What To Expect From Tesla’s Q4 Earnings?

Tesla (NASDAQ:TSLA) is expected to publish its Q4 2022 earnings on January 25, reporting on a quarter which saw the company contend with supply chain and demand-related headwinds. We expect Tesla’s revenues to come in at $24.9 billion, roughly in line with estimates. This would mark year-over-year growth of about 40% and a sequential rise of 16%. Earnings are likely to come in at about $1.13 per share, up from $0.85 in the year-ago quarter. See our interactive dashboard analysis on  Tesla Earnings Preview for more details on how Tesla’s revenues and earnings are likely to trend for the quarter. So what are some of the trends that are likely to drive Tesla’s results? 

Tesla said that it had delivered 405,000 vehicles over the quarter that ended in December, marking a growth of about 31% year-over-year. While this represents healthy growth, it falls short of the company’s long-term target of expanding deliveries by at least 50% annually over a multi-year period. There are a couple of factors that have weighed Tesla down. The Covid-19 outbreaks in China have disrupted production at the company’s Shanghai factory. It’s also likely that the demand picture is also weakening, as Tesla resorted to relatively steep price cuts and promotions in markets including the U.S. and China. Tesla’s automotive gross margins have already been trending lower, falling from around 30.5% in Q3 2021 to 27.9% in Q3 2022. We expect this trend to continue over Q4 2022 as well, considering the price cuts, which stood at as much as 10% of the Model 3 and Y’s sticker price. Moreover, Tesla’s production ramp at new plants in Germany and Texas is also likely to have proven a drag on margins.

Now, Tesla stock has seen a massive sell-off recently, falling by about 25% over the past month, while remaining down close to 67% over the last year. However, we remain positive on Tesla stock with a $217 price estimate which is about 70% ahead of the current market price. We continue to believe that Tesla will remain a big beneficiary of the long-term transition to electric vehicles given its well-oiled supply chain, superior electric drivetrains, and its lead with software and self-driving technology.  Tesla is also slated to bolster its model lineup. The Cybertruck pickup truck is likely to go into production this year, while deliveries of the semi-truck recently started. At the current market price of $129 per share, Tesla trades at just over 22x forward earnings, which we believe is very reasonable considering the company’s growth rates (the consensus analyst average is over 34% revenue growth rate for 2023). 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.

[1] Month-to-date and year-to-date as of 1/12/2023
[2] Cumulative total returns since the end of 2016