I've owned a Model 3 for over 5 months now with almost 6k miles on it. All I can attest to is my personal experience and the experience of some friends who also own a Model 3. Performance and handling on this car is truly amazing. Autopilot (at least in my personal experience) has been excellent. That said I understand the limitations of Autopilot and keep cautious oversight when it's on. I've head a few minor issues with the car but they are very minor compares to how great the car has been. For example, my trunk is difficult to close. One of the panel pieces was bulging out but service ranger fixed that. And sometimes the car doesn't recognize my phone to start the car, so I need to start it from the app or use the key card. Hopefully Tesla will be able to iron out these issues, and other issues that early owners have had. But I went into it knowing that I'm an early owner and will face some issues on first gen, first year car. All first gen, first year cars have their share of problems.
But overall, I suggest those who seriously want to know what kind of car the Model 3 is, is to test drive the car. And to ask Model 3 owners about the car. The vast, vast majority of Model 3 owners I've talked with tell me the car is truly amazing.
I've been invested in TSLA since 2012. And there's always been people saying it's "over-valued", especially the media or folks who don't believe in Tesla's mission or potential. The best thing I've found is to work the numbers a few years out and see what you come up with. Sure, each person's forecasts will be different, but I base my numbers off of company forecasts and also Tesla's track record.
2020 deliveries: 1M vehicles (according to company guidance)
Average sale price per vehicle: 900k Model 3 and Model Y x ASP $42k = $37.8B. Plus 110k Model S/X x ASP $90k = $10B. Total revenue $47.8B
Gross margin = 25% (company guidance is 30%+ for Model S/X and "mid-20s" for Model 3/Y).
Gross profit = $12B
Operating expenses = $6B (note: It's difficult to predict operating expenses 3 years out, but Tesla will likely experience a lot of operating leverage as their sales will grow much faster than R&D and sales.)
EBITDA: $6B
P/E multiple: 30 (note: If targets are achieved in 2020, Tesla likely to be growing 50% year in revenue and would likely fetch a 30-40 P/E multiple.)
1. The above are my forecasts based on my beliefs that Tesla can reach their own forecasts of # vehicles delivered in 2020 and gross margins.
2. Each person has their own beliefs/ideas of Tesla. So, I'm not trying to convince anyone.
3. This model can be tweaked based on changes in # vehicles delivered, gross margin, or operating expenses... to name a few factors. So, it's not perfect but it gives the basics.
4. If you find someone bearish on TSLA and who thinks it's "overvalued", ask them to give you numbers like I have. Chances are they won't be able to.
5. The Model 3 will be the iPhone moment for autos. A sexy car that redefines transport and brings in high margins. This is why Tesla has potential to be the most valuable company in the world by 2025.
6. Tesla's moat grows as they execute faster than any other auto company. It's not appropriate to value TSLA based on other auto makers. It's like valuing AAPL in 2007 based off of Nokia and Blackberry.
Regarding the Fortune article, I'm not sure if that's an accounting "trick" as it's more of a risk factor. Tesla gave a resale value guarantee on loans starting over 3 years ago which had a clause that the buyer could sell back their cars to Tesla at end of 3 years for a certain guaranteed price. A very small % of people have redeemed this guarantee, showing that Tesla vehicles are holding their resale value very well. This shows there's low risk for a massive financial loss in their resale guarantees to leasing partners. Sure, there's always risk but the risk of Tesla vehicles suddenly losing a ton of value (much more than expected) seems quite slim.
Regarding Solarcity, yes I've seen reports saying they become subsidiary. But Elon has mentioned a few times that Tesla will assume all of Solarcity's debt.
"Gross margin is ~20% excluding ZEV"... where are you getting your data? Have you checked their latest Q3 earnings report?
Here's a quote from their Q3 shareholder letter: "Q3 GAAP Total automotive gross margin was 29.4%, while non-GAAP Automotive gross margin was 25.0% excluding SBC and $139 million of ZEV credit revenue."
(1) Tesla is aiming for 1 million cars in 2020. At an average price of $45,000/car ($42k for Model 3/Y but higher for Model S/X) that would be $45 billion a year in revenue. And they would still likely be growing fast at that point, with expansion in Europe and Asia.
(2) Current gross margin is 25%, but is trending up as they scale Model X. Model S/X gross margin is likely going to be 30% within a year. Tesla is targeting a gross margin of 25% on Model 3. This gross margin is excluding ZEV credits.
Tesla will soon use up the federal tax incentive ($7500 going to buyer) as they pass their 200,000th car sold in the U.S. But they still will have state and ZEV incentives that aren't depending on the federal government. There is risk with the new administration possibly delaying Tesla's autonomous driving plans.
(4) For cash flow analysis, look at Tesla's most recent Q3 financials. It was a breakthrough quarter, as they are selling 25k cars/quarter (100k cars/year run rate). Financials show that S/X gross profit now covers all operating expenses. And when you deduct depreciation expenses and stock-based compensation, Tesla is actually cash flow positive by a large amount (over $400M just last quarter). They used some of that cash for capex, but still have over $100M left over. Tesla's finances have turned a corner, and they look very positive. For Solarcity, they had good Q3 earnings as well. Looks like Solarcity will not impact cash flow for Tesla in Q4 as Solarcity look to be cash flow positive in Q4. Next year, Solarcity's cash flow is projected to be neutral.