Tesla reported Q2 earnings after the market close Wednesday. $TSLA beat by $0.46 and reported revenues in-line and reaffirmed the expectation to achieve 50% average annual growth in vehicle deliveries over a multi-year horizon. The company posted its first sequential decline in quarterly profit in more than a year impacted by an extended shutdown at its Shanghai assembly plant. Tesla also announced they sold 75% of its digital holdings of Bitcoin when freed up around $1 billion in cash. CEO Musk gave the reason the Chinese lockdowns and said they may buy Bitcoin in the future.
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
$2.27 Beat $1.83 EPS Forecast AND $16.9 billion Beat $16.88 Billion Forecast in Revenue
Conference call: 5:30 p.m.
Tesla Earnings Highlights
- Operating profit was $2.3 billion, ahead of the $1.9 billion Wall Street was expecting but below its record quarterly profit of $3.3 billion in the prior quarter. TSLA generated $1.1 billion in profit during last year’s second quarter.
- Adjusted earnings per share were $2.27 ahead of estimates for $1.83
- Revenues totaled $16.9 billion against expectations for $16.88 billion, down from $18.8 billion in the first quarter.
- The company said foreign-exchange pressures also weighed on results, with the dollar up strongly against many other currencies.
- The company has unloaded around 75% of its $1.5 billion initial position in the cryptocurrency, leaving it with around $218 million worth of digital assets as of the end of June. Tesla sold $936 million worth of bitcoin in the second quarter to maximize its cash position
“In spite of all these challenges, it was one of the strongest quarters in our history,” Chief Executive Elon Musk said on an earnings call. “It’s been kind of supply-chain hell for several years,” he added.
Market Reaction
Tesla shares closed Wednesday at $742.50 were up less than 1% in late trading. They had traded higher but were brought down on the Bitcoin effect on cash and other metric doubt on the supply side. TSLA’s stock price has fallen by around 30% in 2022 with a broader drop in equities and certain company-specific headwinds and uncertainty over Elon Musk’s Twitter dramas.
Inflation
Tesla management cited inflation pressures in its news release. Mr. Musk on the call said he expects inflation to decline toward the end of this year, citing commodity prices that are trending lower. However, he cautioned that “economic prognostication is fraught with error.”
Guidance
Tesla offered guidance. Chief Financial Officer Zach Kirkhorn said Tesla is still aiming for 50% growth over 2021, though he acknowledged that reaching that target has become more difficult.
Mr. Musk pointed to the long wait times many customers face for the company’s vehicles. “Right now our problem is very much production,” he said. The economic situation is uncertain, though. “Consumer sentiment is all over the map,” he noted.
At 55% volume growth, the mid-point of Musk’s numbers, Tesla would deliver about 1.45 million vehicles in 2022.
Musk also has said the company is working on a new vehicle dedicated to robotaxis. Tesla continues to invest heavily in its self-driving software and technology.
Deliveries
- Tesla delivered around 254,695 vehicles to customers in the three months ended in June, down from 310,048 in the first quarter.
- Deliveries were up roughly 27% from last year’s second quarter, helped by the fact that Tesla reached a monthly production record in June.
Prices
Tesla has been hiking prices as suppliers request raise theirs. U.S. customers who ordered the long-range version of Tesla’s Model Y compact sport-utility vehicle in late June could expect to pay around $68,000, or some $14,000 more than they would have if they ordered the model a year earlier, according to Bernstein Research.
Mr. Musk reiterated that he hopes to reduce vehicle prices, which he said were at “embarrassing levels.”
Texas Relocation
Tesla has relocated its 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”.
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.
What to look for in Tesla Earnings
- Earnings
- Grid Batteries
- Commodity Supply Chain Contracts
- Raising Cash
- Autopilot Updates
- Regulatory Credits
- Solar and Powerwall
- New plant and production update
- Bitcoin
- Charging Network
- Global Chip Shortage
- Twitter and Mr Musk
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.
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
Commodity Supply 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, 2021, 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.”
Raising Cash & Bitcoin
One thing Tesla does better than most is burn through cash to try to deliver on increasingly aggressive goals. To that end Tesla sold $936 million worth of bitcoin in the second quarter to maximize its cash position as it dealt with the closure of its Shanghai factory due to local Covid-19 lockdowns, Mr. Musk said. The company has unloaded around 75% of its $1.5 billion initial position in the cryptocurrency, leaving it with around $218 million worth of digital assets as of the end of June.
“We were concerned about overall liquidity of the company given shutdowns in China,” Mr. Musk said, adding that Tesla is open to increasing its bitcoin holdings in the future.
Mr. Musk has been a vocal commentator on digital currencies. Tesla briefly accepted bitcoin as payment for its vehicles but suspended that policy in May 2021, citing concerns about the use of fossil fuels to mine bitcoin. Mr. Musk said at the time that Tesla wouldn’t sell any bitcoin. This statement has been attacked in the afterhours of news of the sale.
Autopilot Updates
With Google among 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 earnings calls. Expect questions about advances in Tesla’s driver-assistance functions and its driver-assistance software as a subscription.
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.
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.
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.
South Australia Powerwall
New Plant and Production Updates
The big questions include Tesla’s new Germany plant and Austin, Texas facility pace 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.
Consider all the risks and misses with carmakers with the supply chain constraints from Covid and the chip shortage with Tesla production goals.
Bitcoin
There is the issue of Bitcoin (see cash raising above). Musk has said TSLA will hold off accepting bitcoin until it becomes less carbon heavy in mining it. The crypto market didn’t expect Tesla to sell out of its Bitcoin position, but they did. Musk continues to indicate his company will transact in the cryptocurrency when Bitcoin mining uses more sustainable power.
Charging Network
Tesla’s is set to make much money from its charging network. Elon Musk tweeted last quarter 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 added roughly 250 fast-charging stations to its global network during the second quarter. The company has been planning to open that system in the U.S. to electric vehicles made by other manufacturers.
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. However much of that advantage has been caught up by the supply crisis as TSLA CEO Elon Musk warned of continued challenges in securing microcontrollers and raw materials. The chip shortage is having a greater impact on Tesla’s energy business than its car business, the company said.
Mr. Musk is embroiled in a legal battle over his $44 billion deal to acquire Twitter Inc., said he plans to continue working at Tesla for as long as he can. A Delaware judge on Tuesday agreed to Twitter’s request to fast-track a lawsuit seeking to compel Mr. Musk to consummate his purchase of the social-media company.
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