Elon Musk addresses Twitter takeover and possible recession in Tesla earnings call

  • Tesla announced $1.05 in adjusted EPS over and above the expectation of 99 cents with revenues in the range of $21.45 billion, lower then the $21.96 billion that was expected.
  • Net profit (GAAP) was $3.33 billion, nearly twice as much as a year ago and automotive revenue grew 55% from last quarter.
  • The company made a warning about an issue with transportation capacity to ship new cars in the closing days of the quarter and stated that they were “transitioning to a smoother delivery pace.”

Tesla announced third-quarter results shortly after the bell rang and the company’s executives answered various questions on the earnings call that included macroeconomic issues and CEO Elon Musk’s imminent acquisition of Twitter.

Shares dropped by around 5 percent after the announcement of the announcement of results.

Below are the final results.

  • Profits $1.05 instead of 99 cents (adjusted) estimated according to the opinions of analysts surveyed by Refinitiv.
  • Revenue: $21.45 billion vs $21.96 billion expected, per Refinitiv.

The net earnings of Tesla (GAAP) for the quarter ended March 31, 2022 was $3.33 billion. This was with the automotive gross margins staying at 27.9 percent, the same level they were at the end of the first quarter 2022. The same period in the previous calendar year Tesla announced $1.62 billion in profit.

On the earnings call on Wednesday, to review the earnings, Musk addressed questions from shareholders regarding demand for electric vehicles and the possibility of buying back shares.

“I can’t emphasize enough we have excellent demand for Q4 and we expect to sell every car that we make for as far into the future as we can see,” Musk declared. “The factories are running at full speed and we’re delivering every car we make, and keeping operating margins strong.”

Tesla is expected to conduct an “meaningful buyback” next year according to the report, and could be between $5 billion to $10 billion subject to approval by the board.

He also stated, with optimism, “I’m of the opinion that we’ll far surpass Apple

Current market cap for Tesla. In fact , I think there’s a chance to Tesla in the future to have a value higher that Apple or Saudi Aramco combined. This doesn’t mean that it’s going to happen or that it’ll be simple.”

Shareholders questioned Tesla management about macroeconomic issues that impact their business beyond China.

“China is experiencing a recession of sorts” most notably in the property market, Musk said, “and Europe has a recession of sorts driven by energy.” Musk said “North America’s in pretty good health, although the Fed is raising interest rates more than they should, but I think they’ll eventually realize that and bring them down again.”

In response to a separate inquiry, Musk also talked about the possibility of acquiring Twitter

He added that “I think it’s an asset that has sort of languished for a long time but has incredible potential.” Then he added “The long-term potential for Twitter is an order of magnitude greater than its current value.”

Musk is expected to sell some of his substantial stake in Tesla in order to finance the closing of the $44 billion take private.

Q3 earnings details

The company’s revenue from automotive sales came in as $18.69 billion, which is an up 55% over the previous year. The cost of revenues for the company’s primary automotive business climbed to $13.48 billion in the quarter increasing from $10.52 billion in the previous quarter, which was in line with the rise in sales of cars. Tesla’s credits for automotive regulatory credit were 1.5 percent of its total revenue with $286 million in the quarter.

Tesla has reiterated its previous forecast within its investor decks on Wednesday stating: “Over a multi-year horizon, we expect to achieve 50% annual growth in vehicle deliveries.”

The company confirmed that the delivery of their Semi electric heavy-duty truck will start in December. They also announced that it has been manufacturing its Semi in Nevada which is where it manufactures batteries that power their vehicles across the US. Semi was first announced in Dec. 2017. Semi was first announced in December. 2017.

Tesla did not provide a timeframe for the production start for its Cybertruck pickup, but said that it would be made in Texas after the increase in Model Y production there.

Tesla had previously reported that its deliveries for the quarter that ended September 30, amounted to 343,000, and the production of vehicles topped 365,000. Deliveries are the closest representation of the sales figures made by Tesla. Shares have fallen over 17% since the weekend report on the 2nd of October.

While deliveries and production of vehicles have increased, the service hasn’t kept pace and has become a nagging place in the eyes of the majority of Tesla owners.

CEO Elon Musk told shareholders in July Elon Musk said, in July, that he was “Excited to work with Tesla Service to enable same-hour service as often as possible! Applying Formula 1 pit crew techniques to Teslas.”

However, Tesla expanded its service center and store locations by only 6 percent during the third quarter of 2018, including 41 new locations as compared to that of the 2nd quarter in 2022. Tesla added additional mobile service vehicles to its fleet, technicians using them to take customers to fix their vehicles on site when it is possible. At the end of third quarter Tesla announced that it operated 728 service and store locations and had an inventory that included 1,532 vehicles for mobile services.

Other revenues, and services including fees for customers who charge their vehicles through Tesla Supercharging stations, the sale of merchandise with Tesla’s name, as well as repairs to cars of customers beyond warranty, increased to $1.65 billion.

When it released its earnings Q3 announcement The company warned of an issue with the capacity to ship new cars during the final days of the quarter and stated that they were “transitioning to a smoother delivery pace.”

The energy division of Tesla generated $1.12 billion in revenues for the quarter. The division offers backup batteries for commercial, residential and utility applications, and is also responsible for installing solar rooftops.

Growth in revenue for energy came mainly from the sale of storage units for energy. The company announced that it had installed energy storage systems that have capacity of 2,100 megawatt hours (or 2.1 gigawatts) during the quarter . It said, “Demand for our storage products remains in excess of our ability to supply.”

The energy division of Tesla is in competition for supply of battery cells with its automotive division as well as against other electric vehicle manufacturers. Tesla has written within its annual shareholder presentation, “We continue to believe that battery supply chain constraints will be the main limiting factor to EV market growth in the medium and long terms.”

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