Investor's Corner
Tesla’s word of mouth strategy in focus: Why Elon Musk’s owner-based initiative works
Tesla’s (NASDAQ:TSLA) avoidance of traditional advertising initiatives is one of the most recognizable things about the company, yet it is one that has been questioned several times over the years by Wall Street analysts, investors and even avid fans. Yet, despite these questions, CEO Elon Musk’s answer has always been the same: Tesla does not do traditional advertising. Musk emphasized this point during the last earnings call too, stating that if Tesla would do some form of marketing, it would be strictly informational in nature.
“What we’re seeing is that word of mouth is more than enough to drive our demand in excess of production. We have no plans to advertise at this time. At some point in the future, we may do advertising not in the traditional sense but more to just inform people and make sure they are aware of the product, but not engage in the typical trickery that is commonplace in advertising,” Musk said.
In a conversation with Teslarati, investor and economist @Incentives101 explained that if one looks at Tesla’s word-of-mouth strategy from a mathematical perspective, it would seem that Elon Musk’s stern stance against traditional advertising may actually be well justified. Considering the manner that Tesla has been growing so far, the economist noted that “Elon is probably right. They don’t need advertisement and probably will never need it.” The following sections explains this point.
How Customers Learn About Tesla
There are generally three ways a new customer could learn about Tesla and its products: 1)Elon’s/Tesla goodwill, 2) customers’ own research, or 3) through an existing Tesla owner. Tesla relies heavily on current owners spreading the word and converting people they know into new electric car owners. Most people call this strategy the “Network Effect,” but the economist states that this is a misinterpretation.
“The Network Effect is technically applied to how a product increases its value from a network. The telephone is the most obvious example. One or two telephones in the world are useless, but the more there, are the more useful they become. In a way, you have to treat this like a disease. If you analyze (Tesla’s) strategy, you not only need information to flow. You need the information that changed hands to have an effect. In this case, the purchase of another Tesla. The most similar models to this strategy out there are how diseases spread,” the investor said.
These mathematical models try to predict how a disease will be spread considering different assumptions and variables. Among those variables are the number of susceptible individuals, of infected people and of recovered people, as well as the rate of contagion. For purposes of this illustration, information is equal to a virus and the main variables are the number of people that want to buy a car in that period of time within a target price range or TCO (susceptible individuals), the number of owners at the time (infected people), and the average number of people that an owner would convert in that period of time (contagion). This will be referred to in this article as the ‘T’ variable.
How Tesla spreads
The investor explains this further in the following statement. “The easiest way to understand this is the following. Imagine you’re looking at a decision tree. Each node is a new person with a Tesla in a period of time and how many nodes come out of that person is our ‘T.’ In each period of time that you’d want to measure, there are more assumptions that would need to be made. For example, an owner never ‘recovers’ so not only they ‘infect’ people but they will be contagious in perpetuity.
“Let’s analyze the spectrum of possible solutions. If T>=1, it would mean that information is flowing very efficiently and it will behave exponentially even if the time it takes for an owner to spread enough information to convert someone is relatively high. You need to consider that today, there are more than half a million owners. The faster the person transmits the ‘virus,’ the better,” he said.
There is no way to approximate these variables with the information available to us today. But recently, Tom Randall from Bloomberg released the findings of a study involving 5,000 Model 3 owners. According to the study’s results, 99% of Model 3 owners are pretty much satisfied with the vehicle, and they are willing to recommend the electric car to friends and family. A number of assumptions could be drawn from these results, as per the investor.
“If you consider what would be the worst scenario for Tesla, it would mean a very long time for contagion to spread, with the ‘T’ variable being very close to zero. But with the information provided in the Bloomberg report, there is a very high probability that ‘T’ is not close to zero at all. Instead, there’s a good chance that ‘T’ is probably very close to 1,” the economist said.
Growing Without Traditional Advertising
These assumptions would mean that Tesla can continue to grow without engaging in traditional advertising. Looking at Tesla’s history, we can see that this strategy or combination of strategies have worked. But is there an optimal time to have an information campaign? “It seems that the sooner, the better” the investor explained. “If you look at how this strategy functions, theoretically, the best time to have an information campaign is when they’ll have the least amount of owners and when they’ll increase production dramatically. So in theory this means in the next few months as Tesla continues to hit its stride with Model 3 and begin producing the Model Y, high volume vehicle that Elon Musk expects will outsell the Model S, X, and Model 3 combined. This doesn’t mean they need one, it just means it could be the best time,” he added.
It wouldn’t be accurate to assume that this strategy or combination of strategies is what creates demand. Any company could choose to have either this strategy or spend millions of dollars in advertising and demand wouldn’t necessarily go up or down. “Consumers need information to make decisions — it’s a very important factor — but demand is a function of several factors, particularly consumer preferences. Under perfect information, there is zero doubt demand for Tesla’s will rise as we explained in this note,” the investor noted.
“Tesla’s word-of-mouth strategy helps spread information, but if this product didn’t have a fundamental effect in consumers, it wouldn’t really matter. I’m confident that if banks or media had someone looking at this problem from the consumer side, we would never see a note about alleged ‘demand problems’ again. Tesla has never had a demand problem and data shows that they won’t face one. But they might face an information gap, particularly with how media misinforms consumers,” the economist said.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
Tesla (NASDAQ: TSLA) reported its earnings for the third quarter of 2026, marking a reasonable performance on the various financial metrics. Tesla still plans to hold a call that will field investor questions at 5:30 p.m. ET, 4:30 p.m. CT.
Here’s where Earnings came in:
- Total Revenues: $28.046 reported vs. $28.34B expected
- Non-GAAP EPS: $0.48 reported vs. $0.45 expected
- Operating Margin: 2.6 % reported vs. 2.5% expected
- Operating Income: $718M reported vs. $721M expected
- Free Cash Flow: $1.531B reported vs. ~-$4.51B expected
Tesla $TSLA Earnings Results:
Revenues: $28.046B
Non-GAAP EPS: $0.48
Operating Margin: 2.6%
Operating Income: $718M
FCF: $1.531B— TESLARATI (@Teslarati) October 21, 2026
Major Takeaways
Full Self-Driving (Supervised)
“FSD (Supervised)⁴ attach rate continued to grow, reaching over 75% of new vehicle deliveries in North America – our most mature market – a nearly twenty percentage point sequential increase. We believe that FSD is driving demand in markets where it is available, and we continue to work with regulators to get it approved in other markets.”
Tesla Semi
“We began volume production of Tesla Semi, our Class 8 heavy-duty truck. The top variant can go 500 miles at full 82,000 lbs gross combination weight while achieving an efficiency of 1.7 kWh/mile. That efficiency allows the Tesla Semi to use a third of the energy used by a comparable diesel truck to haul the same payload. In a transportation market where energy is one of the largest components of total cost per mile, this will provide a meaningful advantage to Tesla Semi operators.”
SI Compute
“We plan to reach 400 MW of SI training compute by the end of the year, supporting the development of both vehicle and humanoid robot autonomy software. Additionally, we continued construction for the Austin Fab, where we plan to start commissioning equipment in 2027.”
Robotaxi
“We began deployment of Cybercab into our Robotaxi fleet in Austin. We reached nearly two million cumulative unsupervised miles for our Robotaxi service as of the end of the quarter. Operating hours in Austin are now 6am to midnight, and we expect to reduce wait times via increased fleet supply and improvement of Robotaxi orchestration algorithms. Grok is available in Cybercab with access to Grok Bot and Connectors, which allows users to manage their inbox, calendars, files, chats and tasks – all hands free via voice command – making Cybercab a mode of transport, a productivity space and, with our entertainment options, a second living room.”
Interested in ordering a Tesla? Use my referral code for three free months of Full Self-Driving (Supervised) here.
Tesla (NASDAQ: TSLA) reports its earnings for Q3 today. Here’s what to expect, as the company will reveal its balance sheet after the market closes on Wednesday.
Tesla already reported deliveries just after Q3 ended, and it demolished Wall Street consensus estimates of roughly 462,000 vehicles. Tesla delivered 486,532 cars in the third quarter, which was a big beat, but was down 2.1 percent from the same quarter last year. Energy storage deployments were 13.7 GWh, up year-over-year.
Tesla showrooms picked clean ahead of Q3 end as demand looks strong
For the quarter, analysts have already compiled their predictions for what Tesla will report this afternoon:
- Total Revenues: $28.34B
- Non-GAAP EPS: $0.43
- Operating Margin: 2.5%
- Operating Income: $721M
- Free Cash Flow: ~-$4.51B
Here are a few things we are looking forward to hearing about on the call:
Automotive Gross Margin and Overall Profitability
This was 16.3 percent in Q2, down from 19.2 percent in Q1, and was impacted by warranty charges and some fading regulatory credits. Consensus implies overall gross margin near 18 percent, but a miss here would potentially reinforce concerns about pricing pressure on its vehicles.
Pay attention to energy storage margins as well, especially since Tesla missed GWh expectations, although it was still a strong quarter.
Robotaxi/Cybercab, Unsupervised FSD, and Optimus Progress
The Say questions from retail investors usually focus on these types of projects, and this quarter is no different. Scaling the Cybercab fleet beyond Austin amid the open NHTSA safety review, timeline for Unsupervised FSD in customer cars, Robotaxi unit economics, and Optimus cost per unit plus when it could start generating revenue, are all things to be looking for.
Any concrete timelines or regulatory path details will likely move the stock more than the near-term numbers. SpaceX merger speculation, which was detailed during SpaceX’s earnings call last night, may also surface, although the key details were shared last night.
Elon Musk just confirmed the Tesla and SpaceX merger step everyone was waiting for
Say Investor Questions
- How does the Cybercab fleet scale past Austin, and what’s the regulatory path outside Texas given NHTSA’s open safety review?
- When can we anticipate FSD unsupervised in customer cars?
- When will the CyberCab be available for customer purchase/ownership?
- What’s the unit economics per paid robotaxi mile, and how does it compare to the thirty-cent target?
- Tesla has acknowledged that HW3 vehicles cannot support unsupervised FSD. When will owners know whether they can upgrade their hardware for free, and when will Tesla provide a clear plan?
The full Earnings Call will be streamed this evening after market close around 5 p.m. this evening.
Wall Street analysts rapidly raised price targets on SpaceX (NASDAQ: SPCX) after the company reported a bullish third quarter for 2026 following the market close on October 20. Shares were sent sharply higher in after-hours and premarket trading.
SpaceX posted revenue of $14.6 billion, a 161 percent year-over-year increase that comfortably topped consensus estimates, which fell near $12.7 billion. The company also posted a net profit of $4.4 billion from a prior-year loss, with adjusted EBITDA reaching $8.8 billion.
More price target movement:
🚀 Cantor Fitzgerald lifted its target to $345 from $246 (Overweight).
🚀 Barclays raised its target to $300 from $254 (Overweight).
🚀 Citi increased its target to $240 from $200 (Buy),
🚀 UBS moved to $230 from $210 (Buy)
🚀TD Cowen raised its target to $224 from $200 (Buy).
🚀Morgan Stanley held an Overweight rating with a $300 target.
🚀Other firms also adjusted higher, including Wells Fargo (to $274 from $214) and Clear Street (to $248 from $217). Analysts broadly cited the strong quarterly print, accelerating AI compute expansion, Starlink progress, and Starship milestones as drivers of higher long-term growth and earnings power.— TESLARATI (@Teslarati) October 21, 2026
Its Super Intelligence (AI) division generated roughly $7.6 billion and became the largest revenue contributor, growing nearly 830 percent year-over-year, while the Connectivity segment delivered $5.2 billion on strong subscriber additions that lifted the consumer base to 13.6 million for Starlink.
The Earnings Call proved especially catalytic, as CEO Elon Musk and CFO Bret Johnsen outlined Q1 2027 revenue guidance of $33 billion to $37 billion, which was far above the roughly $22 billion analysts had modeled, alongside fourth-quarter capital-expenditure plans of $35 billion to $40 billion focused on AI compute infrastructure at sites including Memphis and Southaven.
SpaceX delivers blockbuster Q3 results as Super Intelligence segment booms
Management targets 2.5 to 3 gigawatts of nameplate compute capacity by year-end and discussed pathways to 13 gigawatts or more by the end of 2027. Musk described relentless demand from hyperscalers and other customers, with compute pricing supporting payback periods of less than a year and potentially as short as six months.
Additional highlights included Starship’s recent orbital success and V3 satellite deployment, Starlink pricing and enterprise momentum, rapid Grok Bot adoption, spectrum expansion plans, and the formation of special committees to explore a possible combination with Tesla.
These elements prompted a wave of price-target increases:
- JPMorgan more than doubled its target to $500 from $240 while maintaining an Overweight rating.
- Cantor Fitzgerald lifted its target to $345 from $246 (Overweight).
- Barclays raised its target to $300 from $254 (Overweight).
- Citi increased its target to $240 from $200 (Buy),
- UBS moved to $230 from $210 (Buy), and
- TD Cowen raised its target to $224 from $200 (Buy).
- Morgan Stanley held an Overweight rating with a $300 target.
- Other firms also adjusted higher, including Wells Fargo (to $274 from $214) and Clear Street (to $248 from $217). Analysts broadly cited the strong quarterly print, accelerating AI compute expansion, Starlink progress, and Starship milestones as drivers of higher long-term growth and earnings power.
Shares, which closed at $147.79 on October 20, jumped roughly 8 percent in early premarket trading on October 21 as investors digested the results and the newly elevated Street targets.
The average analyst price target has moved higher, which reflects greater conviction in SpaceX’s trajectory across launch, connectivity, and the Super Intelligence business, even as elevated spending remains a point of focus.
Tesla Assisted Driving expands to tenth EU country
Tesla expands Robotaxi geofence in Houston with an ode to SpaceX merger
