Tesla is set to report its fourth quarter and full year 2023 earnings after the market closes on Wednesday, January 25th. The electric vehicle maker’s results will be closely watched by investors as signs of how the company is navigating high inflation and rising interest rates.
Wall Street Expects Another Quarter of Record Revenue and Profits
Despite ongoing economic uncertainties, analysts expect Tesla to post strong growth in revenue and earnings for the fourth quarter (Yahoo Finance). Consensus estimates call for:
- Revenue of $24.67 billion, up 55% year-over-year
- Adjusted EPS of $1.19, up 20%
“Tesla has beat earnings expectations for several quarters in a row, and many analysts think they are poised to continue that streak,” said Jessica Caldwell, executive director of insights at auto research firm Edmunds.
Tesla’s growth has been fueled by high demand for its electric vehicles globally. The company delivered over 1.3 million vehicles in 2022, representing a 40% increase from 2021 (Seeking Alpha).
The upcoming earnings will give investors insight into how resilient consumer demand has been for Tesla’s products. With inflation eating into household budgets, there is some risk that fewer consumers are able to afford Tesla’s premium EVs.
On the flip side, Tesla has pricing power due to very high demand and long waitlists for vehicles. The company may use the report to justify additional price increases in 2023 if raw material and supply chain costs remain stubbornly high.
Focus Areas for the Earnings Call
In addition to the headline financial numbers, there are several key topics analysts and investors will be listening for on Tesla’s quarterly earnings call:
Production Plans for 2023
- How many vehicles does Tesla expect to deliver in 2023?
- Does Tesla still expect 50% annual growth in deliveries over the next few years?
- Any updates on manufacturing capacity expansions and new factories coming online?
Tesla’s ambitious growth depends on significantly scaling up production capacity in 2023 and beyond. Execution on new factories such as Gigafactories in Texas and Berlin will determine if Tesla can hit its targets.
- Is there still strong underlying consumer demand globally for Tesla EVs?
- Does Tesla see any signals of demand weakness, especially in Europe and China?
- How is order backlog and wait times for delivery trending?
With potential economic slowdowns looming, investors will listen closely for any cracks in the robust demand that Tesla has enjoyed in recent years. Signs that consumers are cancelling pre-orders or delaying purchases could signal storm clouds ahead.
Tesla’s revenue growth in 2022 was driven by increasing market share in Europe and Asia. Image source: Statista
Trajectory of Full Self-Driving Rollout
- What is the latest timeline for expanding FSD beta tests?
- When does Tesla expect to move from beta to full commercial launch?
- Will regulators place any constraints around FSD capabilities or autonomous driving features?
Tesla’s “Full Self Driving” software is seen as a major long-term growth driver if the company can achieve full autonomous driving. But the technology is still under development and faces uncertainty around safety regulations and limitations. Investors will be listening for any updates to projected timelines.
Energy Business Updates
- Results from Tesla Energy division including solar panels and Powerwall batteries?
- Does Tesla Energy have growth potential comparable to the automotive business?
- Can battery innovations translate to new sustainable energy products?
Beyond electric vehicles, Tesla’s ambitions extend into becoming an integrated sustainable energy company. But the energy business makes up a small fraction of revenue currently. Investors will tune in to hear of any breakthroughs that could move the needle for batteries and solar.
Economic Storm Clouds and 2023 Risks
While Tesla anticipates strong growth in 2023 vehicle production and has a track record of beating expectations, there are also some notable risk factors on the horizon that could threaten the stock’s meteoric rise.
Rising inflation, interest rates hikes, and talk of an economic slowdown have driven extreme stock market volatility over the past year. So far consumers have remained resilient and spending has held up well (MSN). However, analysts debate how long this can continue if unemployment rises. Weakening consumer demand would put pressure on automakers like Tesla.
There are also warning signs from China, which is Tesla’s second largest market. Recent Covid outbreaks and restrictions have hampered manufacturing and logistics there. And the property sector crisis has Chinese consumers tightening their wallets. Tesla’s China sales growth could decelerate if these headwinds continue.
Geopolitics also remains a variable outside of Tesla’s control. An escalation in tensions between the US and China risks disrupting Tesla’s supply chain links and production for both the Chinese and global auto market.
For the US market, Tesla continues to enjoy strong demand momentum with over a yearlong waitlist for vehicles like the Model Y. However, legacy automakers are starting to bring attractive new EV models to market, which could nibble away at Tesla’s dominant market share over time.
What’s the Verdict on Tesla Stock?
Telsa shares have been extremely volatile over the past year amidst the macroeconomic uncertainty, trading in a wide range between $100 to $400 per share. Heading into the print, TSLA stock is up around 25% year-to-date, signaling renewed optimism.
If Tesla delivers another quarter of better-than-expected growth, analysts think the stock could rally back towards all-time highs around $400 (TipRanks). Production targets for 2023 will be a key indicator of whether the company’s steep growth trajectory remains intact.
On the other hand, any signs of wobbling demand or disruption to Tesla’s ambitious targets could reverse the recent stock gains. Bears will be listening closely for indications that Tesla’s meteoric rise is leveling off amidst the uncertain economy.
Leading up to the report, analysts currently lean bullish on TSLA shares:
- Buy recommendations: 13
- Hold recommendations: 8
- Sell recommendations: 3
No matter the results, Tesla’s upcoming earnings will be a must-watch event as investors look for signals around consumer resilience, growth trajectories in the year ahead, and whether Tesla can sustain market-defying growth even in a rocky economic environment.
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