Tesla Earnings Call: My (Overdue) Analysis
Credit to Author: Frugal Moogal| Date: Tue, 29 Oct 2019 23:42:54 +0000
Published on October 29th, 2019 | by Frugal Moogal
October 29th, 2019 by Frugal Moogal
I published an article in my TSLA FUD series on October 23rd about what I was hoping to see from the Tesla 3rd quarter shareholder call. I stated before any earnings were released that I was far less concerned about the actual per-share earnings and much more interested in a set of bullet points regarding where Tesla was with various upcoming projects. Later that day, Tesla reported earnings and they were widely regarded as a home run by analysts.
I don’t necessarily consider myself a stock analyst, but I found myself in a bit of an odd position, and that is to say that I simply wasn’t really sure what to think of the earnings. The numbers definitely looked good, but there were other things that I wasn’t so sure about. I’ve since listened to the earnings call three times, read through the transcript, listened to the solar roof V3 details, read a bunch of FUD and bull statements, and figured that if I waited much longer to write this article, no one would care, so here I am.
While I’m going to go reply to my original article point by point in a moment, I’ll jump to the conclusion quickly first: This was one heck of a quarter for Tesla.
Despite that easy conclusion, it might be worth reading the rest, because I came to realize that the reason it took me so long to fully form that opinion was that a number of things I expected didn’t happen, and a number of things I didn’t expect happened instead. I had to take a deeper look at what I was looking at, and figure out how they balanced in my head.
As usual, I think it’s important that I mention that I own 15 shares of stock in the company, and while I’m open to increasing that position, I don’t intend to do so at current prices for a bit longer. Oh, and if you’re taking stock analysis from only a single voice on the internet, you’re not doing it right, so definitely don’t buy shares based on just this article. Without further ado, let’s go.
To try to organize this as best as possible, I’m going to go point by point using the same topics that I discussed in my original article before earnings were reported, but I’m going to start with what the part of the earnings report that I felt mattered the least to me — the actual earnings.
Tesla reported profits of $1.91 per share, whereas the Wall Street consensus was expecting a loss of $0.15 per share. I personally don’t put too much into a single earnings report, as earnings may be moved and shifted to make a single quarter look better or worse — followed by the next quarter suffering the rebound of that and looking worse, there are a number of things here that I found worth highlighting that I don’t feel have been overly reported on already:
All in all, the earnings were extremely surprising, and none of it seemed to be pointing to particulars that can’t be repeated. In fact, perhaps the most stunning thing about the earnings to me is that it almost seemed like Tesla was being conservative this quarter on a number of fronts.
Having said all of that, I’ll really be watching this in Q4 2019. If Tesla can keep this going, the company will be on extremely solid footing.
Now that topics I wasn’t really focused on are out of the way, let’s look at what I was looking for. I’m going to do these as bullet points for each, with brief commentary:
Like I said at the beginning, it took me a while to really figure out what my full feelings here were. The earnings themselves blew away everyone’s expectations, but the letter and call were filled with fascinating details that updated and answered many of the questions about Tesla’s future, filling in so much more of the story.
I was originally put off by what I felt was a lack of meaningful growth in the solar business, the Tesla insurance strategy, the lack of information on Tesla moving battery production in-house, no Tesla Semi updates, and no timelines for the Tesla Truck.
The Friday launch (or re-launch?) of the Solar Roof product and my rethinking of the Tesla insurance strategy helped to answer questions that I kept coming back to on those topics. Thinking about battery production further, I can understand why Tesla wouldn’t want to say too much until it is ready to roll, as angering Panasonic at this point could be a huge issue. And, as mentioned, the lack of Tesla Truck information didn’t surprise me.
Which really means, at the end of the day, everything on this earnings call to me was a home run with the exception of the Tesla Semi. And, while I think that the Tesla Semi will be a critical product for the future of sustainable transport (a topic that could be deserving of its own article one day), I get that it’s not a product that analysts are looking at right now.
Ultimately, as I’ve taken more time to let this all set in, an article that started with me typing about how much I was surprised we didn’t get information on has evolved into me being far more impressed with this quarterly earnings report today than I was when I first heard it four days ago. If execution remains strong, I anticipate this is the beginning of another huge period of growth for Tesla in the next few years. And I’m extremely excited to be along for the ride as a shareholder.
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Frugal Moogal A businessman first, the Frugal Moogal looks at EVs from the perspective of a business. Having worked in multiple industries and in roles that managed significant money, he believes that the way to convince people that the EV revolution is here is by looking at the vehicles like a business would.