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I'm kind of tired, and I spent all week working on finishing my S&P 500 blog post, so I'm going to keep this forecast short. Just some brief comments, and the following important precaution.
Although the accuracy of my model has gotten quite good as of late, and I was very close in Q4'19 and also in Q1'20 minus the surprisingly high credits sales, Q2'20 really has a lot of factors that are difficult to forecast:
- Credits sales. We don't know whether the $350M in credits sales in Q1, which were likely partially tied to the FCA deal, are dependent on EU sales volume or not. And if so, to what extent.
- Solar and Energy Storage installations are hard to forecast in the middle of a pandemic.
- Margins on two vehicles in the middle of production ramps (Shanghai M3 and MY) are hard to accurately forecast.
- FSD attach rates were reported to be much higher than usual, but it's hard to know exactly how much higher. There were also incentives/discounts for previous owners to upgrade to full FSD.
- Deferred revenue recognition for stop lights and stop signs.
- Temporary salary reductions due to COVID-19, and halting of stock based compensation.
- How the lock downs impacted service revenue and margins.
- Whether there will be new lumpy expenses related to the CEO compensation package.
Simply put, this quarter is pretty tough to predict, but I've done my best.
I was surprised to see how bad Energy was in Q1, even though lock downs only affected the very end of the quarter. This spooked me a little, so I've forecasted a very bad quarter for Energy in Q2. Q3 and Q4 should see new all-time records though, thanks to Solar Roof ramp and solar price reductions.
Only a small price drop for S+X and a small price increase for M3 in spite of the price cuts in June, because Troy estimated FSD attach rate of ~50% this quarter compared to ~20% in the past. If true, this would add ~$2k to ASPs.
Model Y and Shanghai 3 margins should be very strong. We know the exact number of Shanghai 3 sales thanks to this.
I expect credits sales to most likely drop from $350M, but I've kept this steady nonetheless because I expect FSD deferred revenue and FSD sales to previous owners to more-or-less make up for this. There's also still $100-200M in credits on Tesla's balance sheet that they have to recognize this year, and which they could very well use this quarter.
User "The Accountant" on TMC has a much better grasp than me of how the temporary salary cuts and freezing of stock based compensation will impact OPEX, so I've taken R&D and SG&A expenses from one of his recent posts.
- Automotive Revenue = $5.54B
- Automotive Sales Gross Margin Excluding Credits = 21.3%
- Automotive Sales Gross Margin Including Credits = 26.5%
- Total Revenue = $6.20B
- Gross Profit = $1.43B
- EBIT = $558M
- GAAP Profit = $318M
- Non-GAAP EPS = $2.59
- Free Cash Flow = $1.09B
All in all, it's looking like strong Shanghai and Model Y margins should probably lead to very strong earnings this week, as long as one of the factors mentioned at the start of this post didn't trip up my model.
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