Tesla posted strong numbers in a breakthrough quarter for the electric vehicle giant. But current earnings are less than forecast. And while much remains in flux,
expects to produce the best margins in the automotive industry while developing its next-generation vehicle platform.
In short, Tesla (ticker: TSLA) wants to keep the pressure on its peers even as the global economy weakens.
Tesla jolted the global auto industry earlier this year by cutting prices by up to 20% to spur slowing sales. It was able to do this because it has a cost advantage over other EV manufacturers. The lower-cost platform could be Tesla’s next salvo as it tries to expand its position as the world’s largest maker of electric vehicles.
“Price really matters,” CEO Elon Musk said on the earnings call. “These changes make a difference for the average consumer.”
Tesla reported fourth-quarter earnings of $1.19 per share on sales of $24.3 billion. Operating profit reached a record $3.9 billion, up from the previous record of $3.7 billion in the third quarter.
Wall Street was looking for earnings per share of about $1.13 and operating profit of $4.2 billion on sales of $24.7 billion. Free cash flow for the quarter was $1.4 billion. Analysts expected $2.7 billion. Looking ahead, Tesla said it plans to produce 1.8 million units in 2023. The street is looking for around 1.9 million units.
All numbers look good. The top numbers trailed Street’s estimates slightly, but Tesla stock is already down about 35% in the past three months. Expectations weren’t that high in the report.
The shares rose 3.8% shortly after the earnings release, trading near $150 apiece. The shares stabilized, up about 1.5% at $146.50. Tesla stock closed 0.4% higher at $144.43 on Wednesday. The S&P 500 and the Dow Jones Industrial Average were both flat that day.
This is a relatively muted reaction, given the size of the earnings call. Shares are expected to move further on Thursday after investors digest all the details from the company’s conference call
Before the call, Tesla offered some information to investors.
Tesla’s new factories in Austin, Texas, and Berlin, Germany were producing about 3,000 cars per week at the end of 2022. For Berlin, that’s about 2,000 cars per week at the end of the third quarter. Tesla did not have a weekly production number listed for Austin when it last reported earnings.
Tesla also said its next-generation vehicle platform is under development. It’s a lower-priced EV, which is what investors have been looking for. This will expand Tesla’s potential market.
Chief Financial Officer Zachary Kirkhorn said “customer interest remains high,” which is a sign that demand is holding up after the price cuts. He added that the cuts will impact profit margins without giving too many details. He said margins “will remain healthy and industry leading.”
There have been many important earnings reports in the company’s history. The fourth quarter of 2022 could be the most important.
In 2010, Tesla announced its first full quarter as a publicly traded company, during which it generated approximately $31 million in sales from the original Roadster. There were the quarters when the electric vehicle pioneer started delivering the Model S – its first mass-produced car – in 2012, and the low-cost Model 3 in 2017. There was also the third quarter of 2019 , when Tesla made a surprise profit. .
As for this quarter,
is now the most actively traded stock in the US market and faces a tougher economic environment, with rising interest rates, high inflation and fears of recession. In addition, competition from electric vehicles continues to grow and investors are also wary of Musk’s new role as owner of social media platform Twitter.
The uncertainty surrounding profit margins is weighing heavily on investors. For 2022, Tesla generated gross profit margins of around 26% from its automotive business. For the full year of 2023, after price cuts, automotive gross profit margin projections are expected to fall to between 17% and 22%.
Investors should be prepared for trading volatility on Thursday. Options markets imply that the stock will move about 10%, up or down, after the earnings report. Shares have moved an average of around 8%, either up or down, following the last four quarterly reports. The shares rose twice and fell twice during this period.
Through Wednesday, Tesla stock is up about 17% year-to-date. The
is up about 8%.
Write to Al Root at firstname.lastname@example.org