Has Tesla been a 'money furnace' this year? Maybe not, after all

In June, Elon Musk called Tesla’s new Gigafactories in Berlin and Texas “money furnaces,” saying that the automaker was burning through cash faster than expected. However, the company’s earnings call last quarter showed that Tesla actually performed better than expected amidst the overall market. 

In the time between Musk’s words and Tesla’s second-quarter earnings call, the automaker underperformed the Nasdaq Composite by just 2 percent, according to Barron’s. Tesla reported $621 million worldwide in free cash flow, with $2.27 in adjusted earnings per share, and the automaker’s shares jumped nearly 10 percent following the call.

For the month heading into Musk’s comments in June, the company’s shares were outperforming the Nasdaq by roughly 5 percentage points. Analysts estimated Tesla’s earnings per share in Q2 would drop to $1.80 per share from $2, though in hindsight, we can see that’s not what happened.

Co-Founder of Future Fund Active ETF (FFND) Gary Black says this outcome is to be expected when “analysts leapfrog each other to cut [estimates].”

Black’s estimates for the coming years predict that Tesla will generate $20 billion in 2023, and more than $170 in the next five years. He’s also more bullish than much of Wall Street, with most analysts predicting roughly $15 billion in free cash flow in 2023 and $102 billion over the next five years.

While Black’s take is optimistic, it isn’t unheard of in the auto industry. For example, Toyota generated nearly $27 billion in 2014, though the largest five-year streak it had was just $105 billion. Still, today’s auto landscape is quite different than 2014, with early semi-automated driving features, electric vehicles and other high-tech automotive solutions just beginning to emerge.

Some analysts consider debt a major contributor to Tesla’s stock outlook, and through that lens, the automaker may desperately need a debt upgrade. Moody’s rates Toyota debt A1 and the S&P index rates the company A+, considered investment-grade debt levels. Alternatively, however, they rate Tesla’s long-term debt Ba1 and BB+, respectively — in other words, Tesla’s stock is comparable to a junk-bond-level rating and is debt speculative, at best.

Above: Canaccord's George Gianarikas on Tesla's stock. Video: YouTube / CNBC

However, other analysts, such as L&F Investor Services Founder Alexandra Merz, argue that these ratings don’t paint a complete picture. Tesla’s credit metrics could be considered better than Toyota’s by some metrics.

“It’s ridiculous,” says Merz about the debt ratings not comparing cash to debt, debt to equity or operating profits — among other details still. “Tesla is clearly in the top 3 strongest [large cap companies.]”

Tesla’s Q2 results undeniably panned out better than some expected, and with increasing EV competition on the horizon, it’s impossible to predict what the coming years may hold. Still, it’s worth noting how much Tesla has to look forward to, and with Gigafactories in Berlin and Texas now operational, it could be well-poised to maintain hold of the EV industry.

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