Tag Archives: TSLA

Piper Jaffray, Tesla and Creative Analysis

Piper Jaffray stock analyst, Alexander Potter, in what may be the most idiotic stock research report I’ve ever read, issued a buy recommendation on Tesla (TSLA) stock that is completely devoid of any rational arguments or coherent thought:  “before investors can follow our advice and buy TSLA shares, they need to employ a ‘creative’ valuation methodology…”  Anyone who suspends disbelief and reads that report is more dumb for having done so.

Creative valuation methodology?  I had to read that 3 times before I could believe that he put that in the conclusion of his report.  That sounds like something used in conducting human investment analysis tests on stock analysts who have taken LSD.  The CIA might be interested in experiments like that.

While issuing his bullish assessment, Potter at the same time reduced his FY 2017 earnings estimate from $0.42/share to a loss of $4.83.  I shocked that this analyst was forecasting positive net income at all.  But a reduction in an earnings forecast of that magnitude would seem just too embarrassing to report.  Maybe Potter was indeed experimenting with LSD when he was thinking about his investment thesis.

As it is, TSLA uses “creative” accounting methodologies in recognizing “revenues” that would make Amazon’s Jeff Bezos blush with embarrassment.  The Company burned over $1.5 billion in cash in 2016 in its business operations.  This was covered by the most permissive credit and equity markets in U.S. history, which handed over a net $2.7 billion to the Company in  2016.

While the Piper “analyst” claims to have gotten to know the Company because he drove a Tesla around for seven months and met with Tesla’s IR team, he apparently eschewed real fundamental analysis in favor of “creative” methodologies.  The fact that TSLA’s actual vehicle deliveries declined in Q4 from Q3 was creatively removed from his hockey-stick earnings projections.

It will get really interesting  for Tesla when the  tax credits for the first 200,000 vehicle buyers expire. TSLA’s sales are being subsidized heavily by the U.S. taxpayer and yet the company has lost $1.5 billion on GAAP net income basis in which the “net income” was derived using a highly “creative” interpretation of GAAP accounting.   TSLA’s buyback guarantee, in which it has guaranteed the resale value on vehicles sold or leased up until August 2016, has already created a $2.3 billion future liability. Given the plunging prices in the used car market, it is likely that the true level of that resale guarantee is closer to $4 billion.

TSLA delivered 79k cars in 2016 while Ford delivered 2.6 million.  Yet the stock market creatively assigns a market value to TSLA that is about $5 billion higher than Ford’s.  It’s debatable whether or not Tesla will be able to start delivering its highly touted Model 3 before mid-2018 given TSLA’s track record of failure at meeting delivery schedules.

Quite frankly, what’s more amazing than Tesla’s ability to bamboozle investors into throwing more money at the Company’s cash inferno is the willingness of stock “analysts” like Piper’s Potter to release “creative” research reports that read more like “The Onion” than a responsibly prepared business model and projected financial analysis.

Tesla’s GAAP “book value” is listed at  $4.7 billion, or $32/share. Of that $4.7 billion, $3.4 billion is cash that will soon be burned away, leaving $1.3 billion in book value or $9/share. If we mark to market the car value guarantee, Tesla’s book value goes negative.  If we mark to market its $5.9 billion in PP&E, the book value becomes catastrophically negative.   The shorts who defy Elon Musk’s childish Twitter taunts and remain short will eventually make a fortune when reality inevitably seizes the stock market and takes “creatively” valued stocks like Tesla down their intrinsic value, which is close to zero.

AMAZON.CON – ROFLMAO

If this is the case, the true reality beneath Bezo’s fraudulent accounting had to have been horrific:

Amazon’s quarterly profit misses estimates, shares tumble

From Reuters – LINK:  

Amazon.com Inc reported a lower-than-expected quarterly profit on Thursday as expenses rose and the company provided a disappointing fourth-quarter revenue forecast.

The growth of AMZN’s cloud business is rapidly slowing down.  This has been one of my key arguments about the insanity of the market cap attributed to AMZN’s cloud business. It’s tiny compared to AMZN’s overall revenues.  And competition in the cloud space is going to become ferocious as Microsoft, Google and Oracle begin to really flex their muscles.

The only question left for me is to determine which between AMZN and TSLA is biggest Ponzi scheme in history.  AMZN is maybe a $10 stock and TSLA is likely worth $2.

Tesla Reports Another Fraudulent Quarter

Tesla created massive confusion in the financial reporting and analyst community by allegedly coming clean and report actual GAAP quarterly financial results for its 3rd quarter.  But of course, just like the entire U.S. Banana Republic, the use of extreme obfuscation, deceit, propaganda and lies once again is the norm with Tesla’s quarterly report.

TSLA’s use of revenue recognition, deferred revenue and operating leases and its definition of “free cash flow” are enough to create a dedicated forensic accounting case study at the University of Chicago Graduate School of Business, where I did indeed nearly ace a forensic accounting course.

I don’t have enough time to lay out all of specifics and I’m not getting paid to write this blog post – but suffice it to say that several items in Tesla’s financials this quarter serve as big red flag warning flares.  Of course, the market probably won’t care, as it seems that the market cap of a company’s stock is directly proportional to the grandiosity of the Company’s accounting abuse and fraud.  And there’s no one in DC to enforce the laws already in place that are designed to prevent this fraud because the guys running these companies make substantial contributions to the Establishment politicians – just ask Jeff Bezos and Hillary Clinton.

But I’ll point out some of the glaring problems in TSLA’s “GAAP” accounting based on cursory sleuthing.

First and foremost, in his description of the results for the quarter, Musk stated that “residual lease risk” exposure was 32% of deliveries, down from 36% in Q2.  But this is a highly deceptive metric.  IN FACT, deferred revenue as a percentage of total revenue for the quarter soared to 61.4% from 44% in Q2.  Deferred revenue is the amount of revenue that is subject to “residual risk” from leasing financing.  This number is found on the liability side of the balance sheet.  The deferred revenue liability account went from $558 million in Q2 to $1.4 billion in Q3.   This is a huge jump in amount of risk-infused lease-based financing used to generate sales.

In and of itself, using deferred revenue accounting to this degree is highly subjective and susceptible to fraudulent risk assumptions.   But the fact that Musk tries to mask the truth by using a bogus metric to make it seem like TSLA’s exposure to the residual risk embedded in the profoundly questionable leases used to generate revenues and unit sales is a loud signal that there’s fraud embedded in TSLA’s “GAAP” financials.

When you look at what is being reported as  “GAAP operating income” consider that a huge proportion of that income is subject to the risk of coming back at the company in form of “one-time” GAAP charges which result from having to reverse out a large portion of the “GAAP” revenues when the value attached to the cars that will likely come flying back at TSLA when the leases expire is substantially lower than the amount guaranteed by TSLA.     This “GAAP” presentation makes a farce of bona fide accounting standards.

Another huge red flag is the huge jump in accounts payable.  In June, accounts payable were 87% of revenues.   But by September, accounts payable were more than 100% of revenues.   The only reason TSLA would stretch out its payables like this is if it needed the cash.   Not paying bills for a company like TSLA is a source of free financing.   But this is an extreme slow-down in bill payments.  There’s no way to know for sure what’s going on, but something is wrong.

A third huge red flag is the way in which Musk throws around the term “free cash flow.”  His definition is just as fraudulent as Amazon.con’s definition.  At this point in time, because TSLA has only released an 8k which does not contain an GAAP statement of cash flows, there’s no way to know the amount of free or negative free cash flow attributable to TSLA’s operations.  That is, “free cash flow” in the context of the deceitful manner in which TSLA’s financials are presented.

Having said that, Musk states in the 8k that TSLA generated “positive free cash flow.”  No, Elon, you did not.  Buried in the 8k is a section titled,  “selected cash flow information.”  He lays out his definition of “free cash flow” showing $176 million defined as cash flows provided by operating activities less capex.   The GAAP definition of free cash flow, however, also includes debt repayment and other sundry items that drain cash.  We won’t know the full extent of these items until the 10Q is released.

However, TSLA reported that it payed down $178 million on its borrowing facilities.   Using GAAP free cash flow, this takes Elon free cash flow negative.  Furthermore, if TSLA had maintained accounts payable at 86% of revenues, this would have sucked another $324 million of cash from TSLA’s operations, leaving the Company with a free cash flow deficit of $326 million.

There’s a lot more going on with TSLA’s operations that is deceitful, if not outright fraudulent.   This is just the “low hanging fruit.”   At some point the capital markets will stop funding this fraud and that’s when the fun begins.   Of course, by that time insiders will have sucked $100’s of millions of wealth out this Company that will never be retrievable.  In just the last 12 months, insiders have unloaded 4.1 million shares, or roughly $860 million worth of stock.   Oh wait, there was one open market purchase of  stock by an insider of a whopping 1,394 shares.

It’s my view the idiotic shareholders who give money to TSLA deserve what they’ll get eventually.  But then again, many of them are sheeple who have placed trust in financial fiduciaries, like pension managers and investment advisors, to invest their savings.

Gold And Silver Investors Smell Central Bank Blood

The mainstream narrative that gold/silver moves inversely with stocks because the metals are a “risk off” trade has imploded. Since late January, when the S&P 500 began to “recover” from its 11% New Year’s plunge, the precious metals and the stock market have been rising in correlation, with the precious metals significantly outperforming the stock market since mid-February:

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As you can see, the move in the metals accelerated since the BREXIT vote.  The latest Central Bank induced market spike has pierced the boundaries of absurdity:

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The immediate “snap-back” in the stock market after a two-day post BREXIT vote 5.3% plunge in the S&P 500 has violated the sensibilities of all but the most idiotically apologetic stock market perma-bulls (Mark Zandi, Cramer, Suze Orman, Liz Sonders etc).

It’s clear that the Central Banks are desperate to keep the stock markets from plunging, despite the fact that the deterioration of economic and financial fundamentals globally – including and especially in the U.S. – has begun to accelerate.

Smart investors smell Central Bank blood and the latest market intervention just reeks of desperation.  This is the dynamic that is propelling gold and silver higher, despite the preponderance of bearish calls from all corners of the market, including many precious metals market analysts.

The Central Banks went overboard with the latest round of stock market intervention.  The recent increased movement of investment funds from fiat-based “assets” into gold/silver reflects the more widespread perception that the Central Banks are trapped by long series of bad policy decisions.  The obvious conclusion is that Central Banks are now forced to hyperinflate the money supply or face a total stock market collapse.

Of course, the hyperinflation of currencies will do nothing to stimulate real economic growth or fix the completely unmanageable global debt and derivatives problem.

Perhaps the poster-child example of the damage done to the markets by radical Central Bank intervention and manipulation is Tesla (TSLA).  If not Amazon, TSLA is perhaps the greatest stock Ponzi scheme in U.S. history.  Aside being riddled with total accounting fraud, TSLA is technically insolvent and overloaded with debt that it will eventually impale itself on.  It was reported today that the test driver in a TESLA self-driving car was killed when the car crashed into tractor-trailer at high speed.  The test-driver was watching a movie in the car.  At least he didn’t know what hit him.

TSLA stock in a freely trading market would have been decimated today on that news.  But today it’s trading unchanged from yesterday’s close.  The only bigger tragedy than this fact is the death of someone who put their faith in Tesla.

Tesla would not exist in its present form if it weren’t for the extreme Central Bank intervention and manipulation of the capital markets.  It certainly would not have had the capital to work on an auto-piloted car given that its core business model lost nearly a billion dollars last year. This is the type of “blood” in the streets to which the price of gold/silver is responding.

If  you review a long term graph of gold/silver vs. the S&P 500 (on your own), you will note that  best price performance periods for the precious metals have been preceded by a short period of time in which the metals are highly correlated to the upside with the stock market…

MSJ is a great resource!!!  – Johnny – You can subscribe to my Mining Stock Journal here: LINK – or my Short Seller’s Journal here:  LINK.    I am currently offering new MSJ subscribers all of the back-issues (March 4th debut).   I also offer a 50% discount on the second subscription to anyone who subscribes to both (email me for the discount link).

I must say that Tesla is a perfect example of how screwed up the stockmarket is. Only bad news for the company like the purchase of the bankrupt company, Solar City. Wheels falling of the cars and bad suspension on cars that are almost new. Death accidents with malfunctioning auto pilots. Risks of lawsuits due to this. And the stock goes up- how retarded is this? No fundamentals matter at all. I´m really enjoying the silver rally and I bet you do as well. All the best from the negative interest rate Sweden.

The Latest Short Seller’s Journal: The Greater Fraud Contest

The stock I feature in the latest issue of the Short Seller’s Journal was down 3.5% today. The company’s revenues are highly correlated with the GDP,  which is going negative rather quickly.  This stock easily has another $20 of downside by the middle of the summer, which would be another 33% from here.

Icahn has always been one of the shrewdest investors out there. I doubt he’s betting on anything less than a 35-50%% decline. The SPX could drop 50% tomorrow and still be overvalued. Based on historic GAAP accounting and historical valuation metrics, the S&P 500 is intrinsically worth 500-800.

I am working to determine whether TSLA or AMZN is the biggest stock fraud in the history of our markets. Both companies aggressively implement the same business model: charge the end-user (buyer) a price below the all-in cost of getting the product from the factory floor to the customer’s possession for the sake of generating revenues.

AMZN stock has run up $72 to $673 (Friday’s close) since its earnings were reported last Thursday. The Company continued with the same highly misleading accounting in Q1 2016 and the misleading presentation of its numbers that I layout in Amazon.con.  AMZN burned through OVER $3 billion in cash during Q1 2016 despite making the claim that it generated $5 billion of free cash flow.

Of all propaganda-promoting publications, the Wall Street Journal featured a story last week which outlined the ways in which Elon Musk (TSLA founder) moves around cash among TSLA, Space-X and Solar City, depending on which entity recently raised money and which entity needs money. Pure Ponzi scheme.

TSLA is now down over 6% from when I originally recommended shorting it on March 27, despite the fact that SPX is slightly higher. I reiterated the recommendation in last week’s Short Seller’s Journal issue – it’s down 17% since then.

The S&P 500 is getting ready to roll over again and edge off the cliff.  It’s not a question of “IF” but a matter of “WHEN.”  In the latest Short Seller’s Journal I present three great short ideas, including a not well known company who’s revenues are highly tied to GDP activity. This stock could easily shed $30 over the next 3-6 months.  Subscribers to the SSJ gain access to the Mining Stock Journal for half-price (and vice-versa).  You can access the SSJ by clicking here:  Short Seller’s Journal.

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