On Wednesday, April 19th, 2023, Tesla Inc, the top electric vehicle (EV) manufacturer, presented its first-quarter earnings report. According to the Earnings report, Tesla failed to reach revenue estimates despite aggressively lowering the pricing of its EV models, which resulted in higher sales in the prior quarter. The business reported a net profit of $2.5 billion, down from $3.32 billion a year ago. And sales of $23.33 billion, compared to a consensus forecast of $23.21 billion, According to 22 analysts polled by Refinitiv.
In this Report
- ➤ Earnings Report analysis
- ➤ Tesla Stock reaction after revenue miss.
- ➤ Is the price cut a culprit?
- ➤ What next for Tesla?
Earnings Report analysis
Tesla produced 440,808 vehicles and delivered 422,875 of its Model (S/3/X/Y) units in the first quarter of 2023. Compared to the fourth quarter of 2022, the company’s production and delivery numbers increased by 0.25% and 4.34%, respectively. For more reports on Tesla deliveries and production numbers, read this article. Tesla’s operating margin was 11.4%, falling short of the 22.4% expected. In Q1, the Total GAAP gross margin of 19.3% is lower than the previous quarter of 23.8%. The business generated a GAAP operating income of $2.7 billion, a GAAP net income of $2.5 billion, and a non-GAAP net income of $2.9 billion. Operating cash flow was $2.5 billion, and free cash flow was $0.4 billion. In Q1, the company’s cash and investments climbed sequentially by $217 million to $22.4 billion.
Tesla Stock reaction after revenue miss
Tesla’s stock price fell 6.06% after-hours trading following the Q1 results announcement to $169.65. The stock price decrease is mostly due to a revenue shortfall and lower-than-expected operating margins, which did not meet analysts’ expectations.“Coming out of Q1 earnings, we have decreased conviction in Tesla’s ability to accelerate revenue growth and expand operating margin,” Jesse Cohen, an analyst at Investing.com, said.
Is the price cut a culprit?
Tesla has reduced the pricing of its electric vehicles six times this year, with the most recent reduction occurring in April 2023. These substantial price reductions intend to boost sales of Tesla’s EV cars, particularly the Model 3 and Model Y, which are the cheapest in the company’s portfolio. This pricing decreases, however, did not appear to have a major influence on the company’s sales in Q1. Many causes might account for the revenue gap. For starters, Tesla’s Fremont facility stopped for two days in February, affecting Model S and Model X manufacturing. Second, the worldwide semiconductor shortage hampered automobile production and constrained supply.
What next for Tesla?
Despite the revenue deficit, Tesla remains upbeat about its prospects for future development. The firm intends to raise its manufacturing capacity as soon as possible to meet its 50% CAGR objective, which was stated earlier this year. Tesla intends to build roughly 1.8 million cars in 2023, staying ahead of the long-term 50% CAGR.
Tesla also indicated enough cash to cover its product roadmap, long-term capacity growth ambitions, and other costs. Furthermore, the business anticipates that its hardware-related revenues will be complemented by increased software-related income. Tesla believes that its operating margin will stay among the highest in the industry. Regarding product development, Tesla’s Cybertruck is still on pace to begin production at Gigafactory Texas later this year. The business is also working on its next-generation platform, which will be introduced in the coming years.
While Tesla’s Q1 earnings were below expectations, examining the context of the company’s hard operating environment is critical. Despite supply chain interruptions and component shortages, Tesla is a prominent participant in the EV industry and expects to develop further in the next years. Although the company’s dramatic EV price reduction did not raise revenue as projected, it did assist in expanding EV adoption and hasten the shift to sustainable transportation. Tesla is well-positioned to benefit from the long-term trend towards electrification and sustainable transport, with a robust pipeline of new products, an expanding manufacturing presence, and continued investments in research and development.