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Perhaps not precisely every minute, but often enough to
fulfill demand for "wise" investors
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The market is abuzz with
comments like “Tesla
Shares Soar After Crushing Third Quarter Earnings” and “Tesla
Wows Analysts with Quarterly Net Profit”.
So how excited is Abu
Arqala? Not much.
Has AA changed his
view on Tesla? No.
Why?
First, let’s
look at Tesla’s 3Q2019
“performance”.
Reported GAAP net income is
USD 143 million.
Sales of regulatory credits are USD 134 million.
That
USD 134 million is 94% of the quarter’s net profit. It has nothing to do with Tesla’s
fundamental businesses making a profit.
Rather it is (another) gift from Uncle Sugar. Corporate welfare. See
my earlier post.
Excluding that amount Tesla’s automobile and other
businesses generated a “massive” net profit of USD 9 million in 3Q19. AA is suitably un-wowed.
And of course there are likely to be other non-automotive regulatory credits sold, e.g., by Solar City.
On a simple proforma basis, that’s USD 36 million a year from the businesses. An amount so large that in order to calculate
it, AA had to employ both the supercomputer and electron microscope he used to
calculate Saudi investment banking fees for an earlier post. Saudi investment banking fees were much
larger.
Net income for the first nine months is a loss of USD 967 million. Excluding regulatory credit sales, the net
loss is USD 1.428 billion.
AA thinks it’s interesting that regulatory credit sales were not
mentioned in the breathless hype over Tesla’s “crushing” or “wowing” earnings. Are our financial journalists reading more than the press releases? Do they understand the importance of regulatory credit sales to Tesla's business. One (that would be AA) sure hopes so.
And a bonus link on an accounting
change adopted in 2019 that makes Tesla look better on paper.
"Better" is a relative term -- as in USD 967 million in losses is "better" than USD 1.428 million.
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