Tesla Motors Inc (TSLA) has never turned a profit, at least on a generally accepted accounting principles basis. Tesla, like many tech companies, likes to report non-GAAP earnings, which arguably give a more accurate view of the financials for early-stage, high-tech enterprises. But even by these more favorable metrics, TSLA is expected to post a per-share loss of $1.26 this fiscal year.
This is the constant struggle for Tesla (despite being one of the most innovative companies on the planet), as it has yet to deliver profits to its shareholders. Tesla stock continues trading almost entirely on its potential.
Eventually, investors will stop investing on faith and start investing on results. CEO Elon Musk knows this, which is why he is aiming for Tesla to be cash flow positive in the first quarter of 2016. You can be sure the market will hold him to that.
But with the company ramping up operations and bringing in employees left and right, Musk’s vision for profitability next year may be too ambitious, even for Tesla Motors.
By the Numbers
TSLA had 1,656 job openings at the end of last week, with positions available all across the globe. Many of the jobs were for Fremont and Palo Alto, but the electric automaker was also looking to hire in major metro areas across the globe: Milan, Paris, Mexico City, Luxembourg, Shanghai, Amsterdam, London, Antwerp, Berlin, Toronto and Dublin were just a few of the major cities with open positions.
Tesla’s current headcount lies above 14,000.
The company will have to really step up sales before even flirting with breakeven on an earnings or cash-flow basis. In the last five quarters, TSLA has never been able to lose less than $312 million on a free cash flow basis.
Even strictly on an operating cash flow basis, the company has never lost less than $28 million in the last five quarters, and losses actually accelerated to $203 million in the most recent quarter.
Sure, more deliveries of the Tesla Model X should help improve upon these numbers, but TSLA doesn’t exactly have a spotless record of reaching its stated goals. The debut of the Model X, for instance, came a full two years after the company initially planned to release it.
What makes Musk’s goal of positive cash flow by the end of the 2016 first quarter even more difficult is the fact that the cost of acquiring good talent is likely rising as well. After all, not only is Alphabet (GOOG, GOOGL) and Apple (AAPL) building electric and/or self-driving cars, so is Ford (F), and each company obviously wants the best of the best under their wings.
Recently, Musk even went so far as to call Apple a “Tesla graveyard,” saying it was where employees went if they didn’t cut it at his company. He later backtracked on the comments, but the dynamic is clear: The hunt for talent is on.
And while I think it’s necessary for TSLA to hire like mad at this early stage in its company life cycle, I also don’t think it’s entirely reasonable for Tesla to self-impose dates by which it need to be cash-flow positive — especially when those dates seem awfully unrealistic.
As of this writing, John Divine was long shares of AAPL stock. You can follow him on Twitter at@divinebizkid or email him at editor@investorplace.com.
