Tag: Tesla

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Unveiling the Untold Story of Tesla’s Q1 2023 Earnings Report: A Deeper Dive into Share Price Implications

Tesla’s Q1 2023 earnings report has captured the attention of investors and market enthusiasts alike, showcasing impressive revenue growth and a solid financial position. However, a closer inspection reveals some underlying concerns that might not be as clear on the surface. In this analysis, I will explore the hidden truths that may impact the company’s future success and share price, while offering a unique perspective on the unfolding situation.

Part 1: Financials and Profitability

The Balancing Act of Tesla’s Profitability: At first glance, Tesla’s Q1 2023 report reveals an 11.4% operating margin and $2.7B in GAAP operating income. However, this figure is down YoY, primarily due to reduced average selling prices (ASPs), higher raw material costs, and increased logistics and warranty expenses. As the company continues to expand production and launch new products, these costs may continue to escalate, potentially putting a strain on profitability.

Share Price Implications: A decline in profitability could dampen investor sentiment and lead to downward pressure on Tesla’s share price. As the electric vehicle (EV) market becomes increasingly competitive, Tesla may need to continue cutting prices to maintain its market share. This price war, along with the rising costs of production, could significantly impact the company’s profit margins and, consequently, its stock valuation.

Part 2: Product Development and Challenges

Navigating the Cybertruck Waters: Tesla’s Cybertruck has generated a significant buzz, and its production is set to begin later this year at Gigafactory Texas. However, the unconventional design and features of the Cybertruck may not resonate with traditional truck buyers. The pickup truck market is fiercely competitive, and Tesla’s entrance into this space comes with a considerable risk that may not be fully reflected in their earnings report.

The Odyssey of 4680 Cell Production: Tesla’s 4680 battery cells are crucial for their future success, as they promise increased energy density, reduced cost, and better performance. However, ramping up production for these cells has proved challenging, contributing to the decrease in operating income. If Tesla encounters additional setbacks, it could significantly delay product launches and hinder their ability to meet the 50% compound annual growth rate (CAGR) target.

Share Price Implications: Tesla’s share price is heavily influenced by investor sentiment and expectations of future growth. If the Cybertruck fails to capture a significant portion of the pickup truck market, or if the 4680 cell production encounters further delays, it could lead to a negative impact on the stock price. Furthermore, as Tesla’s valuation is based on future growth potential, any delays in product development could result in a revaluation of the company’s worth by the market.

Part 3: Energy Storage Expansion and Market Position

Tesla’s Energy Storage Ambitions: Tesla’s energy storage business showed promising growth in Q1, with the company planning to increase production capacity at their Megafactories in Lathrop and Shanghai. Despite the positive outlook, the energy storage market is becoming increasingly crowded, and Tesla may face stiff competition from both new and established players. This competition may put pressure on margins and make it more difficult for Tesla to maintain its position as a market leader.

Share Price Implications: As a significant portion of Tesla’s valuation is tied to its position as a market leader in the EV and energy storage sectors, increased competition could negatively affect investor sentiment and the company’s stock price. The energy storage market is evolving rapidly, and new technologies could emerge that challenge Tesla’s dominance. If Tesla fails to maintain its competitive edge, the market may reevaluate the company’s growth prospects, leading to potential share price

Part 4: Tesla’s Long-Term Growth Strategy and Share Price Implications

The Roadmap to Tesla’s Growth: In the earnings report, Tesla outlines plans to grow production in alignment with their 50% CAGR target, aiming to produce around 1.8 million cars in 2023. However, the automotive industry is known for its unpredictability, and Tesla’s ambitious growth plans may not be feasible in the long run. The company’s aggressive expansion may leave them vulnerable to unforeseen challenges, such as supply chain disruptions, regulatory hurdles, or shifts in consumer preferences.

Share Price Implications: Investors have high expectations for Tesla’s growth, which is reflected in the company’s stock price. Any signs of faltering growth or the inability to meet their ambitious targets may cause a loss of investor confidence and result in a decline in Tesla’s share price. The market is sensitive to changes in growth projections, and if Tesla’s growth falters, even temporarily, it could cause significant volatility in the stock price.

Part 5: Tesla’s Long-Term Plans and Share Price Dynamics

Tesla’s Vision for the Future: Tesla has ambitious long-term plans that focus on rapid growth, expansion of its product lineup, and continuous investment in autonomy and vehicle software. The company’s strategy includes an emphasis on Full Self-Driving (FSD) technology, which could potentially revolutionize the automotive industry and create new revenue streams through ride-sharing and other applications. Tesla’s commitment to innovation and growth is part of what has propelled its share price to around $170 per share.

Cybertruck Manufacturing Optimism: Cybertruck has the potential to disrupt the pickup truck market with its unique design and advanced technology. Tesla’s Gigafactory Texas, where the Cybertruck will be produced, is expected to feature cutting-edge manufacturing techniques and innovations that could help streamline the production process. If Tesla can successfully ramp up Cybertruck production and gain a foothold in the competitive pickup truck market, it could further solidify its position as a leader in the EV industry and create a positive impact on its share price.

Full Self-Driving (FSD) Prospects: Tesla’s FSD technology is one of the key pillars of the company’s long-term strategy. The company has made significant progress in recent years, with multiple iterations of their Autopilot and FSD software being released to customers. However, the path to true autonomous driving is complex, with regulatory and technical challenges still to be overcome. If Tesla can successfully navigate these hurdles and deliver a fully functional FSD system, it could potentially unlock substantial value for the company and its shareholders.

Share Price Implications: The share price of Tesla is closely tied to the company’s long-term plans and its ability to execute them successfully. The introduction of the Cybertruck and advancements in FSD technology could potentially lead to significant upside in Tesla’s share price. However, the market will closely monitor the company’s progress in these areas. Any setbacks or delays in production, FSD development, or regulatory approval could negatively impact investor sentiment and the stock price.

Conclusion: Tesla’s long-term plans, including the Cybertruck production and Full Self-Driving technology, play a crucial role in the company’s current share price of around $170 per share. While there are risks associated with these ambitious plans, a successful execution could propel Tesla to new heights in the automotive industry and lead to potential gains in its stock valuation. As the electric vehicle market continues to evolve, Tesla’s ability to navigate these challenges and capitalize on emerging opportunities will be key to maintaining its dominance and protecting its share price.

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The Story of InOrbis

It was a matter of need.

In 2014 I was working as an engineer in Hanna, Alberta, a town of about 2600 people at a Power Generating Station. I’m a city-boy and my girlfriend, at the time, lived in Edmonton. My family and friends were spread out between Calgary and Edmonton, each about a two-and-a-half-hour drive from Hanna. I’d drive out every weekend to see my girlfriend, or my parents, or my friends. After a few months, I became mentally and physically exhausted from all the driving. I was falling behind with my work and my mental health was deteriorating. One day, after being on the road for a gruelling multi-hour road trip, I decided to calculate how much time I was spending driving on the road. It was more than 20 hours per week! That’s basically 50% of a full-time job, fully 12% of all the time one has in a week, doing nothing but staring at an open road.

I wasn’t able to make productive use of my time because I had to focus on driving safely (as we all do), and by the time I arrived at my destination, I was exhausted from focusing for so long. Of course, as an Electrical Engineer, I’ve always been fascinated by technology, particularly autonomous and electric vehicles. I would listen to podcasts about business, books about Elon Musk, and read articles about Tesla, and how companies like Waymo would create fully autonomous vehicles that would reinvent how people travel. I knew I needed to be part of that revolution.

Because I was an electrical engineer, working at a Power Plant, I knew how energy was generated, transmitted and stored, and I knew what it cost and how simple the electric motor was compared to a gasoline engine. I wanted an autonomous car, and an electric car… I wanted a Tesla.  But I had no idea how I could ever afford one. Even making over $100,000 per year as a 23-year-old engineer, a $150,000 car was a big ask.

I can’t say it was an epiphany, but, one day, I did have a big realization. I realized that my time was worth about $50 an hour towards my income and even more for the company I was working for.  If I was spending 20 hours a week on the highway, that equated to over $1000 a week in lost productivity. I knew there were other people who had this problem, especially with commute times perpetually on the rise in North America. There was a way to solve my driving problem, recover my lost time, get a Tesla, and in doing so, help thousands (potentially millions) of others who had the same problem. All I had to do was start a company.

The seed of InOrbis was born. The model was simple, ferry weary business travellers between cities in autonomous electric vehicles. It took me two more years to save the money to purchase our first vehicle, a Tesla Model X. The business model changed a lot over that time. Through countless customer interviews, an incubator, investor pitches and several dozen grant applications, InOrbis Intercity operated our first trip, driving a lawyer and his colleagues from a major firm in Calgary on a same-day round trip to Edmonton in May of 2017.

Why electric? Because of economics. An electric car can cost as little as $0.15 per km to operate (if you drive a lot of kilometres), thanks to low energy costs and almost non-existent maintenance costs. Why autonomous? Because 75% of the cost of a ridesharing service is paying the drivers. Of course, sustainability and safety are key aspects as well, but they are secondary to making a business that can be profitable.

In 2020, we have nearly 20 active owner-operated vehicles in Alberta and are building our business with our core group of clients, namely professionals (doctors, lawyers, judges and, consultants), as well as with eco-tourists and everyday commuters. With our revenue nearly doubling year-over-year, and our operations currently limited to one province, the growth and traction we have seen is inspiring. We are incredibly excited for the opportunity to expand into provinces that are even more EV-friendly like Ontario and BC and into states in the US that are even more business-friendly.

 I will continue to grow InOrbis until the vision is realized, when business travel is no-longer a time- wasting, exhausting slog and getting from A to B, 300 kilometres apart, is as easy as stepping onto an elevator. Until then, we’ve got a lot of work to do.

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Elon Musk Indicted by SEC, Can AI Help?

The big news from the tech and finance world on September 27, 2018, is that Elon Musk has been sued by the US Securities and Exchange Commission (SEC) for his tweets about taking Tesla private at $420 per share. 

The SEC is seeking to have Musk banned from serving as an officer or director of any public company. Their reasoning? Musk was lying about having funding secured. This implies that he was trying to manipulate Tesla’s share price in an upward direction. Well, it worked, for about a day, that is. On the day of the tweet, Tesla’s share price rose to a high of $379.87 US per share from its previous price of around $350 per share, before falling back to $352 the next day (August 8, 2018). If the markets had actually believed Musk’s Tweet, Tesla’s share price likely would have climbed closer and closer to the mythical $420 price as the take-private day neared.

Tesla’s share price peaking after Musk’s announcement.

Instead, Tesla’s share price dropped like a rock because every savvy investor realized that Musk’s statement was either pure fanciful bluster, a joke about weed, or both. Of course, today has been much worse for Tesla’s share price than any of Musk’s recent ill-advised tweets. In after-hours trading, Tesla’s share price is down as much as 13%. That’s a lot and it is falling dangerously close to their 52 week low. This is all especially troubling considering that Tesla is expected to announce their best quarter ever, in terms of cash flow, in a few days.

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So, what is the SEC doing, was it possible to predict this, and could AI make this type of situation any better? The answer to the first question is unclear, however, the answer to the second two questions is likely, yes.

AI is already being used in the legal profession to help identify responsive documents that must be turned over to the opposing party during a lawsuit. MIT Professor Emeritus Frank Levy leads a research that helps law firms apply machine learning software to the practice of law. 

If AI can predict what documents will be useful in a lawsuit, then whenever the CEO of a publicly traded company does something suspicious, it should be possible to use these same programs to parse historical cases and see what precedent there is for a lawsuit to be filed. At the very least, it could provide some insight into the likelihood of an indictment and, in the future, could even suggest potential courses of action for a company to take if it found itself in this type of situation.

Would the AI be able to help predict whether or not Elon will be convicted? Possibly. While I am not aware of any AIs currently being used to predict the outcome of legal matters, in my September 24, 2018 column, I covered the AI that perfectly predicted the outcome of last year’s Superbowl. While legal cases may be more complicated than a football score, there is likely several orders of magnitude more data about the outcome of various lawsuits than there is about football players, simply because there are WAY more lawsuits than there are football teams.

From a financial perspective, we could use this type of AI to predict potential lawsuits and their results and train the AI to make trades based on these predictions. If these types of AI were already in use, we could expect much smoother and more predictable share prices as the effect/implications of a particular news story would become apparent almost immediately after the information surfaces.

For now, I’ve programmed a simple AI for Elon Musk to help him decide if he should tweet something or not. You can try it, too, if you’d like. It’s posted below: