ford and GM combined.
The low-priced Model 3 accounts for more than 80 percent, and Tesla’s gross margin remains above 18 percent, regardless of price cuts. Gross profit for 2018 and 2019 was 4.03 billion and 4.07 billion, respectively.
Gross profit is the basis for living, but also the reason. Businesses with low gross margins are hard to do (e.g. takeaways) and businesses without gross profit should not be done at all. If a restaurant spends 10 yuan worth of resources (ingredients, labor and room utilities) to make a pie, because it is too difficult to eat no customers are willing to spend 10 yuan to buy, then this restaurant is a waste of resources, harm society. Such a business should not be adhered to, let alone to grow and develop.
Tesla’s second trick to survival is a positive cash flow from operating activities. Despite the losses, net cash outflows from operating activities narrowed to $120 million in 2016, equivalent to 1.8% of revenue, while net cash outflows from operating activities in 2017 were $61 million, or 0.5% of revenue.
Cash flow from operating activities to positive in 2018 was $2.1 billion, equivalent to 9.8% of revenue; Net cash flow from operating activities was $980 million in the first three quarters of 2019, equivalent to 5.7% of revenue.
Despite a net loss of $1.06 billion and $775 million in 2018 and 2019, operating cash flow was no less significant than a turnaround.
The main reason for Tesla’s cash flow from operating expenses and net profit is that non-cash costs such as depreciation and amortization are huge.
In 2019, for example, depreciation and amortization amounted to $2.07 billion, while a net loss of $775 million. Instead of pr non-pass accounting standards of some of the general companies, has long been advertised “turning a profit.”
Performance inflection point
The dark red line below represents gross profit, and the colored stacking columns represent “research and development costs” and “market and administrative costs”, and it is clear that Tesla’s performance inflection point occurs between 2018 and 2019.
Despite a cut in sales prices in 2019, gross profit remained above $4 billion, with no increase or decrease in costs. Tesla lost $69 million in 2019 ($388 million in 2018), just a stone’s throw from turning a loss.
The quarterly data more accurately indicate that the performance transition occurred between 2019H2 and 2019H1. The root cause is to break through the capacity bottleneck. China and the United States new energy vehicle preferential policies receded, the overall price reduction has not changed Tesla’s economic benefits to a good trend.
The author has repeatedly stressed the importance of gross profit, in fact, enterprises more understand this point.
Whitewashed gross profit can be done justified, auditors can not pick out the problem, the most common trick is to put the cost in the cost. Amazon, for example, lists the cost of performing its own business as a fee.
The best way to see how gross profit is whitewashed is to see if expenses as a percentage of revenue decrease as revenue grows. If reduced, the suspicion of whitewashing gross profit can be basically ruled out. No reduction is not necessarily not without whitewash, enterprises will argue that “increased research and development, marketing efforts.”
In 2015, Tesla’s $718 million in research and development expenses accounted for 18% of revenue, and $922 million in market and administrative expenses accounted for 22% of revenue, and both expenses together accounted for 40% of revenue;
In 2018, $1.34 billion in research and development expenses decreased to 6.8% of revenue, and market and administrative expenses accounted for 13% of revenue, and both expenses accounted for 19.8% of revenue;
In 2019, both charges showed a slight decrease from 2018 to Q4, with the two charges accounting for 14.2% of revenue, a further 5.6 percentage points lower than in 2018.
Tiger-sniffing’s March 2019 article is based on 2018 results, and from the chart above, the inflection point is too obvious.
1 trillion too far, mo struggle for the present
In the past, the reason for shorting Tesla is that it can’t be made, and the other is that losses will lead to a broken capital chain.
After Tesla broke through the capacity bottleneck, delivery is no longer a problem. By the end of 2019, Tesla had invested in two production sites in the U.S. and China, with an annualized production capacity of 640,000 vehicles (to 740,000 in the second half of 2020).
As the economies of scale emerge from higher deliveries, the terse financial position is improving and earnings under GAAP will be achieved as soon as 2020.
As early as early 2019, the short has changed its name to “make a sale can not be sold out.” Whether it can be created, loss or profit is not transferred by the subjective will of the person. Predicted not to sell out is to see the wisdom, some people think not to sell out, some people think that want to buy a lot of people, reason is a waste of time, see the results.
Although Tesla’s market capitalisation is much higher than that of many auto giants, it cannot be seen as a vehicle manufacturer, a technology and innovation company similar to Microsoft and Apple.
From the point of view of competing for talent, the top scientific and technological innovation companies, no matter how much the main business difference, are competitors. For example, one of the world’s top 1,000 technology geniuses can’t go to Apple, so Apple and Tesla are competitors. So is he going to Apple to build a generation of phones that look the same, or to Tesla? The flow of top talent determines the rise and fall of science and technology companies.
Perhaps in three or five years, Tesla could be worth $500 billion, and perhaps more than $1 trillion in five to ten years, but Tesla, which is still unprofitable, is worth $100 billion, and investors should be cautious.