Sozzi & Brad’s Take on TSLA Earnings

Yahoo Finance’s Brad Smith and Brian Sozzi break down Tesla’s Earnings Call.

You can see the entire show here.

Video Transcript

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BRIAN SOZZI: All right, welcome to Yahoo! Finance. This is After The Call. I'm Brian Sozzi joined by Brad Smith. And for After The Call here, we are locking in on Tesla. That call finally, finally, finally ended. Investors were greeted by, I would say Brad, a bit of a sleepy Elon Musk, which makes make sense because he's trying to get to profitability on Twitter. And also dealing with a lot of courtroom cases.

But you're probably wondering what is going on with the stock after hours? And we have seen a strengthening in Tesla stock price, as that earnings call has gone along. A couple of reasons why I think here if you distill that earnings call like I'm about to do right now.

First up, Tesla, Brad, really teased cost cuts throughout that earnings call. Of course, they started off their earnings release teasing a more efficient operation. You saw CFO, Zach Kirkhorn really play that up on the earnings call. You saw Elon Musk focus lock in on them being a more efficient company.

Really battening down the hatches in terms of how they operate their business, really playing into the buzzword right now into tech-- in tech, that is cost cuts to improve profits inside of a slowing economy. Elon also warned about a pretty severe recession. We'll get that a little bit later.

Next thing that I think is driving the stock price here Brad. Elon and his team really confirmed that the Tesla Cybertruck will in fact, begin production this year. Now, the Street wanted to see this weird looking angular truck production starting mid-year. Elon said that would start in the summer.

Ultimately, volume production will kick off in 2024. I think the Street really liked hearing that this Cybertruck will finally reach some form of production at this point this year. Also too here, we have the audio for this one here Brad.

The gross profit margin outlooked into this earnings call for Tesla, very much in focus. There was some concern with Tesla cutting prices recently pretty aggressively to stoke demand, would that automotive gross profit margin dip below 20%? Of course, that would be a big, huge decline if that did, in fact happen. Here's what CFO Zach Kirkhorn said on the call.

ZACH KIRKHORN: There's certainly a lot of uncertainty about how the year will unfold but I'll share what's in our current forecast for the moment. So based upon these metrics here, we believe that we'll be above both of the metrics that are stated in the question. So 20% to automotive gross margin excluding leases and red credits. And then, 47k [? ASP ?] across all models.

BRAD SMITH: Yeah, and that [? ASP ?] was what was key about this. And that ASP 47k that they mentioned on the call. I mean, we were just taking a look at some of the automotive gross margins within this earnings report that it just dropped. And you kind of got this vibe, which we'll get to our vibe checks in a moment from this call.

But I think at the end of the day, one thing that did stick out to me was not just the amount of times that Elon wanted to continue to come back to recession. It's almost like Sozzi, he wanted to be at World Economic Forum and be asked about his take on what a recession may look like. And here's the actual verbatim that he did say about this.

And this was actually the biggest stock move that we did see as well around that. Because in after hours, you also saw this spike up for much of the time during the call. It was higher by about 1%, 2%. And then, you saw this move higher on his comments about the recession.

And here's why. He said, if the recession is a serious one and I think it probably will be, but that will lead to meaningful decreases in almost all of our input costs there. So he's describing a deflationary environment that is what some of the investors really latched on to. A deflationary environment, at least for some of those input costs materials and what have you.

And so that particularly, is what we did see. Some of that share price action on even in the extended hours here. But it was remarkable to see how long it took for somebody to ask about Twitter as well. Of course, they were taking questions from say.

And the question really was, look dude, just spend a lot of time on this other baby, this other child that you've just been able to bring in to your home, the Musk home but not the Tesla home. However, it's taking time away from how much time you spend with us. And so he was asked about that. We have a clip of that to play for our viewers too.

ELON MUSK: Well, let me check my Twitter account. OK, so I've got 127 million followers. It continues to grow quite rapidly. That suggests that I'm reasonably popular. And I might not be popular with some people but for the vast majority of people, my follower account speaks for itself.

I'm the most interactive account, social media account, I think, maybe in the world but I'm certainly on Twitter.

BRAD SMITH: All right.

BRIAN SOZZI: Brad, I was supposed to get to some vibe checks here on this account. Well, hold on. Just because he has 127 million Twitter followers, does that mean he's super popular? What it does mean is that he's an important Dude, important person on the platform that he owns.

And it is there has been a real concern on various polls. Elon scoffed at a YouGov poll. I think he in fact said, who could trust them? But still, the fact is his comments on Twitter and the way he's been acting is not CEO like and it has impacted this brand. You may not have seen it in sales for the fourth quarter but maybe you'd see it at some point this year with Tesla and its various models.

BRAD SMITH: Yeah.