: if this is true then its good news, but that is from their press release, let’s look at the detailed numbers when available, here is a quick take of that part. Also if “growth” is the big story they went down. I believe this was a smoke and mirrors game, and it will help the stock in the short term. And this kind of gaming numbers is one of many reasons I don’t trust Tesla as a company/investment.
“Tesla was able to swing a GAAP profit for three reasons. First, the total cost of revenues came down by $317 million sequentially, and it will be interesting to see if the 10-Q filing sheds any more reasons than just the usual cost improvements cited in the investor letter. The second reason was that zero restructuring charges were taken, which boosted the bottom line by $117 million sequentially. Finally, other one-time items in the "other income" line swung in a positive direction by $126 million.
Adding those last two plus the increase in regulatory credits helped the bottom line by $266 million over Q2's large loss, and that doesn't even factor in the Smart Summon revenue. It was a bit curious to see the cost of goods sold drop so much in the period when Tesla outsold its vehicle production, and yet, inventory on the balance sheet rose by nearly $200 million. Did Tesla sell a lot of product that was previously written down, thus substantially boosting margins in the period? If that was the case, it would explain all of the extra charges taken in prior periods. That would certainly help deliver a big surprise quarter like this.”
The attribution for those quotes is 28 year old Bill Maurer, who has a finance degree but has never had a full time job in finance. He earns his living getting paid for clicks on Seeking Alpha. I don't consider him a credible source for analysis of Tesla's financials since much of what he writes is negative speculation not based in facts.
Restructuring charges are taken when you find ways to take cost out of the business by reducing headcount and/or closing facilities. Tesla undertook significant restructuring activities in Q1 and Q2 in the former Solar City unit and in automotive sales. Because of that they have been able to reduce SG&A expenses by $134M/quarter vs. a year ago, which is very positive. There were no restructuring charges taken in Q3 because there was no further restructuring.
Tesla had very little inventory left at the end of Q2 so the idea that they were holding written down inventory for later sale is just plain wrong. What did happen is that in Q2, after they introduced the new Raven motor and suspension in S/X they heavily discounted the existing inventory and sold it off. That is one of the reasons that gross margins improved in Q3 since the new version didn't need to be discounted. The other is that they continue to ramp volumes on Model 3 resulting in lower parts costs, better fixed costs absorption and labor efficiencies. The improvements in gross margin are real, not manufactured.
Tesla's stated that their finished goods inventory was at the lowest point ever (see the document I linked). So why did inventory go up? Two reasons: they are ramping volumes so they need more parts and the supply chain for the China factory is longer because all the parts that are sourced in the US have to be sent via container ship. Since they are ramping manufacturing in China this quarter that pipeline needed to be filled.
As for the growth story, it is intact but you have to accept the fact that it is lumpy. In 3Q17, before the Model 3 sales ramp, Tesla had $3.0B in revenue. In 3Q19 they had $6.3B in revenue, an increase of 110%. That is a CAGR of 45%.
The next increment of lumpy growth will occur in 2020. The first element is the additional sales of lower priced (and lower cost) Model 3's produced at GF3 in China. The second element is the delivery and production ramp of Model Y, which is now expected in the summer of 2020.