Interactive Investor

ii view: Tesla breaks records but warns about supplies

21st April 2022 11:48

Keith Bowman from interactive investor

Worries about supply chain challenges persist, but are investors looking beyond this to future developments such as the robotaxi? We assess prospects. 

First-quarter results to 31 March

  • Revenue up 81% to $18.76 billion
  • Earnings per share up 246% to $3.22 

ii round-up:

Electric vehicle maker Tesla (NASDAQ:TSLA) again reported record quarterly profits as both earnings and revenue exceeded Wall Street forecasts. 

Elon Musk's company also expressed confidence that over time it could achieve a 50% average annual increase in vehicle production and sales despite current supply chain challenges and the recent pandemic-related closure of its China Shanghai production plant. 

Tesla shares rose by more than 5% in US after-hours trading, leaving them little changed year-to-date, although up around a third over the last year. US rival Ford Motor (NYSE:F) is up by a similar amount over the last year, while Volkswagen AG (XETRA:VOW) has fallen by around a third. 

Tesla's earnings per share of $3.22 comfortably beat analyst forecasts for $2.30, with revenues of $18.7 billion, helped along by higher sales and vehicle prices, above estimates for $17.8 billion. 

The US listed company previously reported a 69% jump in first quarter production to 305,407 vehicles, although that was a slight dip on the 305,840 vehicles built in the fourth quarter of 2021.

The auto industry has been battling a combination of supply chain difficulties following the pandemic, particularly for semiconductor chips. Prices for raw materials such as aluminium and nickel have also increased following the war in Ukraine. 

Tesla only recently opened its new factory in Brandenburg, Germany, although many of its vehicles made for European customers still come from its Covid hindered Shanghai plant. 

In his post-results analyst call Musk made no reference to his own recently announced bid for social media firm Twitter (NYSE:TWTR).

ii view:

Founded in 2003, Tesla today makes both electric vehicles and energy generation and storage systems. A constituent of the S&P 500, it has a stock market value of over one trillion dollars compared to rivals Ford and General Motors (NYSE:GM) at under $70 billion. 

For investors, concerns regarding supply chain challenges, particularly for its operations and suppliers in the still Covid hindered China, offer concern. Raw material costs and business costs more generally are rising, while the valuation continues to ask questions.

On the upside, climate change and a US government with green aspirations provide a positive backdrop. Robust customer demand, new production plants and hopes to eventually begin making both its cyber pickup truck and even possibly a driverless, or robotaxi offer future growth potential. For now, and while its ongoing development of self-driving capabilities generates excitement, the shares, on valuation grounds at least, remain up with events.

Positives: 

  • Clear customer demand
  • Climate change concerns are growing globally

Negatives:

  • Competition from other manufacturers is increasing
  • Persisting valuation concerns

The average rating of stock market analysts:

Strong hold

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