For years on this blog I have defended Tesla and Eon Musk against defamation by the SJW-left, as well as being bullish on Tesla stock. Tesla has defied the left yet again, posting yet anther quarter of strong revenue growth. Tesla, like Trump, is an American capitalist success story, and the left hates that. Elon Musk is also a high-IQ success story, and you never bet against high-IQ (GM (which went bankrupt) vs. Google).
Why has Tesla done so well even though it’s losing money? The devil is in the details. People who lose money shorting Tesla are losing their shirts for the same reason as those who shorted Amazon: cash flow + growth matters more than profitability, PE ratios, or EPS. Tesla’s car business is cash flow positive but the quarterly losses are due to infrastructure investments. This is how finance can be more subtle than meets the eye.
Tesla’s car business is very profitable:
Tesla also reported an automotive gross margin excluding SBC and ZEV credit (non-GAAP), of 22.2% in the quarter, up from 19.7% a year ago, but down from 25.0% in Q3…
Huge growth in shipments:
Looking at the future, Tesla said it expects to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2017, representing vehicle delivery growth of 61% to 71% compared with the same period last year.
Tesla is reinvesting operating profits into investments, which is why it’s losing money:
The company also expects to invest between $2 billion and $2.5 billion in capex ahead of the start of Model 3 production and continues “to focus on capital efficiency while also investing in battery cell, pack and energy storage production at Gigafactory 1. It also forecast that both Model 3 and solar roof launches are on track for the second half of the year.
There is a common misconception that Tesla is losing money on each car sold, but the car business is profitable. When the left says Tesla is losing money on each car, that is after subtracting capital expenditures. let’s say you buy a McDonald’s franchise for $1 million. That is a huge capital expenditure, but each burger sold is $1 of pure profit. If 10,000 burgers are sold, then technically each burger costs $100, but the burger business itself is profitable.