Tesla’s Disastrous Earnings | This Changes Everything

well folks here are my latest thoughts

on tesla after hearing elon musk and

spending some more time going through

the statements

oh boy folks all right so bottom line

first

cash flow

okay yeah we have cash flow we have an

operating cash flow a tesla of 2.351

billion dollars

yes we have free cash flow of

621 billion dollars that's when we take

the actual operating cash flow and we

subtract out their investments of about

1.73 into things like their factor that

number is still positive but what we

really don't have

is a positive change in net cash if we

take out the bitcoin position this is in

my opinion a little bit of an issue

because if you look at the current

assets that tesla has and you subtract

off their current liabilities and i have

just i've adjusted this slightly for not

only rounding purposes to make this

simpler but also because there are

things like deferred revenue which you

expect is going to turn into cash blah

blah blah point is if you take their

current assets which is like their big

old cash position which they have a lot

of cash okay people like to say oh tesla

has a lot of cash yeah they got 18.3

billion in cash okay i got it i got it

but if you take the current cash and

marketable securities and accounts

receivable and then you ignore the

deferred revenues

in the liability section you still end

up getting current assets minus current

liabilities of about zero

that means that if tesla needs any

additional money to fund potential

quarter to quarter losses or wanting to

build a new factory what's tesla going

to have to do they'll have to do a bond

raise or they'll have to sell or issue

and sell new stock and those are things

that dilute existing shareholders we

don't like hearing that last time this

happened in september of 2021 and we did

a five billion dollar bond sale uh what

happened well the stock

this basically started the drop of the

stock in the amount of about 35 now that

september was a little bit of a rough

month other tech stocks fell as well but

it was definitely the turning point uh

for tesla at least in the short term uh

and so you know anytime you get cash

that is close to being negative at any

point on statements people don't like it

and the reality is the following tesla

sold

at a 106 billion dollar loss bitcoin

they said in the earnings call they lost

106 billion dollars

if you take the 936 billion dollars of

change in cash and you subtract that by

the end change in cash that tesla had

the net change in cash cash tesla had of

847 million you would have gotten that

is if you did not sell if you did not

sell this bitcoin you would have been at

negative and this should be reversed but

whatever you would have been at negative

89 million dollars as a change in cash

and i think that would have spooked some

folks

uh now that would just be a short-term

thing probably a short-term buying

opportunity if you're a big tesla bull

but it is something that we were pretty

dang close to having a negative number

on and the bitcoin sale by elon musk

where elon musk decided to sell 75 of

tesla's bitcoin is something that

ultimately

kept that number positive had it not

been for that net change in cash would

have been a big fat negative so we've

got that clarity out of the way now why

did elon do this well elon says he did

this because they were uncertain about

shanghai and let's be clear about

shanghai shanghai props the margins a

lot because without shanghai we ended up

with margins excluding regulatory

credits of 26.2 percent which is some of

the which is actually the lowest level

that we've seen since the second quarter

of 2021 when we were just about at a 20

uh just a little bit over 25 a point uh

25 and a half 25.8 percent somewhere

around there the point is it's the

lowest level we have seen since then

yeah 25.8 was was the prior low

last q2

and again that's 25.8 so we still beat

that but in my opinion we mostly beat

that because we saw model s and x

deliveries up substantially of a nine

percent quarter over quarter that's a

pretty good boost of model s and x

deliveries in fact if you go all the way

back to the last time we had margins

this low we only delivered 2.3 000 model

s's and x's now we delivered

16.4 uh thousand model s's and x's which

is still nine percent greater than the

last quarter so it goes to show you like

the s's and x's were the only thing that

kept this margin together if we didn't

have the s's and x's and shanghai were

closed oh we would have had a terrible

margin mesh and unfortunately this was

one of the scenarios that i said hey how

inefficient is tesla without shanghai

uh unfortunately it's still pretty

inefficient without shanghai now

hopefully that once uh berlin and austin

ramp we end up getting some substantial

efficiency right that's what we want to

see and we then start growing like

shanghai but look the dollar cost of

labor in shanghai is obviously a lot

cheaper than what it could be in berlin

or in texas so you're always going to

have this large advantage from shanghai

but it just shows you that china is a

pretty big piece of the puzzle for tesla

and remember international sales make up

about 55 percent of sales for tesla we

did have a nice bump in solar deployed

especially uh a storage deployment at 11

or 1.1 uh gigawatts which is really

really nice

and that is a nice that's a decline from

q2 of last year but it's definitely a

nice increase from last quarter where we

had 846 megawatts deployed now we're at

1.133

but some of the other things that we

really have to talk about

uh are not only what we talked about

regarding the sort of cash flow and net

change in cash not only what we talked

about in margin but also what about the

consumer so elon musk did first pull at

tim cook he first dodged a question

about the consumer and just basically

talked about how the big problem for

tesla is production not the consumer

that uh you know if people order a

hamburger they want to they want it

right away they don't want to wait three

hours and the same should be true of a

car people actually don't want to wait

we don't want an order backlog yeah sure

maybe you don't want an order back log

elon but i want an order backlog because

i don't want to see tesla doing 1.4

million vehicles per year and having no

order backlog i want to see an order

backlog until we get to like 5 to 10

million vehicles produced and if we get

to 10 million a year and then it's like

yeah you could go to the lot and pick up

a tesla just like you could pick up a

toyota prius that's fine but until that

point

i want to see a backlog because i want

to be able to i want to grow into the

ramp phase why you buy tesla like i said

on the live stream is because of the

ramp of these factories the factory is

the product here folks if we can copy

and paste the factory we win

unfortunately we got no mention of the

new factory no mention of insurance a

brief mention that the cyber truck might

come out

for deliveries in the second half of

2023 so we're kicking the can down the

road again all right also not a surprise

but when we're finally drilled about the

consumer again

first their cfo says no we're not seeing

an impact then says well maybe a little

elon musk is heard chiming in going some

maybe elon musk continues by saying that

orders or meglo you know or i should say

manic depressive that it seems like

orders really move the way either

markets or the consumer sentiment moves

and so in my opinion if you have like a

really big green day you know you've got

like three million retail shareholders

for tesla and i think only you know one

and a half million retail owners of

tesla's so you get like a really really

green day

more people are ordering teslas

so not a surprise that you're seeing uh

you know people's sentiment match their

spending at all but elon mentions that

they don't really see this as much of a

predictor for the consumer that uh

they're they're good now there were some

discussions about chips and batteries

and ai day ai day they're very excited

about they think it'll be better than

what people expect they think next year

they'll really get to using the 4680s

that right now they have enough 2170s to

get through the year and they don't

really have to worry about 4680 so they

started producing those in one of their

new giga factories which is great and we

expect at some point to be at roughly

a production of 1 000 46 80s per week

which is quite impressive elon again

talking about inflation potentially

trending down and then tesla lowering

prices over time he thinks that prices

are embarrassingly high however uh the

cfo and elon think that we're going to

see inflation mostly due to commodities

decline in the third quarter versus the

second quarter again they lost about 106

million dollars on their btc impairment

and elon musk mentioned that they'd be

open to buying more btc in the future so

now bottom line on everything for this

earnings call and this earnings report

could it have been better for this

hellish quarter absolutely margin could

have been stable it wasn't it fell uh

cash flow was there yes but net change

in cash was propped up by btc which is

kind of lame because it means elon had

to go to the piggy bank because he was

that worried about tesla and tesla

shanghai which just again reiterates how

much power china has over tesla

not sure how much we love that in the

days after ukraine

is what it is it's a red flag though and

again we need

gigafactory announcements to really grow

into wall street's expectations

otherwise we've got another red flag

regarding the consumer fine demand is

still there more than production right

now great but i don't even want to spend

time so much talking about the consumer

i want to know more about the ramp let's

get berlin and austin figured out let's

get that coupon code before it expires

on the 28th and make some money