Is the after hours selloff something more than a typical sell the news reaction or the start of something bigger?
Tesla Record Earnings
Tesla is down about 4 percent after hours after reporting Record Earnings.
Q2-2023 was a record quarter on many levels with our best-ever
production and deliveries and revenue approaching $25B in a single
quarter. We are excited that we were able to achieve such results given
the macroeconomic environment we are currently in.Our operating margin remained healthy at approximately 10%, even with
price reductions in Q1 and early Q2. This reflects our ongoing cost
reduction efforts, the continued production ramp success in Berlin and
Texas and the strong performance of our Energy and Services & Other
businesses.Our commitment to being at the forefront of AI development entered a
new chapter with the start of production of Dojo training computers.In conclusion, we are focusing on cost reduction, new product
development that will enable future growth, investments in R&D, better
vehicle financing options, continuous product improvement and
generation of free cash flow. The challenges of these uncertain times are
not over, but we believe we have the right ingredients for the long-term
success of the business through a variety of high potential projects.
The Reaction
CNBC reported “The stock price remained flat after the initial report, but began dropping during the earnings call as CEO Elon Musk and other executives failed to deliver precise specs and start of delivery dates for the Cybertruck, and for a robotaxi-ready vehicle. Musk and other execs also said during the call that vehicle production would slow down during Q3 due to shutdowns for factory improvements.”
Was the reaction a typical sell the news event?
If so, the reaction was mild. The four percent drop was not even enough to wipe out the prior six day gain.
If it’s something more, Tesla has a long way to drop.
Tesla Monthly Chart
Elliott Wave E-wave View
Technically speaking, the E-wave count suggests the more bearish view may be correct.
We had 5 waves down from the top followed by three waves up. 5-wave moves in either direction are impulse moves while 3-wave moves are corrective.
If my larger font 1-2 count is correct, wave 3 down is about to start. Wave threes tend to be the longest and strongest, but the only technical requirements are waves threes cannot be the shortest and waves cannot overlap other waves.
Support Levels
Monthly technical support levels are approximately 160, 100-120, then nothing until about 30.
Other timeframes will have additional support levels.
Tesla Fundamentals
Fundamentally speaking, Tesla does not have many of the problems traditional dealers have. It does not have dealers or huge inventories.
Tesla, is not struggling to make a profit.
And now, most analysts have written off or at least discounted the odds of a strong recession.
Congrats to the longs.
Goldilocks View
The Goldilocks view seems to be Hooray! No recession!
Yet, I wonder what the heck is priced in for a stock whose PE is over 85 despite record earnings.
The Fed Reports Abysmal Industrial Production Numbers and Negative Revisions Too
Meanwhile, please note The Fed Reports Abysmal Industrial Production Numbers and Negative Revisions Too
Peaks in industrial production tend to indicate economic peaks as well. The Recessions in 2001 and especially 2020 were exceptions.
IP peaked eight months ago, a long time by historical standards.
It would be amusing if recession started the very month nearly everyone gave up on the idea.
Electric Vehicles for Everyone? If the Dream Was Met, Would it Help the Environment?
Are EVs really going to happen as fast as people think?
For discussion, please see Electric Vehicles for Everyone? If the Dream Was Met, Would it Help the Environment?
Finally please consider A 5 Percent Pay Cut is Coming for 37 Million Student Loan Borrowers.
Something is likely to give on spending, across the board on spending.
“Fundamentally speaking, Tesla does not have many of the problems traditional dealers have. It does not have dealers or huge inventories.” ~Mish
I would add…or costly inventory problems associated with balancing ICE and EV inventories.
The regional banks popped up on bad reports, TSLA plunged on great earnings, because QQQ Might be in distribution for technical reasons.
QQQ can go higher.
A lot of folks don’t understand EV’s from this perspective. As a cheap skate and a mechanic I understand 2 things, my Prius is one of the most efficient internal combustion(ICE) cars out there coming in close to 40% energy efficiency. The average is 20% for ICE cars. For electric it runs close to 90% with some major caveats.
There are two big drawbacks though with electric. First fossil fuel power plants are only 36% efficient on average and power transmission distribution robs another 10%. The energy cost factor for electricity delivered versus gasoline is about half at current costs in Los Angeles meaning gasoline at the pump is about half as expensive per BTU than delivered electricity. This is at 25 cents per KWH and $4.59 per gallon gasoline. At these numbers electric lands in the mid to high teens in power efficiency, roughly 16%.
Depending on where one lives and their electricity costs versus gasoline costs the picture can vary greatly. In areas with cheap hydroelectric power EV’s are an awesome cost saver providing gasoline isn’t dirt cheap as well.
The second big cost component is electric car drivetrains can last a long longer with less maintenance costs than ICE car drivetrains can. People note battery costs but I can tell you Prius batteries have come way way down in cost and EV car batteries are doing same. Myself personally being a retired IT guy its simple and under $100 to swap out a bad cell in my Prius battery packs. My oldest current Prius has 185k miles and is still on the original battery pack.
would not buy one but trading their stock made me enough money to do so.
Like Homer Simpson who sold his Apple stock just before it took off to buy a bowling ball.
I’m reminded of a discussion about AMZN about 13 years ago, a friend tried talking me out of my long position because the P/E was relatively high. My argument was potential market share.
I say the same stands for TSLA now, there’s insane market potential in the U.S.
TSLA’s primary constraint is supply, certainly not demand.
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Amazon is exactly what came to mind when I saw the degradation in Tesla’s margins. This puts more pressure on GM and Ford then it does Tesla. Pressure to make better and more competitive EV’s. Having said that, even with implicit government guarantees, legacy auto makers are no match for Tesla.
Of course there was a sell-off. Was it in reaction to Musk not answering a few questions? Doubtful. News stories are written to get people to buy the paper, not give you real answers. Especially in finance. Are those real problems? Probably, but nothing that Musk hasn’t given ample evidence he can overcome them via his past performance of get ‘er done. It’s called taking your profits. Those stocks rose up in expectation of the earnings for this quarter, once they entered the next quarter, it’s a whole new ballgame. 4% down isn’t enough to worry about on its own. Would I ever buy a Tesla? No. That’s for people who waste their money on spoiling themselves. I grew up around people who lived the old Sam Walton philosophy of buying your car by the pound. We’re talking people who had a railroad car in their backyard as a memento of when they used to own the whole railroad. You would have gotten a pocket watch. He got an engine and a bit of track to sit it on. Baling wire on his driver’s door to keep it shut. But that’s just me.
“News stories are written to get people to buy the paper, not give you real answers”
This, absolutely.
Now if Musk can put a Tesla on a SpaceX rocket there is no telling where it could go; Mars and then orbit the Sun I bet.
I don’t own any Tesla stock except via index funds, but if you did want to invest in the company, this “sell the news” and paying attention to quarterly numbers at all is silly. Where do you see Tesla going long term? Buy or sell based on that, not some dumb triangles someone put on a graph with MSPaint.
Or you can just not try to pick anything, buy consistently, otherwise do nothing, and easily get rich. Have you seen a chart of the S&P with dividends reinvested over the last 100 years? It’s better than porn!
Your call.
I totally agree that this quarterly “accounting earnings or adjusted EBITDA” game is scheme cooked up by wall street a long time ago to generate transactions and fees.
I don’t own any Tesla stock except via index funds, but if you did want to invest in the company, this “sell the news” and paying attention to quarterly numbers at all is idiotic. Where do you see Tesla going long term? Buy or sell based on that, not some dumb triangles someone put on a graph with MSPaint.
Or you can just not try to pick anything, buy consistently, otherwise do nothing, and easily get rich. Have you seen a chart of the S&P with dividends reinvested over the last 100 years? It’s better than porn!
Your call.
Past performance is no indication of future performance. That well may be dry for a few decades.
I can’t say that Tesla has displeased me with these results. They show that the company is on track. It probably is due for a retracement since it has reached the objective of the reverse head-and-shoulders. That would be a reason to sell some except for the fact that it would be very easy to miss it when it takes off again.
KidHorn gave a very good summery and he underlines the usefulness of regenerative braking for semis. I would like to point out that Teslas are the safest cars on the road in an accident. If you roll in the possibilities of avoiding accidents through the FSD system then you get something unique.
While revenue growth and market share expansion are deemed positive, both came at the expense of margins.
Their earnings were mostly in line with expectations. They had a runup prior to earnings because some thought they may surprise to the upside.
They have a high PE, but if their long term plans play out, they’re a bargain. They plan to sell 20 millions cars/year. They make about $10k/car now, so if that continues that would be $200b/year in profits. Even if cut in half, that’s still a huge profit.
They can upgrade cars with software upgrades. Like any tesla can add full self driving for $15k or $200/mo. I have no idea how much revenue this makes.
They also own 45,000 superchargers and the number is growing, so that’s another avenue for profits. These have the potential to be highly profitable since they can get free electricity from solar panels and they can store energy with batteries. They charge the batteries when rates are low and then sell for a lot more during peak hours. The margins should be far higher than a typical gas station.
They’re starting to make Semi’s. This could be a huge business. Semi’s can save a lot of money since they consume a lot of diesel. These can save hundreds/day in operating costs. And they can go up hills a lot faster and breaking is a lot better because of regenerative breaking. the charging fits in well with current laws limiting the amount of driving by a driver. I think right now Pepsi is buying them as fast as they can make them.
They also have robots and self driving taxis. I don’t see these as being profitable for 5+ years, but if they pan out, it could be a huge revenue stream. Kind of like free call options right now.
All great … but Elon’s shown himself to be a kook. What happens when he’s done wrecking twitter and turns his attention back to Tesla?
Was sad to have my illusions about the guy shattered, but I’ll always be grateful to him for the arcade games and the fart button.
I guess your definition of wrecking twitter is no longer suppressing conservatives.
And he didn’t become the worlds richest man with kooky ideas.
He became rich because he had kooky ideas and worked to make them work.
He was born rich, made some lucky bets, and rode to fame and more riches on the backs of much smarter people. Then he let his narcissism run away with him and shattered the illusion… and now he’s butthurt that people treat him like what he actually is.
Story old as time…
You seem really bitter that he helped expose how the gov’t was working with twitter to suppress conservative posts.
I’m talking about the 50% drop in revenue, but you spin it how you like.
Oh OK. It has nothing to do with your political views.
You think you understand my political views. You don’t.
Anybody that doesn’t agree with your politics is a kook? These tech oligarchs are all weird and I consider him as the least worst. Outing the FEDS meddling in politics on Twitter and attempting to provide an alternative to the crazy woke BS gives him kudos in my book. I will say tho the way he went about making changes at Twitter could have been vastly better, he should stick to mostly hardware engineering companies. I have been under no illusions about the man personally, I only admire what he’s been able to do
Ever heard of a “Jake-Brake”?
Tesla is part of the MOAB pheomena. Mother of all bubbles. Wait until Elon makes mention of AI with Tesla as all others companies with little to no real AI capabilities do and watch is go even more vertical.
Tesla is in discussion with other car manufacturers to license their self-driving software which now has 350 million miles of testing. They didn’t say who it was but it could be a very big money-maker in its own right and would sell more than Tesla cars themselves. It would be thousands per car in Tesla’s pocket and since it is software they use themselves there are no manufacturing costs. Pure profit!
He’s been peddling broken AI for over a decade, and people are on to it.
And now Tesla’s works while the others don’t work. Reminds me of the other rocket companies scoffing at SpaceX plans to build reusable rockets.
It absolutely does not ‘work’ or you wouldn’t have to keep your hand on the wheel waiting for it to give up.
Come on Zardoz. Admit that Tesla has become much better than you ever would have thought.
I own one, and I think it’s amazing. The self driving tech is useless crap though.
“One day it seems like the world economy is falling apart. And the next day everything’s fine. I don’t know what the hell is going on,” Musk told analysts on the earnings conference call.
https://finance.yahoo.com/news/tesla-stock-is-worth-only-85-after-gross-margin-whiff-analyst-says-wall-street-reacts-085541588.html
Neither do we Elon.