Morningstar

Tesla Makes Progress but Faces Long Journey Ahead

The firm's long-term story--not any single quarter's results--will ultimately determine the value of the company.

Securities In This Article
Tesla Inc
(TSLA)

Vehicle deliveries increased year over year by 19.7% to 29,997, with the Model 3 sedan comprising 8,182 of the total. Management continues to expect a Model 3 weekly production rate of 5,000 in about two months’ time. Tesla Energy’s revenue nearly doubled year over year to $410 million with storage revenue growth of 161% more than offsetting a 50% decline in energy generation megawatts down to 76 MW. Also encouraging is cash sales' continued increase as a percent of total residential solar deployments (66% in first quarter versus 54% in fourth quarter and 31% in first-quarter 2017) which helps cash flow compared with the old leasing format under SolarCity.

We expect a dramatic improvement in profit and cash flow soon, in either second-quarter--or more likely--third-quarter results, due to a large jump in Model 3 deliveries later this year. Management also has high expectations as they expect Tesla to be profitable on a GAAP basis and have positive cash flow for third and fourth quarter. We calculate adjusted free cash burn for the quarter of $942 million compared with cash burns in fourth-quarter 2017 and first-quarter 2018 of $181.9 million and $436.1 million, respectively.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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