Thread by @tomi

1/ THREAD: Weak 1H 2020 will put significant pressure on current FY2020 and FY2021 consensus estimates, which should weigh on the share price in the coming quarters and risk changing the growth narrative.

Other risks are merely the icing on the cake (disc: short).

2/ Following 31% q/q deliveries decline in Q1 (as US M3 backlog was exhausted and Europe deliveries had not started en masse), managed to grow deliveries sequentially from Q1’s low base throughout the rest of FY2019.

3/ Q4 will follow Q2 and Q3 in setting new deliveries records, this time at >110k, driven by geographic expansion, release of RHD M3 and expiration of various tax incentives (NL, US FIT).

However, will barely hit the lower end of its delivery guidance of 360-400k in FY2019

4/ In Q4 2018 deliveries report said they ended FY2018 with a 350k deliveries run-rate, and FY2019 will end with ~365k deliveries. Either production didn’t improve at all, or manufactured to demand. (h/t @Badger24)

Declining ASPs suggest demand issue is more likely.

5/ In Q3 2019, auto revenue declined q/q and ~12% y/y. Q4 auto revenue may beat Q3 q/q comp depending on mix, but will be down y/y and mark first LTM revenue decline.

Revenue is already declining despite record deliveries, as mix (and thus ASPs) continue to deteriorate.

6/ To make matters worse, management is guiding to a “tough 1H 2020”. Soft Q1 y/y comp aside, how many q/q declines can the growth story take in a row?

Just meeting the consensus revenue estimates will be a tall order if 1H 2020 starts off far below current record deliveries.

7/ Consensus estimates call for $29.4bn of revenue in FY2020E, and $37.5bn in FY2021E.

Assuming stable contributions from Energy and Services segments, and a $55k ASP, that implies >450k and >600k deliveries in FY2020/FY2021, far above current demand and production capacity.

8/ will need to rush both MY and CT to market, having realized M3 demand will not sustain the growth without new geographies left to expand to.

Notably cumulative M3 deliveries post-Q4 will barely be at the “420k reservations” number, despite a $1,000 deposit at the time.

9/ MY and CT deliveries are unlikely to start in time to contribute much to 1H 2020 with having guided for MY deliveries starting in late 2020 (and Deutsche expecting early 2020 start) and CT in late 2021. famously doesn’t tend to hit their estimated timelines.

10/ The 250k CT “deposits” were $100/each, 90% below M3 where most reservations never translated to sales. With no 300k update from Musk, it’s unlikely CT has gotten there.

Notably never put out a MY reservations number, saying it's not "relevant". Make of it what you will

11/ will need >100k of production from Shanghai in FY2020 to have a shot at their consensus revenue estimates, but that assumes demand for >100k incremental sales, even before looking at profitability, at a time when ASPs seemingly remain the only lever to increase demand.

12/ Consensus estimates call for $5.07 of EPS in FY2020E and $10.89 in FY2021E. $TSLA’s mix is not improving (i.e. ASP will only decrease further), meaning they must rely on further efficiencies and cost cuts to remain margin neutral – and consensus calls for a profitable year.

13/ In addition, need to sell enough vehicles from China to generate $300mm of annual tax revenue to avoid the risk of giving the factory back to the Chinese govt, which helped put it up in record time. That will add pressure to move metal, even at lower ASPs.

14/ YTD net income is negative $900mm despite $460mm of regulatory credit sales, with negative cash flow. And this is despite capex being below maintenance levels, even after including the capex hid under finance leases to boost reported FCF (h/t @orthereaboot).

15/ has never had a profitable (or cash flow positive) year, even when they were the only EV option for many consumers, and thus held strong pricing power. That advantage is disappearing with more and more EVs coming to market, putting more pressure on the company.

16/ Each year forward will bring in new and tougher competition from other OEMs, which will spread demand for EVs around a larger pool, mean less demand for regulatory credits, and decrease the impact of any incremental EV tax incentives for .

17/ Let us once more remind everyone this is a company with $13bn of debt and nearly $20bn of purchase obligations. A lot of creditors (not the least the Chinese government…) will want to get paid, which is why $TSLA’s cash generation ability remains important going forward.

18/ If cannot start generating cash to fund its operations and expansion, they will need to again tap the markets for more money. Musk can’t talk about 1mm robotaxis in FY2020 again, and growth is slowing and revenue declining. When will the narrative change?

19/ At some point, the market will realize is just a poorly ran OEM that cannot subsidize the unprofitable EVs with profitable ICE vehicles and cannot generate enough demand at prices that would make its operations sustainable. That is when the wrecking will occur.

20/ When the market comes to the realization that is a regular OEM at moderate to no growth, it should start trading down towards other OEMs – which are at the 0.5x EV/revenue and ~5x EV/EBITDA range.

1x EV/revenue implies $0 for equity; 2x ~60% downside.(h/t @WallStCynic)

21/ This has already been highlighted as a possibility in equity research by none other than long-time bull Adam Jonas, who is “…not bullish on Tesla longer term”.

What about the short to mid-term, if 1H 2020 sees two more quarters of q/q revenue decline?

22/ To summarize, without record deliveries in 3/4 quarters in FY2020 (seemingly unlikely), has no chance at hitting consensus revenue estimates, may extend their q/q revenue declines to 4 quarters, and risk the end of the growth narrative…

23/ …and that is when they are expected to turn the corner on profitability – something has yet to accomplish in 16 years of operations.

If have a weak 1H 2020, there will be pressure to revise down estimates. If that happens, the share price should reflect it.

24/ As @WallStCynic says, isn’t going bankrupt overnight. However, this year’s WeWork story is an illustrative example of just how quickly 80% of market value can evaporate.

Weak 1H 2020 may finally change the narrative. Trade carefully; all feedback welcome.

25/ Final note: This is not meant to be an exhaustive coverage of the story, which will one day make for one hell of a book.

There are countless other on-going risks such as federal investigations and questions about accounting, and has those covered.

26/ This news from China (h/t @TESLAcharts) reporting has no equipment to stamp, weld or paint vehicles at the Shanghai factory bodes well for my thesis.

Getting to consensus revenue may be impossible not only from demand, but also from supply perspective.