Tesla Delivers Record Earnings Despite Global Supply Chain Headwinds

Tesla reported record  Q3 earnings after the market close Wednesday. $TSLA made $1.62bn in the third quarter, beating its old record $1.14bn last quarter. Tesla said it expects sales to grow an average of 50% annually.Gross automotive margins were 30.5%,up from 28.4% over the previous quarter.

Tesla reported record  Q3 earnings after the market close Wednesday. $TSLA made $1.62bn in the third quarter, beating its old record $1.14bn last quarter. Tesla said it expects sales to grow an average of 50% annually.Gross automotive margins were 30.5%,up from 28.4% over the previous quarter.

Tesla Series 3 2021

Tesla is much more than an electric car company these days. Tesla earnings releases and Elon Musk’s conference calls leave much up to conjecture and we have seen violent stock price swings off them.

 Tesla Inc NASDAQ: TSLA· Reported Earnings After Close Wednesday

$1.86 Beat $1.59 EPS Forecast AND $13.757 billion Beat $13.66 Billion Forecast in Revenue

Conference call: 5:30 p.m.

Updated After Release

Earnings

Tesla Inc. posted stronger-than-expected third quarter earnings Wednesday with profit margins increasing. Tesla said non-GAAP earnings for the three months ending in September were $1.86 per share, up 135% from the same period last year and well ahead of the Street consensus forecast of $1.59 per share. Net income on a non-GAAP basis came in at $2.093 billion, Tesla said, and $1.618 billion on a GAAP basis.

Group revenues rose 56.8% from last year to a record $13.757 billion, firmly ahead of analysts’ forecasts of an $13.6 billion tally. Gross automotive margins were 30.5%, Tesla said, 290 basis point higher than last year and up from 28.4% over the previous quarter.

Market Reaction: Tesla Inc NASDAQ: TSLA $851.80▼ 14.00 (▼1.62%) After Hours

Highlights

“EV demand continues to go through a structural shift. We believe the more vehicles we have on the road, the more Tesla owners are able to spread the word about the benefits of EVs,” the company said in a statement.

Tesla Key Metrics Q3 2021

“While Fremont factory produced more cars in the last 12 months than in any other year, we believe there is room for continued improvement. Additionally, we continue to ramp Gigafactory Shanghai and build new capacity in Texas and Berlin.”

“A variety of challenges, including semiconductor shortages, congestion at ports and rolling blackouts, have been impacting our ability to keep factories running at full speed,” the statement continued. “We believe our supply chain, engineering and production teams have been dealing with these global challenges with ingenuity, agility and flexibility that is unparalleled in the automotive industry.”

Deliveries

  • Tesla delivered a record 241,300 new cars over the three months ended in October, up 73.2% from last year and nearly 20% higher than the 201,250 reached in the second quarter.
  • The third quarter total was comprised of 323,025 Model 3 and Model Y sedans,  and 9,275 of its higher-priced Model S and Model X.
  • Analysts were looking for an overall total of around 230,000.

Tesla market share Q3 2021

Texas Relocation

Tesla has relocated it’s headquarters to Austin, Texas. The company said in its statement that construction of its new factory is progressing as planned and it’s preparing equipment and “fabricating our first pre-production vehicles”.

This week, Tesla announced it would provide insurance to its customers in Texas. This service will monitor their driving in real time and lower their insurance premiums based on safe driving history.

In a call with investors on Wednesday, CFO Zachary Kirkhorn thanked the regulators of Texas for allowing Tesla to launch the new insurance product.

“Because our cars are connected, because they are essentially computers on wheels, there is enormous amounts of data available to us to be able to assess the attributes of a driver,” he said. “So what we have created is a model for predicting the likelihood of collision over time with decent accuracy”, he added, saying that Tesla plans to launch the service in all its markets pending regulatory approval.

Q3 Earnings Preview

  • Tesla Q3 2021 results after the bell; conference call at 5:30 p.m. ET
  • Projected EPS: $1.54
  • Projected revenue: $13.66 billion.

Expectations are high after Tesla reported a record Q3 deliveries last month. $TSLA rose +19.58 to 794.80 on the news. Tesla has been able circumnavigate the chip shortages that are plaguing the auto industry and appears to be one step ahead compared to OEMs regarding chips.

Tesla also recently implemented a price increase across its entire Model 3 and Model Y lineup in an overnight update to its online configurator in the US.

Tesla Model 3 prices In an overnight update to its online configurator in the US today, Tesla increased the price of both the Model 3 Standard Range Plus and Performance.

Here are all the prices of the different versions of the Model 3:

  • Tesla Model 3 Standard Range Plus: price went from $39,990 to $41,990
  • Tesla Model 3 Long Range AWD: price stayed at $49,990
  • Tesla Model 3 Performance: price went from $56,990 to $57,990

Tesla Model 3 10 6 21

The most significant change is obviously the $2,000 price increase to the Model 3 Standard Range Plus, which has been Tesla’s cheapest car. Earlier this year, the same version of the car was starting at just $36,990, which is a $5,000 or 13% price increase for Tesla’s cheaper vehicle over just seven months.

Tesla Model Y prices

The Model Y was also subject to price increases with Tesla’s overnight update. Like Model 3, the cheapest version of Model Y got a $2,000 price increase and the performance version a $1,000 price increase

Here are all the updated prices for all versions of the Model Y:

  • Tesla Model Y Long Range Dual Motor: price went from $52,990 to $54,990
  • Tesla Model Y Performance: price went from $60,990. to $61,990

Tesla Model Y 10 6 21

 Tesla Q2 Recap

  • Tesla Q2 Earnings Adj. EPS $1.45 (est $0.97) Revenue $11.96B (est $11.36B)
  • Capex $1.51B (est $1.19B)
  • Sees 50% Average Annual Growth In Deliveries
  • Have Sufficient Liquidity To Fund Product Roadmap
  • Noted a $23 million impairment related to bitcoin.
  • Tesla market share is growing in all markets
  • Europe to catch up in 2022 with Giga Berlin ramp up
  • Tesla plans to grow faster than 50% in 2021 planning production start for Giga Berlin & Texas 2021
  • Average sales price to grow again when Model S and X are in full delivery in Q3 after semiconductor shortage adjustment in Q2 with Model S and X largely stopped production due to equipment retrofit

Records for Tesla Q2

Image

12 months trailing results show the exponentiality

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Growth across the globe

https://pbs.twimg.com/media/E7P_NfgWUAAqa76?format=jpg&name=large

Tesla Inc NASDAQ: TSLA

Market Reaction: After hours $664.16 +6.54 (+0.99%)

What to look for in Earnings

 To be prepared we go into depth in these key 7 areas.

  1. Earnings
  2. Grid Batteries
  3. Commodity Supply Chain Contracts
  4. Raising Cash
  5. Autopilot Updates
  6. Regulatory Credits
  7. Solar and Powerwall
  8. New plant and production update
  9. Bitcoin
  10. Charging Network
  11. Global Chip Shortage

1. Earnings

The consensus from 39 analysts polled by FactSet points is for Tesla adjusted earnings of $0.93 per share, up from Q2 2020 adjusted earnings of $0.44 per share. FactSet consensus is for GAAP earnings standing at $0.53 per share. Estimize, which aggregates estimates from Wall St. analysts, fund managers, company executives sees an an adjusted profit estimate of $1.02 per share. Q2 2021 earnings release: after market; conference call: 5:30 p.m. Projected EPS: 94 cents Projected revenue: $11.53 billion

FactSet consensus estimates sales of $11.47 billion for Q2, more than double the $5.18 billion that Tesla posted in the same quarter last year. Estimize is expecting revenue of $11.68 billion from the EV maker.

2. Grid Batteries

Gigafactories are facilities that produce batteries for electric vehicles on a large scale. Tesla is currently involved in multiple projects that are pertinent to its growth in the coming years including Gigafactory Texas and Gigafactory Berlin, both of which are expected to start Model Y production soon. The company is also ramping its operations in China, where it recently launched the Model Y Standard Range from Gigafactory Shanghai. These, together with the rollout of Full Self-Driving subscriptions, would likely be discussed in the upcoming Q2 2021 earnings call as well.

Tesla was early in its plans to manufacture its own batteries, joining with Panasonic to build what it called a Gigafactory in Nevada back in 2015. “The Gigafactory will be the largest footprint building in the world when it is done,” CEO Elon Musk said on the company’s fourth-quarter 2015 earnings conference call.

Tesla Gigafactory Berlin

Tesla Gigafactory Berlin

3. Commodity Supply Chain Contracts

  • Tesla signed a deal with U.S. based lithium miner Piedmont Lithium (PLL) to help secure Tesla’s supply of lithium.
  • BHP Group ( BHP) disclosed an agreement with Tesla July 22 for nickel. “Demand for nickel in batteries is estimated to grow by over 500 per cent over the next decade, in large part to support the world’s rising demand for electric vehicles,” said BHP Chief Commercial Officer Vandita Pant in the company’s news release. “We are delighted to sign this agreement …and to collaborate with them on ways to make the battery supply chain more sustainable through our shared focus on technology and innovation.”

4. Raising Cash

One thing Tesla does better than most is burn through cash to try to deliver on increasingly aggressive goals. The question is will Tesla take to the public markets and raise even more money while the stock market is still near ATH. 

5. Autopilot Updates

With Google amongs other now in this space and Tesla’s past issues with the world’s first known fatality in an autonomous car in May 2017 when a Tesla Model S Autopilot software engaged. There have been a number of deaths since. Analysts will watch Musk on developments on this segment.

Tesla is moving ahead with the rollout of Full Self-Driving subscriptions and levels would likely be discussed in the upcoming Q2 2021 earnings call as well. Expect questions about advances in Tesla’s driver-assistance functions and it’s driver-assistance software as a subscription.

6. Regulatory Credits

Tesla generates sales by selling regulatory credits earned by producing electric vehicles. The company generated $518 million in first-quarter credit sales, which helped Tesla beat earnings estimates. Each earnings report there is a debate about credit sales longevity and quality . Eventually it is expected other auto makers sell their own EVs, cutting off that source of revenue for Tesla.

7. Solar and Powerwall Segment

Tesla’s Solar Roof and Powerwall products are likely to have aided growth for solar and energy storage deployments in the second quarter. Analysts will be watching  Solar guidance for their annual solar installations and expected bookings of home rooftop solar panels. 

Tesla CEO Elon Musk revealed that demand for the company’s Powerwall is as high as 80,000 units but that Tesla will not be able to produce even half of that this quarter. Musk said Tesla will only be able to make 30,000 to 35,000 of its home batteries in a best case scenario for the period ending in September 2021, blaming the expected shortfall on chip shortages.

The company reported $494 million in energy revenue in the first quarter of 2021, an improvement from $293 million during the first quarter of the pandemic year, but its first-quarter cost of revenue reached $595 million. Tesla does not disclose the breakdown between its solar and energy storage products, or its solar and energy products for homes and larger scale projects like its Megapack in Australia.

Tesla Powerwall South Australia

South Australia Powerwall

8. New Plant and Production Updates

The big question is when Tesla’s new Germany plant and Austin, Texas facility will start delivering cars. The Austin plant will build Tesla’s Cybertruck. Despite seasonality, unstable supply chain, and the company’s transition to the new Model S and Model X, Tesla recorded its highest ever vehicle production and deliveries last quarter.

In the Q1 press release, Tesla said, “We are currently building Model Y capacity at Gigafactory Berlin and Gigafactory Texas and remain on track to start production and deliveries from each location in 2021. Gigafactory Shanghai will continue to expand further over time. Tesla Semi deliveries will also begin in 2021.”

Consider all the risks and misses with carmakers with the supply chain constraints from Covid and the chip shortage with Tesla production goals. Tesla delivered 201,250 units in the second quarter, which rose from the 90,650 deliveries in the same quarter last year and the 184,800 vehicles delivered in the prior quarter.

Markedly, in the second quarter, the Model 3/Y unit vehicle deliveries of 199,360 more than doubled on a year-over-year basis, while increased 9% sequentially. Over the coming years, management expects to achieve 50% average annual growth in vehicle deliveries.

9. Bitcoin

There is the issue of Bitcoin. Tesla recognized a small gain on its Bitcoin holdings in the first quarter, but the cryptocurrency’s prices have fallen by roughly half since their April peak. (Much to do with Musk saying TSLA will hold off accepting bitcoin until it becomes less carbon heavy in mining it.) That means there is a chance of a loss here. Don’t expect Tesla to sell out of its Bitcoin position. Musk continues to indicate his company will transact in the cryptocurrency when Bitcoin mining uses more sustainable power.

10. Charging Network

Tesla’s is set to make much money from its charging network. Elon Musk tweeted this week Tesla would open its charging network to other EVs down the road, he wrote: “We’re making our Supercharger network open to other EVs later this year.” Electric vehicle charging companies that compete with Tesla in the US include ChargePoint, Electrify America, Volta, eVgo, Sema and others.

Tesla Storage

11. Chip Shortage

Tesla appears to be one step ahead compared to OEMs regarding chips, given that the EV producer designed its own chip to accommodate the needs of its autonomous software. TSLA CEO Elon Musk however has warned of continued challenges in securing microcontrollers and raw materials.

Analyst Recommendations

Bank of America

On July 16, Bank of America Securities analyst John Murphy maintained a Hold rating but increased the stock’s price target to $750 (13.6% upside potential) from $700. Murphy anticipates “beats across the board versus low expectations and outlooks” for the automotive industry in Q2. In a note to investors, the analyst said that the impact on sales due to the current semiconductor shortage is generating additional pent-up demand “to be more rationally released over a multi-year recovery.”

Goldman Sachs

Recently, Goldman Sachs analyst Mark Delaney reiterated a Buy rating and a price target of $860 (30.2% upside potential) on the stock. Delaney increased its earnings expectations to $0.94 per share from $0.84, prior to Tesla’s second-quarter earnings report, considering updates to the Model Y to drive earnings higher. Nevertheless, the analyst believes that his price target is exposed to risks based on chip shortages, elevated freight expenses, and a rise in input prices.

Canaccord Genuity

“Tesla’s successful transition to mass-market EVs and strong investments in battery manufacturing expertise and production capacity give us confidence they will attack and conquer another trillion-dollar market in energy generation and storage,” said Canaccord Genuity analyst Jed Dorsheimer, who carries a $1,071 price target with a ‘buy” rating on the stock. “Tesla is rapidly creating an Apple-esque ecosystem of energy products, harmonized in electrification, to become The Brand in energy storage.”

About Tesla

Tesla, Inc. designs, develops, manufactures, sells and lease electric vehicles and energy generation and storage systems, and offer services related to its sustainable energy products. The Company’s segments include automotive, and energy generation and storage. The automotive segment includes the design, development, manufacturing, sales and leasing of electric vehicles as well as sales of automotive regulatory credits.

The energy generation and storage segment include the design, manufacture, installation, sales and leasing of solar energy systems and energy storage products, services related to its products, and sales of solar energy system incentives. Its automotive products include Model 3, Model Y, Model S and Model X. Model 3 is a four-door sedan. Model Y is a sport utility vehicle (SUV) built on the Model 3 platform. Model S is a four-door sedan. Model X is an SUV. Its energy storage products include Powerwall, Powerpack and Megapack

Source: Tesla

From The Pit

From The TradersCommunity Research Desk

One thought on “Tesla Delivers Record Earnings Despite Global Supply Chain Headwinds”

  1. TradersCom says:

    Tesla seems to have soaked up the $10-15 Billion selling from it’s Maestro @elonmusk
    $TSLA $1,098.85 ▲ 44.12 (▲4.18%)

    Keep an eye if dead cat or optionality

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