Tesla shifts into high gear, on track to double annual profits

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JEsla’s share price jumped 2.5% in after-hours trading in New York yesterday as the company announced after markets closed that first-quarter revenue was $18.76 billion, beating expectations of $17.80 billion. Earnings per share also beat expectations, coming in at $3.22 versus estimates of $2.27.

Tesla stock price up as first-quarter results defy expectations

Tesla’s first quarter results will be good news for investors, while helping to support the Nasdaq after a turbulent day. The tech-heavy index was crowded yesterday after the shock of Netflix’s subscriber failure on Tuesday night. That sent the streaming platform’s share price tumbling 35% on Wednesday, while Tesla ended the day down nearly 5% on fears its first-quarter earnings could disappoint.

That turned out not to be the case, with revenue rising to $18.76 billion, up more than 80% from the prior year period and nearly $1 billion. above expectations. Meanwhile, earnings hit a record $3.3 billion, or $3.22 per share. This is a simply staggering improvement considering that annual profits in 2021 totaled $5.5 billion.

On that basis, Tesla is on track to post annual profits of $12.2 billion, assuming no deterioration in margins occurs in the interim. Shares are expected to open sharply higher when US markets reopen later today.

Shanghai factory shutdown barely leaves a scratch

There were concerns that Covid lockdowns in China, which forced Tesla’s factory in Shanghai to suspend operations, and various supply chain issues could impact margins.

Those worries appear to have been premature, as gross margin rose in the first quarter to 32.9%, from 30.6% in the fourth quarter and from 26.5% a year ago. The company said it needed to raise prices to offset supply chain challenges.

Free cash flow also jumped to $2.23 billion, well above estimates of $671.8 million, though Tesla struggled to warn that supply chain issues were likely to go away. continue throughout 2022.

Sales of regulatory credits also helped boost profits in the first quarter, with revenue of $679 million.

Bright outlook

As the company looks to the rest of 2022, issues at its Shanghai factory aside, there are plenty of bright spots. The new factory in Germany has finally opened, albeit later than expected, and should help Tesla boost production levels this year, despite a backdrop of rising costs and chip shortages. Production and deliveries are also expected to begin from the new Texas factory this month.

After delivering more than 310,000 vehicles in the first quarter and dropping to just under 1 million vehicle deliveries in 2021, CEO Elon Musk said he expects Tesla to deliver up to 1 .5 million vehicles in 2022, a high but achievable goal. The figure marks a decent increase from the previous target of 1.3 million, with Musk saying he expected the third and fourth quarters to see significant improvement as new factories ramp up production capacity. and increase their efficiency.

The upwardly revised target means that management expects to achieve 50% growth in vehicle deliveries this year, a target that a year ago might have seemed fanciful. But, given the progress made in Q1, the goal now seems within reach, as does doubling earnings.

Of course, much will depend on the resilience of the company’s supply chain and the availability of the materials used in the batteries. To that end, Tesla said it is diversifying its batteries, with half of its vehicles being equipped with a lithium iron phosphate battery that contains no cobalt or nickel.

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