Profit Is Down On Greater Subsidies and Unit Deliveries
Ha! Tesla just reported their latest quarterly financial results and the company’s financial position continues to deteriorate. I stand by my prediction, this stock will be under $170 per share by November of 2020.
Based on Tesla’s own numbers, revenue was only up 1% year-over-year. This is devastating for a company trying to sell their “growth story”. The growth story is dead.
But wait, it gets worse, gross profit was down 4%. This is on increased units. This the exact opposite of what Tesla bulls have been hoping for. Tesla believers have been predicting for years that the more cars Tesla can deliver, the higher their gross margins will be. They are proven wrong almost every quarter. And this was a record quarter for units delivered. But this is exactly what Tesla bears have been saying all along, that Tesla’s demand problems are causing the prices to drop faster than they can gain efficiencies of scale. Bears proven right again. Lowering prices at the cost of gross margin is an unsustainable practice. Tesla has a demand problem.
Tesla’s net income was down 25% year-over-year. And this is on top of a huge gain in EV credits. Last year, Tesla reaped $419 million in welfare dollars compared to $594 million this year.That’s over a 40% increase in free money that is going to go away very soon. And even with that big increase in EV Credit inflows their net profit was down 25%. There is nothing to cheer about this quarter for anyone who reads the financials.
And about these “record deliveries”. There are two huge reasons not to get too excited about that if you’re an investor in Tesla. First, gross margin was down meaning that Tesla had to cut prices to move metal. The myth of unlimited demand is gone. And second, 2019 was a big year for expiring government subsidies to buyers. That means Tesla moved a lot of the 2020 demand into the the final quarter of 2019. You know what that means? Decreases in 2020. For a stock that is built upon the thin story of explosive growth (never mind Musk is predicting 500K delivers for the 3rd year in a row), this is going to spell trouble in 2020.
Tesla didn’t turn their first annual profit. The only people who matter when it comes to judging a company’s profit are the shareholders. And they collectively lost nearly $900 million in 2019 on a GAAP basis. And without the huge increase in subsidies, Tesla would’ve lost money in Q4. Show me someone who’s bullish on Tesla, and I’ll show you someone who reads headlines instead of financial statements.
So the numbers are out and I feel pretty good about my thesis on Tesla. The company is overvalued and it’s financial health continues to deteriorate. Woe unto the suckers who buy into this stock at over $600 per share.
But wait, it gets worse, gross profit was down 4%. This is on increased units. This the exact opposite of what Tesla bulls have been hoping for. Tesla believers have been predicting for years that the more cars Tesla can deliver, the higher their gross margins will be. They are proven wrong almost every quarter. And this was a record quarter for units delivered. But this is exactly what Tesla bears have been saying all along, that Tesla’s demand problems are causing the prices to drop faster than they can gain efficiencies of scale. Bears proven right again. Lowering prices at the cost of gross margin is an unsustainable practice. Tesla has a demand problem.
Tesla’s net income was down 25% year-over-year. And this is on top of a huge gain in EV credits. Last year, Tesla reaped $419 million in welfare dollars compared to $594 million this year.That’s over a 40% increase in free money that is going to go away very soon. And even with that big increase in EV Credit inflows their net profit was down 25%. There is nothing to cheer about this quarter for anyone who reads the financials.
And about these “record deliveries”. There are two huge reasons not to get too excited about that if you’re an investor in Tesla. First, gross margin was down meaning that Tesla had to cut prices to move metal. The myth of unlimited demand is gone. And second, 2019 was a big year for expiring government subsidies to buyers. That means Tesla moved a lot of the 2020 demand into the the final quarter of 2019. You know what that means? Decreases in 2020. For a stock that is built upon the thin story of explosive growth (never mind Musk is predicting 500K delivers for the 3rd year in a row), this is going to spell trouble in 2020.
Tesla didn’t turn their first annual profit. The only people who matter when it comes to judging a company’s profit are the shareholders. And they collectively lost nearly $900 million in 2019 on a GAAP basis. And without the huge increase in subsidies, Tesla would’ve lost money in Q4. Show me someone who’s bullish on Tesla, and I’ll show you someone who reads headlines instead of financial statements.
So the numbers are out and I feel pretty good about my thesis on Tesla. The company is overvalued and it’s financial health continues to deteriorate. Woe unto the suckers who buy into this stock at over $600 per share.
RSS Feed