Tesla tumbles despite broad beat after warning of supply chain constraints through 2022
As we previewed earlier, in today’s TSLA earnings call, investors will be watching for “details on the start of production at the new Austin and Berlin plants” and “the sales projections for 2022 after company surprised with record fourth-quarter shipments.” as Bloomberg wrote. We reported that in the fourth quarter, Tesla forfeited $1.3 billion in German subsidies it was hoping for as part of the electric vehicle maker’s new battery cell factory in Brandenburg, near Berlin.
The company can also offer color and face questions on Elon Musk’s stock sales, which amounted to more than $10 billion worth of Tesla stock by the end of 2021. Recall that the company just posted a record fourth quarter delivery quarter. For 2021, the automaker delivered “more than 936,000” vehicles, according to a company press release. These figures increased by approximately 87% compared to the previous year. The report also recalled that Tesla has “repeatedly stated that it expects 50% annual increases in deliveries over a multi-year period.”
In addition to sales and deliveries, investors will likely be watching the company’s vehicle lineup and its impact on ASP, which was down 6% year-on-year last quarter. It looks like the phasing out of the Model S and Model X is heading towards completion. Of the fourth quarter deliveries, 296,850 were Model 3 or Model Y vehicles, while only 11,750 were Model S or Model X vehicles.
Estimates called for 12,719 Model S and X deliveries and 263,422 Model 3 and Y deliveries.
Investors can also look for color on a series of recalls that took place towards the end of last year, with the automaker recalling what amounted to hhundreds of thousands vehicles, resulting from the opening and closing of the trunk lid which may damage the rear view camera wiring harness and increase the risk of an accident.
There’s plenty more in our full overview here.
So what does that mean, here’s what Tesla just reported for the fourth quarter a few moments ago:
- Revenue of $17.72 billion, beat East. $16.64 billion
- Adjusted EPS $2.54, beat East. $2.36
- Automotive Gross Margin +30.6%, beat East. +29.9% (it was 29.2% excluding regulatory credits)
- Adjusted EBITDA of $4.09 billion, beat estimated $3.894 billion
- Free cash flow $2.78 billion, +49% y/y, beat $1.67 billion estimate
- Clients deposit $925m, +23% y/y, and beat estimates of $808.0 million
- Cash and cash equivalents $17.58 billion, -9.3% y/y, above estimate $17.49 billion
- Capital spending was $1.81 billion in Q4: Quarterly capital spending topped $1 billion for the first time in Q3 2020, and has been trending higher since, as Musk has launched the construction of two new assembly plants in Austin and Berlin.
So far so good, although the company’s regulatory credits increased in the fourth quarter to $314 million from $279 million in the third quarter.
So why is the stock crashing after hours?
It seems that the market is focusing on the same issues as before, but only paying attention to them now: namely production bottlenecks and supply chain challenges.
Here is the text the market is focusing on:
“In the fourth quarter, we saw continued global supply chain, transportation, labor and manufacturing challenges, limiting our ability to operate our factories at full capacity.”
As Tesla noted in its Q4 2021 Investor Update, the company “plans to increase manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve average annual growth of 50 % of vehicle deliveries The growth rate will depend on our equipment capacity, operational efficiency and supply chain capacity and stability.
And here is the big red flag: “Our own factories have been operating below capacity for several quarters as the supply chain has become the main limiting factor, which is expected to continue through 2022”
The company also addressed the supply chain issue elsewhere in the slideshow, stating that “After a successful 2021, our focus turns to the future. Our goal is to increase our production as quickly as possible, not only by increasing production at the new factories in Austin and Berlin, but also by maximizing production at our established factories in Fremont and Shanghai.
Tesla also echoed what many other automakers said about 2022: those with the chips will win: “We believe that competitiveness in the electric vehicle market will be determined by the ability to add capacity through the supply chain and ramp production.“
And yet, Tesla’s warning is bizarre because, just as it warns of supply chain bottlenecks, it says that “The Fremont plant reached record production in 2021. We believe there is scope to expand overall capacity beyond 600,000 per year. We aim to maximize production from our Fremont plant while developing new plants. »
Even more surprisingly, the company said that “Over a multi-year horizon, we expect to achieve an average annual growth of 50% in vehicle deliveries.” Putting that into context, a 50% gain this year would represent about 1.8 million vehicles. And even though Tesla is having trouble, it has surpassed the rest of the auto industry in its ability to adapt to shortages.
To be clear, a 50% gain this year would be around 1.8 million vehicles. And even though Tesla is having trouble, it has surpassed the rest of the auto industry in its ability to adapt to shortages.
Commenting on the results, Gene Munster of Loup Ventures said “the current state of the business is doing exceptionally well,” Munster said. “But comments about risk factors take on a different weight in today’s environment. As a large-cap company, you need to make sure everything is fine. Whenever there are unknowns about the future, it can scare investors a little.
So ultimately great results, but for a company that trades on a ridiculous forward multiple, that’s to be expected. Meanwhile, the market is spooked by ongoing supply chain issues, and shares are down on the day, erasing an earlier loss of up to 5% when TSLA stock hit a session low of 880 $ after trading at $987.69 earlier.
If those losses hold up in regular trading tomorrow — and Tesla has a knack for staging miraculous recoveries on Musk’s call — Tesla shares will return to levels last hit in mid-December. The stock is currently down about 4%.
And if Powell’s mayhem weren’t enough, Tesla’s troubles are also weighing on shares of other EV startups, with several trading down in post-market trading such as Rivian down 2.3%, Lucid down more than 1% and Nikola down 1.6%.
The Tesla Q4 investor deck can be found here.