* Tesla's moats are vanishing
* Earnings quality is poor
* I shorted Tesla at $671 in after hours trading
I have read most of the positive Wall Street's sell-side reactions to Tesla's (TSLA) results.
This morning I offer a more critical view:
* Tesla had a big earnings beat ( $1.02/share GAAP) but $0.32/share of that was from emission credits - so EPS are only $0.70/share (GAAP) without the credits.
* Emission credits were down sharply from the first quarter and will evaporate as other car companies begin to expand their EV production.
* Tesla did well selling cars as did ALL car companies in this period and margins benefitted from used car sales. (I am short Carvana (CVNA) )
* Tesla lost market share in China and Europe as competition ramped up.
* Tesla surprisingly reduced R&D and SG&A from prior periods despite revenue growth upside.
* Questionable gross margin claims.
Tesla's moats are vanishing:
- Tesla has no edge in batteries. (They buy them from Panasonic (PCRFF) and LG).
- Tesla's uniqueness in having more charging facilities than others will also go away as the company plans to allow other EVs to use its stations. These charging stations will become usable, like gas stations, by all automobiles.
- Tesla's FSD is not unique and is, in fact, rated more poorly than others - so ancillary revenue sources, predicted by some analysts, like robotaxies, increasingly are not likely.
- Truck deliveries to be delayed.
- Musk said that he may not attend future earning calls - so a messianic leader is clearly drifting away from his commitment to Tesla.
Bottom Line
Emission credits are going away (credits reduce annualized EPS to only about $3/share).
Tesla is a company facing a profoundly more competitive business landscape.
Tesla is morphing into just another auto manufacturer - which, like all of them, at the current unique period of time (Peak Autos?), have had strong earnings report. Yawn!
Other OEMs who are also heavily committed to electric vehicles sell at 8x-12x EPS.
An 8x-12x PE ratio on $3/share equates to a share price of about $30/share.
With Tesla's uniqueness going away and its leadership position eroding - why is Tesla worth $673/share?
I shorted a small position in Tesla in the after hours at about $671.
(This commentary originally appeared on Real Money Pro on July 27. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass's Daily Diary and columns from Paul Price, Bret Jensen and others.)
