Stock of the week - Tesla (26.01.2023)

Tesla surprises markets again, this time positively.

Yesterday Tesla announced  results for the most recent quarter, positively surprising the market. The company's stock jumped over 10.0% on Thursday after CEO Elon Musk said the company may be able to produce 2 million vehicles this year.

• The company reported adjusted earnings per share (EPS) of $1.19 above market consensus of $1.13. The EV maker posted record revenue of $24.32 billion, beating analysts estimates of $24.16 billion.
• In Q4 20222 automotive revenue rose 33.0% YoY to $21.3 billion.
• Tesla's service + other revenue, which includes fees for out-of-warranty vehicle repairs, totaled $1.6 billion in the final quarter of 2022.
• Energy generation + storage revenues increased sequentially and yearly to $1.31 billion. However, the cost of revenue for the energy division was high as it amounted to $1.15 billion.

Costs and lower prices are the main challenge…

The gross margin in the automotive segment amounted to 25.9%, which is the lowest result over the last five quarters. Cash flow from operating activities decreased by 29% YoY and 36% QoQ to $3.28 billion "by the downward trend in average sales prices over the past few years and that affordability will be the key to the company's growth in the coming years."

At the end of 2022 and at the beginning of 2023. Tesla has lowered the prices of its cars around the world, causing widespread dissatisfaction among customers in the US and China who recently bought new Teslas at higher prices. As a result prices of used Tesla prices fell sharply also in the US.

… but also an opportunity?

Elon Musk said that in January the company recorded the largest YoY increase in orders in history, exceeding twice the production capacity.

Musk plans to increase production in 2023

Musk also expects that 2023 will be a quiet year without significant supply chain disruptions and the company has the potential to produce 2 million cars which should find buyers. The statement sparked euphoria among investors.

• Tesla expanded its production capacity - across all its factories - in order to produce 100,000 Model S and X vehicles per year and 1.8 million Model Y and Model 3 vehicles.
• Production capacity in Shanghai allows Tesla to produce 750k. Model 3 and Model Y vehicles per year, while its first factory in Fremont, California is able to produce 100k of its more expensive Model S and X vehicles and 550k Model 3 and Y vehicles. Factories in Austin, Texas and in Germany may produce up to 250k Model Y vehicles per year.
• Tesla also said that approximately 400k customers in North America now have the opportunity to test its experimental, "FSD Beta" driver assistance system.

Conclusions

Despite the fact that Tesla's results only slightly topped market estimates, investors once again focus on bright future prospects presented by the company's charismatic CEO. Outlook looks promising and seems to have rational foundations, however, it will be interesting to see how Tesla will deal with approaching recession, which may significantly verify the company's optimistic plans.

Tesla (TSLA.US) stock launched today;s session with nearly 10.0% bullish price gap. Such a dynamic move may create an opportunity to take profits and sellers may take it as an opportunity to close the gap in the next few sessions. Source: xStation