Big Factories, Big Trucks, Big Musk: Tesla's Q4 Earnings Outlook

Big Factories, Big Trucks, Big Musk: Tesla’s Q4 Earnings Outlook

Tesla earnings for the fourth quarter and the full year of 2022 we bear, and with it expectations from Wall Street that the electric car maker will achieve quarterly revenue of $ 24.03 billion and adjusted earnings per share to reach about $ 1.13, according to Yahoo Finance data. If Tesla reaches that revenue estimate, it will mark a record for the company, but also the slowest pace of growth since mid-2020.

As usual, Tesla will share its results Wednesday after the market closes, and management will discuss earnings and answer analyst questions during a webcast that will be held at 5:30 PM ET.

The automaker is wrapping up a tumultuous year in which its stock price has plunged 65% due to factors ranging from CEO Elon Musk’s distraction on Twitter to fears of slowing sales in pandemic-hit China. Tesla is expected to address these concerns, as well as recent auto price cuts and exceeding fourth-quarter delivery estimates, during the call tomorrow.

Indeed, so much has happened over the past few months in Tesla-land that the upcoming earnings call and guidance commentary will be “one of the most important moments in Tesla’s history and for Musk himself,” Dan Ives, managing director at Wedbush Securities, said.

Before we dive into our outlook on the call, let’s note that Tesla shares closed Tuesday at $143.89, up more than 30% since earlier this month after shedding two-thirds of their value as of April 2022.

appearance of musk

Musk doesn’t always join Tesla’s earnings calls — and, in fact, he’s currently busy defending himself in court over allegations that he defrauded investors with his famous 2018 “secured financing” tweet — but the CEO is expected to appear tomorrow, if he quells investor fears that he’s Tesla isn’t giving enough of his attention since he took over Twitter.

The CEO also went to trial in November to defend Tesla’s $56 billion salary package after a shareholder sued to cancel the deal, which he said was unfairly given to Musk, the “part-time CEO.”

Missing delivery estimates

During Tesla’s third-quarter earnings call, Musk promised that Tesla would deliver an “epic end to the year.” The automaker posted record vehicle sales and deliveries, but still lost both its own and Wall Street’s estimates. Buoyed in part by last-minute discounts on Model Y and 3 vehicles in December, Tesla delivered 405,278 vehicles in the fourth quarter. The Street was expecting between 420,000 and 425,000 units to be delivered.

Analysts are likely to question the company about its mistakes, as the fourth quarter marked the third consecutive quarter that the automaker didn’t reach as many deliveries as promised. Tesla may be required to provide more realistic estimates for 2023.

We may also see updated delivery and sales numbers for the fourth quarter when earnings are released.

Margins of vehicle price reductions

Earlier this month, Tesla cut the price of the long-range Model Y crossover (20% to $52,990) and the Model 3 sedan (14% to $53,990) for U.S. buyers. The vehicles’ new, lower base price qualifies them for a $7,500 federal tax credit under the Inflation Reduction Act (IRA), which was signed into law in August. Under the terms of the IRA, the minimum for electric sedans is $55,000 and for SUVs, vans and vans $80,000.

Tesla also lowered the prices of its Model S sedan and Model X, which are still too expensive to qualify for an electric vehicle tax credit.

The latest price cuts mark at least the fourth time the automaker has discounted its cars or offered credits in the past several months. Tesla announced price cuts in China by up to 9% on the Model 3 and Model Y in October, which cut prices by nearly 14% earlier this month. The company also first issued a $3,750 discount to the Model Y and 3s in the US and Canada in early December, before bumping up to $7,500 later in the month.

Investors haven’t taken kindly to the price cuts, which they fear indicate a drop in demand for the popular electric vehicles. However, the price cuts seem to have actually boosted demand for the vehicles. What investors hope to measure is whether price cuts have significantly reduced Tesla’s margins. It may be too early for these answers, but Tesla will likely offer some guidance.

Updates on the new giga factories

Tesla on Tuesday announced plans to invest an additional $3.6 billion in its massive factory in Nevada, adding two new facilities dedicated to building battery cells and Tesla Semis. The automaker may discuss these plans further, such as when they hope to break ground on the facilities and begin production.

The automaker said it has a multi-year plan to increase production by 50%, so analysts will want to know more about the new giant plants. There have been reports that Tesla is planning a $10 billion gigafactory in Mexico, and the company is close to a deal to build factories in Indonesia as well.

More on Semi and Cybertruck

Tesla finally revealed in December the first production versions of its long-awaited electric truck, and delivered the first few of Pepsi’s order of 100 trucks, which the company ordered back in 2017. A number of high-profile companies, including Anheuser-Busch, Pepsi And Walmart and UPS, also booked Semis, so we may get some updates on production and when those companies can expect deliveries.

Tesla’s Cybertruck has also suffered several delays, but Musk said in July that the company is on track to launch the truck in the middle of this year. We expect more updates on timing, as well as new features. In September, Musk said the Cybertruck would be “waterproof enough to serve briefly as a boat.”

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