「Core Tips」
High stock price, no harm to Tesla Baili, how to guide market expectations, is Musk to focus on consideration.
Author | Li Xin
Edited by | Gokuno
In the past two days, many people who have read Tesla's first quarter financial report are estimated to have secretly admired Musk. Because Tesla, whether it is revenue, gross profit margin, or expenses, net profit attributable to the mother and other indicators, all exceeded market expectations.
In particular, the gross profit margin of Tesla vehicles, after excluding carbon points, actually exceeded 30% for the first time, which is the data of many car manufacturers whose gross profit margins are still hovering at 10%-20% and are deeply losing money.
How good Tesla is now, how miserable it was then.
At the TED conference on April 14, Musk recalled the hardships of that year and said affectionately:
I lived in factories in Fremont and Nevada, where I lived for three years, repairing production lines, running around every part of the factory like a lunatic, living with the team. That's when I slept on the floor, because then the team members who were going through the difficulties could see me sleeping on the floor instead of in the ivory tower, and they would know that no matter what pain they were experiencing, I was there.
This is miserable and miserable, and it really adds a layer of arc light to Tesla and Musk. After all, the actual landing of the bull that once bragged in adversity is a story that human beings naturally love.
As a result, some people's pockets began to stir.
Or want to buy a Tesla and feel the charm of Musk's first principles;
And more people may want to support Tesla stock to close the gap with the world's richest man...
For the latter, this article we try to sort out the following 3 questions:
Why did Tesla's first quarterly report exceed expectations?
What exactly is Tesla's core competency?
Is Tesla's valuation expensive?
1. A quarterly report that exceeds expectations
In the capital markets, exceeding expectations is a term that many researchers are obsessed with.
Its magic lies in the fact that by seizing it, it can not only seize the renminbi, but also avoid the risk of the renminbi slipping out of your pocket.
Take a chestnut:
Suppose, the market unanimously believes that the profit of enterprise A is only 20 points, no value, but it finally achieved 50 points, then in the capital market will immediately vote for A, support its stock price soared, if you ask the professional how to see, he will often tell you a little mysteriously: enterprise A exceeded expectations;
If company B is a school bully, the market expectations are very high, and the performance can be 90 points, but only 85 points, less than expected, then the stock price will fall sharply.
This interesting market phenomenon has attracted countless investors, who have been doing research day and night, inquiring into news, and mining excess returns, and have also been scorned by many people who firmly believe that "90-point enterprises are cattle" and deep value.
What is Tesla's first quarterly report? If you make a less accurate analogy, as a pioneer and leader in the category of electric vehicles, Tesla is a bit similar to a 90-point player, taking the 95 test.
In terms of revenue, Tesla achieved revenue of $18.756 billion in the first quarter of 2022, an increase of 80.5% year-on-year and 6% sequentially, better than Bloomberg's consensus estimate of $17.9 billion; in terms of profit, Tesla's attributable net profit was $3.32 billion, significantly exceeding Bloomberg's consensus expectation of $2.1 billion;
What factors are driven by Tesla's expectations? Let's take a breakdown one by one:
Tesla's business layout is somewhat similar to the "one belt and many" satellite type, mainly electric vehicle sales, supplemented by car rental, energy storage, services and carbon credit sales.
Tesla revenue share distribution (click to see the big picture)
From the perspective of year-on-year growth, the core forces contributing to the growth rate of total revenue are mainly two parts: electric vehicle sales (up 89.5% year-on-year) and car rental (124.92%).
The reason why it is called the core growth factor is because the growth rate of both projects is higher than the growth rate of 80.5% of the total revenue.
However, considering that the car rental business accounts for a relatively small proportion (only 3.56%), the focus here is on the changes driven by electric vehicles.
Overall, the growth of electric vehicles is the result of a combination of two aspects: an increase in vehicle sales and an increase in the average unit price (ASP).
In terms of sales, Tesla delivered a total of 310,000 vehicles in the first quarter of this year, an increase of 68% over the first quarter of 2021 and basically the same as the fourth quarter of 2021.
Seeing this, careful readers will find that Tesla's delivery growth rate in the first quarter was 68%, lower than the 89.5% growth rate of automobile revenue, and revenue = volume * price, so we can draw a conclusion:
The factor driving Tesla's vehicle revenue in the first quarter is the increase in the average unit price (ASP).
Here to interject, regarding the growth of ASP, some market views believe that the growth momentum comes from Tesla's price increases in recent months, but in fact this is not the case.
Tesla's long delivery cycle, which has risen in recent months, has not yet been reflected in the statement. According to LoupVentures, Tesla's average delivery time is 135 days, or 4.5 months.
In other words, the vehicles delivered in March this year came from orders made in mid-October last year. But this round of Tesla's price increases, mainly from last November, so the time is staggered.
So, what is the reason for the growth of Tesla's average unit price?
The answer is simple: of the 310,000 cars sold, the high-end model accounts for a larger proportion, driving up the average unit price.
On a Tesla conference call, the chief financial officer said there was a shift to more profitable vehicles, including the Model Y, of the models sold. It is also true that the proportion of high-end models such as Tesla's higher-priced Model S/X has increased from 1% in the first quarter of 2021 to 5% in the first quarter of this year.
In addition to the rapid revenue growth, Tesla's cost control is also doing well.
Its cost of sales of cars grew by 69%, which was lower than the growth rate of revenue. At the same time, according to the calculation of "Super Source Force", Tesla's average production cost per unit in the first quarter of 2022 was $35,200, compared with $34,900 in the same period of 2021, which is almost the same. This is especially rare in the context of the rise in upstream raw materials.
The cost of a bicycle is stable, from two factors. First, Tesla and the upstream signed a long order, and the cost price was temporarily locked at a low level. Second, Tesla revealed in its shareholder report in the first quarter of 2022 that "nearly half" of the cars it produced in the first quarter were equipped with LFP (lithium iron phosphate) batteries that do not contain nickel or cobalt.
The average unit price increases, but the cost changes are not large, and the final result is to increase Tesla's gross profit margin.
Gross profit margin is a key indicator reflecting the profitability of the enterprise, it means that for every 1 yuan of income generated after deducting the cost of operation, how much money can be used to pay for various expenses during the operating period to form a profit.
In terms of data, Tesla achieved a gross profit margin of 29.1% in the first quarter of this year, an increase of 7.8% year-on-year and a 1.7% increase from the previous quarter, exceeding Bloomberg's consensus expectation of 26%.
Specific to the automotive business, the gross profit margin has reached 32.9%, more than 30% for three consecutive quarters, and more importantly, even if the carbon integral income is excluded, the gross profit margin of Tesla's automobile business is still more than 30%, you know, many car manufacturers include carbon credit revenue, the gross profit margin is only 10%-20%.
So, overall, Tesla's profitability has been considerable.
More notably, if we combine the increase in the average unit price of its product portfolio, we will draw an important conclusion:
Tesla may have a feature that Musk particularly disdains - a moat.
2. Tesla's moat
Musk is rather dismissive of the moat.
On a quarterly report conference call in May 2018, he bluntly stated that a moat is a very silly concept. He told analysts: "It seems good from a conservative and degrading point of view. But if your only barrier against the enemy is a moat, you won't last long. What is really important is the rhythm of innovation, which is the core element of maintaining competitiveness. ”
Is Musk right? In fact, what he calls innovation is not in conflict with what Buffett calls a moat, and sometimes even the same thing.
Innovation is to build differentiation and form a competitive advantage by continuing to run wildly and always pulling yourself away from your opponents.
The moat is the barrier of "the opponent can't come in, the customer can't go out". Essentially, it is a differentiated competitive advantage.
So what kind of moat is Tesla? Overall, Tesla has two moats: brand and scale advantage.
(Note: Specifically, there are four types of moats: intangible assets (including: brands, patents), conversion costs, cost advantages (such as scale advantages), and network effects. ）
First of all, the brand, the reason why the brand is called a moat, is because the brand reduces the transaction costs of consumers, eliminating the trouble of comparison, testing and so on.
In a word, consumers buy products of large brands, the figure is convenient, less risky. Once a big brand makes a mistake and its reputation is damaged, it will also lose its competitiveness, so it will try its best to maintain the brand image.
The process of building a brand is a process of "understanding, trusting, and preferring" for consumers.
We will find that whether intentionally or unintentionally, Musk's various actions are constantly adding "understanding, trust, and preference" to the Tesla brand.
For example, he sent an average of more than ten tweets a day, and he built rockets and Martian colonists, invisibly exposing himself and enhancing his global visibility.
More importantly, Musk did cash in on the mass production of affordable electric vehicles, while constantly engaging in research and development to improve the level of technology for autonomous driving, and finally gained people's trust and preference.
The sales growth brought by the brand also brings Tesla a scale advantage.
What reflects the advantage of scale advantage is cost.
Cost = (fixed cost/ sales scale) + variable cost, so if you want to reduce costs, there are three main paths:
Reduced fixed costs (e.g. reduced production line inputs);
Reduce variable costs (e.g. lower purchase prices of raw materials);
Scale up sales.
It is clear that Tesla is taking the road of increasing the scale of sales - Tesla sold 940,000 cars last year, far more than BYD's 600,000 vehicles, wei Xiaoli's more than 90,000 vehicles, can share the fixed cost.
Specific to the financial comparison data, Tesla's average unit price is 325,000 yuan, second only to Weilai, and the unit price upward trend has not stopped. This shows that Tesla's brand can support high-end, and the brand moat logic is established.
As for the scale advantage, Tesla not only has the highest gross profit margin, but also the sales + management expenses apportioned per vehicle are only higher than BYD, but significantly lower than Wei Xiaoli. It shows that Tesla has good cost control and does not need to do too much promotion. In fact, as early as 2020, Musk disbanded Tesla's public relations department.
Therefore, even if the above qualitative analysis is abandoned, from a quantitative point of view, Tesla does have a moat.
For Tesla, the core of the moment is to continue to consolidate its own brand and expand its influence, such as Musk to continue to frequently push and brush the sense of existence, continue to frequently go on the show to talk about the past hard past, and continue to innovate.
Compared with the above "small actions", Musk's more important thing is to keep Tesla's stock price at a high level, because this is conducive to maintaining its image of the world's richest man and facilitating the sale of cars.
In fact, in order to maintain the stock price, Musk spares no effort.
For example, in the first quarter conference call, Musk made it clear that this year he will be able to achieve fully autonomous driving (FSD) safety comparable to or even surpassed by human drivers.
At the same time, he also proposed that a new model without steering wheels and pedals would be developed in the future. The car involves a lot of innovation, is designed for unmanned rental (Robotaxi) services, and is optimized for fully autonomous driving (FSD), ultimately achieving a significant reduction in cost per kilometer, and is expected to be mass-produced in 2024.
In addition, Musk does not emphasize the robot project - Optimus, he said, the ultimate value of Optimus is expected to exceed the car and FSD.
All of the above, Musk is nothing more than to prove that the future Tesla is worth a lot.
Therefore, Musk, a science and engineering man, is a real marketing master and a master of expectation management.
Now the core question is, can Tesla invest?
3. Is Tesla expensive?
In 2020, there was such a tweet: "By 2030, Tesla will achieve the goal of 20 million vehicles per year, reaching 50 times the output of 2019." At that time, Tesla's annual sales were less than 500,000 units.
As for the overall electric vehicle market, Musk expects that production will exceed 30 million units by then, and it may even reach this target within 5 years."
That said, Tesla will grab 67% of the share.
So, can Tesla grab this share?
According to the latest report released by Canalys, from the perspective of the global market, Tesla's global share in 2021 is only 14%, far below 67%. Volkswagen ranks second with a market share of 12%. SAIC, which includes SAIC, GM and Wuling, is in third place with an 11 percent share.
And if we refer to the mobile phone industry next door, which has a strong brand effect, the share of the first place Samsung is only 24%.
Assuming that when the future sales of electric vehicles reach 30 million, Tesla's share can reach 24%, that is, 7.2 million vehicles, and the unit price can still maintain $50,000, then the sales of 7.2 million vehicles correspond to the revenue of the automobile business of $360 billion.
Assuming that Tesla could maintain a net profit margin of 17.49% in the first quarter of 2022, then the net profit was $62.964 billion.
Given a price-to-earnings ratio of 15-20 times in the stable period, Tesla will probably be valued at $940 billion to $1.26 trillion.
Tesla's market value of $1 trillion is a valuation, which basically overdrafts future expectations.
And even if, as Musk said, Tesla can maintain 50% growth per year, reaching 20 million vehicles / year, it will take about 7 years. In these 7 years, what will happen to the world is still unknown.
For example, the current epidemic caused by the Tesla factory shutdown, as well as the shortage of supply chains such as chips, are enough for Tesla to drink a pot.
It's not hard to explain why Musk emphasized so-called strategic-level projects like the Robotaxi and Optimus projects on the conference call.
Because he most likely wants to create a positive feedback:
New project expectations - stimulate market capitalization rise - solidify the position of the richest man to increase brand influence - vehicle sales exceed expectations - continue to stimulate market capitalization rise.
Is this enhancement loop achievable? The core also depends on Musk's project control capabilities, such as whether fully autonomous driving (FSD) really surpasses humans. Will the Robotaxi really be able to mass-produce in 2024?
This, can only go one step at a time.
So, do you think Tesla can buy it?