Tesla Stock is Crashing - Here's Everything You Need to Know

Summary

The video discusses Tesla's stock performance following its earnings report, revealing a 12% drop and a lack of market enthusiasm. Despite energy and services growth, automotive revenue fell 7% year-over-year, with total production and deliveries also declining, indicating potential demand issues. The video scrutinizes Tesla's financials, highlighting a strong balance sheet but questioning the company's valuation, given its high price-to-operating income ratio compared to competitors like Toyota. The host concludes that Tesla's stock is speculative, with significant future growth priced in, and advises caution for investors.

Takeaways

• 📉 Tesla's stock dropped 12% after reporting its earnings, indicating the market's disappointment with the results.
• 🔋 Despite a 7% decrease in automotive revenues, Tesla's energy generation and storage revenue grew by 100% year-over-year.
• 📊 Operating income for Tesla declined by 33% due to a 39% increase in operating expenses, affecting profitability.
• 💰 Tesla's operating cash flow and free cash flow saw positive growth of 18% and 34% year-over-year, respectively.
• 🚗 There is a suggestion of a demand issue for Tesla vehicles, as average selling prices have been lowered, potentially impacting revenue growth.
• 📉 Tesla's total vehicle production and deliveries have decreased year-over-year, which could signal a loss of market share.
• 💼 Investments in AI projects have increased operating expenses without a corresponding boost in revenue or profitability.
• 🚀 Tesla's future products like the humanoid robot 'Optimus' are driving stock prices, but they are not yet contributing to the company's revenue.
• 🆚 Tesla's main competitor, BYD, is experiencing growth in both production and sales, suggesting a potential loss of market share for Tesla.
• 💼 Tesla's balance sheet is strong with ample cash reserves and a solid financial position, despite the challenges in other areas.
• 📈 The market may be valuing Tesla based on future potential rather than current performance, which could be risky for investors.

Q & A

Why did Tesla's stock go down by 12% after the earnings report?

Tesla's stock went down by 12% because the market seemed unimpressed with Tesla's earnings results, which showed a decline in automotive revenues and overall growth stagnation despite an increase in energy generation and storage revenue.

How has Tesla's stock performance been over the past three years?

Tesla's stock has been relatively flat for the past three years, indicating a lack of significant growth or change in the company's market value during that period.

What is Mumu, and how does it help investors stay informed about company earnings?

Mumu is a brokerage app trusted by over 22 million users worldwide. It helps investors stay informed about company earnings through its Earnings Hub, which provides an overview of business reports, conference call highlights, and audio replays. Mumu also integrates Morning Star research and has an earnings calendar feature for tracking earnings dates.

What was the main reason for Tesla's operating income decline?

The main reason for Tesla's operating income decline was a 39% year-over-year increase in operating expenses, largely driven by investments in AI projects like full self-driving and the development of new technologies such as the Optimus robot and a supercomputer.

How did Tesla's vehicle deliveries and production compare year-over-year?

Tesla's vehicle deliveries were down 5% year-over-year, and total production was down 14%, indicating that the automotive business is facing challenges and possibly a decline in demand.

What does the comparison between Tesla and BYD's vehicle sales and production suggest about the market?

The comparison suggests that BYD, Tesla's main competitor, is experiencing growth in both vehicle sales and production, while Tesla is seeing a decline. This could indicate that Tesla is losing market share to competitors like BYD, especially in the Chinese market.

What is the significance of the regulatory credits revenue for Tesla's financials?

Regulatory credits revenue, which amounted to $890 million, is significant because it represents a high-margin, profitable revenue stream for Tesla. However, its high contribution to operating income raises concerns about the company's reliance on these credits and the sustainability of this revenue source.

How has Tesla's gross margin been trending, and what could this indicate about the company's market position?

Tesla's gross margin has been consistently declining, dropping from a peak of 30% in Q1 2022 to 14.6%. This could indicate that Tesla is facing a lack of demand, leading to lower average selling prices and compressed profit margins, while competitors like Toyota and BYD are increasing their margins.

What does the trailing 12 months analysis of Tesla's key metrics reveal about the company's growth?

The trailing 12 months analysis shows that Tesla's vehicle deliveries have been declining for the past three quarters, and both operating cash flow and net income have been on a downward trend for two years. This suggests that the company's growth is stalling, and it may not be a typical growth company as its metrics are moving in the opposite direction of growth.

How does Tesla's balance sheet compare to its total liabilities, and what does this indicate about the company's financial health?

Tesla's balance sheet shows $3.7 billion in cash and cash equivalents and $53 billion in total current assets, compared to $27.8 billion in current liabilities. This indicates that Tesla is in a solid financial position, with enough cash to cover all current debts and still have a significant amount left over, making it a financially sound business.

What is the implication of Tesla's high price-to-operating income ratio compared to Toyota?

Tesla's high price-to-operating income ratio compared to Toyota suggests that the market is valuing Tesla at a significant premium, possibly pricing in future growth and product success that has not yet materialized. This implies that Tesla is considered more speculative and risky by some investors, as its current valuation does not align with its current performance as an automotive company.

What does the discounted cash flow analysis indicate about the market's expectations for Tesla's future growth?

The discounted cash flow analysis indicates that the market is pricing in a 31% compounded annual growth rate for Tesla's operating cash flow over the next five years. This level of optimism may be unrealistic given Tesla's current performance, suggesting that the stock could be overvalued and carry significant risk if the company fails to meet these high growth expectations.