While Tesla (TSLA) is still in its extreme growth phase, the things to look for during their earnings release and conference call have more to do with guidance than their actual results. Tesla already guided revenues higher by 20% and deliveries at 6900, which is 15% higher than guidance. Both of these are signs that its ramp up is going according to plan. Here are the things to look for in Tesla's Guidance and my expectations.
1. Model S 2014 Guidance
Tesla has previously guided an annual run rate of 40,000 vehicles by the end of 2014. This is commonly misprinted in the media as a total production of 40,000 vehicles. At their current growth rate, Tesla can produce over 35,000 in the next year (~36,500 using the trendline in the graph) and also reach an annual run rate of 40,000 (~10,500 in 4Q in the graph).
However, since battery supply is not expected to be a bottleneck later in the year, my expectations are that Tesla will actually guide for 40,000 Model S deliveries in 2014.
2. Model X Production Guidance
The Model X is expected to launch at the end of the year with volume production expected second half of 2015. Last quarter, from my understanding, Tesla said that by volume, they meant the volume of the Model S at that point.
My expectations are that Tesla will be more clear about this guidance during this quarters results. If they can actually boost Model X production to that level (an annual run rate of 50,000 vehicles) by the second half of 2015, then Tesla will grow faster than my previous model has assumed.
If we do get some more guidance on this topic, I will post an updated Tesla model in my next article after earnings. Here is a preview:
The above chart also includes a higher number of total Model S and Model X sales than estimated before, attributed to Tesla's unified worldwide pricing strategy of not gouging.
3. Customer Deposits
I think Customer Deposits is the most important number for investors in Tesla, because it is a very useful demand gauge, possibly the only reliable one. From last quarter's numbers, it could be estimated that Tesla had an order backlog of about 20,000 Model Ss. I expect the number to more or less stay the same or post a slight drop since we had significant delivery growth in Q4.
4. Battery Factory Guidance
From Elon Musk's statements, we will get some more details on the battery factory that Tesla plans to build. We now know that Tesla plans to build it in the US with partners. What I expect from Tesla is:
- Shortlist of states for the planned factory, if not an actual state
- Who the partners are
- A rough timeline
Even though this is the fourth thing on my list, this might be a major driver for the stock price. The speed of future growth hinges on the availability of batteries for Tesla's Gen III car.
5. Gen III Guidance
I don't think we will get any detailed guidance but based on guidance for the Model X and the battery factory, it might be possible to infer more details about the production launch of the Gen III. For example, if the Model X ramp will actually lead to similar numbers for both Model X and Model S by Q3 2015, then to maintain growth the Gen III would need to launch by the end of 2016. However, if the Model X ramp follows a similar pattern to the Model S, I expect the Gen III in 2017. Similarly, the Gen III launch also depends upon either new battery suppliers or the commencement of production from the new battery factory.
6. Storage Battery Guidance
This is the first quarter of storage battery sales to SolarCity (SCTY) and I expect some guidance about that business going forward. If we don't get this from Tesla, I hope this information is available from Solar City.
7. Global Sales, Service and Supercharger Rollout Guidance
We already have guidance about Superchargers from the map on Tesla's website. The west coast corridor is complete. East coast is nearly done and multiple cross country runs have been completed along the one route that has been completed. We also know that right hand drive Model Ss are coming in April and China deliveries are going to start soon. It would be good to see a sales breakdown by country/region but that is not something I expect.
These are the things I will look for in Tesla's earnings release and conference call. So far it looks like Tesla is on the path to "reckless" growth for 2014 and my expectation is that the guidance for 2014 will validate that.
What about the 200$ stock price?
Tesla stock hit $200 for a few moments this week and closed at around $195 today (2/12). The earnings release will tell if the stock will make another correction or keep moving higher. All indications are for the latter. In a recent trip to Europe, Tesla management made several announcements and comments, some of which are below:
- Tesla is now installing new Superchargers at the rate of one every week day.
- Superchargers are being upgraded to charge at 135kW, compared to the current 120kW or the 50kW of other fast chargers.
- Battery Swap will be "up in a few months" along one route in California.
- Model S environmental impact is much lower than estimated and environmental break even might be under 10,000 miles.
- Battery factory production from Tesla's gigafactory would at some point need to get to 30GWh, more than current global capacity.
- Tesla will possibly be first to market with auto-pilot like features
On a recent vacation, I happened to test drive the Model S and I can say it was an excellent drive and the praise is well deserved. The car looks even better in person and the interior design is stunning. The touchscreen works great as a replacement for all kinds of controls with great flexibility. The car accelerates silently and very powerfully. It is hard to believe that this is only the second car and the first sedan from a new company. In fact, even the odometer and gauges are on a customizable screen far more intuitive than any other car I've sat in. It takes one ride in the car to know how outdated everything else is. It is like moving from a BlackBerry (BBRY) to an Apple (AAPL) iPhone.
Even one founder of a supercar company likes the Model S better than a BMW M5.
In conclusion, the future is looking very positive for Tesla. And if Tesla really can execute on that auto-pilot car before the rest of the car industry, they might be left in the dust.
Additional disclosure: I may initiate a position in SCTY at any time.