Tesla's third-quarter report met three benchmarks investors were watching, according to Motley Fool analyst Lee Samaha: a recovering automotive gross margin, a lower capital spending forecast and a Robotaxi timeline in line with management's outlook. Samaha argues investors have reason to feel better about the stock.
Tesla's automotive gross margin rose to 18.3% in the third quarter, the first of three benchmarks Samaha says the company delivered. He writes that the earnings call was less polished than the one held by Space Exploration Technologies the previous day, but no less compelling.
Automotive margin recovers from the Q2 drop
Samaha notes that the gross profit margin, excluding regulatory credit sales, fell from 19.2% to 16.3% in the second quarter, which worried the market. The third-quarter improvement to 18.3% signals strong demand, in his reading.
CEO Elon Musk backed that view on the call. According to Musk: "Demand is growing rapidly for our vehicles."
Meanwhile, global vehicle inventories fell to 11 days from 27 days at the end of the first quarter. Samaha considers it unlikely that Tesla needs to offer significant financial incentives now.
Capex forecast drops to about $20 billion
Management had forecast full-year capital expenditure of more than $20 billion in January, then more than $25 billion in April and again in June. CFO Vaibhav Taneja has now dialed back that expectation to approximately $20 billion for the current year.
The change matters because Tesla lined up $30 billion in credit, which raised concerns that it might not be able to self-fund its plans amid Robotaxi delays. Samaha says the update soothed those concerns.
Samaha ties Robotaxi timeline to Q1 or Q2
Samaha acknowledges that the Robotaxi rollout has been much slower than Musk estimated last year. On the April call, Musk said FSD v15 would arrive hopefully by the end of this year, but certainly by early next year.
Then, on the July call, AI head Ashok Elluswamy said robotaxis were using early versions of v15. Asked by Morgan Stanley analyst Andrew Percoco whether bottlenecks were regulatory-driven, Elluswamy said they are technology-driven but could quickly become regulatory, perhaps in Q1 or Q2 time frames.
Samaha reads that as the window for the v15 release, and concludes the rollout now looks on track and in line with management's outlook.
Source: The Motley Fool
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