Despite Growth, Earnings May Disappoint

Tesla Model S electric car at a supercharger charging station.

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Tesla could use a strong earnings report to prop up its stock price — but analysts aren’t optimistic.

The EV maker will report its fourth quarter results after the market closes on Wednesday, January 25. Consensus estimates show quarter-over-quarter growth in revenue and earnings, but analysts and shareholders may be disappointed anyway.

Analyst Estimates

Tesla’s fourth-quarter earnings estimate is $1.15 per share, according to The Wall Street Journal. Seeking Alpha and Zacks are less optimistic, predicting $1.07 and $1.14, respectively. Revenue estimates range from $24.6 billion to $25.3 billion.

Unfortunately for Tesla, analysts were more optimistic about the company’s fourth-quarter performance a month ago. At the end of December, the consensus earnings estimate was $1.28, or $0.13 higher. But then Tesla released a disappointing fourth-quarter production and delivery report — prompting analysts to lower their estimates.

Fourth Quarter Production and Delivery

On January 2, Tesla announced fourth quarter production of 439,701 units and delivery of 405,278. On January 3, Tesla stock dipped as low as $104.64. That’s the cheapest Tesla stock has been since August of 2020.

Investors and analysts had expected more. Reuters stoked that expectation last September by reporting that Tesla had set an internal fourth-quarter production target of 495,000 Model Ys and Model 3s. The EV maker missed that target by 15%, instead producing 419,088 of the two popular models, along with 20,613 Model Ss and Model Xs.

Tesla did suspend production at its Shanghai plant in the last week of December, according to Reuters. The Shanghai plant is Tesla’s largest, with capacity to produce 750,000 vehicles annually. The company offered no official explanation for the work stoppage. Speculation ties it to slowing demand in China plus a surge in COVID-19 cases.

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Quarter-over-quarter Growth

Although analysts expect the fourth quarter to be a miss for Tesla, the current consensus estimates still represent double-digit growth vs. the prior-year quarter. Specifically:

  • Estimated earnings of $1.15 per share compares positively to Tesla’s fourth-quarter 2021 result of $0.68. Note: Fourth quarter 2021 earnings were $2.05 per share as reported, but Tesla implemented a 3-for-1 stock split in August, 2022.
  • Estimated revenues of $25 billion would be 41% higher than actual fourth quarter 2021 revenues of $17.7 billion.
  • Actual fourth-quarter 2022 deliveries of 405,278 is 31% higher than actual deliveries of 308,600 in the prior year quarter.

Rising Costs, Competition, and Leadership Distraction

The global chip shortage affects the production of electric vehicles, which use more chips than gas-powered cars.

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Along with other carmakers, Tesla has battled supply chain constraints, a global chip shortage, and rising raw materials costs over the last few years. For a time, the company had managed to pass along higher input costs to customers through price increases.

The last of those price increases was implemented in June of 2022. Even so, Tesla held its third quarter automotive gross margin steady from the second quarter. That trend may not hold in the fourth quarter.

In January of 2023, Tesla changed course on pricing and announced double-digit price cuts on its vehicle line-up. The move, intended to boost demand, will sacrifice margin going forward.

Tesla will also grapple with increased competition. That competition comes from established carmakers with EV models as well as newer brands like Rivian and Fisker.

As Tesla looks to retain its leadership position in electric vehicles amid rising costs, lower margins, and increased competition, it has another obstacle to manage: CEO Elon Musk’s divided attention. As CEO of Tesla and SpaceX, Musk was already overbooked. He stepped into the Twitter CEO role in October, 2022, and it’s already been a distraction.

Musk has said he’d resign as Twitter CEO when he finds a replacement. There has been no public update on the search.

Tesla Stock Trends

Tesla closed at $144.13 on January 23. That’s up 38% from its January low, but down more than 60% from its peak of $407, reached in November, 2021.

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