This could be UGLY for Tesla | Watch BEFORE Tomorrow

hey everyone me kevin here let's talk

tesla because tomorrow is july 20th

which is tesla's earnings a day after

hour stay tuned it's going to be big but

let's talk a little bit of a preview

before that so deutsche bank put out a

piece a research piece on tesla and they

actually issued a buy rating for tesla

before earnings listen to some of the

catalysts that they talk about then

we're going to talk about some of the

things that i'm finding important

regarding tesla some of the things that

i'm going to be looking for and of

course we're somewhere here in munich in

front of this fancy building it drove

over here for like six and a half hours

from dusseldorf and let's just say i'm

happy and not to be on the road anymore

today so let's get right into this okay

so what do we have here so deutsche bank

is calling tesla a buy ahead of earnings

and they believe that tesla's a buy

because they think the company is likely

to uh end up reporting a big beat on

margins over what wall street expects

that's because most of wall street has

been expecting a terrible margins for

tesla in q2 because shanghai has mostly

been shut down and as a result of

shanghai mostly being shut down which is

the most efficient plant that we have

operating right now from tesla the

expectations for margin are actually

quite low and they believe this sets

tesla for a potential big beat they also

believe that tesla's price increases

especially the 2 000 price increase that

we had this quarter is definitely going

to help ramp up margins again now i'm a

little skeptical here i've personally

been expecting a margin miss and the

reason for that is simply because

shanghai is a better plant even though

we get model s's and x's and the plaids

coming out of fremont and those are

helpful the shanghai plant will cost the

labor everything substantially cheaper

in shanghai now one of the things that i

love about shanghai though is the ramp

schedule and for the ram schedule i

actually jump over to a barclays report

so we get enthusiasm for a potential

margin beat from deutsche bank and we've

got a buy rating from deutsche bank but

when we jump over to the ramp schedule

that barclays gives it's kind of

interesting they believe

that by

2025 we're going to see fremont cap out

and pretty much where it is now right

around 500 to 550 000 units they believe

shanghai is going to move from about 775

000 units this year to almost a million

next year and that only capping out

around 1.1 by about 2025.

germany they think will ramp from about

59 000 vehicles this year to

275 000 next and then 470 000 by 2025

and austin from 59 000 this year to 234

000 next year and then of course 420 000

in 2025.

now this actually creates a little bit

of a downside risk in my opinion because

even though this forecast sounds nice

for ramping those facilities the

gigafactory berlin shanghai seeing

shanghai's expansion take effect getting

that to 1.1 and then of course austin

texas what are the big issues that we

have here is that barclays is only

suggesting a growth rate for tesla of 37

in 2023 18 in 2024 and just nine percent

in 2025 capping them out at two and a

half million vehicles produced by 2025

which is about one and a half million

vehicles less that i'm targeting

somewhere around four to four and a half

million vehicles this is a little bit of

a red flag so while we've got some

short-term excitement for a potential

beat on margin thanks to what deutsche

bank is showing us going into earnings

that longer term forecast from barclays

in my opinion not that great for

production now this is where my previous

belief about tesla becomes very very

important and that is that tesla cannot

keep its price up with these kind of

ramp rates we need to be able to have

more gigafactories so that wall street

starts pricing in that continued 40 to

50 percent compounded annual growth at

least for the next four to six years

that would justify tesla's valuation

much better than where we sit now and so

that does concern me a little bit that

barclays is not at all considering that

there will be any other gigafactories

between now and 2025. personally i think

that's one of the things that wall

street is really missing about tesla

that what elon musk wants to do is ramp

berlin and giga texas up as quickly as

possible

ramping these and taking these factories

from an idea to built within two years

to fully ramped within four years total

two years and then two years for ram and

then copy and pasting that model because

if we do that then what we could say

with tesla is all right let's go into

2023 when we're doing 250 k plus at

berlin and giga texas

now let's get an announcement from tesla

where in 2023 we're going to have

announcements for let's just say three

new gigafactories rather than just uh

berlin and tac and texas we get maybe

three new whether that's another one in

texas or

another one in south america or one the

first one in south america let's say

maybe one in indonesia whatever right

now we can really get those wall street

ramp rates up so that's something that

we really want to see hints of

on the tesla earnings call though

unfortunately i think now is a little

bit early for that so while i'm

optimistic that maybe deutsche bank will

be right and that will beat on margin

with tesla personally i think ah that

could be hopium and i don't think we're

going to get any kind of real optimism

for future ramp ups now other investment

analysts are suggesting that tesla is

going to do just fine this earnings

because they're going to maintain

substantial positive cash flow although

the estimates for this range we could

see a negative billion dollars in cash

flow we could see positive three billion

dollars in cash flow the estimates are

all over the place the estimates for

earnings are anywhere between a buck

forty per share to two dollars and ten

cents per share they're absolutely all

over the place but clearly in my opinion

the big things we're going to be paying

attention to first margin second do we

have any kind of hope for future

expansion of gigafactories and how are

the ramps going now because the smoother

the ramps go now which let's be real no

ramp goes smoothly okay these factories

are under chaos until they're actually

smoothly operating ramps suck uh then

then the more potential excitement we

can get for future gigas but i really

don't think q2 2022 is the time for any

kind of future company expansion plans

another thing though that we'll

obviously be looking at in the press

release as it comes out is any kind of

bitcoin impairment right now we're

expecting somewhere around 400 million

dollars in bitcoin impairment though

that's not a cash flow effect that will

be an eps and earnings per share effect

but we won't see that in the free cash

flow we'll be able to look at the free

cash flow number on the cash flow

statement and we'll be able to see that

okay they have some paper losses and

bitcoin that get added back in to free

cash flow which is important because we

want to see tesla's working capital be

very very high remember what elon musk

told us in an interview uh with uh with

the silicon valley owners club he told

us that

ramping factories is like throwing money

into a furnace it's literally like

lighting money on fire and what's really

important about that is that we separate

tesla from the notion that it could

potentially go bankrupt remember we are

either in a recession or are going into

a recession or we're basically going to

be teetering next to a recession even

bank of america is suggesting that we're

probably going to have four quarters of

negative gdp growth which the fact that

we're coming off the sugar high is

really no surprise anyway that we're

gonna have a little bit of a crash it's

not that big of a deal if anything it's

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advantage of that coupon code so going

now back to tesla we've talked about

margin we've talked about ramping we've

talked about bitcoin impairment and free

cash flow and expectations very very

important in my opinion that tesla does

maintain positive free cash flow if we

end up getting negative free cash flow

we're going to see more of those

concerns again that oh no here we go

risks of potential tesla bankruptcy

you'll get headlines tesla losing this

much money in the last quarter blah blah

blah and the net and and that's going to

raise the specter of questions again of

why in 2022 does it seem like at least

shout out to troy like on tesla this is

at troy tess like t-e-s-l-i-k-e

who does estimates for vehicle

deliveries and registrations in both

europe and the united states why is it

that the pace at which we're seeing

registrations of american teslas like

model 3s and wise why does it seem like

that's substantially slowing in 2022

relative to other years is tesla maybe

not as insulated from recessionary fears

as we'd hoped

and one of the ways we're going to kind

of get corroboration on that thesis is

or or concern is guidance from tesla so

is tesla going to maintain what elon

musk told us in q1 that hey we might be

able to grow at 60

i hope so but again opium is not an

investing strategy so we have to be

prepared for a potential miss on full

year guide i will tell you though that

tesla registrations in europe which

again go to uh troy's twitter page here

to see it tesla registrations in europe

in 2022 are ramping substantially faster

than in any year prior going all the way

back to 2013. now that could be because

now we're manufacturing 3 and why in

berlin but i doubt that that is exactly

why we're seeing this boost in

registrations what i actually believe is

because we're actually starting to see

the development of the tesla

supercharger network in europe one of

the most frustrating things about having

an electric vehicle is not having a

large enough supercharger network and it

takes time to build the supercharger

networks and so this is where i also am

going to want to pay attention to what

tesla is doing

on their next earnings release with the

supercharger stations how many

supercharger stations are we seeing

built we had superstar uh super

superstarter

supercharger stations in q1 of 2022 of

3724

which represented a 38 year-on-year

growth what i want to see is that number

actually go up because i want to see

tesla's ideally like best case scenario

tesla somehow magically pulls off margin

whether it's through price increases or

whatever

then we end up seeing positive free cash

flow and

more rapid deployments of the

supercharger network that is really

important for future sales and it

separates tesla from all the competition

so again we've got super supercharger

stations at 3724

i want to see that year over year growth

rate exceed 38

now the comp that we're going to be

facing for q2 2021 is

2966 so just do

2966 times one point say four uh which

let's see four times three would be

about 1200 we'd probably that means we'd

have to be somewhere around 4 200. we'd

have to be opening somewhere around 500

supercharger stations that would be a

little faster than what we usually do

which seems to be around two to 300

supercharger stations so i might be

disappointed there but we'll see how how

close we get

and that's just mental math there but

anyway the next thing that i'm excited

about or going to be excited about is

solar deployment so we actually had a

negative

48 solar deployed growth in q1 it's not

uncommon to see a big drop off in q1

usually from q4 but to see a

year-over-year q1 plummet like that i

don't know what happened there for in in

q1 so i'd really like to see solar panel

deployment up uh certainly year over

year i mean we've got to be 85 megawatts

we were at 48 which is poultry in q1 i

don't know what happened there uh i so

i'd like to get a little bit more

clarity on the solar ramp because uh

either homeowners have officially

started to pull back their spending on

investing in their homes which will be a

catalyst for end phase stock as well

which ran to like 215 i wanted to short

it fell to 186 i didn't end up shorting

i just talked about shorting it to

course members of the course member live

streams uh and and now it's already

bouncing back to over what two or five

two or six or so today uh which is

remarkable it's a great company and i

love and face i just expect that if home

appreciation stalls and slows down that

people will spend less on solar and

certainly spend less on batteries

remember for these 5k battery packs

you're spending somewhere around 10 to

15 000 installed i think tesla batteries

you're spending 10 000 on the battery

plus install 5 grand in the permit and

everything it's expensive to do these

batteries and i'm not sure if homeowners

right now want to spend money on doing

the battery upgrades and that's where

the margin is remember that when it

comes to solar the margin is not in the

stupid panels it's in the inverters

whether they're micro inverters or

string inverters whatever

or the battery so i should say and the

batteries that's where the freaking

money is so i do want to see some growth

there as well uh you know i don't expect

to see anything exciting out of tesla

insurance yet although i will tell you i

think the safety score feature that

tesla has is is so unique and

proprietary and it is something that

absolutely uh will be revolutionary in

the insurance industry in the future but

look insurance is one of those products

that even though elon musk believes that

in the future insurance alone could be

worth a quarter of the value of the

company

i think that is just pie in the sky

opium at this point i think what's more

pressing in the near term rather than

talking about fsd or insurance or cyber

truck time frames or all this other kind

of opium crap like roadster time frames

semi-truck time frames all that stuff is

not going to matter in my opinion in

this quarter i think actually what

matters more than all of those things is

what ends up happening with twitter now

i'm going to make some separate videos

on elon musk and twitter and some of my

thoughts especially as we find out what

the judge ends up ruling in terms of is

elon going to be faced with an expedited

trial in september are we going to have

a more full-fledged exposure of all the

bot accounts at twitter

which will probably uh be more of an

extended like one to two-year court

battle starting uh in 2023 is my guess

and then that'll go for a few years and

it'll just be a long overhang for

twitter it'll be terrible and twitter

will probably end up if they go for a

long lawsuit i wouldn't be surprised if

twitter ends up caving and we get some

kind of negotiated price twitter ends up

getting sold to elon musk for

substantially less twitter's best case

scenario is getting an expedited trial

and being done with this

which an expedited trial would probably

be quite bad for elon musk but we'll see

what happens there again this isn't

supposed to be a twitter elon musk video

really at this point i think elon musk

has liquidated what he needs to to do

the twitter deal whether it happens or

not

and i don't know how much of an effect

is left for tesla there although we do

expect that if the deal doesn't go

through

that there should be some residual

benefit to tesla stock as the investor

community does seem to believe that elon

musk would otherwise be distracted if he

uh if he did get involved with uh

managing and running twitter uh and

trying to reform twitter so anyway uh

personally optimistic i am also uh

probably going to be selling my model s

plaid and maybe we'll trade that in for

an x we'll see uh you know it's one of

those weird things where

last september i tweeted uh don't buy a

tesla buy

tsla and uh

that ended up not being the best uh

suggestion because the cars ended up

going up more in value than tesla stock

hopefully

this time though is different because

those are after all the safest words in

investing this time is different buy

tesla stock okay not a recommendation

because this video is not financial

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you so much for watching and we'll see

you in the next one