Tesla , the world’s largest electric vehicle manufacturer, published at the end of trading today (Wednesday) its financial reports for the third quarter of 2022, which ended in September. Tesla posted revenue of $21.45 billion in the quarter, below analysts’ forecasts for revenue of $22 billion. Tesla’s profit per share in the third quarter was $1.05, slightly higher than market forecasts ($1 per share).
Tesla ended trading on Wall Street with an increase of about 1%, and is now losing 4% in late trading.
Tesla confirmed its previous forecast and said that “on a multi-year perspective, we still expect to achieve 50% annual growth in vehicle deliveries.”
Tesla regularly publishes data on the volume of production and deliveries of its vehicles for the quarter even before the publication of the full financial reports. Already on October 2, Tesla published the data for the third quarter, which showed that the company delivered a record number of 343,830 electric vehicles in the months of July-September, an increase of about 11% compared to the 310 thousand vehicles it delivered in the first quarter of this year. In the second quarter, Tesla was hit hard by the Corona restrictions in Shanghai, which shut down its factory in the city, and delivered only 255,000 vehicles. Despite the record delivery, Tesla stock has lost over 15% since the beginning of October and is down 45% overall this year.
Analysts expected more vehicle deliveries
The drop in the stock is due to the fact that the analysts predicted that the delivery figures of the electric vehicle giant will be even higher and will be over 360 thousand cars per quarter. Additionally, unusually for Tesla, in the third quarter the company produced 22,000 more vehicles than it delivered, which raised the question of whether demand for Tesla vehicles is declining. This is in light of the economic situation in the US and China, its two largest markets, and the growing competition from the old car manufacturers and new players such as Rivian in the US and Nio in China.
Following the missed forecast for vehicle deliveries, the analysts covering Tesla reduced their revenue expectations for the company for the third quarter. In April, the average analyst expectation for Tesla’s revenue for the third quarter was $23.1 billion. Prior to the release of the reports, analysts’ expectations had dropped to $22 billion – still a strong quarter, but less than the previous one. In terms of earnings per share (non-GAAP), analysts predicted that it would be $1.01, compared to $0.62 in the third quarter last year. These numbers refer to earnings per share after the 1:3 stock split that Tesla completed last August.
The big question for the future is how a significant global economic recession will affect the demand for expensive Tesla cars. Tesla CEO Elon Musk himself has expressed conflicting views regarding the economic situation in recent months. In July he said he had a “super bad feeling” about the economy, but in August he expected only a “slight recession”. According to the research firm Kelly Blue Book, Tesla will significantly increase its price its cars in the past two years. Between the beginning of 2021 and August of this year, the average price of a Tesla car jumped 31%, compared to an 18% increase in the price of new cars in the industry as a whole. The question is when the climbing price will start to hurt demand for Tesla cars, especially in light of the gloomy economic situation. Until now Tesla’s problem was mainly meeting the high demand for vehicles, but analysts see a chance that this trend will reverse in the coming quarters.
Musk’s focus on Twitter doesn’t help
Musk’s Twitter acquisition saga has been another factor that has had a negative impact on Tesla stock this year. After already withdrawing from the deal he proposed, Musk returned to the original plan to purchase the social network for $44 billion, a deal he must complete by next week. From the point of view of Tesla investors, the meaning of completing the transaction is that Musk will be quite busy with Twitter matters, which will leave him even less time to deal with Tesla. To complete the deal Musk would also have to sell a large block of Tesla shares, which could have a negative impact on it.