Do Not Get Distracted By Tesla’s (NASDAQ:TSLA) Q-3 Profitability

Do Not Get Distracted By Tesla’s (NASDAQ:TSLA) Q-3 Profitability

Do Not Get Distracted By Tesla’s (NASDAQ:TSLA) Q-3 Profitability


  • Tesla posted an impressive Q-3 profit Wednesday, and the company’s top-line revenue was more stunning.
  • The money flowing toward Tesla is more important than whether it makes or loses money on a Quarterly basis.
  • As Tesla grows, questions could arise over its monopoly status in the EV sector, and use of pricing power.

Wednesday, Tesla (NASDAQ:TSLA) posted a big Quarterly profit, its 1st since 2016 and a fulfillment of CEO Elon Musk’s prophecy that the carmaker would enter the Black in Y 2018.

The company made $312-M.

But more important, it took in almost $7-B in revenue, a huge increase to the top-line, which had been moving very predictably by about $200-M a Quarter. The jump for Q-3 was strong.

More than the bottom-line number, it was a huge Beat on analysts’ expectations, as Wall Street had figured in a breakeven Quarter or a slight Beat. If you take out the sales of Zero-emissions credits of $50-M, Tesla made roughly $260-M.

Putting things in perspective

Ford (NYSE:F) also reported Q-3 earnings Wednesday, making a profit of almost $2-B on a non-GAAP basis on revenue of nearly $38-B. It lost close to $200-M on its new mobility unit. So, on a single trying things out division, Ford is losing what Tesla is making on its entire business.

So, do get distracted by Tesla’s profitability either.

With just $3-B in cash and $10-B in debt, as well as some large debt payments coming due in Y 2019, Tesla needs much more cash flow than it needs profits.

On the conference call after earnings were announced, CEO Musk indicated that profits might not be so impressive going forward.

For example: Tesla has to deal with a huge convertible-debt payout in Q-1, adding up to about $1-B. It also has billions in coming investment commitments to address, including building a new factory in China and launching a crossover SUV, and the car business is expensive in the extreme.

Tens of billions of dollars are really nothing to a major car maker, that is how much it costs to keep the plants running and keeping the show on the road.

Ferrari (NYSE:RACE) spends more money on racing that Tesla makes.

The EV market is tiny with about 1% of global sales, and micro-mini Tesla has much of it. The company has been using its pricing power to satisfy its capital needs, and, lacking any meaningful competition, there is not much yet that consumers can do about it.

For the moment Tesla’s travails have paused, but the big problems still exist, and soon I expect that Mr. Musk’s mini-monopoly will fade.

HeffX-LTN’s Analysis for TSLA: Overall Short Intermediate Long
Neutral (0.15) Neutral (0.22) Bullish (0.33) Neutral (-0.10)

Have a terrific weekend

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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