Hey everyone Me: Kevin Here let's talk. Tesla Wow, Yes, we did get a beat on deliveries. We beat deliveries at 48457 versus the 483173. But what are some of the details we got to talk about regarding not only what beat in terms of deliveries because it wasn't the model 3 and Y which is really interesting.

Uh, what about Morgan Stanley What does Morgan Stanley saying what? Waring does Morgan Stanley See for the stock, that's a big deal. What does Gordon Johnson have to say in a tweet reply to my quote tweeting him will break down that drama as well as what could margins and cash flow end up looking like in Q4 That's going to be the big old question. So first and foremost here these are the Tesla production and delivery numbers here. As you can see, we actually missed on Model 3 and a Model Y numbers.

We came in with deliveries of 4615 538. The market was expecting 462 523, so wait a minute. How did we miss when everybody's screaming about a beat? Well, where we beat was in the other models category. Other models came in a few thousand above expectations, leading not only the total number to beat, but offsetting the Model 3 and Model Y? Miss Now in this other models is expected to be cybertruck.

Information: Elon Musk on Twitter as of about a week ago, indicated that maybe Tesla would deliver a couple hundred cyber trucks this year that's not produced that's delivered. So probably somewhere around two to 300 cyber trucks actually getting delivered this year. Which means most of these beats probably came from Model S's and X Now that that is actually really impressive this morning on the market open Live stream which keep in mind some people are not aware that I do Market open live stream every day at 5:30 or 5:25 in the morning California time. Just go to the meet Kevin Live channel it's linked down below anyway.

I'm there every single day and we're covering the market. But this morning what we thought was really interesting was we were covering Tesla and uh, as we looked at the vehicles on Tesla uh we realized that the cheapest model X is actually sitting below $80,000 Now you go to purchase price. you're sitting at $799 which I think is a great value I Don't know that it makes sense to spend an extra $115,000 for, you know, 1.3 seconds I I I Personally, don't think that's worth it I Don't think that's a good investment. that's like a vanity item, right? Fine, Sometimes we we want to reward ourselves so to speak.

But anyway, look at the Model Y I Personally think the Model Y it's a deal and that's actually where you would expect Tesla to make a whole lot less money Because look, you could get the rear Wheeel drive Model Y for under $444,000 You're basically getting a 10 % smaller car for roughly half the price. The model Y is a steel. I Personally think so now I know the rear wheeel drive models got 260 Mi of range and I know it's not the longest. but the point is the fact that other models beat expectations here and offset a model 3 and Y Miss is probably margin.

ACC Creative to Tesla It is a good thing for Tesla and Tesla investors because we want to see margins going up, not down. In fact, let me tell you what Morgan Stanley's biggest concern is for Tesla You ready for this? This is in a note released this morning: Uh, Morgan Stanley This is just a tiny little snippet here of their entire piece. But in this little snippet here, we would not rule out the potential for Tesla's gross margin to test 10% for. uh, you know, maybe one of the quarters ahead, which somewhat implies that the bottom is still ahead of us for Tesla's margin and then maybe their core operating margin could actually end up flipping to negative.

Now the company is still optimistic. They still maintain their $380 price Target Not only do they maintain their $380 price Target but they think that The Optimist is going to be uh, a big potential solution to what they called the 330 trillion labor labor market. They reiterate which we've talked about before this idea that hey, uh, you know Tesla could make a lot of money getting into Dojo as a service much like AWS Now, uh delivers about 70% of the earnings before interest taxes and uh, whatever. Uh depreciation over at Amazon That same thing could happen at Tesla So in other words Optimus Bullishness.

Dojo Bullishness. That's great. but they do think there's a chance you could go negative here with margin in the next few quarters or or at least see more of a fall down to potentially 10% personally. I Don't know why they didn't address it, but they didn't address this.

Maybe they draft Ed most of the piece before the numbers came up because you know they didn't want to wake up early or whatever. But the fact that other models here beats to me is a sign that margin might actually come in better than expected. Commodity prices have come down. Now we know there's a lag in when commodity prices come down to when those actually show up in vehicle margins.

But look at for example, Lithium prices. go to a website like Trading Economics and look at Lith Ium prices, and then let's zoom out a little bit. here. Let's just go out to the 5year chart.

Look at that collapse in Lithium prices Commodities have essentially just been coming straight down over the last 6 months. A little bit of volatility around March and April There this should be good. I Mean, look at another one bcom index, so type that into Google You get the Bloomberg commodity index, get rid of the little spam that pops up, then. Uh, just zoom out for a moment.

Go well. Year today doesn't do us any good anymore. Go. Uh, one year back? Look at this solid, almost perfect, perfectly straight trend line of a declining commodity prices.

Go to the alltime. We should be a little higher still today. Oh no. Look at that.

No way. Uh, we are a little higher than where we were in, like 2018 and 2019. We're actually way lower in commodity prices. Uh, than where we have been really in in, um, any of the period between 20 15 and 2002? Kind of wild.

But the point is, those sort of declines should slowly start showing up in margins. So I think lower Comm prices, lower Lithium prices, and a richer mix of vehicles should all be beneficial to Tesla's margins for their earnings coming up on the 24th. So that is a good sign. Now keep in mind I say this every single time with Tesla Good news usually is around production and delivery numbers.

Okay, that's like that and even if it's bad news, that's usually the best possible news you're going to get, right? So even if it's bad news, it is the best news because it's still like the positive stuff. like how many vehicles would you deliver. Usually the bad news comes out in the actual earnings report, which that's when we look at the details and we're like that's not as good as we thought you know. So my concern would be not that margin comes in weak, but instead we end up getting a free cash flow number that's not as juicy although I'm also not really worried about that this time I was more worried about that in previous Cycles I'm not as worried about that in this cycle.

look uh, here at Tesla's free cash flow. we had a free cash flow here in the last um, earning cycle here of just over $800 million, which we can get just by subtracting the operating cash provided from Capex over here. and uh, before that, we were sitting at about a Billy right? So it's somewhat been trending down here. But the point is, uh, you know I was looking for 400 million that cycle and we got almost twice that.

So so they did very well here. I think that with lower costs and higher margin from some of these vehicles I actually think uh, that there's a chance with with Elon Musk tapping the breaks on cap X which he implied in the last earnings call I think this could actually be a positive earnings report and I've been pretty negative going into the earnings reports I usually see them as like a sell event which then usually end up being a Civan I Don't think this one's going to be as bad now. Gordo and I were arguing. Uh, well, not really arguing I mean you know it's Gordon Johnson We always like to get his bare perspective I like to see him so I was looking at it, you know I I Respect everybody's opinion I have no problem with anybody else's opinion.

So Gordo says uh Q4 Deliveries 20% year-over-year growth the lowest since Q2 2020 the height of the pandemic. Uh, keep in mind he's not wrong I mean the the the growth. the headline growth has slowed down at Tesla and we want to see as we ramp Giga Berlin Austin and cybertruck this move up. we got to get back to 30% Morgan Stanley By the way, I think they're at 27% EPS growth projected for their math.

Yep, 27% kager on EPS I'm at 30% So I've been off 50% for a very very very long time. I've met 30% Morgan sings at 27% % but 27% Topline Growth not great. Uh, 20% that is. Uh, then you've got uh, you know Gordon's multiplying here costs a good soul to get some cash burned.

That's okay because they're probably still cash flow positive. but we'll find out. uh, this idea that the Cyber truck is a mistake I mean to me, that's an opinion I don't think that's a B. That's a big deal I Don't think it's a mistake at all.

but that's okay. You know Bull vers bear here, right? That's an opinion? That's fine, but this is interesting. He says Byd sold more battery electric vehicles versus Tesla Uh, as some of Tesla models lost their full tax credit. Well, okay, it's not entirely untrue that some Tesla vehicles did lose their tax credit like the cheapest Model 3 did lose its tax credit.

But it's worth noting that the cars eligible for the federal tax credit of $7,500 shrank a lot. Literally shrank by like 50% Uh, and so a massive shrinkage here in the number of cars eligible. And so you can. Now, if you want the $7,500 tax credit, these are the only Vehicles eligible for $7,500 You ready for that? The Bolt Okay Who wants that? The F-150 Lightning which barely has enough production.

Rivan does not have a single car with $7,500 And then what do you have at $7,500 Tesla Model 3 Performance The model X long range qualifies for $7,500 Holy crap, that's amazing. Use Metkevin.com Tesla as referral code. Uh, but anyway, or is it meet Kevin I should check M Kevin.com By the way, if you go to Meetkevin.com yeah, it is M Kevin Met and meet both. Uh, the Gold course.

We are replying to emails this morning. Uh, so we can get that all caught up once we have everybody caught up in email this morning, we're raising the price so you still have a few hours here if you want to get in the Gold course. Lifetime access to the course member, live streams, and all the other uh, new content all filmed within this quarter. None of it's repurposed content, it's all brand new.

But anyway, look at this Model Y All-wheel drive, Model Y Performance Model Y Rear Wheel Drive Tesla's killing it. I mean yes, Okay, one of the vehicles lost the $7,500 but relative to the rest of the EV Community Tesla's like the only one I mean Rivan. Their cars are at 35 or 3750 half of the tax credit. so the government's actually incentivizing Teslas over Rivian Rivian.

Miss this morning. They're really a topic for a different video actually. I don't think their Miss is that big of a deal. Uh, I I've actually been surprisingly becoming a little bit less bearish on Rivan.

Uh, you know, even though in the past, they shorted them profitably, I've I've become less bearish on them because I think they're finally getting their act together and and they're surviving some of the the real pain here. But anyway, this argument here. Byd sold more battery electric vehicles than Tesla. Who cares is is sort of my argument.

So I quoted tweeted I quote tweeted this uh and I wrote yes, Byd may have sold more battery electric vehicles than Tesla 526 versus 484 th000. But let's not forget Byd sells cars at an average of 20 $5,000 T Tesla sells them at an average of $46,000 so you make a lot more money at Tesla. Now yes, Tesla's operating margins have fallen. This is true.

Gordon Johnson hits on that right away. It's it is. A bare argument right now is that Tesla's operating margins aren't excellent right now Uh, and we could see that actually, just by going to their last earnings report right here. The uh, let's go to the actual income statement.

a statement of Operations here. So this is it. I'll hide myself for a moment. So what you can find here is: income from operations sits at about 7.5% of total revenues.

So right now, 1764 operating income divided by all of their revenues is only 7. 1.5% That's very low. Byd sits at about 8.9% so they are beating Tesla on operating margins here. And if you want to get even more nasty to Tesla just subtract their operating income or or subtract regulatory credits from their operating income.

You're left with only about a 5.4% operating margin. It's low. It is low now. One of the reasons that operating margin Uh has gotten so low is mostly because those revenues have really stagnated.

Whereas those operating expenses uh have not right, look at, uh, look at. For example, our operating expenses operating expenses were uh, $2.1 billion. They went up to 2.4 at the same time as Revenue declined about $1.5 billion. So yes, yes, absolutely.

Operating expenses have risen as the company is scaling as the company is adding uh uh, more facilities. Sgna, uh, obviously the scanning their scaling their manufacturing plants. but some of that goes into cogs. But still.

you have to build out the hiring, the human resources, the regulatory work, the legal work, and all this. So your Sgna your your general operating expenses go up at the same time you're spending way more money on R&D now expanding into the dojo and Optimus world not just R&D for the cars. So yes, Opex is going up at the same time as revenues did take a hit, likely in my opinion due to interest rates. The the fact though, that we were able to see these numbers at Tesla at a time when Tesla had the worst interest rates ever in the career of Tesla in quarter four, the highest interest rates ever.

Okay, remember, October is part of Q4 That's when interest rates peaked and we got a beat on deliveries here. I Have to say, it's pretty impressive. It's pretty impressive. In fact, take a look at this.

This is a chart here that overlays uh, finished vehicles and inventory versus days of inventory. And what you could find here is that vehicles in inventory actually shot up about 10,000 Vehicles right here. But days of inventory is almost flat. In fact, days of inventory has really started to flatten over here.

Uh, that's despite production either going slightly down or up. Uh, a bit more than that. So it's a sign these vehicles are selling which is good. And again, the fact that when we look at this Matrix here from Tesla Chan we see the other section of vehicles starting to explode Again, the S's and x's In my opinion, it's a sign that that wealthier demographic is deciding.

You know what? I'm interest rates are starting to fall, stocks are starting to go up I'm willing to spend money again. and because I'm willing to spend money I'm going to splurge on the X or I'm going to splurge on the S or whatever I want I Want a different car than the one everybody else is? whatever I think that's mostly a head trip and don't get me wrong, I mean it's like pot calling the kettle black. Okay I I got a Model S and the model X Okay, I just look at them and and I have some regret because I should have just gotten two wise. You know I could have gotten two wise for the cost of one of them.

Uh, but they didn't have a y or a three when I bought the X so it was either the x or the S. I got the X uh and then the model S I I Don't know that that was just stupid. uh, but, but whatever. Okay, whatever.

So I'm not I Have to say I'm not bearish on this earnings report and given that Tesla has lagged the other magnificent six bullish My take: Maybe I'm biased, but I'm not nervous about this one. TR Not advertise these things that you told us here I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes. Congratulations man, you have done so much. People love you people.

look up to you Kevin PA there financial analyst and YouTuber meet Kevin Always great to get your take even though I'm a licensed financial adviser, real estate broker and becoming a stock broker. This video is neither personalized Financial advice nor real estate advice for you. It is not tax, legal or otherwise personalized advice tailor to you. This video provides generalized perspective, information and commentary.

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