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LIVE BLOG: Tesla (TSLA) Q3 2019 earnings call updates

Tesla Model 3 production line in Gigafactory 3, Shanghai, China. (Credit: Tesla)

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Tesla’s (NASDAQ:TSLA) third-quarter earnings call comes on the heels of a blockbuster earnings report that saw the electric car maker prove its critics wrong by posting a surprise profit and showing earnings per share of $1.91, far beyond Wall St’s expec. By beating Wall Street’s estimates, Tesla appears to be on the cusp of changing the narrative surrounding the company’s immediate future once more.

As revealed in the company’s Q3 2019 Update Letter, Tesla is GAAP profitable once more. The company is also seeing free cash flow, something that was largely unexpected during the days leading up to the earnings report.

For today’s earnings call, Tesla’s executives are expected to address questions surrounding the company’s plans for the immediate and CEO Elon Musk’s apparent ability to now underpromise and overdeliver. Tesla stock is currently trading +20.30% at $306.38 in after-hours trading. The earnings call will likely affect these results further, for better or for worse. 

The following are live updates from Tesla’s Q3 2019 earnings call. I will be updating this article in real-time, so please keep refreshing the page to view the latest updates on this story.

16:35 PT – And that concludes the third-quarter earnings call! We saw a far more tempered, far more restrained Elon Musk, and a more confident Zach Kirkhorn. Calm, composed and quick, this earnings call appears to be one of Tesla’s smoothest yet. I’m inclined to be more optimistic about the company’s future after this Q&A session. And it appears that the company’s shareholders are too. At the end of the call, TSLA stock has remained where it was when the session started. No wild swings — and everyone’s the better for it.

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16:34 PT – Dan Levy from Credit Suisse questions Gigafactory 3’s Model 3 production ramp, and how smooth will it be. Elon notes that he is optimistic about Gigafactory 3’s ramp, but not on a week-by-week basis. This is quite impressive for Elon Musk. In previous earnings calls where he was much more emotionally charged, I can’t help but think that he would have given an ambitious estimate as a response. Not so much anymore.

16:30 PT – Pierre Ferragu of New Street Research asks about how Tesla’s thinking about Model S and X have evolved, and if Model 3 has cannibalized sales of the flagships. Elon explains that the S and X are niche products, made in low volumes and higher prices. “We continue to make them more for sentimental reasons than anything else,” Musk said, adding that “If you’re buying an electric (full-sized sedan) and you don’t buy a Model S, you’re making a mistake.” It is evident from Elon’s statements that the Model S still holds a special, special place in his heart.

Kirkhorn did state that Model S and X are seeing more production lately due to increasing demand. Though delivery numbers for the Model S and X this quarter actually “understate the interest in the product,” he said. Elon also announced an upcoming upgrade for the Model S, X, and 3 that will improve comfort, feel and range. VP for Tech Drew Baglino adds that this upcoming updates will make Supercharging better too.

16:23 PT – Emmanuel Rosner of Deutsche Bank asks about electric pickups, particularly the Tesla Pickup Truck. He also asks about the baseline for Tesla’s baseline for orders quarter to date. Musk responds by stating that the Tesla Cybertruck is the company’s best ever, though he also mentioned that he could be wrong about this.

Kirkhorn, speaking about Tesla’s baseline orders, noted that the company is focused on moving quickly as it can. “We believe everyone should be driving an electric car,” he said. Musk adds a long-term (very long) estimate of 20 million vehicles a year.

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16:20 PT – Maynard Um of Macquarie Research asks about Tesla’s software and its potential monetization opportunities, Elon reiterated the company’s intention of giving customers the most fun they can have with a car. “People spend a couple hours on average in a car. It’s a lot of time,” Musk said, adding that Tesla can look at its software for profit down the line, but for now, the company is simply focused on improving user experience.

16:16 PT – Morgan Stanley asks if vehicles produced in China could be the most profitable vehicle in Tesla’s lineup. Kirkhorn states that Tesla expects China vehicles to be in line with the cars from Fremont. The company is still working on landing the right mix for the Chinese market. “For now, it’s safe to assume that it’s in line with the margins of cars coming out of the Fremont factory,” he said.

When asked if Tesla will be open to the idea of becoming a supplier of batteries and drivetrains to other OEMs, Elon Musk stated that it is in line with Tesla’s mission to help other carmakers in their EV initiatives. “It’s something we’re open to,” Musk said.

16:13 PT – Daniel Galves from Wolfe Research. He asks about the auto gross margin from Q2 to Q3, as well as potential headwinds for the Shanghai plant. CTO Kirkhorn states that Tesla is working hard to prevent ramp inefficiencies for Gigafactory 3 that it experienced in Fremont. He also explained that Tesla is working on a way to implement a “targeted” way of adjusting prices for its products.

16:08 PT – Elon Musk confirms that Gigafactory 3 Phase 2 is for battery and module production. More construction is due in Shanghai as well, as preparations for Model Y production gets underway. As for Tesla Insurance, the CTO stated that the service will be expanded to other US states, as well as some foreign territories. “The goal here is to make sure that customers have an alternative if their insurance rates are high,” Kirkhorn said.

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16:05 PT – Asked about the DeepScale acquisition and how it could help Tesla’s FSD initiative, Musk stated that the startup is a very tiny company. That being said, DeepScale has expertise in reducing the size of Neural Nets, “which is very helpful in slightly accelerating FSD,” he said.

16:00 PT – When asked if Tesla would consider selling NoA and Summon features as individual modules, Musk stated that the company will remain selling the suite as a whole. Responding to an inquiry about the Model Y’s launch and if it would interfere with Model 3 production, Musk assured that the electric sedan should not be affected that much.

15:57 PT – Questions from Say are up. First up, advertising. Is word of mouth enough? Elon says it’s more than enough. “We have no plans to advertise at this time,” he says. Tesla may do advertising in the future, but they will be more informative in nature.

When asked about Tesla Energy, Musk stated that he expects the business to be even bigger than the company’s automotive business. “Tesla Energy is the least appreciated element (of Tesla). For about 18 months, almost 2 years, we had to divert a tremendous amount of resources for the Model 3 production ramp,” Musk said, explaining that Tesla Energy’s resources paid the price for the electric sedan’s challenges. Now that Model 3 is humming along, Tesla solar and storage could see “crazy growth” in the future.

15:53 PT – Kunal Girotra, Energy Operations, discusses the improvements in Tesla’s energy business, which has seen a rise in recent months. “If it doesn’t print money, we’ll fix it or take it back,” Musk confidently said, referring to the company’s revived solar business. He also mentions how homes’ value increases if they are equipped with clean energy equipment such as solar panels.

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Girotra also mentions that Tesla is able to offer low solar prices because it doesn’t do advertising, lowering the company’s costs of acquisition. An enthusiastic Elon Musk adds more details, interrupting Kunal. This is not annoyed Elon though — rather, the CEO in this call is more like a very excited Musk.

15:47 PT – CFO Zachary Kirkhorn takes the stage. He explains how Tesla achieved GAAP profitability. Model S and X ASPs increased, Model 3 ASPs declined slightly, the CFO noted. “With the release of Smart Summon, we were able to recognize $30 million of deferred revenue,” Kirkhorn added, emphasizing Tesla’s strong positive free cash flow in the third quarter.

Kirkhorn emphasizes that despite increases to production backlogs, orders continue to grow for the company’s electric cars. Demand is strong. The no-demand narrative is dead, and Tesla is stepping on its carcass at this point. The CFO also pledges to further reduce costs.

15:43 PT – Early access release of a “feature complete” version of Full Self-Driving is expected to be rolled out by the end of the year, says Musk. He adds that Tesla is focused on opening more Gigafactories in several countries. Lastly, Tesla is also releasing Solar Roof Version 3, which is “finally ready for the big time.” Official product launch of Solar Roof Version 3 will be done tomorrow.

15:40 PT – CEO Elon Musk thanks the Tesla team for pushing hard to achieve GAAP profitability. “Operating costs are at their lowest levels since Model 3 production started,” Musk said. He also mentions that Gigafactory 3 is already conducting Model 3 production activities. Equipment in Gigafactory 3 was installed while the factory shell was still under construction.

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Gigafactory 4 will be announced by the end of 2019. Tesla is “confident” that Model Y could enter production in Summer 2020. “Model Y will outsell S, X, and 3 combined.” Musk also mentions V10, which includes the first version of Smart Summon. “There’s now been a million uses of Smart Summon.” A new version of Smart Summon is set to be released soon, taking the learnings that were gathered from the feature’s initial release.

15:35 PT – And so it begins. Senior Director of Investor Relations Martin Viecha takes the stage. He provides an overview of the topics that the earnings call will cover. Hands over the stage to Elon Musk.

15:31 PT – The earnings call should start any moment now. That being said, it’s understandable if Tesla is taking its time. Unlike the previous quarters, the company is coming to this call not to explain a loss, but to highlight a victory.

15:26 PT – It’s now just a few minutes before the Q3 2019 earnings call is expected to begin. This is a very exciting time for Tesla.

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Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Shareholder group urges Nasdaq probe into Elon Musk’s Tesla 2025 CEO Interim Award

The SOC Investment Group represents pension funds tied to more than two million union members, many of whom hold shares in TSLA.

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Credit: xAI/X

An investment group is urging Nasdaq to investigate Tesla (NASDAQ:TSLA) over its recent $29 billion equity award for CEO Elon Musk. 

The SOC Investment Group, which represents pension funds tied to more than two million union members—many of whom hold shares in TSLA—sent a letter to the exchange citing “serious concerns” that the package sidestepped shareholder approval and violated compensation rules.

Concerns over Tesla’s 2025 CEO Interim Award

In its August 19 letter to Nasdaq enforcement chief Erik Wittman, SOC alleged that Tesla’s board improperly granted Musk a “2025 CEO Interim Award” under the company’s 2019 Equity Incentive Plan. That plan, the group noted, explicitly excluded Musk when it was approved by shareholders. SOC argued that the new equity grant effectively expanded the plan to cover Musk, a material change that should have required a shareholder vote under Nasdaq rules.

The $29 billion package was designed to replace Musk’s overturned $56 billion award from 2018, which the Delaware Chancery Court struck down, prompting Tesla to file an appeal to the Delaware Supreme Court. The interim award contains restrictions: Musk must remain in a leadership role until August 2027, and vested shares cannot be sold until 2030, as per a Yahoo Finance report.

Even so, critics such as SOC have argued that the plan does not have of performance targets, calling it a “fog-the-mirror” award. This means that “If you’re around and have enough breath left in you to fog the mirror, you get them,” stated Brian Dunn, the director of the Institute for Comprehension Studies at Cornell University.

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SOC’s Tesla concerns beyond Elon Musk

SOC’s concerns extend beyond the mechanics of Musk’s pay. The group has long questioned the independence of Tesla’s board, opposing the reelection of directors such as Kimbal Musk and James Murdoch. It has also urged regulators to review Tesla’s governance practices, including past proposals to shrink the board. 

SOC has also joined initiatives calling for Tesla to adopt comprehensive labor rights policies, including noninterference with worker organizing and compliance with global labor standards. The investment group has also been involved in webinars and resolutions highlighting the risks related to Tesla’s approach to unions, as well as labor issues across several countries.

Tesla has not yet publicly responded to SOC’s latest letter, nor to requests for comment.

The SOC’s letter can be viewed below.

Nasdaq+Letter Tsla Socig Final by Simon Alvarez

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Tesla investors may be in for a big surprise

All signs point toward a strong quarter for Tesla in terms of deliveries. Investors could be in for a surprise.

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(Credit: Tesla)

Tesla investors have plenty of things to be ecstatic about, considering the company’s confidence in autonomy, AI, robotics, cars, and energy. However, many of them may be in for a big surprise as the end of the $7,500 EV tax credit nears. On September 30, it will be gone for good.

This has put some skepticism in the minds of some investors: the lack of a $7,500 discount for buying a clean energy vehicle may deter many people from affording Tesla’s industry-leading EVs.

Tesla warns consumers of huge, time-sensitive change coming soon

The focus on quarterly deliveries, while potentially waning in terms of importance to the future, is still a big indicator of demand, at least as of now. Of course, there are other factors, most of them economic.

The big push to make the most of the final quarter of the EV tax credit is evident, as Tesla is reminding consumers on social media platforms and through email communications that the $7,500 discount will not be here forever. It will be gone sooner rather than later.

It appears the push to maximize sales this quarter before having to assess how much they will be impacted by the tax credit’s removal is working.

Delivery Wait Time Increases

Wait times for Tesla vehicles are increasing due to what appears to be increased demand for the company’s vehicles. Recently, Model Y delivery wait times were increased from 1-3 weeks to 4-6 weeks.

This puts extra pressure on consumers to pull the trigger on an order, as delivery must be completed by the cutoff date of September 30.

Delivery wait times may have gone up due to an increase in demand as consumers push to make a purchase before losing that $7,500 discount.

More People are Ordering

A post on X by notable Tesla influencer Sawyer Merritt anecdotally shows he has been receiving more DMs than normal from people stating that they’re ordering vehicles before the end of the tax credit:

It’s not necessarily a confirmation of more orders, but it could be an indication that things are certainly looking that way.

Why Investors Could Be Surprised

Tesla investors could see some positive movement in stock price following the release of the Q3 delivery report, especially if all signs point to increased demand this quarter.

We reported previously that this could end up being a very strong rebounding quarter for Tesla, with so many people taking advantage of the tax credit.

Whether the delivery figures will be higher than normal remains to be seen. But all indications seem to point to Q3 being a very strong quarter for Tesla.

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Tesla bear Guggenheim sees nearly 50% drop off in stock price in new note

Tesla bear Guggenheim does not see any upside in Robotaxi.

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tesla showroom
Credit: Tesla

Tesla bear Guggenheim is still among the biggest non-believers in the company’s overall mission and its devotion to solving self-driving.

In a new note to investors on Thursday, analyst Ronald Jewsikow reiterated his price target of $175, a nearly 50 percent drop off, with a ‘Sell’ rating, all based on skepticism regarding Tesla’s execution of the Robotaxi platform.

A few days ago, Tesla CEO Elon Musk said the company’s Robotaxi platform would open to the public in September, offering driverless rides to anyone in the Austin area within its geofence, which is roughly 90 square miles large.

Tesla CEO Elon Musk confirms Robotaxi is opening to the public: here’s when

However, Jewsikow’s skepticism regarding this timeline has to do with what’s going on inside of the vehicles. The analyst was willing to give props to Robotaxi, saying that Musk’s estimation of a September public launch would be a “key step” in offering the service to a broader population.

Where Jewsikow’s real issue lies is with Tesla’s lack of transparency on the Safety Monitors, and how bulls are willing to overlook their importance.

Much of this bullish mentality comes from the fact that the Monitors are not sitting in the driver’s seat, and they don’t have anything to do with the overall operation of the vehicle.

Musk also said last month that reducing Safety Monitors could come “in a month or two.”

Instead, they’re just there to make sure everything runs smoothly.

Jewsikow said:

“While safety drivers will remain, and no timeline has been provided for their removal, bulls have been willing to overlook the optics of safety drivers in TSLA vehicles, and we see no reason why that would change now.”

He also commented on Musk’s recent indication that Tesla was working on a 10x parameter count that could help make Full Self-Driving even more accurate. It could be one of the pieces to Tesla solving autonomy.

Jewsikow added:

“Perhaps most importantly for investors bullish on TSLA for the fleet of potential FSD-enabled vehicles today, the 10x higher parameter count will be able to run on the current generation of FSD hardware and inference compute.”

Elon Musk teases crazy new Tesla FSD model: here’s when it’s coming

Tesla shares are down just about 2 percent today, trading at $332.47.

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