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The Future of this Blog

Before I share my earnings forecast, I first want to briefly talk about the future of this blog.

Since I started this blog in June of last year, I've been self-employed, which has given me the ability to drop everything and spend 12 hours a day working on blog posts for a week or two, like I did when I wrote My Tesla Investment Thesis 2.0. This is about to change, because I am currently in the middle of relocating to Singapore to do an MBA, which starts in January. Whereas a lot of MBA programs are one and a half or two years in duration, my MBA (INSEAD) is a one year program, which means the workload will also be higher, because (according to them) they've cramped the most important 80% of an MBA into just one year. As a result, I doubt I'll have time to write any massive posts during the next 15 months, especially because maintaining a social life and staying in shape are more important to me.

Furthermore, for the past two months or so, I've been more confident in Tesla's long-term success than ever. In My Investment Thesis 2.0 I wrote:

I think that it's a near certainty that Tesla will end up among the market leaders at the very least. For them to not gain a majority/monopoly market share, some of Volkswagen's serious attempts at EVs (ID.3 & ID.4) in the next few years HAVE TO achieve a certain level of success. I doubt they will sell as many as the Model 3 and Model Y, but these cars are supposed to be profitable mass market vehicles. If Volkswagen does not manage to sell at least hundreds of thousands of these per year, I think the entire automotive industry is done for and can pack up their bags.

Well, the ID.3 is here and for the most part it's been a major disappointment. At this point, I think it's up in the air whether it will even sell 100k units per year, let alone hundreds of thousands of units. I think it's now crystal clear that Tesla will be the dominant player in the automotive industry, even before factoring in Tesla's seemingly unbeatable strategy and insurmountable lead in autonomy, and to me the only question is how massive of a market share Tesla will end up with.

With this in mind, I've been less interested in following every tiny detail going on with Tesla (but I still follow the major news), and I don't care that much whether Tesla will sell 900k, 1M or 1.1M units in 2021, and 4M, 4.5M, or 5M units in 2025. Tesla is still the most exciting thing going on in the world, and Elon is still an amazing human which we can all learn loads from, but I don't currently find myself wanting to spend 2-3 hours a day reading up on Tesla, like I have for the past one and a half years.

Tesla's new stance towards investor relations from the past year or so of "less tell and more show", which I believe has helped the stock price tremendously by the way, also doesn't really help with that. Tesla seems to share less details about its business these days, so it also makes me just want to sit back, relax, and trust Elon and the rock-star employees working at Tesla to transition the world to sustainable energy and transport.

And last but not least, there hasn't been anything I've really wanted to write about as of late. I feel like My Tesla Investment Thesis 2.0 is still very relevant today, 10 months later, I've already shared My TSLA Investment Strategy, and there's nothing super exciting going on that I haven't already written about like a Valuation Allowance ReleaseS&P Inclusion, or Delta Hedging.

I'm not sure yet exactly what kind of shape this blog will take over the next 15 months while I pursue my MBA. Perhaps I'll make smaller posts, simply sharing my thoughts on major events, such as earnings calls, investor days, etc. Or maybe I'll post these things on Twitter, like I did after Batter Day.

TSLA Q3'20 Earnings Forecast

Without further ado, here is my Q3'20 earnings forecast:





Some notes:
  • Energy was surprisingly strong in Q2, and I'm expecting Q3 to be a new record after lockdowns have been lifted and solar price reductions. Solar Roof should also be increasing slowly but steadily.
  • I would expect S & X margins to be worse than this, because of price reductions in Q2, but they just reduced the price of the Performance S by $3k and of the LR version by $5.5k. Although I'm not sure how, it really suggests margins in Q3 were stronger than one would think.
  • Model Y margins are probably very high right now. It shouldn't cost much more to make than the 3, yet there's no SR trim, and the price is much higher.
  • I've more-or-less copied OPEX and stock-based compensation (impacting non-GAAP numbers) from The Accountant on TMC. He does much more in-depth calculations on these than I do.
In fact, his earnings estimates are very good in general, and although I ended up being closer last quarter on the metrics total revenue and non-GAAP EPS, that was only because I was way off in a few places that ended up exactly evening each other out. All in all, I think his Q2 forecast was much better than mine. So if you're interested, you can check out his Q3 forecast on TMC of $8.2B in revenue and $0.77 non-GAAP EPS here.

For further comparison, here is the Estimize consensus as of right now:



My forecast is towards the upper end of the Wall Street range, and well above both the Wall Street and Estimize consensuses.

In summary, I am forecasting Q2 => Q3:
  • Automotive Revenue: $5.18B => $7.65B
  • Automotive Sales Gross Margin Excluding Credits: 20.7% => 21.3%
  • Total Revenue: $6.04B => $8.82B
  • Gross Profit: $1.27B => $1.99B
  • Total Gross Margin: 21% => 22.5%
  • EBIT: $327M => $750M
  • GAAP Profit: $104M => $468M
  • Non-GAAP EPS: $0.44 => $0.87
  • Free Cash Flow: $418M => $693M

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