All The Reasons Tesla Stock Popped After The Q2 Conference Call

Aug. 03, 2018 12:33 AM ETTesla, Inc. (TSLA)205 Comments


  • Tesla estimates average production rate for Q3 at 5K/wk.
  • The company continues to guide for positive FCF and GAAP profitability in Q3 on increased Model 3 deliveries.
  • It continues to guide no capital raises and that all future products will be self-funded.


The following is an analysis of the Q2 conference call. Specifically, bullish takeaways that I noted while listening to the call. The 16% gain on the day was due to multiple factors, which I will cover in some detail in this article.

Increasing Production rates

Musk reported that Tesla produced 5K/wk multiple times in July, which means it was not a sustained average but only burst rates, most likely extrapolated from individual daily rates.

He estimates a 5K/wk average for Q3, in line with the expected 6K/wk burst rate, which would make up the ground lost in July. The estimates of 50-55K for the quarter don't add up to a 5K/wk average but may be factoring in some downtime for improvements.

The current bottleneck keeping the company from a 5K/wk steady state is body production, which it estimates will be solved in 1-2 weeks. Tesla says it achieved a burst rate of 800 bodies made in 24 hours. The production rates are clearly making significant progress on a quarterly basis, and any deadline misses from internal guidelines are secondary to actual output and deliveries which will improve Tesla's bottom line for Q3

Surprising Sales and Demand

Model 3 US market share for the midsize luxury category surpassed all competitors combined. This was outlined in the shareholder newsletter but also mentioned again in the call. This means the majority of cars sold in this category were Model 3s.

Tesla's head of sales says Model 3 trade-ins are also coming from non-mid-sized luxury owners. This means the addressable market for Model 3 is much larger than most people anticipated and not limited to luxury car buyers only. The company listed the top 5 vehicles that Model 3 buyers traded in between January and July: they were the Toyota Prius (TM

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