Tesla Faces Earnings Shock in Surface Area... Many Long-Term Positives Ahead

[Asia Economy Reporter Minji Lee] Tesla is expected to show performance growth this year due to an increase in automobile shipments. Although the stock price is undergoing short-term adjustments following weak results in the fourth quarter of last year, it is anticipated to follow an upward trend in the mid to long term.

[Image source=Yonhap News]

According to the financial investment industry and Tesla on the 30th, the company recorded revenue of $10.74 billion in the fourth quarter of last year, a 45% increase compared to the same period the previous year, and operating profit rose by 60% to $570 million. Revenue slightly exceeded market expectations, but operating profit was about 47% lower than the expected $1.084 billion.

Regarding revenue, the significant increase in electric vehicle deliveries had a positive effect. Production volume was 179,757 units (16,097 Model S/X, 163,660 Model 3/Y), and deliveries reached 180,667 units, marking an all-time high. Although the average selling price (ASP) fell by about 11% due to expanded sales of the low-priced Model 3/Y line and price reductions of older models, this was offset by achieving the sales target of 500,000 units and a 202% increase in environmental regulatory credit revenue to $400 million compared to the previous year.

The lower-than-expected operating profit was mainly attributed to the transition costs for new models (Model X, Y) to be produced at the Fremont factory and increased cost rates in the automotive division due to supply chain and labor instability caused by COVID-19.

Wonju Lee, a researcher at Kiwoom Securities, explained, “The cost rate rose from 72.4% in the third quarter to 75.9% in the fourth quarter,” adding, “Also, the stock compensation cost paid to management upon achieving targets increased to $630 million due to the recent stock price rise, and the decline in ASP also damaged the gross margin.”

Tesla has set a long-term average annual growth rate of 50% for automobiles this year. Although it did not specify a target shipment volume, considering the expected growth rate, shipments exceeding 750,000 units are anticipated. Tesla’s global production capacity (CAPA) has expanded to 1.05 million units through the expansion of its China factory. Production of Model Y at the China factory began at the end of last year, and the Texas and Berlin factories are also expected to start full-scale production of Model Y within this year. According to Bloomberg, Tesla’s revenue growth rate this year is estimated at 63.2% compared to one year ago, and the revenue growth rate for this year is projected at 48.8%.

During this conference call, CEO Elon Musk emphasized the Full Self-Driving (FSD) service, which is currently undergoing beta testing and is scheduled to launch as a subscription service this year. Elon Musk expressed confidence, stating, “A $1 trillion valuation can be justified by the vehicle and FSD.” Hi Investment & Securities commented, “Once FSD is launched, service revenue previously treated as deferred income will gradually begin to be recognized, which is a positive factor,” and added, “The willingness to license to other OEMs and the mention of expanding data collection through technology sharing are also positive.”

In the domestic securities industry, Tesla is viewed as having favorable factors that can drive stock price increases in the mid to long term. However, it is advised to keep in mind the possibility of increased volatility in the short term due to results falling short of expectations. Hyungtae Kim, a researcher at Shinhan Financial Investment, said, “The launch of the new Model S/X and Semi Truck is positive but has already been largely reflected in the stock price,” and added, “Attention should be paid to the completion of FSD technology, profitability improvement excluding environmental credits, and expansion potential in the mobility sector.”

This content was produced with the assistance of AI translation services.