”Q4 was a record quarter for both vehicle deliveries and energy storage deployments. We expect Model Y to once again be the best-selling vehicle, of any kind, globally for the full year 2024, and we have made it even better, with the New Model Y now launched in all markets. In 2024, we made significant investments in infrastructure that will spur the next wave of growth for the company, including vehicle manufacturing capabilities for new models, AI training compute and energy storage manufacturing capacity.”
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Overview
Whilst the numbers this quarter weren’t the most exciting, it did for the first time feel like analysts were more interested in products Tesla is working on, aside from it’s cars. We also saw the Q4 numbers come declining in most areas for a variety of reasons such as production shut downs due to upgrades, lower ASP’s and increased R&D etc.
For the most part the headlines numbers came in with misses, nothing too out of left field though. Perhaps the biggest ”miss” analysts didn’t like was the big jump in CAPEX +21% YoY to $2.8 billion. Certainly not pocket change. Unlike analysts though, I very much appreciate some investment now that can lead to some very juicy rewards later on.
You can find the full earnings deck release here.
Highlights and Summary
Missed revenue estimate with $25.71B under $27.26B – (-5.73%)
Missed EPS estimate with $0.73 over $0.774 – (-5.69%)
Lets start off with a little look at the financial summary. Q3 was beautiful…. Q4 is no doubt an ugly duckling. I highlighted the worst and the best bits. I struggled to find much bad in Q3 but feels a lot like you could throw darts blindfolded and find bad numbers in this quarter. .
Once again, Capex is still high, down from previous Q though, and given the HUGE free cash flow they are pulling in, the massive cash pile they are sitting on and looking at what they are spending that cash on… I see it as a plus!
Over all the numbers make sense and align with Tesla’s plan for the next 5 years, so It’s hard to be too mad at them. After all, I’m personally not too excited by just the auto part of the business and I want them pushing more and more products out with aggressive ramps. We can at least be thankful that this earnings will no doubt cause a short term drop in price so we can buy more shares.
Updated Vizual Summary Charts
Key Charts
Here’s what I like:
• They have made the switch to FASB accounting. This could also be a negative as it did provide a $600 million boost to GAAP net income for this quarter.
• Average COGS per vehicle continues to fall, sitting with an average of just below $35,000.
• Energy margins at 25.2% whilst having a record Q4 with highest ever gross profit generation.
• Talks still ongoing for FSD licencing, but they will only do it for high volume customers. I think whilst a deal could be made fairly soon it will take time for any potential partner to implement the required production changes to benefit from this is the near future.
• Cash pile is still growing, which will come in very handing during this uncertain time as Tesla scales up and doubles down on its plans for the future. A $7.5B increase in cash and investments in 2024, brining it to $36.6B…. Crazy!
• The shanghai Mega factory is starting its ramp this quarter.
•Preparation is underway for Cybercab lines in Giga Texas with volume production planned for 2026.
Here’s what I don’t like:
• Reduced average selling price brought in to shift stock ready for the new model Y. A necessary evil though, or we would risk cannibalising sales on the new vehicle. The factory upgrades for this also caused a drop in production and an increase in operating expenses. Again…. a necessary evil. Revenue from auto fell 10% YoY too…. Not ideal.
• Solar generation deployments still falling. It’s not a product they seem to push very much and It never gets talked about. Solar in general is a rough sector right now so not overly concerned with it and I don’t pay it much mind if this part of the business is cut off.
• A lot of analysts during the call seemed to finally start asking about the upcoming products for Tesla, indicating that they may finally be moving from only seeing Tesla as a car company. Which is great for me, since I’m very excited about energy storage, but we were noticeably light on detail surrounding the affordable car. They did mention it with a few small sentences on the earnings deck and I assume this is deliberate to keep focus on the model Y refresh.
•Automotive margins ex credits doesn’t look very appealing at 13.6%
•Volume production suggested have some potential issues as they are battery constrained but still expect the vehicle business to return to growth in 2025, sure sounds like no one is buying Tesla’s and margins don’t want to grow again….
•The earnings call was a bit too much about Optimus and not about what was coming in the near future. For me, the bots are an options play many years out… and not something I’m pricing in for the short term. So whilst I love it, I’d prefer to see this focussed on during an investor day, not the earnings call.
Estimates and Guidance
Analysts seem to be expecting a steady uptrend in most metrics as the above image shows.
Activity
Short interest has been dropping nicely for some time. Despite all the bears out there moaning about the stock being expensive and a dead company, there certainly isn’t much interest in putting ones money where ones mouth is. This data is lagging so could be higher, unless all the Tesla haters aren’t brave enough to short it.
Institutional ownership continues to hold, so whilst retail seems to be convinced this is a company in trouble, for now the big boys don’t agree.
Bonus Section – A couple of things I’m gassed about. The jokes a little on the nose I know!
• For some reason in the earnings deck they mention the Cybertruck will be eligible for the tax credit soon… Thought they were going away? Interesting.
• The model Y was the best selling vehicle in China for the full year as they had record breaking deliveries. Not sure where the narrative that China hates Tesla’s is coming from.
• Optimus planned pilot production to take place in 2025 still.
• Tesla expect energy storage deployments to grow at least 50% year-over-year in
2025. Amazing.
• Expected maximum capacity of close to three million vehicles, enabling more than 60% growth over 2024 production before investing in new manufacturing lines.
• Unsupervised FSD will launch in Austin with a small fleet in June. I’d take that timeline with some caution though…This is an Elon statement.
• A 400% increase in AI training compute in 2024 with over 3 billion miles driven on FSD in total. Would love to get my hands on the ”accident” data for these miles.
Conclusion
My conclusion really hasn’t changed much since the last quarter. Back then I said: ”I saw a lot of people right after earnings moaning about Tesla and a lot of ”I told you so’s” but those people fail to read between the lines. Sometimes there are companies out there, that have planted seeds that will take time to grow. At some point there will be a lightening bolt, and things will come together. We don’t exactly know when that will be so myself, and many investors take the stance of time IN Tesla stock is better than trying to time it. The insane growth phase in Tesla can be parabolic and I’m not splitting hairs trying to time an entry here.
I am NOT invested in Tesla for a short 1 to 2 year hold. I invest in them because some of the seeds they have been planting have INSANE potential to be hugely profitable products in their own right, for many years to come. Far more so than the car segment as a standalone. It is impossible to put a price on some of this, even the best models seem to generate crazy numbers. Personally I stick to adding in energy, service expansion and FSD. Even the numbers I see for those segments make me feel like I have a steal deal on my hands, even at these prices.
Will Tesla struggle a little to get there? More than likely. The company will take two steps forward and one step back on it’s journey as it transitions into this next phase of it’s evolution. I’m more than happy to capitalise on the volatility of the stock price in the mean time, by adding and trimming my position as price moves.
As price falls I will continue to scale back into a position, my ideal size is a 10% weighting. However, If we get any very large dips, I will be happy to go overweight into the end of 2025 as I think 2026/2027/2028 will be the years when the stars start to align.
Essentially for a company on the precipice of a huge growth cycle, things look very healthy.
