Tesla Earnings Preview: Outlook, Margins and Bitcoin Hits in Focus

by James · July 20, 2022

Updated at 9:41 AM EST

Tesla (TSLA) – Get Tesla Inc. Report Shares rose on Wednesday ahead of expected second-quarter results after the closing bell, with investors focused on near-term delivery forecasts and shrinking profit margins for the clean-energy automaker.

Tesla, which suffered from supply chain disruptions, chip shortages and a 22-day shutdown at its Shanghai gigafactory in the three months ended June, saw shipments fall 17.7% from the prior period to a weaker-than-expected 254,695 units.

Raw material prices, as well as labor costs linked to total production cycles, have risen steadily over the past year, while nickel – a crucial component in the production of electric car batteries – is up around 20% to $21,200 a tonne on the London Metals Exchange . Lithium carbonate battery prices are up around 60% from early 2021 levels.

Tesla told investors in April that “the inflationary impact on our cost structure has contributed to adjustments in our product prices, despite a continued focus on reducing our manufacturing costs where possible,” and has since started layoffs in California at the same time as prices for the Model S has increased. and Model Y sedans.

The group is still expected to deliver a 43% year-on-year gain in group revenue, of $17.2 billion, with a bottom line of $1.86 per share. The key to the update, however, will be Tesla’s expectations for the second half of the year, and whether the “giant money furnaces”, as Elon Musk has described his new gigafactories, can increase production during the September and December quarters to meet the Street’s annual delivery target of 1.5 million .

Ramping up production due to supply chain disruptions, increases in production costs and early-stage costs are likely to affect the group’s automotive profit margins, which reached a record high of 30.6% in the fourth quarter of last year but narrowed to 26.5% during the three. months ending in March.

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“With soft deliveries this quarter due to the China shutdown, Tesla’s ability to preserve margins this quarter will be front and center,” in today’s earnings report, Wedbush analyst Dan Ives noted earlier this week, adding that the group’s near-term outlook will overshadow the company’s results. second quarter well-documented challenges for the second quarter.

Tesla shares were marked 1.4% higher in early Wednesday trading to change hands at $746.80 each, a move that would send the stock down about 30% so far this year.

A decline in deliveries and a reduced margin are not the only concerns heading into today’s second quarter earnings report. group Twitter (TWTR) – Get Twitter Inc. report.

Tesla shares have fallen about 35.3% since Musk announced his 9.1% stake on Twitter on April 4, as investors discounted both Musk’s margin loan for the purchase, his sale of about $9 billion in Tesla stock and the billionaire’s growing executive portfolio , which includes space. exploration group SpaceX, construction company The Boring Company and neurotechnology specialists Neuralink Corp.

The group is also facing a significant write-down on its $1.5 billion bitcoin holdings, which have fallen around 60% since the end of March.

Estimates of Tesla’s bitcoin carrying costs vary, but the timing of the purchase suggests a level around $32,600. Of course, this value rose in the latter half of 2021, when bitcoin reached an all-time high of around $67,000, but now looks far more fragile after crashing below the $20,000 level last month.

Tesla Earnings Preview: Outlook, Margins and Bitcoin Hits in Focus

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Tesla Earnings Preview: Outlook, Margins and Bitcoin Hits in Focus

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