Autonomy Day brings flat cash flow expectations to Tesla

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Tesla's Autonomy Investor Day Monday received somewhat of a collective shrug from the market Tuesday. Despite promises of a robotaxi fleet and cars with a net present value of $200,000, the stock is only up a touch at pixel -- 0.88 per cent to $264.80.

Much has been written about the investor event in the past 24 hours, including in the sacred salmon pink of the FT, but there's another angle to the themed showcase which has been less touched upon: further muted cash flow guidance from Tesla.

During the four-hour sesh, which largely explored Tesla's new technology, Elon Musk had this to say about the cash flow cost of launching a new fleet of brainy cars (transcript courtesy of Sentieo):

Well, we're aiming to be approximately cash flow neutral during the fleet pullout phase. And there, I expect to be extremely cash flow positive once the robotaxis are enabled, but I don't want to talk about financing round. It's difficult to talk about financing rounds in this venue, but I think we'll make the right moves. I think we'll make the moves we think we should make, yes.

He later clarified following another question from an attendee:

No, I just think between now and when the robotaxis are fully deployed throughout the world, the sensible thing for us is to maximise rates and drive the company to cash flow neutral. Once the robotaxi fleet is active, I would expect to be extremely cash flow positive.

So no significant cash flow until at least the end of 2020, when Tesla hopes to launch its self-driving taxi fleet offering. In last quarter's update, Tesla promised to generate positive free cash flow after the first quarter (results due tomorrow), so this does represent a change of expectations -- "neutral" is different to "positive" right? Even if when cash flow does turn positive it will be positive in the extreme.

And extremely positive cash flows might come even later if pesky regulators slow down the unstoppable march to autonomous, which analysts at Needham, Goldman Sachs and Morgan Stanley all cite as a potential blockage for Tesla in notes Tuesday.

For instance, here's Adam Jonas of Morgan Stanley:

It is our understanding that robotaxi fleet deployment will ultimately be rolled out on a city-by-city basis in co-ordination with local transport authorities and other regulatory bodies. Tesla’s autonomy investor day did not provide any specific details of such plans at the metro level. We note that moral/legal/regulatory variables represent an impediment for all companies with plans to deploy autonomous fleets at scale

There's also the potential for an internal delay to the roll out. Which given Tesla's proclivity for over-promising, is not out of the question.

What this means for this stock-du-jour is anyone's guess. Goldman took the opportunity to downgrade its earnings-per-share for 2019 from $1.88 to $0.89, but somewhat bafflingly kept its price target of $210. Others were equally cautious. RBC — price target $200 — said it has "doubts on proposed timing” of the launch, while Needham believes that, while impressed by Tesla's demonstration, its technology does "not offer a sustainable competitive advantage over other auto OEMs, as self-driving / ADAS technology will be made available by chip, software and Tier-1 suppliers”.

First-quarter earnings are due after the bell Wednesday. Expect more clarity about future profitability and cash flows then. And please, no bone-headed questions or it'll be YouTube's turn, and YouTube analysts are not quite as reliable as they used to be.

Tesla declined to comment for now. We will update the post if they send anything later.

  1. The great Tesla solar roof distraction
  2. Volkswagen/Tesla: errr
  3. Walmart sues Tesla over dodgy solar service
  4. Tesla’s fake buyout, one year on
  5. Tesla’s second quarter, charted
  6. Tesla’s latest security offering: cars
  7. FT Alphaville ordered a Tesla Model 3
  8. Tesla executives aren't sticking around for a record quarter
  9. Tesla: significant other
  10. Tesla strikes out on its own
  11. The curious blocking of elonmusk.today
  12. ARK Invest's effective Tesla model
  13. Finally, a Tesla Model 3 for $39,900
  14. Tesla's shifting capital raise narrative
  15. Tesla returns to the capital markets
  16. Three questions about Tesla's first quarter results
  17. The Tesla Twitter war, charted
  18. Tesla and Panasonic hold fire on the Gigafactory
  19. Tesla's dire deliveries
  20. Elon Musk reveals his favourite cryptocurrency
  21. Why Tesla is such a great place to work [Update]
  22. Tesla's parallel universes
  23. Tesla's number one retail investor begins to doubt himself
  24. Tesla's war against whistleblower Martin Tripp
  25. The Tesla semi-truck is ready to reserve [UPDATED]
  26. Tesla: “Surprise! You may not be fired"
  27. German watchdog slaps down Tesla's pricing practices
  28. How much does Tesla have in the bank?
  29. Tesla: 'Surprise! You're fired!'
  30. Meanwhile, just past midnight on the West Coast...
  31. Stuff Elon says, SEC compliance edition
  32. Tesla's profitability: how every little helped [Update]
  33. Stuff Elon says, (inevitable) bitcoin edition
  34. If it has to be said out loud...(Tesla edition, part deux)
  35. Finally, a Tesla Model 3 for $35,000*
  36. Stuff Elon says
  37. All the better to share you with
  38. A message from the dear leader to the stakhanovites
  39. Tesla's Q3, the mea culpa
  40. Missing: Tesla's full self-driving option
  41. Tesla's full self driving: compare and contrast
  42. Meanwhile, at 1.22am on the West Coast....
  43. The SEC vs Elon Musk [Updated]
  44. Tesla needs cash, says Morgan Stanley
  45. Calling all suburban Bond villains
  46. If it has to be said out loud... (Tesla edition)
  47. Tesla: ladies, liquor and leverage
  48. Taking Tesla private
  49. Change of control: How would Tesla's creditors fare in a LoLBO?
  50. Tesla going private? We have questions...
  51. Tesla: a strange case of credits [Update]
  52. Je suis Montana Skeptic, part deux
  53. Je suis Montana Skeptic [Update]
  54. Just how many dimensions of chess is Elon Musk playing?
  55. A brief history of Tesla and the number 500,000
  56. About that Tesla short squeeze...
  57. Tesla: debt deterioration meets equity exuberance
  58. Selling an unintelligible dream at Tesla (an update)
  59. Selling an unintelligible dream at Tesla
  60. Elon Musk plays to human fantasy, and the world plays along
  61. Raise eyebrows one day, and liquidity buffers the next
  62. “Great quarter guys!”
  63. Elon's plea, an interpretation
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