CEO Elon Musk, never one to understate his successes, started the earnings call by telling it the way he saw it: “All right. So, Q3 was our best quarter in history.”
He highlighted the company’s other initiatives, including the incremental advances in battery technology that Tesla showcased at its Battery Day, the beta release of Full Self-Driving mode, the continued buildout of the company’s manufacturing capabilities, and a projected increase in sales of Solar Roof, which he referred to as a “killer product.”
He also doubled down on the company’s stated goal of continuing to cut prices:
If the car is too expensive… and people don’t have enough money in their bank account, they simply can’t buy it no matter what the value proposition is. So it is important to lower the prices. … I do not think we lack for desire for our product, but we do lack for affordability.
Some analysts are concerned that, as the company grows sales of its lower-priced cars and pursues price cuts, it won’t be able to maintain its double-digit margin target. CFO Zachary Kirkhorn agreed with Musk on the need for affordability, but didn’t think it was mutually exclusive with margin growth:
If you just look at the journey of the company over the last 1.5 years, we have grown volumes and grown gross margins despite a number of price reductions over that period of time, and we have kept OpEx fairly stable during that period of time as well.
We have to also continue to make progress improving the cost structure … and improve the value of the vehicles at the same time. So in addition to reducing the cost of the car, we’re making the cars better. And that’s the formula to sell the volume. That’s what we’re focused on.
One way to do this, according to Musk, is to bring as much manufacturing in-house as possible. “There’s in excess of a dozen start-ups effectively in Tesla,” Musk said, citing microchips, battery cells, superchargers, and autonomous driving as areas that other car companies outsource but Tesla doesn’t. “Tesla is absolutely vertically integrated compared to other auto companies or basically most any company,” said Musk. “We literally make the machine.”
“Quite frankly, we would like to outsource less,” concluded Musk. “That would be great.”
What Q3 tells investors
The third quarter’s strong performance indicates that Tesla has finally turned the corner when it comes to profitability and cash flow generation from its passenger cars.
Interestingly, Musk and his management team didn’t even mention the Semi or Cybertruck until they were specifically asked about them by the analysts on the call. They only briefly mentioned the company’s often-overlooked energy storage products, Powerwall and Megacell. The primary focus of the earnings call — and the company — is clearly on its passenger cars.
That’s probably good news for investors, since Tesla’s cars are in demand and selling well. Focusing on maximizing their profitability and improving their affordability is probably going to give Tesla the biggest bang for its buck in terms of improving the (already-much-improved) bottom line.
Tesla’s sky-high valuation should give new investors pause, but operationally, it seems to be on solid footing, and its impressive growth streak seems likely to continue. I wouldn’t place any bets against the company right now.
Tesla, Inc., formerly Tesla Motors, Inc., designs, develops, manufactures and sells fully electric vehicles, and energy storage systems, as well as installs, operates and maintains solar and energy storage products.
The Company operates through two segments: Automotive, and Energy generation and storage.
The Automotive segment includes the design, development, manufacturing, and sales of electric vehicles.
The Energy generation and storage segment includes the design, manufacture, installation, and sale or lease of stationary energy storage products and solar energy systems to residential and commercial customers, or sale of electricity generated by its solar energy systems to customers.
The Company produces and distributes two fully electric vehicles, the Model S sedan and the Model X sport utility vehicle (SUV). It also offers Model 3, a sedan designed for the mass market.
It develops energy storage products for use in homes, commercial facilities and utility sites.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 493.27.
The projected lower bound is: 350.89.
The projected closing price is: 422.08.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 28.7574. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.79. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 37 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -102.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 4 period(s) ago.
Rex Takasugi – TD Profile
TESLA INC closed down -0.350 at 420.280. Volume was 100% below average (consolidating) and Bollinger Bands were 59% narrower than normal.
Open High Low Close Volume 411.630 425.760 410.000 420.280 73,443
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 433.86 420.20 238.62 Volatility: 34 113 115 Volume: 32,505,550 68,929,728 81,525,200
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
TESLA INC is currently 76.1% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future.
Our volume indicators reflect volume flowing into and out of TSLA.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on TSLA.O and have had this outlook for the last 6 periods.