Thread by @cppinvest

1/ Regrettably, I’ve seen many TSLA/AMZN analogies pop up again, shockingly from bulls AND bears. Even more regrettably, I decided to dig in. Apologies in advance for the chart crimes, as I know @teslacharts did this exercise a while back.

2/ TSLA is now 10 years old as a public company. Let’s do a side by side of AMZN and TSLA after the First Ten Years.

3/ At Year 10 Tesla had:

(1) $21bil in rev vs. $14bil for AMZN;

(2) A y-y rev growth rate nearly 2x AMZN’s;

(3) Lower gross margin (19% vs 23%) but higher EBITDA margin (7.7% vs. 6.1%); and

(4) almost 2x the Ent Val.

So far so good, bully for Tezzla.

4/ But when you drop below the Op Inc line (and all its non-cash contributors), it starts to fall apart for our heros from Fremont. Net Income in Yr 10 of (869mm) vs 476mm for AMZN. EPS of (5.10) vs. 1.12. Most importantly, FCF of (2.9mm) vs $1.2 bil.

5/ In the TSLA vs. AMZN Brawl-For-It-All, Thrilla in Manilla, $TSLA only managed to produce positive EBITDA once (in Yr 10) whereas $AMZN started in Yr 7 and has produced positive (and steadily increasing) EBITDA ever since.

6/ Further, AMZN was only spending $224mm/yr in capex (1.5% of revenue) by yr 10, whereas TSLA spent $2.1bil (10% or revenue) in yr 10. In fact – pay attention lemmings if you are reading - AMZN’s capex spend in its first 10 years was just $1.3bil total.

7/ TSLA, conversely, spent more than 10x that amount in its first 10 years. Is it starting to sink in yet?

8/ The comparison gets worse when the balance sheet is factored in. By yr 10, on just $500mm more in EBITDA, TSLA had managed to accumulate almost 10x the debt. Where AMZN could finance its growth internally, TSLA was forced into the cap mkts repeatedly.

9/ By yr 10 of its existence, AMZN had produced steadily increasing cash flow and net income and investors rewarded. This is what AMZN looks like today, in year 20 of life as a public company.

10/ For that performance from 2008-2018, and the confidence it has engendered, the market has rewarded AMZN with these multiples today:

11/ Ironically, those multiples of AMZN as a 20-year old public company are pretty close to (but higher than) TSLA’s multiples of it as a 10-year old company, which implies the market has some degree of confidence in Tesla’s ability to execute. Should it?

12/ Again, here are AMZN’s margins again for the last 10 yrs. Anyone see TSLA doubling gross margin from here? Or see it generating $27bil in EBITDA? Yeah, me neither.

13/ There is less noise in AMZN’s numbers. SBC is 66% less as a percent of revenue in AMZN than TSLA. More than 200% of TSLA’s EBITDA is non-cash items versus about 10% for AMZN, which means AMZN’s operating income is mostly positive margin contribution, TSLA’s is not.

14/ AMZN can cover interest expense from EBIT, TSLA cannot. That’s called operating leverage. In the vernacular, wiggle room. Tesla has none. AMZN has tons.

15/ This is just a joke. This is the starkest representation of a capital-intensive business vs. a capital light business you will ever see. It’s a reason the rest of the auto-industry (ex-RACE) struggles to garner investor attention. Cyclical businesses are tough.

16/ And make no mistake, TSLA is a cyclical business. You’ll soon see y-y declines in units, ASP’s and revenue. h/t @BradMunchen. Capital needs will increase. Working capital items will start to reverse as revenue slows becoming a drag on liquidity.

17/ The bull story in TSLA is that manufacturing efficiencies will emerge at volume. We’ve just had record volumes and manufacturing efficiency got worse. Again. Where will efficiency come from next? Batteries? After TSLA chokes on its fixed price contract with Panasonic?

18/ NUMMI produced 20% more cars per week with fewer employees when it was owned by Toyota and GM. The Alien Dreadnaught is a laughingstock. We will not see fully autonomous vehicles in my lifetime. Nor robotaxis.

My price target is $0. I have a model. It's based on expected outcomes and takes recent trends into consideration.
Someone tell @cathiedwood.