To The Moon

$Tesla Motors(TSLA)$ will be reporting its Q2 2023 earnings on Wed, 19 Jul 2023 after market closing.

It is natural that investors’ focus will be on Tesla’s profit quantum earned during the past 3 months.

When it comes to investment (especially mid to long term), do we ask ourselves - is “dollars & cents” the only criterion-dimension for assessment? See below.

I think the article is a timely reminder for us, retail investors.

For every stock that we invest our hard-earned monies, is there a bigger picture in the background while we trace & track the stock’s performance?

Mr Gary Black, co-founder & managing partner of Future Fund, has provided his estimates on Tesla’s Q2 earnings.

• He predicts, Tesla’s adjusted earnings per share (EPS) will be around $0.87.

• This forecast will be +14.47% higher than Q2 2022’s $0.76, YoY.

• It will also be +6.10% higher than Wall Street expectations of $0.82 EPS.

Mr Black’s Assumptions:

• Auto Gross margin (excluding regulatory credits), of 18%, compared to (a) 19% (Q1 2023), (b) 26.2% (Q2 2022) and (c) 18.2%, Wall Street forecast.

• Regulatory credits will come in at $340 Million, down from $521 Million (Q1 2023).

• Auto Average selling price, (excluding regulatory credits), would be $45,000, a decrease from $46,000 (Q1 2023) and $56,000 (Q2 2022).

• Energy revenue should come in at $1.9 Billion, with a $289 Million profit, coupled with a 15% gross margin.

• Expenses in research and development (R&D) will increase by +2.5% YoY.

• Expenses in selling, general and administrative (SG&A) will increase by +3.9% YoY.

According to Gary Black, management commentary on several key aspects will be more important than adjusted EPS per se.

These include:

1. Fiscal year 2023 deliveries guidance.

2. Timing of Tesla’s first Cybertruck deliveries.

3. Trajectory of the auto gross margin (excluding credits),

4. Recognition of deferred revenue from full-self driving.

My Personal View:

1. In 2023, Tesla has resorted to “dumping” practice (via steep discount of up to 20%), in a bid to keep “demand afloat”, amidst rising competition from other EV makers.

2. As a result, it was able to deliver 466,000 EVs (Q2 2023) vs 254,695 (Q2 2022). This is a +82.96% gained YoY.

3. I believed that auto gross margin should be slightly less than the 18% Gary Black has predicted.

4. However, “massive” lead in EV delivered would have offset the “loss” incurred in terms of “profit margin made” per EV.

5. Will Wall Street be willing to overlook this when results are out, is left to be seen?

6. Of the 4 factors mentioned by Gary Black, item #4 should be disregarded, I feel. It is unethical “money in Tesla’s pocket”, as it is “advanced” payment for an undelivered services, that has been 7 years overdue.

7. This leaves the question for Tesla stock owner - “Is it time to sell or to continue to hold?” knowing that Tesla’s Q2 2023 earnings should still come in better (a) YoY and (b) compared to its Q1 2023?

If you are looking for tips, guidance or insights, look no further than what Tesla’s #1 fan (Ms Cathie Wood of ARK funds) has been up to. (see below):

Below are Q2 2023 sales by Ms Cathie Wood managed ARK group of funds:

• 14 Jul 2023 - sell $6 Million.

• 03 Jul 2023 - sell $8.2 Million.

• 13 Jul 2023 - sell 5.7 Million.

• 28 Jun 2023 - sell $7.27 Million.

• 26 Jun 2023 - sell $7 Million.

• 22 Jun 2023 - sell 8.6 Million.

• 17 Jun 2023 - sell $16 Million.

• 16 Jun 2023 - sell $19.05 Million.

• 13 Jun 2023 - sell $92 Million.

Ms Wood has successfully transformed herself from Fund Manager to daytime Trader. Her action mantra is “take profit when possible!”.

• Do you think Tesla will report a stellar report come Wed, 19 Jun 2023 ?

• Do you think Ms Wood strategy will work for you or will you just hold on?

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