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by Eva Fox November 03, 2019

1 Comment

In 2008, Tesla made a big impact with the luxury Roadster, and then released the 2012 concept car, released the Model S, a high-end sedan at prices starting around $ 75,000. Three years later, in 2015, Tesla released the Model X, a luxury SUV, priced at just over 80,000 dollars. But the biggest product release came in mid-2017, when Tesla released its first mass market car, Model 3, which starts at $ 35,000. The next model will be the Model Y, crossover, or “CUV”, the price of which will be slightly higher than that of Model 3, but will also be more profitable. Its production is scheduled for autumn 2020. In addition, it is also planned to produce a Tesla Pickup Truck and a Tesla Semi.

Wall Street, in particular, are considering Tesla shares, analyzing quarterly supplies. But from the point of view of investments, this is the wrong approach to consider Tesla as a long-term investment.

 

1. Revenue growth

Over the past five years, Tesla has achieved incredible revenue growth, increasing from just $3.2 billion in sales in 2014 to $24.9 billion for the 12 months ending in June. Most of the profits came from the past two years, as the production of Model 3 of the mass market grew to meet high demand.

Chart source: YCharts

2. Debts, capital expenditures and Tesla's big growth

We can see a significant increase in Tesla's investment in 2017 when it built Gigafactory in Fremont for Model 3, as well as new service centers and infrastructure to support the influx of new customers from the mass market car.

The increase in expenses led to an increase in the debt burden, including secured debt and convertible debt, however, many of these expenses were one-time or at least increased compared to Tesla's basic spending levels. In addition, the company's net debt began to level off.

The increase in expenses led to an increase in the debt burden, including secured debt and convertible debt, however, many of these expenses were one-time or at least increased compared to Tesla's basic spending levels. In addition, the company's net debt began to level off.

Chart source: YCharts

3. Gross margins, earnings, and cash flows

As spending went up, you can also see that the Model 3 has hit Tesla's margins. That's not only because the Model 3 has lower gross margins than the Model X and Model S, but also because of the high fixed costs needed to mass-produce a car. Like capital spending, Tesla's net losses have piled up over the past year; however, as the company is now reaching scale, you can also see that its net losses are narrowing. So while Tesla's net income is still firmly in the negative, it's moving in the right direction.

Also we can notice free cash flow in 2019. Tesla has achieved positive free cash as capital expenditures have come down and sales have surged.

Chart source: YCharts

 

Valuation of Tesla in October 2010: $1 billion

Valuation of Tesla in November 2019: $56.76 billion.

For 9 years, Tesla increased in valuation by $ 55.76 billion.

In November 2008, Tesla escaped bankruptcy by receiving a loan of $ 40 million.

And now, Tesla's shares with 56 billion market capitalization make Tesla the most valuable US automaker. Aspiring to 360-400K annual supply vehicles.

 

 


1 Response

Chad Mortensen
Chad Mortensen

November 04, 2019

Great writeup Eva

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