Shares in car manufacturer Tesla Inc (NASDAQ: TSLA) crashed in 2022, having fallen over 40% during the year. However, there seems to be some respite of late.
On Thursday (26 January 2023), Tesla shares surged some 11% immediately after reporting record quarterly revenue, operating profit, and net profit.
Source: Google Finance
For the week, Tesla’s share price is up 30%. It’s currently trading at USD$177.90.
Source: Google Finance
The company, which has a market capitalisation of about US$557 billion currently, has also grown its market share in many parts of the world.
To find out more about the company’s latest results and what it bodes for Tesla’s future, we took a deeper look into Tesla’s 4Q2022 results.
#1 Tesla’s Strong Revenue Growth Triumphs The Automotive Industry
In spite of all the challenges surrounding Tesla including a retrenchment exercise in 2022 and fears about Elon Musk’s focus being diverted away from Tesla due to Twitter, Tesla announced yet another record-breaking quarter.
In its reporting quarter, total revenue grew 37% year-on-year to US$24.3 billion while operating income increased by 49% year-on-year to US$3.9 billion, giving an operating margin of 16%. It’s worth noting that compared to 4Q2021, Tesla managed to reduce its operating expenses in 4Q2022 while also increasing its revenues.
The company’s rise in total revenue came from higher vehicle deliveries, growth in other parts of its business, and higher average selling price (ASP) that includes positive impact of model and regional mix.
The increase was partially offset by a negative foreign exchange impact of US$1.4 billion.
2022 was also a record-breaking year for Tesla where total revenue surged 51% year-on-year to US$81.5 billion, with operating income more than doubling to US$13.7 billion, up from US$6.5 billion in 2021. Net profit ballooned 128% to US$12.6 billion.
More specifically, in 2022, Tesla’s automotive revenue grew 51% year-on-year to US$71.5 billion.
Overall, Tesla’s revenue growth is superior to both the automotive industry’s and the S&P 500 companies’ revenue growth, putting Tesla in a league of its own.
Source: Tesla 2022 Q4 earnings presentation
#2 Tesla’s Increasing Market Share Across Many Regions
Tesla produced a total of 1.37 million cars in 2022, which was 47% higher than the previous year’s figure of 930,422. In terms of delivery numbers, it delivered 1.31 million cars, up 40% year-on-year.
Source: Tesla 2022 Q4 earnings presentation
You can see the different models of Tesla cars in the chart above. Here’s a quick breakdown of its car models to understand them better:
- Model 3: a four-door mid-size sedan that is designed for manufacturability with a base price for mass-market appeal
- Model Y: a compact sport utility vehicle (SUV) built on the Model 3 platform with seating for up to seven adults
- Model S: a four-door full-size sedan, featuring high performance characteristics and long ranges
- Model X: a mid-size SUV with seating for up to seven adults, featuring high performance characteristics and long ranges
In early 2021, Tesla projected that over a multi-year horizon, it expects to achieve 50% average annual growth in vehicle deliveries per year. It has surpassed its own expectations with vehicle deliveries in both 2021 and 2022 triumphing projections.
Source: Tesla 2022 Q4 earnings presentation
With Tesla’s deliveries and revenues being on point, it has managed to increase its vehicle market share in US/Canada, Europe, and China over the past many quarters and years too.
If the company continues executing well, it won’t be surprising to see its market share increasing even further over the long run.
Source: Tesla 2022 Q4 earnings presentation
Read Also: How Much Would The Tesla Model Y Cost In Singapore?
#3 Tesla Flexes Its Operating Leverage Muscle
Tesla is a company that strives to lower the cost of car ownership for its customers through continuous efforts to reduce manufacturing costs. This is explicitly mentioned in its annual report.
True to its world, its Average Selling Price (ASP) has been generally trending downwards over many years. It said in its latest earnings that “improving affordability is necessary to become a multi-million vehicle producer”.
Despite ASPs halving between 2017 and 2022, its operating margin has expanded from -14% to +17% during the same time frame. In layman’s terms, it means Tesla has been able to make higher profits per car sold even though it’s now selling them at a lower price.
Introduction of lower cost models, the building of localised and more-efficient factories, vehicle cost reduction, and operating leverage led to the margin increase. Tesla’s relentless focus on cost control and cost innovation has bode well for the company.
Source: Tesla 2022 Q4 earnings presentation
Just like its superior revenue growth over its rivals, Tesla’s operating margin of over 16% triumphs that of its competitors as well, which hovers at just around 8%.
Source: Tesla 2022 Q4 earnings presentation
#4 Tesla Is A Turbocharged Cash Cow
“Turnover is vanity, profit is sanity but cash is king.”
A company may generate earnings, but it may not necessarily bring in cash due to the concept of accrual accounting (an accounting method where revenue or expenses are recorded when a transaction occurs rather than when the actual cash payment is received or made).
Therefore, focusing on the actual free cash flow of a business is more important. Without free cash flow, a company has to borrow money from banks or be forced to raise cash by selling more shares. Free cash flow is also needed to grow and reinvest into its own business, pay off debt (if any), and buy back shares.
A business with consistently growing earnings and free cash flow over many years shows that it has a strong business, and that’s what investors want.
On that front, Tesla ticks the right boxes. Apart from increasing revenue and earnings, its free cash flow grew for 2022 as well, surging 51% year-on-year to US$7.6 billion.
Its balance sheet is rock-solid as well, with US$22.2 billion in cash, cash equivalents and investments, and minimal borrowings. With a strong free cash flow-generating ability and a healthy balance sheet, Tesla is a cash-cow that is very likely to withstand any economic headwinds that it is presented with.
Source: Tesla 2022 Q4 earnings presentation
#5 Tesla Should Continue Firing On All Cylinders
As for its outlook, Tesla said that it expects to deliver around 1.8 million cars in 2023, up from 1.31 million cars delivered in 2022 (as seen earlier). The 2023 projection will also be higher than the long-term 50% average annual growth rate.
Furthermore, the company added that it will manage its business in a way that it maintains a strong balance sheet “during this uncertain period”.
During its latest earnings call, Elon Musk, Tesla’s chief executive and product architect, mentioned the following about an imminent recession:
“As I said in the last call, there’s going to be bumps along the way and we’ll probably have a pretty difficult recession this year, probably. I hope not, but probably. And so, one can’t predict the short-term sort of stock value because when there’s a recession and people panic in the stock market, then prices of stocks — well, the value of stocks can drop sometimes to surprisingly low levels. But long term, I am convinced that Tesla will be the most valuable company on earth.”
Product-launch wise, Tesla said that Cybertruck is on track to begin production later this year. Its next-generation vehicle platform is also under development with additional details to be shared at its Investor Day on 1 March 2023. It will be interesting to watch what Tesla announces on that day.
Understanding Meituan Dianping – The Food Delivery and Online Travel Chinese Tech Giant
The post Tesla Inc 2022 Earnings Grew Like Gangbusters: 5 Things To Know From The Electric Carmaker’s Latest Financial Results appeared first on DollarsAndSense.sg.
0 Mga Komento