Tesla Earnings: Did Elon Musk shoot himself in the foot? – The Average Joe
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    Tesla Earnings: Did Elon Musk shoot himself in the foot?

    victorlei

    October 20, 2022

    Lots of chatter after Tesla’s earnings report. Investors are getting worried about Tesla after the release of their third-quarter financial results.

    But it was a record quarter, right? $21B in sales, with net income doubling to $3.3B. For most companies, this would have been impressive. But not for Tesla…

    There are extremely high expectations of Tesla for two reasons:

    1. Valuations: Tesla is no ordinary stock. It’s over 10x more expensive (based on valuation metrics and market cap) than other carmakers like Ford and GM.
    2. Musk himself: Despite production issues in the first half of 2022, Musk said they would still hit their full-year 50% growth target.

    The results were strong (but failed to meet estimates). It’s always about expectations. With such a high valuation, investors expect lots of growth. Investors will be quick to move on if they fail to meet that growth.

    A lot is riding on Tesla meeting demand next quarter. For years, Tesla had a massive backlog. How’s demand holding now? 

    When Musk was asked about demand, here’s what he said:

    • “I can’t emphasize enough, we have excellent demand for Q4, and we expect to sell every car that we make for as far into future as we can see.”
    • “Of the 2 billion cars and trucks on the road, we only have about 3.5 million. So, we’ve got a long way to go to even reach 1% of the global fleet.”
    • “We are extremely confident of the great Q4, and we anticipate continuing to grow our vehicle production, sales deliveries by on average 50% a year as far into the future as we can see.”

    But data from other auto companies paint a different picture: Auto loans have fallen significantly and auto sales in China (one of Tesla’s largest markets) is slowing rapidly.

    There’s a lot riding on Tesla meeting demand next quarter.

    The Average Joe: “At these prices and market condition, there’s low upside potential and high downside risk.”

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