Antonio Linares

Why Lower Margins Are GOOD For Tesla #teslastock

Name: Why Lower Margins Are GOOD For Tesla #teslastock
Uploaded: 2025-10-23T15:28:55Z
Description: Jeff Bezos said it first: "Percentage margins are not one of the things we are seeking to optimize. It’s the absolute dollar free cash flow per share that you want to maximize, and if you can do that by lowering margins, we would do that. So if you could take the free cash flow, that’s something

10/23/2025, 3:28:55 PM

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Economic Summary

Jeff Bezos argues companies should optimize absolute dollar free cash flow per share rather than percentage margins, because investors can spend dollars but not percentages.
Lowering percentage margins can be economically rational if it increases absolute free cash flow per share, which can raise a company’s value per share even as percentage margins fall.
Valuation and corporate strategy should emphasize dollar profitability and per-share cash generation over percentage-margin metrics, so managers may pursue lower margins to maximize shareholder value.

Bullish

Higher dollar free cash flow per share increases shareholder value even with lower margins.
Deliberately lowering margins to grow absolute FCF can justify valuation expansion.

Bearish

Falling percentage margins can signal weakening pricing power or competitive pressure.
Investors often misinterpret margin declines, prompting sell-offs despite cash flow improvements.

People mentioned

Jeff Bezos