Thanks to The Accountant
Let’s not forget to celebrate Tesla’s 2021 Performance.
Wow! A $31B company grew revenues by 71% during a year with supply chain issues
What? Revenues grew 71% but Operating Profits more than tripled from $2.0B to $6.5B? Amazing
Is this right? GAAP earnings per share grew more than 7 times the prior year? Yep, I checked . . .it’s true.
While they were busy driving operating results, they found the time to invest in the future by doubling their CAPEX spend from $3.2B to $6.5B.
Wait a minute! Tesla spent $6.5B on Capex and still had $5B remaining to paydown debt and increase cash balances? Are they printing money.
but Operating Profits more than tripled from $2.0B to $6.5B? Amazing
About what I figured.
While they were busy driving operating results, they found the time to invest in the future by doubling their CAPEX spend from $3.2B to $6.5B.
Wait a minute! Tesla spent $6.5B on Capex and still had $5B remaining to paydown debt and increase cash balances? Are they printing money.
Yes, they are printing money and according to The Gorilla Game that is not supposed to happen until well beyond the initial growth spurt.
Funny thing about discounted cash flow, every current dollar is worth a full dollar unlike future dollars which are uncertain in the best of cases. In the call they said they have enough cash to cover their CapEx plans.
One totally misunderstood aspect of the business is insurance. People are debating how much Testa will profit from insurance which shows a total lack of understanding of the business. I claim some knowledge having spent five years selling insurance. Insurance is a two part business, the most visible part are the insurance policies which is what most people know about. The truth about the policies is that if they break even they are doing just fine. There are competitive pressures that keep premiums down. With the data that Tesla collects they should have no problem meeting this goal and this part of the business is only of interest to investors because of the risk involved. The second part is the cash flow. Part of the premium goes to paying the expenses of issuing the policies, commissions, SG&A, taxes, etc. The rest is the reserve to cover claims and it’s called the Float.
Warren Buffett loves Float which is the reason Berkshire-Hathaway owns Geico and a reinsurance company. Buffett uses this OPM (Other Peoples’ Money) to invest. It’s leverage but much safer than bank loans or margin because the insured are very unlikely to ask for their money back.
So how about Tesla? It has been pointed out that making cars is capital intensive. True. It’s lovely not to have to go to capital markets for loans to fund Giga-Factories! That’s the true value of Tesla Insurance, The Float. Low cost of capital!
Being able to fund growth from internal cash flow is an investors wet dream!
Denny Schlesinger
Nice, but that’s January.
How about we discuss the October numbers?
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How about we discuss the October numbers?
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Sure, go right ahead! 