Will Tesla Stock Gain Post Q1 Results?

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Tesla (NASDAQ:TSLA) is slated to report its Q1 2022 results on Wednesday, April 20. We estimate that Tesla’s revenue will come in at about $17.6  billion for the quarter, rising by about 69% versus last year and roughly in line with consensus estimates. We project that earnings will stand at close to $2.23 per share, slightly below consensus estimates, although this would mark an increase from $0.93 per share seen in Q1 2021. So what are some of the trends that are likely to drive Tesla results?

Tesla has already reported its delivery figures for the first quarter, noting that total deliveries for Q1 stood at 310,048, marking an increase of about 68% versus last year, driven by surging sales of its Model 3 and Y vehicles and a recovery in Model S and X sales, after the company paused production for some time last year to make way for upgraded models. However, Tesla’s performance in China – a key market – is likely to be more mixed, due to the February Chinese New Year period and the recent surge in Covid-19 cases, which forced the company to suspend production at its Shanghai facility for a few days in March.

While automotive companies have been facing considerable pressure on the cost side, amid supply-chain headwinds and rising inflation, we expect Tesla’s margins to hold up pretty well. For perspective, over Q4 2021 Tesla’s Automotive margins rose 648 basis points year-over-year to 30.6% in Q4 2021, driven by strong growth in Model Y and 3 vehicles sales, and we expect the trend to hold up over Q1 as well. Both the Model Y and 3 share a common platform and largely utilize similar parts, enabling Tesla to realize considerable economies of scale as volumes rise. Moreover, Tesla, like most other manufacturers, has also been prioritizing the production of more expensive variants for its vehicles over the basic models given the strong demand environment.

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We value Tesla at about $640 per share translating into a market cap estimate of about $720 billion or over 2.5x the market cap of Toyota, which is the world’s largest automaker in terms of volume and the second-largest by market value.  However, our price estimate is about 35% below Tesla’s current market price of $985 per share. With a market cap of roughly $1 trillion, Tesla is essentially valued at more than the ten largest automotive companies combined, which we don’t believe is warranted. Sure, Tesla is the dominant player in the EV space currently, but we think that could change, as the EV market is going to get a lot more competitive. The barriers to entry aren’t very high, the products are not too complex compared to internal combustion engines, and mainstream automotive companies are investing in building massive scale. For example, VW alone plans to invest about $100 billion toward its EV transition in the next five years. It’s very likely that we will see several compelling EVs from major automakers and this could put pressure on Tesla.

See our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla Revenue: How TSLA Makes Money.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Apr 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 TSLA Return -9% -7% 2205%
 S&P 500 Return -2% -7% 99%
 Trefis Multi-Strategy Portfolio -1% -9% 259%

[1] Month-to-date and year-to-date as of 4/15/2022
[2] Cumulative total returns since the end of 2016

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