When Tesla reports fourth-quarter results after the close of markets on Wednesday, likely the last thing on investors’ minds will be the actual figures themselves.
Instead, the focus will be squarely on the outlook amid the ongoing semiconductor shortage, plans for the production ramp-up in two new factories, and updated guidance promised by CEO Elon Musk on the launch of new models like the Cybertruck.
Last quarter’s results will likely fade into the background because the company already blew consensus estimates for vehicle sales and production out of the water in the final three months of last year, increasing the gap to its closest rivals and forcing analysts to begin revising their Q4 forecasts on the fly.
Moreover, its operations are solidly profitable and business is booming. Seemingly long gone are the days when the EV pioneer could only swing into the black thanks to the lucrative sale of regulatory credits to competitors looking to offset their cars’ tailpipe CO2 emissions.
After sales surged 87% last year to 936,000 vehicles, Wall Street analysts are starting to ratchet up their forecasts for 2022 from around 1.3 million to possibly 1.4 million cars or more.
“We think 2022 is the year where Tesla can begin to perform like a Tera-cap,” Morgan Stanley wrote earlier this month, arguing supply constraints rather than demand will dictate its volumes.
Rough start for stock
The year has not been kind to Tesla investors so far.
After vaulting to $1,200 a share after the Q4 sales volumes were announced, the stock has fallen by over a fifth to close at just $930 on Monday, mainly due to the deteriorating macro environment. Growth companies have been hammered as investors priced in four interest rate hikes by the Federal Reserve this year, due to soaring inflation.
Bulls have tried swatting off unflattering comparisons to Peloton and Netflix, two former market darlings down on their luck, as well as concerns over a potential surge in redemptions for Cathie Wood’s ARK Innovation ETF, a major Tesla shareholder.
That’s why the immediate concern for investors is adding fresh capacity to reinforce Tesla’s still very much intact growth story. With its original Fremont factory in California bursting at the seams, and production in Shanghai hitting record volumes, they will be looking for clues about the start of production in two new factories in Texas and Germany. The latter has come under particular scrutiny due to regulatory delays with the local government.
Another important issue Musk will need to shed light on is the status of Tesla’s futuristic Cybertruck, which was first revealed in November 2019. It appears that the purported launch date has been pushed back once more and is now scheduled for the first quarter of next year, whereas it was initially advertised to come last year. That means Tesla—rather unusually—will be later to market than some of its competitors, who have risen to the challenge.
The recent plaudits won by the Rivian R1T, the launch of the GMC Hummer EV Pickup, and this year’s anticipated arrival of the Ford F-150 Lightning could all tempt Cybertruck reservation-holders, dejected by the prospect of waiting another 12 months for the Tesla.
The first warning sign came in October, when Tesla removed the model entirely from its configurator. Most fan sites now expect the entry version—costing $39,900, with a single motor—will be scrapped in favor of adding a new model at the top end of the range, with four motors to better compete against the R1T.
Speculation has even emerged recently that Tesla could be already working on a smaller version of the Cybertruck for markets outside North America.
Another key model underpinning Tesla’s growth story is what some are calling the Model 2: an affordable compact hatchback. Investors could get an updated timetable for the launch of a model first announced back at the company’s Battery Day presentation in September 2020.
“We are most keen on learning more on ‘Model 2’, which could offer a $25,000 base price and be Tesla’s attempt to democratize EVs,” wrote Credit Suisse in an earnings preview.
Price hikes
Products are not the only focal point: Tesla is viewed as a tech company with the potential for software-industry margins.
That’s why the road map for its Full Self-Driving (FSD) beta software is key to Tesla’s oversized valuation; it has recently traded at the same market cap as its next nine largest competitors combined. Version 11 of FSD is expected to arrive soon, prompting Tesla’s to controversial hike the price to $12,000. Consumers unsure whether the feature is worth that much have questioned the move, while investors have generally welcomed it, due to the added profits.
This new updated FSD version will unify all functions into one “full stack” of programming code. In theory, this should accelerate further development and bring forward the date when Tesla drivers can move from what is now “hands-off” to “eyes-off” automated driving.
Other issues that might arise during Wednesday’s calls include Tesla’s timetable for India, the rollout of its insurance business, possible effects from its Bitcoin investment, any new plans for accepting Dogecoin, as well as customer fallout in Canada from heating systems failing in cold weather.
Finally one last key topic might be discussed—China. Tesla sold some 70,000 cars to customers in the world’s largest EV market in December. That was roughly a third higher than their previous record for the month and powered the brand’s Q4 global performance.
Investors will want to know how much of that is sustainable, as a portion of that was no doubt demand brought forward as owners wanted to take advantage of generous Chinese subsidies for EVs before they were slashed in January. That could mean a weak start to the year.
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