Tesla reports disaster financials

A shrinking automaker, with falling profits, mostly from the government

Tesla reported second quarter financial results after the market closed on July 23, and they are a disaster.  Here are the highlights:

Automotive revenue:  Down 7% from last year

Earnings per share:  Down 43% from last year

Here is the kicker:  “Automotive regulatory credits” were $890 million.  That’s 60% of total net profit, which was $1.478 billion.  

Those “automotive regulatory credits” are what other automakers are forced to pay Tesla because governments around the world say so.  It’s like Burger King having to pay KFC $2 per burger sold.  Atrocious.

Folks, Tesla’s financial situation is a disaster.  Tesla’s car business is shrinking, profits are collapsing, and 60% of the remaining profits come from government edicts. 

$0.43 per share annualizes to $1.72.  Add a most generous 25x multiple on this, and you have a $43 price target.  This of course assumes that Tesla resumes some sort of healthy growth.  At the current rate of decline, this business shouldn’t deserve more than a 5x multiple, or $9 per share.  

For the Tesla bear case, listen to this interview from approximately one quarter ago, conducted by Chris Irons (“Quoth The Raven”) interviewing Mark Spiegel: