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Tesla Q2 2018 earnings preview: Layoffs, auto revenue, cost of Model 3 ramp

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All eyes will be on Tesla’s pace toward profitability on Wednesday, August 1 when the Silicon Valley company, led by CEO Elon Musk, releases its second quarter financial results after the closing bell. With the electric car maker meeting Musk’s self-imposed Model 3 weekly production target for the second quarter practically by the skin of its teeth, there is a good chance that Q2’s financial results will trigger even more volatility in Tesla’s stock (NASDAQ:TSLA). Here then, is a preview of what we can expect for Tesla’s Q2 2018 financial report and earnings call.

Automotive Deliveries and Revenue Impact

Tesla revealed Q2 deliveries totaling 40,740 vehicles, of which 18,440 were Model 3, 10,930 were Model S, and 11,370 were Model X when it released its production and delivery report earlier this month. Based on the company’s figures, the second quarter results are set to highlight the record deliveries for the Model 3, 10,000 more units compared to Q1. Charts displaying these could be viewed below, courtesy of Galileo Russell of YouTube’s HyperChange TV.

Tesla posted revenue of $2.56B in Q1 for vehicle sales, including 8,182 Model 3s that were delivered to customers during the three-month period. Assuming that the additional 10,000 Model 3 delivered in Q2 averaged $55,000 per unit, Tesla could post an additional ~$550 million in earnings from the electric car. Revenue from Tesla’s vehicle leasing business likely remained flat considering that the lending option is not available yet for the Model 3. Service revenue could see a spike in Q2, however, as a result of more Model 3 vehicles being on the road.

The Price of the Model 3 Ramp

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Tesla focused largely on the Model 3 ramp during Q2 2018, with the company pulling out all stops to hit its milestone of producing 5,000 Model 3 per week by the end of June. In order to achieve its target production rate, Tesla adopted unorthodox measures such as air-freighting robots and equipment from Europe and setting up an entirely new Model 3 assembly line on the grounds of the Fremont factory. These strategies likely resulted in additional expenses for the company in the second quarter. With the Model 3 ramp as a priority, Tesla’s other sources of income, such as its battery storage and solar business likely remained flat compared to Q1 as a result.

The company’s operational expenditure would likely see a slight bump in the second quarter due to the 9% layoffs that Tesla implemented to organize its workforce, considering that the restructuring included severance pay packages to employees who were terminated. In a video outlining his expectations for Tesla’s Q2 2018 results, the HyperChange TV host noted that he believes Tesla would post an estimated $4B in revenue with losses in the ~$500 million range. That’s a 43% increase in revenue compared to Q2 2017, when Tesla posted earnings of $2.8B, but also double the losses of the company’s losses in 2017’s second quarter.

Looking Past Q2’s Aftermath

Overall, Tesla’s Q2 2018 quarter financial results would likely feature similarities with Q1, in the way that the company would show strong growth but post substantial losses and negative cash flow. Nevertheless, it is pertinent to note that while Q2 2018’s numbers could be discouraging, the quarter could be seen as a turning point for Tesla, especially with regards to its Model 3 ramp. The past quarters, Q2 2018 included, have been focused on bringing the vehicle’s manufacturing up to 5,000 per week, resulting in the company investing heavily in resources to help scale the vehicle’s production.

With the 5,000/week milestone attained and with Tesla now more focused on sustaining its Model 3 production rate, Q3 2018 would most likely feature a pathway to profitability in the form of more encouraging financials than the second quarter. Provided that Tesla adopts a deliberate, realistic plan for the further ramp of the Model 3, the next few quarters could very well prove to be profitable.

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Watch Galileo Russell’s take on Tesla’s Q2 2018 financial results in the video below.

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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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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