Morningstar

Record Deliveries, Meaningful Free Cash Flow for Tesla

We are raising our fair value estimate to account for an increase in vehicles delivered through 2027.

Securities In This Article
Tesla Inc
(TSLA)

Tesla delivered 56,065 Model 3s in the quarter, up from 18,449 in the second quarter. Total company deliveries were 83,775, more than triple the prior-year's quarter and a 105% rise from the second quarter of 2018. Tesla also reported adjusted diluted EPS, which excludes stock-based compensation expense, of $2.90, crushing consensus of a loss of $0.19. GAAP diluted EPS came in at $1.75. CEO Elon Musk reiterated second-quarter call comments by saying he expects the company to be self-funded going forward, retire rather than refinance upcoming debt maturities, and be free cash flow-positive other than for large debt payoffs. The Model 3's demand looks excellent with Tesla reporting order cancellations from the August 2017 reservation count of 455,000 of under 20%. Anticipation should continue to build for the company after it unveils the Model Y crossover next year, though it's not expected to be available until 2020. Most interesting to us is Tesla saying that over 50% of vehicles traded in for a Model 3 were vehicles priced below $35,000 when they were new. This suggests many consumers are paying more than normal to buy a Tesla Model 3, which is a good sign for brand equity and future demand.

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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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