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Tesla (TSLA) Q2 2020 earnings call: Top 4 things to watch out for

Tesla Model Y Performance delivery center (Credit: i1Tesla/YouTube)

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Tesla (NASDAQ: TSLA) will report its Q2 2020 performance in an Earnings Call on Wednesday, July 22, 2020. Ahead of the call, investors and supporters of the electric automaker will be waiting to see if the company will turn its fourth straight profit, which would be a company record.

However, four things could ultimately affect Tesla’s performance during the second quarter of the year, which could lead to the company’s inclusion in the S&P 500 index. TheStreet believes that investors should pay attention to these four themes in the Q2 2020 Earnings Update Letter and Call.

1. Impact of Price Cuts

Tesla has reduced the prices of all four of its available vehicles so far in 2020. The move stimulated demand for the company’s electric cars, but analysts are conflicted about whether the strategy was a good business move or an indication that demand is lagging. However, it more than likely is not the latter, as Tesla managed to deliver 90,650 vehicles in the second quarter, beating Wall Street estimates handily. The company’s revenue for Q2 compared to its overall delivery figure for the quarter will give more insight into what the price cuts did to Tesla’s demand.

2. Free Cash Flow

TSLA shares have continued to rise in value nearly every day for the past few months. The run is particularly incredible because it has mainly occurred during the COVID-19 pandemic, which continues to tear through the United States, where the electric automaker is based. With the company’s surge in price per share, Tesla has overtaken Toyota as the most valuable automaker in the world. The company’s bulls believe Tesla can scale production around the globe, and the company is certainly looking to do that. With plans to open another production facility in the U.S. soon, Giga Berlin under construction, and rumors of another Asian and U.K. located factory in the works, there is no reason to believe that the company can’t assume worldwide success.

3. China Demand

China has become one of the main parts of Tesla’s success as an automaker in 2020. The company currently only produces the Model 3 at Giga Shanghai now, but the vehicle has been selling well according to figures from the China Passenger Car Association (CPCA). Tesla will look to expand its production to the Model Y soon as it is building the Shanghai factory’s “Phase 2” currently. Dan Ives, an analyst for Wedbush Securities, said, “strong Model 3 demand out of China remains a ray of shining light (and we believe was a clear standout in 2Q) for Tesla in a dark global macro.” He also believes that Tesla could deliver 150,000 vehicles this year in China alone.

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Giga Shanghai is currently holding a 200,000 annual vehicle production rate, Tesla said in the Q1 Earnings Call. It will be interesting to see if that number has increased.

4. Full-Year Outlook

Tesla has managed to power through the COVID-19 pandemic with relatively small amounts of damage. However, the company’s outlook for all of 2020 has not been updated. Both the Fremont and Shanghai production facilities were closed for one and a half months, and two weeks, respectively. The company expected to deliver 500,000 cars this year, but in the first half of the year, only 179,000 were successfully given to consumers. Tesla said it would modify its full-year guidance in Q2 during the Q1 Earnings Call, so the revisions to the company’s goals will likely be included with the Update Letter.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on X @KlenderJoey. If you're looking for great Tesla accessories, check out shop.teslarati.com

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Tesla called ‘biggest meme stock we’ve ever seen’ by Yale associate dean

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Credit: Tesla

Tesla (NASDAQ: TSLA) is being called “the biggest meme stock we’ve ever seen” by Yale School of Management Senior Associate Dean Jeff Sonnenfeld, who made the comments in a recent interview with CNBC.

Sonnenfeld’s comments echo those of many of the company’s skeptics, who argue that its price-to-earnings ratio is far too high when compared to other companies also in the tech industry. Tesla is often compared to companies like Apple, Nvidia, and Microsoft when these types of discussions come up.

Fundamentally, yes, Tesla does trade at a P/E level that is significantly above that of any comparable company.

However, it is worth mentioning that Tesla is not traded like a typical company, either.

Here’s what Sonnenfeld said regarding Tesla:

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“This is the biggest meme stock we’ve ever seen. Even at its peak, Amazon was nowhere near this level. The PE on this, well above 200, is just crazy. When you’ve got stocks like Nvidia, the price-earnings ratio is around 25 or 30, and Apple is maybe 35 or 36, Microsoft around the same. I mean, this is way out of line to be at a 220 PE. It’s crazy, and they’ve, I think, put a little too much emphasis on the magic wand of Musk.”

Many analysts have admitted in the past that they believe Tesla is an untraditional stock in the sense that many analysts trade it based on narrative and not fundamentals. Ryan Brinkman of J.P. Morgan once said:

“Tesla shares continue to strike us as having become completely divorced from the fundamentals.”

Dan Nathan, another notorious skeptic of Tesla shares, recently turned bullish on the stock because of “technicals and sentiment.” He said just last week:

“I think from a trading perspective, it looks very interesting.”

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Nathan said Tesla shares show signs of strength moving forward, including holding its 200-day moving average and holding against current resistance levels.

Sonnenfeld’s synopsis of Tesla shares points out that there might be “a little too much emphasis on the magic wand of Musk.”

Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever

This could refer to different things: perhaps his recent $1 billion stock buy, which sent the stock skyrocketing, or the fact that many Tesla investors are fans and owners who do not buy and sell on numbers, but rather on news that Musk might report himself.

Tesla is trading around $423.76 at the time of publication, as of 3:25 p.m. on the East Coast.

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Elon Musk affirms Tesla commitment and grueling work schedule: “Daddy is very much home”

The remarks came as Tesla shares crossed the $400 mark on the stock market.

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Tesla CEO Elon Musk reiterated his commitment to the electric vehicle maker and its future projects this week, responding to speculation following his $1 billion purchase of TSLA stock. 

The remarks came as Tesla shares crossed the $400 mark on the stock market, extending a rally fueled in part by Musk’s TSLA purchase.

Elon Musk’s nonstop work schedule

Amidst the reaction of TSLA stock to Musk’s $1 billion investment, Tesla owners such as @greggertruck noted that “Daddy’s home.” Musk replied, stating that “Daddy is very much home.” He then shared details of a packed weekend of work, which was definitely grueling but completely within character for a “wartime CEO.”

Musk did note, however, that he had lunch with his kids during the weekend despite his extremely busy schedule.

“Daddy is very much home. Am burning the midnight oil with Optimus engineering on Friday night, then redeye overnight to Austin arriving 5am, wake up to have lunch with my kids and then spend all Saturday afternoon in deep technical reviews for the Tesla AI5 chip design. 

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“Fly to Colossus II on Monday to walk the whole datacenter floor, review transformers and power production (excellent progress), depart midnight. Then up to 12 hours of back-to-back meetings across all Tesla departments, but with a particular focus on AI/Autopilot, Optimus production plans, and vehicle production/delivery,” Musk wrote in his post

Wartime CEO

Wedbush analyst Dan Ives described Musk as operating in “wartime CEO mode,” highlighting autonomous driving and AI as a trillion-dollar market opportunity for Tesla. Musk reiterated this point late last month as well, when he outlined the several projects he is juggling among his numerous companies. At the time, Musk stated that he was busy with Starship 10, Grok 5, and Tesla V14. This was despite his notable presence on X. 

With Tesla Master Plan Part IV being partly released, the company is entering what could very well be its most ambitious stage to date. To usher in an era of sustainable abundance, Tesla would definitely require a “wartime CEO,” someone who could remain locked in and determined to push through any obstacles to ensure that the company achieves its goals.

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Tesla analyst says Musk stock buy should send this signal to investors

“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish.”

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(Credit: Tesla)

Tesla CEO Elon Musk purchased roughly $1 billion in Tesla shares on Friday, and analysts are now breaking down the move as the stock is headed upward.

One of them is William Blair analyst Jed Dorsheimer, who said in a new note to investors on Monday that Musk’s move should send a signal of confidence to stock buyers, especially considering the company’s numerous catalysts that currently exist.

Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever

Dorsheimer said in the note:

“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish. This purchase is Musk’s first buy since 2020. To us, this sends a strong signal of confidence in the most important part of Tesla’s future business, robotaxi.”

Musk putting an additional $1 billion back into the company in the form of more stock ownership is obviously a huge vote of confidence.

He knows more than anyone about the progress Tesla has made and is making on the Robotaxi platform, as well as the company’s ongoing efforts to solve vehicle autonomy. If he’s buying stock, it is more than likely a good sign.

Tesla has continued to expand its Robotaxi platform in a number of ways. The project has gotten bigger in terms of service area, vehicle fleet, and testing population. Tesla has also recently received a permit to test in Nevada, unlocking the potential to expand into a brand-new state for the company.

In the note, Dorsheimer also touched on Musk’s recent pay package, revealing that William Blair recently met with Tesla’s Board of Directors, who gave the firm some more color on the situation:

“We recently participated in a meeting with Tesla’s board of directors to discuss the details of Musk’s performance package. The board is confident of its position in the Delaware case and anticipates a verdict by end of year. It does not expect a similar situation to occur under new Texas jurisdiction. Musk has the board’s full support, and we expect he’ll get more than enough shareholder support for this to pass with flying colors.”

Tesla stock is up over 6 percent so far today, trading at $421.50 at the time of publication.

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