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Tesla reported fourth-quarter earnings of $1.19 per share on sales of $24.3 billion.
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Tesla released strong fourth quarter numbers, but investors will want to know more about demand and profit margins later tonight.
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(ticker: TSLA) on Wednesday night reported fourth-quarter earnings of $1.19 per share on sales of $24.3 billion. Operating profit reached a record $3.9 billion, up from the previous record of $3.7 billion in the third quarter.
Wall Street was looking for earnings per share of about $1.13 and operating profit of $4.2 billion on sales of $24.7 billion.
Free cash flow for the quarter was $1.4 billion. Analysts expected $2.7 billion.
Looking ahead, Tesla said it plans to produce 1.8 million units in 2023. The street is looking for around 1.9 million units.
It’s an OK report. Shares rose 3.8% in after-hours trading shortly after the earnings release. Tesla stock closed 0.4% higher at $144.43 on Wednesday. The S&P 500 and the Dow Jones Industrial Average were both flat that day.
Investors can expect the shares to move after the company’s earnings conference call which begins at 5:30 p.m. ET. Investors will be looking for comments on production, profit margins, EV competition and new products. They will want an update on everything.
This is breaking news. Read a preview of the revenue report below.
Tesla earnings reports are always key events for investors, and the electric vehicle pioneer’s upcoming fourth quarter report on Wednesday afternoon is no exception. In fact, it could be the most significant earnings report in the company’s history.
There have been other “biggest” quarters in the company’s past. In 2010, Tesla (ticker: TSLA) announced its first full quarter as a publicly traded company, during which it generated approximately $31 million in sales from the original Roadster. There were the quarters when the electric vehicle pioneer began delivering the Model S – its first mass-produced car – in 2012, and the low-cost Model 3 in 2017.
There was also the third quarter of 2019, when Tesla made a surprise profit. In the three-plus years leading up to that time, Tesla had lost about $2.5 billion in operating profits and used more than $5 billion in cash in total. Since then, Tesla has generated nearly $19 billion in operating profits and $15 billion in cumulative free cash flow.
There is evidence that the upcoming fourth quarter report trumps all of these.
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is now the most actively traded stock in the US market, but faces a tougher economic environment, with rising interest rates, high inflation and fears of recession. In addition, competition from electric vehicles continues to grow and investors are also wary of CEO Elon Musk’s new role as owner of social media platform Twitter.
“After experiencing unprecedented hyper growth over the past few years in the electric vehicle market that was essentially created by Musk…Tesla faces a darker macro in 2023,” Wedbush analyst Dan wrote. Ives in a Tuesday report.
Ives is a Tesla bull, noting that stocks are bought. His price target is $175 per share.
Tesla significantly reduced prices for its electric vehicles around the world in early 2023 amid this darker macroeconomic backdrop, which has created fear and uncertainty around demand for electric vehicles and Tesla’s profit margins.
For 2022, Tesla will generate gross profit margins of about 26% from its automotive business, based on the first three quarters of the year and Wall Street consensus estimates. For the full year of 2023, after price cuts, automotive gross profit margin projections fall from 17% to 22%. Operating profit estimates for 2023 now range from about $9 billion to $30 billion, according to FactSet.
That’s a wide range, even for Tesla, and means the stock is likely to face great volatility in 2023. The $21 billion range for the operating profit forecast represents about 140% of the average estimate $15 billion. At the start of 2022, the estimate range was around $13 billion, or about 100% of the average estimate.
When Tesla reports Wednesday after the market closes, investors will want an update on profit margins as well as production and sales. They will also want to see how the year ended.
Wall Street is forecasting earnings per share of about $1.13 on sales of $24.7 billion in the fourth quarter. Operating profit and free cash flow are expected to be $4.2 billion and $2.7 billion, respectively.
Tesla earned $1.05 per share on sales of $21.5 billion in the third quarter of 2022. Operating profit and free cash flow were approximately $3.7 billion and 3.3 billions of dollars, respectively.
Regardless of Tesla’s reports, investors should be prepared for trading volatility. Options markets imply that the stock will move about 10%, up or down, after the earnings report. Shares have moved an average of around 8%, either up or down, following the last four quarterly reports. The shares rose twice and fell twice during this period.
Tesla stock has had a strong start to the year, up about 13% year-to-date. The S&P 500 and Dow Jones Industrial Average are up about 3% and 6%, respectively.
Tesla stock is down 3.4% in early trading on Wednesday. The
Nasdaq Compound
is down 2.2%.
Write to Al Root at allen.root@dowjones.com