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Tesla is up 8% in after hours trading and it seems like the market so far is happy with the business's earnings results I personally think that this is kind of surprising because as we're going to see this was a pretty brutal report for Tesla but I will be explaining why I think that the stock is up despite some pretty weak numbers so as promised I am going to go through Tesla's earnings and give you all my opinion on its financials and its price today all right so let's just dive right into the video and take a look at Tesla's numbers here so here we can see that total Automotive revenues declined by % year-over-year however energy generation and storage Revenue was up 7% and services Revenue was up 25% total revenues did come in at $21.3 billion which is a decline of 9% year-over-year so Tesla's revenue is still declining gross profit was also down 18% and operating income was down 56% due to operating expenses being up 37% now at the bottom here we can also see that operating cash flow was only $242 million which is down 90% year-over-year Capital expenditures also increased by 34% year-over-year which resulted in free cash flow declining by 674 year-over-year and the company actually producing negative free cash flow of $2.5 billion so what I'm seeing here is revenue declining while expenses are up and every single profit margin across the board is declining in a pretty significant way so just by taking a quick look at Tesla's income statement here these are some pretty rough numbers and again this is kind of why I'm surprised that the stock is up so much in after hours trading but let's continue on so here we can kind of see Tesla's explanation for their lower profitability this quarter and this says our operating income decreased year-over-year by $1.2 billion in q1 resulting in a 5.5% operating margin year over-year operating income was primarily impacted by the following items reduced vehicle average selling price due to pricing and mix increase in operating expenses partly driven by AI cell advancements and other R&D projects cost of cybertruck production ramp and a decline in vehicle deliveries so these are all of the things that negatively impacted Tesla's operating margin in this quarter now here are the things that positively impacted Tesla's operating margin lower cost per vehicle so the company is still finding ways to lower its cost per vehicle which I do think is a good thing gross profit growth in the energy generation and storage businesses so these businesses are starting to become more profitable which is a good thing as well and then lastly this says higher full self-driving Revenue recognition so it sounds like full self-driving revenue is increasing as well then the company reports that it has about $27 billion of cash on the balance sheet as of the end of the quarter so the company is not going bankrupt anytime soon and they still have a large cash position on the balance sheet now moving on to Total production and deliveries take a look at this so year-over-year for the model 3 and Y production it was down 2% however the other models production was up 8% but overall the total companies production was down 2% in the quarter now when we take a look at deliveries model 3 and model y deliveries were down at 10% whereas the other model deliveries were up 59% overall total deliveries were down 9% year-over-year on the quarter though so Tesla is delivering less Vehicles Global vehicle inventory or the days of Supply is now sitting at 28 days of Supply as well which is the highest it has been over the past 5 quarters now moving on to the next key piece of data that I found this shows Tesla's market share in every region that it sells vehicles in and we can see that for this quarter Tesla's market share did decline in the US in Europe and in China so in every Market that Tesla is currently in it did see its market share decline slightly this quarter now it is worth noting that back in 2019 Tesla did see its market share decline in the United States and in Canada but it has never seen a quarter where it has seen a decline in market share across all three major markets so this is kind of a trend change for Tesla and overall I don't think that it is super bullish to see the company losing market share in its key markets all right moving on to some other highlights here though our non-automotive business is becoming an increasingly profitable part of Tesla energy generation and storage revenues were up 7% year-over-year and gross profit was up 140% so that is actually pretty dang bullish for the energy generation and storage business its revenues are growing still and its gross profit is up massively year-over-year services and other Revenue also grew 25% year-over-year which is pretty bullish as well for that segment of the business now moving on to Tesla's Outlook this says our company is currently between two major growth waves the first one began with the global expansion of the model 3 Andy platform and we believe the next one will be initiated by advances in autonomy and introduction of new products so Tesla is very much so saying that the company is currently in between two growth waves or in other words the company is currently seeing a lull in its overall Revenue growth which I'm sure we can all see by now Tesla then says that its next major growth wave is going to be fueled by autonomous driving or basically full self-driving and introduction of new products which is basically more vehicles and other products over the long term that are not necessarily vehicles moving on to cash this says we have sufficient liquidity to fund our product road map and I actually do agree the company is very well funded with $27 billion of cash on the balance sheet so again I do not think that Tesla as a business is going to disappear or go bankrupt or anything like that because they are very well funded and I do believe that if the company wanted to it could generate free cash flow going forward once again so I don't think that the business itself is at any risk then they talk about their profits over time we expect our Hardware related profits to be accompanied by an acceleration of AI software and Fleet based profits so it sounds like over time they are expecting their full self-driving and their AI capabilities to actually boost profitability as well and this kind of makes sense because their full self-driving software is very high margin software because it is literally software Revenue which does generally have higher margins so over time we could see Tesla's profit margins expand once again but right now the company's profit margins are very much so declining and their costs are going up quite a bit relative to revenues dropping now moving on to the product here this says we have updated our future vehicle lineup to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025 so Tesla is now updating its future vehicle lineup and it is accelerating the launch of new models now in my opinion based on what I've read from the Bulls from the Tesla Bulls on Twitter this is why the stock is up in after hour trading I've seen a lot of people highlighting this one sentence right here and saying that basically Tesla is now accelerating its future vehicle development and its future product development and that overall is a bullish thing for the company so take that as you will but again based on what I've seen online this is why the stock is up in after hours trading despite the metrics and the financials not really looking so hot this quarter now moving on this next chart shows the electric vehicle adoption rate which is the global Bev market share over the trailing 12 months now we can see that China's market share is still growing a lot and significantly however we can see that the world excluding China is actually still at an all-time high as well so overall the global Bev market share is still growing and at all-time highs now with electric vehicle sales at all-time highs and Tesla's deliveries and sales down it clearly means that Tesla is currently losing market share Tesla's sales should be growing with the overall EV Market if it was at least maintaining its market share but again this is not currently happening now I also went and took a look at byd which is China's major electric vehicle company and I took a look at their sales so far this year and here we can see that so far year-to date in 2024 they have sold over 300,000 battery electric vehicles which is a 13.4% year-over-year increase Additionally the company sold 140,000 battery electric vehicles in the month of March versus 103,000 last year this is nearly a 40% increase year year for the month of March what this means is that byd's battery electric vehicle sales over in China are still growing and very very strong now what this overall means is that byd is definitely taking market share from Tesla over in China because this company's battery electric vehicle sales are still growing quite strong whereas Teslas are going down additionally GM reported its financials today and here it says that it had a 21% year-over-year increase in retail deliveries for the company's e portfolio so General Motors also saw a 21% increase in its EV deliveries this year now again this does suggest that Tesla is losing market share to its electric vehicle competition because its competitors are growing their sales year-over-year while Tesla's deliveries are declining so it does seem like competition in the electric vehicle space is heating up and the other electric vehicle companies are still posting year-over-year increases to their deliveries all right moving on to the next slide here we have the key metrics on our quarterly basis and here we can see that the vehicle deliveries were down and this was what we were all expecting Tesla already announced that its deliveries were going to be down in this quarter and we can see that it was a pretty dang weak quarter for deliveries however moving on to operating cash flow and free cash flow this is the lowest amount of operating cash flow that Tesla has produced in 3 years now and this is the first quarter of negative free cash flow in 3 years as well net income and adjusted iata are also at a three-year low now so we can overall see that Tesla's deliveries are down and its overall profitability is declining in a pretty significant way as well we can also see this more clearly when we take a look at a trailing 12 months view in the trailing 12 months Tesla's deliveries are now down for the first time in 3 years and its operating cash flow and free cash flow have been consistently declining on a trailing 12-month basis for 2 years now its adjusted IA has also been declining for a year now so overall the company's profitability is declining in a pretty significant way and this is because overall revenue is declining while expenses are increasing and as we saw that means that its profitability margins are going down in a pretty big way which I do not like to see all right moving on to the next slide here and I'm going to focus on the trailing 12 months numbers here and we can see that in the trailing 12 months now Tesla has produced $ 11 billion in operating cash flow and it has been declining now for about the past 2 years consistently this is at the same time as the company's Capital expenditures are now at 9.6 billion in the trailing 12 months which have been consistently increasing ing over time this ultimately results in Tesla producing $1.4 billion in free cash flow in the trilling 12 months now and overall free cash flow has been declining for almost 2 years as well so again this is just another suggestion that the company's profitability is going down while its capital expenditures or expenses are increasing which is resulting in overall profits declining and again I do not love to see this all right so now let's head over to stock unlock very quickly and talk about Tesla's price today so before the earnings report Tesla was trading for a price to operating Inc of roughly 51 now if we take a look at Tesla's historical average over the past 3 years now its average is about 98 so when we take a look at its current price to operating income versus its historical average you could make the argument that hey the stock is looking cheap relative to how the market has historically valued this business right however when we add Nvidia into this chart we can see that it is trading for a price to operating income of about 60.3 right now it's also worth noting that after this earnings report since Tesla's operating income is going down and its stock price just went up the company is now trading for a price to operating income of about 62 based on my calculation this means that Tesla's price to operating income is now in line with Nvidia now as you know on my channel I think that Nvidia is a very expensive business but now I actually think that Tesla is arguably an even more expensive business than Nvidia and this is kind of why right here if we take a look at these two company's operating income over time we can see that Tesla's operating income is clearly downtrending from its all-time high whereas nvidia's operating income is massively exploding okay now think about this these two businesses price relative to their operating income that they produce is basically the same now but when you take a look at the growth to these two companies operating income nvidia's is clearly exploding whereas Tesla's is currently declining so that ultimately leads me to the conclusion that Tesla is actually quite an expensive company today and it's it's uh it's actually very very expensive in my opinion like if we go back to the price to operating income and we add in companies like Microsoft which I do still think is a very expensive business as well by the way and let's also add in Google so here we can see that Tesla in real terms is at 62 Nvidia is at 60 Microsoft is at 30 and Google is at 22 now Google and Microsoft are also growing their revenues year-over-year and the cash flows year-over-year and their overall profits year-over-year and they're trading at less than half of the price of Tesla today which is currently seeing its fundamentals decline this overall leads me to the conclusion again that Tesla is a very expensive stock today and just because the stock is down I know it's down over 50% from its all-time highs it doesn't necessarily mean that the stock is cheap what it means is that the stock was even more expensive in 2021 and in 2022 there was clearly an electric vehicle bubble in the overall stock market during those times so I don't think that it is really a wise idea to compare Tesla's stock price today versus when the stock was clearly in a bubble at least in my own opinion I always try to focus on the valuation of the business today relative to its overall financials and its profits and when I take a look at these metrics I see a business with revenues declining expenses going up every single profitability metric going down declining profits and trading at massive premiums to stocks that I think are still arguably expensive in the market so I don't know I'm going to be honest I don't really see the attraction to Tesla stock right now based on this earnings report I'm pretty shocked that the stock is up 8% and after hours trading like this was a pretty bad report there's not a lot to like about it and I don't know the market is still rewarding the stock despite it being arguably still very expensive now that leads me into the next screenshot that I want to bring up here which is Tesla's overall ecosystem this is the company slide that says we are more than just Vehicles so this is the company saying that we're not just a vehicle company we are going to build humanoid robots we have ai compute we have full self-driving we have a ride hill app we have insurance etc etc etc however it is worth noting that 82% % of the company's revenues come from Vehicles today and 86% of its gross profits come from Vehicles today as well what this ultimately means is that today Tesla is a vehicle company that is where its revenues and profits are coming from so when I take a look at the business today and when I take a look at what I am buying today it it is a vehicle company okay that's that's what the company is at this moment however when I take a look at the price of Tesla today and how it is being valued it is not being valued as a vehicle company or an auto company now what that tells me is Tesla is an auto compy today but it's not being valued as an auto company today which ultimately means or leads me to the conclusion that Tesla's market cap today and its price today is already factoring in these future products that it is promoting here like the humanoid robots the full self-driving the charging the insurance the ride haill and all of those things because again it is not being valued as a vehicle business despite 86% of its profits coming from Vehicles therefore it is being valued as if it already has all of these other products in its ecosystem and it is already generating profits from these products now why this adds significant risk to an investment is because again you are already paying for the future success and profitability of these products that you were seeing on your screen you're paying for them today now why this is a significant risk is because what if these things don't actually turn out to be successful or profitable for the company and it shareholders like let's just this is just an example I'm just giving you guys as an example right now let's say that humanoid robots there's just no way in the future over the next 50 years that we can figure out how to make these profitable I actually don't think that that's true but just an example bear with me let's say that over the next 50 years humanoid robots turn out you know what no company can do this profitably and they just lose money okay now if you're paying for humanoid Road Bots today or you're factoring that in to your DCF calculations on Tesla today and then 30 years in the future it turns out that humanoid robots are just a total flop no one can make them work they don't produce profits etc etc then that means that by you paying for that product and its profitability today you're adding significant risk and you're probably going to see downside because because again you've already paid for this the success of a product that is not actually proven successful so that is how I think about investing and based on all of the mentors that I follow like Warren Buffett Benjamin Graham Charlie Munger Peter Lynch they all warn against paying too much for future growth because you're just adding so much risk if that future growth never materializes and even if it does materialize since you're already paying for it today it means that you may not necessarily profit from the company's future growth so what I try my best to do is buy businesses where I believe I am not paying for future growth but the business is actually going to continue growing over the long term because if I'm not paying for that future growth today then my investment actually benefits from all of the company's future growth because again I'm not already paying for it so I get to benefit as a shareholder so that's what I try to focus on on my Channel I know that may not be for everyone I know that you may call me a value investor or whatever but this is me just being honest with everything that I've learned about investing and having made mistakes like this before as I write in my book The fundamentals of investing my largest mistake ever when and my largest loss ever in an investment was when I was paying for future growth of a business and I was paying for massive future growth of a business that future growth never materialized and I ended up losing 80% of my investment basically so now I am very hesitant to pay for too much future growth with a business and when I take a look at Tesla I genuinely do believe that investors are paying for a significant amount of future growth and based on my history that does mean that there is a a pretty significant risk with this stock so that's my rant over that's kind of what I think about Tesla I actually do think that based on this company's products and everything is probably going to be fine over the long term it's just the price of this business today does not make any sense to me based on fundamentals based on Revenue based on profits etc etc so that is my reservation with Tesla that is my opinion on Tesla you guys can take it or leave it all I can do is tell you guys the truth and my truth and Bas you know just be honest and real with you guys I know that this is probably not the opinion of a lot of other YouTubers or what you guys see on Twitter etc etc that's okay I'm unique I guess and uh I got to stay true to my principles and stay true to you guys so that is my opinion on Tesla that is my opinion on its earnings if you guys enjoyed this video if you guys enjoyed this video then please remember to leave a like on it I really appreciate it and if you want to see more stock market related content like this then please consider subscribing to the channel as well but that's going to wrap up the video for today everyone thank you so much for tuning in I really appreciate appreciate you guys if you made it to the end of the video thank you for listening to my ramblings and I hope to see you all again in the next one
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