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1/ In a recent article, I argued that Tesla owed its Q3 profit entirely to regulatory credit sales. However, several bulls (and a few bears) pointed out that I neglected to factor in tax effects. So I wrote a follow-up doing just that. $TSLA $TSLAQ https://seekingalpha.com/article/4381646-tesla-q3-profit-conceals-underlying-problems
2/ Reporting a $331M profit after $397M in credits sales, it appeared at first glance that Tesla had once again failed to make money selling cars (subtract credit sales from net income leaves -$66M). $TSLA $TSLAQ https://twitter.com/TESLAcharts/status/1319661868487761920
3/ Merely subtracting reg credit revenue from net income does not provide us with an accurate picture of Tesla’s core business profitability, the principal reason being that it doesn't account for the tax effects on net income. $TSLA $TSLAQ https://seekingalpha.com/article/4381646-tesla-q3-profit-conceals-underlying-problems
4/ In Q3, Tesla reported a $186M provision for income tax. Adding that back to net income leaves earnings before taxes of $517M. Subtracting the $397 million in regulatory credit sales from EBT leaves us with $120M. Applying a uniform tax rate leaves us with $76.8M. $TSLA $TSLAQ
5/ Based on this analysis, it appears that Tesla did indeed manage to eke out a small net profit from operations. Yet, as has consistently been the case, reg credit sales were Tesla’s greatest profit driver in Q3, representing more than 3/4 of EBT. $TSLA $TSLAQ
6/ But wait, there's more! Tesla's penchant for accounting chicanery was again on full display in Q3, as @orthereaboot has been kind enough to lay out (as well as to offer reasonable doubt of the need to adjust for tax effect on credit sales). $TSLA $TSLAQ https://twitter.com/orthereaboot/status/1320719297858183173
7/ Then there is the issue of deferred revenue recognition. As @BradMunchen has observed, the 10-Q shows Tesla recognized $223M of deferred auto revenues from FSD. Strip out those 100% margin vaporware sales, and Tesla's Q3 turns red again! $TSLA $TSLAQ https://twitter.com/BradMunchen/status/1320727172844118017
8/ Ultimately, whether or not Tesla had a small profit in Q3 is of little consequence. The core auto business's growth struggles continue, even with a second factory in full swing. @fly4dat has demonstrated this stagnancy to great effect. $TSLA $TSLAQ https://twitter.com/fly4dat/status/1319009591544451074
9/ Things look even worse when we look at automotive revenue on a per-share basis. Years of dilutive stock offerings have spread revenues across more shares, leading to per-share revenue decline in the absence of credit sales. $TSLA $TSLAQ https://twitter.com/fly4dat/status/1319031874996547584
10/ Without reg credit sales to plug holes and paper over its operational challenges, Tesla will struggle to maintain its exuberant growth narrative. $TSLA $TSLAQ https://seekingalpha.com/article/4381646-tesla-q3-profit-conceals-underlying-problems
11/ Bulls often admonish skeptics to take a long-term view of Tesla, yet time does not appear to be working in Tesla’s favor. $TSLA $TSLAQ https://seekingalpha.com/article/4381646-tesla-q3-profit-conceals-underlying-problems
