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Tesla Q1 FY 2022 Earnings Report Preview: What to Look For

Focus on TSLA vehicle production

Key Takeaways

  • Analysts estimate adjusted EPS of $2.31 vs. $0.93 in Q1 FY 2021.
  • The number of vehicles produced by Tesla, reported earlier this month, rose at a rapid pace YOY.
  • Revenue is expected to rise with growth accelerating sequentially for the second straight quarter.

Tesla Inc. (TSLA) is coming off an exceptionally strong year despite facing numerous global supply chain challenges. Profits soared on torrid revenue growth in 2021 and and the outlook for future growth is bright for the electric-vehicle (EV) maker. The company has recently opened new manufacturing plants in the U.S. and Germany. Amid this success, Chief Executive Officer (CEO) Elon Musk now has his sights on a new target: Twitter Inc. Musk has made a recent unsolicited takeover bid for the popular social media platform.

Investors will be watching to see if Tesla can maintain its rapid growth when the company reports earnings on April 20, 2022 for Q1 FY 2022. Analysts expect adjusted earnings per share (EPS) and revenue to rise at a rapid pace compared to the year-ago quarter.

Many investors will focus on one indicator to gauge whether Tesla might meet its Q1 FY 2021 earnings and revenue expectations. That metric is the company's vehicle production numbers for the quarter, which Tesla already reported earlier this month. Tesla produced 305,407 vehicles in Q1, a dramatic increase from the same quarter a year earlier, but below analyst estimates of around 311,600.

Investors will also be watching what happens with Musk's bid to buy Twitter. The $43 billion offer came only a week after news broke that Musk, an avid Twitter user, had a 9.2% stake in the company. Some analysts and investors wonder whether Musk would have to sell some of his stake in Tesla in order to complete the all cash offer. Such a move could cause Tesla's stock price to drop. But he could always finance the purchase by borrowing against his Tesla holdings instead.

It's unclear if Musk will succeed in buying the social media company. Twitter made moves last Friday to keep Musk from significantly increasing his stake. The company adopted what is known as a poison-pill strategy. The tactic gives Twitter's shareholders the right to purchase additional shares at a discounted value if Musk or anyone else takes control of 15% or more of Twitter's shares. If it were to happen, it would dilute Musk's stake and make it more expensive to buy more shares.

Musk has gotten into trouble using Twitter's platform in the past. In August 2018, he tweeted that he would take Tesla private if the company's stock reached $420 per share and that he had secure funding. It was trading nowhere near that at the time. Musk was subsequently charged with fraud by the Securities and Exchange Commission (SEC) for making the statement. As part of the settlement, Musk was forced to step down as Tesla's chairman, and he and the company were each required to pay $20 a million penalty.

Tesla's shares have outperformed the broader market over the past year. The stock underperformed through much of the first half of the last year. It then surged beginning in early October and has outperformed ever since. The stock has shed some of its gains after peaking in early November. Shares of Tesla have provided a total return of 34.5% over the past year, well above the S&P 500's total return of 6.5%.

One Year Total Return for S&P 500 and Tesla
Source: TradingView.

Tesla Earnings History

Tesla reported Q4 FY 2021 earnings that beat analysts' expectations. Adjusted EPS rose 215.7% as revenue grew 64.9% compared to the year-ago quarter. Both adjusted EPS and revenue growth accelerated from the previous quarter's pace. The company said that it continued to face transportation, labor, and other global supply chains issues, which limited its ability to run its factories at full capacity.

In Q3 FY 2021, Tesla's earnings beat but its revenue missed consensus estimates. Adjusted EPS increased 144.3% year over year (YOY), continuing a slowing trend that began in the previous quarter. Revenue expanded 56.9% YOY, decelerating from the previous quarter's pace. The company cited semiconductor shortages, port congestions, and rolling blackouts as some of the supply chain challenges keeping its factories from running at optimal speed and efficiency.

Analysts expect strong performance in Tesla's Q1 FY 2022 earnings and revenue. Adjusted EPS is expected to rise 148.7% YOY, a rapid pace but slower than in the previous quarter. Revenue growth is expected to accelerate to 72.8% YOY. For full-year FY 2022, analysts expect adjusted EPS to rise 67.7%, slowing significantly from the previous year's rapid pace. Annual revenue is expected to grow 58.6%, also decelerating from the previous year's pace.

Tesla Key Stats
  Q1 FY 2022 Q1 FY 2021 Q1 FY 2020
Adjusted Earnings Per Share ($) 2.31 (estimate) 0.93 0.23
Revenue ($B) 17.9 (estimate) 10.4 6.0
Vehicle Production 305,407 (actual) 180,338 102,672

Sources: Visible Alpha; Tesla Q1 FY 2022, Q1 FY 2021, and Q1 FY 2020.

The Key Metric

As mentioned above, investors are also focused on Tesla's vehicle production. The company's primary business is making electric cars and it needs to continue expanding production in order to grow revenue and profits. However, the company has faced enormous challenges over the past year related to global supply chain disruptions. Vehicle production could take a bit of a hit after Tesla shutdown production at its factory in Shanghai at the end of March amid a recent outbreak of COVID-19 that prompted the city to impose a partial lockdown. The company originally said that it expected the shutdown to last just four days. However, it has still not opened and is now expected to resume production on Monday, April 18, having received confirmation from local authorities.

Tesla is coming off of a strong year of vehicle production. Last year, the number of vehicles the company produced rose approximately 82.5%, the fastest annual pace since FY 2018. The second quarter of FY 2021 was exceptionally strong, with the number of vehicles produced rising about 150.9% YOY. That pace slowed to 64.0% YOY in the third quarter before accelerating to a pace of 70.1% YOY in the fourth. Tesla's vehicle production rose 69.4% YOY in Q1 FY 2022, slower than what analysts were expecting. For full-year FY 2022, analysts expect Tesla to produce approximately 1.5 million vehicles, up 64.0% from the previous year.

Article Sources
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  1. Tesla Inc. "Elon Musk Opens Tesla’s First European Factory."

  2. The Wall Street Journal. "Elon Musk Delivers First Teslas Made in Texas, Shows Off Cybertruck."

  3. The Wall Street Journal. "Elon Musk Wants to Buy Twitter."

  4. Tesla Inc. "Tesla Vehicle Production & Deliveries and Date for Financial Results & Webcast for First Quarter 2022."

  5. Visible Alpha. "Financial Data."

  6. Bloomberg. "Musk Needs ‘Massive Loan’ or Big Tesla Sale to Buy Twitter."

  7. The Wall Street Journal. "Twitter Adopts Poison Pill Plan to Block Elon Musk From Increasing Stake."

  8. U.S. Securities and Exchange Commission. "Elon Musk Settles SEC Fraud Charges; Tesla Charged With and Resolves Securities Law Charge."

  9. Tesla Inc. "Q4 and FY2021 Update," Page 9.

  10. Tesla Inc. "Q3 2021 Update," Page 3.

  11. The Wall Street Journal. "Elon Musk Tests Positive for Covid-19 as Tesla Pauses Production in Shanghai."

  12. Reuters. "Tesla looks to resume production at Shanghai plant on April 18."

  13. Tesla Inc. "Tesla Q1 2021 Vehicle Production & Deliveries."

  14. Tesla Inc. "Tesla Vehicle Production & Deliveries and Date for Financial Results & Webcast for First Quarter 2022."

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