The cash flow forecast however, will show the income and expenses including taxes, with separate tax payments occurring at a later date. Tesla's balance sheet is currently home to more than $12.4 billion in long-term debt. GM Trucks and SUVs Sales Tesla inventory turnover and management analysis, Tesla has been losing money in this business segment. 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. 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. 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. The stock’s lowest target price is $40, while the highest target price is $1,200. 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. The direct method of forecasting cash flow relies on this simple overall formula: Cash Flow = Cash Received – Cash Spent. Specifically, Tesla has bought about $1.5 billion of bitcoin in Jan 2021 according to the following excerpt. This amount of cash generated from net cash from financing activities is also shown in the chart above. Stock Dividend Screener is optimized for reading, learning and studying. However, Tesla produced only about $1.9 billion of free cash flow in 2020 Q4. As mentioned, Tesla generated about $1.9 billion in free cash flow in Q4 2020. Copyright 2013-2021 by Stock Dividend Screener. Indeed, among the sell-side analysts following Tesla, just a few report forecasts for free cash flow. Even Ashwath Damodaran, known as the “dean of valuation” valued TSLA stock way below what it currently trades at. Here is an excerpt extracted from the 2020 annual report regarding Tesla’s investment in bitcoins. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy. In January, General Motors (GM) said that it would only sell zero-emission cars by 2035. 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 reported fourth-quarter results that missed the Refinitiv consensus adjusted diluted EPS of $1.03. Meanwhile, its trailing operating cash flow is just $2.6 billion. Unlike most other pure-play electric vehicle companies that are posting losses, Tesla is sustainably profitable and generating positive free cash flows. Tesla’s cash consumption or cash burn comes from two areas: (1)operating activities and (2)capital expenditures. Tesla (TSLA) is among the most polarizing stocks. 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. Ford Vehicle Deliveries 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. 2. Tesla Gigafactory Shanghai. Quietly reducing warranty reserves Basically, the automobile business is an asset-heavy operation that requires lots of cash or working capital to operate. It produced free cash flow of $2.8 billion, … There's also a possibility of Tesla licensing its battery and software to other companies. 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. 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. Musk expects the energy segment, which includes solar and the energy storage business, to become as large as the automotive business. Examples might be simplified to improve reading and basic understanding. 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. The valuation pundits and some analysts value Tesla as an automaker. 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. Coming back to the chart, the free cash flow chart above depicts Tesla’s quarterly cash outflow over 5 years from 2015 to 2020. Given Tesla's high growth, it might continue to trade at elevated valuations in the foreseeable future. Tesla’s cash outflow in the chart is basically the same as the quarterly free cash flow which we discussed earlier. In addition, we will also find out whether Tesla’s cash on hand has been enough to cover its cash outflow. A rise of 160 percent doesn't look tough for Tesla stock based on the momentum. Still, Jonas is forecasting Tesla's free cash flow to be negative $1 billion dollars for the second quarter. 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. You might hate or love Tesla CEO Elon Musk, but he gets credit for redefining the automotive industry. The budget for wages is the gross wages while the cash flow forecast … 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. To this end, Tesla has actually invested some of its cash reserves in bitcoin. Chamath Palihapitiya, also known as the king of SPACs, is bullish on Tesla. Annual cash flow by MarketWatch. Earlier, Tesla reported that it delivered 139,300 vehicles during the quarter, a 44 per cent growth year-over-year and … The polarization is best visible in its stock price forecast for 2021. Those who are bullish on Tesla see it as a tech company. 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. Tesla Vehicle Deliveries Based on the chart above, you may notice that Tesla has been cash-flow positive from financing activities in most financial periods. Why only operating cash flow and capital expenditures? While Tesla’s cash position has been increasing over the years, is it sufficient to cover the ever-increasing cash consumption? Its market capitalization is above the combined market capitalization of Toyota Motors, General Motors, Ford, and Volkswagen put together. 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. Thanks for sharing! References and examples such as tables, charts and diagrams are constantly reviewed to avoid errors, but we cannot warrant full correctness of all content. Has the Endgame Started in CCIV or Should You Buy the Dip. 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. 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. As a result, the net cash Tesla managed to raise in 2020 Q4 was about $2.7 billion. Finally, we will explore the reason for the uptrend seen in Tesla’s cash position. 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. The worst may have been over for Tesla in 2019 when Tesla managed to generate positive free cash flow in 3 consecutive quarters. GM Vehicle Deliveries He expects the first trillionaire to come from the green energy ecosystem. 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. For instance, Tesla managed to raise its cash reserves by more than 30% or $5 billion within a single quarter from 3Q20 to 4Q30. Tesla Crucial Infrastructure How Much Money Has Ford Spent On Research and Development? 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. Will NIO Follow in Tesla's Footsteps and Buy Bitcoin? Now, the tables have turned and legacy automakers are trying to make up for lost time. 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. From a TTM perspective, we can clearly see that Tesla’s free cash flow did improve tremendously from 2019 and onward. The cash flow statement is a summary of the cash inflows and outflows for a business over a given period of time. Here’s how Tesla could become the next $2 trillion company. 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. Tesla had cash and cash equivalents of $8,615 million as of Jun 30, 2020 compared with $8,080 million on Mar 31, 2020. 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. Moreover, in the third quarter, Tesla generated $1.395bn of free cash flow. 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. In the snapshot above, Tesla raised as much as $5 billion of cash through common stocks issuance in Q4 2020. Tesla Inc. quarterly cash flow and in depth look at TSLA operating, investing, and financing activities. Currently, Apple is the only company that has a market capitalization of $2 trillion. 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 … Going forward, Tesla will be having enough cash in the bank to pay for its business expenses and invest for future growth. The following chart depicts Tesla’s quarterly cash flow from financing activities over the last 5 years from 2015 to 2020. We maintain certain cash balances restricted as to withdrawal or use. Amazon and Microsoft are strong contenders to achieve that feat. In general, free cash flow is derived from the following equation: Free cash flow = operating cash flow – capital expenditures. 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. The Sheer Size of Tesla Charging Infrastructure. This is especially true when the company is in the midst of an expansion. ... 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 … Tesla Inc. Ford is also spending billions of dollars on electric vehicles. Ten years of annual cash flow statements for Tesla (TSLA). Apparently, the company has been raising capital through common stock offerings and debt issuings over the years. 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. 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. 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. Forecasting cash … 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. While using this site, you agree to have read and accepted our terms of use, cookie and privacy policy. The reason is that these 2 items consume the most cash in Tesla’s businesses. In the same quarter, Tesla repaid some of the debts which amounted to about $2.3 billion. 1. 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. Sometimes the business can use up more cash than it can generate during the normal course of the business operation. GM Global Sales & Market Share 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. 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. 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. Tesla (TSLA) is among the most polarizing stocks. 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. For Tesla, capital expenditures are crucial financial outlays required to maintain and expand its business operations. 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. Musk beat Bezos to become the world’s richest person in 2021. 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. Therefore, Tesla’s cash outflow consists of both operating cash flow and capital expenditures. The stock rose 740 percent last year and is looking strong in 2021. Seven years down the line, Tesla is the largest automaker by market capitalization. Instead, Tesla far exceeded expectations, generating free cash flow of $881 million in the third quarter and earning a $312 million profit. Nevertheless, Tesla’s free cash flow has improved over the years, particularly in recent quarters. If you want to follow the “consensus,” you would have missed the sharp rally in Tesla as well as NIO. Source: Tesla Q3 2019 Update Letter. How did Tesla manage to grow its cash on hand to $19 billion when the respective free cash flow was only $1.9 billion? Featured images in this article are used under creative commons license and sourced from the following websites: Marco Verch. Cash is literally the lifeline of a business. 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. Tesla shares, down about 22% for the … 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. Indeed, a review of Tesla's 10-Q reveals the reported profit and positive cash flow to be little more than smoke and mirrors. Free Cash Flow Yield: 7.3%: 4.9% . 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. According to investopedia, cash flow from financing activities focuses on how a firm raises capital. It’s simply due to the capital-intensive nature of the automobile business. 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. 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 answer can be found in cash flow from financing activities. View TSLA net cash flow, operating cash flow, operating expenses and cash dividends. For this reason, Tesla (NASDAQ:TSLA) cash flow has always been a hot topic, not just among the investors but also the creditors. … For this reason, Tesla current asset has also been increasing over the years. 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. 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. 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. The polarization is best visible in its stock price forecast for 2021. 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. To further illustrate, the snapshot below shows Tesla’s capital raise through financing activities: Tesla cash flow from financing activities – Q4 2020. 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.