As expected, Tesla is difficult to give the market too much surprise

2022-05-31 0 By

Compile | large events, the company’s performance, such as Wall Street expected more than market expectations.· Short-term guidance is in line with expectations.· Share prices have fallen recently because the Fed has killed the market rally.Electric car maker Tesla (TSLA) reported its fourth-quarter results after the market closed on Wednesday.The company had high hopes for the results after delivering more than 308,000 vehicles, a quarterly record.Tesla’s results were largely in line with expectations when the numbers came in, and its stock remains well off its highs as recent market weakness has hurt growing companies.Analysts’ expectations are, as usual, low.The company has beaten revenue and profit estimates in every quarter but one of the past two years.Although Tesla delivered 65,000 more vehicles than it did in the third quarter, some forecasts point to little sequential revenue growth.In the table below, you can see how the overall income statement compares with my usual three scenarios.Author’s Tesla model and actual Results Author estimates and Tesla q4 letter my overall impression is that Tesla’s performance is substantial.It’s not exactly a blowout, as some bulls are hoping for earnings well above $3 a share, but that’s not a bad outcome either.Automotive gross margin is up about 11 basis points sequentially, which is a little less than I expected but still above market expectations as usual.Overall, the gross margin figure in my base case was only $10 million off the actual result.The main difference between my model and Tesla’s reality comes from operating costs.In its letter to shareholders, management referred to “SG&The increase in A was primarily due to A payroll tax of $340 million on the exercise of CEO award options in 2012 “.Given that we’ve known for months that Elon Musk is going to exercise options and sell stock, Tesla might be able to spell out this potential expense in advance.Excluding that fee, Tesla’s revenue is probably the same as my base case.Tesla did report record cash flow of nearly $2.8 billion.Of course, much of this is due to an increase in short-term debt as production grows.As long as production and deliveries continue to grow, free cash flow should remain strong.With a net cash balance of more than $10.7 billion at the end of last year, management says it has enough money to execute on its current growth plans.Management continues to stand by its “50% long-term growth” delivery statement, but Musk said on the conference call that Tesla will exceed that number.The 50% figure implies about 1.4 million in 2022, but the most realistic estimate is between 1.5 million and 1.6 million.Austin-made Model Ys will be delivered to customers once final certification is completed, while Berlin is still in the licensing process.According to management, Tesla won’t introduce any new models this year, but will work to make the Semi, Cybertruck, and Roadster hopefully available next year.Tesla shares initially fell after the results came out, but after some time, they started to recover.Shares are trading at $937.41, just below their average price target of $947.I think this average will rise in the next few days as all analysts rush to raise their numbers, which were too low to begin with.Still, the stock is about $300 below its 52-week high, thanks to Musk’s stock sales and market weakness as the Federal Reserve begins to tighten its monetary policy.In the end, Tesla’s shareholder letter contained few surprises.Revenue and earnings were largely in line with my expectations, especially including payroll taxes, and exceeded Wall Street’s consistently low estimates.Some investors are hoping for higher numbers and more specific forecasts for the year.We’ll see if we get any more details on the call, but the stock was up 2 per cent in after-hours trading.In the short term, it will probably depend more on the overall market reaction after the Fed meeting, and I don’t think investors need to change their long-term view based on today’s news.Elon Musk: “Looking back on 2021, it was a breakthrough year for Tesla and for electric vehicles in general.Although we struggled with supply chain challenges throughout the year and everyone worked hard, we managed to increase our sales volume by almost 90% last year.This level of growth is no coincidence.This is the result of ingenuity and hard work by multiple teams across the company.In addition, we achieved the highest operating margin in the industry in our last widely reported quarter, achieving a GAAP operating margin of over 14%.Finally, thanks to $5.5 billion in GAAP net income in 2021, our cumulative profitability since inception is positive, which I think makes us a real company at this point.This is an important milestone for the company.So, after an extraordinary year, we turned our attention to the future, Texas and Berlin.So we’ve already started production in Texas and Berlin, and we started it last quarter.But that’s not the most important thing.We’re more focused on when we can mass produce and when we can deliver the car to customers.But I think it’s worth noting, as the Internet has observed, that we build quite a few cars in Texas and Berlin.So, in Texas, we are making the Model Y with the structural battery pack and 4680 battery, and we will begin delivery after the vehicle is finally certified, which should be soon.Future capacity expansion will continue by maximizing production at each facility as well as building new facilities and new locations.While we are not ready to announce any new locations on this call, we will be looking for new locations by 2022 and may be able to announce new locations by the end of this year, I expect.Supply chains will continue to be the fundamental constraint on output for all plants in 2022.So the chip shortage, while better than last year, is still a problem.Yes, there are multiple supply chain challenges.That said, we do expect 2022 to show significant growth over 2021, easily surpassing the 50% growth seen in 2022.Tesla’s basic focus this year is to expand production.So, whether it was last year or this year, if we were to introduce new cars, our total car production would go down.This is a very important point that I think people don’t understand.Last year, we spent a lot of engineering and management resources to solve supply chain problems: rewrite code, replace our chips, reduce the number of chips we needed, chip centric, and as a result, we were able to grow by nearly 90 percent, while at least last year almost every other manufacturer was shrinking.So, this is a good result.But if we had launched a new car last year, we would have had the same total vehicle production because of constraints, especially chip constraints.So if we actually launch an add-on product, it will require a lot of attention and resources to deal with the increased complexity of the add-on product, resulting in fewer vehicles actually being delivered.The same is true this year.Therefore, we will not introduce new models this year.It doesn’t make any sense because we’ll still be partially limited.However, we will do a lot of engineering and tooling to build these vehicles — Cybertruck, Semi, Roadster, Optimus — and prepare to put these vehicles into production next year.”Credit Suisse analyst Dan Levy raised his price target on Tesla to $1,025 from $830 and kept his “neutral” rating on the stock.Analysts believe favorable fundamentals will continue to support Tesla’s stock price, but added that non-fundamental factors need to remain supportive as well.Moody’s confirmed in the report that Tesla’s outlook remains positive and that the company will continue to rapidly scale up and significantly improve profitability.Moody’s said Tesla’s financial policy is likely to be cautious and its liquidity will remain healthy.However, it added that the offer of more competitive pure electric vehicles by other carmakers could start to put some pressure on the company’s margins in 2023.Separately, the rating agency expects Tesla to deliver nearly 1.4 million vehicles in 2022, up from 936,000 in 2021.Jpmorgan: Raised price target on Tesla (TSLA.O) to $325 from $295.Wells Fargo: Raised price target on Tesla (TSLA.O) to $910 from $860.