The Bullish Case For Tesla: GPT-4 Sees The Silver Lining In The Company's Q1 Earnings Miss

Tesla Tanks After Earnings

Tesla, Inc. TSLA shares were down nearly 8% in early pre-market trading after the company reported revenues below Wall Street’s consensus estimate and narrowing margins. I asked GPT-4 to listen to Tesla’s conference call and then make the bullish case for Tesla after that. Here’s what it came up with: 

Tesla Earnings Call Recap – Why We’re Still Bullish

  • Strong Revenue Growth: Although Tesla missed earnings expectations, the company still reported strong revenue growth. This growth can be attributed to increasing demand for electric vehicles (EVs), which is expected to continue in the foreseeable future. As a leader in the EV market, Tesla is well-positioned to benefit from this trend.
  • Gigafactory Expansion: Tesla is in the process of expanding its production capabilities through the construction of new Gigafactories. The upcoming completion of the Berlin and Texas Gigafactories, in particular, will significantly increase Tesla’s production capacity, allowing the company to meet the growing demand for their vehicles and achieve economies of scale.
  • Improved Supply Chain: Tesla’s efforts to secure long-term contracts for raw materials and components have helped alleviate some of the supply chain issues that have plagued the automotive industry. As Tesla continues to improve its supply chain, the company will be better able to manage production and deliver vehicles to customers.
  • Energy Storage Business: Tesla’s energy storage business, including the Powerwall and Megapack product lines, has experienced significant growth. As the demand for clean energy and reliable power storage solutions continues to rise, Tesla’s energy storage business is poised for further expansion, contributing to the company’s long-term growth.
  • Autonomous Vehicle Technology: Tesla’s investment in its Autopilot and Full Self-Driving (FSD) technologies sets the stage for a potential revolution in the automotive industry. As the company continues to refine its autonomous driving systems, Tesla’s vehicles are likely to become increasingly attractive to consumers, boosting sales and market share.
  • Strong Brand Loyalty: Tesla enjoys a passionate and loyal customer base that supports its mission to accelerate the world’s transition to sustainable energy. This loyalty should help the company maintain its competitive edge and drive growth in the coming years.

In conclusion, the company’s long-term prospects remain strong. Tesla’s robust growth, Gigafactory expansion, supply chain improvements, energy storage business, autonomous vehicle technology, and dedicated customer base make me confident in the company’s future performance.

Evaluating Tesla’s Financial Strength

One difference between Tesla today and in previous years is that it’s profitable and has a strong balance sheet, so it doesn’t require capital raises to stay in business. With that in mind, I asked GPT-4 to quantify Tesla’s current financial strength using the Piotroski F-Score. It did so, showing its work along the way: 

The Piotroski F-Score is a financial analysis tool used to assess the financial health and strength of a company. It ranges from 0 to 9, with a higher score indicating better financial health. The F-Score is calculated using nine criteria based on a company’s financial statements. Using Tesla’s most recent financial statements, we can calculate Tesla’s Piotroski F-Score as follows:

  • Positive Net Income: Tesla has a positive net income of $2,173 million in Q1 2023. (+1 point)
  • Positive Operating Cash Flow: Tesla’s operating cash flow is $3,046 million in Q1 2023. (+1 point)
  • Increasing Return on Assets (ROA): ROA in Q1 2023 is 7.07% and in Q1 2022, it was 5.94%. ROA has increased. (+1 point)
  • Cash Flow from Operations > Net Income: Tesla’s cash flow from operations of $3,046 million is greater than its net income of $2,173 million. (+1 point)
  • Decreasing Long-term Debt to Assets Ratio: Long-term debt to assets ratio in Q1 2023 is 0.202, while in Q1 2022, it was 0.244. The ratio has decreased. (+1 point)
  • Increasing Current Ratio: Current ratio in Q1 2023 is 1.40, and in Q1 2022, it was 1.19. The current ratio has increased. (+1 point)
  • No New Shares Issued: The weighted average shares outstanding are 1,026 million in Q1 2023 and 1,023 million in Q1 2022. Tesla has issued new shares. (0 points)
  • Increasing Gross Margin: Gross margin in Q1 2023 is 27.9%, and in Q1 2022, it was 21.9%. The gross margin has increased. (+1 point)
  • Increasing Asset Turnover: Asset turnover in Q1 2023 is 0.51, and in Q1 2022, it was 0.49. Asset turnover has increased. (+1 point)

After calculating the individual components, Tesla’s Piotroski F-Score is 8 out of 9. This indicates strong financial health for the company.

One of Joseph Piotroski‘s conclusions in his landmark paper unveiling his F-score was that 

[T]he market does not fully incorporate historical financial information into prices in a timely manner

We’ll see if that’s the case with Tesla, if the market reassess its Q1 results in the near future.