1/ I really did not want to come back to $tsla for a while but the 3Q earnings conference call forces my hand. Given that the reported $tsla numbers were fantastic at the top level, and given my bearishness, I don't want to leave the impression I am hiding after being wrong.
2/ In fact, my predictions were close to correct. I predicted that 3Q would be a high-water mark and, in a series of tweets, that $tsla stock price would pop quickly after an earnings call focused just on the good stuff but would likely fall over time as folks looked deeper
3/ The only thing I missed was just how good the top-level numbers for $tsla would be in 3Q - they were eye-popping. Big profit on large revenue increase, large gross margin improvement, large fixed cost improvement, etc. with positive cash flow.
4/ The numbers are so extraordinary that they actually are bizarre. It is hard to fathom how sales and production nearly doubled without any substantial increase in SG&A or depreciation. Gross margins improved from terrible to industry-leading despite tons of operational chaos
5/ We knew Tesla was pulling profits in from 2Q and 4Q and possibly doing one-time fleet sales to really blow our 3Q, but this much? It almost reminds me of the movie Office Space when a math mistake turned a small and unnoticeable fraud into a huge and obvious one.
6/ Either Musk is really the smartest guy in the world, or some hinky stuff is going on in 3Q accounting. Which means the bull and bear cases are largely unchanged. I still believe the key issue for $tsla valuation is growth after 3Q and there are some real challenges.
7/ The major problem is that not only does $tsla not have enough money to do all of its promised growth projects (10K model 3's a week, China, pickup, semi, Europe, coupe, etc), it doesn't seem to have the cash to do ANY of these. 3Q is still likely the high water mark
8/ $tsla is facing headwinds such as Europe delays, competition, tariffs, subsidy wind-down, etc. It HAS to raise capital to keep growing. Why it continues to say it will not raise capital is perhaps the $tsla central mystery. Betting either way on this mystery is VERY high risk
