Plaid Sales Edge Tesla Q2 Deliveries Above 200,000
Q2 Deliveries topped 200k market consensus and my 187k est. A deeper look revealed weakness vs Q1 building for months. See how the numbers landed and what this means for Q2 revenue & profit forecasts.
Working the Late Surge
Tesla (TSLA) reported on Friday that second quarter deliveries jumped to an impressive 201,250. This topped market consensus for 200,000 and my estimate for 187,000 (which I suspect may be from slightly better results from the US, Europe, and new markets. We’ll see).
Results were up 9% versus the previous record of 184,877 for the first quarter and up 114% versus weak results last year when the newly launched Model Y was struggling to take hold as the then new Covid-19 pandemic was raging across the globe.
That said, there are indications that results were not as strong a beat as it seems versus the March quarter.
For starters, results only nudged over the mark late in the quarter thanks to the long delayed relaunch of the newly refreshed Model S which rolled out the first week of June (see Tesla's Pending China Sales and Model S Plaid—with an Asterisk on 6/7/21).
Even then, the reported 1,890 deliveries of Models S & X were down 82% y/y and down 7% versus the first quarter—both notably weak comps.
Tesla still benefited from incremental growth as Model Y sales continued to gain traction in the US and China, as well as expansion into new markets. Tesla also seemed to be less impacted by chip shortages which have increasingly impaired production for its largest competitors.
Nevertheless, growth in June slowed markedly as I expected—very unusual versus multiyear trends. June monthly deliveries of Models 3 & Y are indicated down 1% versus March at 107,896. If so, this is the first time since the Covid-hit months of June and March last year that deliveries fell versus the final month of the previous quarter.
Much of this was evident in weak trends I have been tracking in China where Model 3 sales have been struggling since last October. We’re still waiting for details, but Tesla exported more Made-In-China Model 3s in the second quarter than it could sell locally. This was only partially offset by sales of the new MIC Model Y which already outsells Model 3 (see Tesla's Troubles in China Are Heating Up on 5/12/21, Tesla's Pending China Sales and Model S Plaid—with an Asterisk on 6/7/21, What The Market Is Missing About Tesla's Rebound in China Sales in May on 6/10/21, and Tesla Q2 “Complications” on 6/28/21).
As a result, total China deliveries in the second quarter were down about 27% versus the first quarter (see Quick Look: Tesla preliminary Q2 deliveries in China look weak). This accounted for only 31% of total second quarter deliveries, down versus 38% in the first quarter and 34% last year.
That’s about as far as we can get until numbers from other markets roll out in the coming weeks, especially for Europe where I estimated deliveries up 14% versus the first quarter at 35,500.
Actual Profit in the Second Quarter?
Better deliveries signal higher revenue and, gasp, a potential for profit for the second quarter actually earned from operations.
If so, this would be a first for Tesla which has relied every quarter on significant contributions from energy credit revenue, deferred revenue, accounting maneuvers, and unusual items to generate every profit it has ever reported. Tesla also adds back stock-based compensation to EBITDA, which exacerbates already meaningfully understated credit risk; e.g. lower than actual debt/EBITDA.
In the first quarter, Tesla reported net “profit” of $428 million on revenue of $10.4 billion (see Tesla Goes To Record Extremes To Create Q1 "Profits" on 4/28/21). This can be traced to a record $518 million from energy credit revenue, $79 million from deferred revenue from prior periods, $145 million saved thanks to an accounting change on interest expense, and a $101 million gain from the sale of Bitcoin (BTC). These items altogether came to $843 million which masked Tesla’s actual net loss of $415 million—Tesla’s highest loss since Q220, as similarly adjusted.
I expect most if not all of these items to boost second quarter results as well. However, Tesla has lost most of its biggest revenue and profit booster since Stellantis NV (STLA) announced it no longer will buy its energy credits (see Tesla: So Long, Free Money on 5/6/21). I pegged $100 million in boosted revenue from energy credits and unusual items for the second quarter versus $523 million last year. That’s a big hole to plug.
Meanwhile Tesla will get help from increased prices on all models and from selling nearly 2,000 expensive Model S, including several hundred of the new Plaid flavor with a price tag up to $150,000. That will move the needle on average price per car and gross margin.
So I estimate reported second quarter revenue at $11.03 billion (up 83% y/y), with net income at $50-100 million versus $104 million last year and EBITDA at $1.52 billion (up 26%; 13.8% margin).
We don’t have long to wait. Tesla is expected to report second quarter results on or near July 22nd.
Tesla's 5.3% senior notes due 2025 inched lower since my last report but continue to trade near the call price at 103.3 (-0.81% ytw; -6 bps). This offers no credible upside, particularly given good odds that the bonds get refinanced soon and likely at an inordinately cheap, unappealing yield (see why in Tesla Goes To Record Extremes To Create Q1 "Profits” on 4/28/21). There’s perhaps 5 points or more in downside risk in the old or refinanced bonds if Tesla’s operations & financial condition deteriorate as I expect. The bonds remain excessively valued versus, for example, even the BoA High Yield general index yield of 4.01% as Tesla is a weak B3/BB- issuer with “CCC” quality metrics on its underlying core profitability and leverage. Maintain "Underperform."
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