How much higher can Tesla (TSLA) stock go? After falling 70% in 2022, the shares are up 51% year to date, besting the 8% rise in the S&P 500 index. Just as impressive, since reaching 52-week low of around $101, the stock has risen tow-fold, surging more than 104% to $207 on March 31.
The electric vehicle company, which is benefiting from both record vehicle production and deliveries, is set to deliver its financial results for the first quarter fiscal 2023 on Wednesday after the closing bell. However, the company has issued a series of price cuts which could impact not only revenue and profits, but also the guidance for fiscal 2023. Given these factors, analysts will be keeping a close eye on Tesla's segment financials.
In the fourth quarter, roughly 86% of Tesla’s total revenue came via automobile sales and regulatory credits. As such, investors are curious to see the level of impact that the recent price cuts might have on average revenue that Tesla recognized per vehicle. The company’s profit margin profile as well as customer deposits will be closely-watched. While Tesla has not been the only high-growth tech stock to rise so far this year, its surge, particularly to start the year, appears more pronounced when compared to other high-growth tech stocks.
The company’s ability to innovate and its cutting-edge technology has catapulted it to become the dominant player in Electric Vehicles market which it created. Understandably, investors are somewhat nervous about what action to take ahead of the upcoming earnings report. Tesla's increased focus on its growth strategy, namely production and profit margins, have been a major factor in the company’s historical success. These factors will be the main driver of the stock for the just-ended quarter and the rest of the year.
In the three months that ended March, Wall Street expects the Austin, Texas-based company to earn 86 cents per share on revenue of $23.34 billion. This compares to the year-ago quarter when earnings came to $1.07 per share on revenue of $18.76 billion. For the full year, ending in December, earnings are expected to decline 4.17% year over year $3.90 per share, while full-year revenue of $103.06 billion would rise 26.5% year over year.
Tesla's recent price cuts is seen as a double-edged sword. On the one hand, the cuts are driving in new buyers, along with record vehicle registrations, which is helping to secure market share gains over its competitors. At the same time, the cuts are expected to pressure both revenue and profit margins, particularly the price reductions for the Model Y and Model 3 in the U.S. This highlights the expected 4% year-over-year decline in fiscal 2023 earnings.
In the fourth quarter, automotive gross margin (excluding regulatory credits) was 28.5% vs. 30.6% a year ago and 27.9% in Q3. The margin mark missed the consensus expectation of analysts of 28.4%. However, the company was able to offset the margin decline with some gains on the non-auto side of the business. Likewise, although the company's operating expenses were higher, Tesla was able to offset the costs with higher interest income as well as lower taxes.
In essence, the company managed its costs and margins which led to a top and bottom line beat, reporting Q4 adjusted EPS of $1.07, beating consensus estimates of $1.05. Q4 revenue was just as strong, coming at $24.32 billion, rising 37% year over year, beating estimates by $17.21 million. Tesla ended the quarter with a cash position of $22.4 billion, thanks to free cash flow of $1.4 billion. On Wednesday investors will want to see whether Tesla can improve on these numbers amid recent price cuts.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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