Tesla revenue miss "first disappointment" of US earnings season

(Alliance News) - Tesla Inc's shares were struggling in New York on Thursday in the "first big disappointment" of the US third quarter earnings season.

The shares were down 5.1% at USD210.79, and have fallen a mammoth 40% in 2022.

AJ Bell investment director Russ Mould said US corporate earnings have, up until now, had "been a qualified success", but Tesla missed expectations on revenue and car sales.

"The electric vehicle manufacturer's underpowered performance reflects continuing challenges around the supply chain and rising costs. It suggests expectations were pitched too high coming into this quarterly update," he continued.

The Austin, Texas-headquartered electric carmaker, in the three months to September 30, recored net attributable income jumped to USD3.29 billion from USD1.62 billion a year prior. Diluted earnings per share improved to USD0.95 from USD0.48.

Total revenue rose 56% to USD21.45 billion from USD12.76 billion - but came in behind the market consensus of USD21.98 billion - with Automotive revenue up 55% to USD18.69 billion from USD12.06 billion.

Total production was up 54% year-on-year to 365,923 from 237,823, with Model S production more than doubled and Model 3 up 51%.

Total deliveries improved 42% to 343,830 from 241,391.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "Decades-high inflation, rising energy bills in Europe and signs of a weakening China market were all blinking alarms heading into Tesla's quarterly results. We're seeing that the strength of the group's brand is holding it steady in times of deep economic uncertainty.

"With all that said, there are challenges just up the road. We're yet to understand how deep an oncoming recession will be, and it has the potential to shake Tesla's chassis. There is a limit to how far prices can go without volumes falling. Tesla's starting price is a lot for the average person to spend on a car at the moment, especially when you consider the rapid weakening of US consumer spending power."

Lund-Yates feels the carmaker is "untested in the face of sharp economic contractions", so is interested to see how it will handle the "obstacles" in place when economic conditions worsen.

Tesla said its results were "strong", noting its record revenue, operating profit and free cash flow

"We remain focused on increasing vehicle production as quickly as possible, by increasing our weekly build rate in Fremont and Shanghai and progressing steadily through the production ramps in Berlin and Texas," Tesla added.

Looking ahead, it is hoping for 50% average annual growth in vehicle deliveries.

HL's Lund-Yates added: "Recent performance is not to be knocked, and Tesla has a habit of surprising us, but all eyes will be laser focused on what could turn out to be fickle demand in the near-term.

"It's not lost on investors that Tesla needs to pull off an exceptional final quarter if it wants to hit its target of 50% average delivery growth. Failure to do so could see further pressure heaped on the group's already downtrodden valuation."

AJ Bell's Mould said the "poor" quarterly results will only add to concerns that Elon Musk is "too caught up" in his revived takeover of Twitter to "lend Tesla the attention it needs".

The carmaker did not offer any updates on its ongoing saga to buy social media platform Twitter Inc.

A judge has delayed a looming trial between Twitter and Elon Musk, giving the Tesla chief executive officer more time to close the USD44 billion deal - after months spent fighting to get out of it.

Musk had asked to halt the upcoming Delaware court trial, where the Tesla billionaire was expected to fare poorly against Twitter's lawsuit to force him to complete his April merger agreement.

The deal is expected to close by October 28.

Stockbroker Wedbush Securities said: "This quarter was a respectable performance in a very difficult environment with delivery and supply chain issues front and centre in Europe and China that threw another dose of reality for Tesla which has been Teflon-like over the past few years despite supply chain chaos across the auto/tech world.

"The bullish narrative is clearly "hitting a rough patch" as Tesla must now prove again to the Street that the robust growth story is running into a myriad of logistics issues as opposed to demand softening with EV competition coming from all angles around the globe."

Wedbush holds an 'outperform' rating, with a price target of USD300.

By Paul McGowan; [email protected]

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