Telsa's Earnings: Grounding SpaceX Rocket Enthusiasm?
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What is the main topic discussed in this episode?
This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm J.R. Whalen in New York.
How did Tesla's recent SpaceX rocket launch shape public enthusiasm?
Tesla is flying high these days after the successful SpaceX rocket launch, which blasted a Tesla Roadster into space. But a look at the automaker's fourth quarter numbers would indicate gravity is taking hold of the company's efforts to reach for the stars. Wall Street Journal heard on the street columnist Charlie Grant joins us to discuss. So, Charlie, there was some good news and bad news in Tesla's earnings report. First, it just beat the consensus loss that had been issued by analysts.
That's right, yeah. Tesla reported a loss of $3.04 a share, and that actually was better than what analysts had been expecting, $3.11. Normally, that would be occasion for a stock to go up when you beat the estimate, but Tesla There was a bit of an asterisk there with Tesla's estimate. A year ago, these same analysts were expecting a loss of just 17 cents a share. So it's not the good progress that you might have otherwise thought. So it sounds good, but... Yeah, there's a little fine print attached.
And then, you know, cash burn has been a big issue for the company. But at least in the latest quarter, as you point out in your story, the company and its CEO, Elon Musk, they seem to have reined that in.
Yeah. This number was much better. Free cash outflow was $277 million. That's significant, but the last two quarters, it was more like a billion dollars. We'll have to see if that's an improvement in the business or that just a few one-time events were working in their favor.
And like any business, margins are one of several lifelines to success. And the more cars Tesla sells, you say in your story, the worse its margins become. What did you mean by that?
Well, basically, Tesla set a record for deliveries in the fourth quarter, and it was their worst automotive gross margin performance in quite some time, just 13.8%. And a year ago, we were talking 22%, 23%.
Oh, so that's come down.
Yeah, yeah. So very, very significant change.
How do Tesla's fourth-quarter earnings compare to analyst expectations?
And Tesla's, of course, losing a lot of money while selling $100,000 cars. And the Model 3, which is the car that everyone's so excited about, it's supposed to be selling for much less than that. So if you can't generate a decent margin at a much higher price point, making it work with a cheaper car, I'm scratching my head on how that exactly is going to happen.
We're going to talk about the Model 3 in just a moment. We're speaking with Heard on the Street columnist Charlie Grant, and you're listening to Your Money Matters from The Wall Street Journal. Welcome back, everybody. So, Charlie, a lot of Tesla's success, both real and perceived, rests on the sales of its Model 3, which you could describe as a discount vehicle up to 65% lower than the cost of the more expensive Model S and X. And not only does that present margin issues, but there's a lot of competition on the horizon.
That's right. I mean, Tesla is the leader in electric cars. And I think the big auto makers that, you know, are more traditional players have gotten serious about electric cars because of Elon Musk.
Why did Tesla beat estimates but still raise investor concerns?
And that's to his credit, you know. But the flip side of that is Tesla has serious competition from established luxury car makers who are not going to have the trouble, the teething problems of, you know, developing mass production vehicles. Systems and processes. Tesla is way behind on that.
So, you know, you make a good point about the teething process. I mean, they have had to chart through literally uncharted territory and putting these cars on the road with very, very expensive components. And that plays right into the cash flow issues.
Absolutely. Absolutely. The auto business is very tough. Elon Musk has gotten a lot farther than many observers thought possible, myself included. But you know what? There's a reason why we haven't had a new significant American automaker in decades. It's hard.
And you're right that despite the struggles, Tesla still enjoys open access to capital markets.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:02–0:13
2
How did Tesla's recent SpaceX rocket launch shape public enthusiasm?
0:13–2:11
3
How do Tesla's fourth-quarter earnings compare to analyst expectations?
2:11–3:17
4
Why did Tesla beat estimates but still raise investor concerns?
3:17–5:09
5
How did Tesla's cash burn and free cash flow change in the latest quarter?
5:09–5:29
Speakers
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