Tesla reported Q4 earnings after the market close Wednesday of $1.19 earnings per share beating the consensus of $1.13 per share. Revenue rose to $24.32 billion ahead of the consensus $24.16 billion. $TSLA shares rose more than 9% after CEO Elon Musk said the company might be able to produce 2 million cars this year. The Tesla company acknowledged that average sales prices have “generally been on a downward trajectory for many years,” and said “affordability” would be necessary for Tesla to grow into a company that sells multiple millions of cars annually.
In late 2022 Tesla cut prices on its cars around the world, triggering an instant decline in used Tesla prices in the U.S. as well but have sparked demand, however.
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
What to look for in Tesla Earnings
- Earnings Highlights
- Stock Market Reaction
- Automotive: Production, Delivery, Prices, Used cars
- Tesla Energy: Grid Batteries, Solar and Powerwall
- Commodity Supply Chain Contracts
- Raising Cash
- Autopilot Updates
- Regulatory Credits
- New plant and production update
- Bitcoin
- Charging Network
- Global Chip Shortage
- Twitter and Mr Musk
- Branding, demographics
Tesla Q4 2022 Earnings
Q4 2022 earnings released after close 4:00 p.m.; conference call followed at 5.30 p.m.
Highlights
- Net profit for the quarter was $3.7 billion, up from $3.3 billion in the third quarter.
- During the same period last year, Tesla reported $1.62 billion in profits.
- For the full year, Tesla’s profit more than doubled to $12.6 billion from $5.5 billion in 2021. Sales for the year, including revenue from solar panels, energy storage and other businesses, rose to $81.5 billion from $53.8 billion the previous year.
- Earnings: (adjusted): $1.19 vs $1.13 per share expected, per Refinitiv. In the year-ago quarter, Tesla reported adjusted earnings of $2.52 per share ($0.85 adjusted for an August 2022)
- Revenue: $24.32 billion vs $24.16 billion expected, per Refinitiv, In the year-ago quarter, Tesla reported revenue of $17.72 billion
- Automotive revenue of $21.3 billion, representing 33% growth year-over-year. $467 million of that came from regulatory credits in the fourth quarter of 2022, up by nearly half from the prior year in the same period.
- Automotive gross margins 25.9%, the lowest figure in the last five quarters.
- Operating cash flow was down 29% from last year, and down 36% from last quarter, at $3.28 billion.
- Services and other revenue for Tesla, which includes fees for out-of-warranty vehicle repairs, among other items, reached $1.6 billion in the quarter.
- Revenue from energy generation and storage was up sequentially and year-over-year, reaching $1.31 billion. The cost of revenue for its energy division was high, though, at $1.15 billion in the fourth quarter.
- Tesla said that it had installed the capacity — across all of its factories — to make 100,000 Model S and X vehicles annually, and 1.8 million Model Y and Model 3 vehicles.
TSLA: Stock Market Reaction
- $157.39 ▲+12.96(8.97%) Premarket
- $157.39 ▲ +49.29(45.60%)YTD
- $157.39 ▼ -155.08(49.63%) Over year
- $157.39 ▲ +134.331(582.54%) Over 5 years
- 52wk High $384.29
- 52wk Low $101.81
“CEO Elon Musk said, “Thus far in January we’ve seen the strongest orders year-to-date than ever in our history. We’re currently seeing orders of almost twice the rate of production.”
Guidance
The company did not issue new guidance, but reiterated in its earnings release, “We are planning to grow production as quickly as possible in alignment with the 50% compound annual growth rate target we began guiding to in early 2021.”
The company reiterated that its Cybertruck pickup is on track to start production this year in Texas but will not reach volume production until next year.
Automotive
Production
- One analyst asked Musk why Tesla’s guidance for production was just 1.8 million in 2023 after the company has been ramping up production at its new factories.
- Musk replied, “We’re saying 1.8 because there always seems to be some friggin’ force majeure thing that happens somewhere on Earth. We don’t control if there’s earthquakes, tsunamis, wars, pandemics, etc. If it’s a smooth year, without some big supply chain interruption or massive problem we have the potential to do 2 million cars this year. I think there would be demand for that, too.”
- Production capacity in Shanghai allows Tesla to manufacture 750,000 Model 3 and Model Y electric cars annually, the company reported, whereas its first factory in Fremont, California, can make 100,000 of its higher-priced Model S and X vehicles, and 550,000 of its Model 3 and Y vehicles. Factories in Austin, Texas and near Berlin, Germany, each have capacity to make 250,000 Model Y vehicles annually, the company says.
Deliveries
- Tesla previously reported that its deliveries for the quarter ending September 30 reached 343,000 and vehicle production reached 365,000.
- TSLA had over 20,000 vehicles in transit at the end of the quarter which negatively affected profits.
- Deliveries are the closest approximation of sales reported by Tesla.
Prices
In late 2022 Tesla cut prices on its cars around the world, triggering an instant decline in used Tesla prices in the U.S. as well but have sparked demand, however. Tesla had been hiking prices as suppliers raised theirs. Mr. Musk had reiterated that he hopes to reduce vehicle prices, which he said were at “embarrassing levels.”
The price of a Model 3 sedan, the least expensive Tesla, dropped by $3,000, selling now for $44,000 in the United States before government incentives.
Tesla faces a stronger challenge from established car companies like Hyundai, Ford Motor, General Motors and Volkswagen, which are selling more battery-powered vehicles and at lower prices than Tesla.
Although the price cuts helped to promote sales, they took a toll on Tesla’s profit margin. The gross profit margin on car sales slipped to 26 percent in the fourth quarter from 28 percent in the third quarter of 2022 and 31 percent in the fourth quarter of 2021.
Tesla Energy
Tesla Energy is the company’s energy division that sells backup batteries for residential, commercial and utility use, and installs solar rooftops. Stationary energy storage products include Powerwall and Megapacks.
Solar and Powerwall Segment
Revenue from energy generation and storage was up sequentially and year-over-year, reaching $1.31 billion. The cost of revenue for its energy division was high, though, at $1.15 billion in the fourth quarter.
Analysts will be watching Solar guidance for their annual solar installations and expected bookings of home rooftop solar panels.
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
A ramp-up in Tesla Powerwalls and Megapacks is responsible for the new record. Tesla has ramped up Powerwall production. Megapacks contribute a lot more with fewer units since a single Megapack can deliver over 3 MWh of energy capacity.
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
Inflation
Tesla management cited inflation pressures in its news release. Mr. Musk has 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.”
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.
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
Tesla said that approximately 400,000 customers in North America now have the ability to test out its experimental, “FSD Beta” driver assistance system. The company recognized deferred revenue of $324 million for the quarter related to FSD, it said in a shareholder presentation.
This driver assistance system is only available to customers who purchase or subscribe to Tesla’s premium driver assistance package, marketed as FSD, or Full Self-Driving capability. Tesla does not make autonomous vehicles, or a driver assistance system that is safe to use without a driver behind the wheel, ready to steer and brake at all times. FSD Beta contains new software features that the company has not yet fully debugged.
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.
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.
New Plant and Production Updates
Tesla said that it had installed the capacity, across all of its factories to make 100,000 Model S and X vehicles annually, and 1.8 million Model Y and Model 3 vehicles.
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 has said.
Shareholders asked a question about how Musk plans to safeguard Tesla’s brand and reputation from any backlash resulting from his political statements, and new job as the CEO of Twitter, the social media company he acquired in October 2022. Musk replied by promoting Twitter as a great way to connect with customers:
“I’ve got 127 million followers. And it continues to grow rapidly. That’s that suggests that I’m reasonably popular. I might not be popular with some people. But for the vast majority of people, like the follower count speaks for itself. [I have one of] the most interactive accounts, social media accounts, maybe in the world, certainly on Twitter, and that actually predated the acquisition. So Twitter is actually an incredibly powerful tool for driving demand for Tesla. And I really encourage companies out there of all kinds automotive or otherwise to make more use of Twitter and to to use their Twitter accounts in ways that are interesting and informative, entertaining, and it will help drive sales just as it has with Tesla.”
Partisan divide in Tesla emerging – Morning Consult
With manic crowd behavior it is never that simple. There are two ways of looking at this movement, many of these same people now in the Hate Elon camp were Tesla and the EV market’s biggest cultists and feel betrayed by Musk uncovering many attacks on those with middle to right viewpoints by the previous Twitter owners. Self-identifying Democrats in particular have turned against Tesla since Mr. Musk bought Twitter in late October, according to data from research firm Morning Consult.
On Nov. 7, for the first time since YouGov began tracking Tesla in 2016, more respondents in the U.S. reported a negative perception of Tesla than a positive view. The brand perception has eroded further since, according to YouGov data.
Morning Consult also found that more people hold a negative view of Tesla than at the start of the year. In surveys of about 200 people in the U.S. each day this month through Nov. 27, roughly 22% had a negative impression of the company, compared with 15% in January.
Morning Consult said 38% of those surveyed this month through Nov. 27 had a positive impression of Tesla, down from 43% in January.
- Tesla’s net favorability among self-described Democrats in the U.S. fell to an average of 10.4% through Nov. 27, down from an average of 24.8% in October.
- It rose to 26.5% from 20% among self-described Republicans during the same period.
- Via Morning Consult
“It seems like Tesla is on its way to becoming a partisan brand,” said Jordan Marlatt, tech analyst at Morning Consult.
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