Is there a new bubble behind Teslas soaring share price?

 Is there a new bubble behind Teslas soaring share price?

Every reporter Zhao Yumeng, every editor sun Lei, Lu Xiangyong

According to the financial report, Teslas earnings per share in the second quarter was $0.5, with a market expected loss of $0.86, compared with a loss of $2.31 per share in the same period last year; net profit was $6.036 billion, down 4.9% from $6.35 billion in the same period of last year, but higher than the markets expected $5.4 billion; net profit was $104 million, the market expected loss was $240 million, and the loss was $408 million in the same period last year u3002

It is worth mentioning that Teslas revenue and free cash flow in the second quarter have exceeded previous market expectations, and are higher than the general loss expectations of Wall Street analysts. In addition, for the first time, Tesla has achieved four consecutive quarters of profits, which also means that Tesla has met the criteria for inclusion in the S & P 500 index.

Photo source: by reporter Liu Ling

After the announcement of the financial report, Teslas share price soared all the way. On Wednesday, the U.S. stock rose by more than 8% after hours, closing at $1592.33, with a total market value of $295.338 billion. After hours, it soared by $11.928 billion, with a market value of more than $300 billion. At the same time, Tesla CEO Musks fortune also soared. Just one day, Musks fortune rose more than $3.4 billion, becoming the fifth richest person in the world.

The target of annual delivery of 500000 vehicles remains unchanged

Tesla reported in novel coronavirus pneumonia that the two quarter profit was due to a temporary reduction in staff salaries, increased credit revenue and FSD related deferred earnings, which offset the impact of the new crown pneumonia outbreak on factory closures.

At present, Teslas revenue mainly consists of automobile sales, car rental, power generation and energy storage, services, etc., among which automobile sales is the main source of Teslas revenue.

According to the financial report, in the second quarter of 2020, Teslas total operating expenses were US $940 million, 13.7% lower than US $1089 million in the same period of last year, and 1.16% lower than US $951 million in the previous quarter. It is worth noting that Teslas spending on sales and administrative expenses increased slightly in the second quarter. In the second quarter, Teslas sales and administrative expenses were $661 million, up 2.2% from $647 million in the same period of last year, and 5.4% higher than that of $627 million in the previous quarter. In contrast, Teslas R & D investment has been significantly reduced. According to the data, Teslas R & D expenses in the second quarter were 279 million US dollars, 13.9% lower than the previous quarters 324 million US dollars.

Despite novel coronavirus pneumonia, Fremonts factory was shut down for 48 days, but musk was unable to live to restart the factory despite public health orders. But in the two quarter, Teslas production and delivery volume were still hit by the new crown pneumonia epidemic.

In terms of production volume, Teslas total production volume in the second quarter was about 82300 vehicles, a decrease of more than 20000 vehicles compared with 102700 vehicles in the previous quarter, a decrease of 20% on a month on month basis. Among them, 6326 vehicles were produced for models s and modelx, 59% less than 15400 units in the previous quarter; 76000 vehicles were produced monthly for model 3 and modely, 13% less than about 87300 units in the previous quarter.

Photo source: Daily Economic News

In terms of delivery volume, Tesla delivered about 91000 vehicles in the second quarter, 5% less than compared with the same period, and increased by 3% month on month. Among them, models s and modelx delivered about 11000 vehicles, a decrease of 40% compared with 17800 vehicles in the same period of last year, and a decrease of 13% compared with 12200 vehicles in the last quarter; 80000 vehicles were delivered by Model3 and modely, an increase of 3% compared with 77700 vehicles in the same period of last year, and an increase of 5% compared with 76300 vehicles in the same period of last year.

The decline in production and delivery directly affects Teslas revenue. According to the financial report, in the second quarter of 2020, the total revenue of Tesla automobile was $5.179 billion, a decrease of 3.7% compared with the same period of last year of $5.376 billion, and only 0.92% higher than that of $5.132 billion in the first quarter. Among them, automobile sales contributed 85.8% of revenue, reaching 5.179 billion US dollars.

The novel coronavirus pneumonia is a very difficult way to maintain such a revenue level, and this is not related to the smooth operation of Tesla Shanghai super factory. Tesla delivered 31000 vehicles in China in the second quarter, accounting for 30% of global sales, and China firmly occupied the second largest market position in the world outside the United States, according to the China Travel Association.

In fact, as novel coronavirus pneumonia continues to spread globally, Tesla also believes there are too many uncertainties about future vehicle deliveries and production.

Although Tesla has successfully restored car production to its previous level, it is still difficult to predict whether it will stop production or shut down again due to the need of the epidemic in the future. We will continue to update our outlook on how global consumer sentiment will evolve in the second half of 2020. The target of delivering 500000 vehicles by 2020 remains unchanged. Tesla said in the earnings report.

There are still doubts behind the soaring share prices

It is worth noting that although Teslas revenue has declined, its revenue and free cash flow in the second quarter have exceeded previous market expectations. As a result, Wall Street analysts upgraded Teslas stock rating and target price. Even Adam Jonas, a Morgan Stanley analyst who was short on Tesla and rated Tesla as low, had to admit that bears have to be picky to find negative factors in financial reports..

In fact, behind the soaring share price, Tesla has been questioned by the industry. Some analysts have noted that one of Teslas means to achieve quarterly profits is to sell carbon emission quotas to its competitors. It is understood that in the second quarter, Teslas revenue from regulatory credit points reached a record high of $428 million, nearly four times that of $111 million in the same period last year, accounting for 7% of the total revenue of $6.04 billion.

Toni sacconaghi, an analyst at abbernstein, said that although Teslas GAAP operating profit margin was 5% in the past 12 months, the figure would fall below 1% if regulatory credit integral income was excluded. In addition, Pierre ferragu, an analyst at newstreet, also lowered its rating from buy to neutral with a target price of $1500. He believed that Teslas positive growth and gross margin growth would slow down, and the short-term stock price catalyst would be limited.

Photo source: by reporter Li Xing

In addition, SEC chairman Jay Clayton said in an interview recently that he was worried that retail investors were allocating funds to high-risk short-term transactions, which led to the price surge of some individual stocks. The SEC has issued guidance to brokers and investment advisers, proposing to provide retail investors with appropriate warnings about the risks of investment: short term trading is not long-term investment. The former is much more risky than the latter. I hope people will pay attention to this. It is worth mentioning that although this statement does not point out the specific names of individual stocks, it seems to be clearly pointed out.

Analysts at Berkeley questioned Teslas claim in the financial report that it still aims to deliver 500000 vehicles this year. He believes Tesla is unlikely to achieve its 500000 vehicle delivery target by 2020 and predicts that the share price may begin to reverse in the fourth quarter.

It is worth noting that, in a voice of doubt, the trend of Teslas stock price also fluctuated. Before midday trading on July 23, Tesla opened high and went low. At one time, it rose more than 6%. The Nikkei stock price was close to US $1690, and then it fluctuated and fell. In 45 minutes of the opening, Tesla hit the daily low and pushed down to the $1550 mark, with the largest drop of 2.5%. After midday trading, Teslas share price continued to decline, with the largest drop of 7% in the day, forcing it down to $1480. Finally, it fell 4.98% to close at US $1513.07, the lowest in the week, and continued to fall slightly by 0.2% after trading.

The road of automatic driving research and development is difficult

In addition to the annual sales target, Teslas fully automatic driving is also an aspect questioned by the industry. It is worth noting that due to frequent traffic accidents, Teslas autopilot system has become the object of the industrys spoil.

After the results, musk attended the earnings conference call. He said that fully autonomous driving is the most important research and development work of Tesla in the next few years. At the same time, musk said Tesla has been working on research and development to improve its safety and performance.

In the conference call, musk said Tesla plans to upgrade all its models to fully automatic driving products, that is, software upgrades. At the same time, musk said there would be a five fold increase in the instantaneous performance of millions of vehicles once the relevant regulations allowed.

In addition, musk said Tesla has updated its autopilot driving aid software to identify stop signs. By the second quarter of 2020, Tesla vehicles equipped with FSD will stop at intersections or cross intersections without driver confirmation.

Mask also said that the calculation of Teslas automatic driving system will increase from the current 2.5D to 4D. At present, Teslas autopilot system is still calculated in the 2.5D scenario, and this 2.5D is 2D image with information tags. No matter how detailed the information label is, the 2D image can not contain depth information, and the decision-making during automatic driving may be inaccurate. Therefore, Tesla hopes to establish a 3D 3D scene with depth information by shooting multiple 2D images, and add time codes to these 3D information to form 4D information, so as to improve the accuracy of automatic driving perception, recognition and decision-making.

It is worth noting that at the opening ceremony of the world Artificial Intelligence Conference (waic) on September 9, musk said that Tesla was very close to the realization of L5 automatic driving technology, and said that it was expected to realize the development of basic functions of L5 automatic driving within the year. In this regard, experts agree that at present, this is a goal that is technically impossible and almost absurd.

In fact, experts hold a negative attitude to this, because no company has announced that it has realized L5 automatic driving. At the present stage, most of the auto driving assistance functions of automobile enterprises mostly stay at L2 and L3 levels. For example, Tesla is only at L2 level now. Even though Googles autopilot vehicle department Waymo deploys L4 level automatic driving test car, like most other companies, most Waymo driving test cars require human safety personnel. Waymo also believes that the L5 automatic driving is not a realistic goal.

It is worth noting that why it is difficult to promote fully automatic driving is always a difficult problem. It is understood that a report recently published by the MIT task force on future work has answered this question. Co authors of the report, John Leonard (Professor of mechanical and ocean engineering at MIT) and Eric Stayton (Ph.D. student at MIT) point out that cost is the biggest obstacle to the adoption of driverless commercial vehicles, and that real autonomous vehicles require complex and expensive sensors and computers. As for Musks concept that fully autonomous driving has been achieved, the final conclusion of the report is that it will take at least 10 years for the fully autonomous system to be commercially available on a large scale.

From this, we can see that for Tesla, there are still too many unknowns about its future development and R & D road. Will the grand blueprint drawn by Tesla be realized as musk expected or become a bubble? The industry will continue to pay attention to it.

Source: Wang Fengzhi, editor in charge of daily economic news_ NT2541