Earnings report analysis for Tesla, Inc. (TSLA)

Introduction

Welcome to the Thematic Earnings Report Analysis, where we break down the latest company earnings reports and analyst calls and provide an overvalued, undervalued, or fairly valued valuation analysis relative to the company's competitors and industry.

In each analysis, we start by providing a concise summary of the prior earnings call, giving you the necessary context just a few days before the next report. Once the latest report concludes, we’ll update this post with a fresh summary and compare it to previous reports, highlighting key insights, trends, and changes to help you stay informed and ahead of the curve.

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Earnings report analysis for Tesla, Inc. (TSLA)

Prior report: July 24, 2024

Full summary

Key takeaways

• Tesla reported strong financial performance, with record quarterly revenues and robust growth in the energy storage business, which contributed to record profits.
• The company's focus on affordability through financing programs impacted revenue per unit, but is expected to be a demand driver as the feature set of its full self-driving technology improves.
• Tesla is investing heavily in AI infrastructure, including a new 50,000 GPU cluster, to support its autonomous driving and Optimus humanoid robot initiatives, which the company believes will be the key long-term value drivers.
• The company is making progress on its Robotaxi and Optimus projects, with plans to unveil an updated Robotaxi design and begin limited Optimus production in early 2024.
• Tesla is facing increased competition in the EV market, leading to discounting, but the management team remains confident in the company's ability to maintain its competitive edge through its focus on autonomy and manufacturing efficiency.
• The company is adjusting its global production and import strategies to navigate regulatory and trade policy changes, such as tariffs in Europe.
• Tesla is in discussions with several major OEMs about licensing its full self-driving technology, though the timeline for any such deals is uncertain.

Earnings call

Full summary

Focus of management’s prepared remarks

• Focused on profitable growth, cost reduction, and operational efficiency
• Investing heavily in R&D, AI, and autonomous driving capabilities
• Expanding global manufacturing capacity and delivery infrastructure
• Generating positive operating cash flow to fund growth, though capital expenditures remain high
• Experiencing headwinds from macroeconomic factors like inflation and interest rates

Focus of the analyst Q&A

• New Vehicle Introductions: Questions were asked about the new vehicles Tesla is planning to introduce next year, signaling interest in the company's upcoming product lineup.
• Robotaxi Strategy: Analysts focused on Tesla's strategy for the Robotaxi, particularly the regulatory hurdles that could delay its deployment. Specific attention was given to the fact that the Robotaxi shown publicly is pedal-less and wheel-less, raising additional regulatory concerns. Additional questions were asked about Tesla’s timeline for Robotaxi deployment, highlighting interest in the regulatory and technical milestones required for its launch.
• Revenue Segmentation: There was a focus on how Tesla sees its revenue mix evolving over time, particularly whether auto revenue will fall below 50% as other segments like energy and software grow.
• Full Self-Driving (FSD) Licensing: Analysts sought clarity on Tesla's plans for licensing its FSD technology to other automakers, indicating interest in how this could be a significant new revenue stream. Following Tesla’s price reduction of FSD, analysts asked about the increased uptake and sought quantification of the impact on adoption rates.
• Impact of Tariffs: There were questions about the potential impact of European tariffs and changes to the import of batteries from China into the U.S., addressing geopolitical risks to Tesla's supply chain.

Thematic evaluation

Overvalued | Full evaluation (as of October 18, 2024)

Compared to: General Motors Co. (GM) | Uber Technologies, Inc. (UBER) | Consumer Discretionary Select Sector SPDR Fund (XLY)

Tesla's current valuation appears moderately overvalued based on its high EV/EBITDA ratio of 54.54, which significantly exceeds the industry average of 38.19. While the company has strong growth prospects in autonomous driving and energy storage, these are balanced against significant risks including intensifying competition and reliance on regulatory credits. The high valuation multiples suggest that much of Tesla's future growth potential is already priced in, leaving limited room for upside.

Earnings report analysis

Most recent report: October 23, 2024

Full summary and analysis will be made available shortly after the latest report is released.

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