PREPARE for Tesla’s Earnings | WARNING

okay

well it's time for a preview on what to

expect for Tesla earnings coming up on

July and 19th I will be covering the

Tesla earnings live so I hope you join

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let's talk Tesla look as much as people

like to sit and crunch okay we delivered

this many cars and that's going to lead

to X dollars of Revenue let's make this

very simple

this is the quarter Tesla took some of

the most price cuts that we have seen in

the last well really year most of them

happened at the beginning of this

quarter so there are some real concerns

about obviously number one margin but

it's not just number one margin it's

also

cash flow and this is something that I

have religiously been warning about in

every single Tesla video that I've been

making I've worn the Tesla's balance

sheet is not as robust as it appears

that is okay though it's a manufacturing

company they must invest consider for

example the manufacturing expenditures

that a company like Intel undertakes

just so they can build Fabs to

manufacture Advanced chips they're going

to be receiving some of the first three

nanometer lithography machines from asml

they'll probably have their machine up

and running before even TSM which could

potentially be a nice reboot for Intel

as their revenue sort of declines on the

CPU side and gets more into sort of a

brand agnostic Fabs point is when it

comes to manufacturing you have to spend

a lot of money investing and this is

what you want for a company but don't be

surprised if Tesla actually and

potentially goes cash flow

negative this quarter partly because we

might be at either last quarter was the

bottom in margin or more likely this

quarter may be the bottom in margin for

Tesla a bottom read in margin is going

to create some nervousness for Tesla

investors especially if that free cash

flow number goes negative take a look at

the last earnings update from q1 free

cash flow declined from somewhere over

1.8 billion dollars in Prior quarters to

just 400 million dollars now 400 million

dollars is great but if you couple that

with the potential for declining margin

you might end up going negative on free

cash flow and I've been warning that

Tesla is very likely to end up raising

money now what I thought was very

interesting is there's some commentary

that Tesla is making another attempt at

pricing in an asset backed a bond sale

this is is something that they wanted to

do last year raise about a billion

dollars to an asset back Bond sale and

really what they're trying to do is

securitize their leases now some people

think that Tesla's going to try to get

into uh you know the more of their their

own financing opportunities uh

specifically with direct financing

offers for customers uh and uh what I

believe is really happening when I look

at this one billion dollar suggested

lease securitization offering is in

English Tesla's like

yo y'all we need to raise a little money

how can we raise a little money without

diluting the shareholders since we put

them through hell over the last year

thanks in part to Elon dumping 24

billion dollars which was still 9

billion dollars more than what retail

sold what could we do well how about we

take all these assets that we have which

are leases providing us residual income

and why don't we take those leases and

try to slice them up or the equity in

them essentially and raise money with

those this is sort of an X play it's not

actually what's happening but it's an

explanation for essentially what is

backing these bonds it's leases so Tesla

is kind of like breaking a piggy bank

saying okay let's raise money based on

the fact that we have this recurring

Revenue here through leases and we have

these as assets let's use that as

collateral for doing a bond offering

rather than maybe diluting shareholders

it's still going to lead to more debt

for Tesla as it would offset some of the

asset that they do have now but they

would receive that cash which would help

a lot of their building and their build

outs obviously because where are we

still building

Austin Nevada uh you're building out in

uh obviously Germany and now Northeast

Mexico and then potentially expansion

plans for uh Giga Shanghai which mind

you

all this talk about China stimulating

and uh trying to stimulate their economy

personally I believe they're likely to

do what they've done historically which

is corporate welfare in order to

simulate the economy in China China

likes to say hey

let's make it easier for manufacturers

to build let's bring manufacturing to

China again versus everybody trying to

suggest that they want to start building

in India or Vietnam you know Apple

threatening and otherwise let's

incentivize these corporations to stay

or come back to China I expect that but

you don't want to build that into your

models for Tesla because you should

always expect the unexpected and I think

what you should really expect going into

this next earnings report is a likely

lower margin a margin bottom probably

somewhere around 16 17 margin that's

likely to lead to a negative cash flow

read free cash flow read and then we get

to a negative free cash flow read we're

going to couple that with this Bond off

ring securitizing those leases and a

teslary look hey we think maybe I would

hope at least in commentary they say

that they think they've hit a bottoman

margin

and that they're covering their weaker

cash flow this quarter with the bond

offering and they don't think they have

to raise money again in the future I

highly expect Tesla to say something

like that if it is true that margin has

hit bottom margin hasn't hit bottom well

then there are probably more issues so

uh now when it comes to the balance

sheet which I've complained about many

times on Twitter and and on YouTube

people just don't want to hear it

whatever I'm just going to provide it

anyway oh by the way have you seen this

look at this Omar posted this on Twitter

let me quickly digress here for a moment

Omar posted on Twitter someone check on

Gary and Ross to make sure they don't

faint and here's really this magazine uh

you know full page ad showing meet model

y the best selling car in the world is

on display at Goodwood driveityourself

at tesla.com Drive uh and I quote

tweeted this and I said

meet model y a Elon Musk love it keeping

up team Tesla that's true I love it I

think it's awesome obviously a lot of

people in the comments are like oh hey

this is paying homage to the fact that

yes you Kevin uh went to the shareholder

meeting and convinced Elon Musk to

advertise which is great I I'm very

happy uh Tesla took the suggestion many

people have been making the suggestions

so I've credit the entire Community uh

but it is kind of cool who knows if

there's a correlation just wanted to say

even though I digress I think it's kind

of cool and I think it's got a good ring

to it personally if I could give some

unsolicited feedback I don't think it

would be too terrible to maybe having a

little byline over here at the bottom

just some like

you know cute fact bubble that you put

up on every Tesla ad where you say

something like I don't know just as an

example did you know we sent software

updates to uh you know

increase the safety of your car on

average every 27 days or or whatever

something like that right little fun

facts like that where every time

somebody sees a Tesla ad they're it's

almost like an engaging game to look at

oh what's what's the fun fact in that ad

and uh it not only excites existing

owners and gives them ammunition to talk

about to their friends and families or

whatever but I think it also then

becomes informative now I understand the

goal of this magazine ad here is to

inform people that they can go test

drive the vehicle which I think is

fantastic and a great way to sell the

cars get people behind the wheel of

these cars

so for what it's worth I appreciate the

Simplicity of the ad little bubble

strategy could be interesting but it's

just an idea I might be worth a b

testing supposedly okay so let's now

look and understand the balance sheet

here so look I have a unique way of

looking at balance sheets because I'm

very aggressive in my opinion with what

I think of balance sheets I think

balance sheets are extremely important

uh they are only second important to the

cash flow statement a cash flow

statement is what I start every single

fundamental analysis off with uh and so

cash flow is great but we already know

these cash flows have been condensing

and shrinking again free cash flow

somewhere around 400 million bucks now

what do we have on that balance sheet

because every time I talk about Tesla

potentially needing to raise money

people like why would Tesla be raising

money they have 22 billion dollars of

cash

yes yes congratulations somebody's able

to read one line of a balance sheet and

yes indeed Tesla has 22 billion dollars

of cash but good Lord maybe one day

people will actually read a little bit

further down the damn balance sheet and

what do you get oh dear you get accounts

payable and what do we got over here 16

billion dollars we're gonna call it

accrued liabilities another 7.3 so let's

add this up we're gonna add it up so

we're gonna get 16 plus 7.3 quick a

little bit of rounding here deferred rev

we're not going to add up deposits we're

not going to add up as a liability

current portion of debt and finance

leases we can go ahead and throw that in

that's another Billy right here and a

longer term debt we'll ignore right now

although it has been somewhat growing so

what do we have here we've got about

24.3 in current bills right so you've

got

24.3 billion dollars in bills to pay and

yes that is offset by 22 2.4 billion

dollars in cash now of course then

people argue oh but Kevin they have

inventory yes and that goes into the

future cash flows of the business and so

if the future cash flows of the business

go negative then that inventory isn't

really helping you with your cash

balance is it Anyway so again I like to

be aggressive and just at a you know on

a 20 second analysis of the balance

sheet let's just make it clear there are

more bills on the desk than there is

cash at this point yes as they sell more

cars hopefully that cash flow increases

and we're well able to build that cash

position again we're just not there

right now especially given that Capital

expenditures are likely to grow now I'm

not a bear here I'm just saying just be

prepared for earnings uh that you know

if we get a margin bottom then we get a

negative cash flow read and we get an

offering

the Stock's probably not going to be

very happy especially since a lot of

people are Blinded By no no wrong

oh my gosh okay so just just be prepared

but this is good you want Tesla to spend

on capex that's the point it's like what

I started off with with Intel you want

Capital expenditures very very very

important

uh so uh

Devin was talking to my friends who uh

have a massive Tesla whatever uh seems

to know uh something about cash raising

he said they won't look at the cash pile

they have 20 bills ducky gaming I don't

really know what you're saying here but

it sounds to me like your friends kind

of given that same argument that other

people argue again it's like oh they got

20 billion dollars of cash again it's

like dude you know what if let me put it

this way okay let me put it this way if

somebody today gave me a billion dollars

of cash and I set a billion dollars

right here and then I put an invoice

doing 30 days right here of a billion

dollars

do I really have a billion dollars in

cash

I mean maybe I can invest that for the

30 days and I could try to Arbitrage

holding on to that cash but let's be

real am I a billionaire if somebody puts

a billion dollars on my desk and then I

got bills of a billion dollars on the

other side of this am I a billionaire no

right anyway uh again okay so

let's move on from this

last thing that I want to say is what we

want to also pay attention to is we want

to look at

forecasts for quarter over quarter

growth rates okay this is also important

so what kind of forecasts or hints could

we get potentially for the next quarters

right now Wall Street thinks Tesla's

only going to really be able to grow at

somewhere around 25 to 32 percent

annual compounded growth for the next

few years your Tesla hyperboles think

that's going to be closer to 50 percent

and then you've got your moderates in

the middle that are going to sit around

I'm usually around like 35 percent and

then some people are like no Kevin it's

40 it's like okay whatever 35 to 40

percent whatever uh we had in the uh q1

to Q2 and annualized rate of growth of

about 40 percent

if you compounded that you'd get to

about 48-ish percent I don't know though

that we have the right indicators to

suggest that we are growing uh quarterly

deliveries at 10 compounded but we are

on a speed trajectory of uh somewhere on

40 growth so we'll see what happens uh

and uh we might not actually get any

kind of guide here so that's why I'm

keeping that towards the more towards

the end of the uh Tesla segment big fan

though of obviously just be prepared

margin cash flow money raise it's not a

big deal it's all totally normal for a

manufacturing company if you want if you

want to see spending okay you really

want to see spending why don't you jump

over to the Intel report you go to the

Intel earnings report and then you could

really see some spending a little bit of

spending maybe a lot of bits of spending

uh but anyway in Intel is is spending a

lot let's look for example over here

this is the cash flow statement for

Intel for the three months ending April

2023 we have net income oh oops a net

loss of 2.7 billion dollars we then jump

over here to cash provided by operating

activities

1.7 to the downside in other words they

lost about 1.7 uh in cash from

operations so Intel's losing money from

operations they're obviously going

through a big transition a lot of people

see them as either value or value trap

TBD which happens

but look at this folks additions to

plant property and Equipment

7.4 billies

imagine if Tesla came out and said oh

yeah we're uh we're negative nine

billion dollars of free cash flow like

Intel because we're building factories

so when you look at this way even if

Tesla goes slightly negative on free

cash flow it's nowhere near what some of

these other companies are spending on

manufacturing uh so so it's fine like in

the long term again this is what you

would expect for a growing company

that's ramping factories there's nothing

wrong with this so very excited uh

obviously uh there's always some

nervousness that goes into earnings as

well not a big deal if you're a

long-term holder but you know it still

is a psychological thing too you want to

see the company you're investing in is

performing well you don't want to end up

stuck with something like a Disney where

you know you invest in Disney for eight

years eight years ago last week and uh

you know you put 100 bucks in and what

are you left with after eight years

76 dollars yeah not so great anyway so

that that covers our Tesla

segment

now I want you to know this when it

comes to AI

time is what's going to make you money

and if you can prove that value to an

employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

but

foreign