Last Thursday, Tesla released its latest annual report on Form 10-K with the SEC.
And after going through all 98 pages of the filing, analysts at Barclays found three big problems, which reaffirm the firm’s view of Tesla’s growth path.
Barclays thinks shows that progress is being made at Tesla, though things are “far from rosy.”
- Tesla is not only selling “build to orders” cars, but also selling cars available for immediate sale. While elevated finished goods inventory is somewhat a function of in-transit vehicles, it is also a reflection of a new strategy of holding new cars available for immediate sale (beyond loaners and showroom models), as well as potentially used cars. This is a departure from the past — indicating that Tesla production is not as much of a build-to-order model as it had been historically.
- Capital spending has been for Tesla Model S and Model X upgrades — not its big gigafactory. Capital spending data (as seen in “Construction in Progress” PP&E) indicates that Tesla is spending ahead of demand. However, with only $US107mn of spend on the gigafactory to date, plus minimal spend on gigafactory/Model 3 reflected in R&D and SG&A, it is yet another reminder that Tesla has yet to realise the uptick in spend associated with the gigafactory and Model 3.
- Customer deposits now include pre-delivery prepayments. Whereas the customer deposit line has historically been a gauge of order activity, the inclusion of prepayments now makes it more difficult to gauge underlying order activity.
On the bright side, Barclays said that Tesla is making progress on some key product milestones, as stock grant data shows that the Model X Beta prototype is complete, while the Model 3 Alpha prototype is considered “probable of achievement.” Barclays has “Equal Weight” rating and a $US190 price target on Tesla shares.
This report on Tesla comes after analysts at Bank of America said last week that Tesla could be facing a huge collapse, writing: “We believe Tesla has seemingly managed to offset a steady stream of negative news and weak financial results by issuing long-term targets that, in our view, are often quite difficult to fathom.”
Last week, Tesla’s Model S was named the top pick by Consumer Reports for the second year in a row.
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