Very good quarterly earnings report. The stock market likes it too. 70 jump which is around 20%. Revenue is slightly down year over year but profitability is way up.
I don't think it is a good quarterly report actually, so I'm in disagreement with the stock market for what its worth. There are two highlights: a surprise net-profit (I was very much not expecting this), as well as positive cash flow for a 2nd quarter in a row. There's no glossing over these two facts: profit + positive FCF is a good thing for sure. However, the small profit of $150 Million isn't enough to wipe out the $742 Million loss in Q1 2019, or the $389 Million loss in Q2 2019. (Tesla needs to post a $981 Million profit in Q4 2019 to break even this year). So overall net-profit numbers are still in the toilet this year.
Where I have very pessimistic thoughts however, is that revenue. Tesla sold +20% more cars, but made -8% as much revenue (!!). Clearly, the value of Tesla cars has plummeted over the past year. I know that Tesla lost its US Tax credit (or at least, its down to $1875 from $7500 from last year), which probably plays a role, but Tesla sold a significant number of cars overseas this past quarter. So the US-Tax Credit has no effect on oversea-pricing. Why is Tesla unable to maintain their prices? +20% more cars should
be +20% more revenue in a logical world. To see a revenue drop while growing suggests well... demand problem. Tesla doesn't seem to be able to command as high prices as before.
CapEx, the investment into equipment, is also down severely from last year. I keep looking at that number: Gigafactory 3 has a bunch of nifty pictures, but where's the money coming from? Building a factory of that size should be seen as a sizable +CapEx investment, but its not really showing up. Now I'm not a conspiracy theorist, I really do trust the 10Q data. My current assumption is that Tesla has cut-back on other CapEx spending to make the Gigafactory 3 possible.
Think about the future projects of Tesla: Model Y, Project Semi, Tesla Truck, Roadster... as well as the Model S refresh and Model Y refresh. These all require factory equipment, these all will require money to build and process the equipment. Its already going to be severely expensive to build the Gigafactory 3, let alone these other projects. So why is CapEx flat?
On the one hand, Tesla-bulls probably will spin the story as "Renewed focus and cost cutting". Which wouldn't be wrong. On the other hand, the cost-cutting is becoming obvious, with more-and-more complaints about shoddy service. But if the customers are happy with shoddy service, maybe its good for Tesla to take advantage of the euphoria of its fanbase? The long-term sustainability of this profit is in question IMO, it can only last as long as Tesla owners are willing to put up with these cost-cutting measures.