For Tesla, capital expenditures are crucial financial outlays required to maintain and expand its business operations. There's also a possibility of Tesla licensing its battery and software to other companies. In the same quarter, the company generated $1.9 billion in free cash flow, leaving plenty of cash around for the next quarter and the rest of 2021. In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity. The valuation pundits and some analysts value Tesla as an automaker. Still, Jonas is forecasting Tesla's free cash flow to be negative $1 billion dollars for the second quarter. As of 2020 4Q, Tesla achieved a record high of $2.8 billion in free cash flow on a TTM basis, a new record for the company since its inception. Now, the tables have turned and legacy automakers are trying to make up for lost time. Cash on hand or cash position as depicted in the chart above refers to highly liquid current assets, including cash and cash equivalents disclosed in the balance sheets. Tesla inventory turnover and management analysis, Tesla has been losing money in this business segment. While Tesla may have been making some profits in recent quarters, it’s a different story when it comes to cash reserve or cash on hand in the balance sheets. "We forecast Tesla 1Q19 free cash flow to be negative $600 million driven by a sequential decline in profit and working capital leakage," said Adam Jonas, an analyst at Morgan Stanley. Most parties want to know about Tesla’s cash position, and they are eager to find out whether the company has enough liquidity to run its businesses. The valuation would change drastically (on the higher side) if we increase the PE multiple forecasts. Seven years down the line, Tesla is the largest automaker by market capitalization. Going forward, Tesla will be having enough cash in the bank to pay for its business expenses and invest for future growth. Also, the core automotive business would continue to grow. The automotive industry has come a long way since 2014 when Fiat Chrysler’s former CEO Sergio Marchionne referred to Fiat Chrysler’s electric 500e and said, “I hope you don’t buy it because every time I sell one it costs me $14,000.” Most automotive industry experts scoffed at the idea that Tesla could survive selling electric cars. Tesla cash on hand has been sufficient to cover its cash outflow in most reporting periods, judging from the surplus of cash on hand after accounting for negative free cash flow. Given Tesla's high growth, it might continue to trade at elevated valuations in the foreseeable future. Stock Dividend Screener is optimized for reading, learning and studying. Instead, Tesla far exceeded expectations, generating free cash flow of $881 million in the third quarter and earning a $312 million profit. Even Ashwath Damodaran, known as the “dean of valuation” valued TSLA stock way below what it currently trades at. In addition, restricted cash includes cash received from certain fund investors that have not been released for use by us and cash held to service certain payments under various secured debt facilities. Tesla's balance sheet is currently home to more than $12.4 billion in long-term debt. The direct method of forecasting cash flow relies on this simple overall formula: Cash Flow = Cash Received – Cash Spent. Here’s how Tesla could become the next $2 trillion company. This has resulted in the growing cash reserves in Tesla’s balance sheets to the tune of $19 billion as of 2020 4Q. According to investopedia, cash flow from financing activities focuses on how a firm raises capital. Tesla annual free cash flow for … From a TTM perspective, we can clearly see that Tesla’s free cash flow did improve tremendously from 2019 and onward. Therefore, Tesla’s cash outflow consists of both operating cash flow and capital expenditures. However, Tesla produced only about $1.9 billion of free cash flow in 2020 Q4. In the balance sheet, Tesla’s capital expenditures are treated as investment rather than expenses. And its free cash flow of $2.8 billion was up 158% from a year earlier, a dramatic turnaround from 2018 when Tesla was burning through cash and in danger of running out of money. However, the trend has reversed in favor of Tesla when the company managed to be cash-flow positive consecutively many quarters from 2019 to 2020. How did Tesla manage to grow its cash on hand to $19 billion when the respective free cash flow was only $1.9 billion? Copyright 2013-2021 by Stock Dividend Screener. Home Homepage Membership Levels … Indeed, among the sell-side analysts following Tesla, just a few report forecasts for free cash flow. Quietly reducing warranty reserves TSLA DCF and Reverse DCF Model - Tesla Inc : discounted cash-flow fair value calculator: view the intrinsic value of the stock based on user-defined parameters. Here is a snapshot that shows examples of Tesla cash and cash equivalents as well as the current portion of restricted cash disclosed in the Q4 2020 financial statement: Coming back to the chart above, Tesla’s cash on hand has basically been trending upward since 2015. Financial figures in all charts and tables were obtained and referenced from quarterly and annual filings available in Tesla Investor Relations. Meanwhile, its trailing operating cash flow is just $2.6 billion. While Tesla may have been free cash flow positive in recent quarters, the amount does not seem to be large enough to grow Tesla’s cash position to the existing level. We maintain certain cash balances restricted as to withdrawal or use. For example, Tesla obtained a total of $4.6 billion of cash in 2020 4Q alone. The operating cash flow can be a positive or negative number, depending on whether Tesla’s business operations can generate a positive or negative operating cash flow. Tesla Inc. earned its first-ever profit in the first quarter of a year, but the electric-car maker burned through cash again and backed off its guidance for how the rest of the year will shake out. In this case, the operating cash flow will be a negative number. Free Cash Flow Yield: 7.3%: 4.9% . Readers, investors, analysts, bloggers, visitors, researchers, writers, or academicians are highly encouraged to use, copy, quote, distribute, duplicate, modify, edit, upload, download, share and link any materials on this webpage such as the charts, snapshots, texts, paragraphs, etc. In the snapshot above, Tesla raised as much as $5 billion of cash through common stocks issuance in Q4 2020. Tesla’s cash consumption or cash burn comes from two areas: (1)operating activities and (2)capital expenditures. This high-expense and high-cost business environment often mean that Tesla needs a very large cash position to deal with the expanding business and thus, the growing working capital requirement. A negative figure indicates when the company has paid out capital, such as retiring or paying off long-term debt or making a dividend payment to shareholders. According to the chart, Tesla’s cash on hand has been more than enough to cover what the company has spent in the last 5 years. A rise of 160 percent doesn't look tough for Tesla stock based on the momentum. With an increasing working capital requirement, it seems natural that Tesla’s cash reserve or cash position will also be increasing. Tesla’s record amount of free cash flow generated in 2020 has been primarily driven by the unprecedented Model 3 and Model Y delivery throughout 2020. Moreover, in the third quarter, Tesla generated $1.395bn of free cash flow. Forecasting cash … The answer can be found in cash flow from financing activities. Tesla shares, down about 22% for the … Tesla's free cash flow in 2017 was negative $3.5 billion -- worse than its negative free cash flow of $1.4 billion in 2016. Our restricted cash is comprised primarily of cash as collateral for our sales to lease partners with a resale value guarantee, letters of credit, real estate leases, insurance policies, credit card borrowing facilities and certain operating leases. GM Global Sales & Market Share You can credit back to this page by a link or a mention of the website. The polarization is best visible in its stock price forecast for 2021. As part of the policy, we may invest a portion of such cash in certain specified alternative reserve assets. Tesla’s cash outflow in the chart is basically the same as the quarterly free cash flow which we discussed earlier. Ford Vehicle Deliveries EPS instead grew 95.1% year over year and by 5.3% sequentially to $0.80. While Tesla’s cash position has been increasing over the years, is it sufficient to cover the ever-increasing cash consumption? Be reminded that debt repayment and refinancing do not fall into the operating activities of the company and hence, it’s not part of the cash outflow discussed here. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy. While using this site, you agree to have read and accepted our terms of use, cookie and privacy policy. Between 2019 and 2020, Tesla’s free cash flow totaled $1 billion on a TTM basis in several quarters, suggesting that the company’s business operations have got more efficient in terms … To analyze Tesla’s cash consumption or cash outflow, we will look at the company’s free cash flow which is plotted in the following chart. In general, free cash flow is derived from the following equation: Free cash flow = operating cash flow – capital expenditures. Basically, the automobile business is an asset-heavy operation that requires lots of cash or working capital to operate. Tesla’s market capitalization is below $800 billion and it would need to rise around 160 percent to hit a market capitalization of $2 trillion. 1. As such, I have created the trailing 12-months (TTM) chart above to smooth out the bumps and to clearly show you the improvement in Tesla’s free cash flow. Tesla generated $1.4 billion in free cash flow (FCF) in Q3, up sharply from $418 million in Q2 and $371 million in Q3 2019. Although Tesla’s free cash flow had been mostly negative from 2015 to 2018, the company had even bigger cash reserves to support the cash shortfall in most financial periods. ... Wright’s Law has forecast cost declines successfully in more than 60 technologies ranging from solar power to ... ARK assumes that Tesla will invest any incremental cash … And here’s what that cash flow forecast actually looks like: Let’s start by estimating your cash received and then we’ll move on to the other sections of the cash flow forecast. Currently, Apple is the only company that has a market capitalization of $2 trillion. Tesla free cash flow for the twelve months ending December 31, 2020 was, a year-over-year. In January, General Motors (GM) said that it would only sell zero-emission cars by 2035. For example, cash on hand in Q1 2015 was roughly $1.5 billion but the amount has since gone higher and reached more than $19 billion as of Q4 2020. The growth in cash reserves is attributed to the expanding working capital requirement when the company is actively growing its business. How Much Money Has Ford Spent On Research and Development? Amazon and Microsoft are strong contenders to achieve that feat. In this sense, not only does Tesla have to deal with the high costs of maintaining its plants and equipment but also high-paid technical personnel who are often under union contracts. The worst may have been over for Tesla in 2019 when Tesla managed to generate positive free cash flow in 3 consecutive quarters. According to the chart, Tesla’s quarterly free cash flow has been mostly in the red in most quarters, implying that the company’s operating activities have failed to generate sufficient cash to covers its business operations and CAPEX. … Tesla Gigafactory Shanghai. View TSLA net cash flow, operating cash flow, operating expenses and cash dividends. 2. Musk beat Bezos to become the world’s richest person in 2021. Ten years of annual cash flow statements for Tesla (TSLA). Annual cash flow by MarketWatch. It’s simply due to the capital-intensive nature of the automobile business. Cash is literally the lifeline of a business. In this aspect, we will compare the company’s cash on hand with free cash flow which is derived from operating cash flow minus capital expenditures. In 4Q 2020, Tesla has a cash position of more than $19 billion sitting nicely in the banks. Doing some back of the envelope calculations, if we assign a PE multiple of 10x for the core automotive and energy business on annual revenues of $60 billion and a profit margin of 10 percent, we get another $120 billion in equity value. With net cash of $2.7 billion obtained from financing activities and coupled with the generated free cash flow of $1.9 billion, Tesla’s cash on hand of $19 billion reported in 2020 4Q seems to add up now. Tesla (TSLA) is among the most polarizing stocks. The company has a clear growth path over the next decade and sales should continue to soar as it enters new markets and launches new models. Earlier, Tesla reported that it delivered 139,300 vehicles during the quarter, a 44 per cent growth year-over-year and … Before we begin, Tesla’s cash on hand, cash reserves or cash positions discussed in this article are the combinations of cash, cash equivalents and restricted cash disclosed in the balance sheet and the terms are used interchangeably. The polarization is best visible in its stock price forecast for 2021. You can't justify the valuation based on that criterion. Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt. Will NIO Follow in Tesla's Footsteps and Buy Bitcoin? Why only operating cash flow and capital expenditures? If you want to follow the “consensus,” you would have missed the sharp rally in Tesla as well as NIO. In short, all hope is not lost for Tesla. The long-term portion of restricted cash is excluded as they are collateral which needs to be held for more than 1 year. If you look closely at the current chart, Tesla’s cash outflow was the worst in 2017, leaving the company with a cash deficit of as much as $3.5 billion in the entire year. The cash flow forecast however, will show the income and expenses including taxes, with separate tax payments occurring at a later date. As a result, the net cash Tesla managed to raise in 2020 Q4 was about $2.7 billion. Its market capitalization is above the combined market capitalization of Toyota Motors, General Motors, Ford, and Volkswagen put together. Tesla's free cash flow jumped to 1.9 billion U.S. dollars in the fourth quarter of 2020, up from 1.4 billion U.S. dollars in the third quarter. When you add that amount to the prior quarter, the final figure of cash on hand arrived at the total $19 billion reported in 2020 4Q. The graph above shows Tesla historical cash on hand or cash reserve for the past 5 years from 2015 to 2020. To further illustrate, the snapshot below shows Tesla’s capital raise through financing activities: Tesla cash flow from financing activities – Q4 2020. Operating cash flow turned negative — a net $640 million going out the door over the three months versus a positive $1.23 billion in the previous period. On the other hand, capital expenditures or CAPEX are cash needed to acquire and maintain hard assets such as property, buildings, equipment, offices and factories. Ford is also spending billions of dollars on electric vehicles. Has the Endgame Started in CCIV or Should You Buy the Dip. Coming back to the chart, the free cash flow chart above depicts Tesla’s quarterly cash outflow over 5 years from 2015 to 2020. This amount of cash generated from net cash from financing activities is also shown in the chart above. Here is an excerpt extracted from the 2020 annual report regarding Tesla’s investment in bitcoins. Tesla (TSLA) is among the most polarizing stocks. I have combined both the cash reserves and cash outflow into the same chart as shown above to compare Tesla’s cash on hand with cash outflow. Tesla posted its first annual profit, easily topping Wall Street's forecasts in the final three months of 2019. As mentioned, Tesla generated about $1.9 billion in free cash flow in Q4 2020. Tesla annual free cash flow for 2020 was $2.786B, a 158.44% increase from 2019. Tesla had cash and cash equivalents of $8,615 million as of Jun 30, 2020 compared with $8,080 million on Mar 31, 2020. The Sheer Size of Tesla Charging Infrastructure. If the momentum in Tesla stock continues and Musk lists his privately held companies, he could very well be the world’s first trillionaire. Particularly, Tesla’s free cash flow reached as much as $1.9 billion in 2020 4Q alone, representing a growth of more than 80% on a year over year basis. To this end, Tesla has actually invested some of its cash reserves in bitcoin. Unlike most other pure-play electric vehicle companies that are posting losses, Tesla is sustainably profitable and generating positive free cash flows. Using a PE multiple of 20x, we get a $1.2 billion valuation. To justify Tesla’s current valuation as well as the path to $2 trillion in market capitalization, we have to look beyond the myopic view of the NTM earnings. Has GM Been Utilizing Its Assets Efficiently? They were slow initially with their electric vehicle plans. Tesla cash outflow or cash burn can be derived from its historical free cash flow which is measured by deducting capital expenditures from operating cash flow. Musk expects the energy segment, which includes solar and the energy storage business, to become as large as the automotive business. The same goes for 2018 in which Tesla burned up to $1 billion cumulatively in 1Q18 and 2Q18. It produced free cash flow of $2.8 billion, … Tesla looks like the best way to play the electric vehicle story. SNPR SPAC Joins the EV Charging Bandwagon With Volta Merger, General Motors Could Repeat Ford’s Magic in Q4 Earnings. Operating activities are day to day business activities that consumes operating cash flows, including employees payroll, offices and factories rental, equipment and tools maintenance, R&D expenses, contracts, advertising and administrative expenses. Tesla Inc. quarterly cash flow and in depth look at TSLA operating, investing, and financing activities. The reason is that these 2 items consume the most cash in Tesla’s businesses. Tesla Inc. Tesla Investments in Bitcoin Tesla Crucial Infrastructure Ford Global Sales & Market Share, GM Current and Historical Market Valuation, Assessing Tesla Automotive Revenue and Gross Margin. The stock’s lowest target price is $40, while the highest target price is $1,200. He expects the first trillionaire to come from the green energy ecosystem. Here is a paragraph from Investopia regarding cash flow from financing activities: “A positive number indicates that cash has come into the company, which boosts its asset levels. The cash flow statement is a summary of the cash inflows and outflows for a business over a given period of time. In 2020, Gene Munster, who correctly predicted that Apple’s market capitalization would rise above $2 trillion, projected that Tesla’s market capitalization would hit $2 trillion by 2023. References and examples such as tables, charts and diagrams are constantly reviewed to avoid errors, but we cannot warrant full correctness of all content. Sometimes the business can use up more cash than it can generate during the normal course of the business operation. Finally, we will explore the reason for the uptrend seen in Tesla’s cash position. According to the estimates compiled by Koyfin, TSLA stock has a 12-month average target price of $585.87, which is 27 percent below its Feb. 10 closing prices. During Tesla’s earnings call for the fourth quarter of 2020, Musk said that the company can generate $60 billion in revenues from services like FSD (full self-driving) and robo-taxis, which would almost entirely flow to its gross profit. Based on the chart above, you may notice that Tesla has been cash-flow positive from financing activities in most financial periods. For this reason, Tesla current asset has also been increasing over the years. In fact, Tesla’s core businesses, automotive and solar, had consumed more cash than it could bring in as depicted in all the negative free cash flow figures in the above chart. Tesla capped its breakout year with a record profit that still fell short of analysts forecasts, sending its shares lower in after-hours trading. All Rights Reserved. Featured images in this article are used under creative commons license and sourced from the following websites: Marco Verch. All said, while analysts have different target prices on companies, we don’t see the kind of stark difference as is the case with Tesla. The quarterly free cash flow chart may not reflect the true scenario of Tesla’s free cash flow generation. GM Trucks and SUVs Sales Investors are bullish on the green energy and electric vehicle ecosystem. Apparently, the company has been raising capital through common stock offerings and debt issuings over the years. In short, Tesla’s cash on hand or cash reserve has been sufficient to cover the company cash outflow throughout most quarters in the past 5 years. Source: Tesla Q3 2019 Update Letter. Tesla reported fourth-quarter results that missed the Refinitiv consensus adjusted diluted EPS of $1.03. As the chart shows, Tesla has been generating negative free cash flow in most quarters from 2015 to 2020, signaling that the company has used more cash than it could bring in. Those who are bullish on Tesla see it as a tech company. Examples might be simplified to improve reading and basic understanding. Specifically, Tesla has bought about $1.5 billion of bitcoin in Jan 2021 according to the following excerpt. The table below illustrates the output of a discounted cash flow forecast using a variety of scenarios for Tesla Inc. To summarize, we found that Tesla Inc ranked in the 9th percentile in terms of potential gain … Tesla Vehicle Deliveries The following chart depicts Tesla’s quarterly cash flow from financing activities over the last 5 years from 2015 to 2020. You might hate or love Tesla CEO Elon Musk, but he gets credit for redefining the automotive industry. GM Vehicle Deliveries Why is Tesla racking up so much cash all these quarters? In the same quarter, Tesla repaid some of the debts which amounted to about $2.3 billion. For the most part, more than 70% of the company’s current asset is in cash and cash equivalents as seen from the following snapshot. ”. The stock rose 740 percent last year and is looking strong in 2021. Nevertheless, Tesla’s free cash flow has improved over the years, particularly in recent quarters. The cash flows are grouped into three main categories: cash flow from operations, cash flow from investing and cash flow … For example, the Gigafactory Shanghai China and Gigafactory Berlin Germany which were recently launched were accounted as capital expenditures. Aside from cash and cash equivalents, restricted cash – only the current portion – is also included as part of Tesla’s cash on hand in the chart above. Between 2019 and 2020, Tesla’s free cash flow has been mostly positive and reached as much as $1 billion on a TTM basis in several quarters, suggesting that the company’s business operations have got more efficient in terms of cash flow generation. Tesla’s cash on hand or cash reserves are highly liquid assets which include cash such as cash and cash equivalents as well as short-term restricted cash. This is especially true when the company is in the midst of an expansion. In the last 5 years, Tesla’s quarterly cash position has grown from $1.5 billion in Q1 2015 to more than $19 billion in Q4 2020. Thanks for sharing! Another under looked opportunity, while forecasting Tesla’s stock price, is the energy business. Chamath Palihapitiya, also known as the king of SPACs, is bullish on Tesla. The budget for wages is the gross wages while the cash flow forecast … In the following discussion, we will dig into Tesla’s cash position and analyze the respective cash reserves over a period of time to see how the numbers have changed. Although Tesla continued running its business at positive free cash flow in recent quarters, the company still raised extra capital through stock offerings and debt issuance as seen from the cash flow from financing activities. For instance, Tesla managed to raise its cash reserves by more than 30% or $5 billion within a single quarter from 3Q20 to 4Q30. In addition, we will also find out whether Tesla’s cash on hand has been enough to cover its cash outflow. Also, despite being disrupted by the COVID-19 outbreak throughout 2020, Tesla has successfully grown its positive free cash flow in 3 consecutive quarters in 2020. For this reason, Tesla (NASDAQ:TSLA) cash flow has always been a hot topic, not just among the investors but also the creditors. As you will see in the following charts, Tesla’s cash on hand has been mostly positive and in fact, been growing substantially in the past 5 years. Basically, Tesla gets extra cash from financing activities by issuing equity and debts. Indeed, a review of Tesla's 10-Q reveals the reported profit and positive cash flow to be little more than smoke and mirrors. Here is what Tesla said about restricted cash in the financial statements: Restricted Cash

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