Tesla's Profit Powerhouse Has Awakened

Tesla's energy sector growth and potential for significant contribution to the company's bottom line is being overlooked, with massive demand for storage and good margins making it a strong business opportunity

Questions to inspire discussion

• What are the implications of Tesla's accounting for Mega packs?

  —Tesla's accounting for Mega packs has significant implications for the energy business, with unearned revenue and deferred recognition of revenue milestones.

• How could Tesla's profit margins be impacted by revenue recognition changes?

  —The matching principle in revenue recognition has changed, allowing for costs to be recognized separately from revenue, impacting Tesla's profit margins.

• What is included in Tesla's deferred revenue for energy?

  —Tesla's deferred revenue includes warranties, maintenance agreements, and performance guarantees, with the latter being potentially more interesting.

• How could Tesla's energy gross margin impact earnings per share growth?

  —Tesla's energy gross margin could potentially lead to significant earnings per share growth, challenging the dominant narrative of stagnant earnings and declining volumes.

• What is the potential long-term profit from maintenance contracts for energy storage?

  —Tesla's potential long-term profit from maintenance contracts for energy storage could be around 2.3 billion, with a total energy revenue of about 12 billion.

Key Insights

• 📈 The potentially more interesting aspect is Tesla's performance guarantees for the mega pack, which could have significant implications.
• 🔋 With the Shanghai Megapack Factory coming online, Tesla's energy production could increase to 20 gigawatt hours per quarter, potentially leading to significant earnings per share.
• 📈 The potential for Tesla to add close to a billion dollars of profit to the bottom line is significant.
• 💰 Tesla's potential to unlock $4 billion a year of gross profit could significantly impact their ability to fund their AI initiatives and future growth.
• 📈 The potential revenue from the energy projects in the future could reach $10 billion annually, with significant growth opportunities.
• 🔋 The long-term target of 1,000 gwatt hours in the energy sector presents a significant runway for growth and profitability, potentially leading to billions of dollars in margin.
• 💰 Tesla's energy business could double or more than double gross profit dollars, making it a significant contributor to the bottom line for Tesla.
• 💰 Tesla's profits from energy and auto business are being used to invest in artificial intelligence, creating a brilliant and profitable cycle.

#Tesla #EnergyStorage

XMentions: @Tesla @TeslaLarry @HansCNelson @Farzyness @MatchasmMatt 

Clips

• 00:00 🚀 Tesla's new accounting for Mega packs has major implications for the energy business, potentially leading to significant earnings per share growth and challenging the narrative of stagnant earnings and declining volumes.
  • Tesla's accounting for Mega packs has significant implications for the energy business, with unearned revenue and deferred recognition of revenue milestones.
  • The matching principle in revenue recognition has changed, allowing for costs to be recognized separately from revenue, impacting Tesla's profit margins.
  • Tesla's deferred revenue includes warranties, maintenance agreements, and performance guarantees, with the latter being potentially more interesting.
  • Tesla's ability to recognize revenue from deployed equipment without additional costs could lead to growing margins and staggering assumptions about future profitability.
  • Tesla's energy gross margin could potentially lead to significant earnings per share growth, challenging the dominant narrative of stagnant earnings and declining volumes.
  • The speaker attempts to simplify the topic and asks for feedback.
• 10:34 🚀 Tesla's energy revenue recognition and potential long-term profit from maintenance contracts could significantly increase profit, with accounting changes possibly leading to increased margins.
  • Tesla's energy revenue recognition is similar to FSD revenue recognition, with deferred revenue potentially being 25-35% and varying by contract, with the focus being on when Tesla is allowed to recognize the revenue.
  • Tesla's deferred energy revenue of 3.86 billion, with 1 billion to be recognized in the next 12 months, represents a high-margin opportunity.
  • Tesla's potential long-term profit from maintenance contracts for energy storage could be around 2.3 billion, with a total energy revenue of about 12 billion.
  • Tesla's profit is expected to increase by $2.4 billion, adding 20-30% more sales at 100% margin.
  • Tesla's energy revenue estimates and storage revenue calculations indicate a significant amount of missing revenue, potentially due to unsatisfied performance obligations, and the confirmation of 100% margin deferred revenue is unclear in the contract verbiage and 10q.
  • Tesla's accounting changes may lead to increased margins, but we will have to wait for the quarterly reports to confirm.
• 23:38 🚀 Tesla's potential for increased revenue from energy deployment is significant, with Q2 revenue expected to increase, but there are complexities in revenue recognition and margin pressure due to price reductions.
  • Tesla's potential for increased revenue from energy deployment may be significant, but there are complexities in revenue recognition and correlation between gigawatt hours deployed and revenue.
  • Tesla's Q2 revenue is expected to increase significantly, with potential for an additional 30% revenue at 100% margin, and there is also a significant impact of price reductions on megapack.
  • Tesla's pricing for their MEAP pack has decreased significantly, which may limit revenue potential and create margin pressure, but previous project pricing will still be honored and lower lithium prices will offset some of the decrease in revenue.
  • The speaker discusses the potential revenue growth and margin opportunities of Tesla's projects, as well as the challenges of accurately estimating revenue recognition based on deployment averages.
  • Tesla's energy revenue is difficult to predict due to the uncertainty of when milestones will be met, but it is an important aspect of the company's future.
  • Tesla's profit has finally arrived, and we are all unsure of how to handle it.
• 36:22 💡 Tesla's profit potential is set to increase significantly, potentially reaching $4 billion a year, which will help fund their AI operations and vehicle side, with a focus on long-term revenue potential from energy sales and auto production.
  • The potential for Tesla to significantly increase its profit margins through growth in gwatt hours and revenue from energy generation and storage is substantial.
  • Tesla's profit potential is set to increase significantly, potentially reaching $4 billion a year, which will help fund their AI operations and vehicle side.
  • Tesla's earnings growth has exceeded expectations, with a focus on long-term revenue potential from energy sales and auto production.
  • Tesla's potential for high profit margins and growing business may attract big investors like Warren Buffett.
  • Investing in Tesla may seem simple from a battery production perspective, but the challenge lies in understanding the customer and the complexity of the business.
  • Auto sales are struggling, but there is potential in FSD and robotex, with a 25% gross margin and promising growth.
• 43:25 🚀 Tesla's energy sector growth and potential high margins, along with cheaper batteries and delays in project development, are key factors in the company's profit powerhouse.
  • Tesla's energy sector growth and potential high margins make it easier for institutional investors to value the company at a higher price.
  • Tesla's ability to bring in cheaper batteries in the next 12-18 months due to the current glut and plummeting lithium prices will give them a significant margin potential, with some reports suggesting that cells are now going for as low as $50 per kilowatt hour.
  • Tesla's lower input costs may offset the impact of lower prices, and the slow ramping up of the business is due to the purchasing cycle of large utility customers.
  • Tesla's project development timelines have been delayed due to interconnect issues and regulatory uncertainty, causing delays in the delivery of Mega packs and potentially impacting the growth of the Tesla energy business.
  • Massive amounts of new storage projects are trying to connect to the grid, leading to a significant increase in battery capacity, despite potential delays and lumpy deployment.
  • Tesla's grid storage projects are significant in terms of capacity, with the company's production representing a small percentage of the total capacity waiting to be deployed, and it would take 75 years to fulfill the backlog.
• 58:03 🚀 Tesla's energy growth and potential for significant contribution to the company's bottom line is being overlooked, with massive demand for storage and good margins making it a strong business opportunity.
  • The speaker discusses the potential for micro grids detached from the main grid using solar and Mega packs, but expresses skepticism about the feasibility due to the large amount of land and resources required.
  • Elon Musk's prediction of an electricity shortage may not be as extreme as initially thought, but the increase in demand for grid stability due to intermittent solar and wind energy will create a need for more storage, although it may be more of a supply need rather than a demand pull from companies like Microsoft.
  • Tesla's margin might decrease due to the decrease in prices and uncertainty about the pure margin amount, but it's unconfirmed speculation and should be taken with a grain of salt.
  • Tesla's energy growth and potential for significant contribution to the company's bottom line is being overlooked, with massive demand for storage and good margins making it a strong business opportunity.
  • Tesla's investment in Shanghai's mega pack factory will have a quick payback, and their profits are being used to invest in artificial intelligence.
  • The speaker predicts higher earnings per share for Q2 but is skeptical about auto gross margins due to discounting and plant capacity, and believes energy will outperform auto.
• 01:13:18 🚗 Tesla's production is down, affecting fixed cost absorption and income statement, but potential cash flow benefit from increased deliveries and lower lithium prices may help margins.
  • Tesla's production is down, which will result in worse fixed cost absorption and pressure on the income statement, despite an increase in deliveries and potential cash flow benefit.
  • Tesla's production and delivery numbers in Q1 and Q2 resulted in higher fixed cost absorption in Q1, leading to a similar margin profile in Q2.
  • Tesla's FSD revenue may drop in the short term due to the introduction of monthly subscriptions, but lower lithium prices and the higher ASP of the cybertruck may help margins.
  • Tesla's gross margin may not be significantly impacted, and the speakers discuss playing chess and losing points while playing drunk.
  • The speaker and another person discuss their chess games and strategies.
  • The speaker expresses dissatisfaction with the game and acknowledges being down on time.
• 01:25:49 💡 Tesla's Profit Powerhouse Has Awakened: Speaker makes a mistake in chess game, but ultimately sees opponent's strategy and responds.
  • The speaker makes a mistake in a chess game but ultimately sees the opponent's strategy and responds.
  • Both players acknowledge their poor performance in a game and discuss their accuracy percentages.

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Duration: 1:32:29

Publication Date: 2024-07-05T19:15:41Z