Tesla's Q3 Earnings Will Surprise You

Tesla's Q3 Earnings Will Surprise You

Tesla's Q3 earnings are about to be reported and we think that they will be a surprise on the upside. With so much FUD lately against Tesla, many are not realizing Tesla's continued cost cutting and increasing margins.

Tesla has an average selling price of $54,500, including FSD. There is $18.7 billion in auto revenue, 33.3% gross margin and $6.2 billion in gross profit, all without regulatory credits, in last quarter.

Tesla total auto gross margin looks to be 35.2%, which is starting to look really high. This is with Tesla expanding to their RWD variants. This will also help when Tesla starts to expand their Model Y vehicles from Giga Texas. Tesla's total gross profit for autos could be $6.5 billion.

Tesla energy may start to show signs of improving with more LFP cells. Tesla energy could surprise on the upside with $1.1 billion in total revenue. This will be a big difference in energy, the LFP cells, which are in my Model 3 RWD as well. They are much more plentiful, longer lasting, and cheaper to produce. Energy could have a profit just under 10% margin.

Additional Q3, 2022 Insights

There could be around $1.8 billion in various operating expenses, including restructuring, research and development, and S, G, and A. The thing that most people are interested in is earnings as that is what determines the ever important price earnings ratio.

When we look at what could happen in Q3, 2022 for earnings, we see net income GAAP around $4.3 billion and net income non-GAAP around $4.679 billion. These are great numbers and we believe Tesla will reach them.

EPS GAAP will be around $1.23 and EPS non-GAAP, $1.34. This is not far off from double of Q2, 2022. This is why we think Tesla will be way above Wall Street's estimates. A result like this would move the stock price much higher.

Tesla's results are the only thing that matters to investors. Tesla's current stock price is $219 at a 687 billion market cap. With these numbers, Tesla reaches a price earnings ratio of 40. With all the potential of Tesla, a price earnings ratio of 40 is insane.

Tesla is a valuable company. About 6% of vehicles produced this quarter didn't get delivered. That will also contribute to the success of the company. If those vehicles were added, were get $1.1 more in revenue and $370 million in gross and operating profit. That would put the price earnings ratio at 36.5.

Is Tesla really over valued? Will it really drop another $100 in the stock price?

For more information, see this video from Tesla Economist:

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla Gallery, Screenshot