Tesla Q3 Earnings Disaster | Expect 12 Months of HELL.

hey everyone me Kevin here boy oh boy

Elon Musk I gave us a whole bill of

opium today and I'll tell you I like

compium the path for Tesla has been

written at least for Elon Musk that with

a little bit of luck maybe a lot of luck

and a lot of hard work Tesla per Elon

Musk could potentially be worth twice

the value of Saudi aramco

that would be over 4 trillion dollars in

future value potentially now Elon also

says that another way Tesla could be

worth as much as apple and Saudi aramco

are worth today combined also over four

trillion dollars that's about 5.7 X the

stock price today which would be over a

thousand dollars which Elon Musk thinks

is possible uh per share for Tesla now

of course hey that's opium but he even

added to that about 50 minutes into the

call Elon Musk mic drops because here I

am thinking sure I mean if Robo taxi

takes off all the cars the semi trucks

the energy and robots take off sure

thousand bucks a share fine but then

about 50 minutes into the call he Mike

drops and says oh by the way that's

without Optimus four trillion dollars

wow okay a lot of Hope right out of the

gate so we're gonna do this video from

like the happiest part to the worst

parts so the next happy part the

potential for a five to ten billion

dollar buyback of Tesla shares probably

next year that's because they're keeping

this cash Reserve to make sure if in

their scenario of a nasty 2023 recession

they can still survive which they

believe that even in a nasty scenario or

recession they'll still be able to

produce operating cash flow in a 2023

nasty recession which is amazing if they

can and obviously we don't want to go

through a nasty recession but we want

them to be prepared for that and have a

cash buffer that actually is interesting

because if we don't have a nasty

recession in 2023 and things start

turning up that means the stock market

will probably start going up and Tesla

stock will probably start going up right

at the same time Tesla says oh now let's

do our buyback and you could just

literally take jet fuel and pour it onto

Tesla stock once it starts going up

potentially next year so you got lots of

time to buy the dip between now and then

unfortunately or maybe fortunately

anyway they did have a four percent

reduction in GNA costs this year I'm

sorry this quarter which is actually

good this is part of the layoffs that

they had and white collar workers they

still grew Revenue in sort of their Top

Line deliveries at a 50 clip while

reducing GNA by four percent Elon Musk

says will happen have an epic Q4 however

there is a little bit of reading into

that you had to do regarding their 50

annual compounded growth rate for their

50 annual compounded growth rate they

believe that in future years probably 24

25 and 26 they're actually going to

average more than a 50 growth rate in

fact at the beginning of this year Elon

Musk was talking about maybe even a 60

compounded annual growth rate but that

went away there's no more comment about

60 now it's like ah we hope to average

50 to me this kind of sounds like the

Federal Reserve when they're like we

hope to average two percent inflation in

other words it's probably going to run

hot uh or inflation's going to run hot

for a while and for Tesla's purposes it

probably means we're going to miss 50

for a few quarters going forward

especially since Tesla's projecting that

2023 could be rough as they get through

some of these recessionary challenges

and remaining commodity and supply chain

crises and that's obviously where we had

a big Miss today margin margin just

didn't come in as well as we expected we

expected it to come in at about 28.4 it

actually uh came in hold on let me uh

fact check that number really quick uh

we had a margin I have it written down

right here yeah 28.4 was the expectation

it came in at 27.9 unfortunately coming

out of Shanghai or shanghel last quarter

with Shanghai being shut down so much we

actually saw margin uh stay stable with

shanghai's quarter this quarter and we

missed expectations despite the fact

that Shanghai reopened up that's a

problem now part of that is because

Tesla is arguing that hey we're still

seeing the the pain of peak commodity

prices and they say that even though

commodity prices are falling for things

like steel and aluminum being down

somewhere around 17 to 20 percent and

even though shipping costs are down from

twenty thousand dollars a container to

like 35 to 3 600 they're not seeing

Commodities deflation in lithium and

Battery products they're also remember

companies like Tesla they lock in these

costs into their supply chains and to

into contracts for a while so they're

only now what they believe is just now

hitting Peak commodity prices and they

expect maybe they'll see 10 of their

costs come down in Q4 but not some kind

of windfall so they're like don't expect

to see uh our costs come down a lot next

uh next quarter maybe in 2023 and Elon

Musk is like yeah probably 2023. in fact

uh it would be surprised if costs didn't

come down in 2020 uh three some other

hope excuse me was this comment on the

potential for that model two to be a

smaller car and potentially in the

future half the cost of a model 3 and Y

and they're going to take everything

that they've learned from making the

model S the three the X the Y the Cyber

truck and the semi and hopefully make a

car for half the cost with half of the

factory space and and they think all of

this can be done at some point in the

future obviously again that's just more

hopium so kind of back to reality Q4

numbers operating margin did breach 17

however we hit 19 in q1 so we kind of

fell back down a little bit uh free cash

flow of over three billion dollars 3.2

to be exact expecting an annual free

cash flow of over nine billion dollars

this is remarkable and Tesla Bulls are

going to talk about that all day long

but let's be real that's already priced

in and really what moves Tesla stock is

growth projections and the fact that we

went from hey maybe we'll have 60 annual

compounded growth too uh we'll average

50 and we're probably going to miss in

Q4 even though we're excited about Q4

kind of is leaving the stock down 4.7

Elon does believe it's foolish to buy a

gas vehicle because the residual value

of those will go down to zero full

self-driving is expecting a wider

release in Q4 likely next month and it

will also be immediately available when

you buy a new car so far Tesla has about

three and a half million vehicles on the

road a fraction of even one percent of

the global Fleet of over 2 billion

vehicles on the road Elon believes that

energy storage could see 150 to 200

growth rate in the future but the

problem with that is not a lot of margin

there semi gets delivered the first semi

gets delivered to uh Pepsi December 1st

margin on energy by the way is like nine

and a half percent so relatively low

again they're uh they believe they're

they're spending on R D which is up

about nine percent nineteen percent year

over year is uh actually it actually

goes a lot further than any of our

competition outside of Tesla Factory

ramping Q3 hit record numbers Berlin up

to 2 000 Vehicles a week Giga Austin

should reach that soon that means Berlin

is actually ahead of Austin they tripled

their 4680 cell production from the

prior quarter and uh growth is rapidly

growing which is our production is

rapidly growing which is great still

Transit problems though not enough ships

to get vehicles out of China because

less Chinese are buying Vehicles so you

got to ship them out but there just

aren't enough ships and trains to

actually get these vehicles out and so

you have logistical issues bringing

margins down and then obviously Supply

uh cost issues of bringing margins down

supply chain risks could lead to a Miss

on that 50 percent growth rate that's

obviously a problem and Elon Musk does

expect that will meet all the thresholds

to basically take full advantage of the

inflation reduction act and so one of

the big things that I'm seeing here is

you're basically if you're a Tesla

investor you have to look at Tesla as

okay we're probably going to go through

not another quarter of hell but like

another year of help that's because

maybe in a year from now inflation will

finally start meaningfully coming down

not only will inflation meaningfully

start coming down but maybe rates will

start coming down then the supply chain

issues and shipping issues will be gone

and then the commodity costs issues will

be gone and then we can pour jet fuel on

Tesla stock but until then you gotta

wait uh it's gonna be a bumpy ride until

then honestly I don't think we're going

to see 50 annual compounded uh growth

rates for the next few quarters to me

what I'm hearing here is we're gonna

have a bumpy Q4 we're gonna have

probably have a bumpy q1 q1 is always

worse than Q4 so if Q4 is going to be

bumpy q1 is probably going to be bumpy

you're still ramping and so

unfortunately you've got more hardship

ahead rather than just easiness however

the expectations are that if you're a

long-term investor hey you know what

this hardship is just an opportunity to

be part of something that could

potentially in the future uh be worth uh

two and a half times what it's worth now

which would be say somewhere around 500

a share 550 a share and maybe even

double that if elon's optimistic

projections are right so in other words

if you take elon's optimistic

projections water them down by 50 you're

still at 500 bucks right so uh they do

believe that margin will uh return to

that 30 level and uh if you take out FX

and some of the commodity issues they

believe exactly that is possible but uh

realistically the issues like from what

I'm hearing I'm not hearing that we have

any issues that are short-term

everything to me sounds like a long-term

long-term issue long-term pain more pain

to come uh and uh unfortunately we've

got to buckle up and buckle up just

means strap in hold tight and if you're

long term buyer buy and hoddle if you're

trading yeah you're probably just making

money shorting it uh personally I'm

optimistic I don't see anything here

that's the red flag my biggest red flags

were margin and honestly the fact that

they told me they're still not past Peak

margin uh or past Peak or or maybe just

now past Peak commodity prices made a

lot of sense to me it actually gave me

confidence that okay that makes sense

like Q3 was still experiencing

increasing costs not decreasing cost

because a lot of us went into this

quarterly report thinking oh well cost

came down right no okay well that's good

Clarity uh confidence on sales look I do

expect they're going to sell all their

vehicles and uh that was reiterated

today they didn't reiterate it as

hardcore as they previously had but uh

they still expect to sell other vehicles

and even Wall Street expects they're

gonna sell all their vehicles through

the end of 2023. I think now it's just a

matter of how bad is the recession gonna

be so folks there you have it

bullish but enjoy the opportunity to buy

The Damp thanks for being here folks

we'll see you next one goodbye