After the shock of Netflix's (NASDAQ:NFLX) subscriber miss earlier this week, a lot of Nasdaq stocks got clobbered yesterday, with Tesla (NASDAQ:TSLA) finishing the day almost 5% lower on concerns that last night’s Q1 earnings might disappoint.
That turned out to not be the case as revenues came in at $18.76bn, a rise of 81% and almost $1bn above expectations, while profits came in at a record $3.22c a share, or $3.3bn. This is a simply staggering improvement given that, in all of last year, the company made $5.5bn.
On that basis, Tesla is on course to post annual profits of $12.2bn, assuming no deterioration in margins in the meantime, with the shares looking to open strongly higher when US markets reopen later today.
There had been a worry that the various COVID restrictions in China, which affected its Shanghai factory, as well as the various supply chain issues the company encountered in Q1, might have impacted margins.
These concerns appear to have been premature after gross margin rose in Q1 rising to 32.9%, from 30.6% in Q4 and 26.5% a year ago, with the company saying that they had to raise prices to offset the challenges to supply chains.
Free cash flow also surged rising to $2.23bn, well above estimates of $671.8m, however, Tesla was at pains to warn that supply chain issues were likely to continue throughout 2022.
Regulatory credit sales also helped boost profits in Q1 with revenue here coming in at $679m.
As the company looks to the rest of 2022, notwithstanding the issues at its Shanghai factory the new plant in Germany has finally opened, albeit later than scheduled, but this should help Tesla boost its production levels as we look ahead to the rest of this year, despite a backdrop of rising costs and chip shortages. Production and deliveries are also set to begin from the new Texas factory this month as well.
Having delivered over 310k vehicles in Q1 and having fallen just shy of 1m vehicle deliveries in 2021, CEO Elon Musk said, he expects Tesla to deliver up to 1.5m vehicles in 2022, a lofty goal and a decent increase on the previous target of 1.3m, with Musk saying he expected Q3 and Q4 to see a significant improvement as the new factories look to scale up their production capacity and boost their efficiency.
Of course, much of this will depend on the resilience of the company’s supply chain and its ability to source batteries. To that end, Tesla has said that it is diversifying how it makes its batteries, with half of its vehicles equipped with a lithium iron phosphate battery which doesn’t contain any cobalt or nickel.
Management went on to say that they expected to achieve 50% annual growth in vehicle deliveries, a goal which, a year ago, might have seemed fanciful. Having seen the progress made in Q1, that goal looks within reach as does the prospect of a doubling in profits as well.
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