Tesla Q1 2022 Earnings Preview

Upbeat Q1 Forecasts & Record Deliveries

The electric vehicle (EV) maker comes from a strong fourth quarter and a barrage of news and developments recently, with markets now turning their attention to the earnings report for the first quarter of the year, which is due on Wednesday April 20, after market close.

First Quarter Forecasts

Tesla (TSLA) had announced Revenue growth of 65% year-over-year for the last quarter of the previous year, which stood at $17.719 billion and diluted Earnings were at $2.54/share. ^[1]

As per the Investing.com earnings calendar ^[2], the automaker is projected to report higher Revenue of $17.63 billion, compared to 10.48 billion a year ago. Earnings/share are also forecast to increase to $2.24, while in Q1 2021 they were $0.93.

Markets will likely focus on margins given high inflation and a tightening monetary environment, as well as any commentary around supply chain issues and chip shortages that have plagued the auto industry.

First Quarter Deliveries

The firm has already released its delivery figures for the first quarter of the year, which hit new records. In particular, the company delivered 310,048 vehicles in that period, from 308,650 in the previous quarter. ^[3]

On the other hand, production numbers showed a small decline to 305,407 units in the first quarter, compared to 305,840 in Q4 2021. Telsa noted that these figures were achieved "despite ongoing supply chain challenges and factory shutdowns".

Potential Stock-Split

At the end of March, a filing with the U.S. Securities and Exchange Commission (SEC) revealed that Tesla plans to request shareholder approval for a stock-split at the upcoming 2022 Annual Meeting. ^[4]

The firm's last such action had taken place in August 2020, with a 5-to-1 split, which had made the stock cheaper and more accessible to investors.

New Factories & Upcoming Products

Tesla (TSLA) has been firing on all cylinders this year, as apart from the new record quarterly deliveries, it opened two new factories, it pushes on scaling up, makes progress on self-driving and has a series of exciting models in the pipeline for 2023.

Giga Berlin & Texas

Elon Musk inaugurated not just one, but two new factories within a span of just a few weeks. Tesla's first European plant in Germany, the Giga Berlin opened its doors in late March ^[5], while the second US car factory, in Austin, Texas followed in early April ^[6].

Both plants will produce the Model Y and the first vehicles made on-site, were delivered during the respective opening events, while the one in Texas will also manufacture the long-awaited Cybertruck.

Tesla Motors Inc now has four factories in three continents that manufacture electric cars. The original one in California, which produces all four available vehicles, the one in Shanghai, China which is the main export hub and manufactures the Models Y and 3, as well as the two aforementioned new entries.

New Vehicles Coming in 2023

Back in January and the firm's Q4 earnings call, Mr Musk had disappointed the brand's fans, saying that it "will not be introducing any new models this year"^[7]. On this month's Texas factory opening party, which was dubbed Cyber Rodeo, he noted that the current year is about "scaling up", but next year there is going to be "a massive wave of new products". ^[8]

Production of the delayed and eagerly anticipated Cybertruck will begin in 2023, a model that will be "epic" as per the CEO's comments. Manufacturing on the other two anticipated Tesla vehicles will also begin in the same year, as Mr Musk added that "we'll be in production with the Roadster and with Semi".

Other Upcoming Products

Tesla Motors Inc is also ramping up its autonomous driving efforts and aims for broad user testing, with its CEO saying during the same event, that "We're aiming to go to wide beta for almost all Full Self-Driving customers in North America this year".

He also teased a dedicated robotaxi that will look "quite futuristic", without offering much detail though, while offering updates on the firms Optimus humanoid, which will in production "hopefully next year".

Potential Headwinds

Amidst pandemic disruptions and economic fallout, the curveball from the war in Ukraine and monetary tightening, the auto industry is trying to navigate a highly challenging environment.

Supply Chains & Semiconductors

In the aftermath of the pandemic, the automotive industry as a whole, has been plagued by supply chain disruptions and chip shortages. These have not been resolved and are likely to continue to affect car makers and although Tesla seems to have handled those issues better than most of its competitors it is affected by them.

Energy & Commodity Prices

The war in Ukraine and Western sanctions against Russia, have sent energy and commodity prices soaring. Although Teslas don't run on fossil fuels, the manufacturing of their electric batteries includes materials such as lithium, the price of which has also risen.

Tesla's CEO recently commented that the price of the said metal "has gone to insane levels!", saying the EV maker may need to get "into the mining & refining directly at scale" ^[9]. Such a move however would probably not be able to provide any immediate solution.

Inflation & Higher Rates

Inflation has been surging worldwide due to the economic fallout from the pandemic and the ultra-loose monetary policies enacted to combat them, while the war in Ukraine has exacerbated the problem. Now the US Central bank is trying to reign-in inflation by aggressive tightening and interest rate hikes.

This is a difficult environment for automakers, as consumers face higher prices, while rising lending costs can make funding for vehicle purchases more difficult.

Competition

Telsa is the king of the electric vehicle market, but it has been facing increasing competition from legacy auto giants, as well as EV start-ups and although its CEO touted a compelling 2023 line-up, the firm is known for delays and unfulfilled promises.

Rivian beat it to the electric truck market with its critically acclaimed R1T, while auto goliath Ford is pushing hard on electrification and its deliveries for the F-150 Lightning pickup truck are expected within spring ^[10].

The Elon Musk Factor

The company's prolific CEO has been quite active recently, pushing on multiple fronts, including a bid to acquire his favorite social media platform, Twitter.

Elon's Year

Mr Musk seems to enjoy attention and he has definitely attracted lots of it recently, being one of 2022's main protagonists. He became the world's richest man according to Forbes ^[11], launched two new Tesla factories and made a bid to acquire social media firm Twitter. As such, he aspires to be the CEO of a third major company, along with Tesla and SpaceX, while he also has Neuralink and The Boring Company.

Mr Musk is an industry disruptor, having single-handedly created the electric vehicle market with Tesla, he is driving space exploration with SpaceX, he is trying to alter Los Angeles transportation with The Boring Company's tunnel system and he probably helped shape the online payments business with his involvement in Paypal.

The Musk-Twitter Saga

After some tweets criticizing Twitter over freedom of speech, it was disclosed earlier this month, that Mr Musk owned around 9% of Twitter's share. Then, there was an agreement between the two sides for him to join the board, which would limit his share to 14.9% ^[12], from which he eventually backed away from ^[13].

Last week, he made a bid to acquire 100% Twitter for $54.20 per share and take it private, noting that this is his "best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder", adding that the firm has "extraordinary potential. I will unlock it". ^[14]

Following the "unsolicited, non-binding proposal", Twitter announced a Rights Plan that would make a hostile takeover hard, as shareholders will be allowed to purchase extra shares at a discount, in the event of any person/group/entity acquiring more than 15% of the company. ^[15]

Stock Movement

TSLA.us had set record highs in November (1,244.70), but had then entered retreated and made a lackluster start to the current year, but staged a solid recovery in March, ending the first quarter with small gains.

The last two weeks have been negative and it has been testing the 38.2% Fibonacci of the last leg up (from this year's low to April's high). Closes below that level could open the door for further decline that would find the fist key support confluence by the EMA200 and the ascending trendline from the 2022 lows (890.00-860.00). However, near term bias in on the upside and the stock has the ability to push for fresh highs.