Key Takeaways From Tesla's (TSLA) Q4 2021 Earnings

Electric carmaker Tesla, Inc. (TSLA) blew past market expectations yesterday after it reported earnings of $17.7 billion, a 65% increase from previous year, and diluted earnings per share (EPS) of $2.54. Analysts had estimated $16.57 billion in revenue and an EPS of $2.33 for the company. Tesla also achieved the highest operating margin among all electric vehicle manufacturers in 2021 at 14.7% and had record profits of $2.3 billion during the fourth quarter. 

While it was largely expected, Tesla's performance failed to move the markets. Its high-flying stock price fell 5% in after-hours trading and is down roughly 7% from the day's start to $870.46, as of this writing.

Key Takeaways

  • Tesla blew past analyst estimates for its earnings, but its successful quarter failed to move markets.
  • The company says that supply chain issues will persist this year and prevent it from working on new car models. Instead, Tesla will focus on ramping up production for its existing slate of cars.
  • CEO Elon Musk's exercise of options that constitute his salary affected the company's profitability.
  • Tesla also plans to start work on its first humanoid robot to solve its labor problems.

Here are three key takeaways from the company's earnings call.

Supply Chain Problems Will Prevent Tesla From Working on New Car Models in 2022

Tesla CEO Elon Musk told analysts that the supply chain was a "fundamental limiter" to delivery across its factories. While the company devised workarounds to its supply chain shortages during the pandemic, it may not be able to repeat that performance this year. "I am not sure what you do for an encore to 2021, 2020," Musk told analysts. 

The end game of supply chain issues faced by Tesla is that the company is not planning to work on new models this year. That leaves a slew of vehicles, new and updates, in the lurch. The company's much-awaited Cybertruck, which was postponed from last year, now has a 2023 production date. The Semi truck remains indefinitely postponed. A long-awaited update to the Roadster, Tesla's first release, is also not in the cards. According to Musk, the chip shortage will "alleviate" next year.

"If we were to introduce new vehicles, our total vehicle output will decrease," he said during the earnings call. Instead, the company plans to focus on production of its existing slate of cars, which includes the Model 3 and Model Y. Together, both models accounted for 96% of total production output during the fourth quarter of 2021. Tesla does not provide production guidance, but it aims for an output increase of 50% each year.

Musk's Options Exercise Affected Tesla's Profitability

Tesla CEO Musk's exercise of his options last year triggered a crash in the company's stock price. The options, amounting to roughly $10 billion, ended up with Musk owning more of the company than before and incurring a massive tax bill. They also affected Tesla's overall profit. In its fourth quarter 2021 earnings release, the company stated that its selling, general, and administrative (SG&A) expenses had increased, mainly driven by $340 million payroll tax on 2012 CEO award option exercise.

Why is this important? Musk was awarded 101 million options, subject to Tesla hitting certain financial targets, in his 2018 pay package. So far, the company has achieved seven of those financial targets, and five remain. Analysts expect Tesla to achieve the remaining five either this year or next. That means Musk should get the remaining options within the same timeframe. However, he is not expected to exercise them until 2028, when the options expire.

Tesla Is Building a Humanoid Robot 

In true showmanship style characteristic of Musk, he announced yesterday that the company will focus on developing an Optimus humanoid semi-sentient robot this year. The robot was first introduced to audiences in human form during the company's AI Day. It flabbergasted audiences because the presentation featured a human dressed as a robot and dancing to music. 

But Musk said during the recent earnings call that the robot has the potential to be "more significant" than its electric vehicle business. "If you think about the economy, it is—the foundation of the economy is labor. Capital equipment is distilled labor. So, what happens if you don't actually have a labor shortage? I'm not sure what an economy even means at that point. That's what Optimus is about, so very important," he said.

To be sure, Musk has made similarly rosy predictions about other parts of Tesla's business, such as its foray into the insurance industry and the prevalence of a Tesla fleet of robotaxis by 2020. CNBC says the Tesla robot could be years away and may never come to fruition.

Article Sources
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  1. Tesla. "Q4 and FY2021 Update." Accessed Jan. 27, 2022.

  2. Fool. "Tesla Earnings Transcript." Accessed Jan. 27, 2022.

  3. CNN. Tesla CEO Elon Musk Is About to Get A Lot Richer. Accessed Jan. 27, 2022.

  4. YouTube. "Elon Musk Reveals Tesla Bot." Accessed Jan. 27, 2022.

  5. Car and Driver. "Elon Musk Says Tesla Robotaxis Will Still Be Ready in 2020." Accessed Jan. 27, 2022.

  6. CNBC. "Tesla Says It's More Important to Make a Robot Than New Car Models This Year." Accessed Jan. 27, 2022.

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