Tesla’s Q3 earnings report 2022
Tesla reported its third quarter earnings on Wednesday this week, with the main highlight being a record revenue of $21.45 billion for Q3 whilst still missing analysts expectations of $21.96B. Shares fell 3.5% in after-hours trading following the earnings release and have dropped over 6% so far.
Tesla nearly doubled its net income for Q3, with the company reporting s net income of $3.3B, as compared to $1.62 billion it earned in the same period last year.
Tesla cited increased raw material costs, the strengthening dollar, and issues ramping up production at its Germany and Texas factories as reasons for not hitting Wall Street’s estimates.
The company continues to expand first despite the global economic jitters as Musk, the CEO of the company, reassured investors of the company that demand was still high despite surging inflation and a series of interest hikes among global central banks.
Highlights of the Tesla Earning Report
- Tesla’s Q3 revenues came in at a record $21.45 billion, missing Wall Street’s estimate of $21.96B. As for earnings per share, Tesla reported adjusted earnings of $1.05 per share, topping analysts’ estimates of 99 cents per share.
- Tesla also reported record deliveries of over 343,000 electric vehicles during the quarter. However, the automaker had over 20,000 vehicles in transit at the end of the quarter which negatively affected profits. Wedbush analyst Daniel Ives wrote in a client note that “Tesla must now prove again to the Street that the robust growth story is running into a myriad of logistics issues as opposed to demand softening with EV competition coming all angles around the globe.” This clearly pointed towards the logistics issues that have continuously affected global markets and supply chains.
- The automaker had an operating free cash flow of $3.3 billion last quarter and increased its cash balance to a record $21 billion.
- One of the most important metrics is Tesla’s automotive gross margin, which is the percentage of profit on sales of new vehicles. It stayed at 27.9% this quarter, which is high for the auto industry but missing analysts’ estimates and down from 30.5% a year earlier.
Musk’s comments on Teslas’s earnings
- Musk highlighted a few factors that squeezed the company’s earnings targets, citing elements of a recession in China and Europe and commenting that the U.S. Federal Reserve is raising interest rates by too much. Musk has been a notable critic of the Feds action on raising interest rates. “The Fed’s decisions make sense if you’re looking in the rear-view mirror not if you’re looking out the windshield,” Musk said.
- He commented on a question from a journalist on the potential of the company failing on the wake of bad economic conditions, saying “To be frank, we’re very pedal to the metal come rain or shine”. He also assured investors on continued ramping of production, saying “We are not reducing our production in any meaningful way, recession or not recession.” He added that “I wouldn’t say it’s recession-proof (Tesla stock) but it’s recession-resilient, because basically the people of Earth have made the decision in large part to move away from gasoline cars.”
- Musk however continues to be confident in the growth of the EV markets, and is confident the company will continue gaining traction as EVs replace CEV. He said, “The public at large realizes that world’s moving towards electric vehicles, and it’s foolish to buy a new gasoline car at this point because the residual value of that gasoline car is going to be very low,” Musk said. “So, we’re in a very good spot.”
- Musk’s ongoing potential acquisition of Twitter has in recent weeks affected the company’s stock performance. Journalist questioned Musk on the same and he said he is “excited about the Twitter situation” and that the company has “sort of languished for a long time but has incredible potential.The long-term potential for Twitter is an order of magnitude greater than its current value.”
- Musk added that production of the 4680 battery was gaining rapid traction, although executive Andrew Baglino said, “There are challenges still ahead that we have not yet surpassed. No doubt.” Musk added that Tesla’s Semi trucks, which would start to be delivered to customers beginning this December, will not use the 4680 battery cells.
- Musk also said the company has the ability to do a stock buyback in the range of $5 billion to $10 billion, pending board review and approval.
Next Tesla earning date - 25/01/2023, Q4 of 2022 Fiscal Year, after Market close.