Author: Paul Vigna

Source: Wall Street Journal

Elon Musk created a minor firestorm over the weekend, as well as nice little pop for his stock, when he sent out a tweet flogging his road map for the next phase of Tesla Motors: “Working on Top Secret Tesla Masterplan, Part 2. Hoping to publish later this week.”

After closing on Friday at $217, shares jumped as high as $266 on Monday. Why exactly he chose that time and medium to make that announcement one can only guess, and “Part 2″ notion is a reference to the “Master Plan” he outlined a decade ago in an August 2006 blog post, which was essentially what you see today: “an electric car without compromises.” With all that in mind, Barclays analyst Brian Johnson decided to tally up the balance sheet for Masterplan Part 1. His conclusion is sobering. The plan succeeded as a vision, he said, but has failed as a business – apart from the hype around the plan giving the company the ability to keep raising money (which, truth be told, is a pretty standard business model in Silicon Valley).

He gives Mr. Musk a B+ “as a ‘Popular Mechanics’-style science project” for the execution of the plan. “Tesla has largely, albeit consistently belatedly, delivered on its 2006 plan to launch a sports car, followed by a four-passenger sedan, followed by a more affordable car (in development, the Model 3), as well as sustainable energy products.

“The mere fact that he has delivered these three cars, while announcing the PowerWall, Powerpack, and a more affordable car, is enough to keep much of his fan club (including the new tech media) happy.”

However, the plan got a D for its financial acumen. The 2006 wasn’t just a Popular Mechanics wish list, it also resembled a traditional business plan. “In these terms, the plan has been a bust, only saved by the endless willingness of the market (so far) to provide over $6 billion of fresh funding.”  This is how he arrived at that D grade: The company has generated about $1.7 billion from selling its cars, plus another $500 million from zero-emission vehicle credits, for a total of $2.2 billion. But it has spent $2.1 billion on R&D, and $4.1 billion in capex, leaving it with a deep deficit. “Indeed, ex-reservations and fundraising, Master Plan Part 1 dug a $4.2 billion hole.”

A Tesla spokeswoman was not immediately available for comment.

Since it went public in 2010, Tesla has never turned a profit based on standard accounting. In 2013, it lost $2.26 a share, though on a non-GAAP basis, it earned 78 cents a share. In 2014, it lost $2.36 a share, but on a non-GAAP basis earned 16 cents a share. In 2015, it lost on both a GAAP basis ($6.93) and non-GAAP basis ($2.30). For 2016, it is projected to lose $3.52 a share on a GAAP basis, but earn 12 cents a share non-GAAP, according to data from FactSet.

Street consensus sees the company finally turning a GAAP-based profit in 2019 of $5.55 a share.

 

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