We've got a lot of Catalyst to talk about in this video. We're going to look at expectations for Tesla earnings as well as some other catalysts. But look folks, we just got this from the IRS and the treasury. Department These are the models that qualify for the following tax credits.

It looks like the Model 3 standard range will be or see its credits reduced from 7 500 to 37.50 That's the only tax credit that really gets reduced for Tesla that is the approximately forty two thousand dollar Model 3 Tesla Uh, that basically just got a price hike of three thousand. Seven hundred fifty dollars. All the other models maintain their 7 500 credit. Rivian did not get the credit.

Lincolns You've got. Well, you can see on screen here the Grand Touring at 7 500 Corsair Grand Touring it's 37.50 Get a couple Jeep Uh, at 37.50 you've got the Mustang Machi extended and standard at 37.50 The Lightning gets the full 7 500 Escape plug-in 37.50 and you can kind of pause the screen here and see some of the others lyric from Cadillac it's the full 7500. With that said, let's get into Catalyst Well, we've got a lot of Catalyst to talk about this week. for the stock market, including 420s Tesla earnings.

we're going to talk about what some of the expectations are for Tesla earnings, but let's also go through some of the economic data we're expecting this week and which matter the most this morning. For example, we got Empire manufacturing that came in a lot stronger than expected at 10 points versus negative 18 for the survey or negative 24.6 prior suggesting maybe the recession isn't as close as people might think it is. Tomorrow, on the 18th we'll be getting building permits. We'll be a little bit of an indicator for what we're seeing in housing as well as housing starts.

We're looking for a 1.5 or 1.45 million permits. That's a month over month decline of 6.5 Is it going to come in hotter than expected along with housing starts Expected to be negative 3.5 percent. Will those rise as the real estate market so far this year has actually been booming, very little inventory, leading real estate prices actually to rise some of those year over fee year fears that we're looking for in May may not end up coming to fruition. Initial jobless claims are expected for a Thursday at 4 20 at 4 20, and then on Friday we'll get some manufacturing PMI services, pmis, and then a combined at PMI.

all of those expected to be around 49 to a 51. Uh, more importantly, this week are going to be earnings though. So uh, today we'll be getting uh Charles Schwab Uh, although actually some of their earnings actually just already out. 93 cents on EPS Revenue Slightly misses after the Bell on Monday we'll be getting a JB Hunt Now that's a transportation service and a lot of people like looking at JB Hunt as a potential inflation indicator.

Uh, four or four. Freight Since Freight really affects almost every company, whether you're shipping servers in, you're shipping clothing out. who knows? a lot of people like looking at freight companies, so JB Hunt might be an interesting one. A lot of talk of layoffs happening at freight companies because of weaker demand Bank of America reports before the Market opens tomorrow Johnson and Johnson Goldman Sachs Lockheed Martin A Bank of New York Mellon So some more bank and defense earnings tomorrow morning and then then things get entertaining.

Then we get into what Ryan Reynolds calls one of his favorite stocks. In fact, just this morning he was on CNBC pitching I think it was newbie or Nouveau or something like this. some Canadian finance a fintech company and uh, the folks on CNBC are asking if so what do you know about financials and he's like absolutely nothing you know in classic Ryan Reynolds style and he's like I just like the emotion of companies I'm a marketer yeah and In fairness, he's a great marketer. He's incredible.

Uh you know he's an inspiration for many money, but some other companies that he thought were an inspiration to him in addition to um to Netflix where actually or was actually Ford I was kind of surprised. He's like oh it's a legacy company. you know part of part of the the the the American Fabric and I'm like it's gonna be part of the American BK if they don't innovate soon with getting their costs down on those EVS. But uh.

anyway. so Ryan Reynolds Big fan of Netflix He's kind of made the argument that he can't really bet against it based on the industry that he's in. Netflix reports earnings at 4 pm on Tuesday and it is usually seen as the signal for kicking off attack earnings. and it seems like every earning season we get to Netflix is the one that everybody's kind of like.

Man, if Netflix comes in good, it's good. Netflix comes in bad. It's bad. They did go back to growth in the last quarter which was great.

We are expecting an A movement of eight percent on Netflix stock. Uh, tomorrow afternoon? That's down from the average movement of 12.3 percent uh, earnings per share. Expected to come in at a Uh 2.87 with revenue of 8.18 billion in net income of 1.34 So we'll see what happens with Netflix after Netflix will get United Airlines Interactive brokers those Tuesday afternoon, then on Wednesday we're going to be looking at Morgan Stanley in the morning and in the afternoon on the 19th. Uh, sorry, this is already.

Yeah, no, this is the 19th. Okay, uh. Wednesday Afternoon on the 19th. Uh, we'll be getting a Tesla earnings at 405.

Uh, Ross Gerber is apparently having a Tesla party on 420 the next day star sorry SpaceX is actually expected to launch potentially one of their vehicles. Today or tomorrow, we'll see what ends up happening. Uh, this is the big one people have been waiting for. But anyway Tesla on the 19th.

Expectations we'll talk about Tesla in just more it will. Circle back to Tesla IBM Reports on Wednesday afternoon as well as Las Vegas Sands and then on Thursday Thursday Morning will be entertaining. Uh, we'll be getting ATT and Taiwan semiconductors along with American Express and DR Horton. So we'll be getting a look into housing not only DR Horton but Blackstone A lot of those REITs A lot of Blackstones REITs are seeing liquidations.

A lot of talk about paying in commercial real estate. How is that going to affect the broader economy? American Express What can they tell us about that wealthier consumer is American Express Still going to tell us that people are spending through the recession? Or are we going to see an inflection where people are no longer spending through the recession? Taiwan semiconductors. Hey, what's going on with China or any potential issues with Uh China Uh, still present is how much is China adding to a book of business or taking away from the book of businesses Taiwan semiconductors. What about Uh International sales to the United States Is the chip Market really growing because of the AI Revolution I Expect to hear a lot from Taiwan semiconductors about none other than chips of course.

excuse me? Uh, and specifically because of this. AI Revolution That really began. Uh, I Mean it's been going on for years, but really exploded over the last couple a couple of months here. We'll be talking a lot about Google in a different segment, especially with uh, with the potential for Google scrambling and shaking in their boots as they may be losing some billion dollar contracts, we'll be talking about that.

All of this, of course, driven by AI on the afternoon of Thursday we'll be looking at a Seagate we'll get a little bit of a look into maybe memory and uh, more specifically, storage for Seagate. Both of those are my least favorite segments as I find them to be more commodity is Ish Uh, that might be offensive to some people in the field, but I hate to say it, but I I Feel like SD cards and Ssds and memory are a little more commodity-ish Procter Gamble On Friday morning, we'll be looking at some of those consumer staples as, uh, well as a Friday afternoon. We have nothing because you generally don't have anything on Friday afternoon. So I said we talk about Tesla Let's try to look at some expectations for Tesla The most important thing in my opinion for Tesla is going to come down to margin.

It's going to be very simple is how bad did the margin get in Q1 and the question isn't necessarily how bad is it going to get in Q1 since we already have estimates of that and we know that Zach The CFO told us we don't expect to go under 20 gross vehicle margin. How bad though, is that margin going to potentially get in? Q2 Remember, in Q1, we have pretty much an entire quarter of Inflation Reduction Act credits of about 7 500. Unfortunately for Tesla and a lot of EV manufacturers, the 7 500 credit is actually going to fall to 37.50 which could potentially lead to more price cuts for Teslas. In fact, here at the top, you could see a 7 500 tax credit for the Model Y and Model 3 Model 3 real-wheel Drive will be, however, reducing to 37.50 on April 18th.

So you're seeing some bottles that are going to get impacted with a lower inflation reduction Act tax credit. What does that potentially mean for Tesla Margins: If Tesla had a 7 500 credit all throughout Q1 and only has a 7 500 credit on all their vehicles for the first three weeks of the quarter, Which means you actually have a whole other 11 weeks essentially to go, Uh, a little less than 11 weeks, it'll be more like nine weeks to go. There, We go. Let's get our math right.

Uh, well. then the bulk of Q2 is actually not going to have a full 7500 credit and that could really hit margins more. So, what are expectations right now in terms of margins? Well, expectations are the following: Uh, let's go ahead and pull these up on screen here. these are the A margin expectations that we have.

The expectations are simple. We're looking at Uh Automotive gross margins set to decline once again with our peak in Q1 2022, where we actually broke over 30 margins. But the expectation is that these could go down to as low as about 23.1 23.1 percent. There are 17 analysts interviewed by Reuters and the average estimate is 23.1 Some estimates are lower, some are higher, but this is going to be a big deal and I think the biggest part is going to be hey, what are those expectations for Q2 Because again, this right here on screen is the Q1 expectation.

Now we'll look at the expectations for actual earnings, but uh, I think there are going to be two main things we're going to be looking at. I'll explain the second in just a moment. But number one is going to be gross margin, including the path forward on gross margin. Right now, we're expecting an implied one-day move on Tesla Stock After earnings of 6.51 that is in line with the average movement of 6.4 percent.

Regarding earnings, we're looking at an adjusted EPS of 86.3 cents Gap EPS of 77.1 cents revenue of 23.46 Billies? That's the Top Line Looking for a net income of 3.05 billion, operating profit of 3.06 billion? Uh, and that's the adjusted net income. By the way, an ebitda at 4.43 Now keep in mind that Tesla has had sort of a mixed record on earnings here when it comes to adjusted EPS Five out of eight times you beat. However, they're almost always right on net income. If they miss here, it could be painful because they'd be breaking a trend.

They have beat eight out of the last eight times on uh, on on net income adjusted net income. so we'll see if they continue to beat this time around. These are the current estimates, again margin being the number one. but I think there's also a number two.

I Think the number two thing that we really want to pay attention to for Tesla is going to be the free cash flow. Now the reason I mentioned free cash flow is because I personally believe that Tesla doesn't have as much cash as people like to say they do. Now some Tesla Bulls think I'm just trying to be a bear. or for some reason I'm trying to like click bait people into thinking there's a problem.

But the reality is, the Tesla's cash isn't as great as it seems. In fact, if we jump over to their cash flow statement. first of all, we see that regularly Tesla spending about 1.8 billion dollars in cap X expenditures and from the third quarter to the fourth quarter which the fourth quarter is usually that really big sell-through push for vehicles, we actually saw free cash flow decline from just over 3.3 billion dollars of free cash flow down to about 1.3 billion dollars of free cash flow And the concern is, what if that contracts even more in Q1? We'll see if there were any potential credits that could potentially hold this up as well. Uh, for for maybe, um, electric, uh, charging inputs or or electric charger manufacturing from the Biden Administration But consider when we jump over to, uh, the balance sheet over here.

Yes, everybody likes to look at the Top Line right here of suggesting yeah, Tesla's got 22 billion cash? That's fantastic. They've got a lot of money in cash, and we know they've got about 12.8 billion in inventory. but they've got bills sitting on their desk of over 23 billion dollars. I Mean just the first couple lines over here on the right shows you 22.3 billion dollars of payables and accrued liabilities that need to be paid.

Now that's not even including customer deposits, deferred revenue which I Generally don't consider those as debts anyway. Uh, and then of course, you've got other long-term debts here at 5.3 billion. So you add up all the debts you're sitting between 23 to 28 29 billion dollars substantially. You know, more than the amount of uh, cash that Tesla has.

which means we want to see continued cash flow. I'm not offended by the cap balance sheet at all. I'm just worried that if we start seeing free cash flow go under a billy, maybe we start going towards, uh, somewhere around 50, You know, 500 million? Uh, personally I get a little bit. I'm going to start scratching my head a little bit about hey, is Tesla going to have to enter any kind of financing agreements to get through 2023 and these are probably the worst times to enter into Finance agreements.

In fact, Morgan Stanley's Mr Mike Wilson has the argument that usually what happens is in in a recessionary environment is that you end up seeing earnings slow gradually and then suddenly he had a piece and now he's always. We know he's a bear. Okay, we know he's bearish. Talks about a trillion dollars having left the banking system over the last year.

he talks about small business credibility shrinking uh to its lowest level in 20 years while interest rates are at a 15-year High Keep in mind a lot of entrepreneurs and business owners uh end up uh with uh with um Teslas because they they use Teslas as a tool uh for advertising their business or or they just want a Tesla whatever it is. But Mike Wilson talks about this idea that we could have a gradual and then sudden decline in earnings And the reason for that is right now you see this gradual decline in earnings, but you could all of a sudden drop off a cliff like we have in the past. In fact, these are sort of generally what we tend to see here. In 2007 to 2008, you saw this gradual decline in earnings and then all of a sudden you saw a crash in earnings.

You jump in over here. in the uh, the Covet era. What do you see? You kind of see this: this gradual softening in 2019, late 2018, and then of course, the Covet crash. I Personally would remove the covet Crash from this analysis because I think it's a little ridiculous to have the Kova crash in here.

but I think it's a good analogy to look back in 2007 and Eight and say, hey, look, this gradual decline in earnings became a massive decline in earnings. And part of the reason that happens is because businesses are able to, uh as earnings gradually decline, businesses are basically able to refinance through the pain, uh, through with cash that they have. They're not actually exposed to debts yet. But what happens when that cash runs dry? when earnings declined to the point where you don't actually have as much cash anymore? Now you have to go to the bank at really expensive rates.

What happens? You're basically screwed. And then earnings suddenly, uh, decline now again. I think Morgan Stanley here and Mr Mike Wilson really only give us one good example of this. They didn't decide to go back further into history, potentially because maybe it doesn't rhyme at the way.

Morgan Stanley's Mike Wilson prefers uh and I Don't think you can really include Covid here, so he's got a good example for 2007 and eight I'll give him that he's not wrong That yes, margin degradation can be a lot more sudden. uh as as at first, Revenue slowly disappointed and then all of a sudden you get a more meaningful acceleration than declines. I Personally think that margin squeeze could really occur if the event occurs where Tesla needs to borrow to continue to fund their expansion. now.

Uh, according to Uh, Bloomberg Tesla we already know this: Tesla delivered a record 423 000 Vehicles globally in Q1, That's 36 average growth year over year, maintaining 50 average volume gains, but putting profit a gross profit at risk. That's what we're getting. Production: Uh, uh, Serge Um, let's see the surge failed to Halt a rise in inventory? Yeah, uh. let's see here.

Consensus calls for 1.8 million vehicles to be sold in 2023, not exceeding 3 million until 2026, with an average growth rate of just 20 percent expected for Tesla according to Wall Street While the company targets 50 myself, I'm sitting somewhere between 30 to 35 percent on my projection, so I'm somewhat in the midpoint there. Tesla's EV market share. Uh, it has Uh has hit 86 percent in Q3 of 2018 and it's slipped to an EV market share of just 50 57 in Q4. Though many argue that as the pie grows, you actually need less less of the pie to continue to to push, the strength of Tesla Tesla has also cut prices quite a few times and uh, the the question is, how are those price Cuts really going to hit? We've seen most of the price Cuts I believe about five price Cuts Now since January and we haven't had an earnings report, that kind of gives us some light into those price Cuts until, well, two days from now.

so that's going to be a concern. Now there will be some potential Uh relief and some of that potential relief may come in Projections: The Tesla or Elon Musk gives us. In terms of the battery packs, we know that Shanghai is expected to manufacture Uh, expand the Shanghai gigafactory and manufacture a substantial set of Mega packs, potentially as many as 10 000, but that's going to be expensive to ramp before we start seeing those numbers come through. Same thing for Giga Northeast Mexico And if there's another gigafactory that ends up being announced in, say Vietnam or Indonesia or ever, these are all expensive projects that aren't leading to cash flows just yet.

So those are all things that we're going to be looking for in this next earnings report. Biggest thing for me though, uh, margin cash flow and uh, and and then of course, hopefully we get something to soften the blow in the way of not just batteries, but also FSD FSD will be a potential uh tool for maybe propping up some of these revenues if we see a larger take rate on Fsds. and maybe we could start including a little bit more revenue for FSD. We do know that uh Zach the CFO of Tesla has told us we will be seeing more FSD revenues recognized as they continue to roll out full self-driving they did just roll up for FSD 11.

I think they're already on the third or fourth update for number 11. I've certainly done at least two updates on number 11 and I'm usually a little bit behind in the updates I just don't drive that much. but I will say just as sort of an Annex dope between myself and you Tesla full self-driving on version 10.0 95 of the time I could trust the car, but there were certain parts around my town where I'm like it just it can't handle this. It can't move from uh, you know, a right turn exit off of a freeway and then needing to get across four lanes to make an immediate following left turn.

It was incapable of doing that. It has gotten substantially better at being able to do that. It still doesn't get all the way, but it's probably gotten eight times closer to making that left turn lane. And there's also a part in my town where it, uh, it.

Usually when I used to get on top on a highway, there were some construction barriers that came up pretty suddenly. I would hold it until the last second to see if FSD would ever turn and on Version 10, it wouldn't and I'm like, all right I guess I gotta take over. Version 11 has solved that. Uh, Version 11 has also solved some funky merges where it used to cut off bike lanes and and basically use right turn Lanes into neighborhoods before getting to the main intersection.

So you're kind of coming up on a main intersection and it just turns right so early that it cuts off the bike lanes and the neighborhood right turns when it should actually stay in more of one of the primary lanes and then turn right into its its right turn lane. FSD 11 has done that. So the FSD is getting really incredible. You really can't make a long-term bet against Tesla in my opinion, but if you're making short-term plays, there are plenty of reasons to potentially be disappointed on the 19th.

But don't worry, 420 is just the day later and you could party or sadness away. So my take here on Catalyst I'm honestly not terribly concerned about Tesla It's gonna do know what it's going to do. It usually goes down after earnings, so if you're nervous about it, sell some calls. I I I'm not optimistic about seeing a big upside surprise.

Uh, but hey, you know if if you're if you're thinking there's a potential for an upside surprise, add some shares or maybe sell some puts, who knows, maybe it'll stay stable. More importantly to me, for Catalyst I want to know what's going on at American Express I think American Express is going to be a much bigger Catalyst Even though it's not going to get the news as much as Tesla for me, it's going to be a bigger Catalyst As to whether or not this recession is actually coming, I think American Express is going to be a tool for that. and now I understand that American Express really focuses on the higher net worth consumer and the higher income consumer. but generally the companies that I'm investing in are exposed to that consumer base.

So from a personal point of view, that is the company that I really want to pay attention to for sort of that broad-based spending as well as of course the artificial intelligence Drive which I think will get a lot of insight in from Taiwan Semiconductor. so we'll see. but those are my expectations on Catalyst for the week including Tesla So look at that. I went a whole segment without pitching you once on either the programs are building your wealth link down below the paid promotion on life insurance.

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