Motley Fool Money: Tesla’s Margins Face Headwinds

Date: October 23, 2025
Host: Jon Quast
Guest: Matt Frankel, Contributor and Financial Planner

Episode Overview

This episode takes a long-term investor’s lens to recent market news, with a special focus on calendar-based investing concepts and a deep dive into Tesla’s latest earnings and margin challenges. The hosts also highlight two stocks recently dropped from the S&P 500 that could outperform in the coming years.

Key Discussion Points & Insights

1. Debunking Calendar-Based Investment Strategies

[00:04 - 07:31]

• Tax Loss Harvesting:

  • Defined as selling positions at a loss to lower tax liability (offset gains or up to $3,000/year against income).
  • Jon Quast cautions: "We really don’t want to judge an investment success or failure based on just a few months." [01:47]
  • Matt Frankel on best practice: “If it’s a stock that you’re on the fence about selling and could use the loss for your taxes, then go for it. But if it’s something that you like that just went down, it’s not worth selling just to get a tax break.” [02:24]

• Other Calendar Effects:

  • Terms like Santa Claus Rally, January Barometer, Sell-in-May-and-Go-Away discussed.
    • Santa Claus Rally: Market has risen 79% of years in the last five days of December and first two of January, average 1.3% gain. [03:06]
    • January Barometer: If market gains in January, 85% of the time, the year ends positive. Only wrong 11 times since 1950. [03:44]
  • Caution for Investors: These are minor, short-term effects; building wealth takes a multi-year approach and isn’t significantly influenced by these small calendar-driven moves.
    • “...when you’re thinking about a difference of a percent or two, maybe really not all that consequential over the long term." – Jon Quast [04:09]
    • 2021 case: January market was -5% but year ended +27%, illustrating the risk of following calendar-based heuristics. [05:07]

• Actionable Takeaway:

  • "Stocks go up most of the time, so don't worry about the market conditions so much as identifying those high quality businesses you can buy and hold for the long term." – Jon Quast [07:05]

2. Tesla’s Earnings: Margins and Headwinds

[07:58 - 11:53]

• Headline Results:

  • Tesla posted 12% revenue growth YoY after two quarters of declines, but the stock dropped after earnings as margins disappointed. [08:11]
  • "Tesla returned to growth... but earnings did miss expectations, and when you combine an earnings miss with a revenue beat, it generally indicates worse than expected margins, which is the case here." – Matt Frankel [08:11]

• Key Margin Pressures:

  • Rising R&D Spend: Up 42% YoY, much of it attributed to AI initiatives like Full Self Driving (FSD) and Optimus robot development. [09:26]
  • Low FSD Pay Rate: Only 12% of Tesla customers are paying for FSD, disappointing for what was billed as a major profit driver. [08:41]
  • Shrinking Regulatory Credit Revenue: Down 44% YoY for Q3; Tesla expects less than $1B in the next 12 months compared to ~$2B annually prior—pure profit that is fading fast. [09:46]

• Model Mix and Tax Credit Effects:

  • Expiration of EV tax credits drove “pull-forward” sales and lower average selling prices (as cheaper models were purchased for eligibility), contributing to margin compression. [11:03]
  • Competition intensifies as other automakers roll out new EVs with potential tax benefits, further pressuring Tesla. [11:53]

• Forward-Looking Commentary:

  • Investors should watch Q4 results: How does Tesla adapt without the aid of these tax credits, especially as they're "ramping up spending on R&D to have those payoffs." [11:53]

3. Radar Segment: Outperformers After S&P 500 Removal

[12:54 - 16:57]

• The hosts highlight a counterintuitive trend: Stocks dropped from the S&P 500 tend to outperform the index over the next five years as post-removal selling pressure abates.

Jon Quast’s Pick: Etsy (Dropped 2024)

• Cautions: Buyer growth has peaked; revenue is stagnating. [12:54]
• Opportunities:
  • Generates >$600M in free cash flow, trades at 14x FCF.
  • Reduced share count by 20%+ via buybacks.
  • Integration with ChatGPT may drive renewed user growth: “This may be a way that Etsy can actually start finding some new user growth again by having that integration with a huge user base at ChatGPT.” [14:16]
  • Already up 40% in 2025, potential for more if growth re-accelerates.

Matt Frankel’s Pick: Enphase Energy (ENPH)

• Dropped from S&P 500 to S&P Small Cap 600 due to price decline. [14:46]
• Challenges: Solar sector facing cyclical, political, and regulatory headwinds.
• Strengths:
  • International growth strong, smart pivots like moving production to the US.
  • Long-term innovation and opportunity remain.
  • “While this stock could be a roller coaster ride for a while, I think investors who get in here could have a long term winner on their hands.” [16:57]

Notable Quotes & Moments

• On Calendar Strategies:
  "As a certified financial planner, I’ve never suggested clients buy stock a week before the end of the year and sell the first week of January to take advantage of a Santa Claus rally. I don’t do anything like that." – Matt Frankel [06:00]

• On Tesla’s Future: “Tesla has a strong history of producing great products... like a year or two late. So investors are less than convinced by these earnings is kind of my big takeaway.” – Matt Frankel [08:51]

• On Etsy & AI Partnerships:
  “Etsy is unique in the sense that there’s a ton of potential for AI-driven shopping for a company whose specialty is unique and handmade goods... If I want something custom, AI could be a great way to help me find what I want.” – Matt Frankel [15:30]

Timestamps for Important Segments

• Tax Loss Harvesting and Calendar Effects: 00:04 – 07:31
• Tesla’s Results and Margin Pressure: 07:58 – 11:53
• Stocks Dropped From S&P 500 That Could Outperform: 12:54 – 16:57

Summary Takeaways

• Most calendar-based strategies are unreliable for long-term investors. Focus on holding quality businesses for 5+ years rather than trying to time the market based on seasonal effects.
• Tesla faces real near-term headwinds to profitability as regulatory benefits fade, margin pressure mounts, and R&D spending rises.
• Distressed, unloved former S&P 500 names like Etsy and Enphase might offer strong future opportunity, especially once selling pressure and negative sentiment subside.

“Stocks go up most of the time… focus on identifying high quality businesses you can buy and hold for the long term.” – [07:05]

This summary captures the episode's key content and takeaways, providing time-stamped insights and memorable moments for listeners and investors who want to catch the highlights without listening to the full show.